9. Equity

Preferred Stock. Historically, 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 was convertible into 2,000,000 shares of our common stock at $19.25 per share and dividends were payable quarterly. During the year ended December 31, 2015, the sole holder of our Series C Preferred stock elected to convert all of its preferred shares into 2,000,000 shares of common stock. Accordingly, we had no preferred stock outstanding as of December 31, 2015.

Common Stock. During the year ended December 31, 2015, we entered into equity distribution agreements to issue and sell, from time to time, up to $200,000,000 in aggregate offering price of our common shares. Sales of common shares will be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings. During 2015, we did not sell shares of common stock under our equity distribution agreement. At December 31, 2015, we had $200,000,000 available under this agreement.

During 2014, we sold 600,000 shares of common stock at a price of $41.50 per share in a registered direct placement to certain institutional investors. The net proceeds of $24,644,000 were used to pay down amounts outstanding under our unsecured line of credit, to fund current developments and for general corporate purposes.

During 2015 and 2014, we acquired 26,993 shares and 5,324 shares, respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2015, we acquired 30,482 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

During 2013, we terminated our prior 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 2013, we sold 126,742 shares of common stock for $4,895,000 in net proceeds under our prior equity distribution agreement. In conjunction with the sale of common stock, we reclassified $662,000 of accumulated costs associated with the prior equity distribution agreement to additional paid in capital.

Available Shelf Registration. On July 19, 2013, we filed an automatic shelf registration statement with the SEC to replace our prior shelf registration statement. The automatic shelf registration statement we filed in 2013 provides us with the capacity to publicly offer common stock, preferred stock, warrants, debt, depositary shares, or units. At December 31, 2015 we had availability of $575,100,000 under this automatic shelf registration statement.

In advance of the three-year expiration of the automatic shelf registration statement we filed in 2013, we filed a new automatic shelf registration statement with the SEC on January 29, 2016 to provide us with additional capacity to publicly offer an indeterminate amount of common stock, preferred stock, warrants, debt, depositary shares, or units.

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


	Year Ended
	December 31, 2015						December 31, 2014
	Declared			Paid			Declared			Paid
Preferred Stock Series C	$	2,454		$	2,454		$	3,273		$	3,273
Common Stock		74,311	(1)		74,311	(1)		71,158	(2)		71,158	(2)
Total	$	76,765		$	76,765		$	74,431		$	74,431

⁽¹⁾

Represents $0.17 per share per month for January through September 2015 and $0.18 per share per month for October through December 2015.

⁽²⁾

Represents $0.17 per share per month for the twelve months ended December 31, 2014.

In January 2016, we declared a monthly cash dividend of $0.18 per share on our common stock for the months of January, February and March 2016 payable on January 29, February 29 and March 31, 2016, respectively, to stockholders of record on January 21, February 19 and March 23, 2016, respectively.

Accumulated Other Comprehensive Income. During prior years, we had investments in Real Estate Mortgage Investment Conduit (or REMIC) Certificates, and retained the non‑investment grade certificates issued in the securitizations. During 2005, a loan was paid off in the last remaining REMIC pool which caused the last third party REMIC Certificate holders entitled to any principal payments to be paid off in full. After this transaction, we became the sole holder of the remaining REMIC Certificates and were therefore entitled to the entire principal outstanding of the loan pool underlying the remaining REMIC Certificates. Under the FASB accounting guidance relating to accounting for changes that result in a transferor regaining control of financial assets sold, a Special Purpose Entity (or SPE) may become non‑qualified or tainted which generally results in the “repurchase” by the transferor of all the assets sold to and still held by the SPE. Since we were the sole REMIC Certificate holder entitled to principal from the underlying loan pool, we had all the risks and were entitled to all the rewards from the underlying loan pool. As required by the accounting guidance, the repurchase for the transferred assets was accounted for at fair value. The accumulated other comprehensive income balance represents the fair market value adjustment offset by any previously adjusted impairment charge which is amortized to increase interest income over the remaining life of the loans that we repurchased from the REMIC pool. At December 31, 2015 and 2014, accumulated other comprehensive income was $47,000 and $82,000, respectively.

