Earnings per Share

3 Months Ended

Mar. 31, 2016

17. Earnings per Share

The following table provides a reconciliation of net income and the number of shares of common stock used in the computation of basic EPS and diluted EPS (amounts in thousands, except per share amounts):


	For the Three Months Ended
	March 31,
	2016		2015
Basic Earnings
Income attributable to STWD common stockholders	$	26,657	$	120,363
Less: Income attributable to participating shares		(708)		(972)
Basic earnings	$	25,949	$	119,391

Diluted Earnings
Basic — Income attributable to STWD common stockholders	$	26,657	$	120,363
Less: Income attributable to participating shares		(708)		(972)
Add: Undistributed earnings to participating shares		—		106
Less: Undistributed earnings reallocated to participating shares		—		(104)
Diluted earnings	$	25,949	$	119,393

Number of Shares:
Basic — Average shares outstanding		236,556		223,541
Effect of dilutive securities — Convertible Notes		—		5,353
Effect of dilutive securities — Contingently issuable shares		121		138
Effect of dilutive securities — Unvested non-participating shares		82		—
Diluted — Average shares outstanding		236,759		229,032

Earnings Per Share Attributable to STWD Common Stockholders:
Basic	$	0.11	$	0.53
Diluted	$	0.11	$	0.52

As of March 31, 2016 and 2015, participating shares of 1.5 million and 1.8 million, respectively, were excluded from the computation of diluted shares as their effect was already considered under the more dilutive two-class method used above.

Also as of March 31, 2016, there were 62.7 million potential shares of common stock contingently issuable upon the conversion of the Convertible Notes. The Company has asserted its intent and ability to settle the principal amount of the Convertible Notes in cash. As a result, this principal amount, representing 62.7 million shares at March 31, 2016, was not included in the computation of diluted EPS. As discussed in Note 10, the conversion options associated with the Convertible Notes are “out-of-the-money” because the if-converted value of the 2017, 2018 and 2019 Convertible Notes was less than their principal amount by $90.5 million, $72.2 million and $23.4 million, respectively, at March 31, 2016. Therefore, there was no dilutive effect to EPS for the Convertible Notes.