<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file Number 33-58936
------------------------------------
DIMECO, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2250152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
820 Church Street
Honesdale, PA 18431
(Address of principal executive offices)
(717) 253-1970
(Issuer's Telephone Number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 2, 1996, there were 720,159 shares outstanding of the issuer's
common stock with an aggregate market value of approximately $15,843,498.
<PAGE>
Dimeco, Inc.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) as of June 30,
1996 and December 31, 1995 3
Consolidated Statement of Income (unaudited) for the
three months and the six months ended
June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows (unaudited) for
the six months ended June 30, 1996 and 1995 5
Consolidated Statement of change in Stockholders' Equity
(unaudited) for the six months ended June 30, 1996 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Default Upon Senior Securities 13
Item 4. Submissions of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
Dimeco, Inc.
CONSOLIDATED BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,283,094 $ 1,231,674
Interest-bearing deposits in other banks 2,832,717 1,970,017
Federal Funds Sold 3,830,000 5,920,000
------------ ------------
Total cash and cash equivalents 7,945,811 9,121,691
------------ ------------
Mortgage loans held for sale 798,043 464,588
Investment securities held to maturity
(market value $14,511,446 and $9,357,895) 14,467,780 11,453,419
Investment securities available for sale 8,999,717 9,267,390
Loans (net of unearned income of $2,096,860
and $2,150,429) 94,967,804 89,656,264
Less allowance for possible loan losses 1,341,627 1,247,629
------------ ------------
Net loans 93,626,177 88,408,635
------------ ------------
Premises and equipment, net 2,889,561 2,960,622
Other real estate 453,895 389,422
Accrued interest receivable 1,006,410 943,319
Other assets 1,856,177 1,799,179
------------ ------------
TOTAL ASSETS $132,043,571 $124,808,265
============ ============
LIABILITIES
Deposits:
Noninterest-bearing $ 13,724,713 $ 12,352,292
Interest-bearing 104,848,745 97,525,940
------------ ------------
Total Deposits 118,573,458 109,878,232
------------ ------------
Securities sold under agreements to repurchase - 2,050,000
Accrued interest payable 561,412 568,413
Other liabilities 465,753 568,578
------------ ------------
TOTAL LIABILITIES 119,600,623 113,065,223
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.50 par value; 3,000,000 shares
authorized, 718,338 and 708,449 shares issued
and outstanding 359,168 354,225
Capital surplus 2,480,550 2,303,241
Retained earnings 9,650,016 9,076,350
Net unrealized gain (loss) on securities available
for sale (46,786) 9,226
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 12,442,948 11,743,042
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $132,043,571 $124,808,265
============ ============
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
[CAPTION]
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------- -----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,139,306 $ 1,916,109 $ 4,262,825 $ 3,778,945
Interest-bearing deposits in other banks 8,319 3,470 12,334 5,250
Federal funds sold and securities
purchased under agreement to resell 130,983 34,892 251,778 35,683
Investment securities:
Taxable 217,792 256,686 379,009 528,966
Exempt from federal income tax 81,056 81,408 161,651 168,857
------------ ------------- ------------ ------------
Total interest income 2,577,456 2,292,565 5,067,597 4,517,701
------------ ------------- ------------ ------------
INTEREST EXPENSE
Deposits 1,079,583 986,752 2,147,235 1,908,989
Borrowed funds - 73 - 14,811
Securities sold under agreements
to repurchase 28,993 2,222 58,636 21,523
------------ ------------- ------------ ------------
Total interest expense 1,108,576 989,047 2,205,871 1,945,323
------------ ------------- ------------ ------------
NET INTEREST INCOME 1,468,880 1,303,518 2,861,726 2,572,378
Provision for loan losses 136,500 117,750 273,000 170,250
------------ ------------- ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,332,380 1,185,768 2,588,726 2,402,128
------------ ------------- ------------ ------------
OTHER INCOME
Service charges on deposit accounts 57,374 44,160 106,704 85,864
Gain (loss) on loans available for sale (35,746) 13,512 (36,084) 36,885
Other operating income 91,996 92,576 197,717 184,112
Gain on sale of securities 59,257 - 59,257 -
------------ ------------- ------------ ------------
Total other income 172,881 150,248 327,594 306,861
------------ ------------- ------------ ------------
OTHER EXPENSES
Salaries and employee benefits 477,167 410,598 957,182 818,046
Occupancy expense, net 63,975 50,099 140,485 101,831
Furniture and equipment expense 68,690 57,369 128,183 102,547
Deposit insurance premiums 500 57,615 1,000 114,597
Other operating expense 296,456 242,698 585,930 505,714
------------ ------------- ------------ ------------
Total other expenses 906,788 818,379 1,812,780 1,642,735
------------ ------------- ------------ ------------
Income before income taxes 598,473 517,637 1,103,540 1,066,254
Income tax expense 179,000 154,000 329,000 326,000
------------- ------------- ------------ ------------
NET INCOME $ 419,473 $ 363,637 $ 774,540 $ 740,254
============= ============= ============ ============
NET EARNINGS PER SHARE $ 0.58 $ 0.52 $ 1.08 $ 1.07
============= ============= ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Dimeco, Inc.
STATEMENT OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 774,540 $ 740,254
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 273,000 170,250
Depreciation 130,406 112,948
Market value adjustment, loans held for sale 31,365 (88,750)
Amortization of investments, net 64,393 86,472
Investment securities gains (59,257)
Decrease (increase) in accrued interest receivable (63,091) 15,714
Increase (decrease) in accrued interest payable (7,001) 31,110
Net decrease in loans available for sale (364,820) 917,604
Amortization of net deferred loan origination fees (41,995) (28,194)
Other, net (150,668) (144,620)
------------- -------------
Net cash provided by operating activities 586,872 1,812,788
------------- -------------
INVESTING ACTIVITIES
Investment securites available for sale:
Proceeds from sales of investment securities 354,248 -
Proceeds from maturities or paydowns
of investment securities 11,698,103 3,663,022
Purchase of investment securities (14,889,043) (504,650)
Net increase in loans (5,586,211) (1,404,631)
Purchase of life insurance policies - (885,000)
Purchase of premises and equipment (50,142) (174,410)
Proceeds from sale of other real estate 89,655 99,248
-------------- -------------
Net cash provided by (used for) investing activities (8,383,390) 793,579
-------------- -------------
FINANCING ACTIVITIES
Increase in deposits, net 8,695,224 3,362,043
Decrease in short term borrowings (2,050,000) (1,400,000)
Proceeds from dividend reinvestment and stock purchase plan 182,252 162,881
Dividends paid (206,836) (173,721)
--------------- -------------
Net cash provided by financing activities 6,620,640 1,951,203
--------------- -------------
Increase (decrease) in cash and cash equivalents (1,175,878) 4,557,570
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,121,689 2,694,187
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,945,811 $ 7,251,757
=============== =============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
<TABLE>
<CAPTION>
Net unreal- Total
Common Retained ized loss on Stockholders'
Stock Surplus Earnings Securities Equity
------------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 354,225 $ 2,303,241 $ 9,076,350 $ 9,226 $ 11,743,042
Net income 774,540 774,540
Net unrealized loss on securities (56,012) (56,012)
Dividend reinvestment and stock
purchase plan 4,943 177,309 182,252
Cash dividends ($.28 per share) (200,874) (200,874)
------------- --------------- --------------- ------------- ---------------
Balance, June 30, 1996 $ 359,168 $ 2,480,550 $ 9,650,016 $ (46,786) $ 12,442,948
============= =============== =============== ============= ===============
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
Dimeco, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Dimeco,
Inc. (the "Company") and its wholly-owned subsidiary The Dime Bank (the
"Bank"). All significant intercompany balances and transactions have been
eliminated in the consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not necessarily include all information that would be included in
audited financial statements. The information furnished reflects all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of operations. All such adjustments are of a
normal recurring nature. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full
year.
