<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 September 30,1997
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 October 31, 1997, there were 724,691 shares outstanding of the issuer's
common stock with an aggregate market value of approximately $21,016,045.
<PAGE>
Dimeco, Inc.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) as of September 30,
1997 and December 31, 1996 3
Consolidated Statement of Income (unaudited) for the
three months and the nine months ended
September 30, 1997 and 1996 4
Consolidated Statement of Cash Flows (unaudited) for
the nine months ended September 30,1997 and 1996 5
Consolidated Statement of Changes in Stockholders' Equity 6
Notes to Consolidated Financial Statements (unaudited) 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default Upon Senior Securities 15
Item 4. Submissions of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<PAGE>
Dimeco, Inc.
CONSOLIDATED BALANCE SHEET (Unaudited)
September 30, December 31,
1997 1996
------------- -------------
Assets
Cash and due from banks $ 1,085,299 $ 1,600,524
Interest-bearing deposits in other banks 4,036,864 3,718,168
Federal funds sold 5,720,000 1,195,000
------------- -------------
Total cash and cash equivalents 10,842,163 6,513,692
------------- -------------
Mortgage loans held for sale 53,893 206,813
Investment securities held to maturity
(market value $7,697,543 and $14,907,048) 7,645,083 14,792,495
Investment securities available for sale 16,712,676 13,714,782
Loans (net of unearned income of $1,473,253
and $1,473,603) 109,055,088 100,013,324
Less allowance for possible loan losses 1,438,422 1,366,006
------------- -------------
Net loans 107,616,666 98,647,318
------------- -------------
Premises and equipment, net 2,985,518 3,066,150
Other real estate 704,619 460,619
Accrued interest receivable 915,559 1,003,565
Other assets 1,893,846 1,878,770
------------- -------------
TOTAL ASSETS $ 149,370,023 $ 140,284,204
============= =============
Liabilities
Deposits:
Noninterest-bearing $ 14,128,605 $ 12,760,278
Interest-bearing 119,435,862 113,242,229
------------- -------------
Total deposits 133,564,467 126,002,507
------------- -------------
Securities sold under agreements to repurchase 510,244 -
Accrued interest payable 569,616 521,229
Other liabilities 673,999 613,193
------------- -------------
TOTAL LIABILITIES 135,318,326 127,136,929
------------- -------------
Stockholders' Equity
Common stock, $.50 par value; 3,000,000 shares
authorized, 722,736 and 721,904 shares issued
and outstanding 363,108 360,952
Capital surplus 2,658,431 2,558,151
Retained earnings 11,139,298 10,257,053
Less: treasury stock; 3,481 shares at cost (92,250) -
Net unrealized loss on securities
available for sale (16,890) (28,881)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 14,051,697 13,147,275
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 149,370,023 $ 140,284,204
============= =============
See accompanying notes to the consolidated financial statements.
3
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest and dividend income
Interest and fees on loans $2,402,265 $2,112,412 $6,991,782 $6,375,237
Interest-bearing deposits in other banks 6,017 4,668 18,025 17,002
Federal funds sold and securities
purchased under agreement to resell 59,564 64,729 106,692 316,507
Investment securities:
Taxable 315,512 281,012 915,638 660,021
Exempt from federal income tax 59,900 82,932 188,396 244,583
---------- ---------- ---------- ----------
Total interest income 2,843,258 2,545,753 8,220,533 7,613,350
---------- ---------- ---------- ----------
Interest expense
Deposits 1,241,874 1,099,625 3,525,238 3,246,860
Borrowed funds 125 - 5,707 -
Securities sold under agreements to repurchase 2,267 - 2,267 58,636
---------- ---------- ---------- ----------
Total interest expense 1,244,266 1,099,625 3,533,212 3,305,496
---------- ---------- ---------- ----------
Net interest income 1,598,992 1,446,128 4,687,321 4,307,854
Provision for loan losses 138,000 138,000 409,500 411,000
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 1,460,992 1,308,128 4,277,821 3,896,854
---------- ---------- ---------- ----------
Other income
Service charges on deposit accounts 57,072 51,928 163,820 158,632
Gain (loss) on loans available for sale 84,636 28,472 104,667 (7,612)
Other operating income 110,167 129,232 309,551 326,949
Gain on sale of securities - - - 59,257
---------- ---------- ---------- ----------
Total other income 251,875 209,632 578,038 537,226
---------- ---------- ---------- ----------
Other expenses
Salaries and employee benefits 471,340 480,259 1,499,070 1,437,441
Occupancy expenses, net 82,525 65,687 252,238 206,172
Furniture and equipment expense 75,955 57,108 228,606 185,291
Operations of other real estate 57,133 14,489 69,024 57,106
Other operating expense 343,759 252,679 976,546 796,992
---------- ---------- ---------- ----------
Total other expenses 1,030,712 870,222 3,025,484 2,683,002
---------- ---------- ---------- ----------
Income before income taxes 682,155 647,538 1,830,375 1,751,078
Income tax expense 206,900 200,000 558,000 529,000
---------- ---------- ---------- ----------
NET INCOME $ 475,255 $ 447,538 $1,272,375 $1,222,078
========== ========== ========== ==========
Net earnings per share $ 0.66 $ 0.62 $ 1.76 $ 1.70
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Dimeco, Inc.
