Net Income Per Share
Grants of restricted stock and restricted stock units (“RSUs”) of the Company in share-based payment transactions are considered participating securities prior to vesting and, therefore, are considered in computing basic earnings per share under the two-class method. The two-class method is an earnings allocation method for calculating earnings per share when a company’s capital structure includes either two or more classes of common stock or common stock and participating securities. Earnings per basic share under the two-class method is calculated based on dividends declared on common shares and other participating securities (“distributed earnings”) and the rights of participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends and dividend equivalents accruing during the period. The undistributed earnings are allocated to all outstanding common shares and participating securities based on the relative percentage of each security to the total number of outstanding participating securities. Earnings per basic share represents the summation of the distributed and undistributed earnings per share class divided by the total number of shares.
Through December 31, 2025, all of the Company’s participating securities received dividends or dividend equivalents at an equal dividend rate per share. As a result, distributions to participating securities have been included in net income attributable to common stockholders to calculate net income per basic and diluted share.
The 9,468 shares and 81,169 shares necessary to settle the Exchangeable Senior Notes on the if-exchanged method basis were dilutive for the years ended December 31, 2024, and 2023, respectively, and were included in the computation of diluted earnings per share.
For the years ended December 31, 2024, and 2023, the performance share units (“PSUs”) granted to certain employees were not included in dilutive securities as the performance thresholds for the vesting of the PSUs were not met as measured as of the respective dates. The PSUs expired on December 31, 2024 (see Note 11 " Common Stock Incentive Plan" for further discussion of the PSUs).
Computations of net income per basic and diluted share were as follows (in thousands, except share and per share data):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Net income | $ | 118,247 | | | $ | 161,661 | | | $ | 165,588 | |
| Preferred stock dividends | (3,812) | | | (1,804) | | | (1,352) | |
| Distribution to participating securities | (2,987) | | | (2,254) | | | (1,482) | |
| Net income attributable to common stockholders used to compute net income per share – basic | 111,448 | | | 157,603 | | | 162,754 | |
| Dilutive effect of Exchangeable Senior Notes | — | | | 28 | | | 212 | |
| Net income attributable to common stockholders used to compute net income per share – diluted | $ | 111,448 | | | $ | 157,631 | | | $ | 162,966 | |
| | | | | |
| Weighted-average common shares outstanding: | | | | | |
| Basic | 28,005,228 | | 28,226,402 | | 27,977,807 |
| Restricted stock and RSUs | 371,999 | | 294,780 | | 196,821 |
| Dilutive effect of Exchangeable Senior Notes | — | | 9,468 | | 81,169 |
| Diluted | 28,377,227 | | 28,530,650 | | 28,255,797 |
| Net income attributable to common stockholders per share: | | | | | |
| Basic | $ | 3.98 | | | $ | 5.58 | | | $ | 5.82 | |
| Diluted | $ | 3.93 | | | $ | 5.52 | | | $ | 5.77 | |
About Earnings Per Share Disclosures
The earnings per share disclosure breaks down the calculation from net income to both basic and diluted EPS, revealing the full impact of a company's capital structure on per-share economics. The reconciliation between basic and diluted share counts exposes how many stock options, RSUs, convertible securities, and warrants are potentially dilutive to existing shareholders.
Key signals: a widening gap between basic and diluted shares indicates growing dilution from equity compensation or convertible instruments. Anti-dilutive securities excluded from the diluted calculation deserve attention — they represent latent dilution that will materialize if the stock price rises. Watch for the effect of share buybacks on per-share metrics: EPS growth driven primarily by repurchases rather than income growth signals weakening fundamentals. Compare year-over-year changes in the diluted share count against equity compensation expense to assess whether management is effectively managing dilution.