Consolidated K-Series

The Company has elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series be reflected in the Company's condensed consolidated statements of operations. Our investment in the Consolidated K-Series is limited to the multi-family CMBS comprised of first loss tranche PO, certain IOs and mezzanine securities issued by certain K-Series securitizations with an aggregate net carrying value of $408.7 million and $314.9 million at September 30, 2017 and December 31, 2016, respectively (see Note 10). The Consolidated K-Series is comprised of six and five K-Series securitizations as of September 30, 2017 and December 31, 2016, respectively.

The condensed consolidated balance sheets of the Consolidated K-Series at September 30, 2017 and December 31, 2016, respectively, are as follows (dollar amounts in thousands):



Balance Sheets	September 30, 2017		December 31, 2016
Assets
Multi-family loans held in securitization trusts	$	8,399,334	$	6,939,844
Receivables	28,103		24,098
Total Assets	$	8,427,437	$	6,963,942
Liabilities and Equity
Multi-family CDOs	$	7,990,619	$	6,624,896
Accrued expenses	27,783		24,003
Total Liabilities	8,018,402		6,648,899
Equity	409,035		315,043
Total Liabilities and Equity	$	8,427,437	$	6,963,942

The multi-family loans held in securitization trusts had an unpaid principal balance of approximately $8.1 billion and $6.7 billion at September 30, 2017 and December 31, 2016, respectively. The multi-family CDOs had an unpaid principal balance of approximately $8.1 billion and $6.7 billion at September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017 and December 31, 2016, the current weighted average interest rate on these multi-family CDOs was 4.07% and 3.97%, respectively.

The Company does not have any claims to the assets or obligations for the liabilities of the Consolidated K-Series (other than those securities represented by our first loss and mezzanine tranche securities). We have elected the fair value option for the Consolidated K-Series. The net fair value of our investment in the Consolidated K-Series, which represents the difference between the carrying values of multi-family loans held in securitization trusts less the carrying value of multi-family CDOs, approximates the fair value of our underlying securities. The fair value of our underlying securities is determined using the same valuation methodology as our CMBS investments available for sale (see Note 18).

The condensed consolidated statements of operations of the Consolidated K-Series for the three and nine months ended September 30, 2017 and 2016, respectively, are as follows (dollar amounts in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
Statements of Operations	2017		2016		2017		2016
Interest income	$	76,186	$	62,126	$	213,242	$	187,427
Interest expense	67,030		55,359		187,835		167,783
Net interest income	9,156		6,767		25,407		19,644
Unrealized gain on multi-family loans and debt held in securitization trusts, net	2,353		738		5,184		2,340
Net income	$	11,509	$	7,505	$	30,591	$	21,984

The geographic concentrations of credit risk exceeding 5% of the total loan balances related to our CMBS investments included in investment securities available for sale and multi-family loans held in securitization trusts as of September 30, 2017 and December 31, 2016, respectively, are as follows:



	September 30, 2017		December 31, 2016
California	11.8	%	13.8	%
Texas	10.5	%	12.4	%
New York	6.9	%	8.1	%
Maryland	4.5	%	5.3	%