STATEMENT OF CASH FLOWS (Unaudited)
Nine Months
Ended September 30,
1997 1996
----------- -----------
Operating activities
Net income $ 1,272,375 $ 1,222,078
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 409,500 411,000
Depreciation 247,738 214,226
Market value adjustment, loans held for sale - 4,009
(Accretion) amortization of investments, net (117,457) 99,781
Investment securities (gains) losses, net - (59,257)
Decrease (increase) in accrued interest receivable 88,006 (73,027)
Increase (decrease) in accrued interest payable 48,387 (95,000)
Net (increase) decrease in loans available for sale 152,920 161,139
Amortization of net deferred loan origination fees (54,373) (66,290)
Other, net 70,553 (161,167)
----------- -----------
Net cash provided by operating activities 2,117,649 1,657,492
----------- -----------
Investing activities
Investment securities available for sale:
Proceeds from sales of investment securities - 354,248
Proceeds from maturities or repayments
of investment securities 26,068,171 8,939,295
Purchase of investment securities (28,893,794) (8,954,027)
Investment securities held to maturity:
Proceeds from maturities or repayments
of investment securities 9,611,001 5,280,000
Purchase of investment securities (2,500,235) (12,042,470)
Loans originated or acquired, net (9,599,475) (6,652,405)
Purchase of premises and equipment (167,106) (231,120)
Proceeds from sale of other real estate owned - 162,806
----------- -----------
Net cash used for investing activities (5,481,438) (13,143,673)
----------- -----------
Financing activities
Increase in deposits, net 7,561,960 11,100,420
Increase (decrease) in securities sold under
agreements to repurchase 510,244 (2,050,000)
Proceeds from dividend reinvestment plan 158,586 221,940
Cash dividends paid (390,130) (307,139)
Purchase treasury stock (148,400) -
----------- -----------
Net cash provided by financing activities 7,692,260 8,965,221
----------- -----------
Increase (decrease) in cash and cash
equivalents 4,328,471 (2,520,960)
Cash and cash equivalents at beginning of period 6,513,692 9,121,689
----------- -----------
Cash and cash equivalents at end of period $10,842,163 $ 6,600,729
=========== ===========
See accompanying notes to consolidated financial statements.
5
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN STOCK HOLDERS' EQUITY
<TABLE>
<CAPTION>
Net Total
Common Retained Unrealized Treasury Stockholders'
Stock Surplus Earnings Gain (Loss) Stock Equity
--------- ----------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 360,952 $ 2,558,151 $ 10,257,053 $ (28,881) $ - $ 13,147,275
Net Income 1,272,375 1,272,375
Net unrealized gain on
securities 11,991 11,991
Purchase treasury stock (148,400) (148,400)
Dividend reinvestment and
stock purchase plan 2,156 100,280 56,150 158,586
Cash dividends
(.52 per share) (390,130) (390,130)
--------- ----------- ------------ --------- --------- ------------
Balance,
September 30,1997 $ 363,108 $ 2,658,431 $ 11,139,298 $ (16,890) $ (92,250) $ 14,051,697
========= =========== ============ ========= ========= ============
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<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 1996 have been reclassified to conform to 1997
classifications.
