Note 3 – Earnings per Common Share

9 Months Ended

Sep. 30, 2011

Note 3 – Earnings per Common Share

The Company has presented both basic and diluted earnings per common share (“EPS”). Basic EPS is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period, without considering any dilutive items. Diluted EPS is calculated by dividing net income (loss) available to common shareholders by the sum of the weighted average number of common shares outstanding for the period and common stock equivalents for items that are dilutive, net of shares assumed to be repurchased using the treasury method.

The potential common stock of the Company includes stock options and unvested shares issued for the Recognition and Retention Plan (“RRP”) granted to various directors and officers of the Bank and unexercised warrants issued to the U.S. Treasury. The Company excluded 763,977 outstanding options and RRPs from the calculation of diluted earnings per share for the three- and nine-month periods ended September 30, 2011, and 797,927 outstanding options and RRP shares from the calculation of diluted earnings per share for the three- and nine-month periods ended September 30, 2010, because the exercise price exceeded the average closing price of the shares of common stock during the respective period and, accordingly would have been anti-dilutive. All of the 450,314 warrants had an exercise price of $6.83 which was in excess of the market value of the stock at September 30, 2011 and September 30, 2010, so no warrants were included in the calculation of diluted earnings per share for either period since they would have also been anti-dilutive.

The following is a reconciliation of the diluted earnings per share calculation for the three- and nine-month periods ended September 30, 2011 and 2010:

	Three Months					Nine Months
	Ended September 30,					Ended September 30,
	2011		2010			2011		2010
	(Dollars in thousands, except per share amounts)

Net income (loss) available to common shareholders	$	126	$	(528	)	$	1,019	$	9,610
Weighted average number of shares outstanding		11,462,107		10,844,386			11,455,153		9,260,762
Basic earnings (loss) per share	$	0.01	$	(0.05	)	$	0.09	$	1.04

Net income (loss) available to common shareholders	$	126	$	(528	)	$	1,019	$	9,610
Weighted average number of shares outstanding		11,462,107		10,844,386			11,455,153		9,260,762
Incremental shares from assumed exercise of stock options and restricted stock		-		-			-		-
Weighted average number of shares outstanding - diluted		11,462,107		10,844,386			11,455,153		9,260,762
Diluted earnings (loss) per share	$	0.01	$	(0.05	)	$	0.09	$	1.04