Certain comparative amounts for 1995 have been reclassified to conform
to 1996 classifications.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
Total assets at June 30, 1996 increased $7,235,000 or 5.8% over the
$124,808,000 reported at December 31, 1995. The Damascus office continued
to add to our asset and deposit base accompanied by increases in each of
the other offices. Cash and cash equivalents decreased $1,176,000 or 12.9%
due to decreases in federal funds sold. With an adjustment in interest
rates during the second quarter, the Company decided to invest in
relatively short term bonds to boost interest income while maintaining
opportunities to reinvest if interest rates begin to increase in the near
term. Although we do not anticipate any dramatic increase in interest
rates in the near future, the positioning in shorter term bonds provides a
more favorable interest rate spread than federal funds sold. In light of
these purchases, total investment securities increased $2,747,000 or 13.3%
during the first half of 1996.
Mortgage loans held for sale increased $333,000 or 71.8% due to
increased originations of residential mortgages amounting to $1,134,000
netted against sales of $801,000 in May. The loan portfolio increased
$5,312,000 or 5.9% with the largest increase being $2,110,000 in
residential mortgages. This increase is the result of an improving real
estate market, somewhat more aggressive interest pricing and a greater
participation by the Company in local real estate and builders
organizations. Commercial loans increased $1,616,000 which is a
continuation of growth that began in 1995 and is attributable to continued
marketing efforts and business development. Consumer loans increased
$963,000 over the same time frame with a special promotion geared towards
helping area residents who experienced both snow and flooding damage during
the winter of 1995-96.
Deposits increased $8,695,000 or 7.9% since December 31, 1995. The
greatest increase was $4,688,000 or 32.2% in statement savings accounts.
Management believes this increase is due to competitive rates offered ,
with business customers in particular using this type of account.
Noninterest-bearing deposits also increased $1,654,000 or 13.4%, which is
typical for the end of the second quarter as local businesses are more
active. Securities sold under agreement to repurchase have been eliminated
since December 31, 1995 with the maturity of this account in June 1996.
These liabilities were used to offer competitive rates to certain larger
customers without the guarantee of the FDIC and therefore without the added
expense of deposit insurance premiums. Since deposit premiums have greatly
decreased, the need for this type of account has been nullified at this
time.
Equity capital increased $700,000 or 6.0% during the six months ended
June 30, 1996, primarily the result of net earnings for the period of
$775,000. The dividend reinvestment plan contributed $182,000 during the
period with the stock purchase option not available to stockholders in the
second quarter of 1996. Dividends of $201,000 along with a $56,000
adjustment in the unrealized loss on securities available for sale
accounted for the remaining change in Stockholders' Equity.
Management monitors risk-based capital and leverage capital ratios in
order to assess compliance with regulatory guidelines. At June 30, 1996
the bank had risk-based capital totalling 14.3%, exceeding the 8.0% minimum
risk-based capital requirement. Core equity capital, which must be at
least fifty percent of the total risk-based capital, was 13.0% of this
requirement at June 30, 1996. Additionally, the Company must maintain a
minimum leverage capital ratio of 3%, as of June 30, 1996 the Company's
leverage capital ratio was 9.6%.
<PAGE>
RESULTS OF OPERATION
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995.
The Company earned $775,000 for 1996, an increase of $34,000 or 4.6%
from the $740,000 reported for 1995.
The net margin increased $289,000 or 11.2% from 1995 to 1996. This
increase resulted from volume increases in average interest-earning assets
of $12,605,000 from 1995 to 1996 offset by a decrease in the average
interest rate from 8.19% in 1995 to 8.09%in 1996. The cost of funds
increased from 3.73% in 1995 to 3.82% in 1996 with the volume of deposits
increasing from $104,387,000 to $115,606,000. The net interest spread
decreased from 4.46% in 1995 to 4.28% in 1996.
The provision for loan losses increased $103,000 or 60.4% in 1996 from
1995 due to the increased size of the loan portfolio and to management's
continuing evaluation of credit risk in the portfolio. The level of the
allowance for loan loss as a percentage of total loans remained relatively
consistent during the period at 1.41% in 1996 compared to 1.43% in 1995.
Gains (losses) on loans held for sale decreased $73,000 in 1996 from
1995. During 1996 the Company experienced losses in the held for sale loan
category due to decreased market value. Losses realized on sales of loans
in this category during 1996 were $5,000 with unrealized losses accounting
for the remaining $31,000. During 1995 market prices had increased from
the values booked in 1994.
In the second quarter of 1996, a municipal bond which had been in
nonaccrual status and had been adjusted to a lower market value was
refunded realizing a gain of $52,000. In addition, a group of mortgage-
backed securities which had been paid down to a value below our policy
limits was sold realizing a gain of $7,000.
Salaries and employee benefits increased $139,000 or 17.0% in 1996 as
compared to 1995. Salary expense increased $72,000 or 11.8% which is due
to a combination of normal salary increases of approximately 4.0%,
increased staffing in the Damascus office and overtime associated with
training and installation of Jack Henry Siverlake software which was
installed in May 1996. The additional employees in Damascus accounted for
increased employee benefit expense of $15,000 with additional benefits
from other increased salary expense accounting for $8,000. Expenses
associated with the salary continuation plan which began in 1995 accounted
for $24,000 of the increase because the plan was implemented in the second
quarter of 1995. There was no corresponding expense for the first five
months of 1995. Various miscellaneous items accounted for the remaining
increase, no one of which is material.
Occupancy expense increased $38,000 or 38.0% mainly due to the
establishment of the Damascus office in the third quarter of 1995.
Deposit insurance premiums decreased $114,000 due to the full
recapitalization of the Bank Insurance Fund in the second quarter of 1995.
<PAGE>
Other operating expense increased $80,000 or 15.9% from 1995 to 1996.
The main item contributing to this difference was increased advertising
expenses of $20,000 associated with our entrance into a new market area and
extra promotions for our 90th anniversary celebration. In addition, in
1996 the Company outsourced its' Internal Audit function accounting for
$13,000 of unmatched expenses in this category in 1995. Additional MAC
expenses of $11,000 were associated with the additional location in
Damascus. Postage fees rose $11,000 or 28.1% due to the 10.3% increase in
postage rates and the increased number of customer accounts. Computer
software amortization increased $8,000 with the purchase of $135,000 in new
software in 1996 and platform automation software of $69,000 purchased in
1995 on which the company is beginning to recognize additional depreciation
expense.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 AND 1995
The Company earned $419,000 for 1996, an increase of $56,000 over the
$364,000 reported for 1995. The net interest margin increased $165,000
over the same quarter in 1995 based upon increased volume with a decrease
in interest rate, as noted in six month discussion above.
The provision for loan loss increased $19,000, based on the increased
size and management's analysis of the loan portfolio.
Market rates dropped on the loans held for sale portfolio during the
second quarter of 1996 resulting in a decrease of $49,000 over the same
quarter in 1995 when management took an opportunity to sell a portion of
loans originated for sale at a gain of $14,000.
Salaries and employee benefits increased $67,000 or 16.2% reflecting
annual salary increases, additional expenses associated with of new
employees for our Damascus office and overtime pay associated with
installation and training on the new Jack Henry software system.
Occupancy expense increased $14,000 mainly due to the increased expense
of the Damascus office which was not open in the second quarter of 1995.
Furniture and equipment expense increased $11,000 mainly due to
depreciation on the new assets in the Damascus office.
Deposit insurance premiums decreased in 1996 from 1995 as discussed
above.
Other operating expense increased $54,000 or 22.2% during 1996.