Pending Accounting Pronouncements
- ---------------------------------
In June 1996, the Financial accounting Standards Board ("FASB") issued
Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." The Statement provides consistent
standards for distinguishing transfers that are secured borrowings based on
control-oriented "financial -components" approach. Under this approach, after
a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and liabilities it has incurred, derecognizes
financial assets when control has been surrendered and derecognizes
liabilities when extinguished. The provisions of Statement No. 125 are
effective for transactions occurring after December 31, 1996, except those
provisions relating to repurchase agreements, securities lending, and other
similar transactions and pledged collateral, which have been delayed until
after December 31, 1997 by Statement No. 127, "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125, an amendment of FASB
Statement No. 125." The adoption of these statements is not expected to have a
material impact on financial position or results of operations.
On March 3, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earning Per Share." Statement No.128
will become effective for the Company beginning in December 1997. This
statement re-defines the standards for computing earnings per share ("EPS")
previously found in Accounting Principles Board Opinion No. 15, Earnings Per
Share. Statement No. 128 establishes new standards for computing and
presenting EPS and requires dual presentation of "basic" and "diluted" EPS on
the face of the income statement for all entities with complex capital
structures. Under Statement No. 128, basic EPS is to be computed based upon
income availability to common shareholders and the weighted average number of
common shares outstanding for the period. Diluted EPS is to reflect the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company.
Statement No. 128 also requires the restatement of all prior-period EPS data
presented. The Company will adopt Statement No. 128 as of December 31, 1997
and based on current estimates, does not believe the effect of adoption will
have a significant impact on the Company's financial position or results of
operations.
7
<PAGE>
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.130, "Reporting Comprehensive Income."
Statement No. 130 is effective for fiscal years beginning after December 15,
1997. This statement establishes standards for reporting and presentation of
comprehensive income and its components (revenue, expenses, gains, and losses)
in a full set of general purpose financial statements. It requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is presented with the same prominence as other financial statements.
Statement No. 130 requires that companies (i) classify items of other
comprehensive income by their nature in a financial statement and (ii) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial condition. Reclassification of financial statements for earlier
periods provided for comprehensive purposes is required.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
-------------------
Total assets at September 30, 1997 increased $9,086,000 or 6.5% to
$149,370,000 from the $140,284,000 reported at December 31, 1996. Cash and
cash equivalents increased $4,328,000 or 66.5% due mainly to increases in
federal funds sold. In light of lower interest rates offered in the bond
market, the proceeds of investment securities that have matured in 1997 were
left in federal funds sold or reinvested in short term commercial paper in
order to keep liquidity levels high while maintaining interest income levels
comparable to those on short term investments.
The investment security portfolio reflects the above mentioned changes with a
decrease of $4,150,000 or 14.6% in total investment securities. Maturities of
investments were generally not matched with purchases due to the leveling of
the yield curve on longer term investments. Management believes that there is
not sufficient return in longer term investments to justify the loss of
liquidity in purchasing longer term securities. Commercial paper purchases,
which are included in the available for sale category, increased $2,676,000 or
25.8% during the period.
The loan portfolio increased $9,042,000 or 9.0% from December 31, 1996,
bringing the total to $109,055,000 as of September 30, 1997. More than half
of this increase, $4,547,000, was generated in the form of commercial
mortgages. While these new loans were originated by all four offices of the
subsidiary bank, the majority of these loans came from the Honesdale and
Greentown offices. In particular, the Greentown office continues to grow and
provide new loan opportunities. Installment loans increased $2,103,000. A
large portion of this increase is from automobile loans which were internally
originated from the annual promotion of these loans. Overall, loan growth
continues as the Company's presence becomes more widespread throughout our
market area.
Noninterest-bearing deposits increased $1,368,000 or 10.7% due in part to
increased branching in the past two years along with normal cyclical
commercial and municipal customer increased balances. Interest-bearing
deposits increased $6,194,000 or 5.5%, with the greatest increase in time
deposits greater than $100,000. This category of deposits increased
$4,831,000 or 51.5% during the period. Management believes this increase is
due to competitive rates offered.
