SHAREHOLDERS' EQUITY

Common Stock

The Company has recently implemented a Dividend Reinvestment and Share Purchase Plan ("DRIP") which allows registered shareholders to automatically reinvest some or all of their quarterly dividends in shares of the Company’s stock and provides an opportunity for investors to purchase shares of the Company’s stock, potentially at a discount to the prevailing market price. The Company declared a third quarter common stock dividend of $0.27 per share payable on October 31, 2011 to shareholders of record as of September 30, 2011, however there is no Dividend Reinvestment Discount for third quarter dividends reinvested through the DRIP.

The Company also has a continuous equity placement program (“EPP”) whereby the Company may offer and sell through its sales agent shares of its common stock in negotiated transactions or transactions that are deemed to be “at the market offerings,” as defined in Rule 415 under the 1933 Act, including sales made directly on the New York Stock Exchange or sales made to or through a market maker other than on an exchange. During the nine months ended September 30, 2011, the Company has received proceeds of $4,332, net of broker sales commission, for 409,237 shares of common stock sold under this program at an average price of $10.75. The Company originally registered 5,000,000 shares under the EPP, and as of September 30, 2011, has 538,147 remaining shares to be issued under the EPP.

During the nine months ended September 30, 2011, the Company closed a public offering of 9,200,000 shares of its common stock, including 1,200,000 shares pursuant to an overallotment option that was fully exercised by the underwriters, at a public offering price of $10.35 per share for total net proceeds of $90,459 after deduction of underwriting discounts, commissions, and expenses. The Company has used these proceeds to acquire additional investments consistent with its investment policy.

The following table presents a summary of the changes in the number of common shares outstanding for the periods indicated:



	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2011	2010	2011	2010
Balance at beginning of period	40,343,159	15,168,742	30,342,897	13,931,512
Common stock issued under EPP	—	3,540,500	409,237	4,680,700
Common stock issued under DRIP	2,111	—	2,111	—
Common stock issued via public offering	—	—	9,200,000	—
Common stock redeemed under 2004 Stock and Incentive Plan	—	—	15,000	50,000
Common stock issued under 2009 Stock and Incentive Plan	35,006	—	411,031	47,030
Conversion of preferred stock to common stock	—	152	—	152
Balance at end of period	40,380,276	18,709,394	40,380,276	18,709,394

Incentive Plans. Pursuant to the Company’s 2009 Stock and Incentive Plan, the Company may grant stock-based compensation to eligible employees, directors or consultants or advisers to the Company, including stock awards, stock options, stock appreciation rights (“SARs”), dividend equivalent rights, performance shares, and restricted stock units. Of the 2,500,000 shares of common stock authorized for issuance under this plan, 2,041,939 shares remain available as of September 30, 2011. Although the Company is no longer issuing stock-based compensation under its 2004 Stock Incentive Plan, there are stock options, SARs, and restricted stock still outstanding (and exercisable if vested) thereunder as of September 30, 2011.

Stock options and restricted stock that the Company has issued may be settled only in shares of its common stock, and therefore are treated as equity awards with their fair value measured at the grant date as required by ASC Topic 718. The compensation cost related to all stock options has been expensed in prior periods. As of September 30, 2011, the fair value of the Company’s outstanding restricted stock remaining to be amortized into net income is $2,979.

The Company did not grant any stock options during the three and nine months ended September 30, 2011 or September 30, 2010, and there were no forfeitures of its outstanding stock options for those same periods. There were no options exercised during the three months ended September 30, 2011 or September 30, 2010, and 15,000 options were exercised at a weighted average price of $7.42 during the nine months ended September 30, 2011 compared to 50,000 options exercised at a weighted average price of $8.45 during the nine months ended September 30, 2010. As of September 30, 2011, there are 30,000 options remaining to be exercised at a weighted average price of $9.42.

