4.	Mortgage-Backed Securities

All of the Company’s MBS are classified as available-for-sale and, as such, are reported at their estimated fair value. The MBS market is primarily an over-the-counter market. As such, there are no standard, public market quotations for individual MBS. The Company estimates the fair value of the its MBS based on a market approach by obtaining values for its securities from third-party pricing services. The third-party pricing services gather trade data and use pricing models that incorporate such factors as coupons, primary mortgage rates, prepayment speeds, spread to the U.S. Treasury and interest rate swap curves, periodic and life caps and other similar factors. The third party pricing services also receive data from traders at broker-dealers that participate in the active markets for these securities and directly observe numerous trades of securities similar to the securities owned by the Company.

The Company regularly reviews the prices obtained and the methods used to derive those prices. As part of this evaluation, the Company considers security-specific factors such as coupon, prepayment experience, fixed/adjustable rate, annual and life caps, coupon index, time to next reset and issuing agency, among other factors to ensure that estimated fair values are appropriate. The Company’s analysis of pricing information obtained also includes comparing the data received to other available information, such as other independent pricing services, repurchase agreement pricing, discounted cash flow analysis, matrix pricing, option adjusted spread models and other fundamental analysis of observable market factors.

In addition to agency securities, the Company’s MBS portfolio includes MBS not issued or guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity (“non-agency” securities). The following table presents the composition of the Company’s MBS at December 31, 2014.

	Amortized Cost		Gross Unrealized Loss			Gross Unrealized Gain		Estimated Fair Value
Agency Securities
Fannie Mae Certificates
ARMs	$	9,203,741	$	(13,737	)	$	183,889	$	9,373,893
Fixed-Rate		1,111,288		-			5,177		1,116,465
Total Fannie Mae		10,315,029		(13,737	)		189,066		10,490,358

Freddie Mac Certificates
ARMs		6,805,885		(21,794	)		76,790		6,860,881
Fixed-Rate		158,402		-			1,767		160,169
Total Freddie Mac		6,964,287		(21,794	)		78,557		7,021,050

Total Agency Securities		17,279,316		(35,531	)		267,623		17,511,408

Total Non-Agency ARMs		75,454		-			148		75,602

Total Mortgage-Backed Securities	$	17,354,770	$	(35,531	)	$	267,771	$	17,587,010

The following table presents the composition of the Company’s MBS at December 31, 2013.

	Amortized Cost		Gross Unrealized Loss			Gross Unrealized Gain		Estimated Fair Value
Agency Securities
Fannie Mae Certificates
ARMs	$	9,620,743	$	(44,871	)	$	167,848	$	9,743,720
Fixed-Rate		806,312		(1,798	)		3,832		808,346
Total Fannie Mae		10,427,055		(46,669	)		171,680		10,552,066

Freddie Mac Certificates
ARMs		6,671,013		(70,752	)		57,808		6,658,069
Fixed-Rate		338,738		(1,600	)		21		337,159
Total Freddie Mac		7,009,751		(72,352	)		57,829		6,995,228

Ginnie Mae Certificates
ARMs		-		-			-		-
Fixed-Rate		96,236		(998	)		-		95,238
Total Ginnie Mae		96,236		(998	)		-		95,238

Total Mortgage-Backed Securities	$	17,533,042	$	(120,019	)	$	229,509	$	17,642,532

The components of the carrying value of available-for-sale MBS at December 31, 2014 and 2013 are presented below.

	As of December 31
	2014			2013
Principal balance	$	16,864,583		$	17,044,190
Unamortized premium		490,187			488,854
Unamortized discount		-			(2	)
Gross unrealized gains		267,771			229,509
Gross unrealized losses		(35,531	)		(120,019	)
Carrying value/estimated fair value	$	17,587,010		$	17,642,532

The following table presents components of interest income on the Company’s MBS portfolio for the three years ended December 31, 2014:

	Years Ended December 31
	2014			2013			2012
Coupon interest	$	456,415		$	616,632		$	667,644
Net premium amortization		(101,979	)		(165,924	)		(162,844	)
Interest income	$	354,436		$	450,708		$	504,800

Gross gains and losses from sales of securities for the three years ended December 31, 2014 were as follows:

	Years Ended December 31
	2014			2013			2012
Gross gains	$	15,821		$	18,717		$	66,084
Gross losses		(10,625	)		(301,729	)		(1,737	)
Net gain (loss)	$	5,196		$	(283,012	)	$	64,347

The Company monitors the performance and market value of its MBS portfolio on an ongoing basis, and on a quarterly basis reviews its MBS for impairment. At December 31, 2014 and 2013, the Company had the following securities in a loss position as presented in the following two tables:

