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. 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 December 31, 2017 and 2016, there were 51,105 and 84,964 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 months ended December 31, 2017 and 2016 is as follows (dollars in thousands, except per share amounts):



	Three Months Ended December 31,
	2017		2016
Basic net income per common share computation
Numerator – net income	$	3,614	$	3,147

Denominator – weighted average common shares outstanding	7,312,531		6,862,749

Basic net income per common share	$	0.49	$	0.46

Diluted net income per common share computation
Numerator – net income	$	3,614	$	3,147

Denominator – weighted average common shares outstanding	7,312,531		6,862,749
Effect of dilutive stock options (1)	195,638		139,493
Effect of dilutive stock warrant (2)	—		233,273
Weighted average common shares outstanding - assuming dilution	7,508,169		7,235,515

Diluted net income per common share	$	0.48	$	0.43

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(1) For the three months ended December 31, 2017, average options to purchase 14,651 shares of common stock 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 months ended December 31, 2016, all outstanding options were included in the computation of diluted net income per share.

(2) Represented a warrant to purchase 370,899 shares of the Company's common stock at an exercise price of $6.73 per share (subject to anti-dilution adjustments) at any time through December 23, 2018 (the "Warrant"). The Warrant was granted on December 23, 2008 to the U.S. Treasury Department ("Treasury") as part of the Company's participation in the Treasury's Troubled Asset Relief Program ("TARP"). On June 12, 2013, the Treasury sold the Warrant to private investors. On January 31, 2017, the Warrant was exercised and 370,899 shares of the Company's common stock were issued in exchange for $2.50 million.