Promotional and advertising expenses were $9,000 greater during this
quarter of 1996 as compared to 1995 with additional advertising in the
Damascus office and in celebration of our 90th anniversary. Internal audit
fees were outsourced in 1996 compared to an on staff Internal Auditor in
1995 accounting for $13,000 of increased expenses in this category. A
combination of MAC fees being invoiced incorrectly in the first quarter of
1996 and corrected in the second quarter and the addition of an ATM in
Damascus show increased fees of $10,000 over the same quarter of 1995. All
other items mentioned in the six month discussion above had a similar
effect on the second quarter analysis.<PAGE>
<PAGE>
LIQUIDITY AND CASH FLOWS
To ensure that the Company can satisfy customer credit needs for current
and future commitments and deposit withdrawal requirements, the Bank
manages the liquidity position by ensuring that there are adequate short-term
funding sources available for those needs. Liquid assets consists of
cash and due from banks, federal funds sold, interest-bearing deposits with
other banks and investment securities maturing in one year or less. The
following table shows these liquidity sources, minus short-term borrowings,
as of June 30, 1996 compared to December 31, 1995:
<TABLE>
<CAPTION>
June 30, December 31,
------------ -------------
(dollars in thousands)
<S> <C> <C>
Cash and due from banks $ 1,283 $ 1,232
Interest-bearing deposits with other banks 2,833 1,970
Federal funds sold 798 465
Mortgage loans held for sale 3,830 5,920
Investment securities maturing in one year or less 8,828 14,012
------------ -------------
17,572 23,599
Less short-term borrowings - 2,050
------------ -------------
Net liquidity position $ 17,572 21,549
============ =============
As a percent of total assets 13.3% 17.3%
============ =============
</TABLE>
Management monitors liquidity on a consistent basis and feels that
liquidity levels are adequate. In addition to these liquidity sources, the
Bank has available also a credit line with the Federal Home Loan Bank in
the amount of $3.4 million.
Management is not aware of any known trends, events or uncertainties that
will have or is reasonably likely to have a material effect on the
Company's liquidity, capital resources or operations nor is management
aware of any current recommendations by regulatory authorities, which if
implemented, would have such an effect.
<PAGE>
RISK ELEMENTS
The table below presents information concerning nonperforming assets
including nonaccrual loans, renegotiated loans, loans 90 days or more past
due, nonaccrual securities, other real estate loans and repossessed assets
at June 30, 1996 and December 31, 1995. A loan is classified as nonaccrual
when, in the opinion of management, there are doubts about collectibility
of interest and principal. At the time the accrual of interest is
discontinued, future income is recognized only when cash is received.
Renegotiated loans are those loans whose terms have been renegotiated to
provide a reduction or deferral of principal or interest as a result of the
deterioration of the borrower.
<TABLE>
<CAPTION>
June 30, December 31,
------------- -------------
(dollars in thousands)
<S> <C> <C>
Loans on nonaccrual basis $ 1,346 $ 1,096
Loans past due 90 days or more 1,453 463
Renegotiated loans 641 -
------------- -------------
Total nonperforming loans 3,440 1,559
Other real estate 454 389
Repossessed assets - -
Nonaccrual securities - 151
------------- -------------
Total nonperforming assets $ 3,894 $ 2,099
============= =============
Nonperforming loans as a percent of total loans 3.62% 1.74%
============= =============
Nonperforming assets as a percent of total assets 2.95% 1.70%
============= =============
</TABLE>
Management believes the level of the allowance for loan losses at June
30, 1996 is sufficient. The relationship between the allowance for loan
losses and outstanding loans is a function of the credit quality and known
risk attributed to the loan portfolio. The on-going loan review program
and credit approval process is used to determine the adequacy of the
allowance for loan losses. Included in total loans are loans of $1,110,000
which management has classified as impaired under the terms of Financial
Accounting Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan Income Recognition and Disclosure." The related
allowance for loan losses on these loans amounted to $172,000. There were
no impaired loans without a related allowance for loan losses.
Management does not believe that loans classified as loss, doubtful
substandard or special mention for internal or regulatory purposes (i)
represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results,
liquidity, or capital resources, or (ii) represent material loans about
which management is aware of any information which causes management to
have serious doubts as to the ability of such borrowers to comply with the
loan repayment terms.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
NONE
Item 2 - Changes in the rights of the Company's security holders
NONE
Item 3 - Defaults by the Company on its senior securities
NONE
Item 4 - Submissions of matters to a vote of security holders
The following represents the results of matters submitted to a
vote of the shareholders at the annual meeting held on April 25,
1996:
Election of Directors:
The following directors were elected with terms to expire April,
1999:
For Against Abstain
Joseph J. Murray 485,791.3484 18,334.2831 0.
Thomas A Peifer 485,791.3484 18,334.2831 0.
S.R. Snodgrass, A.C. was selected as the Company's independent
auditors for the year ending December 31, 1996 by the following
vote:
For: 503,785.6315
Against: 40.0000
Abstain: 300.0000
Item 5 - Other information
NONE
Item 6 - Exhibits and Reports on Form 8-K
NONE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIMECO, INC.
Date: August 6, 1996 By:
Joseph J. Murray
President and Chief Executive Officer
Date: August 6, 1996 By:
Maureen H. Beilman
Controller/Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,283
<INT-BEARING-DEPOSITS> 2,833
<FED-FUNDS-SOLD> 3,830
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,000
<INVESTMENTS-CARRYING> 14,468
<INVESTMENTS-MARKET> 14,511
<LOANS> 94,968
<ALLOWANCE> 1,342
<TOTAL-ASSETS> 132,044
<DEPOSITS> 118,573
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 359
<OTHER-SE> 12,084
<TOTAL-LIABILITIES-AND-EQUITY> 132,044
<INTEREST-LOAN> 4,263
<INTEREST-INVEST> 792
<INTEREST-OTHER> 12
<INTEREST-TOTAL> 5,068
<INTEREST-DEPOSIT> 2,147
<INTEREST-EXPENSE> 2,206
<INTEREST-INCOME-NET> 2,862
<LOAN-LOSSES> 273
<SECURITIES-GAINS> 59
<EXPENSE-OTHER> 1,813
<INCOME-PRETAX> 1,104
<INCOME-PRE-EXTRAORDINARY> 775
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 775
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<YIELD-ACTUAL> 8.09
<LOANS-NON> 1,346
<LOANS-PAST> 1,453
<LOANS-TROUBLED> 641
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,248
<CHARGE-OFFS> 225
<RECOVERIES> 46
<ALLOWANCE-CLOSE> 1,342
<ALLOWANCE-DOMESTIC> 1,048
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 294
</TABLE>
<PAGE>
BY-LAWS
of
DIMECO, INC.
Article 1
CORPORATION OFFICE
Section 1.1 The Corporation shall have and continuously maintain in
Pennsylvania a registered office which may, but need not, be the same as
its place of business and at an address to be designated from time to time
by the Board of Directors.
Section 1.2 The Corporation may also have offices at such other
places as the Board of Directors may from time to time designate or the
business of the Corporation may require.
Article 2
SHAREHOLDERS MEETINGS
Section 2.1 All meetings of the shareholders shall be held at such
time and place as may be fixed from time to time by the Board of Directors.
Section 2.2 The annual meeting of the shareholders shall be held no
later than the thirty-first day of May in each year, when the shareholders
shall elect members to the Board of Directors and transact such other
business as may properly be brought before the meeting.
Section 2.3 Special meetings of the shareholders may be called at
any time by the President or a majority of the Board of Directors or of its
Executive Committee. At any time, upon written request of any person who
has called a special meeting, it shall be the duty of the Secretary to fix
the time of the meeting which, if the meeting is called pursuant to a
statutory right, shall be held not more than sixty (60) days after the
receipt of the request. If the Secretary neglects or refuses to fix the
time of the meeting, the person or persons calling the meeting may do so.
Section 2.4 Written notice of all shareholder meetings (other than
adjourned meetings of shareholders), shall state the place, date, hour, the
purpose thereof and shall be served upon, or mailed, postage prepaid, or
telegraphed, charges prepaid, at least twenty (20) days before such
meeting, unless a greater period of notice is required by statute or by
these By-laws, to each shareholder entitled to vote thereat at such address
as appears on the transfer books for shares of the Corporation.
