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 consolidated statements of operations. Our investment in the Consolidated K-Series is limited to the multi-family CMBS comprised of first loss PO, certain IOs and mezzanine securities issued by certain Freddie Mac K-Series securitizations with an aggregate net carrying value of $468.0 million and $314.9 million at December 31, 2017 and 2016, respectively (see Note 10). The Consolidated K-Series is comprised of seven and five multi-family CMBS investments as of December 31, 2017 and December 31, 2016, respectively.

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



Balance Sheets	December 31, 2017		December 31, 2016
Assets
Multi-family loans held in securitization trusts	$	9,657,421	$	6,939,844
Receivables	33,562		24,098
Total Assets	$	9,690,983	$	6,963,942
Liabilities and Equity
Multi-family CDOs	$	9,189,459	$	6,624,896
Accrued expenses	33,136		24,003
Total Liabilities	9,222,595		6,648,899
Equity	468,388		315,043
Total Liabilities and Equity	$	9,690,983	$	6,963,942

The multi-family loans held in securitization trusts had unpaid aggregate principal balances of approximately $9.4 billion and $6.7 billion at December 31, 2017 and December 31, 2016, respectively. The multi-family CDOs had aggregate unpaid principal balances of approximately $9.4 billion and $6.7 billion at December 31, 2017 and December 31, 2016, respectively. As of December 31, 2017 and 2016, the current weighted average effective interest rate on these multi-family CDOs was 3.92% and 3.97%, respectively.

In February 2015, the Company sold a first loss PO security that was part of the Consolidated K-Series obtaining total proceeds of approximately $44.3 million and realizing a gain of approximately $1.5 million. The sale resulted in a de-consolidation of $1.1 billion in multi-family loans held in a securitization trusts and $1.0 billion in multi-family CDOs.

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 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 years ended December 31, 2017, 2016, and 2015, respectively, are as follows (dollar amounts in thousands):



	Years Ended December 31,
Statements of Operations	2017		2016		2015
Interest income	$	297,124	$	249,191	$	257,417
Interest expense	261,665		222,553		232,971
Net interest income	35,459		26,638		24,446
Unrealized gain on multi-family loans and debt held in securitization trusts, net	18,872		3,032		12,368
Net income	$	54,331	$	29,670	$	36,814

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 December 31, 2017 and December 31, 2016, respectively, are as follows:



	December 31, 2017		December 31, 2016
California	14.7	%	13.8	%
Texas	12.7	%	12.4	%
New York	6.5	%	8.1	%
Maryland	5.5	%	5.3	%