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, 2018 and 2017.

Table 14.1 – Changes in Accumulated Other Comprehensive Income by Component



	Three Months Ended June 30, 2018						Three Months Ended June 30, 2017
(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	$	114,577		$	(34,522	)	$	114,875		$	(42,273	)
Other comprehensive (loss) income before reclassifications ⁽¹⁾	(3,104		)	3,417			1,811			(2,429		)
Amounts reclassified from other accumulated comprehensive income	(4,748		)	—			(2,322		)	14
Net current-period other comprehensive (loss) income	(7,852		)	3,417			(511		)	(2,415		)
Balance at End of Period	$	106,725		$	(31,105	)	$	114,364		$	(44,688	)



	Six Months Ended June 30, 2018						Six Months Ended June 30, 2017
(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	$	128,201		$	(42,953	)	$	115,873		$	(44,020	)
Other comprehensive income (loss) before reclassifications ⁽¹⁾	(7,341		)	11,848			4,741			(696		)
Amounts reclassified from other accumulated comprehensive income	(14,135		)	—			(6,250		)	28
Net current-period other comprehensive income (loss)	(21,476		)	11,848			(1,509		)	(668		)
Balance at End of Period	$	106,725		$	(31,105	)	$	114,364		$	(44,688	)


(1)	Amounts presented for net unrealized gains on available-for-sale securities are net of tax benefit (provision) of $0.2 million and $0.1 million for the three and six months ended June 30, 2018, respectively, and $0.1 million and $(0.1) million for the three and six months ended June 30, 2017, respectively.

The following table provides a summary of reclassifications out of accumulated other comprehensive income for the three and six months ended June 30, 2018 and 2017.

Table 14.2 – 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	2018			2017
Net Realized (Gain) Loss on AFS Securities
Other than temporary impairment ⁽¹⁾	Investment fair value changes, net	$	56		$	128
Gain on sale of AFS securities	Realized gains, net	(4,804		)	(2,450		)
		$	(4,748	)	$	(2,322	)
Net Realized Loss on Interest Rate Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	—		$	14
		$	—		$	14



		Amount Reclassified From Accumulated Other Comprehensive Income
	Affected Line Item in the	Six Months Ended June 30,
(In Thousands)	Income Statement	2018			2017
Net Realized (Gain) Loss on AFS Securities
Other than temporary impairment ⁽¹⁾	Investment fair value changes, net	$	56		$	245
Gain on sale of AFS securities	Realized gains, net	(14,191		)	(6,495		)
		$	(14,135	)	$	(6,250	)
Net Realized Loss on Interest Rate Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	—		$	28
		$	—		$	28

(1)

For the three and six months ended June 30, 2018, other-than-temporary impairments were $0.3 million, of which $0.1 million were recognized through our consolidated statements of income and $0.2 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. For the three months ended June 30, 2017, other-than-temporary impairments were $0.5 million, of which $0.1 million were recognized through our consolidated statements of income and $0.3 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. For the six months ended June 30, 2017, other-than-temporary impairments were $0.6 million, of which $0.2 million were recognized through our consolidated statements of income and $0.4 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet.

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, 2018 and 2017.

Table 14.3 – Basic and Diluted Earnings per Common Share



	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands, except Share Data)	2018			2017			2018			2017
Basic Earnings per Common Share:
Net income attributable to Redwood	$	32,747		$	36,324		$	79,592		$	73,293
Less: Dividends and undistributed earnings allocated to participating securities	(1,074		)	(884		)	(2,535		)	(1,852		)
Net income allocated to common shareholders	$	31,673		$	35,440		$	77,057		$	71,441
Basic weighted average common shares outstanding	75,380,715			76,819,703			75,388,638			76,779,178
Basic Earnings per Common Share	$	0.42		$	0.46		$	1.02		$	0.93
Diluted Earnings per Common Share:
Net income attributable to Redwood	$	32,747		$	36,324		$	79,592		$	73,293
Less: Dividends and undistributed earnings allocated to participating securities	(1,156		)	(935		)	(2,584		)	(1,940		)
Add back: Interest expense on convertible notes for the period, net of tax	6,335			6,205			14,976			12,075
Net income allocated to common shareholders	$	37,926		$	41,594		$	91,984		$	83,428
Weighted average common shares outstanding	75,380,715			76,819,703			75,388,638			76,779,178
Net effect of dilutive equity awards	277,788			235,273			156,307			173,235
Net effect of assumed convertible notes conversion to common shares	24,773,490			20,439,168			28,746,235			20,766,137
Diluted weighted average common shares outstanding	100,431,993			97,494,144			104,291,180			97,718,550
Diluted Earnings per Common Share	$	0.38		$	0.43		$	0.88		$	0.85

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 and six months ended June 30, 2018 and 2017, 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 (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 three and six months ended June 30, 2018, the number of outstanding equity awards that were antidilutive totaled 7,091 and 6,965, respectively. For the three and six months ended June 30, 2017, the number of outstanding equity awards that were antidilutive totaled 5,555 and 5,691, respectively.

Stock Repurchases

In February 2016, our Board of Directors approved an authorization for the repurchase of up to $100 million of our common stock and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization replaced all previous share repurchase plans and has no expiration date. During the year ended December 31, 2017, we repurchased 610,342 shares of common stock pursuant to this authorization for $9 million. At December 31, 2017, approximately $77 million of this current authorization remained available for the repurchase of shares of our common stock. During January 2018, we repurchased 1,040,829 shares of our common stock pursuant to this authorization for $16 million.

In February 2018, our Board of Directors approved an authorization for the repurchase of an additional $39 million 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. As noted above, 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, 2018, $100 million of the current authorization remained available for the repurchase of shares of our common stock.