Section 2.5 When a meeting of shareholders is adjourned, it shall
not be necessary to give any notice of the adjourned meeting or of the
business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the
Board of Directors fixes a new record date for the adjourned meeting.
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Article 3
QUORUM OF SHAREHOLDERS
Section 3.1 The presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes which all shareholders
are entitled to cast on the particular matter shall constitute a quorum for
purposes of considering such matter, and unless otherwise provided by
statute, the acts of such shareholders at a duly organized meeting shall be
the acts of the shareholders. If, however, any meeting of shareholders
cannot be organized because of lack of a quorum, those present, in person
or by proxy, shall have the power, except as otherwise provided by statute,
to adjourn the meeting to such time and place as they may determine,
without notice other than an announcement at the meeting, until the
requisite number of shareholders for a quorum shall be present, in person
or by proxy, except that in the case of any meeting called for the election
of directors such meeting may be adjourned only for periods not exceeding
fifteen (15) days as the holders of a majority of the shares present, in
person or by proxy, shall direct, and those who attend the second of such
adjourned meetings, although less than a quorum, shall nevertheless
constitute a quorum for the purpose of electing directors. At any
adjourned meeting at which a quorum shall be present or so represented, any
business may be transacted which might have been transacted at the original
meeting if a quorum had been present. The shareholders present, in person
or by proxy, at a duly organized meeting can continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
Article 4
VOTING RIGHTS
Section 4.1 Except as may be otherwise provided by statute or by
the Articles of Incorporation, at every meeting of shareholders, every
shareholder entitled to vote thereat shall have the right to one vote for
every share having voting power standing in his name on the transfer books
for shares of the Corporation on the record date fixed for the meeting. No
share shall be voted at any meeting if an installment is due and unpaid
thereon.
Section 4.2 When a quorum is present at any meeting the voice vote
of the holders of a majority of the stock having voting power, present, in
person or by proxy, shall decide any question brought before such meeting
except as provided differently by statute or by the Articles of
Incorporation.
Section 4.3 Upon demand made by a shareholder entitled to vote at
any election for directors before the voting begins, the election shall be
by ballot.
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Article 5
PROXIES
Section 5.1 Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act
for him by proxy. Every proxy shall be executed in writing by the
shareholder or his duly authorized attorney in fact and filed with the
Secretary of the Corporation. A proxy, unless coupled with an interest,
shall be revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy shall
not be effective until notice thereof has been given to the Secretary of
the Corporation. No unrevoked proxy shall be valid after eleven (11)
months from the date of its execution, unless a longer time is expressly
provided therein, but in no event shall a proxy, unless coupled with an
interest, be voted after three years from the date of its execution. A
proxy shall not be revoked by the death or incapacity of the maker, unless
before the vote is counted or the authority is exercised, written notice of
such death or incapacity is given to the Secretary of the Corporation.
Article 6
RECORD DATE
Section 6.1 The Board of Directors may fix a time, not more than
ninety (90) days prior to the date of any meeting of shareholders, or the
date fixed for the payment of any dividend or distribution, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of shares will be made or go into effect, as a record date for the
determination of the shareholders entitled to notice of, and to vote at,
any such meeting, or entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or to exercise
the rights in respect to any such change, conversion or exchange of shares.
In such case, only such shareholders as shall be shareholders of record on
the date so fixed shall be entitled to notice of, or to vote at, such
meeting or to receive payment of such dividend or distribution or to
receive such allotment of rights or to exercise such rights, as the case
may be, notwithstanding any transfer of any shares on the transfer books
for shares of the Corporation after any record date fixed as aforesaid.
The Board of Directors may close the transfer books for shares of the
Corporation against transfers of shares during the whole or any part of
such period, and in such case written or printed notice thereof shall be
mailed at least twenty (20) days before closing thereof to each shareholder
of record at the address appearing on the records of the Corporation or
supplied by him to the Corporation for the purpose of notice. While the
transfer books for shares of the Corporation are closed, no transfer of
shares shall be made thereon. If no record date is fixed by the Board of
Directors for the determination of shareholders entitled to receive notice
of, and vote at, a meeting of shareholders, transferees of shares which are
transferred on the books of the Corporation with twenty (20) days next
preceding the date of such meeting shall not be entitled to notice of or to
vote at such meeting.
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Article 7
VOTING LISTS
Section 7.1 The officer or agent having charge of the transfer
books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by
each. The list shall be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholders
during the whole time of the meeting for the purposes thereof except that,
if the Corporation has 5,000 or more shareholders, in lieu of the making of
the list the Corporation may make the information therein available at the
meeting by any other means.
Section 7.2 Failure to comply with the requirements of Section 7.1
shall not affect the validity of any action taken at a meeting prior to a
demand at the meeting by any shareholder entitled to vote thereat to
examine the list. The original share register(s) or transfer book(s), or a
duplicate thereof kept in the Commonwealth of Pennsylvania shall be prima
facie evidence as to who are the shareholders entitled to examine the list
or share register(s) or transfer book(s) or to vote at any meeting of
shareholders.
Article 8
JUDGES OF ELECTION
Section 8.1 In advance of any meeting of shareholders, the Board of
Directors may appoint judge(s) of election, who need not be shareholders,
to act at the meeting or any adjournment thereof. If judge(s) of election
is/are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholders shall, appoint judge(s) of election at the
meeting. The number of judges shall be one or three. A person who is a
candidate for office to be filled at the meeting shall not act as a judge.
Section 8.2 In case any person appointed as a judge fails to appear
or fails or refuses to act, the vacancy may be filled by appointment made
by the Board of Directors in advance of the convening of the meeting or at
the meeting by the presiding officer thereof.
Section 8.3 The judge(s) of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the authenticity, validity and
effect of proxies, receive votes or ballots, hear and determine all
challenges and questions in any manner arising in connection with the right
to vote, count and tabulate all votes, determine the result and do such
acts as may be proper to conduct the election or vote with fairness to all
shareholders. The judge(s) of election shall perform his or their duties
impartially, in good faith, to the best of his or their ability and as
expeditiously as is practical. If there are three judges of election, the
decision, act or certificate of a majority shall be effective in all
respects as the decision, act or certificate of all.
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Section 8.4 On request of the presiding officer of the meeting, or
of any shareholder, the judge(s) of election shall make a report in writing
of any challenge or question or matter determined by him or them, and
execute a certificate of any fact found by him or them. Any report or
certificate made by him or them shall be prima facie evidence of the facts
stated therein.
Article 9
CONSENT OF SHAREHOLDERS IN LIEU OF MEETING
Section 9.1 Any action required or permitted to be taken at a
meeting of the shareholders, or of a class of shareholders, may be taken
without a meeting, prior or subsequent to the action, if a consent or
consents in writing setting forth the action so taken shall be signed by
all of the shareholders who would be entitled to vote at a meeting for such
purpose and shall be filed with the Secretary of the Corporation.
Section 9.2 The consent or consents in writing required by this
Article 9 may be given by proxy in accordance with Section 5.1 hereof.
Article 10
DIRECTORS
Section 10.1 Any shareholder who intends to nominate or to cause to
have nominated any candidate for election to the Board of Directors (other
than any candidate proposed by the Corporation's then existing Board of
Directors) shall so notify the Secretary of the Corporation in writing not
less than sixty (60) days prior to the date of any meeting of shareholders
called for the election of directors. Such notification shall contain the
following information to the extent known by the notifying shareholder:
(a) the name and address of each proposed nominee;
(b) the age of each proposed nominee;
(c) the principal occupation of each proposed nominee;
(d) the number of shares of the Corporation owned by each
proposed nominee;
(e) the total number of shares that to the knowledge of the
notifying shareholder will be voted for each proposed
nominee;
(f) the name and residence address of the notifying shareholder;
and
(g) the number of shares of the Corporation owned by the
notifying shareholder.
