<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 March 31, 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 May 2, 1997, there were 726,219 shares outstanding of the issuer's
common stock with an aggregate market value of approximately $19,063,241.
<PAGE>
Dimeco, Inc.
INDEX
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) as of
March 31, 1997 and December 31, 1996 3
Consolidated Statement of Income (unaudited) for
the three months ended March 31, 1997 and 1996 4
Consolidated Statement of Changes in Stockholders'
Equity (unaudited) for the three months ended
March 31, 1997 5
Consolidated Statement of Cash Flows (unaudited)
for the three months ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submissions of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
page 2
<PAGE>
Dimeco, Inc.
CONSOLIDATED BALANCE SHEET (Unaudited)
March 31, December 31,
1997 1996
------------ ------------
ASSETS
Cash and due from banks $ 1,354,586 $ 1,600,524
Interest-bearing deposits in other banks 2,583,845 3,718,168
Federal funds sold - 1,195,000
------------ ------------
Total cash and cash equivalents 3,938,431 6,513,692
------------ ------------
Mortgage loans held for sale - 206,813
Investment securities
(market value $12,432,086 and $14,907,048) 12,342,494 14,792,495
Investment securities available for sale 10,877,556 13,714,782
Loans (net of unearned income of $1,756,943
and $1,473,603) 103,131,998 100,013,324
Less allowance for loan losses 1,455,687 1,366,006
------------ ------------
Net loans 101,676,311 98,647,318
------------ ------------
Premises and equipment, net 3,007,665 3,066,150
Other real estate 460,619 460,619
Accrued interest receivable 1,078,434 1,003,565
Other assets 1,960,963 1,878,770
------------ ------------
TOTAL ASSETS $135,342,473 $140,284,204
============ ============
LIABILITIES
Deposits:
Noninterest-bearing $ 12,437,375 $ 12,760,278
Interest-bearing 108,262,753 113,242,229
------------ ------------
Total Deposits 120,700,128 126,002,507
------------ ------------
Short-term borrowings - -
Accrued interest payable 521,707 521,229
Other liabilities 697,380 613,193
------------ ------------
TOTAL LIABILITIES 121,919,215 127,136,929
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.50 par value; 3,000,000 shares
authorized, 724,040 and 721,904 shares issued
and outstanding 362,020 360,952
Capital surplus 2,608,337 2,558,151
Retained earnings 10,494,072 10,257,053
Net unrealized loss on securities (41,171) ( 28,881)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 13,423,258 13,147,275
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $135,342,473 $140,284,204
============ ============
See accompanying notes to the consolidated financial statements.
page 3
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Three Months Ended
March 31,
1997 1996
------------ ------------
INTEREST INCOME
Interest and fees on loans $ 2,222,207 $ 2,123,519
Interest-bearing deposits in other banks 5,737 4,015
Federal funds sold and securities purchased
under agreements to resell 16,649 120,795
Investment securities:
Taxable 309,303 161,217
Exempt from federal income tax 65,852 80,595
------------ ------------
Total interest income 2,619,748 2,490,141
------------ ------------
INTEREST EXPENSE
Deposits 1,123,776 1,067,652
Borrowed funds 4,912 -
Securities sold under agreements to repurchase - 29,643
------------ ------------
Total interest expense 1,128,688 1,097,295
------------ ------------
NET INTEREST INCOME 1,491,060 1,392,846
Provision for loan losses 135,000 136,500
------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,356,060 1,256,346
------------ ------------
OTHER INCOME
Service charges on deposit accounts 50,686 49,330
Gain (loss) on loans available for sale 13,994 (338)
Other operating income 102,156 105,721
------------ ------------
Total other income 166,836 154,713
------------ ------------
OTHER EXPENSES
Salaries and employee benefits 533,444 480,015
Occupancy expense, net 85,702 76,510
Furniture and equipment expense 70,183 59,493
Deposit insurance premiums 1,318 500
Other operating expenses 303,203 289,474
------------ ------------
Total other expenses 993,850 905,992
------------ ------------
Income before income taxes 529,046 505,067
Income tax expense 161,700 150,000
------------ ------------
Net income $ 367,346 $ 355,067
============ ============
NET EARNINGS PER SHARE $ .51 $ .50
============ ============
See accompanying notes to the consolidated financial statements.
page 4
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
<TABLE>
<CAPTION>
Net unreal-
ized gain Total
Common Capital Retained (loss) on Stockholders'
Stock Surplus Earnings Securities Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 360,952 $ 2,558,151 $10,257,053 $ (28,881) $13,147,275
Net income 367,346 367,346
Net unrealized loss on securities
available for sale (12,290) (12,290)
Dividend reinvestment and stock
purchase plan 1,068 50,186 51,254
Cash dividends ($.18 per share) (130,327) (130,327)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 $ 362,020 $ 2,608,337 $10,494,072 $ (41,171) $13,423,258
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
page 5
<PAGE>
Dimeco, Inc.
