Note 2. Earnings and Dividends per Share

Basic earnings per share ("EPS") is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the applicable period. Shares used in the diluted earnings per share calculation are based on the weighted average number of shares outstanding during the period increased by potentially dilutive common equivalent shares. Potentially dilutive common shares include stock options, stock subscribed under the HickoryTech Corporation Amended and Restated Employee Stock Purchase Plan ("ESPP"), retention stock awards and stock awarded under the Long-Term Executive Incentive Program ("LTEIP"). Dilution is determined using the treasury stock method. The Company does not use the two-class method to report its earnings per share. The two-class method includes an earnings allocation formula that determines earnings per share for common stock and restricted stock issued under the LTEIP, which participate in dividends. However, the application of this method would result in an immaterial change in earnings per share and is therefore not presented.

	Three Months Ended June 30				Six Months Ended June 30
(Dollars in thousands, except share and earnings per share amounts)	2013		2012		2013		2012

Net income	$	2,321	$	1,738	$	3,947	$	4,032

Weighted average shares outstanding		13,531,007		13,404,628		13,543,690		13,377,209
Stock options (dilutive only)		5,896		12,493		5,320		14,664
Stock subscribed (ESPP)		-		-		-		-
Retention awards		16,775		16,414		13,980		20,029
Stock subscribed (LTEIP)		23,289		21,172		21,759		21,375
Total dilutive shares outstanding		13,576,967		13,454,707		13,584,749		13,433,277

Earnings per share:
Basic and diluted	$	0.17	$	0.13	$	0.29	$	0.30

Dividends per share	$	0.145	$	0.14	$	0.29	$	0.28

Options to purchase 77,150 and 83,900 shares for the three months ended June 30, 2013 and 2012, respectively, and 82,150 and 78,900 shares for the six months ended June 30, 2013 and 2012, respectively, were not included in the computation of diluted EPS, because their effect on earnings per share would have been anti-dilutive.

Cash dividends are based on the number of common shares outstanding at their respective record dates. The number of shares outstanding as of the record date for the first and second quarters of 2013 and 2012, respectively, are as follows:

Shares outstanding on record date	2013	2012
First quarter (February 15)	13,586,903	13,409,941
Second quarter (May 15)	13,559,043	13,479,677

Dividends per share are based on the quarterly dividend per share as declared by the HickoryTech Board of Directors. HickoryTech paid dividends of $0.145 and $0.14 per share in the second quarter of 2013 and 2012, respectively. During the first six months of 2013 and 2012, shareholders have elected to reinvest $154,000 and $147,000, respectively, of dividends into HickoryTech common stock pursuant to the HickoryTech Corporation Dividend Reinvestment Plan.

In the three and six months ended June 30, 2013, we acquired and retired 71,638 and 124,285 shares, respectively, of HickoryTech common stock.