NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income to common shareholders by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Diluted net income per common share is computed by dividing net income to common shareholders by the weighted average number of common shares and common stock equivalents for items that are dilutive, net of shares assumed to be repurchased using the treasury stock method at the average share price for the Company’s common stock during the period. The dividend and related accretion for the amount of the Company's Series A Preferred Stock outstanding for the respective period was deducted from net income and the discount on the redemption of Series A Preferred Stock was added to net income in computing net income to common shareholders. Common stock equivalents arise from the assumed conversion of outstanding stock options and the outstanding warrant to purchase common stock. Shares owned by the Bank’s ESOP that have not been allocated are not considered to be outstanding for the purpose of computing basic and diluted net income per common share. At June 30, 2014 and 2013, there were 187,807 and 225,070 shares, respectively, that had not been allocated under the Bank’s ESOP.

Information regarding the calculation of basic and diluted net income per common share for the three and nine months ended June 30, 2014 and 2013 is as follows (dollars in thousands, except per share amounts):



	Three Months Ended June 30,					Nine Months Ended June 30,
	2014		2013			2014			2013
	(In thousands, except for per share data)
Basic net income per common share computation
Numerator – net income	$	1,434	$	876		$	4,204		$	3,863
Preferred stock dividends	—		(151		)	(136		)	(559		)
Preferred stock discount accretion	—		(47		)	(70		)	(236		)
Discount on redemption of preferred stock	—		—			—			255
Net income to common shareholders	$	1,434	$	678		$	3,998		$	3,323

Denominator – weighted average common shares outstanding	6,857,149		6,818,752			6,855,811			6,816,772

Basic net income per common share	$	0.21	$	0.10		$	0.58		$	0.49

Diluted net income per common share computation
Numerator – net income	$	1,434	$	876		$	4,204		$	3,863
Preferred stock dividends	—		(151		)	(136		)	(559		)
Preferred stock discount accretion	—		(47		)	(70		)	(236		)
Discount on redemption of preferred stock	—		—			—			255
Net income to common shareholders	$	1,434	$	678		$	3,998		$	3,323

Denominator – weighted average common shares outstanding	6,857,149		6,818,752			6,855,811			6,816,772
Effect of dilutive stock options (1)	38,582		18,458			36,070			13,035
Effect of dilutive stock warrant	137,982		65,287			123,274			40,944
Weighted average common shares and common stock equivalents	7,033,713		6,902,497			7,015,155			6,870,751

Diluted net income per common share	$	0.20	$	0.10		$	0.57		$	0.48

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(1) For the three and nine months ended June 30, 2014, average options to purchase 126,000 and 131,489 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share because their effect would have been anti-dilutive. For the three and nine months ended June 30, 2013, options to purchase 56,546 and 131,152 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per common share because their effect would have been anti-dilutive.