4. AGENCY MORTGAGE-BACKED SECURITIES

The following tables present the Company’s available-for-sale Agency mortgage-backed securities portfolio as of December 31, 2013 and 2012 which were carried at their fair value:

December 31, 2013	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)

Principal outstanding	$	24,458,925		$	43,564,657		$	120,739		$	68,144,321
Unamortized premium		1,627,966			2,970,813			27,085			4,625,864
Unamortized discount		(9,533	)		(11,568	)		(383	)		(21,484	)
Amortized cost		26,077,358			46,523,902			147,441			72,748,701
Gross unrealized gains		227,423			456,057			9,845			693,325
Gross unrealized losses		(1,267,106	)		(1,781,683	)		(4,288	)		(3,053,077	)
Estimated fair value	$	25,037,675		$	45,198,276		$	152,998		$	70,388,949


	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	68,784,424		$	3,964,277		$	72,748,701
Gross unrealized gains		538,556			154,769			693,325
Gross unrealized losses		(3,040,153	)		(12,924	)		(3,053,077	)
Estimated fair value	$	66,282,827		$	4,106,122		$	70,388,949




December 31, 2012	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)
Principal outstanding	$	44,296,234		$	70,649,782		$	273,988		$	115,220,004
Unamortized premium		2,121,478			3,695,381			39,348			5,856,207
Unamortized discount		(9,515	)		(12,315	)		(389	)		(22,219	)
Amortized cost		46,408,197			74,332,848			312,947			121,053,992
Gross unrealized gains		1,166,299			1,913,334			17,583			3,097,216
Gross unrealized losses		(36,890	)		(146,533	)		(4,578	)		(188,001	)
Estimated fair value	$	47,537,606		$	76,099,649		$	325,952		$	123,963,207

	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	115,267,274		$	5,786,718		$	121,053,992
Gross unrealized gains		2,838,203			259,013			3,097,216
Gross unrealized losses		(183,388	)		(4,613	)		(188,001	)
Estimated fair value	$	117,922,089		$	6,041,118		$	123,963,207

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 periodic payments and prepayments of principal on the underlying mortgages.

The following table summarizes the Company’s Agency mortgage-backed securities as of December 31, 2013 and 2012, according to their estimated weighted average life classifications:

	December 31, 2013				December 31, 2012
Weighted Average Life	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
	(dollars in thousands)
Less than one year	$	65,584	$	64,561	$	1,264,094	$	1,250,405
Greater than one year through five years		50,046,013		51,710,059		119,288,168		116,510,310
Greater than five years through ten years		14,915,716		15,292,973		3,104,073		2,992,054
Greater than ten years		5,361,636		5,681,108		306,872		301,223
Total	$	70,388,949	$	72,748,701	$	123,963,207	$	121,053,992

The weighted average lives of the Agency mortgage-backed securities at December 31, 2013 and 2012 in the table above are based upon principal prepayment rates for each security provided through subscription-based financial information services. 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 December 31, 2013 and 2012.

	December 31, 2013							December 31, 2012
	Estimated Fair Value		Gross Unrealized Losses			Number of Securities		Estimated Fair Value		Gross Unrealized Losses			Number of Securities
	(dollars in thousands)
Less than 12 Months	$	47,677,197	$	(2,569,474	)		583	$	11,220,514	$	(82,721	)		187
12 Months or More		6,102,283		(483,603	)		55		147,775		(105,280	)		39
Total	$	53,779,480	$	(3,053,077	)		638	$	11,368,289	$	(188,001	)		226

The decline in value of these securities is solely due to market conditions and not the quality of the assets. Substantially all of the Agency mortgage-backed securities 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 year ended December 31, 2013, the Company disposed of $54.5 billion of Agency mortgage-backed securities, resulting in a realized gain of $440.2 million. During the year ended December 31, 2012, the Company sold $30.4 billion of Agency mortgage-backed securities, resulting in a realized gain of $438.5 million. During the year ended December 31, 2011, the Company sold $18.7 billion of Agency mortgage-backed securities, resulting in a realized gain of $199.2 million. Average cost is used as the basis on which the realized gain or loss on sale is determined.

Agency interest-only mortgage-backed securities represent the right to receive a specified portion of the contractual interest flows of the underlying outstanding principal balance of specific Agency mortgage-backed securities. Agency interest-only mortgage-backed securities in the Company’s portfolio as of December 31, 2013 and 2012 had net unrealized gains (losses) of $78.1 million and ($141.1) million and an amortized cost of $1.0 billion and $797.1 million, respectively.