Note 15. Equity

The following table provides a summary of changes to accumulated other comprehensive income by component for the three and six months ended June 30, 2013.

Changes in Accumulated Other Comprehensive Income by Component


Three Months Ended June 30, 2013 (In Thousands)	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	$	183,603	$	(40,720)
Other comprehensive (loss) income before reclassifications		(38,012)		13,585
Amounts reclassified from other accumulated comprehensive income		(242)		69

Net current-period other comprehensive (loss) income		(38,254)		13,654

Balance at End of Period	$	145,349	$	(27,066)


Six Months Ended June 30, 2013 (In Thousands)	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	$	186,580	$	(48,248)
Other comprehensive (loss) income before reclassifications		(28,982)		21,025
Amounts reclassified from other accumulated comprehensive income		(12,249)		157

Net current-period other comprehensive (loss) income		(41,231)		21,182

Balance at End of Period	$	145,349	$	(27,066)

The following table provides a summary of reclassifications out of accumulated other comprehensive income for three and six months ended June 30, 2013.

Reclassifications out of Accumulated Other Comprehensive Income


	Affected line item in the	Amount reclassified from accumulated other comprehensive income
	statement where net income	Three Months Ended		Six Months Ended
(In Thousands)	is presented	June 30, 2013		June 30, 2013

Net realized gains (losses) on AFS securities
Other than temporary impairment	Other market valuations, net	$	(133)	$	(124)
Gain on sale of AFS securities	Realized gains, net		(109)		(12,125)
Loss on sale of AFS securities	Realized gains, net		-		-

		$	(242)	$	(12,249)

Net realized gains on interest rate agreements designated as cash flow hedges
Amortization of deferred gain	Interest expense	$	-	$	-
Hedge ineffectiveness	Interest expense		69		157

		$	69	$	157

Earnings Per Common Share

The following table provides the basic and diluted earnings per common share computations for the three and six months ended June 30, 2013 and 2012.

Basic and Diluted Earnings Per Common Share


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands, Except Share Data)	2013		2012		2013		2012
Basic Earnings Per Common Share:
Net income attributable to Redwood	$	65,573	$	19,527	$	126,183	$	49,990
Less: Dividends and undistributed earnings allocated to participating securities		(1,830)		(538)		(3,819)		(1,491)

Net income allocated to common shareholders	$	63,743	$	18,989	$	122,364	$	48,499

Basic weighted average common shares outstanding		82,123,823		78,815,313		81,729,014		78,606,336
Basic Earnings Per Common Share	$	0.78	$	0.24	$	1.50	$	0.62

Diluted Earnings Per Common Share:
Net income attributable to Redwood	$	65,573	$	19,527	$	126,183	$	49,990
Less: Dividends and undistributed earnings allocated to participating securities		(1,175)		(538)		(2,527)		(1,336)
Add back: Interest expense on convertible notes		3,856		-		4,933		-

Net income allocated to common shareholders	$	68,254	$	18,989	$	128,589	$	48,654


Weighted average common shares outstanding		82,123,823		78,815,313		81,729,014		78,606,336
Net effect of dilutive equity awards		2,222,440		-		2,274,311		1,359,070
Net effect of assumed convertible notes conversion to common shares		11,825,450		-		7,644,075		-

Diluted weighted average common shares outstanding		96,171,713		78,815,313		91,647,400		79,965,406

Diluted Earnings Per Common Share	$	0.71	$	0.24	$	1.40	$	0.61

For the three and six months ended June 30, 2013, there were 2,222,440 and 2,274,311 of dilutive equity awards, respectively, determined under the two-class method. For the three and six months ended June 30, 2012, there were no dilutive equity awards determined under the two-class method as dividend distributions were greater than net income for these periods. We included participating securities in the calculation of diluted earnings per common share as we determined that the two-class method was more dilutive than the alternative treasury stock method. 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. For the three and six months ended June 30, 2013, common shares related to the assumed conversion of the convertible notes, totaling 11,825,450 and 7,644,075, respectively, were included in the calculation of diluted earnings per share.

For the three months ended June 30, 2013 and 2012, the number of outstanding equity awards that were antidilutive totaled 255,529 and 1,877,664, respectively, under the two-class method. For the six months ended June 30, 2013 and 2012, the number of outstanding equity awards that were antidilutive totaled 271,392 and 531,072, respectively, under the two-class method. There were no other participating securities during these periods.

Stock Repurchases

We announced a stock repurchase authorization in November 2007 for the repurchase of up to 5,000,000 common shares. This plan replaced all previous share repurchase plans and has no expiration date. During the six months ended June 30, 2013, there were no shares acquired under the plan. At June 30, 2013, there remained 4,005,985 shares available for repurchase under this plan.