	As of December 31, 2014
	Less than 12 Months					Greater than 12 Months					Total
	Fair Market		Unrealized			Fair Market		Unrealized			Fair Market		Unrealized
	Value		Loss			Value		Loss			Value		Loss
Fannie Mae Certificates
ARMs	$	806,600	$	(1,240	)	$	1,306,153	$	(12,497	)	$	2,112,753	$	(13,737	)
Fixed-Rate		-		-			-		-			-		-
Freddie Mac Certificates
ARMs		498,994		(792	)		1,737,760		(21,002	)		2,236,754		(21,794	)
Fixed-Rate		-		-			-		-			-		-
Total temporarily impaired securities	$	1,305,594	$	(2,032	)	$	3,043,913	$	(33,499	)	$	4,349,507	$	(35,531	)
Number of securities in an unrealized loss position				56					108					164

	As of December 31, 2013
	Less than 12 Months					Greater than 12 Months				Total
	Fair Market		Unrealized			Fair Market		Unrealized		Fair Market		Unrealized
	Value		Loss			Value		Loss		Value		Loss
Fannie Mae Certificates
ARMs	$	3,233,274	$	(44,871	)	$	-	$	-	$	3,233,274	$	(44,871	)
Fixed-Rate		281,760		(1,798	)		-		-		281,760		(1,798	)
Freddie Mac Certificates
ARMs		4,046,473		(70,752	)		-		-		4,046,473		(70,752	)
Fixed-Rate		316,835		(1,600	)		-		-		316,835		(1,600	)
Ginnie Mae Certificates
ARMs		-		-			-		-		-		-
Fixed-Rate		95,238		(998	)		-		-		95,238		(998	)
Total temporarily impaired securities	$	7,973,580	$	(120,019	)	$	-	$	-	$	7,973,580	$	(120,019	)
Number of securities in an unrealized loss position				279					-				279

The Company did not make the decision to sell the above securities as of December 31, 2014 and 2013, nor was it deemed more likely than not the Company would be required to sell these securities before recovery of their amortized cost basis. The unrealized losses on the above securities are the result of market interest rates and are not considered to be credit related. The Company recognized an other-than-temporary impairment of $8,102 as of September 30, 2013 on three securities the Company had decided to sell as of that date, prior to the recovery of their amortized cost. These securities were disposed of in early October 2013. There were no other impairment losses recognized during the three year period presented herein.

The contractual maturity of the Company’s MBS ranges from 15 to 30 years. Because of prepayments on the underlying mortgage loans, the actual weighted-average life is expected to be significantly less than the stated maturity. The following table presents certain information about the Company’s adjustable rate MBS that will reprice or amortize based on contractual terms, which do not consider prepayment assumptions, at December 31, 2014 and 2013.

	December 31, 2014								December 31, 2013
						Weighted								Weighted
						Average								Average
	Fair Value		% of Total			Coupon			Fair Value		% of Total			Coupon
Months to Coupon Reset
0 - 12	$	2,272,988		14.0	%		3.02	%	$	1,236,878		7.5	%		3.15	%
13 - 24		1,799,368		11.0	%		2.97	%		1,614,081		9.8	%		3.49	%
25 - 36		2,026,261		12.4	%		2.73	%		2,321,985		14.2	%		2.99	%
37 - 48		2,268,665		13.9	%		2.89	%		2,524,939		15.4	%		2.73	%
49 - 60		5,855,524		35.9	%		2.52	%		2,483,318		15.1	%		2.94	%
61 - 72		880,039		5.4	%		2.52	%		4,750,098		29.0	%		2.46	%
73 - 84		1,207,531		7.4	%		2.98	%		1,470,490		9.0	%		2.44	%
Total ARMS	$	16,310,376		100.0	%		2.75	%	$	16,401,789		100.0	%		2.80	%

The following table presents certain information about the Company’s fixed rate MBS that will reprice or amortize based on contractual terms, which do not consider prepayment assumptions, at December 31, 2014 and 2013.

	December 31, 2014								December 31, 2013
						Weighted								Weighted
						Average								Average
Wtd Average Months to Maturity	Fair Value		% of Total			Coupon			Fair Value		% of Total			Coupon
121-132	$	73,814		5.8	%		3.50	%	$	-		-			-
133-144		589,051		46.1	%		3.50	%		75,693		6.1	%		3.50	%
145-156		613,769		48.1	%		3.43	%		477,544		38.5	%		3.50	%
157-168		-		-			0.00	%		95,238		7.7	%		3.00	%
169-180		-		-			0.00	%		592,268		47.7	%		3.50	%
Total Fixed Rate Securities	$	1,276,634		100.0	%		3.47	%	$	1,240,743		100.0	%		3.46	%