NOTE 4 - AVAILABLE-FOR-SALE SECURITIES

Non-Agency RMBS that are accounted for as components of Linked Transactions are not reflected in the tables set forth in this Note, as they are accounted for as derivatives. (See Notes 7 and 8).

The following table presents the Company’s AFS investment securities by collateral type at fair value as of June 30, 2013 and December 31, 2012:

	June 30, 2013		December 31, 2012
Mortgage-backed securities:
Agency
Federal Home Loan Mortgage Corporation	$	260,188,673	$	49,765,271
Federal National Mortgage Association		297,457,718		20,208,333
Non-Agency		32,656,349		11,054,394
Total mortgage-backed securities	$	590,302,740	$	81,027,998

The following tables present the amortized cost and fair value of the Company’s AFS investment securities by collateral type as of June 30, 2013 and December 31, 2012:

	June 30, 2013
	Agency		Non-Agency		Total
Face Value	$	548,679,744	$	55,039,916	$	603,719,660
Unamortized premium		32,908,152		-		32,908,152
Unamortized discount
Designated credit reserve		-		(11,055,275)		(11,055,275)
Net, unamortized		-		(11,268,439)		(11,268,439)
Amortized Cost		581,587,896		32,716,202		614,304,098
Gross unrealized loss		(23,941,505)		(59,853)		(24,001,358)
Fair Value	$	557,646,391	$	32,656,349	$	590,302,740

	December 31, 2012
	Agency		Non-Agency		Total
Face Value	$	65,310,197	$	18,507,380	$	83,817,577
Unamortized premium		3,193,345		-		3,193,345
Unamortized discount
Designated credit reserve		-		(4,882,582)		(4,882,582)
Net, unamortized		-		(3,534,339)		(3,534,339)
Amortized Cost		68,503,542		10,090,459		78,594,001
Gross unrealized gain		1,470,062		963,935		2,433,997
Fair Value	$	69,973,604	$	11,054,394	$	81,027,998

The following tables present a summary of the Company’s net realized gain (loss) from the sale of Agency and non-Agency RMBS for the three and six months ended June 30, 2013 and the period May 16, 2012 (commencement of operations) to June 30, 2012:

	Three Months Ended		Six Months Ended
	June 30, 2013		June 30, 2013
Agency and non-Agency RMBS sold, at cost	$	368,783,917	$	368,783,917
Proceeds from Agency and non-Agency RMBS sold		355,338,884		355,338,884
Net realized gain (loss) on sale of Agency and non-Agency RMBS	$	(13,445,033)	$	(13,445,033)

	Period May 16, 2012
	to June 30, 2012
Agency and non-Agency RMBS sold, at cost	$	-
Proceeds from Agency and non-Agency RMBS sold		-
Net realized gain (loss) on sale of Agency and non-Agency RMBS	$	-

The following tables present the fair value of AFS investment securities by rate type as of June 30, 2013 and December 31, 2012:

	June 30, 2013
	Agency		Non-Agency		Total
Adjustable rate	$	-	$	32,656,349	$	32,656,349
Fixed rate		557,646,391		-		557,646,391
Total	$	557,646,391	$	32,656,349	$	590,302,740

	December 31, 2012
	Agency		Non-Agency		Total
Adjustable rate	$	-	$	11,054,394	$	11,054,394
Fixed rate		69,973,604		-		69,973,604
Total	$	69,973,604	$	11,054,394	$	81,027,998

As described in Note 3, when the Company purchases a credit-sensitive AFS security at a significant discount to its face value, the Company generally does not amortize into income a significant portion of this discount that the Company is entitled to earn because it does not expect to collect it due to the inherent credit risk of the security. The Company may also record an OTTI for a portion of its investment in the security to the extent the Company believes that the amortized cost will exceed the present value of expected future cash flows. The amount of principal that the Company does not amortize into income is designated as an off balance sheet credit reserve on the security, with unamortized net discounts or premiums amortized into income over time to the extent realizable.

Actual maturities of AFS securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore actual maturities of available-for-sale securities are generally shorter than stated contractual maturities. Stated contractual maturities are generally greater than ten years.

The following tables present the changes for the six months ended June 30, 2013 and the period May 16, 2012 (commencement of operations) to December 31, 2012 of the unamortized net discount and designated credit reserves on non-Agency AFS securities.

	June 30, 2013
	Designated		Unamortized
	credit reserve		net discount		Total
Acquisitions	$	(11,810,437)	$	(12,009,982)	$	(23,820,419)
Accretion of net discount		-		741,543		741,543
Realized credit losses		755,162		-		755,162
Ending balance at June 30, 2013	$	(11,055,275)	$	(11,268,439)	$	(22,323,714)

	December 31, 2012
	Designated		Unamortized
	credit reserve		net discount		Total
Acquisitions	$	(5,363,444)	$	(3,997,817)	$	(9,361,261)
Accretion of net discount		-		463,478		463,478
Realized credit losses		480,862		-		480,862
Ending balance at December 31, 2012	$	(4,882,582)	$	(3,534,339)	$	(8,416,921)

Gains and losses from the sale of AFS securities are recorded within realized loss on sale of investments, net in the Company's condensed consolidated statements of operations and comprehensive income (loss).

Unrealized gains and losses on the Company’s AFS securities are recorded as unrealized gain (loss) on available-for-sale securities, net in the Company's condensed consolidated statement of comprehensive income (loss). For the three and six months ended June 30, 2013, the Company had unrealized losses on AFS securities of $25,738,658 and $26,435,355, respectively.

The following table presents components of interest income on the Company’s Agency RMBS and non-Agency RMBS for the three and six months ended June 30, 2013 and the period May 16, 2012 (commencement of operations) to June 30, 2012:

	Three Months Ended June 30, 2013						Six Months Ended June 30, 2013
			Net (premium						Net (premium
	Coupon		amortization)/		Interest		Coupon		amortization)/		Interest
	interest		discount accretion		income		interest		discount accretion		income
Agency	$	7,406,364	$	(622,957)	$	6,783,407	$	10,406,208	$	(654,813)	$	9,751,395
Non-Agency		58,226		514,317		572,543		93,040		741,543		834,583
Total	$	7,464,590	$	(108,640)	$	7,355,950	$	10,499,248	$	86,730	$	10,585,978

	Period May 16, 2012 to June 30, 2012
			Net (premium
	Coupon		amortization)/		Interest
	interest		discount accretion		income
Agency	$	174,606	$	(16,715)	$	157,891
Non-Agency		-		-		-
Total	$	174,606	$	(16,715)	$	157,891