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Any nomination for director not made in accordance with this Section
shall be disregarded by the presiding officer of the meeting, and votes
cast for each such nominee shall be disregarded by the judges of election.
In the event that the same person is nominated by more than one
shareholder, if at least one nomination for such person complies with this
Section, the nomination shall be honored and all votes cast for such
nominee shall be counted.
Section 10.2 The number of directors that shall constitute the whole
Board of Directors shall be not less than three. The Board of Directors
shall be classified into three classes, each class to be elected for a term
of three years. The terms of the respective classes shall expire in
successive years as provided in Section 10.3 hereof. Within the foregoing
limits, the Board of Directors may from time to time fix the number of
directors and their respective classifications.
Section 10.3 At the 1994 annual meeting of shareholders of the
Corporation, the shareholders shall elect seven (7) directors as follows:
two Class A directors to serve until the 1995 annual meeting of
shareholders, two Class B directors to serve until the 1996 annual meeting
of shareholders, and three Class C directors to serve until the 1997 annual
meeting of shareholders. Each class shall be elected in a separate
election. At each annual meeting of shareholders thereafter, successors to
the class of directors whose term shall then expire shall be elected to
hold office for a term of three years, so that the term of office of one
class of directors shall expire in each year.
Section 10.4 The Board of Directors may declare vacant the office of
the director who has been judicially declared of unsound mind or who has
been convicted of an offense punishable by imprisonment for a term of more
than one year or for any other proper cause which these By-laws may specify
or if, within sixty (60) days after notice of his selection, he does not
accept the office either in writing or by attending a meeting of the Board
of Directors and fulfill such other requirements of qualification as these
By-laws may specify.
Section 10.5 Upon application of any shareholder or director, the
court may remove from office any director in case of fraudulent or
dishonest acts, or gross abuse of authority or discretion with reference to
the Corporation, or for any other proper cause, and may bar from office any
director so removed for a period prescribed by the court. The Corporation
shall be made a party to the action and, as a prerequisite to the
maintenance of an action under this Section 10.5, a shareholder shall
comply with Section 1782 of the Business Corporation Law of 1988 and any
amendments or supplements thereto.
Section 10.6 An act of the Board of Directors done during the period
when a director as been suspended or removed for cause shall not be
impugned or invalidated if the suspension or removal is thereafter
rescinded by the shareholders or by the Board of Directors or by the final
judgment of a court.
Section 10.7 The Board of Directors may appoint a person who
previously held the position of director to be a director emeritus. A
director emeritus may attend meetings of the Board of Directors. A
director emeritus may advise the Board of Directors on any proposed
corporate action but shall not have voting rights. The compensation of a
director emeritus shall be determine from time to time by resolution of the
Board of Directors.
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Article 11
VACANCIES ON BOARD OF DIRECTORS
Article 11.1 Vacancies on the Board of Directors, including
vacancies resulting from an increase in the number of directors, shall be
filled by a majority of the remaining members of the Board of Directors,
though less than a quorum, and each person so appointed shall be a director
until the expiration of the term of office of the class of directors to
which he was appointed.
Article 12
POWERS OF BOARD OF DIRECTORS
Section 12.1 The business and affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by
statute of by the Articles of Incorporation or by these By-laws directed or
required to be exercised and done by the shareholders.
Section 12.2 A director shall stand in a fiduciary relation to the
Corporation and shall perform his duties as a director, including his
duties as a member of any committee of the Board of Directors upon which he
may serve, in good faith, in a manner he reasonably believes to be in the
best interests of the Corporation and with such case, including reasonable
inquiry, skill and diligence, as a person of ordinary prudence would use
under similar circumstances. In performing his duties, a director shall be
entitled to rely in good faith on information, opinions, reports or
statements, including financial statements and other financial data, in
each case prepared or presented by any of the following:
(a) one or more officers or employees of the Corporation whom
the director reasonably believes to be reliable and
competent in the matters presented;
(b) counsel, public accountants or other persons as to matters
which the director reasonable believes to be within the
professional or expert competence of such persons; and
(c) a committee of the Board of Directors upon which he does not
serve, duly designated in accordance with law, as to matters
within its designated authority, which committee the
director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause his
reliance to be unwarranted.
Section 12.3 In discharging the duties of their respective
positions, the Board of Directors, committees of the Board of Directors and
individual directors may, in considering the best interests of the
Corporation, consider the effects of any action upon employees, upon
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suppliers and customers of the Corporation and upon communities in which
offices or other establishments of the Corporation are located, and all
other pertinent factors. The consideration of those factors shall not
constitute a violation of Section 12.2.
Section 12.4 Absent breach of fiduciary duty, lack of good faith or
self-dealing, actions taken as a director or any failure to take any action
shall be presumed to be in the best interests of the Corporation.
Section 12.5 A director shall not be personally liable, as such, for
monetary damages for any action taken, or any failure to take any action,
unless:
(a) the director has breach or failed to perform the duties of
his office under this Article 12; and
(b) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
Section 12.6 The provisions of Section 12.5 shall not apply to:
(a) the responsibility or liability of a director pursuant to
any criminal statute; or
(b) the liability of a director for the payment of taxes
pursuant to local, state or federal law.
Section 12.7 A director of that Corporation who is present at a
meeting of the Board of Directors, or of a committee of the Board of
Directors, at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent is entered
in the minutes of the meeting or unless he files his written dissent to the
action with the Secretary of the Corporation before the adjournment thereof
or transmits the dissent in writing to the Secretary of the Corporation
immediately after the adjournment of the meeting. The right to dissent
shall not apply to a director who voted in favor of the action. Nothing in
this Section 12.7 shall bar a director from asserting that minutes of any
meeting incorrectly omitted his dissent if, promptly upon receipt of a copy
of such minutes, he notifies the Secretary of the Corporation, in writing,
or the asserted omission or inaccuracy.
Article 13
COMMITTEES OF THE BOARD OF DIRECTORS
Section 13.1 The Board of Directors may, by resolution adopted by a
majority of the directors in office, establish one or more committees to
consist of one or more directors of the Corporation. Any committee, to the
extent provided in the resolution of the Board of Directors or in these
By-laws, shall have and may exercise all of the powers and authority of the
Board of Directors, except that a committee shall not have any power or
authority as to the following:
<PAGE>
(a) the submission to shareholders of any action requiring
approval of shareholders under applicable law, the Articles
of Incorporation or these By-laws;
(b) the creation or filing of vacancies in the Board of
Directors;
(c) the adoption, amendment or repeal of these By-laws;
(d) the amendment or repeal of any resolution of the Board of
Directors that by its terms is amendable or repealable only
by the Board of Directors; and
(e) action on matters committed by these By-laws or resolution
of the Board of Directors to another committee of the Board
of Directors.
Section 13.2 The Board of Directors may designate one or more
directors as alternate members of any committee who may replace any absent
or disqualified member at any meeting of the committee or for the purposes
of any written action by the committee. In the absence or disqualification
of a member and alternate member or members of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint
another director to act at the meeting in the place of the absent or
disqualified member.
Section 13.3 Each committee of the Board of Directors shall serve at
the pleasure of the Board of Directors. The term "Board of Directors,"
when used in any provision of this Article 13 relating to the organization
or procedures of, or the manner of taking action by, the Board of
Directors, shall be construed to include and refer to any executive or
other committee of the Board of Directors. Any provision of this Article
13 relating or referring to action to be taken by the Board of Directors or
the procedure required therefor shall be satisfied by the taking of
corresponding action by a committee of the Board of Directors to the extent
authority to take the action has been delegated to the committee pursuant
to this Article 13.
Article 14
MEETINGS OF THE BOARD OF DIRECTORS
Section 14.1 An organization meeting may be held immediately
following the annual shareholders meeting without the necessity of notice
to the directors to constitute a legally convened meeting, or the directors
may meet at such time and place as may be fixed by either a notice or
waiver of notice or consent signed by all of such directors.
