Earnings Per Common Share

12 Months Ended

Dec. 31, 2016

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, unvested and fully vested SERP shares 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 years indicated:



	Years Ended December 31,
(Dollars in millions, except per share amounts)	2016			2015			2014
Net income	$	2,143		$	1,980		$	2,022
Less:
Preferred stock dividends	(173		)	(130		)	(61		)
Dividends and undistributed earnings allocated to participating securities⁽¹⁾	(2		)	(2		)	(3		)
Net income available to common shareholders	$	1,968		$	1,848		$	1,958
Average common shares outstanding (In thousands):
Basic average common shares	391,485			407,856			424,223
Effect of dilutive securities: common stock options and common stock awards	4,605			5,782			7,784
Diluted average common shares	396,090			413,638			432,007
Anti-dilutive securities⁽²⁾	2,143			661			1,498
Earnings per Common Share:
Basic	$	5.03		$	4.53		$	4.62
Diluted⁽³⁾	4.97			4.47			4.53

⁽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. Refer to Note 18 for additional information about equity-based awards.

⁽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.