| Equity |
Equity The following table provides a summary of changes to accumulated other comprehensive income by component for the three and nine months ended September 30, 2016 and 2015. Table 16.1 – Changes in Accumulated Other Comprehensive Income by Component | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2016 | | Three Months Ended September 30, 2015 | (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 | | $ | 116,849 |
| | $ | (70,518 | ) | | $ | 179,659 |
| | $ | (38,965 | ) | Other comprehensive income (loss) before reclassifications | | 9,038 |
| | 647 |
| | (5,673 | ) | | (12,049 | ) | Amounts reclassified from other accumulated comprehensive income | | (1,319 | ) | | 18 |
| | (3,270 | ) | | 19 |
| Net current-period other comprehensive income (loss) | | 7,719 |
| | 665 |
| | (8,943 | ) | | (12,030 | ) | Balance at End of Period | | $ | 124,568 |
| | $ | (69,853 | ) | | $ | 170,716 |
| | $ | (50,995 | ) |
| | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30, 2016 | | Nine Months Ended September 30, 2015 | (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 | | $ | 139,356 |
| | $ | (47,363 | ) | | $ | 186,737 |
| | $ | (46,049 | ) | Other comprehensive income (loss)
before reclassifications | | 5,195 |
| | (22,545 | ) | | (5,701 | ) | | (5,023 | ) | Amounts reclassified from other
accumulated comprehensive income | | (19,983 | ) | | 55 |
| | (10,320 | ) | | 77 |
| Net current-period other comprehensive income (loss) | | (14,788 | ) | | (22,490 | ) | | (16,021 | ) | | (4,946 | ) | Balance at End of Period | | $ | 124,568 |
| | $ | (69,853 | ) | | $ | 170,716 |
| | $ | (50,995 | ) |
The following table provides a summary of reclassifications out of accumulated other comprehensive income for three and nine months ended September 30, 2016 and 2015. Table 16.2 – Reclassifications Out of Accumulated Other Comprehensive Income | | | | | | | | | | | | | | | | | | | | | | | Amount Reclassified From Accumulated Other Comprehensive Income | | | Affected Line Item in the | | Three Months Ended September 30, | (In Thousands) | | Income Statement | | 2016 | | 2015 | Net Realized (Gain) Loss on AFS Securities | | | | | | | Other than temporary impairment (1) | | Investment fair value changes, net | | $ | — |
| | $ | 198 |
| Gain on sale of AFS securities | | Realized gains, net | | (1,319 | ) | | (3,468 | ) | | | | | $ | (1,319 | ) | | $ | (3,270 | ) | Net Realized Loss on Interest Rate
Agreements Designated as Cash Flow Hedges | | | | | | | Amortization of deferred loss | | Interest expense | | $ | 18 |
| | $ | 19 |
| | | | | $ | 18 |
| | $ | 19 |
|
| | | | | | | | | | | | | | | | Amount Reclassified From Accumulated Other Comprehensive Income | | | Affected Line Item in the | | Nine Months Ended September 30, | (In Thousands) | | Income Statement | | 2016 | | 2015 | Net Realized (Gain) Loss on AFS Securities | | | | | | | Other than temporary impairment (1) | | Investment fair value changes, net | | $ | 305 |
| | $ | 198 |
| Gain on sale of AFS securities | | Realized gains, net | | (20,288 | ) | | (10,518 | ) | | | | | $ | (19,983 | ) | | $ | (10,320 | ) | Net Realized Loss on Interest Rate
Agreements Designated as Cash Flow Hedges | | | | | | | Amortization of deferred loss | | Interest expense | | $ | 55 |
| | $ | 77 |
| | | | | $ | 55 |
| | $ | 77 |
|
| | (1) | For the three months ended September 30, 2016, there were no other-than-temporary impairments. For the nine months ended September 30, 2016, other-than-temporary impairments were $3 million, of which $0.3 million were recognized through our consolidated statements of income and $2 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 nine months ended September 30, 2016 and 2015. Table 16.3 – Basic and Diluted Earnings per Common Share | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | (In Thousands, except Share Data) | | 2016 | | 2015 | | 2016 | | 2015 | Basic Earnings per Common Share: | | | | | | | | | Net income attributable to Redwood | | $ | 52,553 |
