EARNINGS PER 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 years ended December 31 were calculated as follows (in thousands, except share and per share data):



	2017		2016	2015
Net income	$	12,972	12,482	11,474
Less allocation of earnings and dividends to participating securities	7		13	—
Net income allocated to common shareholders	12,965		12,469	11,474

Weighted average common shares outstanding, gross	10,011,358		9,958,300	9,704,965
Less average participating securities	5,783		10,243	—
Weighted average number of shares outstanding used in the calculation of basic earnings per common share	10,005,575		9,948,057	9,704,965
Add dilutive effect of:
Stock options	6,936		10,765	17,174
Stock warrants	—		17,548	89,328
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share	10,012,511		9,976,370	9,811,467

Earnings per common share:
Basic	$	1.30	1.26	1.18
Diluted	1.29		1.25	1.17

Options to purchase 12,962 shares of common stock at a weighted average price of $18.41 per share were outstanding at December 31, 2015 and 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 prices of the common shares. There were no such options at December 31, 2017 or 2016.