5.Equity

Equity activity was as follows (in thousands):

		Total Equity
Balance at December 31, 2013		$ 632,438
Net income		52,399
Vesting of Stock option and restricted common stock		2,326
Stock option exercise		277
Reclassification adjustment		(27)
Preferred stock dividends		(2,454)
Common stock dividends		(53,275)
Other		(7)
Balance at September 30, 2014		$ 631,677

Preferred Stock. At September 30, 2014, we had 2,000,000 shares of our 8.5% Series C Cumulative Convertible Preferred Stock (or Series C preferred stock) outstanding. Our Series C preferred stock is convertible into 2,000,000 shares of our common stock at $19.25 per share. Total shares reserved for issuance of common stock related to the conversion of Series C preferred stock were 2,000,000 shares at September 30, 2014.

Common Stock. During the nine months ended September 30, 2014 and 2013, we acquired 200 shares and 600 shares, respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. During the nine months ended September 30, 2013, we sold 4,025,000 shares of common stock at a price of $44.50 per share, before fees and costs of $7,748,000, in a public offering. The net proceeds of $171,365,000 were used to pay down amounts outstanding under our Unsecured Credit Agreement, to fund our current development commitments and general corporate purposes.

We had an equity distribution agreement which allowed us to issue and sell, from time to time, up to $85,686,000 in aggregate offering price of our common shares. Sales of common shares were made by means of ordinary brokers’ transactions at market prices, in block transactions, or as otherwise agreed between us and our sales agents. During the nine months ended September 30, 2013, we sold 126,742 shares of common stock for $4,895,000 in net proceeds under our equity distribution agreement. In conjunction with the sale of common stock, during 2013, we reclassified $662,000 of accumulated costs associated with the equity distribution agreement as a reduction to additional paid in capital.

Available Shelf Registrations. On July 19, 2013, we filed a Form S-3ASR “shelf” registration statement to replace our prior shelf registration statement. This current shelf registration statement provides us with the capacity to offer up to $800,000,000 in common stock, preferred stock, warrants, debt, depositary shares, or units. We may from time to time raise capital under this current shelf registration in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.

Non-controlling Interests. We currently have no limited partners. During 2012, we had one limited partnership. The limited partnership agreement allowed the limited partners to convert, on a one-for-one basis, their limited partnership units into shares of common stock or the cash equivalent, at our option. Since we exercised control, we consolidated the limited partnership and we carried the non-controlling interests at cost. During the nine months ended September 30, 2013, we paid $7,000 of accrued distributions to our former limited partners.

Distributions. We declared and paid the following cash dividends (in thousands):

	Nine months ended September 30, 2014		Nine months ended September 30, 2013
	Declared	Paid	Declared	Paid
Preferred Stock Series C	$ 2,454	$ 2,454	$ 2,454	$ 2,454
Common Stock(1)	53,275	53,275	45,909	45,909

Total	$ 55,729	$ 55,729	$ 48,363	$ 48,363

⁽¹⁾

Represents $0.17 per share per month and $0.155 per share per month for the nine months ended September 30, 2014 and 2013, respectively.

In October 2014, we declared a monthly cash dividend of $0.17 per share on our common stock for the months of October, November and December, payable on October 31, November 28, and December 31, 2014, respectively, to stockholders of record on October 23, November 20, and December 23, 2014, respectively.

Accumulated Other Comprehensive Income. At September 30, 2014 and December 31, 2013, accumulated comprehensive income of $91,000 and $117,000, respectively, represents the net unrealized holding gains on available-for-sale REMIC Certificates recorded in 2005 when we repurchased the loans in the underlying loan pool. This amount is being amortized to increase interest income over the remaining life of the loans that we repurchased from the REMIC Pool.

Stock-Based Compensation. During the nine months ended September 30, 2014, a total of 11,666 stock options were exercised at a total option value of $277,000 and a total market value on the date of exercise of $455,000. In the comparable 2013 period, a total of 22,000 stock options were exercised at a total option value of $523,000 and a total market value on the date of exercise of $865,000. During the nine months ended September 30, 2014, we granted 15,000 options to purchase common stock at an exercise price of $38.43 per share. These stock options vest ratably over a three-year period from the grant date. No stock options were granted during the nine months ended September 30, 2013. At September 30, 2014, we had 76,668 stock options outstanding and 61,668 stock options are exercisable.

At September 30, 2014, the total number of stock options that are scheduled to vest through December 31, 2014, 2015, 2016 and 2017 is 0; 5,000; 5,000 and 5,000, respectively. We have no stock options outstanding that are scheduled to vest beyond 2017. Compensation expense related to the vesting of stock options for the three and nine months ended September 30, 2014 was $4,000 and $9,000. We did not record compensation expense related to the vesting of stock options for the nine months ended September 30, 2013. The remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options for 2014, 2015, 2016 and 2017 is $3,000; $15,000; $15,000 and $2,000, respectively.

During the nine months ended September 30, 2014 and 2013, we granted 87,500 and 34,400 shares of restricted common stock, respectively, as follows:

Year	No. of Shares	Price per Share	Vesting Period
2014:
	59,000	$36.81	ratably over 3 years
	3,000	$38.43	ratably over 3 years
	15,000	$40.05	ratably over 3 years
	10,500	$40.05	June 9, 2015
	87,500
2013:
	8,400	$46.54	ratably over 3 years
	6,000	$41.83	ratably over 3 years
	20,000	$36.26	June 1, 2016
	34,400

At September 30, 2014, we had 240,381 restricted common shares outstanding. The total number of restricted common shares that are scheduled to vest through December 31, 2014, 2015, 2016 and 2017 is 33,713; 110,211; 66,726 and 29,731, respectively. We have no restricted common stock that are scheduled to vest beyond 2017. During the three and nine months ended September 30, 2014, we recognized $873,000 and $2,317,000, respectively, of compensation expense related to the vesting of restricted common stock. The remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock for 2014, 2015, 2016, and 2017 is $873,000; $2,484,000; $1,262,000 and $190,000, respectively.

During the nine months ended September 30, 2013, we accelerated the vesting of 18,180 shares of restricted common stock due to the retirement of our former Senior Vice President, Marketing and Strategic Planning. Accordingly, we recorded $457,000 of compensation expense related to the accelerated vesting. During the three and nine months ended September 30, 2013, we recognized $542,000 and $2,050,000, respectively, of compensation expense related to the vesting of restricted common stock.