Equity capital increased $904,000 or 6.9% since December 31, 1996, primarily
the result of net earnings for the period of $1,272,000. The dividend
reinvestment plan contributed $159,000 during the period. The Company took
advantage of an opportunity to purchase a block of 5,600 shares of stock for
$148,000. The Company will continue to use this stock for reinvestment of
dividends in the plan until it is depleted. Stockholders' Equity was
decreased by dividends of $390,000, which accounted for a 28.6% increase in
dividends per share as compared to the first three quarters of 1996.
9
<PAGE>
Management monitors risk-based capital and leverage capital ratios in order to
assess compliance with regulatory guidelines. At September 30, 1997, the bank
had total risk-based capital of 13.6%, 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 12.4% of this requirement at
September 30, 1997. Additionally, the Company must maintain a minimum
leverage capital ratio of 3%. This ratio was 10.0% as of September 30, 1997.
Results of Operation
--------------------
Comparison of the Nine Months Ended September 30, 1997 and 1996
- ---------------------------------------------------------------
The Company earned $1,272,000 for the nine months ended September 30, 1997, an
increase of $50,000 or 4.1% from the $1,222,000 reported for the same period
in 1996.
Interest income increased $607,000 or 8.0% from 1996 to 1997 with the average
earning assets increasing $12,124,000 or 9.9%. Offsetting this increase in
average earning assets, the average interest rate on earning assets decreased
from 8.30% to 8.16% during the period with approximately 64% of the loan
portfolio being variable rate instruments which repriced downward in 1997.
Interest expense increased $228,000 or 6.9% due to a larger volume of
interest-bearing liabilities. The average interest rate paid on these
liabilities decreased from 3.77% in 1996 to 3.74% in 1997. The net effect of
these increases in interest income and interest expense is an increase of
$379,000 or 8.8% in net interest income from 1996 to 1997.
The provision for loan losses remained constant in spite of increases in the
size of the loan portfolio in light of management's continuing evaluation of
credit risk in the portfolio. Our internal evaluation of the allowance for
loan loss indicates that the current allowance is adequate and that the
provision expense is sufficient. Management has taken an aggressive stand in
charging off problem loans in light of their more stringent charge-off
guidelines and feels that this policy will in fact strengthen the quality of
the remaining loan portfolio. The allowance for loan loss equals 1.32% and
1.30% at September 30, 1997 and 1996, respectively.
Gains (losses) on loans held for sale increased $112,000 in 1997 from 1996.
During 1996 the Company experienced losses in the held for sale loan category
while during 1997 the Company sold loans of $5,953,000 recognizing gains of
$105,000.
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 and sold
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. There were no securities sold in 1997.
Salaries and employee benefits increased $62,000 or 4.3% in 1997 as compared
to 1996. Payroll expense, net of the direct cost deferral of origination
expenses, increased $32,000 or 3.1% due to a combination of normal salary
increases of approximately 5.3%, increased deferral of payroll costs
associated with the origination of loans (deducted from payroll expense) and
to increased staffing due to the 1996 opening of the Greentown office.
Employee benefits and accruals for the year end incentive payments increased
in proportion to payroll changes $11,000 and $19,000, respectively.
10
<PAGE>
Occupancy expense increased $46,000 or 22.3% due mainly to the establishment
of the Greentown office in the fourth quarter of 1996.
Furniture and equipment expense increased $43,000 or 23.4% with increased
depreciation expenses on fixed assets associated with the opening of the
Greentown office of $20,000 and on the 1996 purchases of computer hardware of
$27,000. Offsetting this increase is the reclassification in 1997 to other
operating expenses of costs associated with computer software support.
