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 nine months ended September 30, 2013 and 2012.

	For the three months ended September 30,				For the nine months ended September 30,
(in thousands)	2013		2012		2013		2012
Net income from continuing operations	$	73,042	$	1,111	$	106,927	$	5,632
Net income (loss) from discontinued operations		274		(393)		5,215		1,342
Net income to common shareholder	$	73,316	$	718	$	112,142	$	6,974

Basic weighted-average shares ⁽¹⁾		42,290		42,304		42,380		42,207
Common stock equivalents ^{(2) (3) (4)}		1,626		76		1,443		207
Diluted weighted-average shares		43,916		42,380		43,823		42,414

	⁽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 September 30, 2013, 2,128,125 stock options were in the money and had a dilutive impact of 1,470,198 shares and 1,373,840 shares for the three months and nine months ended September 30, 2013, respectively. In addition, 260,417 unvested employee deferred shares had a dilutive impact of 156,251 and 69,826 shares for the three and nine months ended September 30, 2013, respectively.

	⁽³⁾	At September 30, 2012, 850,000 stock options were in the money and had a dilutive impact of 75,508 shares and 206,967 shares for the three months and nine months ended September 30, 2012, respectively. There were no unvested employee deferred shares at September 30, 2012.

	⁽⁴⁾	For the three months and nine months ended September 30, 2013, the average number of options excluded from the calculations of diluted earnings per share was 302,287 and 456,803, respectively, because of their anti-dilutive effect. For the three months and nine months ended September 30, 2012, the average number of options excluded from the calculations of diluted earnings per share was 1,512,031 and 1,060,535, respectively, because of their anti-dilutive effect.

On July 10, 2013, the Company converted from a partnership to a corporation for federal and state income tax purposes. As a result of the conversion, the Company will (i) be a direct corporate taxpayer, (ii) no longer pass through its income and loss to its shareholders for tax purposes, and (iii) no longer issue each shareholder an annual tax statement on Schedule K-1 (although there will be investor K-1s for the partial year January 1, 2013 through July 9, 2013). At the date of the conversion to a corporation, there was no impact to the Company’s earnings.

During November 2012, our Board of Directors authorized a one year stock repurchase program of up to $1.0 million. The program was terminated and replaced with a new stock repurchase program as authorized by our Board of Directors on August 8, 2013. Specifically, the Board authorized management to enter into an amended and restated stock repurchase program effective subsequent to the Company’s filing of the June 30, 2013 quarterly report on Form 10-Q, and in any event not earlier than August 15, 2013. Pursuant to this authorization the Company amended and restated the plan on August 16, 2013, to provide for the Company to purchase up to four million shares, 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. During September 2013 the Board authorized further amendments to the plan to increase the aggregate shares authorized for repurchase to five million shares, to remove the monthly limit of 800,000 shares and to allow for block trades. The Company has repurchased 386,236 shares at an average price of $1.31 during the nine months ended September 30, 2013.

Perpetual Preferred Shareholders’ Equity in a Subsidiary Company

On July 3, 3013 the perpetual preferred shares were assumed at their liquidation preference amount by the Purchaser of the Company’s common shares in TEB. As a result, the Company recorded a reduction to common shareholders’ equity of $3.0 million representing the difference between the carrying value of the preferred shares of $118.0 million and the liquidation preference amount assumed by the Purchaser of the Company’s common shares in TEB.

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.

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 with a weighted average distribution 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.

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 September 30, 2013 and December 31, 2012:

(in thousands)	September 30, 2013		December 31, 2012
Noncontrolling interests in:
LIHTC Funds	$	343,962	$	379,407
SA Fund		130,915		122,641
Lower Tier Property Partnerships		14,470		10,777
IHS		(1,451)		(1,034)
Total	$	487,896	$	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 nine months of 2013. During the first nine months of 2013, the Funds’ investment balance declined by $33.6 million and the noncontrolling interest balance declined by $35.4 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 obligations. 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 nine months of 2013, the SA Fund’s noncontrolling interest balance increased by $8.3 million, which was due to $7.4 million of capital contributions from third party equity holders and $21.6 million of net operating income partially offset by $20.7 million of foreign currency translation loss adjustments for the nine months ended September 30, 2013. Because the SA Fund’s functional currency is the South African rand and the Company’s functional currency is the US dollar, the Company translates the SA Fund’s rand balance sheet into a dollar denominated balance sheet as part of consolidating the SA Fund into the Company’s balance sheet. The translation losses recorded for the first nine months of 2013 were a result of the weakening of the South African rand as compared to the US dollar. The Company recorded foreign currency translation losses of $0.6 million through OCI allocable to common shareholders for the nine months ended September 30, 2013.

Lower Tier Property Partnerships

At September 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.

These non-profits held 14 and 12 Lower Tier Property Partnerships of which four and one were classified as held for sale at September 30, 2013 and December 31, 2012, respectively. The remaining properties at each period end were classified as held for use.

IHS

At September 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 September 30, 2013.

	Unrealized Gains on Bonds Available- for-Sale			Foreign Currency Translation		Accumulated Other Comprehensive Income
Balance at July 1, 2013	$	119,239		$	(333)	$	118,906
Unrealized net holding (losses) gains arising during period		(5,259)			43		(5,216)
Reversal of unrealized gains on sold/redeemed bonds		(76,362)	⁽¹⁾		–		(76,362)
Reclassification of unrealized losses to income		939			–		939
Reclassification of unrealized gains to operations due to consolidation of funds and ventures		(2,411)	⁽¹⁾		–		(2,411)
Net current period other comprehensive income		(83,093)			43		(83,050)
Balance at September 30, 2013	$	36,146		$	(290)	$	35,856

⁽¹⁾

Realized gains on bond redemptions included in “Net gains (losses) on assets and derivatives” on the consolidated statements of operations.

The following table summarizes the net change in accumulated other comprehensive income and amounts reclassified out of accumulated other comprehensive income for the nine months ended September 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		(16,792)			44		(16,748)
Reversal of unrealized gains on sold/redeemed bonds		(76,960)	⁽¹⁾		–		(76,960)
Reclassification of unrealized losses to income		1,772			–		1,772
Reclassification of unrealized gains to operations due to consolidation of funds and ventures		(10,895)	⁽¹⁾		–		(10,895)
Net current period other comprehensive income		(102,875)			44		(102,831)
Balance at September 30, 2013	$	36,146		$	(290)	$	35,856

⁽¹⁾

Realized gains on bond redemptions included in “Net gains (losses) on assets and derivatives” on the consolidated statements of operations.