EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net income by the weighted-average common shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted-average common shares and potentially dilutive securities outstanding during the period.

Earnings per share is calculated using the two-class method, which requires the allocation of earnings to each class of common stock outstanding and to unvested share-based payment awards that participate in dividends with common stock, also referred to herein as unvested participating shares.

The Company’s unvested stock-based payment awards include unvested shares awarded as restricted stock awards at the discretion of the Company’s board of directors. The restricted stock awards generally vest at the end of three years. The unvested shares participate equally in dividends. See Note 11, “Stockholders’ Equity and Stock-Based Compensation,” for a discussion of the current year unvested stock awards and issuances.

Earnings per Share - Basic

The following table sets forth the computation of earnings per share using the two-class method (in thousands, except share and per share amounts):



	Years ended December 31,
	2017		2016		2015
Basic earnings per share:
Net income	$	156,963	$	94,760	$	93,927
Allocation of net income to common stockholders:
Common stock	$	155,995	$	93,919	$	93,287
Unvested participating shares	968		841		640
	$	156,963	$	94,760	$	93,927
Weighted average number of common shares:
Common stock	58,873,196		59,229,069		60,835,574
Unvested participating shares	366,029		531,364		417,285
Earnings per common share:
Common stock	$	2.65	$	1.59	$	1.53

Earnings per Share - Diluted

The Company calculates diluted earnings per share for common stock using the more dilutive of (1) the treasury stock method, or (2) the two-class method. The following table sets forth the computation of diluted earnings per share using the two-class method (in thousands, except share and per share amounts):



	Years ended December 31,
	2017			2016			2015
Diluted earnings per share:
Earnings allocated to common stock	$	155,995		$	93,919		$	93,287
Plus earnings allocated to unvested participating shares	968			841			640
Less adjusted earnings allocated to unvested participating shares	(947		)	(822		)	(624		)
Earnings allocated to common stock	$	156,016		$	93,938		$	93,303
Weighted average number of common shares:
Common stock	58,873,196			59,229,069			60,835,574
Effect of dilutive securities	1,380,495			1,365,826			1,525,204
	60,253,691			60,594,895			62,360,778
Earnings per common share:
Common stock	$	2.59		$	1.55		$	1.50

Options outstanding to purchase 0.6 million, 0.5 million and 0.2 million shares of common stock were excluded from diluted earnings per share for the years ended December 31, 2017, 2016, and 2015, respectively, since their effect was anti-dilutive, which may be dilutive in the future.