Note 22—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 year. 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 non-vested stock-based compensation awards. As a result of the Reorganization on November 1, 2018, all Class A units of PNMAC converted for shares of PFSI common stock on a one-for-one basis.

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


	Year ended December 31,
	2019		2018		2017
	(in thousands, except per share data)
Basic earnings per share of common stock:
Net income attributable to common stockholders	$	392,965	$	87,694	$	100,757
Weighted average shares of common stock outstanding		78,206		33,524		23,199
Basic earnings per share of common stock	$	5.02	$	2.62	$	4.34

Diluted earnings per share of common stock:
Net income attributable to common stockholders	$	392,965	$	87,694	$	100,757
Net income attributable to dilutive stock-based compensation units		—		3,868		—
Net income attributable to common stockholders for diluted earnings per share	$	392,965	$	91,562	$	100,757
Weighted average shares of common stock outstanding applicable to basic earnings per share		78,206		33,524		23,199
Effect of dilutive shares:
Common shares issuable under stock-based compensation plan		2,134		1,798		1,800
Weighted average shares of common stock applicable to diluted earnings per share		80,340		35,322		24,999
Diluted earnings per share of common stock	$	4.89	$	2.59	$	4.03

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 weighted-average number of anti-dilutive outstanding performance-based RSUs, time-based RSUs, stock options and Exchangeable PNMAC Class A units excluded from the calculation of diluted earnings per share:



	Year ended December 31,
	2019		2018		2017
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		1,032		1,084		497
Time-based RSUs		—		3		—
Stock options (2)		572		740		1,323
Exchangeable PNMAC Class A units (3)		—		43,700		53,299
Total anti-dilutive shares and units		1,604		45,527		55,119
Weighted average exercise price of anti-dilutive stock options (2)	$	23.70	$	17.81	$	16.40

(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 during the year.

(3)

Exchangeable PNMAC units were anti-dilutive during 2017 primarily due to the effect of adoption of the Tax Act on earnings attributable to PNMAC unitholders.