NOTE 7 – Earnings Per Common Share and Stock Dividend

On January 17, 2012, the Company's Board of Directors approved a ten percent stock dividend to the Company's shareholders. The record date for shareholders entitled to receive the stock dividend was February 3, 2012 and the distribution date was February 17, 2012. Certain amounts in our Consolidated Balance Sheets, including common shares outstanding, have been adjusted for the prior period to reflect the stock dividend. In addition, earnings per share and average shares outstanding in our Consolidated Statements of Income have been adjusted for the prior period to reflect the stock dividend.

The following schedule reconciles the numerators and denominators of the basic and diluted earnings per share computations for the three month periods ended March 31, 2012 and 2011. Dilutive common shares arise from the potentially dilutive effect of the Company's stock options and warrants that are outstanding. The assumed conversion of stock options and warrants can create a difference between basic and dilutive net income per common share. At March 31, 2012 and 2011, 79,002 and 87,967 options, respectively, were anti-dilutive in the calculation of earnings per share as their exercise price exceeded the fair market value.


			Three months ended March 31,
(dollars in thousands, except share data)			2012		2011
Numerator:
Net income		$	688	$	537
Less:	Preferred stock dividend		216		216
	Discount accretion (1)		73		68
Net income available to common shareholders (1)		$	399	$	253
Denominator:
Weighted-average common shares outstanding - basic			3,838,747		3,813,368
Common stock equivalents			41,083		88,031
Weighted-average common shares outstanding - diluted			3,879,830		3,901,399
Earnings per common share (1):
Basic		$	0.10	$	0.07
Diluted		$	0.10	$	0.06

(1) See Note 1 to financial statements for information related to a correction of an error.