Note 15. Equity

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

Changes in Accumulated Other Comprehensive Income by Component


Three Months Ended September 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	$	145,349	$	(27,066)
Other comprehensive (loss) income before reclassifications		(633)		4,018
Amounts reclassified from other accumulated comprehensive income		(6,962)		62


Net current-period other comprehensive (loss) income		(7,595)		4,080

Balance at End of Period	$	137,754	$	(22,986)


Nine Months Ended September 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		(29,615)		25,043
Amounts reclassified from other accumulated comprehensive income		(19,211)		219


Net current-period other comprehensive (loss) income		(48,826)		25,262

Balance at End of Period	$	137,754	$	(22,986)

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

Reclassifications out of Accumulated Other Comprehensive Income


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

Net realized gains (losses) on AFS securities
Other than temporary impairment	Other market valuations, net	$	-	$	(124)
Gain on sale of AFS securities	Realized gains, net		(6,962)		(19,087)

		$	(6,962)	$	(19,211)


Net realized gains on interest rate agreements designated as cash flow hedges
Amortization of deferred loss	Interest expense	$	62	$	219

		$	62	$	219

Earnings Per Common Share

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

Basic and Diluted Earnings Per Common Share


	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands, Except Share Data)	2013		2012		2013		2012
Basic Earnings Per Common Share:
Net income attributable to Redwood	$	21,929	$	39,701	$	148,112	$	89,691
Less: Dividends and undistributed earnings allocated to participating securities		(565)		(1,104)		(4,209)		(2,631)

Net income allocated to common shareholders	$	21,364	$	38,597	$	143,903	$	87,060

Basic weighted average common shares outstanding		82,201,473		79,685,099		81,888,231		78,908,057
Basic Earnings Per Common Share	$	0.26	$	0.48	$	1.76	$	1.10

Diluted Earnings Per Common Share:
Net income attributable to Redwood	$	21,929	$	39,701	$	148,112	$	89,691
Less: Dividends and undistributed earnings allocated to participating securities		(565)		(861)		(3,030)		(2,200)
Add back: Interest expense on convertible notes		-		-		8,790		-

Net income allocated to common shareholders	$	21,364	$	38,840	$	153,872	$	87,491


Weighted average common shares outstanding		82,201,473		79,685,099		81,888,231		78,908,057
Net effect of dilutive equity awards		2,220,566		1,079,281		2,292,451		1,267,603
Net effect of assumed convertible notes conversion to common shares		-		-		9,053,183		-

Diluted weighted average common shares outstanding		84,422,039		80,764,380		93,233,865		80,175,660


Diluted Earnings Per Common Share	$	0.25	$	0.48	$	1.65	$	1.09

For the three and nine months ended September 30, 2013, there were 2,220,566 and 2,292,451 of dilutive equity awards, respectively, determined under the two-class method. For the three and nine months ended September 30, 2012, there were 1,079,281 and 1,267,603 dilutive equity awards determined under the two-class method. 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 nine months ended September 30, 2013, 9,053,183 common shares related to the assumed conversion of the convertible notes were included in the calculation of diluted earnings per share.

For the three months ended September 30, 2013, 11,825,450 common shares related to the assumed conversion of the convertible notes were antidilutive and were excluded in the calculation of diluted earnings per share. For the three months ended September 30, 2013 and 2012, the number of outstanding equity awards that were antidilutive totaled 190,627 and 1,014,274, respectively, under the two-class method. For the nine months ended September 30, 2013 and 2012, the number of outstanding equity awards that were antidilutive totaled 244,174 and 704,087, 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 nine months ended September 30, 2013, there were no shares acquired under the plan. At September 30, 2013, there remained 4,005,985 shares available for repurchase under this plan.