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 period. 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, before the Reorganization, 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 PNMAC Class A units 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 September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(in thousands, except per share amounts)
Basic earnings per share of common stock:
Net income attributable to common stockholders	$	121,473	$	14,489	$	240,304	$	48,945
Weighted average shares of common stock outstanding		78,361		25,125		78,119		24,644
Basic earnings per share of common stock	$	1.55	$	0.58	$	3.08	$	1.99

Diluted earnings per share of common stock:
Net income attributable to common stockholders	$	121,473	$	14,489	$	240,304	$	48,945
Net income attributable to dilutive stock-based compensation units		—		552		—		2,435
Net income attributable to PennyMac Class A units exchangeable to Class A common stock, net of income taxes		—		29,580		—		101,921
Net income attributable to common stockholders for diluted earnings per share	$	121,473	$	44,621	$	240,304	$	153,301
Weighted average shares of common stock outstanding applicable to basic earnings per share		78,361		25,125		78,119		24,644
Effect of dilutive shares:
Common shares issuable under stock-based compensation plan		2,021		1,476		1,702		1,818
PennyMac Class A units exchangeable to Class A common stock		—		52,312		—		52,492
Weighted average shares of common stock applicable to diluted earnings per share		80,382		78,913		79,821		78,954
Diluted earnings per share of common stock	$	1.51	$	0.57	$	3.01	$	1.94

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 September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		1,157		1,172		985		1,060
Time-based RSUs		—		86		—		68
Stock options (2)		566		1,208		888		705
Total anti-dilutive shares and units		1,723		2,466		1,873		1,833
Weighted average exercise price of anti-dilutive stock options (2)	$	23.50	$	17.79	$	23.98	$	17.79

(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 period.