NYCB 2017 Annual Report

90 Earnings (Loss) per Common Share (Basic and Diluted) Basic earnings (loss) per common share (“EPS”) is computed by dividing the net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the same method as basic EPS, however, the computation reflects the potential dilution that would occur if outstanding in-the-money stock options were exercised and converted into common stock. Unvested stock-based compensation awards containing non-forfeitable rights to dividends paid on the Company’s common stock are considered participating securities, and therefore are included in the two -class method for calculating EPS. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends on the common stock. The Company grants restricted stock to certain employees under its stock-based compensation plan. Recipients receive cash dividends during the vesting periods of these awards, including on the unvested portion of such awards. Since these dividends are non-forfeitable, the unvested awards are considered participating securities and therefore have earnings allocated to them. The following table presents the Company’s computation of basic and diluted earnings (loss) per common share for the years ended December 31, 2017, 2016, and 2015: Years Ended December 31, (in thousands, except share and per share amounts) 2017 2016 2015 Net income (loss) available to common shareholders $441,580 $495,401 $(47,156) Less: Dividends paid on and earnings/(loss) allocated to participating securities (3,554) (3,795) (3,357) Earnings/(loss) applicable to common stock $438,026 $491,606 $(50,513) Weighted average common shares outstanding 487,073,951 485,150,173 448,982,223 Basic earnings (loss) per common share $0.90 $1.01 $(0.11) Earnings (loss) applicable to common stock $438,026 $491,606 $(50,513) Weighted average common shares outstanding 487,073,951 485,150,173 448,982,223 Potential dilutive common shares -- -- -- Total shares for diluted earnings (loss) per common share computation 487,073,951 485,150,173 448,982,223 Diluted earnings (loss) per common share and common share equivalents $0.90 $1.01 $(0.11) Recently Adopted Accounting Standards In March 2016, the FASB issued ASU No. 2016- 09, “Compensation— Stock Compensation (Topic 718): Improvements to Employee Share- Based Payment Accounting.” ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the Statements of Cash Flows, and accounting for forfeitures. The Company adopted ASU No. 2016-09 prospectively, effective for the first quarter of 2016. Upon adoption, the Company recorded an immaterial cumulative-effect adjustment to the opening balance of retained earnings. In addition, ASU No. 2016-09 requires that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than as equity. This resulted in an immaterial benefit to income tax expense in the first quarter of 2016. Relative to forfeitures, ASU No. 2016- 09 allows an entity’s accounting policy election to either continue to estimate the number of awards that are expected to vest, as under previous guidance, or account for forfeitures when they occur. The Company elected to continue its practice of estimating the number of awards that will be forfeited. The income tax effects of ASU No. 2016-09 on the Statements of Cash Flows are now classified as cash flows from operating activities, rather than cash flows from financing activities. The Company elected to apply this cash flow classification guidance prospectively and, therefore, prior periods were not adjusted. ASU No. 2016-09 also requires the presentation of certain employee withholding taxes as a financing activity on the Consolidated Statements of Cash Flows; this is consistent with the manner in which the Company has presented such employee withholding taxes in the past. Accordingly, no reclassification for prior periods was required. In December 2016, the FASB issued ASU No. 2016- 19, “Technical Corrections and Improvements,” which includes various clarifications or corrections to the ASC that are not intended to have a significant effect on current accounting practice or create significant administrative costs for most entities. ASU No. 2016-19 includes an amendment that clarifies the difference between a valuation approach and a valuation technique when applying the