(11)	Earnings per Share

Stock Dividend On July 1, 2016, the Company paid a special stock dividend of 4% to common shareholders of record at the close of business on June 15, 2016. For all periods presented, share information, including basic and diluted earnings per share, has been adjusted retroactively to reflect this change.

Basic earnings per share is computed by dividing income available to shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share gives effect to all dilutive potential shares that were outstanding during the year. The calculations of basic and diluted earnings per share are as follows for the periods indicated:

	Three Months Ended March 31,
(dollars in thousands, except per share data)	2017		2016
Basic earnings per share:
Net income available to shareholders	$	2,100	$	1,998
Basic earnings per share	$	0.37	$	0.35
Diluted earnings per share:
Net income available to shareholders	$	2,100	$	1,998
Average shares outstanding		5,615,300		5,654,066
Effect of dilutive stock options		4,726		0
Average shares outstanding including dilutive stock options		5,620,026		5,654,066
Diluted earnings per share	$	0.37		0.35

Under the treasury stock method, outstanding stock options are dilutive when the average market price of the Company’s common stock, when combined with the effect of any unamortized compensation expense, exceeds the option price during the period, except when the Company has a loss from continuing operations available to shareholders. In addition, proceeds from the assumed exercise of dilutive options along with the related tax benefit are assumed to be used to repurchase common shares at the average market price of such stock during the period.

Options to purchase 20,787 and 44,458 shares during the three months ended March 31, 2017 and 2016, respectively, were not included in the respective computations of diluted earnings per share because the exercise price of the option, when combined with the effect of the unamortized compensation expense, was greater than the average market price of the common shares and were considered anti-dilutive.

Repurchase Program On August 6, 2015, the Board of Directors authorized a share repurchase plan to purchase through open market transactions $2.0 million market value of the Company’s common stock. As of March 31, 2017, the Company repurchased a total of 45,293 shares of common stock pursuant to the plan at an average price of $15.04 per share, including 1,400 shares of common stock repurchased pursuant to the plan during the three months ended March 31, 2017 at an average price of $17.88 per share. At March 31, 2017, approximately $1.3 million may be used to purchase shares under the plan.

The table below shows activity in the outstanding shares of the Company's common stock during the past three years. Shares in the table below are presented on a historical basis and have not been restated for the annual 4% stock dividends.

	Number of shares
	March 31,			December 31,			March 31,
	2017			2016			2016
Outstanding, beginning of year		5,616,607			5,441,190			5,441,190
Issuance of stock:
4% stock dividend		0			217,155			0
Purchase of treasury stock		(1,400	)		(41,738	)		(8,635	)
Outstanding, end of year		5,615,207			5,616,607			5,432,555

Except as noted in the above table, all share and per share amounts in this note have been restated for the 4% common stock dividend distributed July 1, 2016.