Earnings per Share

3 Months Ended

Mar. 31, 2022

(11) Earnings per Share

The Company calculates its basic and diluted earnings (loss) per share using the two-class method for all periods presented, which defines unvested stock-based compensation awards that contain nonforfeitable rights to dividends as participating securities. The two-class method is an allocation formula that determines earnings per share for each share of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. The unvested restricted shares of its common stock granted to certain current and former employees and affiliates of the Manager qualify as participating securities. These restricted shares have the same rights as the Company’s other shares of common stock, including participating in any dividends, and therefore are included in the Company’s basic and diluted earnings per share calculation. For the three months ended March 31, 2022 and 2021, $0.2 million and $0.1 million, respectively, of common stock dividends declared and undistributed net income attributable to common stockholders were allocated to unvested shares of our common stock pursuant to stock grants made under the Company’s Incentive Plan. See Note 12 for details.

In connection with the issuance of Series B Preferred Stock and the Warrants described in Note 13, the Company elected the accreted redemption value method whereby the discount created based on the relative fair value of the Warrants to the fair value of the Series B Preferred Stock and the related issuance costs were accreted as a non-cash dividend on preferred stock over four years using the effective interest method. Such adjustments are included in Accretion of Discount on Series B Cumulative Redeemable Preferred Stock on the Company’s consolidated statements of changes in equity and treated as a deemed dividend on preferred stock for GAAP and income tax purposes. For the three months ended March 31, 2021 this adjustment totaled $1.5 million.

The computation of diluted earnings per common share is based on the weighted average number of participating securities outstanding plus the incremental shares that would be outstanding assuming exercise of the Warrants. The number of incremental common shares is calculated utilizing the treasury stock method. For the three months ended March 31, 2022 and 2021, the Warrants are included in the calculation of diluted earnings per common share because the Company generated earnings on a per common share basis, and the average market price of the Company’s common stock during the three months ended March 31, 2022 and 2021 was $12.17 and $10.95, respectively, which exceeds the strike price of $7.50 per common share for Warrants currently outstanding.

The following table sets forth the calculation of basic and diluted earnings per common share based on the weighted-average number of shares of common stock outstanding for the three months ended March 31, 2022 and 2021 (dollars in thousands, except share and per share data):


	Three Months Ended March 31,
	2022			2021
Net income	$	23,781		$	31,955
Preferred stock dividends(1)		(3,148	)		(6,124	)
Participating securities' share in earnings		(197	)		(146	)
Series B Preferred Stock accretion, including allocated Warrant fair value and transaction costs(2)		—			(1,452	)
Net income attributable to common stockholders	$	20,436		$	24,233
Weighted average common shares outstanding, basic		77,183,957			76,895,615
Incremental shares of common stock issued from the assumed exercise of the Warrants		4,604,766			3,777,621
Weighted average common shares outstanding, diluted		81,788,723			80,673,236
Earnings per common share, basic(3)	$	0.26		$	0.32
Earnings per common share, diluted(3)	$	0.25		$	0.30

(1)

Includes preferred stock dividends declared and paid for Series A preferred stock, Series C Preferred Stock, and Series B Preferred Stock shares outstanding for the three months ended March 31, 2022 and 2021, respectively.

(2)

Series B Preferred Stock Accretion, including Allocated Warrant Fair Value and Transaction Costs includes amounts recorded as deemed dividends of amortized transaction costs and the accreted portion of the allocated Warrant fair value related to the Company’s Series B Preferred Stock.

(3)

Basic and diluted earnings per common share are computed independently based on the weighted-average shares of common stock outstanding. Diluted earnings per common share also includes the impact of participating securities outstanding plus any incremental shares that would be outstanding assuming the exercise of the Warrants.