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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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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
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Honesdale, PA 18431
-------------------
(Address of principal executive offices)
(570) 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
----- -----
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on a closing sale price: $17,613,961 on July 25, 2000.
As of July 25, 2000, the registrant had outstanding 739,999 shares of its
common stock, par value $.50 share.
<PAGE>
Dimeco, Inc.
INDEX
Page
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited)
as of June 30, 2000 and December 31, 1999 3
Consolidated Statement of Income (unaudited)
for the three months and the six
months ended June 30, 2000 and 1999 4
Consolidated Statement of Cash Flows
(unaudited) for the six months ended
June 30, 2000 and 1999 5
Consolidated Statement of Changes in
Stockholders' Equity 6
Notes to Consolidated Financial
Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 8-13
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 15
2
<PAGE>
Dimeco, Inc.
CONSOLIDATED BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,656,741 $ 2,491,460
Interest-bearing deposits in other banks 28,345 1,199,210
Federal funds sold and securities purchased under
agreement to resell 4,890,000 940,000
Total cash and cash equivalents 9,575,086 4,630,670
------------- -------------
Mortgage loans held for sale 45,000 237,000
Investment securities available for sale 38,864,441 31,246,921
Investment securities held to maturity (market value of $621,063
and $15,516,823) 597,566 15,570,500
Loans (net of unearned income of $697,130 and $702,421) 142,780,869 137,526,437
Less allowance for loan losses 1,936,405 1,833,615
------------- -------------
Net loans 140,844,464 135,692,822
Premises and equipment, net 4,232,278 3,598,780
Other real estate 391,816 355,436
Accrued interest receivable 1,458,675 1,386,655
Other assets 2,052,457 1,947,855
------------- -------------
TOTAL ASSETS $ 198,061,783 $ 194,666,639
============= =============
LIABILITIES
Deposits:
Noninterest-bearing $ 17,536,687 $ 14,627,337
Interest-bearing 152,341,220 152,666,444
------------- -------------
Total deposits 169,877,907 167,293,781
Short-term borrowings 7,071,113 8,184,933
Other borrowings 1,000,000 -
Accrued interest payable 1,051,634 962,542
Other liabilities 802,691 802,167
------------- -------------
TOTAL LIABILITIES 179,803,345 177,243,423
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $.50 par value; 3,000,000 shares
authorized, 739,622 and 735,565 shares issued 369,811 367,782
Capital surplus 3,127,096 3,004,439
Retained earnings 15,032,067 14,378,134
Accumulated other comprehensive loss (243,911) (245,830)
Treasury stock, at cost (1,000 and 2,144 shares) (26,625) (81,309)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 18,258,438 17,423,216
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 198,061,783 $ 194,666,639
============= =============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 3,184,055 $ 2,765,054 $ 6,263,656 $ 5,497,655
Interest-bearing deposits in other banks 3,136 29,151 13,519 97,585
Federal funds sold and securities
purchased under agreement to resell 36,174 106,404 57,044 214,430
Investment securities:
Taxable 549,629 520,513 1,107,467 902,122
Exempt from federal income tax 60,917 11,445 107,405 27,418
----------- ----------- ----------- -----------
Total interest income 3,833,911 3,432,567 7,549,091 6,739,210
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 1,580,675 1,455,694 3,139,261 2,907,348
Short-term borrowings 81,740 43,661 145,573 69,658
Other borrowings 14,939 - 21,998 -
----------- ----------- ----------- -----------
Total interest expense 1,677,354 1,499,355 3,306,832 2,977,006
----------- ----------- ----------- -----------
Net Interest Income 2,156,557 1,933,212 4,242,259 3,762,204
Provision for loan losses 205,000 93,750 402,500 206,250
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,951,557 1,839,462 3,839,759 3,555,954
----------- ----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 132,500 62,714 218,868 116,239
Mortgage loans held for sale gains (losses), net 7,465 (34,671) 9,560 (56,590)
Other income 133,199 127,578 257,361 269,803
----------- ----------- ----------- -----------
Total noninterest income 273,164 155,621 485,789 329,452
----------- ----------- ----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits 633,051 555,155 1,277,993 1,124,332
Occupancy expense, net 113,687 114,672 247,709 233,957
Furniture and equipment expense 110,863 95,879 208,947 200,910
Professional fees 103,503 92,964 178,492 137,522
Other expenses 394,584 370,090 764,244 689,871
----------- ----------- ----------- -----------
Total noninterest expense 1,355,688 1,228,760 2,677,385 2,386,592
----------- ----------- ----------- -----------
Income before income taxes 869,033 766,323 1,648,163 1,498,814
Income taxes 275,900 256,565 522,082 498,258
----------- ----------- ----------- -----------
Net Income $ 593,133 $ 509,758 $ 1,126,081 $ 1,000,556
=========== =========== =========== ===========
Earnings Per Share $ 0 .80 $ 0.70 $ 1.53 $ 1.37
=========== =========== =========== ===========
Average shares outstanding 738,452 731,996 736,884 731,153
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
Dimeco, Inc.