Section 14.2 Regular meetings of the Board of Directors shall be
held not less often than semi-annually at a time and place determined by
the Board of Directors at the preceding meeting. One or more directors may
participate in any meeting of the Board of Directors, or of any committee
thereof, by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear one another.
<PAGE>
Section 14.3 Special meetings of the Board of Directors may be
called by the President on one day's notice to each director, either
personally or in the manner set forth under Article 33 hereof; special
meetings shall be called by the Chairperson of the Board or the President
in like manner and on like notice upon the written request of three
directors.
Section 14.4 At all meetings of the Board of Directors, a majority
of the directors shall constitute a quorum for the transaction of business,
and the acts of a majority of the directors present at a meeting in person
or by conference telephone or similar communications equipment at which a
quorum is present in person or by such communications equipment shall be
the acts of the Board of Directors, except as may be otherwise specifically
provided by statute or by the Articles of Incorporation or by these By-laws.
If a quorum shall not be present in person or by communications
equipment at any meeting of the directors, the directors present may
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or as
permitted herein.
Article 15
INFORMAL ACTION BY THE BOARD OF DIRECTORS
Section 15.1 Any action required or permitted to be taken at a
meeting of the directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the
directors in office is filed with the Secretary of the Corporation.
Article 16
COMPENSATION OF DIRECTORS
Section 16.1 Directors, as such, may receive a stated salary for
their services or a fixed sum and expenses for attendance at regular and
special meetings, or any combination of the foregoing as may be determined
from time to time by resolution of the Board of Directors, and nothing
contained herein shall be construed to preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Article 17
OFFICERS
Section 17.1 The officers of the Corporation shall be elected by the
Board of Directors at its organization meeting and shall be a President, a
Secretary and a Treasurer. At its option, the Board of Directors may elect
a Chairperson of the Board. The Board of Directors may also elect one or
more Vice Presidents and such other officers and appoint such agents as it
shall deem necessary, who shall hold their offices for such terms, have
such authority and perform such duties as may from time to time be
prescribed by the Board of Directors. Any number of offices may be held by
the same person.
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Section 17.2 The compensation of all officers of the Corporation
shall be fixed by the Board of Directors.
Section 17.3 Each officer shall hold office for a term of one year
and until his successor has been selected and qualified or until his
earlier death, resignation or removal. Any officer may resign at any time
upon written notice to the Corporation. The resignation shall be effective
upon receipt thereof by the Corporation or at such subsequent time as may
be specified in the notice of resignation. The Corporation may secure the
fidelity of any or all of the officers by bond or otherwise.
Section 17.4 Any officer or agent of the Corporation may be removed
by the Board of Directors with or without cause. The removal shall be
without prejudice to the contract rights, if any, of any person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
Section 17.5 An officer shall perform his duties as an officer in
good faith, in a manner he reasonably believes to be in the best interests
of the Corporation and with such care, including reasonable inquiry, skill
and diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his duties shall not be liable by
reason of having been an officer of the Corporation.
Article 18
THE CHAIRPERSON OF THE BOARD
Section 18.1 The Chairperson of the Board shall preside at all
meetings of the shareholders and directors. He shall supervise the
carrying out of the policies adopted or approved by the Board of Directors.
He shall also have and may exercise such further powers and duties as from
time to time may be conferred upon or assigned to him by the Board of
Directors.
Article 19
THE PRESIDENT
Section 19.1 The President shall be the chief executive officer of
the Corporation; shall have general and active management of the business
of the Corporation; shall see that all orders and resolutions of the Board
of Directors are put into effect, subject, however, to the right of the
Board of Directors to delegate any specific powers, except such as may be
by statute exclusively conferred on the President, to any other officer or
officers of the Corporation. The President shall execute bonds, mortgages
and other contracts requiring a seal under the seal of the Corporation,
except where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or
agent of the Corporation. In the absence or incapacity of the
<PAGE>
Chairperson of the Board, the President shall have and exercise all powers
conferred by these By-laws or otherwise on the Chairperson of the Board.
Article 20
THE VICE PRESIDENT
Section 20.1 The Vice President or, if more than one, the Vice
Presidents in the order established by the Board of Directors shall, in the
absence or incapacity of the President, exercise all powers and perform the
duties of the President. The Vice Presidents, respectively, shall also
have such other authority and perform such other duties as may be provided
in these By-laws or as shall be determined by the Board of Directors or the
President. Any Vice President may, in the discretion of the Board of
Directors, be designated as "executive," "senior," or by departmental or
functional classification.
Article 21
THE SECRETARY
Section 21.1 The Secretary shall attend all meetings of the Board of
Directors and of the shareholders and keep accurate records thereof in one
or more minute books kept for that purpose and shall perform the duties
customarily performed by the secretary of a corporation and such other
duties as may be assigned to him by the Board of Directors or the
President.
Article 22
THE TREASURER
Section 22.1 The Treasurer shall have the custody of the corporate
funds and securities; shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall perform such
other duties as may be assigned to him by the Board of Directors or the
President. He shall give bond in such sum and with such surety as the
Board of Directors may from time to time direct.
Article 23
ASSISTANT OFFICERS
Section 23.1 Each assistant officer shall assist in the performance
of the duties of the officer to whom he is assistant and shall perform such
duties in the absence of the officer. He shall perform such additional
duties as the Board of Directors, the President or the officer to whom he
is assistant may from time to time assign him. Such officers may be given
such functional titles as the Board of Directors shall from time to time
determine.
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Article 24
INDEMNIFICATION
Section 24.1 (Third Party Actions) The Corporation shall have power
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative (other than an action by
or in the right of the Corporation), by reason of the fact that he is or
was a representative of the Corporation, or is or was serving at the
request of the Corporation as a representative of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action or proceeding if
he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to
any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action or proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not
act in good faith and in a manner that he reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to
any criminal proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 24.2 (Derivative Actions) The Corporation shall have
power to indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action by or in the
right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a representative of the Corporation or is or was
serving at the request of the Corporation as a representative of another
domestic or foreign corporation for profit or not-for-profit, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of the action if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation. Indemnification shall not be made under this
section in respect of any claim, issue or matter as to which the person has
been adjudged to be liable to the Corporation unless and only to the extent
that the court of common pleas of the judicial district embracing the
county in which the registered office of the Corporation is located or the
court in which the action was brought determines upon application that,
despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for
the expenses that the court of common pleas or other court deems proper.
Section 24.3 (Mandatory Indemnification) To the extent that a
representative of the Corporation has been successful on the merits or
other wise in defense of any action or proceeding referred to in Sections
24.1 (relating to third party actions) or 24.2 (relating to derivative
actions) or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 24.4 (Procedure for Effecting Indemnification) Unless
ordered by a court, any indemnification under Sections 24.1 (relating to
third party actions) or 24.2 (relating to
<PAGE>
derivative actions) shall be made by the Corporation only as authorized in
the specific case upon a determination that indemnification of the person
is proper in the circumstances because he has met the applicable standard
of conduct set forth in those sections. The determination shall be made:
(a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the action
or proceeding;
(b) if such a quorum is not obtainable or if obtainable and a
majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion;
or
(c) by the shareholders.
Section 24.5 (Advancing Expenses) Expenses (including attorneys'
fees) incurred in defending any action or proceeding referred to in this
Article 24 may be paid by the Corporation in advance of the final
disposition of the action or proceeding upon receipt of the undertaking by
or on behalf of the person to repay the amount if it is ultimately
determine that he is not entitled to be indemnified by the Corporation as
authorized in this Article 24 or otherwise.
Section 24.6 (Supplementary Coverage) (a) The indemnification and
advancement of expenses provided by, or granted pursuant to, the other
sections of this Article 24 shall not be deemed exclusive of any other
rights to which a person seeking indemnification or advancement of expenses
may be entitled under any By-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding that office.
