Note 12—Equity

Common Share Information

The following table provides a summary of net income to common shareholders as well as information pertaining to weighted average shares used in the per share calculations as presented on the consolidated statements of operations for the three and six months ended June 30, 2013 and 2012.

	For the three months ended June 30,				For the six months ended June 30,
(in thousands)	2013		2012		2013		2012
Net (loss) income from continuing operations	$	(869)	$	2,092	$	34,880	$	5,558
Net income from discontinued operations		418		322		3,945		698
Net (loss) income to common shareholder	$	(451)	$	2,414	$	38,825	$	6,256

Basic weighted-average shares ⁽¹⁾		42,406		42,194		42,426		42,158
Common stock equivalents ⁽²⁾ ⁽³⁾ ⁽⁴⁾		1,406		240		1,280		258
Diluted weighted-average shares		43,812		42,434		43,706		42,416

⁽¹⁾

Includes common shares issued and outstanding, as well as non-employee directors’ and employee deferred shares that have vested, but are not issued and outstanding.

⁽²⁾

At June 30, 2013, 2,128,125 stock options were in the money and had a dilutive impact of 1,354,122 shares and 1,254,647 shares for the three months and six months ended June 30, 2013, respectively. In addition, 312,500 unvested employee deferred shares had a dilutive impact of 51,511 and 25,898 shares for the three and six months ended June 30, 2013, respectively.

⁽³⁾

At June 30, 2012, 850,000 stock options were in the money and had a dilutive impact of 240,457 shares and 258,192 shares for the three months and six months ended June 30, 2012, respectively. There were no unvested employee deferred shares at June 30, 2012.

⁽⁴⁾

For the three months and six months ended June 30, 2013, the average number of options excluded from the calculations of diluted earnings per share was 579,117 and 625,334, respectively, because of their anti-dilutive effect. For the three months and six months ended June 30, 2012, the average number of options excluded from the calculations of diluted earnings per share was 1,331,591 and 832,306, respectively, because of their anti-dilutive effect.

In November 2012, our Board of Directors authorized a one year stock repurchase program of up to $1.0 million. During the six months ended June 30, 2013, the Company repurchased 176,460 shares of our common stock for an average price per share of $1.23, using cash on hand. At June 30, 2013, a balance of approximately $0.8 million remained available under the program.

On August 8, 2013, our Board of Directors authorized management to enter into an amended and restated stock repurchase program effective subsequent to the Company’s filing of this quarterly report on Form 10-Q, and in any event not earlier than August15, 2013. The authorization permits the plan to be amended and restated to provide for the Company to purchase up to four million shares total, and up to 800,000 shares in any one calendar month at a price up to 100% of its common shareholders’ equity per share as shown on its most recently filed periodic report. No shares will be purchased pursuant to the amended and restated plan before August 26, 2013.

Perpetual Preferred Shareholders’ Equity in a Subsidiary Company

At June 30, 2013, the Company had $121.0 million (liquidation preference) in perpetual preferred shares all of which were assumed at their liquidation preference amount by the purchaser of the Company’s common shares in TEB on July 3, 2013. As a result in the third quarter of 2013 the Company will record a reduction to common shareholders’ equity of $3.0 million representing the difference between the carrying value of the shares of $118.0 million and the liquidation preference amount assumed by the purchaser of the Company’s common shares in TEB on July 3, 2013. See Note 18, “Subsequent Events” for more information.

As discussed in Note 6, “Debt”, during the first quarter of 2013, TEB issued $74 million (liquidation preference) of mandatorily redeemable preferred shares with a distribution rate of 5.0%. Proceeds from this issuance were used to redeem $27.0 million (liquidation preference) of then outstanding perpetual preferred shares at a weighted average rate of 8.5%. The Company recorded a net reduction in common shareholders’ equity of $0.3 million as a result of unamortized issuance discounts and net premiums paid related to the redeemed shares.

During the second quarter of 2013, TEB repurchased and retired five shares of Series C-1 cumulative perpetual preferred shares (original liquidation preference of $5.0 million) and three shares of Series D Preferred Shares (original liquidation preference of $6.0 million) for $9.5 million. As a result of the repurchase and retirement, the Company recorded a net increase to common equity of $1.2 million, comprised of the discount on the repurchase of $1.5 million partially offset by unamortized issuance discounts of $0.3 million associated with these shares.

Noncontrolling Interests

A significant component of equity is comprised of outside investor interests in entities that the Company consolidates. In addition to the preferred shares discussed above, the Company reported the following noncontrolling interests within equity in entities that the Company did not wholly own at June 30, 2013 and December 31, 2012:

(in thousands)	June 30, 2013		December 31, 2012
Noncontrolling interests in:
LIHTC Funds	$	357,273	$	379,407
SA Fund		124,346		122,641
Lower Tier Property Partnerships		16,759		10,777
IHS		(1,268)		(1,034)
Total	$	497,110	$	511,791

Substantially all of these interests represent limited partner interests in partnerships or the equivalent of limited partner interests in limited liability companies. In allocating income between the Company and the noncontrolling interest holders of the consolidated entities, the Company takes into account the legal agreements governing ownership, and other contractual agreements and interests the Company has with the consolidated entities. See Note 16, “Consolidated Funds and Ventures,” for further information.