The following table presents a rollforward of the restricted stock activity for the periods presented:



	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2011	2010	2011		2010
Restricted stock at beginning of period	330,500	25,000	25,000		32,500
Restricted stock granted	35,006	—	358,006		10,000
Restricted stock vested	—	—	(17,500	)	(17,500	)
Restricted stock outstanding at end of period	365,506	25,000	365,506		25,000

SARs issued by the Company may be settled only in cash, and therefore have been treated as liability awards with their fair value measured at the grant date and remeasured at the end of each reporting period as required by ASC Topic 718. As of September 30, 2011 and December 31, 2010, the fair value of the Company’s outstanding SARs of $131 and $492, respectively, are recorded as liabilities on its consolidated balance sheet for the respective periods. The fair value of SARs is estimated using the Black-Scholes option valuation model based upon the assumptions in the table below.



	September 30, 2011		December 31, 2010
Expected volatility	22.8%-34.2%		16.2%-18.6%
Weighted-average volatility	28.8	%	17.3	%
Estimated dividend yield	13.3%-14.2%		9.9%-10.3%
Expected term (in months)	7		12
Weighted-average risk-free rate	0.57	%	0.81	%
Range of risk-free rates	0.4%-0.9%		0.4%-1.3%

As of September 30, 2011, the Company has 136,875 SARs outstanding, all of which are vested and exercisable at a weighted average price of $7.31 at any time prior to their expiration dates. The weighted average remaining contractual term on these outstanding SARs as of September 30, 2011 is 15 months, and 60,000 of the outstanding SARs are set to expire if they are not exercised on or before December 31, 2011. As of September 30, 2010, there were 136,875 SARs outstanding at a weighted average price of $7.31, and 116,875 of those SARs were vested and exercisable at that time at a weighted average price of $7.35. No SARs were granted, forfeited, or exercised during the three and nine months ended September 30, 2011. During the three and nine months ended September 30, 2010, no SARs were granted or forfeited and approximately 141,000 SARs were exercised at a weighted average price of $7.24.

Total stock-based compensation expense recognized by the Company for the three and nine months ended September 30, 2011 is $139 and $492, respectively, compared to $395 and $558 for the three and nine months ended September 30, 2010, respectively.

Additional Paid-In Capital

The following table presents a rollforward of the Company's changes in additional paid-in capital for the nine months ended September 30, 2011:



	Additional Paid-In Capital
Balance as of January 1, 2011	$	538,304
Common stock issuances:
DRIP issuances	20
EPP issuance	4,284
Public offering	90,343
Incentive plans	656
Amortization of restricted stock	852
Capitalized expenses	(142		)
Balance as of September 30, 2011	$	634,317

Accumulated Other Comprehensive Income

Accumulated other comprehensive income as of September 30, 2011 and December 31, 2010 is comprised of the following items:



	September 30, 2011			December 31, 2010
Available for sale investments:
Unrealized gains	$	35,948		$	20,443
Unrealized losses	(11,084		)	(7,566		)
	24,864			12,877
Hedging instruments:
Unrealized gains	—			692
Unrealized losses	(26,469		)	(3,512		)
	(26,469		)	(2,820		)
Accumulated other comprehensive (loss) income	$	(1,605	)	$	10,057

Due to the Company’s REIT status, the items comprising other comprehensive income do not have related tax effects.

Accumulated Deficit

The following table presents a rollforward of the Company's accumulated deficit for the nine months ended September 30, 2011:



	Accumulated Deficit
Balance as of January 1, 2011	$	(256,307	)
Net income for the quarter ended March 31, 2011	10,280
Dividends declared ($0.27 per share) for the quarter ended March 31, 2011	(10,886		)
Net income for the quarter ended June 30, 2011	13,594
Dividends declared ($0.27 per share) for the quarter ended June 30, 2011	(10,892		)
Net income for the quarter ended September 30, 2011	1,532
Dividends declared ($0.27 per share) for the quarter ended September 30, 2011	(10,903		)
Balance as of September 30, 2011	$	(263,582	)