Quarterly Financial Highlights

Dear Shareholders:

I am excited to report the results for Dimeco, Inc. as of the third quarter of 2025. The momentum from the first half of the year continued into the most recent quarter. Both loan and deposit growth are stronger than projected and prudent management of the balance sheet produced a net income of $12.7 million as of September 30, 2025! This resulted in a return on average assets (ROAA) of 1.52% and a return on average equity (ROAE) of 15.02%, an increase of 25.6% and 22.2% over prior year, respectively.

Total assets of $1.1 billion increased $67.7 million or 6.3% from the third quarter of 2024. Loans and investments drove most of the balance sheet growth. Loan balances of $819.3 million at the end of the quarter were $44.9 million or 5.8% greater than September 30, 2024. As was the case for the previous quarters, 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 $39.7 million while consumer loans expanded by $8.6 million. Investment securities of $242.8 million were $20.8 million or 9.4% greater than the third quarter of last year. Management added bonds throughout the year that supported our strategic plan and met our policy guidelines before expected additional rate cuts by the Federal Reserve (Fed).

Deposit balances of $935.8 million were an increase of $53.5 million or 6.1% over the previous year. Noninterest bearing deposits grew by $18.1 million while interest-bearing deposits added $35.4 million. Personal and business noninterest bearing accounts continued to show increases over previous year. Certificates of deposit (CD) specials are the main driver of interest-bearing growth. Brokered deposits decreased as the rates offered on these deposits remained elevated throughout the quarter; instead, management used short-term borrowings at more favorable rates.

Short-term borrowings decreased by $1.7 million or 4.3% over September 30, 2024. Due to the seasonality of our deposit base, the bank does typically borrow from the Federal Home Loan Bank of Pittsburgh in this quarter each year. Other borrowed funds increased slightly by $757 thousand or 2.6%. Term borrowings in the fourth quarter of 2024 of $19.3 million and $9M in the first quarter of 2025 were deployed while payment and maturities offset these borrowings. No new term borrowings were added in the third quarter.

Stockholders’ equity grew by $12.8 million or 11.8% from September 30, 2024, to $120.9 million. Retained earnings accounted for most of this growth at $12.1 million or 10.8%. A slight increase in capital surplus with a recovery in the accumulated other comprehensive losses contributed to the remaining growth.

Interest income increased $6.5 million or 15.1% over the third quarter of 2024. Loan income and fees accounted for $4.3 million of this growth, investment income added $1.6 million and other interest income grew by $569 thousand primarily from interest-bearing deposits at the Fed. Interest expense of $16.4 million was $1 million or 6.7% greater than the same period last year. Deposits contributed $889 thousand of this greater expense which is due to the growth from our CD specials as rates continue to be elevated. Borrowings made up the remaining difference. Non-interest income grew by $597 thousand or 10.7%, with the largest component coming from a gain on the sale of our downtown Hawley building of $350 thousand. This sale reduced our non-earning assets while still maintaining our branch presence within the downtown area with the signing of a long-term lease. Non-interest expenses grew by $1.2 million or 5.7%, mostly due to salaries and employee benefits, computer software maintenance and certain other operating expenses. The provision for credit losses increased by $686 thousand to adjust the allowance required by our Current Estimated Credit Losses (CECL) calculation. This adjustment was primarily due to the growth in the loan portfolio. Tax expense increased by $840 thousand as certain tax credits expired and increased income. Year to date net income of $12.7 million was $3.4 million or 36.4% greater than September 30, 2024.

While there is still one quarter to go for 2025, I am optimistic of the possible outcomes. Management will continue to look for strategic opportunities for your Company while balancing sound banking principles. As always, we thank you for your continued support and commitment. Please take any opportunity to refer family and friends to Dimeco, Inc. I welcome your comments.