9. Shares and Stockholders’ Equity

Common Shares

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



	For the Three
	Months Ended
	March 31,
	2016		2015
Common Stock
Balance as of beginning-of-year	243,835,893		256,551,440
Stock issued for exercise of warrants	24,813		946,926
Stock compensation/issued for benefit plans	660,605		1,473,401
Retirement/cancellation of shares	(5,516,059	)	(6,043,265	)
Balance as of end-of-period	239,005,252		252,928,502

Common Stock as of End-of-Period
Basic basis	239,005,252		252,928,502
Diluted basis	242,238,533		257,232,725

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
	Months Ended
	March 31,
	2016		2015
Weighted-average shares, as used in basic calculation	241,676,363		255,495,650
Shares to cover exercise of outstanding warrants	1,101,947		1,852,122
Shares to cover non-vested stock	1,121,727		1,493,614
Average stock options outstanding during the period	1,806,644		3,842,146
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(291,520	)	(350,927	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(1,332,808	)	(2,747,382	)
Shares repurchasable from measured but
unrecognized stock option expense	(1,103	)	(60,519	)
Average deferred compensation shares	1,039,929		1,037,000
Weighted-average shares, as used in diluted calculation	245,121,179		260,561,704

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 all or a portion of their deferral amounts. For the three months ended March 31, 2016 and 2015, 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 the 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 $1 million for the three months ended March 31, 2016 and 2015, respectively.

AOCI

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


	For the Three
	Months Ended
	March 31,
	2016			2015
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	991		$	3,213
Unrealized holding gains (losses) arising during the period		2,469			1,150
Change in foreign currency exchange rate adjustment		7			(34	)
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		(661	)		(200	)
Income tax benefit (expense)		(641	)		(322	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(44	)		184
Associated amortization of DAC, VOBA, DSI and DFEL		(2	)		(7	)
Income tax benefit (expense)		16			(62	)
Balance as of end-of-period	$	2,195		$	3,692
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	26		$	26
(Increases) attributable to:
Gross OTTI recognized in OCI during the period		(26	)		(9	)
Change in DAC, VOBA, DSI and DFEL		6			2
Income tax benefit (expense)		7			3
Decreases attributable to:
Changes in fair value, sales, maturities or other settlements of AFS securities		(14	)		(3	)
Change in DAC, VOBA, DSI and DFEL		4			(2	)
Income tax benefit (expense)		3			2
Balance as of end-of-period	$	6		$	19
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	132		$	139
Unrealized holding gains (losses) arising during the period		(129	)		(108	)
Change in foreign currency exchange rate adjustment		(11	)		37
Change in DAC, VOBA, DSI and DFEL		(4	)		-
Income tax benefit (expense)		50			25
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		7			(194	)
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		1
Income tax benefit (expense)		(2	)		68
Balance as of end-of-period	$	34		$	218
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(5	)	$	(3	)
Foreign currency translation adjustment arising during the period		(2	)		(1	)
Balance as of end-of-period	$	(7	)	$	(4	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(299	)	$	(279	)
Adjustment arising during the period		2			8
Income tax benefit (expense)		-			(1	)
Balance as of end-of-period	$	(297	)	$	(272	)

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 Three
	Months Ended
	March 31,
	2016			2015
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(44	)	$	184		Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(2	)		(7	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		(46	)		177		operations before taxes
Income tax benefit (expense)		16			(62	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	(30	)	$	115		Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	-		$	(3	)	Total realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		-			(2	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		-			(5	)	operations before taxes
Income tax benefit (expense)		-			2		Federal income tax expense (benefit)
Reclassification, net of income tax	$	-		$	(3	)	Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	1		$	(197	)	Net investment income
Interest rate contracts		-			1		Interest and debt expense
Foreign currency contracts		6			2		Net investment income
Total gross reclassifications		7			(194	)
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		1		Commissions and other expenses
Reclassifications before income							Income (loss) from continuing
tax benefit (expense)		6			(193	)	operations before taxes
Income tax benefit (expense)		(2	)		68		Federal income tax expense (benefit)
Reclassification, net of income tax	$	4		$	(125	)	Net income (loss)