10. OUTSTANDING SHARES AND EARNINGS PER SHARE

On January 24, 2019, the Board of Directors of the Company declared a 5% stock dividend payable 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 and six months ended June 30, 2019 and 2018 (dollars in thousands except per share amounts):

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Basic earnings per share:
Net income	$	3,406	$	3,003	$	7,391	$	5,736

Weighted average common shares outstanding		12,169,937		12,127,378		12,156,829		12,119,688
Basic EPS	$	0.28	$	0.25	$	0.61	$	0.47

Diluted earnings per share:
Net income	$	3,406	$	3,003	$	7,391	$	5,736

Weighted average common shares outstanding		12,169,937		12,127,378		12,156,829		12,119,688

Effect of dilutive shares		146,994		168,730		145,161		169,752

Adjusted weighted average common shares outstanding		12,316,931		12,296,108		12,301,990		12,289,440
Diluted EPS	$	0.28	$	0.24	$	0.60	$	0.47

Stock options which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounting to 215,415 shares and 73,361 shares for the three months ended June 30, 2019 and 2018, respectively. Stock options which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounting to 215,415 shares and 106,221 shares for the six months ended June 30, 2019 and 2018, respectively.