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, as share-based awards are exercised, (a) the exercise price of a share-based award and (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized, are assumed to be used to repurchase shares in the current period.

The following table sets forth the computation of basic and diluted earnings per share for the three- and nine-month periods ended September 30:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2019		2018		2019		2018
Net income attributable to the Company	$	7,952	$	10,634	$	20,078	$	21,757
Weighted average common shares outstanding – Basic	1,889		1,887		1,888		1,886
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)	6		10		8		10
Weighted average common shares outstanding – Diluted	1,895		1,897		1,896		1,896
Basic earnings per common share	$	4.21	$	5.64	$	10.63	$	11.53
Diluted earnings per common share	$	4.20	$	5.61	$	10.59	$	11.47

There were 14 thousand potential shares excluded from the computation of diluted earnings per share for the three- and nine-month periods ended September 30, 2019, respectively. There were 9 thousand and 4 thousand potential shares excluded from the computation of diluted earnings per share for the three- and nine-month periods ended September 30, 2018, respectively.

The Company historically has adopted employee stock award plans under which restricted stock, options or stock appreciation rights ("SARs") exercisable for the Company's stock, may be granted to key employees or directors of the Company. There is currently one active plan from which the Company may grant share-based awards. The awards eligible to be granted under the active plan are limited to SARs, and the maximum aggregate number of shares of common stock of the Company available pursuant to the plan for the grant of SARs is 250 thousand shares.

As of September 30, 2019, the only outstanding awards under the plans were SARs, which expire seven years from the date of grant, and all of which vest and are exercisable within one year of the date of grant. All SARs issued to date have been share-settled only. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.

There was approximately $205 thousand and $239 thousand of compensation expense relating to SARs vesting on or before September 30, 2019 and 2018, respectively, included in personnel expenses in the Consolidated Statements of Income. As of September 30, 2019, there was $117 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.

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



(in thousands, except weighted average exercise price and average remaining contractual term)	Number Of Shares		Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2018	25		$	93.40	3.98	2,624
SARs granted	4		188.71
SARs exercised	(1	)	41.50
Outstanding as of December 31, 2018	28		$	110.27	3.64	2,019
SARs granted	4		162.81
SARs exercised	(2	)	50.50
Outstanding as of September 30, 2019	30		$	124.13	3.78	1,367

Exercisable as of September 30, 2019	28		$	120.99	3.55	1,367

Unvested as of September 30, 2019	2		$	162.81	6.63	—

During the second quarters of 2019 and 2018, the Company issued 4 thousand share-settled SARs, respectively, 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 2019 and 2018 were $51.88 and $78.61, respectively, and were estimated using the weighted average assumptions shown in the table below.



	2019	2018
Expected Life in Years	7.0	7.0
Volatility	30.2%	39.0%
Interest Rate	2.3%	3.1%
Yield Rate	1.0%	0.8%