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Earnings per Share

6 Months Ended

Jun. 30, 2017

(11)

Earnings per Share

Stock Dividend On July 1, 2017, the Company paid a special stock dividend of 4% to common shareholders of record at the close of business on June 15, 2017. For all periods presented, share information, including basic and diluted earnings per share, has been adjusted retroactively to reflect this change.

Basic earnings per share is computed by dividing income available to shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share gives effect to all dilutive potential shares that were outstanding during the year. The calculations of basic and diluted earnings per share are as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands, except per share data)	2017		2016		2017		2016
Basic earnings per share:
Net income available to shareholders	$	1,919	$	1,412	$	4,020	$	3,410
Basic earnings per share	$	0.33	$	0.24	$	0.69	$	0.58
Diluted earnings per share:
Net income available to shareholders	$	1,919	$	1,412	$	4,020	$	3,410
Average shares outstanding		5,838,506		5,871,208		5,839,175		5,874,706
Effect of dilutive stock options		4,929		0		4,948		0
Average shares outstanding including dilutive stock options		5,843,435		5,871,208		5,844,123		5,874,706
Diluted earnings per share	$	0.33		0.24		0.69		0.58

Under the treasury stock method, outstanding stock options are dilutive when the average market price of the Company’s common stock, when combined with the effect of any unamortized compensation expense, exceeds the option price during the period, except when the Company has a loss from continuing operations available to shareholders. In addition, proceeds from the assumed exercise of dilutive options along with the related tax benefit are assumed to be used to repurchase common shares at the average market price of such stock during the period.

Options to purchase 46,244 shares during the three and six months ended June 30, 2016, respectively, were not included in the respective computations of diluted earnings per share because the exercise price of the option, when combined with the effect of the unamortized compensation expense, was greater than the average market price of the common shares and were considered anti-dilutive. There were no anti-dilutive shares for the three and six months ended June 30, 2017.

Repurchase Program On August 6, 2015, the Board of Directors authorized a share repurchase plan to purchase through open market transactions $2.0 million market value of the Company’s common stock. As of June 30, 2017, the Company repurchased a total of 48,608 shares of common stock pursuant to the plan at an average price of $15.34 per share, including 4,715 shares of common stock repurchased pursuant to the plan during the six months ended June 30, 2017 at an average price of $19.01 per share. At June 30, 2017, approximately $1.3 million may be used to purchase shares under the plan.

The table below shows activity in the outstanding shares of the Company's common stock during the past three years. Shares in the table below are presented on a historical basis and have not been restated for the annual 4% stock dividends.

	Number of shares
	June 30,			December 31,			June 30,
	2017			2016			2016
Outstanding, beginning of year		5,616,607			5,441,190			5,441,190
Issuance of stock:
4% stock dividend		224,550			217,155			217,155
Purchase of treasury stock		(4,715	)		(41,738	)		(15,301	)
Outstanding, end of year		5,836,442			5,616,607			5,643,044

Except as noted in the above table, all share and per share amounts in this note have been restated for the 4% common stock dividend distributed July 1, 2017.