Note 2: Earnings Per Share

Earnings per common share (EPS) is computed using the two-class method. Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding participating securities. Participating securities include non-vested restricted stock awards. Non-vested restricted stock awards are considered participating securities to the extent the holders of these securities receive non-forfeitable dividends at the same rate as holders of common shares. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share plus the convertible impact of preferred shares and the dilutive effect of stock compensation using the treasury stock method. EPS for the years ended December 31, 2017, 2016 and 2015 is computed as follows:

	Twelve Months Ended Dec., 31
($ in thousands - except per share data)	2017		2016		2015

Distributed earnings allocated to common shares	$	1,363	$	1,180	$	982
Undistributed earnings allocated to common shares		8,714		6,620		5,676

Net earnings allocated to common shares		10,077		7,800		6,658
Net earnings allocated to participating securities		13		9		5
Dividends on convertible preferred shares		975		975		956

Net Income allocated to common shares and participating securities	$	11,065	$	8,784	$	7,619

Weighted average shares outstanding for basic earnings per share		4,817		4,877		4,884
Dilutive effect of stock compensation		74		47		88
Dilutive effect of convertible shares		1,460		1,452		1,451

Weighted average shares outstanding for diluted earnings per share		6,351		6,376		6,423

Basic earnings per common share	$	2.10	$	1.60	$	1.36

Diluted earnings per common share	$	1.74	$	1.38	$	1.19

There were no anti-dilutive shares in 2017 or 2016. Shares subject to issue upon exercise of options of 35,424 in 2015 at prices of $11.50 to $14.15 were excluded from the diluted earnings per common share calculation as they were anti-dilutive.