Jan. 30: Dimeco, Inc. Announces 2016 Earnings

P O BOX 509 • 820 CHURCH STREET • HONESDALE, PENNSYLVANIA • 18431 • 570-253-1970

DIMECO, INC. ANNOUNCES 2016 EARNINGS

Honesdale, Pennsylvania/ January 30, 2017/ Dimeco, Inc. (OTC Pink: DIMC), the holding company for The Dime Bank, released unaudited financial results for the quarter and fiscal year ending December 31, 2016.

The Company's net income grew substantially in 2016 to $6.4 million. This represented an increase of $2.7 million, or 74.7% over the results posted for 2015. At this income level, the return on average assets of 1.00% was up 66.7% from 2015, and the return on average equity was up 68.0% from 2015 to end the year at 8.99%. Improvement in loan quality had the greatest impact on net income. Net interest income of $23.0 million showed an increase of $911thousand or 4.1% over 2015. The provision for loan losses declined $2 million, or 66.7%, and noninterest expense was $1.2 million, or 6.2% lower than the previous year.

Dimeco, Inc. experienced balance sheet growth in all categories during the year ended December 31, 2016, with total assets of $641.5 million, an increase of $28.1 million, or 4.6%, from the balance at the end of 2015. With strong loan demand throughout the year, the loan portfolio increased $24.0 million, or 5.1%, to end the year at $495.3 million. Since introducing Kasasa deposit products in 2015, the deposit base has continued to grow, finishing the year at $508.1 million, an increase of $19.0 million, or 3.9% from balances a year earlier.

Gary C. Beilman, president and chief executive officer, commented "At this time last year, I reported on the drastic and prudent steps that were taken in late 2015 to address asset quality issues and pave the way for a return to historical operating results. During the past year, we decreased delinquent loans and our non-performing assets to total assets ratio improved by almost 20%. Furthermore, our allowance for loan losses to nonaccrual loans and to non- performing loans, both improved by 26%. Legal and other collection costs decreased, and the carrying costs for other real estate owned diminished as we sold several properties. These improvements contributed to ending the year with an increase of nearly 17% in the market value of Dimeco stock."

Dividends remained strong, amounting to $1.52 per share for both 2016 and 2015, and resulted in a dividend yield of 3.38%. The fully diluted earnings per share for the year ended 2016 was

$3.84. Stockholders' equity of $71.5 million at December 31, 2016 represented growth of 4.9% over balances a year earlier with a ratio of stockholders' equity to assets of 11.1%.

Dimeco, Inc. is the holding company of The Dime Bank, a full service financial institution serving Northeastern Pennsylvania. The Bank trades on the OTC Pink Marketplace under symbol "DIMC", operated by OTC Markets Group. For more information on Dimeco, Inc. and The Dime Bank, visit www.thedimebank.com.

Source: Dimeco, Inc. / January 30, 2017 / Deborah Unflat

INVESTOR INFORMATION

C O N S O L I D A T E D F I N A N C I A L H I G H L I G H T S (unaudited)

Stock Listing - DIMC Transfer Agent

American Stock Transfer & Trust Company, LLC 6201 15thAvenue

Brooklyn, NY 11219

800-937-5449

e-mail:[e-mail] Internet address: www.amstock.com

Dividend Reinvestment Plan

The Company offers a plan for stockholders to automatically reinvest their dividends in shares of common stock along with the opportunity to purchase additional stock. There are no broker- age commissions or fees imposed. For more information, contact the Transfer Agent listed above.

