4. AGENCY MORTGAGE-BACKED SECURITIES

The following tables present the Company’s available-for-sale Agency mortgage-backed securities portfolio as of March 31, 2014 and December 31, 2013 which were carried at their fair value:

March 31, 2014	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)

Principal outstanding	$	24,875,914		$	47,149,481		$	113,744		$	72,139,139
Unamortized premium		1,697,704			3,367,828			22,465			5,087,997
Unamortized discount		(9,446	)		(11,341	)		(380	)		(21,167	)
Amortized cost		26,564,172			50,505,968			135,829			77,205,969
Gross unrealized gains		205,409			381,265			8,650			595,324
Gross unrealized losses		(1,013,503	)		(1,433,916	)		(3,486	)		(2,450,905	)
Estimated fair value	$	25,756,078		$	49,453,317		$	140,993		$	75,350,388


	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	73,655,761		$	3,550,208		$	77,205,969
Gross unrealized gains		455,048			140,276			595,324
Gross unrealized losses		(2,435,557	)		(15,348	)		(2,450,905	)
Estimated fair value	$	71,675,252		$	3,675,136		$	75,350,388




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

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 March 31, 2014 and December 31, 2013, according to their estimated weighted average life classifications:

	March 31, 2014				December 31, 2013
Weighted Average Life	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
	(dollars in thousands)
Less than one year	$	66,051	$	65,248	$	65,584	$	64,561
Greater than one year through five years		46,192,942		47,553,922		50,046,013		51,710,059
Greater than five years through ten years		22,833,176		23,099,356		14,915,716		15,292,973
Greater than ten years		6,258,219		6,487,443		5,361,636		5,681,108
Total	$	75,350,388	$	77,205,969	$	70,388,949	$	72,748,701

The weighted average lives of the Agency mortgage-backed securities at March 31, 2014 and December 31, 2013 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 March 31, 2014 and December 31, 2013.

	March 31, 2014							December 31, 2013
	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	$	50,079,785	$	(2,046,126	)		642	$	47,677,197	$	(2,569,474	)		583
12 Months or More		6,055,285		(404,779	)		50		6,102,283		(483,603	)		55
Total	$	56,135,070	$	(2,450,905	)		692	$	53,779,480	$	(3,053,077	)		638

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 quarter ended March 31, 2014, the Company disposed of $4.3 billion of Agency mortgage-backed securities, resulting in a net realized gain of $129.5 million. During the quarter ended March 31, 2013, the Company sold $16.3 billion of Agency mortgage-backed securities, resulting in a net realized gain of $182.8 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 March 31, 2014 and December 31, 2013 had net unrealized gains of $57.3 million and $78.1 million and an amortized cost of $1.1 billion and $1.0 billion, respectively.