Stock Based Compensation Plans. During 2015, we adopted and our shareholders approved the 2015 Equity Participation Plan (or the 2015 Plan) which replaces the 2008 Equity Participation Plan (or the 2008 Plan). Under the 2015 Plan, 1,400,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2015 Plan are set by our compensation committee at its discretion. During the twelve months ended December 31, 2015, no stock options or restricted stock were granted under this plan.

Restricted Stock. Restricted stock activity for the years ended December 31, 2015 and 2014 was as follows:


	2015		2014
Outstanding, January 1		214,168		165,149
Granted		92,150		95,000
Vested		(118,331)		(45,981)
Canceled		(640)		—
Outstanding, December 31		187,347		214,168
Compensation expense for the year	$	3,992,000	$	3,241,000

During 2015 and 2014, we granted 92,150 and 95,000 shares of restricted common stock, respectively, under the 2008 Plan as follows:


		Price per
Year	No. of Shares	Share		Vesting Period
2015	65,750	$	44.45	ratably over 3 years
	18,000	$	42.30	ratably over 3 years
	8,400	$	42.30	June 2, 2016
	92,150

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
	7,500	$	41.34	November 12, 2015
	95,000

Compensation expense recognized related to the vesting of restricted common stock for the twelve months ended December 31, 2015 was $3,992,000, compared to $3,241,000 for the same period in 2014. At December 31, 2015, the total number of restricted common shares that are scheduled to vest and remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock are as follows:


	Number	Remaining
	of	Compensation
Vesting Date	Awards	Expense
2016	102,060	$	2,618,000
2017	57,367		1,416,000
2018	27,920		187,000
	187,347	$	4,221,000

Stock Options. During 2015, we did not issue any stock options. During 2014, we issued 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. The fair value of these options was estimated utilizing the Black-Scholes-Merton valuation model and assumptions as of the grant date. In determining the estimated fair value, the expected life assumption was three years, the volatility was 0.21, the risk free interest rate was 0.66% and the expected dividend yield was 5.31%. The fair value of the option granted was estimated to be $2.96. Nonqualified stock option activity for the years ended December 31, 2015 and 2014, was as follows:


			Weighted Average
	Shares		Price
	2015	2014	2015		2014
Outstanding, January 1	43,334	73,334	$	29.16	$	23.97
Granted	—	15,000	$	—	$	38.43
Exercised	(3,333)	(45,000)	$	23.79	$	23.79
Canceled	—	—	$	—	$	—
Outstanding, December 31	40,001	43,334	$	29.60	$	29.16
Exercisable, December 31(1)	30,001	28,334	$	31.99	$	24.25

⁽¹⁾

The aggregate intrinsic value of exercisable options at December 31, 2015, based upon the closing price of our common shares at December 31, 2015, the last trading day of 2015, was approximately $494,000. Options exercisable at December 31, 2015 have a weighted average remaining contractual life of approximately 2.6 years.

The options exercised during 2015 and 2014 were as follows:


		Weighted
		Average
	Options	Exercise		Option		Market
	Exercised	Price		Value		Value(1)
2015	3,333	$	23.79	$	79,000	$	140,000
2014	45,000	$	23.79	$	1,071,000	$	1,840,000

⁽¹⁾

As of the exercise dates.

We use the Black‑Scholes‑Merton formula to estimate the value of stock options granted to employees. This model requires management to make certain estimates including stock volatility, expected dividend yield and the expected term. The weighted average exercise share price of the options was $29.60 and $29.16 and the weighted average remaining contractual life was 2.6 and 2.7 years as of December 31, 2015 and 2014, respectively. Compensation expense related to the vesting of stock options for the twelve months ended December 31, 2015, was $14,000 compared to $12,000 for the same periods in 2014. The following table summarizes our scheduled number of stock option awards vesting and remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options:


	Number	Remaining
	of	Compensation
Vesting Date	Awards	Expense
2016	5,000	$	15,000
2017	5,000		3,000
	10,000	$	18,000