Note 20—Earnings Per Share of Common Stock

Basic earnings per share of common stock is determined using net income attributable to the Company’s common stockholders divided by the weighted average number of shares of common stock outstanding during the quarter. Diluted earnings per share of common stock is determined by dividing net income attributable to the Company’s common stockholders by the weighted average number of shares of common stock outstanding, assuming all dilutive shares of common stock were issued.

Potentially dilutive shares of common stock include non-vested stock-based compensation awards and PennyMac Class A units. The Company applies the treasury stock method to determine the diluted weighted average shares of common stock outstanding based on the outstanding stock-based compensation awards. As a result of the Reorganization, all Class A units of PNMAC converted into shares of the Company’s common stock on a one-for-one basis.

The following table summarizes the basic and diluted earnings per share calculations:


	Quarter ended March 31,
	2019		2018
	(in thousands, except per share amounts)
Basic earnings per share of common stock:
Net income attributable to common stockholders	$	46,135	$	16,619
Weighted average shares of common stock outstanding		77,653		23,832
Basic earnings per share of common stock	$	0.59	$	0.70

Diluted earnings per share of common stock:
Net income attributable to common stockholders	$	46,135	$	16,619
Net income attributable to dilutive stock-based compensation units		—		1,400
Net income attributable to PennyMac Class A units exchangeable to Class A common stock, net of income taxes		—		35,449
Net income attributable to common stockholders for diluted earnings per share	$	46,135	$	53,468
Weighted average shares of common stock outstanding applicable to basic earnings per share		77,653		23,832
Effect of dilutive shares:
Common shares issuable under stock-based compensation plan		1,633		2,947
PennyMac Class A units exchangeable to Class A common stock		—		52,682
Weighted average shares of common stock applicable to diluted earnings per share		79,286		79,461
Diluted earnings per share of common stock	$	0.58	$	0.67

Calculations of diluted earnings per share require certain potentially dilutive shares to be excluded when their inclusion in the diluted earnings per share calculation would be anti-dilutive. The following table summarizes the anti-dilutive weighted-average number of outstanding performance-based restricted share units (“RSUs”), time-based RSUs, and stock options excluded from the calculation of diluted earnings per share:


	Quarter ended March 31,
	2019		2018
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		1,279		134
Time-based RSUs		61		—
Stock options (2)		706		172
Total anti-dilutive stock-based compensation		2,046		306
Weighted average exercise price of anti-dilutive stock options (2)	$	24.26	$	24.40

(1)

Certain performance-based RSUs were outstanding but not included in the computation of earnings per share because the performance thresholds included in such RSUs have not been achieved.

(2)

Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were above the average stock prices for the quarter.