24. Earnings per Common Share

Nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and are included in the computation of earnings per share pursuant to the two-class method prescribed by the Earnings Per Share Topic of the ASC. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Restricted Stock Awards were the only instruments issued by Hilltop which previously qualified as participating securities through August 2017 when these awards vested.

Net earnings, less any preferred dividends accumulated for the period (whether or not declared), is allocated between the common stock and participating securities pursuant to the two-class method. Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during the period, excluding participating nonvested restricted shares.

Diluted earnings per common share is computed in a similar manner, except that first the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares, excluding the participating securities, were issued using the treasury stock method. During the three and nine months ended September 30, 2018, RSUs were the only potentially dilutive non-participating instruments issued by Hilltop. Next, the Company determines and includes in the diluted earnings per common share calculation the more dilutive effect of the participating securities using the treasury stock method or the two-class method. Undistributed losses are not allocated to the nonvested share-based payment awards (the participating securities) under the two-class method as the holders are not contractually obligated to share in the losses of the Company.

The following table presents the computation of basic and diluted earnings per common share (in thousands, except per share data).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Basic earnings per share:
Income attributable to Hilltop	$	35,805	$	30,206	$	93,326	$	119,116
Less: income applicable to participating shares		—		—		—		—
Net earnings available to Hilltop common stockholders	$	35,805	$	30,206	$	93,326	$	119,116

Weighted average shares outstanding - basic		94,554		96,096		95,264		97,554

Basic earnings per common share	$	0.38	$	0.31	$	0.98	$	1.22

Diluted earnings per share:
Income attributable to Hilltop	$	35,805	$	30,206	$	93,326	$	119,116

Weighted average shares outstanding - basic		94,554		96,096		95,264		97,554
Effect of potentially dilutive securities		56		210		91		249
Weighted average shares outstanding - diluted		94,610		96,306		95,355		97,803

Diluted earnings per common share	$	0.38	$	0.31	$	0.98	$	1.22