Quarterly Financial Highlights

I am excited to present the results of Dimeco, Inc. for the second quarter of 2026. So far, the year is off to a great start. Loans, deposits, and stockholders’ equity all demonstrated strong year-over-year growth, while net interest income increased by 19.3%. This resulted in net income of almost $10 million through six months, producing a solid return on average assets of 1.71% and a return on average equity of 15.37%, increases of 21.3% and 8.4%, respectively, over the same period last year. Earnings per share of $3.92 represented a 26.9% increase over last year, while the market value of our stock increased by 51.8% to $55.51 as of June 30, 2026. I am looking forward to the rest of the year and hope you are, too!

Total assets of $1.2 billion increased by $81.3 million, or 7.3%, from the second quarter of 2025. Loan balances of $873.6 million at the end of the quarter were $89.8 million, or 11.4%, higher than June 30, 2025. As was the case in the first quarter, loan growth was across all categories. Commercial and residential loans experienced the largest increase, growing by $78.8 million. Business loans grew by $9.5 million, consumer loans increased by $1.1 million, and other loans showed a slight increase of $732 thousand. Cash and cash equivalents increased by $3 million, while investment securities declined by $10.3 million as bond payments were used to fund loan originations. 

Deposit balances of $1 billion were an increase of $56.4 million, or 5.9%, over the previous year. Both noninterest-bearing and interest-bearing deposits experienced growth with balances rising $5.3 million and $51 million, respectively. Business deposits accounted for much of the growth in interest-bearing checking accounts.

Short-term borrowings increased by $20 million over June 30, 2025, as additional liquidity was necessary to fund loan demand. Other borrowed funds of $17.2 million decreased by $16.2 million, or 48.5%, compared to the same quarter last year. 
Stockholders’ equity grew by $19.4 million to $132.9 million from same time last year. Retained earnings accounted for most of this growth, increasing by $14.2 million, while other comprehensive losses declined by $4.7 million. This adjustment is due to the requirement to mark our investment portfolio to current market values, which improved during the period. 

Interest income increased by $3.1 million, or 9.4%, over the second quarter of 2025. Loan income and fees contributed just over $3 million to this category while investment income added $256 thousand. Other income declined by $226 thousand. Interest expense of $10.1 million was $1 million lower than the same period last year. Deposit expense decreased by $920 thousand, or 9%, while short-term borrowings increased by $347 thousand. This increase was partially offset by a $467 thousand decline in expenses associated with other borrowed funds. 

Non-interest income increased by $524 thousand, or 13.9%, primarily due to higher brokerage commissions which rose by $397 thousand year over year, with other categories contributing smaller increases. Non-interest expenses grew by $1.3 million, or 8.8%, mostly due to salaries and employee benefits. The provision for credit losses increased by $625 thousand, or 67.5%, as we adjusted our allowance required by our Current Estimated Credit Losses (CECL) calculation. This adjustment was attributable to growth in the loan portfolio as well as the impact of current economic conditions.

Income before taxes was $2.7 million, or 28.4%, greater than the same time last year while income taxes increased by $580 thousand or 32.5%. This resulted in a net income of $10 million which was $2.1 million, or 27.4%, greater than the second quarter of 2025. 

I am pleased to report the bank received approval to open a new branch in Throop, Pennsylvania, which will be named our Mid Valley branch. We are thrilled to open our third branch in Lackawanna County and are excited about the opportunities that our tenth branch will bring. We look forward to serving the financial needs of the community and expect to open this location near the end of the third or the fourth quarter of this year. 

During the remaining six months of 2026, management will remain focused on making strategic decisions that position the bank and the Company for continued growth and long-term success, benefiting both the organization and its shareholders. As always, we thank you for your continued support and commitment. Please take any opportunity to refer family and friends to Dimeco, Inc.

(unaudited)

(dollars in thousands, except per share)

Consolidated Balance Sheet