STATEMENT OF CASH FLOWS (Unaudited)
For the three months ended March 31, 1997 1996
- ------------------------------------ ------------ ------------
Operating Activities
Net income $ 367,346 $ 355,067
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 135,000 136,500
Depreciation 75,174 64,440
Amortization (accretion) of investments, net (6,511) 28,095
Market value adjustment, loans held for sale - 338
Net decrease (increase) in loans held for sale 206,813 (413,145)
Increase in interest receivable (74,869) (33,152)
Increase in interest payable 478 75,882
Amortization of net deferred loan origination fees (16,528) (18,103)
Other, net 7,942 116,634
------------ ------------
Net cash provided by operating activities 694,845 312,556
------------ ------------
Investing Activities:
Investment securities available for sale:
Proceeds from maturities and repayments
of investment securities 10,782,729 6,281,946
Purchase of investment securities (7,938,613) (3,334,279)
Investment securities:
Proceeds from the maturities or repayments
of investment securities 2,431,000 -
Loans originated or acquired, net (3,147,465) (1,982,705)
Purchase of premises and equipment (16,689) (19,574)
Proceeds from sale of other real estate owned - 89,655
------------ ------------
Net cash provided by investing
activities 2,110,962 1,035,043
------------ ------------
Financing Activities:
Increase (decrease) in deposits, net (5,302,379) 1,358,815
Proceeds from dividend reinvestment/
stock purchase plan 51,254 142,280
Dividends paid (129,943) (106,268)
------------ ------------
Net cash provided by (used for)
financing activities (5,381,068) 1,394,827
------------ ------------
Increase (decrease) in cash and
cash equivalents (2,575,261) 2,742,426
Cash and cash equivalents January 1, 6,513,692 9,121,691
------------ ------------
Cash and cash equivalents March 31, $ 3,938,431 $ 11,864,117
============ ============
See accompanying notes to the consolidated financial statements.
page 6
<PAGE>
Dimeco, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - 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 prior periods have been reclassified to
conform with current year presentation. The reclassifications did not effect
net income or equity capital.
NOTE 2 - Pending Accounting Standards
On March 3, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share." Statement No.
128 will become effective for the Company beginning in 1998. 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 available 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 on January 1, 1998 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.
page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets at March 31, 1997 decreased $4,942,000 or 3.5% from the
$140,284,000 reported at December 31, 1996. The Company historically shows a
minimal decrease in asset size during the first quarter each year due to a
temporary slow local economy.
Interest-bearing deposits in other banks decreased $1,134,000 or 30.5% due to
the maturity of a $1,000,000 certificate of deposit in January, 1997. Federal
funds sold were decreased to zero. These funds were purchased with the
intention to fund maturities of time deposits in the first quarter of 1997.
Investment securities available for sale decreased $2,837,000 or 20.7% and
investment securities held to maturity decreased $2,450,000 or 16.6%.
Commercial paper of $6,500,000, which was purchased in the fourth quarter of
1996, matured in January 1997 and helped fund loan growth and maturities of
certificates of deposit liabilities in the first quarter. Additional funds
received on matured or called securities were reinvested in similar term
investments.
Loans increased $3,119,000 or 3.1% during the period with the main growth in
one-to-four family residential loans of $1,083,000 and commercial real estate
loans of $1,087,000. Increases in these categories is indicative of the
improving local real estate economy together with a concentrated marketing
effort by the bank for these types of loans.
Interest-bearing deposits decreased $4,979,000 or 4.4% during the first
quarter. $3,006,000 of these deposits were in the form of municipal
certificates of deposit with maturities in the first quarter of 1997. The
remainder of the decrease was mainly due to one depositor who had temporarily
deposited the funds in the fourth quarter of 1996 before reinvesting in an
outside investment option during the first quarter of 1997.
Equity capital increased $276,000 or 2.1% over the period primarily due to
earnings of $367,000. The Dividend Reinvestment Plan added $51,000 and the
dividend of $.18 per share was declared in March 1997 accounted for a decrease
of $130,000.
Management monitors risk-based capital and leverage capital ratios in order to
assess compliance with regulatory guidelines. At March 31, 1997 the Company
had total risk-based capital totaling 14.58%, exceeding the 8.0% minimum
risk-based capital requirement. Tier I risk-based capital, which must be at
least fifty percent of total risk-based capital, was 13.32% at that date.
Additionally, the Company must maintain a minimum leverage capital ratio of
3%; as of March 31, 1997 the Company's leverage capital ratio was 9.94%.
page 8
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996.
The Company earned $367,000 for the first quarter of 1997, a $12,000 or 3.4%
increase over the $355,000 recorded for the first quarter of 1996.
Net interest income increased $98,000 or 7.1% in 1997 over the 1996 figure.
This increase in interest income of $130,000 or 5.2% is attributable to volume
increases in the loan and investment portfolios with an increase in average
earning assets of $9,949,000 in 1997 from 1996. At the same time, average
interest yield on these assets decreased .37% to 8.00% in 1997 from 8.37% in
1996. Interest expense also increased $31,000 or 2.9% which was the result of
increased volume offset by a decrease in cost of funds. The average cost of
funds changed from 3.90% in 1996 to 3.70% in 1997 while the average size of
the liability base increased $9,312,000 or 8.3%.
