10. OUTSTANDING SHARES AND EARNINGS PER SHARE

On January 24, 2019, the Board of Directors of the Company declared a 5% stock dividend payable on March 29, 2019 to shareholders of record as of February 28, 2019. All income per share amounts have been adjusted to give retroactive effect to stock dividends.

Earnings Per Share (EPS)

Basic EPS includes no dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the respective period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding plus dilutive shares for the quarter. Diluted shares include all common stock equivalents (“in-the-money” stock options, unvested restricted stock, stock units, warrants and rights, convertible bonds and preferred stock), which reflects the potential dilution of securities that could share in the earnings of the Company.

The following table presents a reconciliation of basic and diluted EPS for the three months ended March 31, 2019 and 2018 (dollars in thousands except per share amounts):

	Three months ended March 31,
	2019		2018
Basic earnings per share:
Net income	$	3,985	$	2,733

Weighted average common shares outstanding		12,141,752		12,111,999
Basic EPS	$	0.33	$	0.23

Diluted earnings per share:
Net income	$	3,985	$	2,733

Weighted average common shares outstanding		12,141,752		12,111,999
Effect of dilutive shares		143,308		170,787
Adjusted weighted average common shares outstanding		12,285,060		12,282,786
Diluted EPS	$	0.32	$	0.22

Stock options which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 215,415 shares and 139,445 shares for the three months ended March 31, 2019 and March 31, 2018, respectively.