Note 2. Computation of Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the same method as basic EPS, however, the computation reflects the potential dilution that would occur if outstanding in-the-money stock options were exercised and converted into common stock.

Unvested stock-based compensation awards containing non-forfeitable rights to dividends are considered participating securities, and therefore are included in the two-class method for calculating EPS. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. The Company grants restricted stock to certain employees under its stock-based compensation plans. Recipients receive cash dividends during the vesting periods of these awards (i.e., including on the unvested portion of such awards). Since these dividends are non-forfeitable, the unvested awards are considered participating securities and therefore have earnings allocated to them.

The following table presents the Company’s computation of basic and diluted EPS for the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	2013		2012		2013		2012
Net income		$114,200		$128,798		$355,392		$378,263
Less: Dividends paid on and earnings allocated to participating securities		(723)		(1,213)		(2,248)		(3,552)

Earnings applicable to common stock		$113,477		$127,585		$353,144		$374,711


Weighted average common shares outstanding		439,435,579		437,787,688		439,199,487		437,692,411

Basic earnings per common share		$0.26		$0.29		$0.80		$0.86


Earnings applicable to common stock		$113,477		$127,585		$353,144		$374,711


Weighted average common shares outstanding		439,435,579		437,787,688		439,199,487		437,692,411
Potential dilutive common shares⁽¹⁾		--		5,664		3,971		5,026

Total shares for diluted earnings per share computation		439,435,579		437,793,352		439,203,458		437,697,437


Diluted earnings per common share and common share equivalents		$0.26		$0.29		$0.80		$0.86

(1)

Options to purchase 62,040 shares of the Company’s common stock that were outstanding in the three and nine months ended September 30, 2013, at a weighted average exercise price of $17.95, were excluded from the respective computations of diluted EPS because their inclusion would have had an antidilutive effect. Options to purchase 2,579,585 shares of the Company’s common stock that were outstanding in the three and nine months ended September 30, 2012, at a weighted average exercise price of $16.86, were excluded from the respective computations of diluted EPS because their inclusion also would have had an antidilutive effect.