LIHTC Funds

The noncontrolling interest in the LIHTC Funds is comprised primarily of the LIHTC Funds’ investment in Lower Tier Property Partnerships as well as operating cash partially offset by the LIHTC Funds’ obligations which primarily consist of unfunded equity commitments to Lower Tier Property Partnerships. The vast majority of the equity in the LIHTC Funds is held by third parties as the Company’s equity interest is nominal (ranging from 0.01% to 0.04%). A LIHTC Fund’s investment in Lower Tier Property Partnerships is accounted for under the equity method which means the investment balance is impacted by its share of Lower Tier Property Partnership income or loss. By design, the Lower Tier Property Partnerships typically generate net losses which are generally driven by depreciation of the rental property. The investment balance is also impacted by impairment charges as well as investment disposition activity. The decline in the noncontrolling interest balance was primarily a result of the decline in the LIHTC Funds’ investment balance mainly due to net operating losses and impairment charges recognized in the first six months of 2013. During the first six months of 2013, the Funds’ investment balance declined by $20.6 million and the noncontrolling interest balance declined by $22.1 million. See Note 16, “Consolidated Funds and Ventures,” for further information.

SA Fund

The noncontrolling interest in the SA Fund is comprised primarily of the SA Fund’s investment in for-sale and rental properties as well as operating cash partially offset by the SA Fund’s debt obligation. The vast majority of the equity in the SA Fund is held by third parties as the Company’s equity interest is 2.7%. The SA Fund’s investments in for-sale and rental properties are accounted for at fair value. During the first six months of 2013, the SA Fund’s noncontrolling interest balance increased by $1.7 million, which was primarily due to $3.6 million of capital contributions from third party equity holders and $16.7 million of net operating income partially offset by $18.6 million of foreign currency translation loss adjustments for the six months ended June 30, 2013.

Lower Tier Property Partnerships

At June 30, 2013 and December 31, 2012, two non-profit entities (which are consolidated by the Company) consolidated certain Lower Tier Property Partnerships because they were either the GP or the owner of rental properties. The vast majority of the noncontrolling interest balance is related to equity allocated to third party investors.

During the second quarter of 2013, one of the non-profits assumed the GP interest in three multifamily property operations and took full title to two multifamily property operations, all five of which are serving as collateral to our bonds. At the time of assumption, the fair value of the related bonds were $37.9 million with a $7.2 million unrealized gain on these bonds recorded in other comprehensive income; as a result of consolidating the properties and eliminating our bonds, we recognized the $7.2 million of unrealized gains as a reduction to other comprehensive income with an equal and offsetting increase to “Net gains due to real estate consolidation and foreclosure” on the consolidated statements of operations. In addition, due to the GP and property assumptions, the real estate held by consolidated funds and ventures, classified as held for use, increased by $43.5 million. The associated noncontrolling equity increased by $7.3 million which was recorded directly to equity of the noncontrolling interest holder. Because certain of these properties are within the LIHTC Funds consolidated by the Company, we derecognized the LIHTC Funds’ investment in lower tier properties and the related noncontrolling interest equity upon consolidation of the properties. The impact of the LIHTC Fund derecognition resulted in a reduction to noncontrolling equity of $0.6 million, which was recorded directly to equity of the noncontrolling interest holder.

IHS

At June 30, 2013 and December 31, 2012, 17% of IHS was held by third parties.

Accumulated Other Comprehensive Income

The following table summarizes the net change in accumulated other comprehensive income and amounts reclassified out of accumulated other comprehensive income for the three months ended June 30, 2013.

	Unrealized Gains on Bonds Available- for-Sale			Foreign Currency Translation		Accumulated Other Comprehensive Income
Balance at April 1, 2013	$	150,021		$	(347)	$	149,674
Unrealized net holding (losses) gains arising during period		(22,362)			14		(22,348)
Reversal of unrealized gains on sold/redeemed bonds		(416)	⁽¹⁾		-		(416)
Reclassification of unrealized losses to income		480			-		480
Reclassification of unrealized gains to operations due to consolidation of funds and ventures		(8,484)	⁽¹⁾		-		(8,484)
Net current period other comprehensive income		(30,782)			14		(30,768)
Balance at June 30, 2013	$	119,239		$	(333)	$	(118,906)

⁽¹⁾

Realized gains on bond redemptions included in “Net gains (losses) on assets and derivatives” on the consolidated statements of operations. There is no applicable income tax on the realized gains.

The following table summarizes the net change in accumulated other comprehensive income and amounts reclassified out of accumulated other comprehensive income for the six months ended June 30, 2013.

	Unrealized Gains on Bonds Available- for-Sale			Foreign Currency Translation		Accumulated Other Comprehensive Income
Balance at January 1, 2013	$	139,021		$	(334)	$	138,687
Unrealized net holding (losses) gains arising during period		(11,533)			1		(11,532)
Reversal of unrealized gains on sold/redeemed bonds		(598)	⁽¹⁾		-		(598)
Reclassification of unrealized losses to income		833			-		833
Reclassification of unrealized gains to operations due to consolidation of funds and ventures		(8,484)	⁽¹⁾		-		(8,484)
Net current period other comprehensive income		(19,782)			1		(19,781)
Balance at June 30, 2013	$	119,239		$	(333)	$	(118,906)

⁽¹⁾