2. AGENCY MORTGAGE-BACKED SECURITIES

The following tables present the Company’s available-for-sale Agency mortgage-backed securities portfolio as of September 30, 2012 and December 31, 2011 which were carried at their fair value:

September 30, 2012	Freddie Mac			Fannie Mae			Ginnie Mae			Total Mortgage- Backed Securities
	(dollars in thousands)

Agency mortgage-backed securities, par value	$	45,694,153		$	74,191,691		$	296,707		$	120,182,551
Unamortized discount		(9,552	)		(14,615	)		(391	)		(24,558	)
Unamortized premium		2,009,836			3,443,390			24,344			5,477,570
Amortized cost		47,694,437			77,620,466			320,660			125,635,563

Gross unrealized gains		1,535,949			2,546,506			21,808			4,104,263
Gross unrealized losses		(17,193	)		(124,164	)		(755	)		(142,112	)

Estimated fair value	$	49,213,193		$	80,042,808		$	341,713		$	129,597,714

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
	(dollars in thousands)

Adjustable rate	$	6,671,582	$	289,871	$	(4,450	)	$	6,957,003
Fixed rate		118,963,981		3,814,392		(137,662	)		122,640,711

Total	$	125,635,563	$	4,104,263	$	(142,112	)	$	129,597,714

December 31, 2011	Freddie Mac			Fannie Mae			Ginnie Mae			Total Mortgage Backed Securities
	(dollars in thousands)

Agency mortgage-backed securities, par value	$	34,395,542		$	63,066,372		$	500,968		$	97,962,882
Unamortized discount		(9,874	)		(13,632	)		(399	)		(23,905	)
Unamortized premium		1,139,881			2,205,138			15,949			3,360,968
Amortized cost		35,525,549			65,257,878			516,518			101,299,945

Gross unrealized gains		973,476			2,081,282			31,474			3,086,232
Gross unrealized losses		(15,243	)		(118,871	)		(1,008	)		(135,122	)

Estimated fair value	$	36,483,782		$	67,220,289		$	546,984		$	104,251,055


	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
	(dollars in thousands)

Adjustable rate	$	8,698,746	$	345,642	$	(3,188	)	$	9,041,200
Fixed rate		92,601,199		2,740,590		(131,934	)		95,209,855

Total	$	101,299,945	$	3,086,232	$	(135,122	)	$	104,251,055

Actual maturities of Agency mortgage-backed securities are generally shorter than stated contractual maturities because actual maturities of Agency mortgage-backed securities are affected by the contractual lives of the underlying mortgages, periodic payments and prepayments of principal. The following table summarizes the Company’s Agency mortgage-backed securities as of September 30, 2012 and December 31, 2011, according to their estimated weighted-average life classifications:

	September 30, 2012				December 31, 2011
Weighted-Average Life	Fair Value		Amortized Cost		Fair Value		Amortized Cost
	(dollars in thousands)
Less than one year	$	4,424,036	$	4,379,206	$	1,715,530	$	1,697,101
Greater than one year through five years		124,868,825		120,967,061		97,344,791		94,534,782
Greater than five years through ten years		304,853		289,296		4,447,540		4,348,841
Greater than 10 years		-		-		743,194		719,221
Total	$	129,597,714	$	125,635,563	$	104,251,055	$	101,299,945

The weighted-average lives of the Agency mortgage-backed securities at September 30, 2012 and December 31, 2011 in the table above are based upon data provided through subscription-based financial information services, assuming constant principal prepayment rates to the reset date of each security. The prepayment model considers current yield, forward yield, steepness of the yield curve, current mortgage rates, mortgage rate of the outstanding loans, loan age, margin, volatility, and other factors. The actual weighted average lives of the Agency mortgage-backed securities could be longer or shorter than estimated.

The following table presents the gross unrealized losses and estimated fair value of the Company’s Agency mortgage-backed securities by length of time that such securities have been in a continuous unrealized loss position at September 30, 2012 and December 31, 2011.

	Unrealized Loss Position For: (dollars in thousands)
	Less than 12 Months					12 Months or More					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses

September 30, 2012	$	1,302,641	$	(31,172	)	$	360,621	$	(110,940	)	$	1,663,262	$	(142,112	)
December 31, 2011	$	1,087,552	$	(118,593	)	$	883,143	$	(16,529	)	$	1,970,695	$	(135,122	)

The decline in value of these securities is solely due to market conditions and not the quality of the assets. Substantially all of the Company’s Investment Securities are Agency mortgage-backed securities that are “AAA” rated or carry an implied “AAA” rating. The investments are not considered to be other-than-temporarily impaired because the Company currently has 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 it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. Also, the Company is guaranteed payment of the principal amount of the securities by the respective issuing government agency.

During the quarter and nine months ended September 30, 2012, the Company sold $7.0 billion and $17.9 billion of Agency mortgage-backed securities, respectively, resulting in a net realized gain of $142.0 million and $317.1 million, respectively. During the quarter and nine months ended September 30, 2011, the Company sold $3.6 billion and $8.5 billion of Agency mortgage-backed securities, respectively, resulting in a realized gain of $91.7 million and $118.5 million, respectively. Average cost is used for calculating gains or losses on securities sold.

Agency interest-only mortgage-backed securities represent the right to receive a specified portion of the contractual interest flows of the underlying unamortized principal balance of specific Agency mortgage-backed securities. As of September 30, 2012, Agency interest-only mortgage-backed securities had net unrealized losses of $129.9 million and an amortized cost of $604.5 million.