5.	Mortgage-Backed Securities and Agency CRT securities

All of the Company’s securities, other than its agency CRT securities, are classified as available-for-sale and are reported at their estimated fair value. The agency CRT securities are accounted for under the fair value option as discussed in Note 2. 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 its securities 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 at times invests in 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 securities portfolio at December 31, 2015.

	Amortized Cost		Gross Unrealized Loss			Gross Unrealized Gain		Estimated Fair Value
Agency Securities
Fannie Mae Certificates
ARMs	$	7,392,021	$	(14,465	)	$	102,247	$	7,479,803
Fixed-Rate		1,005,458		(8,148	)		-		997,310
Total Fannie Mae		8,397,479		(22,613	)		102,247		8,477,113

Freddie Mac Certificates
ARMs		5,806,425		(22,551	)		41,243		5,825,117
Fixed-Rate		-		-			-		-
Total Freddie Mac		5,806,425		(22,551	)		41,243		5,825,117

Total Agency MBS	$	14,203,904	$	(45,164	)	$	143,490	$	14,302,230

Agency CRT Securities	$	111,217	$	(1,830	)	$	-	$	109,387

The following table presents the composition of the Company’s securities portfolio 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 MBS		17,279,316		(35,531	)		267,623		17,511,408

Total Non-Agency MBS (ARMs)		75,454		-			148		75,602

Total MBS	$	17,354,770	$	(35,531	)	$	267,771	$	17,587,010

The components of the carrying value of the Company’s securities at December 31, 2015 and 2014 are presented below.

	December 31,			December 31,
	2015			2014
Principal balance	$	13,935,533		$	16,864,583
Unamortized premium		381,851			490,187
Unamortized discount		(2,263	)		-
Gross unrealized gains		143,490			267,771
Gross unrealized losses		(46,994	)		(35,531	)
Carrying value/estimated fair value	$	14,411,617		$	17,587,010

The following table presents components of interest income on the Company’s securities for the three years ended December 31, 2015:

	Years Ended December 31
	2015			2014			2013
Coupon interest	$	423,371		$	456,415		$	616,632
Net premium amortization		(117,654	)		(101,979	)		(165,924	)
Interest income	$	305,717		$	354,436		$	450,708

Gross gains and losses from sales of available-for sale MBS and agency CRT securities for the three years ended December 31, 2015 were as follows:

	Years Ended December 31
	2015			2014			2013
Gross gains	$	36,805		$	15,821		$	18,717
Gross losses		(4,074	)		(10,625	)		(301,729	)
Net gain (loss)	$	32,731		$	5,196		$	(283,012	)

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, 2015 and 2014, the Company had the following securities in a loss position as presented in the following two tables:

	As of December 31, 2015
	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		1,712,043	$	(7,922	)	$	511,884	$	(6,542	)	$	2,223,927	$	(14,464	)
Fixed-Rate		997,310		(8,148	)		-		-			997,310		(8,148	)
Freddie Mac Certificates
ARMs		1,814,773		(9,246	)		861,198		(13,306	)		2,675,971		(22,552	)
Fixed-Rate		-		-			-		-			-		-
Total temporarily impaired securities	$	4,524,126	$	(25,316	)	$	1,373,082	$	(19,848	)	$	5,897,208	$	(45,164	)
Number of securities in an unrealized loss position				223					52					275

	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

The Company did not make the decision to sell the above securities as of December 31, 2015 and 2014, 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 and agency CRT securities 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 securities that will reprice or amortize based on contractual terms, which do not consider prepayment assumptions, at December 31, 2015 and 2014.

	December 31, 2015								December 31, 2014
						Weighted								Weighted
						Average								Average
	Fair Value		% of Total			Coupon			Fair Value		% of Total			Coupon
Wtd Average Months to Reset
0 - 12	$	2,377,014		17.7	%		2.84	%	$	2,272,988		14.0	%		3.02	%
13 - 24		1,467,597		10.9	%		2.69	%		1,799,368		11.0	%		2.97	%
25 - 36		1,692,591		12.6	%		2.87	%		2,026,261		12.4	%		2.73	%
37 - 48		4,805,462		35.8	%		2.50	%		2,268,665		13.9	%		2.89	%
49 - 60		1,338,716		10.0	%		2.43	%		5,855,524		35.9	%		2.52	%
61 - 72		1,015,398		7.6	%		2.95	%		880,039		5.4	%		2.52	%
73 - 84		684,191		5.1	%		2.73	%		1,207,531		7.4	%		2.98	%
109 - 120		33,338		0.3	%		2.85	%		-		-			-
Total ARMS and Agency CRTs	$	13,414,307		100.0	%		2.67	%	$	16,310,376		100.0	%		2.75	%

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, 2015 and 2014.

	December 31, 2015								December 31, 2014
						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	%
145-156		-		-			-			613,769		48.1	%		3.43	%
349-360		997,310		100	%		3.50	%		-		-			-
Total Fixed-Rate Securities	$	997,310		100.0	%		3.50	%	$	1,276,634		100.0	%		3.47	%