The Corporation may create a fund of any nature, which may, but need not
be, under the control of a trustee, or otherwise secure or insure in any
manner its indemnification obligations, whether arising under or pursuant
to this Section 24.6 or otherwise.
(b) Indemnification pursuant to subsection (a) of this Section 24.6
shall not be made in any case where the act or failure to act giving rise
to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
(c) Indemnification pursuant to subsection (a) of this Section 24.6
under any By-law, agreement, vote of shareholders or directors or
otherwise, may be granted for any action taken or any failure to take any
action and may be made whether or not the Corporation would have the power
to indemnify the person under any other provision of law except as provided
in this Section 24.6 and whether or not the indemnified liability arises or
arose from any threatened, pending or completed action by or in the right
of the Corporation.
Section 24.7 (Power to Purchase Insurance) The Corporation shall
have power to purchase and maintain insurance on behalf of any person who
is or was a representative of the Corporation or is or was serving at the
request of the Corporation as a representative of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status
as such, whether or not the Corporation would have the power to indemnify
him against that liability under the provisions of this Article 24.
<PAGE>
Section 24.8 (Application to Surviving or New Corporations) For the
purpose of this Article 24, references to "the Corporation" include all
constituent corporations absorbed in a consolidation, merger or division,
as well as the surviving or new corporations surviving or resulting
therefrom, so that any person who is or was a representative of the
constituent, surviving or new corporation, or is or was serving at the
request of the constituent, surviving or new corporation as a
representative of another domestic or foreign corporation for profit or
not-for-profit, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article 24
with respect to the surviving or new corporation as he would if he had
served the surviving or new corporation in the same capacity.
Section 24.8 (Application to Employee Benefit Plans) For purposes
of this Article 24:
(a) References to "other enterprises" shall include employee benefits
plans and references to "serving at the request of the Corporation" shall
include any service as a representative of the Corporation that imposes
duties on, or involves services by, the representative with respect to an
employee benefit plan, its participants or beneficiaries.
(b) Excise taxes assessed on a person with respect to an employee
benefit plan pursuant to applicable law shall be deemed "fines."
(c) Action with respect to an employee benefit plan taken or omitted
in good faith by a representative of the Corporation in a manner he
reasonable believed to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be action in a manner that is
not opposed to the best interests of the Corporation.
Section 24.9 (Duration and Extent of Coverage) The indemnification
and advancement of expenses provided by, or granted pursuant to, this
Article 24 shall, unless otherwise provide when authorized or ratified,
continue as to a person who has ceased to be a representative of the
Corporation and shall inure to the benefit of the heirs and personal
representative of that person.
Article 25
SHARE CERTIFICATES
Section 25.1 The share certificates of the Corporation shall be
numbered and registered in a share register as they are issued; shall bear
the name of the registered holder, the number and class of shares
represented thereby, the par value of each share or a statement that such
shares are without par value, as the case may be; shall be signed by the
President or a Vice President and the Secretary or the Treasurer or any
other person properly authorized by the Board of Directors, and shall bear
the corporate seal, which seal may be a facsimile engraved or printed.
Where the certificate is signed by a transfer agent or a registrar, the
signature of any corporate officer on such certificate may be a facsimile
engraved or printed. In case any officer who has signed, or whose
facsimile signature has been placed upon, any share certificate shall have
ceased to be such officer because of death, resignation or otherwise before
the certificate is issued, it may be issued by the Corporation with the
same effect as if the officer had not ceased to be such at the date of its
issue.
<PAGE>
Article 26
TRANSFER OF SHARES
Section 26.1 Upon surrender to the Corporation of a share
certificate duly endorsed by the person named in the certificate or by
attorney duly appointed in writing and accompanied where necessary by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto and the old
certificate canceled and the transfer recorded upon the transfer books for
shares of the Corporation. No transfer shall be made if it would be
inconsistent with the provisions of Article 8 of the Pennsylvania Uniform
Commercial Code and any amendment or supplements thereto.
Article 27
LOST CERTIFICATES
Section 27.1 Where a shareholder of the Corporation alleges the
loss, theft or destruction of one or more certificates for shares of the
Corporation and requests the issuance of an substitute certificate
therefor, the Board of Directors may direct a new certificate of the same
tenor and for the same number of shares to be issued to such person upon
such person's making of an affidavit in form satisfactory to the Board of
Directors setting forth the facts in connection therewith, provided that
prior to the receipt of such request the Corporation shall not have either
registered a transfer of such certificate or received notice that such
certificate has been acquired by a bona fide purchaser. When authorizing
such issue of a new certificate the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate, or his heirs or
legal representatives, as the case may be, to advertise the same in such
manner as it shall require or give the Corporation a bond in such form and
with surety or sureties, with fixed or open penalty, as shall be
satisfactory to the Board of Directors, as indemnity for any liability or
expense which it may incur by reason of the original certificate remaining
outstanding.
Article 28
DIVIDENDS
Section 28.1 The Board of Directors may, from time to time, at any
duly convened regular or special meeting or by unanimous consent in
writing, declare and pay dividends upon the outstanding shares of capital
stock of the Corporation in cash, property or shares of the Corporation, so
long as any dividend shall not be in violation of law and the Articles of
Incorporation.
Section 28.2 Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such
<PAGE>
other purposes as the Board of Directors shall believe to be for the best
interests of the Corporation, and the Board of Directors may reduce or
abolish any such reserve in the manner in which it was created.
Article 29
FINANCIAL REPORT TO SHAREHOLDERS
Section 29.1 The President and the Board of Directors shall present
prior to each annual meeting of the shareholders a full and complete
statement of the business and affairs of the Corporation for the preceding
year.
Article 30
INSTRUMENTS
Section 30.1 Any note, mortgage, evidence of indebtedness, contract
or other document, or any assignment or endorsement thereof, executed or
entered into between the Corporation and any other person, when signed by
one or more officers or agents having actual or apparent authority to sign
it, or by the President or a Vice President and Secretary or Assistant
Secretary or Treasurer or Assistant Treasurer of the Corporation, shall be
held to have been properly executed for and on behalf of the Corporation.
Section 30.2 The affixation of the corporate seal shall not be
necessary to the valid execution, assignment or endorsement by the
Corporation of any instrument or other document.
Article 31
FISCAL YEAR
Section 31.1 The fiscal year of the Corporation shall be the
calendar year.
Article 32
SEAL
Section 32.1 The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words
"Corporate Seal, Pennsylvania." Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed in any manner reproduced.
<PAGE>
Article 33
NOTICES AND WAIVERS THEREOF
Section 33.1 Whenever written notice is required to be given to any
person under the provisions of applicable law, by the Articles of
Incorporation or of these By-laws, it may be given to the person either
personally or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex
or TWX (with answerback received) or courier service, charges prepaid, or
by telecopier, to his address (or to his telex, TWX, telecopier or
telephone number) appearing on the books of the Corporation or, in the case
of directors, supplied by him to the Corporation for the purpose of notice.
If the notice is sent by mail, telegraph or courier service, it shall be
deemed to have been given to the person entitled thereto when deposited in
the United States mail or with a telegraph office or courier service for
delivery to that person or, in the case of telex or TWX, when dispatched.
A notice of meeting shall specify the place, day and hour of the meeting
and any other information required by any other provision of these By-laws.
Section 33.2 Whenever any written notice is required to be given
under the provisions of applicable law, the Articles of Incorporation or of
these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of the notice. Except as
otherwise required by these By-laws, neither the business to be transacted
at, nor the purpose of, a meeting need be specified in the waiver of notice
of the meeting. In the case of a special meeting of shareholders, the
waiver of notice shall specify the general nature of the business to be
transacted.
Section 33.3 Attendance of a person at any meeting shall constitute
a waiver of notice of the meeting except where a person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting was not lawfully called
or convened.
