Earnings per Common Share

LCNB has granted restricted stock awards with non-forfeitable dividend rights, which are considered participating securities. Accordingly, earnings per share is computed using the two-class method as required by FASB ASC 260-10-45. Basic earnings per common share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities. Diluted earnings per common share is adjusted for the dilutive effects of stock options, warrants, and restricted stock. The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options and warrants with proceeds used to purchase treasury shares at the average market price for the period.

Earnings per share for the three and six months ended June 30, 2017 and 2016 were calculated as follows (dollars in thousands, except share and per share data):



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
Net income	$	3,003	$	2,968	$	6,249	$	5,932
Less allocation of earnings and dividends to participating securities	2		—		4		—
Net income allocated to common shareholders	$	3,001	$	2,968	$	6,245	$	5,932

Weighted average common shares outstanding, gross	10,010,455		9,922,024		10,005,798		9,919,070
Less average participating securities	6,033		—		6,033		—
Weighted average number of shares outstanding used in the calculation of basic earnings per common share	10,004,422		9,922,024		9,999,765		9,919,070
Add dilutive effect of:
Stock options	6,890		18,299		7,427		17,767
Stock warrants	—		—		—		32,465
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share	10,011,312		9,940,323		10,007,192		9,969,302

Earnings per common share:
Basic	$	0.30	$	0.30	$	0.62	$	0.60
Diluted	0.30		0.29		0.62		0.59

Options to purchase 0 and 5,160 shares of common stock at a weighted average price of $0.00 and $17.88 per share were outstanding at June 30, 2017 and 2016, respectively, but were not included in the computation of diluted earnings per common share because the exercise prices of the options were greater than the average market price of the common shares.