Earnings Per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share

NOTE 2 – EARNINGS PER SHARE

The following is an analysis of basic and diluted earnings per share (“EPS”), reflecting the application of the two-class method, as described below:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income	$	6,255		$	6,929		$	19,250		$	20,338
Dividends and undistributed earnings allocated to participating securities (1)		(18	)		(12	)		(48	)		(33	)
Net income available to common shareholders	$	6,237		$	6,917		$	19,202		$	20,305
Weighted-average shares outstanding including participating securities		7,641,866			7,691,378			7,675,088			7,684,918
Less: average participating securities		(22,455	)		(13,406	)		(19,469	)		(13,007	)
Weighted-average common shares outstanding for basic EPS		7,619,411			7,677,972			7,655,619			7,671,911
Dilutive effect of stock-based awards (2)		20,023			5,598			14,144			8,490
Weighted-average common and potential common shares for diluted EPS		7,639,434			7,683,570			7,669,763			7,680,401
EARNINGS PER COMMON SHARE:
Basic EPS	$	0.82		$	0.90		$	2.51		$	2.65
Diluted EPS	$	0.82		$	0.90		$	2.50		$	2.65

(1) Represents dividends paid and undistributed earnings allocated to nonvested restricted stock awards.

(2) Represents the effect of the assumed exercise of stock options, vesting of restricted shares, and vesting of restricted stock units, based on the treasury stock method.

Nonvested stock-based payment awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method.  The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Certain of the Company’s nonvested restricted stock awards qualify as participating securities. 

Net income, less any preferred dividends accumulated for the period (whether or not declared), is allocated between the common stock and participating securities pursuant to the two-class method.  Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period, excluding participating nonvested restricted shares. 

Diluted EPS is computed in a similar manner, except that first the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method.

For the three-month and nine-month periods ended September 30, 2012, options to purchase 18,250 and 49,500 shares, respectively, of common stock were not considered in the computation of potential common shares for purposes of diluted EPS, since the exercise prices of the options were greater than the average market price of the common stock for the respective periods. For the three-month and nine-month periods ended September 30, 2011, options to purchase 108,200 and 102,400 shares, respectively, of common stock were not considered in the computation of potential common shares for purposes of diluted EPS, since the exercise prices of the options were greater than the average market price of the common stock for the respective periods.