Section 33.4 Whenever any notice or communication is required to be
given to any person under the provisions of applicable law, the Articles of
Incorporation, these By-laws, the terms of any agreement and any other
instrument or as a condition precedent to taking any corporate action, and
communication with that person is then unlawful, the giving of the notice
or communication to that person shall not be required and there shall be no
duty to apply for a license or other permission to do so. Any action or
meeting that is taken or held without notice or communication to that
person shall have the same validity as if the notice or communication had
been duly given. If the action taken is such as to require the filing of
any document with respect thereto under any provision of law or any
agreement or other instrument, it shall be sufficient, if such is the fact
and if notice or communication in required, to state therein that notice or
communication was given to all persons entitled to receive notice or
communication except persons with whom communication was unlawful.
Section 33.5 Section 33.4 shall also be applicable to any
shareholder with whom the Corporation has been unable to communicate for
more than twenty-four (24) consecutive months because communications to the
shareholder are returned unclaimed or the shareholder has otherwise failed
to provide the Corporation with a current address. Whenever the
shareholder
<PAGE>
provides the Corporation with a current address, Section 33.4 shall cease
to be applicable to the shareholder under this Section 33.5.
Article 34
EMERGENCIES
Section 34.1 The Board of Directors may adopt emergency By-laws,
subject to repeal or change by action of the shareholders, which shall,
notwithstanding any different provisions of law, of the Articles of
Incorporation or of these By-laws, be effective during any emergency
resulting from an attack on the United States, a nuclear disaster or
another catastrophe as a result of which a quorum of the Board of Directors
cannot readily be assembled. The emergency By-laws may make any provision
that may be appropriate for the circumstances of the emergency including,
procedures for calling meetings of the Board of Directors, quorum
requirements for meetings and procedures for designating additional or
substitute directors.
Section 34.2 The Board of Directors, either before or during any
emergency, may provide, and from time to time modify, lines of succession
in the event that during the emergency any or all officers or agents of the
Corporation shall for any reason be rendered incapable of discharging their
duties and may, effective in the emergency, change the head offices or
designate several alternative head offices or regional offices of the
Corporation or authorize the officers to do so.
Section 34.3 A representative of the Corporation acting in
accordance with any emergency By-laws shall not be liable except for
willful misconduct and shall not be liable for any action taken by him in
good faith in an emergency in furtherance of the ordinary business affairs
of the Corporation even though not authorized by the emergency or other By-laws
then in effect.
Section 34.4 To the extent not inconsistent with any emergency By-laws
so adopted, the By-laws of the Corporation shall remain in effect
during any emergency and, upon its termination, the emergency By-laws shall
cease to be effective.
Section 34.5 Unless otherwise provided in emergency By-laws, notice
of any meeting of the Board of Directors during an emergency shall be given
only to those directors to whom it is feasible to reach at the time and by
such means as are feasible at the time, including publication, radio or
television. To the extent required to constitute a quorum at any meeting
of the Board of Directors during any emergency, the officers of the
Corporation who are present shall, unless otherwise provided in emergency
By-laws, be deemed, in order of rank and within the same rank in order of
seniority, directors for the meeting.
<PAGE>
Article 35
AMENDMENTS
Section 35.1 These By-laws may be altered, amended or repealed by
the affirmative vote of the holders of a majority of the outstanding shares
of Common Stock at any regular or special meeting duly convened after
notice to the shareholders of that purpose, or by a majority vote of the
members of the Board of Directors at any regular or special meeting thereof
duly convened after notice to the directors of that purpose, subject always
to the power of the shareholders to change such action of the Board of
Directors by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock.
<PAGE>
ARTICLES OF INCORPORATION-FOR PROFIT
OF
DIMECO, INC.
1. The name of the corporation is Dimeco, Inc.
2. The address of this corporation's initial registered office
in the Commonwealth of Pennsylvania and the county of venue is 820-822
Church Street, Honesdale, Pennsylvania 18431, Wayne County.
3. The corporation is incorporated under the provisions of the
Business Corporation Law of 1988.
4. The name and address, including number and street of each
incorporator, is John B. Lampi, Schnader Harrison Segal & Lewis, 30 North
Third Street, Suite 700, Harrisburg, Pennsylvania 17101.
5. The articles of incorporation are to be effective at the
time of filing with the Department of State of the Commonwealth of
Pennsylvania.
6. The corporation shall have authority to issue three million
(3,000,000) shares of common stock, par value $.50 per share, with a total
authorized capital in the amount of one million five hundred thousand
dollars ($1,500,000).
7. No cumulative voting rights shall exist with respect to the
election of directors.
8. No holder of shares of any class or of any series of any
class shall have any preemptive right to subscribe for, purchase or receive
any shares of the corporation, whether now or hereafter authorized, or any
obligations or other securities convertible into or carrying options to
purchase any such shares of the corporation, or any options to purchase any
such shares of the corporation, or any options or rights to purchase any
such shares or securities, issued or sold by the corporation for cash or
any other form of consideration, and any such shares, options, securities
or rights may be issued or disposed of by the Board of Directors to such
persons and on such terms as the Board of Directors, in its discretion,
shall deem advisable.
9. No merger, consolidation, liquidation or dissolution of this
corporation nor any action that would result in the sale or other
disposition of all or substantially all of the assets of this corporation
shall be valid unless first approved by the affirmative vote of the holders
of at least seventy-five percent (75%) of the outstanding shares of common
stock of this corporation. This Article 9 may not be amended unless first
approved by the affirmative vote of the holders of at least seventy-five
percent (75%) of the outstanding shares of common stock of this
corporation.
10. (a) The Board of Directors may, if it deems advisable,
oppose a tender or other offer for the corporation's securities, whether
the offer is in cash or in the securities of a corporation or otherwise.
When considering whether to oppose an offer, the Board of Directors
<PAGE>
may, but is not legally obligated to, consider any relevant, germane or
pertinent issue; by way of illustration, but not to be considered any
limitation on the power of the Board of Directors to oppose a tender or
other offer for this corporation's securities, the Board of Directors may,
but shall not be legally obligated to, consider any or all of the
following:
(i) whether the offer price is acceptable based
on the historical and present operating results or
financial condition of this corporation;
(ii) whether a more favorable price could be
obtained for this corporation's securities in the
future;
(iii) the social and economic effects of the
offer or transaction on this corporation and any
of its subsidiaries, employees, depositors, loan
and other customers, vendors, creditors,
shareholders and other elements of the communities
in which this corporation and any of its
subsidiaries operate or are located;
(iv) the reputation and business practice of the
offeror and its management and affiliates as they
would affect the shareholders, employees,
depositors, vendors and customers of the
corporation and its subsidiaries and the future
value of the corporation's stock;
(v) the value of the securities (if any) which
the offeror is offering in exchange for the
corporation's securities, based on any analysis of
the worth of the corporation or other entity whose
securities are being offered;
(vi) the business and financial condition and
earnings prospects of the offeror, including, but
not limited to, debt service and other existing or
likely financial obligations of the offeror, and
the possible affect of such conditions upon this
corporation and any of its subsidiaries and the
other elements of the communities in which this
corporation and any of its subsidiaries operate or
are located; and
(vii) any antitrust or other legal and
regulatory issues that are raised by the offer.
(b) If the Board of Directors determines that an offer should be
rejected, it may take any lawful action to accomplish its purpose,
including, but not limited to, any or all of the following: advising
shareholders not to accept the offer; litigation against the offeror;
filing complaints with all governmental and regulatory authorities;
acquiring the offeror corporation's securities; selling or otherwise
issuing authorized but unissued securities or treasury stock or granting
options with respect thereto; acquiring a company to create an antitrust or
other
<PAGE>
regulatory problem for the offeror; and obtaining a more favorable
offer from another individual or entity.
11. The provisions of Subchapter E (relating to control
transactions) and Subchapter G (relating to control-share acquisitions) of
Chapter 25 of the Pennsylvania Associations Code shall not be applicable to
this corporation.