STATEMENT OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
2000 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,126,081 $ 1,000,556
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 402,500 206,250
Depreciation 181,821 198,244
Amortization of premium and discount on investment
securities, net (13,913) (403,237)
Mortgage loans held for sale, (gains) losses (9,560) 56,590
Net increase in loans held for sale 201,560 15,756
Increase in accrued interest receivable (72,020) (350,897)
Increase (decrease) in accrued interest payable 89,092 (73,568)
Amortization of net deferred loan origination fees (17,980) (20,489)
Other, net (81,294) (425,581)
------------- -------------
Net cash provided by for operating activities 1,798,008 240,440
------------- -------------
INVESTING ACTIVITIES:
Investment securities available for sale:
Proceeds from maturities or paydown 14,319,732 57,854,956
Purchases (7,047,499) (52,067,013)
Investment securities:
Proceeds from maturities or paydown 100,000 1,075,000
Purchases - (11,557,858)
Net increase in loans (5,670,577) (2,136,047)
Purchase of premises and equipment (815,320) (100,769)
Proceeds from sale of other real estate owned 80,684 7,620
------------- -------------
Net cash used provided by (used for)
investing activities 967,020 (6,924,111)
------------- -------------
FINANCING ACTIVITIES:
Increase in deposits, net 2,584,126 9,856,231
Increase (decrease) in short term borrowings (1,113,820) 3,358,741
Increase in other borrowings 1,000,000 -
Proceeds from dividend reinvestment plan 189,451 137,913
Purchase treasury stock (39,625) (150,000)
Cash dividends paid (440,744) (365,171)
------------- -------------
Net cash provided by financing activities 2,179,388 12,837,714
------------- -------------
Increase in cash and cash equivalents 4,944,416 6,154,043
Cash and cash equivalents, beginning of period 4,630,670 6,109,976
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,575,086 $ 12,264,019
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
Dimeco, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Capital Retained Accumulated Treasury Total Comprehensive
Stock Surplus Earnings Other Stock Stockholders' Income
Comprehensive Equity
Income
(Loss)
-------- ---------- ----------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $367,782 $3,004,439 $14,378,134 $(245,830) $(81,309) $17,423,216
Net Income 1,126,081 1,126,081 $1,126,081
Other comprehensive income:
Net unrealized gain on
available for sale
securities, net of
tax benefit of $988 1,919 1,919 1,919
----------
Comprehensive income $1,128,000
==========
Dividend reinvestment plan 2,029 122,657 (29,544) 94,309 189,451
Purchase treasury stock (39,625) (39,625)
Cash dividends
($.60 per share) (442,604) (442,604)
-------- ---------- ----------- --------- -------- -----------
Balance, June 30, 2000 $369,811 $3,127,096 $15,032,067 $(243,911) $(26,625) $18,258,438
======== ========== =========== ========= ======== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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-QSB 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 - INVESTMENT SECURITIES
In accordance with Financial Accounting Standards Board Statement 133,
"Accounting for Derivative Instruments and Hedging Activities", effective
April 1, 2000 the Company reclassified investment securities from held to
maturity classification to the available for sale classification with an
amortized cost of $14,839,000 and estimated market value of $14,777,000.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD LOOKING STATEMENT
The Private Securities Litigation Act of 1995 contains safe harbor provisions
regarding forward-looking statements. When used in this discussion, the
words, "believes," "anticipates," "contemplated," "expects," and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Those risks and
uncertainties include changes in interest rates, the ability to control costs
and expenses, and general economic conditions. The Company undertakes no
obligation to publicly release the results of ant revisions to those
forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
FINANCIAL CONDITION
Total assets at June 30, 2000 increased $3,395,000 or 1.74% from December 31,
1999. Asset growth is not as robust as has been seen in previous years.
Management believes that deposit growth, which drives asset growth, has been
affected by the opportunities for customers to easily invest in alternative
financial companies, including brokerage houses and by high yielding
certificates of deposit offered by our competition.
