Equity

6 Months Ended

Jun. 30, 2020

The following table provides a summary of changes to accumulated other comprehensive income by component for the three and six months ended June 30, 2020 and 2019. During the three and six months ended June 30, 2020, we recognized net unrealized gains (losses) on our Level 3 AFS securities which we owned as of June 30, 2020 of $52 million and negative $24 million, respectively.

Table 17.1 – Changes in Accumulated Other Comprehensive Income by Component


	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
(In Thousands)	Net Unrealized Gains (Losses) on Available-for-Sale Securities		Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges		Net Unrealized Gains on Available-for-Sale Securities		Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	(1,865)	$	(83,666)	$	92,567	$	(39,883)
Other comprehensive income (loss) before reclassifications	52,393		—		8,562		(9,501)
Amounts reclassified from other accumulated comprehensive income	2,718		1,029		(2,822)		—
Net current-period other comprehensive income (loss)	55,111		1,029		5,740		(9,501)
Balance at End of Period	$	53,246	$	(82,637)	$	98,307	$	(49,384)


	Six Months Ended June 30, 2020						Six Months Ended June 30, 2019
(In Thousands)	Net Unrealized Gains on Available-for-Sale Securities		Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges		Net Unrealized Gains on Available-for-Sale Securities		Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	92,452	$	(50,939)	$	95,342	$	(34,045)
Other comprehensive income (loss) before reclassifications	(28,126)		(32,806)		15,280		(15,339)
Amounts reclassified from other accumulated comprehensive income	(11,080)		1,108		(12,315)		—
Net current-period other comprehensive income (loss)	(39,206)		(31,698)		2,965		(15,339)
Balance at End of Period	$	53,246	$	(82,637)	$	98,307	$	(49,384)

The following table provides a summary of reclassifications out of accumulated other comprehensive income for the three and six months ended June 30, 2020 and 2019.

Table 17.2 – Reclassifications Out of Accumulated Other Comprehensive Income



		Amount Reclassified From Accumulated Other Comprehensive Income
	Affected Line Item in the	Three Months Ended June 30,
(In Thousands)	Income Statement	2020		2019
Net Realized (Gain) Loss on AFS Securities
Credit loss recovery on AFS securities	Investment fair value changes, net	$	(54)	$	—
Gain on sale of AFS securities	Realized gains, net	2,772		(2,822)

		$	2,718	$	(2,822)
Net Realized Loss on Interest Rate Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	1,029	$	—
		$	1,029	$	—



		Amount Reclassified From Accumulated Other Comprehensive Income
	Affected Line Item in the	Six Months Ended June 30,
(In Thousands)	Income Statement	2020		2019
Net Realized (Gain) Loss on AFS Securities
Credit loss expense on AFS securities	Investment fair value changes, net	$	1,471	$	—
Gain on sale of AFS securities	Realized gains, net	(12,551)		(12,315)

		$	(11,080)	$	(12,315)
Net Realized Loss on Interest Rate Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	1,108	$	—
		$	1,108	$	—

Issuance of Common Stock

In 2018, we established a program to sell up to an aggregate of $150 million of common stock from time to time in at-the-market ("ATM") offerings. During the six months ended June 30, 2020, we issued 129,500 common shares for net proceeds of approximately $2 million through ATM offerings. At June 30, 2020, approximately $85 million remained outstanding for future offerings under this program.

Direct Stock Purchase and Dividend Reinvestment Plan

During the three months ended June 30, 2020, we did not issue any shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. During the six months ended June 30, 2019, we issued 399,838 shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan, resulting in net proceeds of approximately $6 million.

Earnings (Loss) per Common Share

The following table provides the basic and diluted earnings (loss) per common share computations for the three and six months ended June 30, 2020 and 2019.

Table 17.3 – Basic and Diluted Earnings (Loss) per Common Share


	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands, except Share Data)	2020		2019		2020		2019
Basic Earnings (Loss) per Common Share:
Net income (loss) attributable to Redwood	$	165,444	$	31,266	$	(777,954)	$	85,730
Less: Dividends and undistributed earnings allocated to participating securities	(4,528)		(877)		(1,011)		(2,417)
Net income (loss) allocated to common shareholders	$	160,916	$	30,389	$	(778,965)	$	83,313
Basic weighted average common shares outstanding	114,383,289		96,983,764		114,229,928		94,846,431
Basic Earnings (Loss) per Common Share	$	1.41	$	0.31	$	(6.82)	$	0.88
Diluted Earnings (Loss) per Common Share:
Net income (loss) attributable to Redwood	$	165,444	$	31,266	$	(777,954)	$	85,730
Less: Dividends and undistributed earnings allocated to participating securities	(3,116)		(1,053)		(1,011)		(2,595)
Adjust for interest expense and gain on extinguishment of convertible notes for the period, net of tax	(15,835)		8,698		—		17,385
Net income (loss) allocated to common shareholders	$	146,493	$	38,911	$	(778,965)	$	100,520
Weighted average common shares outstanding	114,383,289		96,983,764		114,229,928		94,846,431
Net effect of dilutive equity awards	—		270,550		—		210,360
Net effect of assumed convertible notes conversion to common shares	32,715,790		33,442,640		—		33,442,640
Diluted weighted average common shares outstanding	147,099,079		130,696,954		114,229,928		128,499,431
Diluted Earnings (Loss) per Common Share	$	1.00	$	0.30	$	(6.82)	$	0.78

We included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, in the calculations of basic and diluted earnings per common share as we determined that the two-class method was more dilutive than the alternative treasury stock method for these shares. Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances.

During the three months ended June 30, 2020 and the three and six months ended June 30, 2019, certain of our convertible notes were determined to be dilutive and were included in the calculation of diluted EPS under the "if-converted" method. Under this method, the periodic interest expense and any realized gains or losses on extinguishment of debt (net of applicable taxes) for dilutive notes is added back to the numerator and the weighted average number of shares that the notes are entitled to (if converted, regardless of whether they are in or out of the money) are included in the denominator.

For the six months ended June 30, 2020, 34,075,404 of common shares related to the assumed conversion of our convertible notes were antidilutive and were excluded in the calculation of diluted earnings per share. For the three and six months ended June 30, 2020, the number of outstanding equity awards that were antidilutive totaled 11,561 and 16,405, respectively. For the three and six months ended June 30, 2019, the number of outstanding equity awards that were antidilutive totaled 8,996 and 8,186, respectively.

Stock Repurchases

In February 2018, our Board of Directors approved an authorization for the repurchase of our common stock, increasing the total amount authorized for repurchases of common stock to $100 million, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization increased the previous share repurchase authorization approved in February 2016 and has no expiration date. This repurchase authorization does not obligate us to acquire any specific number of shares or securities. Under this authorization, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. At June 30, 2020, $100 million of the current authorization remained available for the repurchase of shares of our common stock and we also continued to be authorized to repurchase outstanding debt securities.