Earnings Per Common Share and Share Awards

Basic earnings per common share is computed by dividing net income attributable to the Company by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income attributable to the Company by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, when share-based awards are exercised, (a) the exercise price of a share-based award; (b) the amount of compensation cost, if any, for future service that the Company has not yet recognized; and (c) the amount of estimated tax benefits that would be recorded in additional paid-in capital, if any, are assumed to be used to repurchase shares in the current period. The incremental dilutive potential common shares, calculated using the treasury stock method, were 5,774, 20,459 and 35,090 for 2014, 2013 and 2012, respectively.

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31:



For the Years Ended December 31,	2014		2013		2012
Net income attributable to the Company	$	9,648,975	$	14,708,210	$	11,102,496
Weighted average common shares outstanding – Basic	2,031,760		2,056,169		2,081,703
Incremental shares outstanding assuming the exercise of dilutive stock options and SARs (share-settled)	5,774		20,459		35,090
Weighted average common shares outstanding – Diluted	2,037,534		2,076,628		2,116,793
Basic earnings per common share	$	4.75	$	7.15	$	5.33
Diluted earnings per common share	$	4.74	$	7.08	$	5.24

There were no potential shares excluded from the computation of diluted earnings per share in 2014, 2013 and 2012.

The Company has adopted employee stock award plans under which restricted stock, and options or stock appreciation rights (“SARs”) to acquire shares (not to exceed 500,000 shares) of the Company’s stock, may be granted to key employees or directors of the Company at a price not less than the market value on the date of grant. SARs and options (which have predominantly been incentive stock options) awarded under the plans thus far generally expire in five to ten years and are exercisable and vest (1) immediately; (2) within one year; or (3) at 10% to 20% per year beginning on the date of grant. All SARs issued to date have been share-settled only.

A summary of share-based award transactions for all share-based award plans follows:



	Number Of Shares		Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2012	101,600		$	29.81	3.91	$	697,780
SARs granted	3,000		50.50
Options exercised	(6,380	)	25.17
Options/SARs canceled/forfeited/expired	(70	)	31.00
Outstanding as of December 31, 2012	98,150		$	30.74	3.17	$	2,871,710
SARs granted	3,000		71.59
SARs exercised	(79,500	)	28.77
Options exercised	(2,650	)	28.63
Options/SARs canceled/forfeited/expired	—		—
Outstanding as of December 31, 2013	19,000		$	45.74	3.43	$	669,610
SARs granted	4,500		68.70
SARs exercised	(1,500	)	49.04
Options exercised	(1,000	)	27.21
Options/SARs canceled/forfeited/expired	—		—
Outstanding as of December 31, 2014	21,000		$	51.30	3.64	$	453,510

Exercisable as of December 31, 2014	19,875		$	50.32	3.49	$	448,785

Unvested as of December 31, 2014	1,125		$	68.70	6.39	$	4,725

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock at December 31, 2014. The intrinsic values of options exercised during 2014, 2013 and 2012 were approximately $82,000, $3,486,000 and $153,000, respectively.

The following tables summarize information about fixed stock options outstanding at December 31, 2014:



					Options Outstanding at Year-End				Options Exercisable at Year-End
Range of Exercise Prices					Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	36.79	—	$	36.79	1,500	0.38	$	36.79	1,500	$	36.79
$	36.79	—	$	36.79	1,500	0.38	$	36.79	1,500	$	36.79



					SARs Outstanding at Year-End				SARs Exercisable at Year-End
Range of Exercise Prices					Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	32.00	—	$	33.30	2,000	1.39	$	32.00	2,000	$	32.00
33.31		—	41.49		2,500	2.38	33.31		2,500	33.31
41.50		—	71.59		15,000	4.48	58.33		13,875	57.49
$	32.00	—	$	71.59	19,500	3.89	$	52.42	18,375	$	51.43

In 2014, 4,125 options and SARs vested with a fair value of $118,462.

During the second quarters of 2014, 2013 and 2012, the Company issued share-settled SARs to the directors of the Company. SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments. The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions noted in the table shown below. Expected volatilities are based on both the implied and historical volatility of the Company’s stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant. The weighted average fair values for the SARs issued during 2014, 2013 and 2012 were $28.98, $27.55 and $18.84, respectively, and were estimated using the weighted average assumptions shown in the table below.



	2014	2013	2012
Expected Life in Years	6.9	5.0	5.0
Volatility	39.9%	44.6%	44.6%
Interest Rate	2.1%	1.3%	0.8%
Yield Rate	0.4%	0.5%	0.6%

There was approximately $121,000, $84,000 and $75,000 of compensation expense relating to SARs or options vesting on or before December 31, 2014, 2013 and 2012, respectively, included in salaries, employee benefits and payroll taxes in the Consolidated Statements of Income. As of December 31, 2014, there was approximately $33,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock award plans. That cost is expected to be recognized over a weighted average period of approximately 3 months.

The estimated weighted average grant-date fair value of SARs granted for the years ended December 31 was as follows:



For the Years Ended December 31,	2014		2013		2012
Exercise price equal to market price on date of grant:
Weighted average market price	$	68.70	$	71.59	$	50.50
Weighted average grant-date fair value	$	28.98	$	27.55	$	18.84

There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.