Note 2. Earnings and Dividends per Share

We compute earnings per share pursuant to the two-class method. Under the two-class method, unvested restricted shares that contain non-forfeitable rights to dividends are participating securities and therefore, are included in the computation of basic earnings per share. The two-class method includes an earnings allocation formula to determine earnings per share for common stock and participating securities according to dividends and their respective participation rights in undistributed earnings. Our unvested restricted shares issued under the Long-Term Executive Incentive Program ("LTEIP"), which contain the non-forfeitable right to receive dividends, are considered participating securities.

Basic earnings per share ("EPS") is calculated by dividing net income applicable to common shares by the weighted average number of shares of common stock outstanding during each respective period. Any dividends paid on participating securities and any undistributed earnings considered to be attributable to participating securities are excluded from the numerator. The related participating securities are similarly excluded from the denominator. Diluted earnings per share are calculated by dividing net income applicable to common shares by 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 Enventis Corporation Amended and Restated Employee Stock Purchase Plan ("ESPP"), retention stock awards and stock awarded under the LTEIP.

The computation of basic and diluted earnings per share for the three and six months ended June 30, 2014 and 2013 using the two-class method is as follows:

	Three Months Ended June 30						Six Months Ended June 30
(Dollars in thousands, except share and earnings per share amounts)	2014			2013			2014			2013

Net income	$	1,911		$	2,321		$	3,984		$	3,947
Less: net income allocable to participating securities		(3	)		(4	)		(7	)		(8	)
Net income attributable to common shares	$	1,908		$	2,317		$	3,977		$	3,939

Weighted average shares outstanding		13,641,564			13,531,007			13,619,055			13,543,690
Stock options (dilutive only)		18,293			5,896			17,228			5,320
Stock subscribed ("ESPP")		-			-			-			-
Retention awards		19,667			16,775			19,544			13,980
Stock subscribed ("LTEIP")		16,595			23,289			23,551			21,759
Total dilutive shares outstanding		13,696,119			13,576,967			13,679,378			13,584,749

Earnings per share:
Basic and diluted	$	0.14		$	0.17		$	0.29		$	0.29

Dividends per share	$	0.15		$	0.145		$	0.30		$	0.29

There were no anti-dilutive shares for the three and six months ended June 30, 2014. The diluted earnings per share computation excluded 77,150 shares and 82,150 shares for the three and six months ended June 30, 2013, respectively, 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 2014 and 2013, respectively, are as follows:

Shares outstanding on record date	2014	2013
First quarter (February 15)	13,612,913	13,586,903
Second quarter (May 15)	13,654,438	13,559,043

Dividends per share are based on the quarterly dividend per share as declared by our Board of Directors. During the first six months of 2014 and 2013, shareholders elected to reinvest $154,000 of dividends into Enventis common stock pursuant to the Enventis Corporation Dividend Reinvestment Plan.

There were no share repurchases in the first six months of 2014. During the six months ended June 30, 2013, we acquired and retired 124,285 shares as part of our stock repurchase plan.