9. Shares and Stockholders’ Equity

Common Shares

The changes in our common stock (number of shares) were as follows:



	For the Three				For the Six
	Months Ended				Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Common Stock
Balance as of beginning-of-period	239,005,252		252,928,502		243,835,893		256,551,440
Stock issued for exercise of warrants	13,335		33,510		38,148		980,436
Stock compensation/issued for benefit plans	9,537		515,481		670,142		1,988,882
Retirement/cancellation of shares	(6,243,433	)	(2,558,600	)	(11,759,492	)	(8,601,865	)
Balance as of end-of-period	232,784,691		250,918,893		232,784,691		250,918,893

Common Stock as of End-of-Period
Basic basis	232,784,691		250,918,893		232,784,691		250,918,893
Diluted basis	236,268,119		254,126,732		236,268,119		254,126,732

Our common stock is without par value.

Average Shares

A reconciliation of the denominator (number of shares) in the calculations of basic and diluted earnings (loss) per common share was as follows:



	For the Three				For the Six
	Months Ended				Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Weighted-average shares, as used in basic calculation	236,463,183		251,849,316		239,069,774		253,662,410
Shares to cover exercise of outstanding warrants	1,098,405		1,356,262		1,100,176		1,604,192
Shares to cover non-vested stock	939,526		1,220,690		1,030,627		1,357,152
Average stock options outstanding during the period	2,110,327		3,676,185		1,958,486		3,759,166
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(265,103	)	(240,814	)	(278,312	)	(295,871	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(1,523,490	)	(2,655,466	)	(1,428,150	)	(2,701,424	)
Shares repurchasable from measured but
unrecognized stock option expense	(38,377	)	(65,873	)	(19,740	)	(63,196	)
Average deferred compensation shares	1,101,384		-		1,070,657		1,022,523
Weighted-average shares, as used in diluted calculation	239,885,855		255,140,300		242,503,518		258,344,952

In the event the average market price of LNC common stock exceeds the issue price of stock options and the options have a dilutive effect to our earnings per share (“EPS”), such options will be shown in the table above.

We have participants in our deferred compensation plans who selected LNC stock as the measure for the investment return attributable to all or a portion of their deferral amounts. For the three and six months ended June 30, 2016, and the six months ended June 30, 2015, the effect of settling this obligation in LNC stock (“equity classification”) was more dilutive than the scenario of settling in cash (“liability classification”). Therefore, for our EPS calculation for these periods, we added the shares to the denominator and adjusted the numerator to present net income as if the shares had been accounted for under equity classification by removing the mark-to-market adjustment included in net income attributable to these deferred units of LNC stock. The amount of this adjustment was less than $1 million and $7 million for the three and six months ended June 30, 2016, respectively, and $(1) million for the six months ended June 30, 2015.

AOCI

The following summarizes the components and changes in AOCI (in millions):


	For the Six
	Months Ended
	June 30,
	2016			2015
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	991		$	3,213
Unrealized holding gains (losses) arising during the period		5,394			(2,492	)
Change in foreign currency exchange rate adjustment		(33	)		(16	)
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		(1,620	)		812
Income tax benefit (expense)		(1,321	)		582
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(101	)		193
Associated amortization of DAC, VOBA, DSI and DFEL		(7	)		(15	)
Income tax benefit (expense)		38			(62	)
Balance as of end-of-period	$	3,481		$	1,983
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	26		$	26
(Increases) attributable to:
Gross OTTI recognized in OCI during the period		(36	)		(18	)
Change in DAC, VOBA, DSI and DFEL		8			3
Income tax benefit (expense)		10			6
Decreases attributable to:
Changes in fair value, sales, maturities or other settlements of AFS securities		5			31
Change in DAC, VOBA, DSI and DFEL		(1	)		(14	)
Income tax benefit (expense)		(2	)		(6	)
Balance as of end-of-period	$	10		$	28
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	132		$	139
Unrealized holding gains (losses) arising during the period		(208	)		(96	)
Change in foreign currency exchange rate adjustment		35			16
Change in DAC, VOBA, DSI and DFEL		(6	)		-
Income tax benefit (expense)		62			27
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		9			(189	)
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		-
Income tax benefit (expense)		(3	)		66
Balance as of end-of-period	$	10		$	209
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(5	)	$	(3	)
Foreign currency translation adjustment arising during the period		(13	)		6
Balance as of end-of-period	$	(18	)	$	3
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(299	)	$	(279	)
Adjustment arising during the period		11			1
Income tax benefit (expense)		-			(1	)
Balance as of end-of-period	$	(288	)	$	(279	)

The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):



	For the Six
	Months Ended
	June 30,
	2016			2015
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(101	)	$	193		Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(7	)		(15	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		(108	)		178		operations before taxes
Income tax benefit (expense)		38			(62	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	(70	)	$	116		Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	1		$	31		Total realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		-			(14	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		1			17		operations before taxes
Income tax benefit (expense)		-			(6	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	1		$	11		Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	4		$	(194	)	Net investment income
Interest rate contracts		(2	)		2		Interest and debt expense
Foreign currency contracts		7			3		Net investment income
Total gross reclassifications		9			(189	)
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		-		Commissions and other expenses
Reclassifications before income							Income (loss) from continuing
tax benefit (expense)		8			(189	)	operations before taxes
Income tax benefit (expense)		(3	)		66		Federal income tax expense (benefit)
Reclassification, net of income tax	$	5		$	(123	)	Net income (loss)