Other operating expense increased $180,000 or 22.5% from 1996 to 1997. In an
effort to increase visibility in established and new markets, the Company
increased spending on marketing of $15,000. Legal expenses associated both
with corporate matters and foreclosure actions increased $13,000. ATM expense
increased $13,000 in light of the new location in Greentown and our first
off-site machine located at Woodloch Pines Resort in Hawley, PA. Computer
software amortization increased $22,000 with the purchase of $256,000 in new
software during 1996. In addition, the reclassification of computer software
maintenance coupled with increased expenses due to additional purchases made
in 1996 increased this category by $36,000. Outside professional fees
increased $26,000 due to consulting services in connection with productivity,
technology and management team building. Changes in various other categories
account for the remaining increase, with no one category being a significant
dollar amount.
Comparison of Three Months Ended September 30, 1997 and 1996
- ------------------------------------------------------------
Net income increased $28,000 or 6.2% for the three months ended September 30,
1997 as compared to the same quarter in 1996. Net interest income increased
$153,000 over the same quarter in 1996 based upon increased volume of average
interest-earning assets of $12,100,000 and average interest-bearing
liabilities of $10,916,000 coupled with increases in interest rates of .15% in
interest income and .10% in expense.
Market rates increased in the loans held for sale portfolio during the third
quarter of 1996 and in 1997. In 1997, the Company took advantage of the
increase and sold $3,939,000 of residential mortgage loans.
Occupancy expense increased $17,000 or 25.6% mainly due to the increased
expenses in the Greentown office which was not open in the third quarter of
1996.
Furniture and equipment expense increased $19,000 or 33.0% mainly due to
depreciation on the new assets in the Greentown office and reclassification of
software technical support as discussed above.
Operations of other real estate owned increased $43,000 or 294.3% due to the
recognition of a decrease in market value of $31,000 on three properties. In
addition, the Company had to pay delinquent real estate taxes of $17,000 on
one property which was added to other real estate in 1997.
11
<PAGE>
Other operating expense increased $91,000 or 36.0% from 1996 to 1997.
Advertising expenses were $12,000 greater than in 1996 due to the increased
use of an outside consultant and increased costs of media advertising in
connection with the Greentown office. Legal expenses were $6,000 greater, ATM
expenses were $11,000 greater, computer software amortization was $6,000
greater, computer software maintenance was $13,000 greater and outside
professional fees were $12,000 greater than in 1996 as discussed in the nine
month section above. Postage expenses were $7,000 greater than 1996 due to a
greater number of mailings and to timing differences that will adjust in the
fourth quarter.
12
<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 September 30, 1997
compared to December 31, 1996:
September 30, December 31,
------------ -----------
(dollars in thousands)
Cash and due from banks $ 1,085 $ 1,601
Interest-bearing deposits with other banks 4,037 3,719
Federal funds sold 5,720 1,195
Mortgage loans held for sale 54 207
Investment securities maturing in one
year or less 16,491 20,384
------------ -----------
27,387 27,106
Less short-term borrowings 510 -
------------ -----------
Net liquidity position $ 26,877 $ 27,106
============ ===========
As a percent of total assets 18.0% 19.3%
====== ======
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
$3.5 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.
13
<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
September 30, 1997 and December 31, 1996. 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 which terms have been renegotiated to provide a reduction or
deferral of principal or interest as a result of the deterioration of the
borrower.
September 30, December 31,
------------ -----------
(dollars in thousands)
Loans on nonaccrual basis $ 1,467 $ 1,822
Loans past due 90 days or more 901 834
Renegotiated loans 677 -
------------ -----------
Total nonperforming loans 3,045 2,656
Other real estate 705 461
Repossessed assets 10 -
Nonaccrual securities - -
------------ -----------
Total nonperforming assets $ 3,760 $ 3,117
============ ===========
Nonperforming loans as a percent of
total loans 2.8% 2.7%
====== ======
Nonperforming assets as a percent of
total assets 2.5% 2.2%
====== ======
Management believes the level of the allowance for loan losses at September
30, 1997 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 $1,141,000 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 $178,000. 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.
14
<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
NONE
Item 5 - Other information
NONE
Item 6- Exhibits and Reports on Form 8-K
NONE
15
<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: November 3, 1997 By: /s/ Joseph J. Murray
--------------------
Joseph J. Murray
President and Chief Executive Officer
Date: November 3, 1997 By: /s/ Maureen H. Beilman
----------------------
Maureen H. Beilman
Controller/Treasurer
16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
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0
0
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