Earnings Per Common Share

Basic EPS is calculated pursuant to the “two-class” method, by dividing net income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted EPS is calculated pursuant to the two-class method, by dividing net income available to common shareholders by the total weighted-average number of common shares outstanding for the period plus the shares representing the dilutive effect of common stock options and other equity-based awards. The effect of common stock options and other equity-based awards is excluded from the calculation of diluted EPS in periods in which their effect would be anti-dilutive.

The two-class method requires the allocation of undistributed net income between common and participating shareholders. Net income available to common shareholders, presented separately in our consolidated statement of income, is the basis for the calculation of both basic and diluted EPS. Participating securities are composed of unvested restricted stock and fully vested deferred director stock awards, which are equity-based awards that contain non-forfeitable rights to dividends, and are considered to participate with the common stock in undistributed earnings.

The following table presents the computation of basic and diluted earnings per common share for the periods indicated:



	Three Months Ended June 30,
(Dollars in millions, except per share amounts)	2016			2015
Net income	$	619		$	418
Less:
Preferred stock dividends	(33		)	(29		)
Dividends and undistributed earnings allocated to participating securities⁽¹⁾	(1		)	—
Net income available to common shareholders	$	585		$	389
Average common shares outstanding (in thousands):
Basic average common shares	394,160			410,674
Effect of dilutive securities: common stock options and common stock awards	4,687			6,038
Diluted average common shares	398,847			416,712
Anti-dilutive securities⁽²⁾	3,277			619
Earnings per Common Share:
Basic	$	1.48		$	0.95
Diluted⁽³⁾	1.47			0.93

	Six Months Ended June 30,
(Dollars in millions, except per share amounts)	2016			2015
Net income	$	987		$	823
Less:
Preferred stock dividends	(82		)	(60		)
Dividends and undistributed earnings allocated to participating securities⁽¹⁾	(1		)	(1		)
Net income available to common shareholders	$	904		$	762
Average common shares outstanding (in thousands):
Basic average common shares	396,790			411,445
Effect of dilutive securities: common stock options and common stock awards	4,323			6,198
Diluted average common shares	401,113			417,643
Anti-dilutive securities⁽²⁾	3,426			704
Earnings per Common Share:
Basic	$	2.28		$	1.85
Diluted⁽³⁾	2.25			1.83

⁽¹⁾Represents the portion of net income available to common equity allocated to participating securities, composed of fully vested deferred director stock and unvested restricted stock that contain non-forfeitable rights to dividends during the vesting period on a basis equivalent to dividends paid to common shareholders.

⁽²⁾Represents common stock options and other equity-based awards outstanding but not included in the computation of diluted average common shares, because their effect was anti-dilutive.

⁽³⁾Calculations reflect allocation of earnings to participating securities using the two-class method, as this computation is more dilutive than the treasury stock method.