Boenning & Scattergood, Inc.	Return on average assets	1.00%	.60%	66.7%
800-842-8928	Return on average equity	8.99%	5.35%	68.0%
Raymond James & Associates	Efficiency ratio	64.69%	71.15%	(9.1%)
800-800-4693	Net interest margin	4.03%	4.01%	.5%
Stifel 866-780-7926	Shareholders' equity/asset ratio	11.14%	11.11%	.3%
Dividend payout ratio	39.38%	68.16%	(42.2%)
rectors	Nonperforming assets/total assets	2.32%	2.87%	(19.2%)
John S. Kiesendahl, Chairman	Allowance for loan losses as a % of loans	1.72%	1.76%	(2.3%)
Thomas A. Peifer, Vice Chairman	Net charge-offs/average loans	.16%	.55%	(70.9%)
Gary C. Beilman, President	Allowance for loan losses/nonaccrual loans	104.07%	82.37%	26.3%
John F. Spall, Secretary	Allowance for loan losses/non-performing loans	98.83%	78.36%	26.1%
Barbara J. Genzlinger
David D. Reynolds, M.D. Fi Henry M. Skier	nancial Position at December 31, Assets	$ 641,486	$ 613,352	4.6%
Todd J. Stephens	Loans	$ 495,329	$ 471,364	5.1%
Deposits	$ 508,051	$ 489,076	3.9%
Stockholders' equity	$ 71,470	$ 68,155	4.9%

Dimeco, Inc. Stock Market Makers

Di

e-mail:[e-mail] www.thedimebank.com

888-4MY-DIME

(dollars in thousands, except per share)

Interest income	$ 25,755	$ 24,701	4.3%
Interest expense	$ 2,750	$ 2,607	5.5%
Net interest income	$ 23,005	$ 22,094	4.1%
Net income	$ 6,350	$ 3,635	74.7%

Performance for the year ended December 31,

Net income - basic	$ 3.86	$ 2.23	73.1%
Net income - diluted	$ 3.84	$ 2.22	73.0%
Dividends	$ 1.52	$ 1.52	-
Book value	$ 43.41	$ 41.42	4.8%
Market value	$ 45.00	$ 38.50	16.9%
Market value/book value ratio	103.7%	93.0%	11.5%
Price/earnings multiple	11.7X	17.3X	(32.4%)
Dividend yield	3.38%	3.95%	(14.4%)

Shareholders' Value (per share) Financial Ratios % Increase

2016 2015 (decrease)

Dear Shareholders:

It is with pleasure that I present this report

was 8.99%, both of which were significant

(in thousands)

CONSOLIDATED BALANCE SHEET

(unaudited)

of Dimeco, Inc. for the year ended December

31, 2016. Reviewing this report, you will note many positive achievements. When compared to 2015, the results of the year 2016 are greatly improved. Deposits grew almost 4%, loans increased more than 5%, and total assets expanded by 4.6%. Throughout the year, our offices were busy, electronic banking continued to be accepted by a greater number of customers and our local economy continued to improve.

At this time last year, I reported on the drastic and prudent steps that were taken in late 2015 to address asset quality issues and to pave the way for a return to historical operating results. During the past year, we

increases over the prior year!

