Note 16. 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, 2014 and 2013.

Changes in Accumulated Other Comprehensive Income by Component


	Three Months Ended September 30, 2014				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		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	$	197,542	$	(29,985)	$	145,349	$	(27,066)
Other comprehensive income (loss) before reclassifications		1,849		(3,258)		(633)		4,018
Amounts reclassified from other accumulated comprehensive income		(6,409)		32		(6,962)		62


Net current-period other comprehensive (loss) income		(4,560)		(3,226)		(7,595)		4,080

Balance at End of Period	$	192,982	$	(33,211)	$	137,754	$	(22,986)


	Nine Months Ended September 30, 2014				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		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	$	164,654	$	(15,888)	$	186,580	$	(48,248)
Other comprehensive income (loss) before reclassifications		35,078		(17,454)		(29,615)		25,043
Amounts reclassified from other accumulated comprehensive income		(6,750)		131		(19,211)		219


Net current-period other comprehensive (loss) income		28,328		(17,323)		(48,826)		25,262

Balance at End of Period	$	192,982	$	(33,211)	$	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, 2014 and 2013.

Reclassifications Out of Accumulated Other Comprehensive Income


	Affected Line Item in the	Amount reclassified from accumulated other comprehensive income Three Months Ended September 30,
(In Thousands)	Income Statement	2014		2013
Net realized gains (losses) on AFS securities
Other than temporary impairment	Other market valuations, net	$	188	$	-
Gain on sale of AFS securities	Realized gains, net		(6,597)		(6,962)

		$	(6,409)	$	(6,962)


Net realized gains on interest rate agreements designated as cash flow hedges
Amortization of deferred loss	Interest expense	$	32	$	62

		$	32	$	62


	Affected Line Item in the	Amount reclassified from accumulated other comprehensive income Nine Months Ended September 30,
(In Thousands)	Income Statement	2014		2013
Net realized gains (losses) on AFS securities
Other than temporary impairment	Other market valuations, net	$	565	$	(124)
Gain on sale of AFS securities	Realized gains, net		(7,315)		(19,087)

		$	(6,750)	$	(19,211)


Net realized gains on interest rate agreements designated as cash flow hedges
Amortization of deferred loss	Interest expense	$	131	$	219

		$	131	$	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, 2014 and 2013.

Basic and Diluted Earnings Per Common Share


	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands, Except Share Data)	2014		2013		2014		2013
Basic Earnings Per Common Share:
Net income attributable to Redwood	$	45,097	$	21,929	$	73,447	$	148,112
Less: Dividends and undistributed earnings allocated to participating securities		(1,054)		(565)		(1,819)		(4,209)

Net income allocated to common shareholders	$	44,043	$	21,364	$	71,628	$	143,903

Basic weighted average common shares outstanding		83,017,534		82,201,473		82,722,079		81,888,231
Basic Earnings Per Common Share	$	0.53	$	0.26	$	0.87	$	1.76

Diluted Earnings Per Common Share:
Net income attributable to Redwood	$	45,097	$	21,929	$	73,447	$	148,112
Less: Dividends and undistributed earnings allocated to participating securities		(756)		(565)		(1,784)		(3,030)
Add back: Interest expense on convertible notes		3,855		-		-		8,790

Net income allocated to common shareholders	$	48,196	$	21,364	$	71,663	$	153,872


Weighted average common shares outstanding		83,017,534		82,201,473		82,722,079		81,888,231
Net effect of dilutive equity awards		2,113,248		2,220,566		2,309,051		2,292,451
Net effect of assumed convertible notes conversion to common shares		11,825,450		-		-		9,053,183

Diluted weighted average common shares outstanding		96,956,232		84,422,039		85,031,130		93,233,865


Diluted Earnings Per Common Share	$	0.50	$	0.25	$	0.84	$	1.65

For the three and nine months ended September 30, 2014, there were 2,113,248 and 2,309,051 of dilutive equity awards, respectively, determined under the two-class method. 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. 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 nine months ended September 30, 2014, common shares related to the assumed conversion of the convertible notes, totaling 11,825,450 and zero, respectively, were included in the calculation of diluted earnings per share. For the three and nine months ended September 30, 2013, common shares related to the assumed conversion of the convertible notes, totaling zero and 9,053,183, respectively, were included in the calculation of the diluted earnings per share.

For the nine months ended September 30, 2014, as well as 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, 2014 and 2013, the number of outstanding equity awards that were antidilutive totaled 57,514 and 190,627, respectively. For the nine months ended September 30, 2014 and 2013, the number of outstanding equity awards that were antidilutive totaled 66,129 and 244,174 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, 2014, there were no shares acquired under the plan. At September 30, 2014, there remained 4,005,985 shares available for repurchase under this plan.