9. Shares and Stockholders’ Equity

Common Shares

The changes in our common stock (number of shares) were as follows:



	For the Three				For the Nine
	Months Ended				Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Common Stock
Balance as of beginning-of-period	250,918,893		260,831,708		256,551,440		262,896,701
Stock issued for exercise of warrants	188,530		1,199,609		1,168,966		4,299,088
Stock compensation/issued for benefit plans	40,031		601,359		2,028,913		1,501,167
Retirement/cancellation of shares	(3,682,523	)	(2,846,230	)	(12,284,388	)	(8,910,510	)
Balance as of end-of-period	247,464,931		259,786,446		247,464,931		259,786,446

Common Stock as of End-of-Period
Basic basis	247,464,931		259,786,446		247,464,931		259,786,446
Diluted basis	251,220,934		265,527,521		251,220,934		265,527,521

Our common stock is without par value.

Average Shares

A reconciliation of the denominator (number of shares) in the calculations of basic and diluted earnings (loss) per common share was as follows:



	For the Three				For the Nine
	Months Ended				Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Weighted-average shares, as used in basic calculation	249,227,641		260,371,956		252,167,909		261,785,387
Shares to cover exercise of outstanding warrants	1,219,729		3,485,992		1,476,038		4,929,079
Shares to cover non-vested stock	1,229,031		1,499,529		1,314,445		1,476,448
Average stock options outstanding during the period	2,646,184		3,863,508		3,388,172		3,810,763
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(236,042	)	(689,803	)	(275,928	)	(1,026,460	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(1,870,146	)	(2,720,155	)	(2,424,332	)	(2,657,408	)
Shares repurchaseable from measured but
unrecognized stock option expense	(33,847	)	(63,286	)	(53,413	)	(84,600	)
Average deferred compensation shares	1,028,061		1,037,370		1,024,369		1,036,683
Weighted-average shares, as used in diluted calculation	253,210,611		266,785,111		256,617,260		269,269,892

In the event the average market price of LNC common stock exceeds the issue price of stock options and the options have a dilutive effect to our earnings per share (“EPS”), such options will be shown in the table above.

We have participants in our deferred compensation plans who selected LNC stock as the measure for the investment return attributable to their deferral amounts. For the three and nine months ended September 30, 2015 and 2014, the effect of settling this obligation in LNC stock (“equity classification”) was more dilutive than the scenario of settling in cash (“liability classification”). Therefore, for our EPS calculation for these periods, we added these shares to the denominator and adjusted the numerator to present net income as if the shares had been accounted for under equity classification by removing the mark-to-market adjustment included in net income attributable to these deferred units of LNC stock. The amount of this adjustment was $7 million and $6 million for the three and nine months ended September 30, 2015, respectively, and $(2) million for the three and nine months ended September 30, 2014, respectively.

AOCI

The following summarizes the components and changes in AOCI (in millions):


	For the Nine
	Months Ended
	September 30,
	2015			2014
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	3,175		$	1,500
Unrealized holding gains (losses) arising during the period		(2,870	)		3,100
Change in foreign currency exchange rate adjustment		(35	)		(21	)
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		841			(983	)
Income tax benefit (expense)		713			(734	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		175			10
Associated amortization of DAC, VOBA, DSI and DFEL		(23	)		(25	)
Income tax benefit (expense)		(53	)		5
Balance as of end-of-period	$	1,725		$	2,872
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	64		$	31
(Increases) attributable to:
Gross OTTI recognized in OCI during the period		(23	)		(11	)
Change in DAC, VOBA, DSI and DFEL		3			1
Income tax benefit (expense)		7			4
Decreases attributable to:
Sales, maturities or other settlements of AFS securities		31			55
Change in DAC, VOBA, DSI and DFEL		(13	)		(7	)
Income tax benefit (expense)		(6	)		(17	)
Balance as of end-of-period	$	63		$	56
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	139		$	256
Unrealized holding gains (losses) arising during the period		(200	)		(92	)
Change in foreign currency exchange rate adjustment		35			25
Change in DAC, VOBA, DSI and DFEL		1			2
Income tax benefit (expense)		57			23
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(187	)		(12	)
Associated amortization of DAC, VOBA, DSI and DFEL		2			1
Income tax benefit (expense)		65			4
Balance as of end-of-period	$	152		$	221
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(3	)	$	(5	)
Foreign currency translation adjustment arising during the period		1			(5	)
Balance as of end-of-period	$	(2	)	$	(10	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(279	)	$	(219	)
Adjustment arising during the period		5			2
Income tax benefit (expense)		(1	)		-
Balance as of end-of-period	$	(275	)	$	(217	)

The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):



	For the Nine
	Months Ended
	September 30,
	2015			2014
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	175		$	10		Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(23	)		(25	)	Total realized gain (loss)
Reclassification before income
tax benefit (expense)		152			(15	)	Income (loss) from continuing operations before taxes
Income tax benefit (expense)		(53	)		5		Federal income tax expense (benefit)
Reclassification, net of income tax	$	99		$	(10	)	Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	31		$	55		Total realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		(13	)		(7	)	Total realized gain (loss)
Reclassification before income
tax benefit (expense)		18			48		Income (loss) from continuing operations before taxes
Income tax benefit (expense)		(6	)		(17	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	12		$	31		Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	(193	)	$	(19	)	Net investment income
Interest rate contracts		1			3		Interest and debt expense
Foreign currency contracts		5			4		Net investment income
Total gross reclassifications		(187	)		(12	)
Associated amortization of DAC,
VOBA, DSI and DFEL		2			1		Commissions and other expenses
Reclassifications before income
tax benefit (expense)		(185	)		(11	)	Income (loss) from continuing operations before taxes
Income tax benefit (expense)		65			4		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(120	)	$	(7	)	Net income (loss)