Cash and due from banks increased $2,165,000 or 86.9% and interest-bearing
deposits in other banks decreased $1,171,000 or 97.6% due to the establishment
of a relationship directly with the Federal Reserve Bank of Philadelphia (the
"Fed"). This relationship includes a noninterest-bearing deposit account with
the Fed where cash items are cleared. In the past, the Company utilized the
Federal Home Loan Bank of Pittsburgh to clear items using an interest-bearing
deposit account to facilitate this activity. Management has evaluated the
differences between use of these two entities and estimates an overall annual
increase in income of $26,000 to clear cash items through the Fed.
Federal funds sold increased $3,950,000 or 420.2% from December 31, 1999 to
June 30, 2000 as the result of a recent deposit promotion with an influx of
funds occurring during the last week of June. These funds were invested in
higher yielding assets during the month of July 2000.
Management adopted FASB 133, "Accounting for Derivative Instruments and
Hedging Activities" as of April 1, 2000. Although management does not
anticipate participating in hedging or derivative activities, this decision
provides additional liquidity and flexibility. In conjunction with the
adoption of FASB 133 management opted to reclassify investment securities with
an amortized cost of $14,839,000 and a market value of $14,777,000 to
available for sale. Accordingly, investments available for sale increased
$7,618,000 or 24.4% from December 31, 1999 to June 30, 2000. The reallocation
of securities combined with$12,600,000 in maturities of short-term commercial
paper were reinvested in $4,245,000 of higher yielding corporate bonds,
$2,710,000 of tax-exempt municipal securities and the remainder in loans.
The loan portfolio increased $5,254,000 or 3.8% during the first six months of
the year as loans increased from $137,526,000 to $142,781,000. This loan
growth is primarily attributable to an increase of $3,854,000 in commercial
mortgages. This category increased from $50,711,000 to $54,566,000 during the
period. New loans were granted to various business types including children's
camps, residential communities, a motel, insurance companies and automobile
dealerships. These loans were for acquisition or expansion of fixed assets
and reflect both a healthy economy and increased commerce within the
communities served by the Company. In addition, commercial loans increased
8
<PAGE>
$1,479,000. These loans were utilized for acquisition of equipment,
machinery, inventory and for general working capital needs. Again, increases
of this type of loan point to the continued expansion of our business
community.
Premises and equipment increased $633,000 or 17.6% due mainly to the
remodeling of the Honesdale and Hawley branches. In order to meet the
expectations of our customers as determined through customer survey, each
location was remodeled to provide more privacy for deposit transactions an
implementation of a greeter in each office who will assist customers as they
enter the premises. In addition, management has begun to make equipment
purchases in conjunction with the introduction of Internet banking to
customers, which will be available in August 2000.
Total deposits increased $2,584,000 or 1.5% during the first half of 2000 with
the main increase in noninterest-bearing deposits. This type of deposit
account increased $2,909,000 or 19.9% over the period. Management believes
that the branch network is continuing to develop new customers for deposit
products and that the implementation of our cash management program has also
attracted new business customers.
Short-term borrowings decreased $1,114,000 or 1.6% during the first half of
2000 which consists of an increase of $3,086,000 in securities sold under
agreement to repurchase combined with repayment of $4,200,000 to the Federal
Home Loan Bank. Securities sold under agreement to repurchase typically
fluctuate seasonally and the current balances are indicative of the nature of
these accounts.
Stockholders' equity increased $835,000 or 4.8% during the first half of 2000,
mainly due to net income of $1,126,000. This increase was offset by the
dividend declaration of $.60 per share or $443,000. Participation by
shareholders in the dividend reinvestment plan accounted for an increase of
$189,000 in equity. Management took the opportunity to purchase stock in the
market for $40,000 to fund the dividend reinvestment plan which decreased
stockholders' equity. Management monitors risk-based capital and leverage
capital ratios in order to assess compliance with regulatory guidelines. At
June 30, 2000, the Company had total risk-based capital of 13.0% and Tier I
capital of 11.8%, both of which exceed the regulatory requirements of 8.0% and
4.0%, respectively. The Company's leverage ratio was 9.4%, which also exceeds
the regulatory requirement of 3.0%.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
The Company earned $1,126,000 in the first half of 2000, which represents an
increase of $126,000 or 12.6% over the first half of 1999.
