Annual Report Financial Highlights

Dear Shareholders:

I am excited to report that 2025 was a very good year for Dimeco, Inc. Our achievements reflect a dedication to responsible growth and to new and continued relationships we have cultivated within our community. 2025 marked a historic milestone, 120 years of partnership, progress, and community impact. From our earliest days, we stood alongside families and businesses, turning visions and dreams into reality and we will continue those same efforts as our mission going forward.

Financial performance. Total assets of $1.2 billion increased $83.2 million or 7.7% from the fourth quarter of 2024. Loans and cash balances drove much of the asset growth year over year. Loan balances of $824.7 million at December 31, 2025, were $49.4 million or 6.4% greater than a year earlier. Commercial and residential mortgages and consumer loans all showed increases which were offset with minor declines in business loans and other loans. Mortgages grew by $48.1 million while consumer loans expanded by $4.1 million.

Loan demand remained steady throughout the year and management collectively worked to secure new relationships and assist existing ones with all their needs. The allowance for credit losses increased by $2.6 million to $13.7 million because of portfolio growth and one larger loan relationship that we are monitoring. Cash and cash equivalents of $53.2 million were $35.2 million greater than at year end 2024.

This was the result of management strategically using the Federal Home Loan Bank (FHLB) to secure funding at favorable rates in addition to selling low-yielding bonds in the fourth quarter, so those proceeds can be invested in higher yielding interest-bearing accounts, investment securities or to fund loan originations. These bonds were mainly purchased when the rate cycle was significantly lower, and liquidity was at much higher levels and not needed for loan demand. As a result, the investment portfolio shows only a slight increase of $2 million or .9%, compared to the fourth quarter of 2024.

Deposits and liquidity. Deposit balances of $977.9 million were an increase of $66.9 million or 7.3% over the previous year. Noninterest bearing deposits grew by $27.1 million while interest-bearing deposits added $39.8 million. Personal and business noninterest bearing accounts continued to show increases over the previous year. Certificates of deposit (CD) specials are the main driver of interest-bearing increases, but certain business demand deposit accounts also produced growth while brokered CDs grew slightly from year end 2024.

We expect deposit growth to be a challenge in 2026 as the environment becomes increasingly competitive, but management is continually evaluating opportunities to expand existing relationships and garner new customers.

Short-term borrowings increased by $17.2 million over December 31, 2024. Management borrowed from the FHLB at favorable rates to reinvest in higher rate asset accounts. Other borrowed funds decreased by $20.7 million or 44.6% as existing borrowings were paid down, and no new borrowings were needed. We continue to monitor our liquidity position and will make the best decision as it relates to our borrowing needs.

Earnings and capital. Stockholders’ equity increased by $18.4 million or 17.2% from December 31, 2024, to $125.4 million. Retained earnings, accounted for $12.2 million of this growth while accumulated other comprehensive losses improved by $5.8 million. This improvement is due to the mark to market adjustment on our investment portfolio to value assets at current prices as required by Generally Accepted Accounting Principles.

Interest income increased $8.3 million or 14.1% over 2024. Loan income and fees accounted for $5.6 million of this growth, investment income added $2 million and other interest income grew by $706 thousand primarily from interest-bearing deposits at the Federal Reserve. Interest expense of $21.7 million was $596 thousand or 2.8% greater than last year. Deposits contributed $270 thousand of this greater expense due to the growth of CDs even while interest rates decreased. Short-term borrowings added $78 thousand of expense while other borrowed funds contributed $247 thousand.

Non-interest income grew by $50 thousand. As mentioned above, management sold bonds in the fourth quarter to reinvest in higher earnings assets. This produced a loss of $682 thousand which was offset by increases in other categories which includes a $345 thousand boost from brokerage commissions, $114 thousand from debit card fees, a $350 thousand one-time gain on sale of building with a leaseback and several other smaller gains. Non-interest expenses increased by $1.9 million or 6.7%, mostly due to salaries and employee benefits, computer software maintenance and certain other operating expenses such as professional fees and data processing.

Some of this expense is related to technology improvements mentioned below while others are related to the necessary day to day expenses of running a sound financial institution. In addition, the bank was subject to the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 due to surpassing $1 billion in total assets as of January 1, 2025. This requirement increased audits fees for 2025, however, near the end of 2025, effective as of January 1, 2026, the threshold was changed from $1 billion to $5 billion. As a result, some of the additional professional fees should not be recurring.

The provision for credit losses increased by $1.3 million to adjust the allowance required by our Current Estimated Credit Losses (CECL) calculation. Tax expense increased by $901 thousand as certain tax credits expired and due to increased income. This resulted in a year-to-date net income of $16.6 million which was $3.6 million or 28% greater than December 31, 2024.

