NOTE 4 – AVAILABLE-FOR-SALE SECURITIES

Non-Agency RMBS and Multi-Family MBS 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 8 and 9).

The following table presents the Company’s AFS investment securities by collateral type at fair value as of December 31, 2014 and December 31, 2013:

	December 31, 2014		December 31, 2013
Mortgage-backed securities:
Agency
Federal Home Loan Mortgage Corporation	$	162,344,627	$	237,143,864
Federal National Mortgage Association		152,486,058		145,156,756
Non-Agency		53,485,053		62,684,335
Total mortgage-backed securities	$	368,315,738	$	444,984,955

The following tables present the amortized cost and fair value of the Company’s AFS investment securities by collateral type as of December 31, 2014 and December 31, 2013:

	December 31, 2014
	Agency		Non-Agency		Total
Face Value	$	309,790,551	$	76,672,548	$	386,463,099
Unamortized premium		4,796,106		-		4,796,106
Unamortized discount
Designated credit reserve		-		(12,697,796)		(12,697,796)
Net, unamortized		(2,244,687)		(15,209,335)		(17,454,022)
Amortized Cost		312,341,970		48,765,417		361,107,387
Gross unrealized gain		3,670,643		4,732,247		8,402,890
Gross unrealized (loss)		(1,181,928)		(12,611)		(1,194,539)
Fair Value	$	314,830,685	$	53,485,053	$	368,315,738

	December 31, 2013
	Agency		Non-Agency		Total
Face Value	$	386,672,123	$	95,390,328	$	482,062,451
Unamortized premium		12,544,193		-		12,544,193
Unamortized discount
Designated credit reserve		-		(16,126,355)		(16,126,355)
Net, unamortized		(1,489,132)		(20,911,248)		(22,400,380)
Amortized Cost		397,727,184		58,352,725		456,079,909
Gross unrealized gain		-		4,331,610		4,331,610
Gross unrealized (loss)		(15,426,564)		-		(15,426,564)
Fair Value	$	382,300,620	$	62,684,335	$	444,984,955

The following table presents a summary of the Company’s net realized gain (loss) from the sale of AFS securities, inclusive of securities previously booked as linked, for the years ended December 31, 2014 and December 31, 2013:

	Year Ended		Year Ended
	December 31, 2014		December 31, 2013
AFS securities sold, at cost	$	462,470,753	$	717,309,717
Proceeds from AFS securities sold		466,239,975		687,203,605
Net realized gain (loss) on sale of AFS securities	$	3,769,222	$	(30,106,112)

The following tables present the fair value of AFS investment securities by rate type as of December 31, 2014 and December 31, 2013:

	December 31, 2014
	Agency		Non-Agency		Total
Adjustable rate	$	229,648,342	$	53,485,053	$	283,133,395
Fixed rate		85,182,343		-		85,182,343
Total	$	314,830,685	$	53,485,053	$	368,315,738

	December 31, 2013
	Agency		Non-Agency		Total
Adjustable rate	$	170,587,649	$	62,684,335	$	233,271,984
Fixed rate		211,712,971		-		211,712,971
Total	$	382,300,620	$	62,684,335	$	444,984,955

The following tables present the fair value of AFS investment securities by maturity date as of December 31, 2014 and December 31, 2013:

	December 31, 2014		December 31, 2013
Less than one year	$	-	$	-
Greater than one year and less than five years		35,855,146		-
Greater than or equal to five years		332,460,592		444,984,955
Total	$	368,315,738	$	444,984,955

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 years ended December 31, 2014 and December 31, 2013 of the unamortized net discount and designated credit reserves on the Company’s MBS.

	December 31, 2014
	Designated		Unamortized
	credit reserve		net discount		Total
Beginning Balance as of January 1, 2014	$	(16,126,355)	$	(22,400,380)	$	(38,526,735)
Acquisitions		-		(2,361,186)		(2,361,186)
Dispositions		559,860		1,667,828		2,227,688
Accretion of net discount		-		4,760,729		4,760,729
Realized gain on paydowns		-		223,212		223,212
Realized credit losses		2,868,699		-		2,868,699
Release of credit reserves		-		655,775		655,775
Ending balance at December 31, 2014	$	(12,697,796)	$	(17,454,022)	$	(30,151,818)

	December 31, 2013
	Designated		Unamortized
	credit reserve		net discount		Total
Acquisitions	$	(19,145,414)	$	(24,606,107)	$	(43,751,521)
Accretion of net discount		-		2,836,240		2,836,240
Realized gain on paydowns		-		25,262		25,262
Realized credit losses		2,363,284		-		2,363,284
Release of credit reserves		655,775		(655,775)		-
Ending balance at December 31, 2013	$	(16,126,355)	$	(22,400,380)	$	(38,526,735)

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

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 consolidated statement of comprehensive income (loss). For the year ended December 31, 2013, the Company had unrealized gains (losses) on AFS securities of $18,303,304. For the year ended December 31, 2013, the Company had unrealized gains (losses) on AFS securities of ($13,528,951).

The following tables present components of interest income, inclusive of purchased accrued interest, on the Company’s AFS securities for the years ended December 31, 2014 and December 31, 2013

	Year Ended December 31, 2014						Year Ended December 31, 2013
			Net (premium						Net (premium
	Coupon		amortization)/		Interest		Coupon		amortization)/		Interest
	interest		discount accretion		income		interest		discount accretion		income
Agency	$	11,409,239	$	603,547	$	12,012,786	$	14,266,215	$	(716,788)	$	13,549,427
Non-Agency		261,050		4,077,481		4,338,531		170,750		2,691,552		2,862,302
Multi-Family		184,411		24,610		209,021		-		-		-
Total	$	11,854,700	$	4,705,638	$	16,560,338	$	14,436,966	$	1,974,764	$	16,411,730