Interest and fees on loans increased $766,000 or 13.9% from 1999 to 2000. The
average loan portfolio increased $14,833,000 or 11.6% and the average interest
rate earned on the portfolio increased 19 basis point, from 8.58% to 8.77%.
With a rising interest rates scenario, rates on the variable interest rate
portion of our loan portfolio, which represents 63.8% of loans, will continue
to increase over time, with the majority of these loans written to reprice on
an annual basis.
Interest income on interest-bearing deposits in other banks decreased $84,000
or 86.1% due to the transfer of our main correspondent banking to the Fed and
to the maturity of certificates of deposit in March 2000. Interest income
earned on federal funds sold and securities purchased under agreements to
resell decreased $157,000 or 73.4% due to a decrease of $6,969,000 in average
9
<PAGE>
balances of this type of investment although the average interest rates
received increased from 4.86% to 6.16%.
Interest earned on taxable investments increased $205,000 or 22.8% due to an
increase of $3,313,000 in average balance combined with an increase of 63
basis points in interest income. At the same time interest earned on
investments that are exempt from income tax also increased $80,000 due to an
increase of $3,105,000 in average assets.
Interest expense increased $330,000 or 11.1% from 1999 to 2000. The average
liability increased $8,770,000 or 5.3% from 1999 to 2000 while the average
interest rate paid for funds increased 19 basis points from 3.58% to 3.77%.
With increased competition for deposit dollars, management has promoted
several certificate of deposit products with higher interest rates in order
to maintain existing and attract new relationships.
The provision for loan losses increased $196,000 or 95.2% from the first half
of 1999 to 2000. The loan portfolio increased 12.4% over this time frame and
net charged-off loans increased from $37,000 to $300,000. A few commercial
loan customers experienced severe financial problems which caused these
customers to declare bankruptcy in 2000 in addition to the charge-off of a
number of other commercial and consumer loans. Management increased the
provision expense in order to maintain our internal policy limits which are
monitored and reported to the board of directors on a quarterly basis.
Service charges on deposit accounts increased $103,000 or 88.3% from 1999 to
2000. Management analyzed the structure of existing service charges in the
fourth quarter of 1999 and implemented several changes to the method of
calculating and the dollar amount of charges which have produced this
improvement in income.
Net gains (losses) on sales of mortgage loans has increased $66,000 or 116.9%
due to a more concentrated effort of the management of this function. Loans
are processed and sold in a shorter time frame which abates market risk of
sales.
Salaries and employee benefits increased $154,000 or 13.7% due to annual
salary increases combined with the addition of several new employees to manage
new or expanded activities. In addition, profit sharing accruals were not
made in 1999 as the profit goals had not been met while in 2000 these accruals
are recorded due to the accomplishment of the goals.
Professional fees increased $41,000 or 29.8% in the first half of 2000 as
compared to the same period in 1999. The greatest increase was in the area of
legal fees, which increased $29,000 or 106.3% as a result of elevated levels
of loan collection activity, implementation of the stock option plan and
research on prospective lines of business.
Other expense increased $74,000 or 10.8% from 1999 to 2000. This category
includes all noninterest expense items not specifically detailed above and
therefore has a large number of individual items which each show smaller
changes. The most prominent changes are detailed here. Advertising expense
increased $15,000 or 19.6% in order to promote new business lines and to
attract time deposits. Correspondent bank fees increased $12,000 or 34.6% due
to decreased balances in the correspondent bank account which therefore
increased the hard dollars paid for these services. Expenses related to other
real estate owned increased $11,000 or 63.2% in 2000 as compared to 1999 due
mainly to a market value adjustment for the reassessment of property owned.
FDIC insurance increased $8,000 or 90.9% due to a combination of a new
assessment structure and an increase in the deposits on which the assessment
is based. The Pennsylvania shares tax increased $8,000 or 11.5% due to the
increased equity of the bank. Offsetting these increases was a decrease of
$10,000 or 10.8% in bank supply expenses due to one-time expenses incurred in
1999.
10
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
During the second quarter of 2000, the Company earned $593,000 or 16.4% more
than the same quarter of 1999.
Interest and fees earned on loans increased $419,000 or 15.2% based upon an
increase of $15,337,000 in average loan balances combined with an increase in
the average interest rate earned of 8.86% as compared to 8.61% in 1999.
Interest earned on investments increased $79,000 or 14.8% from the second
quarter of 1999 to 2000 with the average balance of these investments
remaining fairly stable and the average yield earned on the portfolio
increasing to 6.13% from 5.40%.
