ASC 260, Earnings per share, requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.
The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.
The table below presents basic and diluted net (loss) income per share of common stock using the two-class method for the three months ended March 31, 2017 and 2016:
For the three
Net income available to common stockholders
Dividends declared on common stock
Dividends on participating securities
Net income (loss) attributable to common stockholders
Basic weighted average shares of common stock outstanding
Diluted weighted average shares of common stock outstanding
Basic and diluted net income per weighted average share of common stock
Undistributed income (loss)
Basic and diluted net income per share of common stock
For the three months ended March 31, 2017 and 2016, respectively, 1,385,803 and 942,526 unvested RSUs were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.
Note 17 – Business Combination
On August 31, 2016, the Company, pursuant to the terms and conditions of the AMTG Merger Agreement, acquired AMTG for consideration of common stock and preferred stock, as applicable and cash. AMTG merged with and into the Company with the Company continuing as the surviving entity. As a result, all operations of AMTG and its former subsidiaries are consolidated with the operations of the Company. In connection with financing the AMTG Merger, on August 31, 2016, the Company entered into a Loan Agreement (the “Athene Loan Agreement”) with Athene USA Corporation, a subsidiary of Athene Holding Ltd., as lender (“Athene USA”), pursuant to which the Company borrowed $175,000 in order to fund a portion of the Company’s obligations under the AMTG Merger Agreement. The Athene Loan Agreement was repaid in full and terminated on September 1, 2016. On August 31, 2016, pursuant to an Asset Purchase and Sale Agreement, dated February 26, 2016 (as amended, the “Asset Purchase Agreement”) by and among Athene Annuity & Life Assurance Company and Athene Annuity and Life Company (collectively, “Athene Annuity”) and the Company, the Company sold primarily non-agency residential mortgage backed securities previously held by AMTG to Athene Annuity for cash consideration of approximately $1,100,000. Proceeds from the sale were used to repay approximately $804,000 in associated financing, $175,000 to satisfy the Athene Loan Agreement and for general corporate purposes.