Technology and customer experience. This past year, we made significant strides in enhancing the digital banking experience for our customers. We introduced secure, in-app messaging within our mobile banking platform, allowing customers to connect directly with our Customer Experience Center for quick, personalized support. Transaction details were enriched to make account history clearer and more intuitive, featuring full business names, recognizable logos, and spending category icons for easy tracking. For added convenience, we rolled out digital documentation with eSign capabilities across multiple platforms, thus streamlining processes that once required in-person visits.

Our modernization efforts extended to ATMs and deposit automation, improving speed, efficiency, and reliability for everyday banking needs. Recognizing the importance of flexibility, we also launched the ability to book Saturday appointments at select branches, ensuring in-person service fits into our customers’ schedules. To better serve our business clients, we partnered with a new merchant services provider, delivering advanced tools to simplify payment processing and support growth. These enhancements reflect our ongoing commitment to combining innovation with personalized service, meeting customers where they are, both digitally and in person.

Security and fraud prevention. Safeguarding our customers’ assets is a core responsibility. We prioritize combating fraud through a comprehensive approach that combines advanced technology, rigorous internal controls, ongoing employee training, along with continuous customer awareness and education. In 2025, we successfully prevented or recovered nearly 90% of all fraudulent activity. By continuously monitoring for suspicious activity and implementing proactive measures, we work diligently to protect our customers’ financial security and maintain the integrity of our operations.

Community commitment. Giving back to the communities we serve is at the heart of who we are. We proudly supported local education and neighborhood initiatives with $370,000 in contributions made under the Pennsylvania Educational Improvement Tax Credit (EITC) program and $164,500 in contributions under the Neighborhood Assistance Program (NAP). Additionally, we support many local organizations in our communities by donating to and attending their events with an additional $250,000 towards local causes. Beyond corporate giving, our employees demonstrated extraordinary generosity by attending not for profit events and dedicating over 5,000 hours of volunteer service.

In addition, our staff donated over $33,000 to a variety of organizations. Another community project that we are especially proud of is partnering with Pennsylvania Fish and Boat Commission, Wayne County, and others to provide access to the Lackawaxen river via a long-term agreement with the county. This agreement allows for passage through a portion of our Indian Orchard property for the community to enjoy the beautiful river and its surroundings. The impact of these contributions goes far beyond dollars and hours; it represents a culture of care and responsibility that defines our organization.

Our focus on financial education continued in 2025 through three hands-on reality fairs, engaging classroom sessions, a competitive stock market challenge, and tailored programs for students in our local school districts. Whether mentoring students, assisting local nonprofits, or lending a hand at community events, our team consistently steps up to make a difference.

Our people. Not only do we focus on the youth in our communities, but we also care for our elderly and veteran population. For over a decade we have supported the Senior Crimestoppers Foundation and this year we visited the Gino Merli Veterans Center for a special fraud event.

Together, these efforts reflect our shared commitment to strengthening the communities that have supported us for 120 years. It is this spirit of partnership that ensures our communities continue to thrive, and we are honored to play a role in that success. As noted, our employees are the driving force behind our success. Their dedication, expertise, and commitment to excellence make everything we do possible.

At year end, we celebrated the retirement of two senior-level leaders whose contributions shaped our organization for many years. Jill George, our chief human resources officer, retired after an outstanding and dedicated career spanning over 42 years with The Dime Bank! Throughout her remarkable journey, Jill held multiple roles across the organization, gaining invaluable institutional knowledge and demonstrating exceptional versatility. In her vital role heading human resources, Jill’s commitment to supporting colleagues became a cornerstone of her impactful tenure.

After ten years of exemplary service and steadfast leadership, Lisa Cavage, our chief operating officer, retired from The Dime Bank. Lisa left behind a legacy of growth and operational excellence. While we will miss Jill and Lisa’s leadership, we are grateful for the foundation they have built, and we wish them the best in their future endeavors.

Looking ahead. As we celebrated 120 years of serving our community, we reflected on our legacy that was built on trust, resilience, and shared success. On December 16, 1905, The Dime Bank was incorporated and what began as the Honesdale Dime Bank has since grown into nine branches across Wayne, Pike, and Lackawanna Counties. This milestone is more than a measure of time—it is a testament to the enduring relationships we have cultivated and the unwavering commitment to progress that defines us.

Without you, our shareholders, this achievement would not be possible. As always, we truly thank and encourage you to share the advantages of Dimeco ownership along with our banking and wealth management services. Together, we look forward to the future with the same dedication that has guided us for over a century. Your feedback and questions are certainly welcome.

 Sincerely,