Interest earned on interest -bearing balances in other banks decreased $26,000
or 89.2% because of the maturity of certificates of deposit which were on the
books in 1999 and were not repurchased in 2000 in addition to lower balances
held in the interest-bearing checking account at FHLB. At the same time the
average balance in federal funds sold and securities purchased under
agreements to resell decreased $6,158,000 while the interest rate received on
this type of investment increased to 6.34% from 5.04% in 1999.
Interest expense increased $178,000 in 2000 due to a combination of an
increase of $5,795,000 in average balances and an increase of 28 basis points
in interest paid for these liabilities.
The provision for loan losses increased $111,000 or 118.7% in 2000 as compared
to 1999 due to the commercial loan difficulties mentioned above and the
charge-off of these and consumer loans. Management increased the provision
expense in order to maintain our internal policy limits which are monitored
and reported to the board of directors on a quarterly basis.
Income resulting from service charges increased $70,000 or 111.3% as a result
of the revamping of these items as mentioned above. Likewise, income earned
on gains (losses) of mortgage loans sold in the secondary market increased
$42,000 or 121.5% due to management's reorganization of this function in the
second half of 1999.
Salaries and employee benefits increased $78,000 or 14.0% from 1999 to 2000
due to annual salary adjustments, the addition of new employees and accrual of
profit sharing incentives.
Professional fees increased $11,000 or 11.3% due to increased legal fees
regarding loan collections and implementation of the stock option plan for
employees and directors.
11
<PAGE>
LIQUIDITY AND CAHS 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, 2000
compared to December 31, 1999:
June 30, December 31,
2000 1999
------- -------
(dollars in thousands)
Cash and due from banks $ 4,657 $ 2,491
Interest-bearing deposits with other banks 28 1,199
Mortgage loans held for sale 45 237
Federal funds sold 4,890 940
Investment securities maturing in one year or less 13,134 21,804
------- -------
22,754 26,671
Less short-term borrowings 7,071 8,185
------- -------
Net liquidity position $15,683 $18,486
======= =======
As a percent of total assets 7.9% 9.5%
======= =======
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.
12
<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, 2000 , December 31, 1999 and June 30, 1999. 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.
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
------- ------- -------
<S> <C> <C> <C>
Loans on nonaccrual basis $ 1,131 $ 1,057 $ 585
Loans past due 90 days or more 858 832 1,151
Renegotiated loans 559 614 961
------- ------- -------
Total nonperforming loans 2,548 2,503 2,697
Other real estate 392 355 317
Repossessed assets - 10 2
------- ------- -------
Total nonperforming assets $ 2,940 $ 2,868 $ 3,016
======= ======= =======
Nonperforming loans as a percent of total loans 1.8% 1.8% 2.1%
======= ======= =======
Nonperforming assets as a percent of total assets 1.5% 1.5% 1.6%
======= ======= =======
Allowance for loan loss as a percent of loans 1.4% 1.3% 1.4%
======= ======= =======
</TABLE>
Management believes the level of the allowance for loan losses at
June 30, 2000 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 $639,048 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 $124,250. There were no impaired
loans without a related allowance for loan losses. The average balance
of impaired loans for the period was $671,466.
13
<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
27, 2000:
1. Election of Directors:
The following directors were elected with terms to expire
April, 2003:
For Withhold Authority
------------ ------------------
John S. Kiesendahl 561,013.3775 14,918.7155
Barbara J. Genzlinger 557,298.1055 18,633.9875
John F. Spall 560,207.2249 15,724.8681
2. Approval and adoption of the Dimeco, Inc. 2000 Stock Incentive
Plan:
For 546,704.7468
Against 19,592.8187
Abstain 9,634.5275
3. Approval and adoption of the Dimeco, Inc. 2000 Independent
Directors Stock Option Plan:
For 571,841.4613
Against 24,748.5094
Abstain 22,453.1416
4. S.R. Snodgrass was elected as the Company's Independent
Auditors for the year ending December 31, 2000 by the following
vote:
For 571,841.4613
Against 445.3017
Abstain 3,645.3300
Item 5- Other information
NONE
Item 6- Exhibits and Reports on Form 8-K
Exhibit Number
27 Financial Data Table
99 Independent Accountant's Report
14
<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: July 25, 2000 By:
-------------------------------------
Joseph J. Murray
President and Chief Executive Officer
Date: July 25, 2000 By:
-------------------------------------
Maureen H. Beilman
Chief Financial Officer
15
