Earnings Per Common Share

The calculation of basic and diluted earnings per common share from continuing and discontinued operations follows:



	Three months ended						Nine Months Ended
	September 30,						September 30,
(In thousands, except per share data)	2012			2011			2012			2011
Earnings from continuing operations for basic and diluted earnings per common share:
Net income from continuing operations available to common shareholders	$	44,378		$	41,400		$	123,326		$	106,507
Less: dividends declared or accrued:
Common shareholders	(8,737		)	(4,348		)	(21,820		)	(9,564		)
Participating shares	(37		)	(23		)	(102		)	(50		)
Total undistributed income available to common shareholders	35,604			37,029			101,404			96,893
Add dividends paid to common shareholders	8,737			4,348			21,820			9,564
Less: income allocated to participating securities	(149		)	(198		)	(470		)	(499		)
Net income allocated to common shareholders	$	44,192		$	41,179		$	122,754		$	105,958
Earnings from discontinued operations for basic and diluted earnings per common share:
Net income from discontinued operations available to common shareholders	$	—		$	—		$	—		$	1,995
Shares:
Weighted average common shares outstanding - basic	87,394			87,046			87,301			86,978
Effect of dilutive securities:
Stock options and restricted stock	260			362			281			383
Warrants - Series A1 and A2	4,114			3,797			4,060			4,593
Warrants - other	116			—			112			—
Weighted average common shares outstanding - diluted	91,884			91,205			91,754			91,954
Earnings from continuing operations per common share:
Basic	$	0.51		$	0.48		$	1.41		$	1.22
Diluted	0.48			0.45			1.34			1.15
Earnings from discontinued operations per common share:
Basic	—			—			—			0.02
Diluted	—			—			—			0.02
Earnings per common share:
Basic	0.51			0.48			1.41			1.24
Diluted	0.48			0.45			1.34			1.17

Stock Options

Options to purchase 2.0 million shares for the three and nine months ended September 30, 2012 and 1.8 million shares for the three and nine months ended September 30, 2011, respectively, are excluded from the calculation of diluted earnings per share because the options’ exercise price was greater than the average market price of the shares for the respective periods.

Restricted Stock

Non-participating restricted stock awards of 127.2 thousand and 145.4 thousand shares for the three and nine months ended September 30, 2012, respectively, and 1.0 thousand and 11.2 thousand for the three and nine months ended September 30, 2011, respectively, whose issuance is contingent upon the satisfaction of certain performance conditions, were deemed to be anti-dilutive and therefore are excluded from the calculation of diluted earnings per share for the respective periods.

Series A Preferred Stock

Series A Preferred Stock represents potential issuable common stock of 1.1 million shares at September 30, 2012 and 2011. The weighted average effect of the potential issuable common stock associated with the Series A Preferred Stock was deemed to be anti-dilutive and therefore is excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2012 and 2011.

Warrants

Series A1 and A2: The Series A1 and A2 warrants issued in connection with the Warburg investment represent an aggregate 8.6 million potential issuable shares of common stock at September 30, 2012 and 2011. The weighted average dilutive effect of these warrants is included in the calculation of diluted earnings per share because the exercise price of the warrants was less than the average market price of Webster’s common stock for the three and nine months ended September 30, 2012 and 2011. The initial exercise price of $10.00 increased to $11.50 for the A1 warrants on July 28, 2011 and for the A2 warrants on October 15, 2011. The exercise price will similarly increase to $13.00 for the A1 warrants on July 28, 2013 and for the A2 warrants on October 15, 2013, unless otherwise exercised on or before the respective dates. As of September 30, 2012, none of the A1 or A2 warrants have been exercised.

Other: Warrants initially issued to the U.S. Treasury and sold in a secondary public offering on June 8, 2011 represent 0.7 million potential issuable shares of common stock at September 30, 2012 and 2011, respectively. The weighted average dilutive effect of these warrants is included in the calculation of diluted earnings per share because the exercise price of the warrants was less than the average market price of Webster’s common stock for the three and nine months ended September 30, 2012 and 2011.