During 1997 the Company recognized a gain of $14,000 on loans available for
sale. This category of loans reacts quickly to changes in market rates and
the Company was able to take advantage of these market fluctuations to
recognize a gain in 1997 which was not matched in 1996.
Salaries and employee benefits expense increased $53,000 or 11.1% from 1996 to
1997. This increase is due to approximately $25,000 in additional staffing in
conjunction with the addition of the Greentown office in the Fall of 1996,
annual salary increases of approximately 4.84% and increased costs of employee
benefits due to a number of employees who have completed their probationary
period and are now eligible for benefits for the first time in 1997.
Other operating expenses increased $13,000 or 4.74% over the period, due to a
variety of individual expense item increases. The most significant items were
an increase of $21,000 regarding computer software amortization and computer
software maintenance expenses which was offset by a decrease of $19,000 in
expenses related to ownership of foreclosed properties.
page 9
<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 March 31, 1997
compared to December 31, 1996:
March 31, December 31,
1997 1996
-------- --------
(dollars in thousands)
Cash and due from banks $ 1,355 $ 1,601
Interest-bearing deposits with other banks 2,584 3,719
Mortgage loans held for sale - 207
Federal funds sold - 1,195
Investment securities maturing in one year or less 12,564 20,384
-------- --------
16,503 27,106
Less short-term borrowings - -
-------- --------
Net liquidity position $ 16,503 $ 27,106
======== ========
As a percent of total assets 12.2% 19.3%
======== ========
Management monitors liquidity on a consistent basis and feels that liquidity
levels are adequate. In addition to these liquidity sources, the Bank also
has available a credit line with the Federal Home Loan Bank of approximately
$3.5 million. Management feels that with this line of credit available, it is
more prudent to invest available funds in longer maturity investments in order
to increase profits while not hampering liquidity.
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 10
<PAGE>
RISK ELEMENTS
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans and repossessed assets at March 31, 1997 and December 31,
1996. A loan is classified as nonaccrual when, in the opinion of management,
there are doubts about collectability 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 with terms that have
been renegotiated to provide a reduction or deferral of principal or interest
as a result of the deterioration of the borrower.
March 31, December 31,
1997 1996
-------- --------
(dollars in thousands)
Loans on nonaccrual basis $ 1,223 $ 1,822
Loans past due 90 days or more 1,085 834
Renegotiated loans 630 -
-------- --------
Total nonperforming loans 2,938 2,656
Other real estate 461 461
Repossessed assets 4 -
-------- --------
Total nonperforming assets $ 3,403 $ 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 March 31,
1997 is sufficient. The relationship between the allowance for loan loses 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 $1,116,000 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 $173,000. There were no impaired loans without a related
allowance for loan losses. The average balance of impaired loans for the
period was $1,120,000.
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 11
<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 - Results of votes of security holders
The following represents the results of matters submitted to a
vote of the shareholders at the annual meeting held on April 24,
1997:
Election of Directors:
The following directors were elected with terms to expire April,
2000:
For Against Abstain
---------- ---------- ----------
David M. Boyd 500,481.9668 5,851.5479 0.
John S. Kiesendahl 500,542.6204 5,790.8943 0.
S.R. Snodgrass was elected as the Company's Independent Auditors
for the year ending December 31, 1997 by the following vote:
For 506,333.5147
Against 0.0000
Abstain 0.0000
Item 5 - Other Information
NONE
Item 6 - Exhibits and Reports on Form 8-K
NONE
page 12
<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: May 7, 1997 By:\s\ Joseph J. Murray
---------------------------
Joseph J. Murray
Executive Vice President and
Chief Executive Officer
Date: May 7, 1997 By:\s\ Maureen H. Beilman
----------------------------
Maureen H. Beilman
Controller
page 13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,355
<INT-BEARING-DEPOSITS> 2,584
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,878
<INVESTMENTS-CARRYING> 12,342
<INVESTMENTS-MARKET> 12,432
<LOANS> 103,132
<ALLOWANCE> 1,456
<TOTAL-ASSETS> 135,342
<DEPOSITS> 120,700
<SHORT-TERM> 0
<LIABILITIES-OTHER> 697
<LONG-TERM> 0
0
0
<COMMON> 362
<OTHER-SE> 13,061
<TOTAL-LIABILITIES-AND-EQUITY> 135,342
<INTEREST-LOAN> 2,222
<INTEREST-INVEST> 375
<INTEREST-OTHER> 22
<INTEREST-TOTAL> 2,620
<INTEREST-DEPOSIT> 1,124
<INTEREST-EXPENSE> 1,129
<INTEREST-INCOME-NET> 1,491
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 994
<INCOME-PRETAX> 529
<INCOME-PRE-EXTRAORDINARY> 367
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<YIELD-ACTUAL> 8.18
<LOANS-NON> 1,223
<LOANS-PAST> 1,085
<LOANS-TROUBLED> 630
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,366
<CHARGE-OFFS> 54
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 1,456
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