Assets

12/31/2016

9/30/2016 6/30/2016 3/31/2016 12/31/2015

decreased delinquent loans and our non- performing assets to total assets ratio

and our hope is that you are as well. When we

distribute our Annual Report in March, we

Cash and cash equivalents	$	12,015	$	8,630	$	15,203	$	8,672	$	8,134
The benefits of this increased performance	Investment securities available for sale	95,459	101,777	118,421	100,764	95,058
Mortgage loans held for sale	-	-	952	-	-
is most evident when we look at the	Loans, net of allowance for loan losses	486,796	481,090	458,156	467,358	463,087
Premises and equipment	9,237	9,168	9,326	9,338	9,451
improvements in enhanced value to you, our	Accrued interest receivable	1,942	1,735	1,859	1,801	1,805
Other real estate owned	6,158	6,449	6,218	6,625	7,024
shareholders. Book value increased almost	Other assets		29,879		29,359		28,137		28,608		28,793
5% to end the year at $43.41 per share.	TOTAL ASSETS	$	641,486	$	638,208	$	638,272	$	623,166	$	613,352
Liabilities
Stockholders' equity grew from $68 million to	Deposits: Noninterest-bearing	$	81,994	$	85,031	$	85,068	$	77,754	$	75,351
over $71 million, again an improvement of	Interest-bearing		426,057		422,725		415,949		414,755		413,725
almost 5% when comparing 2016 to 2015.	Total deposits	508,051	507,756	501,017	492,509	489,076
Finally, the most dramatic increase in value	Short-term borrowings	31,615	28,299	34,001	28,429	30,025
Other borrowed funds	23,352	23,699	26,246	26,977	20,318
was witnessed in the market value of Dimeco	Accrued interest payable	260	234	261	310	274
Other liabilities		6,738		6,710		5,878		5,630		5,504
stock which grew from $38.50 per share at	TOTAL LIABILITIES		570,016		566,698		567,403		553,855		545,197
year end 2015, to $45.00 at the close of 2016,	TOTAL STOCKHOLDERS' EQUITY		71,470		71,510		70,869		69,311		68,155
TOTAL LIABILITIES AND
an increase of almost 17%!	STOCKHOLDERS' EQUITY	$	641,486	$	638,208	$	638,272	$	623,166	$	613,352
We are certainly pleased with this report,

CONSOLIDATED STATEMENT OF INCOME

(unaudited)

(in thousands, except per share data)Three months ended Year ended

improved by almost 20%. Furthermore, our

will report in much greater detail about the

successes of 2016.

Interest Income

Loans, including fees

12/31/2016

$ 5,981

9/30/2016 6/30/2016 3/31/2016 12/31/2016 12/31/2015

$ 5,851 $ 5,759 $ 5,797 $ 23,388 $ 22,436

allowance for loan losses to nonaccrual loans

Investment securities

554

624 569 524 2,271 2,145 ,

and to non-performing loans, both improved by 26%. Our legal and other collection costs

We thank you for your investment and

continued loyalty. I encourage you to

Other

Total interest income

Interest Expense

26

6,561

21 30 19 96 120

6,496 6,358 6,340 25,755 24,701

decreased, and the carrying costs for OREO

recommend Dimeco, Inc. to others for

Deposits

510

492 505 511 2,018 2,063 ,

properties diminished as we sold several

investment in our stock and to use our banking

Short-term borrowings

Other borrowed funds

20

161

26 19 14 79 65

167 172 153 653 479

properties. In summary, many of our

and wealth management services. As always,

Total interest expense

691

685 696 678 2,750 2,607 ,

Net Interest Income 5,870

5,811 5,662 5,662 23,005 22,094

operating costs were significantly reduced

your comments are welcome.

Provision for loan losses

- 325 325 350 1,000 3,000 ,

from the previous year.

Sincerely,

Net Interest Income, After Provision for Loan Losses 5,870

5,486 5,337 5,312 22,005 19,094

The results of these actions helped to drive

Noninterest income

984

1,142 1,056 1,030 4,212 4,328 ,

Noninterest expense

4,559

4,679 4,454 4,444 18,136 19,342

our net income for 2016 to $6.4 million, a

Income before income taxes Income taxes

2,295

526

1,949 1,939 1,898 8,081 4,080 ,

406 405 394 1,731 445 ,

75% improvement over 2015. From a

financial ratio perspective, return on average assets was 1.0% and return on average equity

Gary C. Beilman

President and Chief Executive Officer

NET INCOME

Earnings per share-basic Earnings per share-diluted

Average shares outstanding-basic Average shares outstanding-diluted

$ 1,769

$ 1.08 $ 1.07

1,644,644

1,655,525

$ 1,543 $ 1,534 $ 1,504 $ 6,350 $ 3,635

$ .94 $ .93 $ .92 $ 3.86 $ 2.23

$ .93 $ .93 $ .91 $ 3.84 $ 2.22

1,644,466 1,643,193 1,643,179 1,644,021 1,630,223

1,652,853 1,650,422 1,648,204 1,651,851 1,635,820