Earnings Per Common Share

We compute earnings per share in accordance with ASC Topic 260,

Earnings per Share

("ASC 260"), which requires earnings per share for each class of stock (common stock and participating preferred stock) to be calculated using the two-class method. The two-class method is an allocation of earnings between the holders of common stock and a company's participating security holders. Under the two-class method, earnings for the reporting period are allocated between common shareholders and other security holders based on their respective participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method.

Basic earnings per common share is computed by dividing income or loss available to common stockholders by the weighted average number of shares of basic common stock outstanding. Our Series B junior participating convertible preferred stock ("Series B Preferred Stock"), which was convertible into shares of our common stock at the holder’s option, and our unvested restricted stock, are classified as participating securities in accordance with ASC 260. Net income allocated to the holders of our Series B Preferred Stock and unvested restricted stock is calculated based on the shareholders’ proportionate share of weighted average shares of common stock outstanding on an if-converted basis.

For purposes of determining diluted earnings per common share, basic earnings per common share is further adjusted to include the effect of potential dilutive common shares outstanding, including stock options, stock appreciation rights, performance share awards and unvested restricted stock using the more dilutive of either the two-class method or the treasury stock method, and Series B Preferred Stock and convertible debt using the if-converted method. Under the two-class method of calculating diluted earnings per share, net income is reallocated to common stock, the Series B Preferred stock and all dilutive securities based on the contractual participating rights of the security to share in the current earnings as if all of the earnings for the period had been distributed. In the computation of diluted earnings per share, the two-class method and if-converted method for the Series B Preferred Stock resulted in the same earnings per share amounts as the holder of the Series B Preferred Stock had the same economic rights as the holders of the common stock.

In connection with the closing of the Merger with Ryland on October 1, 2015, the Company effected a reverse stock split such that each five shares of common stock of Standard Pacific common stock issued and outstanding immediately prior to the closing of the Merger were combined and converted into one issued and outstanding share of common stock of the Company. As required in accordance with GAAP, all share and earnings per share information noted below have been retroactively adjusted to reflect the reverse stock split. The following table sets forth the components used in the computation of basic and diluted income per share.

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(Dollars in thousands, except per share amounts)

Numerator:
Net income	$	112,760		$	57,198		$	185,421		$	88,803
Less: Net income allocated to preferred shareholder		―			(13,798	)		―			(21,475	)
Less: Net income allocated to unvested restricted stock		(251	)		(112	)		(350	)		(181	)
Net income available to common stockholders for basic earnings per common share		112,509			43,288			185,071			67,147
Effect of dilutive securities:
Net income allocated to preferred shareholder		―			13,798			―			21,475
Interest on 1.625% convertible senior notes due 2018		91			―			453			―
Interest on 0.25% convertible senior notes due 2019		82			―			410			―
Interest on 1.25% convertible senior notes due 2032		62			41			310			204
Net income available to common and preferred stock for diluted earnings per share	$	112,744		$	57,127		$	186,244		$	88,826

Denominator:
Weighted average basic common shares outstanding		118,419,937			55,099,690			119,617,438			54,914,435
Weighted average additional common shares outstanding if preferred shares converted to common shares (if dilutive)		―			17,562,557			―			17,562,557
Total weighted average common shares outstanding if preferred shares converted to common shares		118,419,937			72,662,247			119,617,438			72,476,992
Effect of dilutive securities:
Share-based awards		583,264			748,519			575,516			904,526
1.625% convertible senior notes due 2018		7,163,865			―			7,163,865			―
0.25% convertible senior notes due 2019		3,637,091			―			3,637,091			―
1.25% convertible senior notes due 2032		6,283,989			6,262,570			6,283,989			6,262,570
Weighted average diluted shares outstanding		136,088,146			79,673,336			137,277,899			79,644,088

Income per common share:
Basic	$	0.95		$	0.79		$	1.55		$	1.22
Diluted	$	0.83		$	0.72		$	1.36		$	1.12