6.Equity

Equity activity was as follows (in thousands):


	Total
	Equity
Balance at December 31, 2015	$	659,202
Net income		42,038
Proceeds from common stock offering, net of offering costs		70,563
Stock-based compensation expense		2,019
Stock option exercise		159
Reclassification adjustment		(33)
Common stock dividends		(41,031)
Other		(2,174)
Balance at June 30, 2016	$	730,743

Preferred Stock. 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 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 June 30, 2016.

Common Stock. During 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 are made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings. During the six months ended June 30, 2016, we sold 1,490,394 shares of common stock for $70,885,000 in net proceeds under our equity distribution agreements. In conjunction with the sale of common stock, we reclassified $322,000 of accumulated costs associated with the equity distribution agreements to additional paid in capital. At June 30, 2016, we had $127,853,000 available under these agreements. Subsequent to June 30, 2016, we sold 152,623 shares of common stock for $7,715,000 in net proceeds under our equity distribution agreements. Accordingly, we have approximately $120,000,000 available under these agreements.

Also, during the six months ended June 30, 2016 and 2015, we acquired 49,094 shares and 4,609 shares respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Available Shelf Registrations. We had an automatic shelf registration statement which was filed in 2013 and provided us with the capacity to publicly offer up to $800,000,000 in common stock, preferred stock, warrants, debt, depositary shares, or units. 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. We may from time to time raise capital under the automatic registration statement we filed in 2016 (until its expiration on January 29, 2019) in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.

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


	Six Months Ended
	June 30, 2016						June 30, 2015
	Declared			Paid			Declared			Paid
Preferred Stock Series C	$	—		$	—		$	1,636		$	1,636
Common Stock		41,031	(1)		41,031	(1)		36,247	(2)		36,247	(2)
Total	$	41,031		$	41,031		$	37,883		$	37,883

⁽¹⁾

Represents $0.18 per share per month for the six months ended June 30, 2016.

⁽²⁾

Represents $0.17 per share per month for the six months ended June 30, 2015.

In July 2016, we declared a monthly cash dividend of $0.18 per share on our common stock for the months of July, August and September, payable on July 29, August 31, and September 30, 2016, respectively, to stockholders of record on July 21, August 23, and September 22, 2016, respectively.

Accumulated Other Comprehensive Income. At June 30, 2016 and December 31, 2015, accumulated comprehensive income of $13,000 and $47,000, respectively, represents the net unrealized holding gains on available-for-sale REMIC Certificates recorded in 2005 when we repurchased the loans in the underlying loan pool. This amount is being amortized to increase interest income over the remaining life of the loans that we repurchased from the REMIC Pool.

Stock-Based Compensation. 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 six months ended June 30, 2016 and 2015, no stock options were granted. The stock options exercised during the six months ended June 30, 2016 and 2015 were as follows:


		Weighted
		Average
	Options	Exercise		Option		Market
	Exercised	Price		Value		Value(1)
2016	6,667	$	23.79	$	159,000	$	311,000
2015	3,333	$	23.79	$	79,000	$	140,000

⁽¹⁾

As of the exercise date.

At June 30, 2016, we had 33,334 stock options outstanding of which 28,334 stock options are exercisable. Compensation expense related to the vesting of stock options was $8,000 for each of the six months ended June 30, 2016 and 2015. At June 30, 2016, we had 5,000 unvested stock options. The remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options for 2016 and 2017 is $7,000 and $3,000, respectively.

During the six months ended June 30, 2015, we cancelled 640 shares of restricted stock under the 2008 Plan. During the six months ended June 30, 2016 and 2015, we granted restricted stock and performance based stock units for a total of 127,087 and 92,150 shares, respectively, under the 2015 Plan and 2008 Plan as follows:


		Price per
Year	No. of Shares	Share		Vesting Period
2016	65,300	$	43.24	ratably over 3 years
	54,107	$	46.87	TSR targets (1)
	7,680	$	46.87	June 1, 2017
	127,087

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

⁽¹⁾

Vesting is based on achieving certain total shareholder return (or TSR) targets in 3.7 years with acceleration opportunity in 2.7 years.

Compensation expense recognized related to the vesting of restricted common stock for the six months ended June 30, 2016 was $2,012,000, compared to $2,073,000 for the same period in 2015. At June 30, 2016, 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	980		$	2,253,000
2017	85,343			3,428,000
2018	49,352			2,071,000
2019	75,878	(1)		236,000
	211,553		$	7,988,000

⁽¹⁾

Includes 54,107 performance based stock units. The performance based stock units are valued utilizing a lattice-binomial option pricing model based on Monte Carlo simulations. The company recognizes the fair value of the awards over the applicable vesting period as compensation expense.