| | $ | 19,164 |
| | $ | 105,897 |
| | $ | 61,029 |
| Less: Dividends and undistributed earnings allocated to participating securities | | (1,485 | ) | | (553 | ) | | (3,040 | ) | | (1,928 | ) | Net income allocated to common shareholders | | $ | 51,068 |
| | $ | 18,611 |
| | $ | 102,857 |
| | $ | 59,101 |
| Basic weighted average common shares outstanding | | 76,680,183 |
| | 83,787,533 |
| | 76,827,026 |
| | 83,696,461 |
| Basic Earnings per Common Share | | $ | 0.67 |
| | $ | 0.22 |
| | $ | 1.34 |
| | $ | 0.71 |
| Diluted Earnings per Common Share: | | | | | | | | | Net income attributable to Redwood | | $ | 52,553 |
| | $ | 19,164 |
| | $ | 105,897 |
| | $ | 61,029 |
| Less: Dividends and undistributed earnings allocated to participating securities | | (1,439 | ) | | (553 | ) | | (3,226 | ) | | (1,928 | ) | Add back: Interest expense on convertible notes for the period, net of tax | | 6,115 |
| | — |
| | 18,263 |
| | — |
| Net income allocated to common shareholders | | $ | 57,229 |
| | $ | 18,611 |
| | $ | 120,934 |
| | $ | 59,101 |
| Weighted average common shares outstanding | | 76,680,183 |
| | 83,787,533 |
| | 76,827,026 |
| | 83,696,461 |
| Net effect of dilutive equity awards | | 54,696 |
| | 1,287,171 |
| | 18,665 |
| | 1,642,535 |
| Net effect of assumed convertible notes conversion to common shares | | 21,096,738 |
| | — |
| | 21,145,987 |
| | — |
| Diluted weighted average common shares outstanding | | 97,831,617 |
| | 85,074,704 |
| | 97,991,678 |
| | 85,338,996 |
| Diluted Earnings per Common Share | | $ | 0.58 |
| | $ | 0.22 |
| | $ | 1.23 |
| | $ | 0.69 |
|
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 nine months ended September 30, 2016 and 2015, certain 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 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 both the three and nine months ended September 30, 2016, no common shares related to the assumed conversion of the convertible notes were antidilutive and excluded in the calculation of diluted earnings per share. For both the three and nine months ended September 30, 2015, 21,292,309 of common shares related to the assumed conversion of the convertible notes were antidilutive and were excluded in the calculation of diluted earnings per share. For the three and nine months ended September 30, 2016, the number of outstanding equity awards that were antidilutive totaled 6,623 and 6,565, respectively. For the three and nine months ended September 30, 2015, the number of outstanding equity awards that were antidilutive totaled 163,296 and 180,897, respectively. Stock Repurchases In August 2015, our Board of Directors authorized the repurchase of up to $100 million of our common stock. During the nine months ended September 30, 2016, we repurchased 839,130 common shares for $11 million, utilizing the remaining availability under this authorization. In February 2016, our Board of Directors approved an additional 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 current authorization replaced all previous share repurchase plans and has no expiration date. This current repurchase authorization does not obligate us to acquire any specific number of shares or securities. Under this current 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. Under this authorization, during the three and nine months ended September 30, 2016, we repurchased 259,005 shares and 1,078,743 shares, respectively, pursuant to this authorization for $3 million and $14 million, respectively. At September 30, 2016, approximately $86 million of this current authorization remained available for the repurchase of shares of our common stock. During both the three and nine months ended September 30, 2015, there were 2,451,523 shares acquired under then-existing share repurchase authorization. |