Note 5 - Agency Securities, Available for Sale

3 Months Ended

Mar. 31, 2013

Angency Securities [Member]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 5 – Agency Securities, Available for Sale

All of our Agency Securities are classified as available for sale and, as such, are reported at their estimated fair value and changes in fair value reported as part of the statement of comprehensive income. As of March 31, 2013 investments in Agency Securities accounted for 88.7% of our MBS portfolio.

As of March 31, 2013, we had the following securities in an unrealized gain or loss position as presented below. The components of the carrying value of our Agency Securities as of March 31, 2013 are also presented below. All of our Agency Securities are fixed rate securities with a weighted average coupon of 3.14% as of March 31, 2013.

March 31, 2013	Fannie  Mae			Freddie Mac			Total Agency Securities
	(in thousands)
Principal Amount	$	641,220		$	397,048		$	1,038,268
Net unamortized premium		38,020			22,435			60,455
Amortized cost		679,240			419,483			1,098,723
Unrealized gains		-			-			-
Unrealized losses		(11,515	)		(8,927	)		(20,442	)
Fair value	$	667,725		$	410,556		$	1,078,281

  As of December 31, 2012, we had the following securities in an unrealized gain or loss position as presented below. The components of the carrying value of our Agency Securities as of December 31, 2012 are also presented below. As of December 31, 2012 investments in Agency Securities accounted for 89.5% of our MBS portfolio. All of our Agency Securities were fixed rate securities with a weighted average coupon of 3.14% as of December 31, 2012.

December 31, 2012	Fannie  Mae			Freddie Mac			Total Agency Securities
	(in thousands)
Principal Amount	$	651,867		$	403,589		$	1,055,456
Net unamortized premium		38,683			22,821			61,504
Amortized cost		690,550			426,410			1,116,960
Unrealized gains		86			4			90
Unrealized losses		(2,480	)		(2,212	)		(4,692	)
Fair value	$	688,156		$	424,202		$	1,112,358

Actual maturities of Agency Securities are generally shorter than stated contractual maturities because actual maturities of Agency Securities are affected by the contractual lives of the underlying mortgages, periodic payments of principal and prepayments of principal.

The following table summarizes the weighted average lives of our Agency Securities as of March 31, 2013 and December 31, 2012.

	March 31, 2013				December 31, 2012
	(in thousands)
Weighted Average Life of all Agency Securities	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Less than one year	$	-	$	-	$	-	$	-
Greater than one year and less than three years		-		-		-		-
Greater than three years and less than five years		95,921		96,844		638,744		641,231
Greater than or equal to five years		982,360		1,001,879		473,614		475,729
Total Agency Securities	$	1,078,281	$	1,098,723	$	1,112,358	$	1,116,960

We use a third-party model to calculate the weighted average life of Agency Securities. Weighted average life is calculated based on expectations for estimated prepayments for the underlying mortgage loans of our Agency Securities. These estimated prepayments are based on assumptions such as interest rates, current and future home prices, housing policy and borrower incentives. The weighted average lives of our Agency Securities as of March 31, 2013 and December 31, 2012 in the table above are based upon market factors, assumptions, models and estimates from the third-party model and also incorporate management’s judgment and experience. The actual weighted average lives of the Agency Securities could be longer or shorter than estimated.

The following table presents the unrealized losses and estimated fair value of our Agency Securities by length of time that such securities have been in a continuous unrealized loss position as of March 31, 2013 and December 31, 2012.

	Unrealized Loss Position For: (in thousands)
	Less than 12 months					12 Months or More				Total
As of	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2013	$	1,078,281	$	(20,442	)	$	-	$	-	$	1,078,281	$	(20,442	)
December 31, 2012		1,032,421		(4,692	)		-		-		1,032,421		(4,692	)

The decline in value of these securities is solely due to market conditions and not the credit quality of the assets. All of our Agency Securities are issued by the GSEs. The GSEs have a rating of AA+. The investments are not considered other than temporarily impaired because we currently have the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments and we are not required to sell for regulatory or other reasons. Also, we are guaranteed payment of the principal amount of the securities by the GSEs that created them.

Non-Agency Securities [Member]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 6 – Non-Agency Securities, Trading

All of our Non-Agency Securities are classified as trading securities and reported at their estimated fair value.  Fair value changes are reported in the statement of operations in the period in which they occur. 

As of March 31, 2013, investments in Non-Agency Securities accounted for 11.3% of our MBS portfolio.

	Non-Agency Securities (in thousands)
March 31, 2013	Fair Value		Amortized  Cost		Principal Amount		Weighted Average Coupon
Prime/Alt-A	$	136,752	$	131,633	$	160,955		5.35	%

As of December 31, 2012, investments in Non-Agency Securities accounted for 10.5% of our MBS portfolio.

	Non-Agency Securities (in thousands)
December 31, 2012	Fair Value		Amortized  Cost		Principal Amount		Weighted Average Coupon
Prime/Alt-A	$	129,946	$	127,037	$	156,957		5.29	%

Prime/Alt-A Non-Agency Securities as of March 31, 2013 and December 31, 2012 include senior tranches in securitization trusts issued between 2004 and 2007, and are collateralized by residential mortgages originated between 2002 and 2007. The loans were originally considered to be either prime or one tier below prime credit quality. Prime mortgage loans are residential mortgage loans that are considered the highest tier with the most stringent underwriting standards within the Non-agency mortgage market, but do not carry any credit guarantee from either a U.S. government agency or GSE. These loans were originated during a period when underwriting standards were generally weak and housing prices have dropped significantly subsequent to their origination. As a result, there is still material credit risk embedded in these vintages. Alt-A, or alternative A-paper, mortgage loans are considered riskier than prime mortgage loans and less risky than sub-prime mortgage loans and are typically characterized by borrowers with less than full documentation, lower credit scores, higher loan-to-values and a higher percentage of investment properties. These securities were generally rated below investment grade as of March 31, 2013 and December 31, 2012.

The following table summarizes the weighted average lives of our Non-Agency Securities as of March 31, 2013 and December 31, 2012.

	March 31, 2013				December 31, 2012
	(in thousands)
Weighted Average Life of all Non-Agency Securities	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Less than one year	$	-	$	-	$	-	$	-
Greater than one year and less than three years		-		-		-		-
Greater than three years and less than five years		5,584		5,409		5,763		5,678
Greater than or equal to five years		131,168		126,224		124,183		121,359
Total Non-Agency Securities	$	136,752	$	131,633	$	129,946	$	127,037

Our Non-Agency Securities are subject to risk of loss with regard to principal and interest payments and as of March 31, 2013 and December 31, 2012 have generally either been assigned below investment grade ratings by rating agencies, or have not been rated. We evaluate each investment based on the characteristics of the underlying collateral and securitization structure, rather than relying on the ratings assigned by rating agencies.