The Company uses SPEs to facilitate transactions that involve securitizing financial assets or re-securitizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement.

The Company has entered into re-securitization or financing transactions which required the Company to analyze and determine whether the SPEs that were created to facilitate the transactions are VIEs in accordance with ASC 810 and if so, whether the Company is the primary beneficiary requiring consolidation. As of December 31, 2019, the Company evaluated its residential mortgage loan securitizations and concluded that the entities created to facilitate each of the financing transactions are VIEs and that the Company is the primary beneficiary of these VIEs. Accordingly, the Company continues to consolidate the Residential CDOs issued by its residential mortgage loan securitizations as of December 31, 2019.

As of December 31, 2018, the Company evaluated the following re-securitization and financing transactions: 1) its residential mortgage loan securitizations; 2) its multi-family CMBS re-securitization transaction and 3) its distressed residential mortgage loan securitization transaction (each a “Financing VIE” and collectively, the “Financing VIEs”) and concluded that the entities created to facilitate each of the transactions were VIEs and that the Company was the primary beneficiary of these VIEs. Accordingly, the Company consolidated the Financing VIEs as of December 31, 2018. On March 14, 2019, the Company exercised its right to an optional redemption of its multi-family CMBS re-securitization with an outstanding principal balance of $33.2 million resulting in a loss on extinguishment of debt of $2.9 million. Additionally, on March 25, 2019, the Company repaid outstanding notes from its April 2016 distressed residential mortgage loan securitization with an outstanding principal balance of $6.5 million. Due to the redemptions, the multi-family CMBS held by the re-securitization trust and the related residential mortgage loans held in securitization trust were returned to the Company.

The Company invests in multi-family CMBS consisting of POs that represent the first loss position of the Freddie Mac-sponsored multi-family K-series securitizations from which they were issued, and certain IOs and certain senior and mezzanine CMBS securities issued from those securitizations. The Company has evaluated these CMBS investments in Freddie Mac-sponsored K-Series securitization trusts to determine whether they are VIEs and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that fourteen and nine Freddie Mac-sponsored multi-family K-Series securitization trusts are VIEs as of December 31, 2019 and 2018, respectively, which we refer to as the Consolidated K-Series. The Company also determined that it is the primary beneficiary of each VIE within the Consolidated K-Series and, accordingly, has consolidated its assets, liabilities, income and expenses in the accompanying consolidated financial statements (see Notes 2 and 6). Of the multi-family CMBS investments owned by the Company that are included in the Consolidated K-Series, fourteen and eight of these investments are not included as collateral to any Financing VIE as of December 31, 2019 and 2018, respectively.

In the fourth quarter of 2019, the Company invested in subordinated securities that represent the first loss position of the Freddie Mac-sponsored residential mortgage loan securitization from which they were issued, and certain IOs and senior securities issued from the securitization. The Company has evaluated its investments in this securitization trust to determine whether it is a VIE and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that the Freddie Mac-sponsored residential mortgage loan securitization trust is a VIE as of December 31, 2019, which we refer to as Consolidated SLST. The Company also determined that it is the primary beneficiary of the VIE within Consolidated SLST and, accordingly, has consolidated its assets, liabilities, income and expenses, in the accompanying consolidated financial statements (see Notes 2 and 6). The Company’s investments that are included in Consolidated SLST were not included as collateral to any Financing VIE as of December 31, 2019.

In analyzing whether the Company is the primary beneficiary of the Consolidated K-Series, Consolidated SLST, and the Financing VIEs, the Company considered its involvement in each of the VIEs, including the design and purpose of each VIE, and whether its involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the VIEs. In determining whether the Company would be considered the primary beneficiary, the following factors were assessed:

The Company owns 100% of RBDHC. RBDHC owns 50% of KRVI, a limited liability company that owns developed land and residential homes under development in Kiawah Island, SC, for which RiverBanc, a wholly-owned subsidiary of the Company, is the manager. The Company has evaluated KRVI to determine if it is a VIE and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that KRVI is a VIE for which RBDHC is the primary beneficiary as the Company, collectively through its wholly-owned subsidiaries, RiverBanc and RBDHC, has both the power to direct the activities that most significantly impact the economic performance of KRVI and has a right to receive benefits or absorb losses of KRVI that could be potentially significant to KRVI. Accordingly, the Company has consolidated KRVI in its consolidated financial statements with a non-controlling interest for the third-party ownership of KRVI membership interests.

In March 2017, the Company reconsidered its evaluation of its variable interests in Riverchase Landing and The Clusters, two VIEs that each owned a multi-family apartment community and in each of which the Company held a preferred equity investment. The Company determined that it gained the power to direct the activities, and became primary beneficiary, of Riverchase Landing and The Clusters and consolidated them in its consolidated financial statements. In March 2018, Riverchase Landing completed the sale of its multi-family apartment community and redeemed the Company’s preferred equity investment. Also, in February 2019, The Clusters completed the sale of its multi-family apartment community and redeemed the Company’s preferred equity investment. The Company de-consolidated Riverchase Landing and The Clusters as of the date of each property’s sale. Prior to the sale of the respective properties, the Company did not have any claims to the assets or obligations for the liabilities of Riverchase Landing and The Clusters (other than the preferred equity investments held by the Company).

The following table presents a summary of the assets and liabilities of the Company’s residential mortgage loan securitizations, the Consolidated K-Series, Consolidated SLST, and KRVI of as of December 31, 2019 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.



	Financing VIE		Other VIEs
	Residential Mortgage Loan Securitizations		Consolidated K-Series		Consolidated SLST		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	107	$	107
Residential mortgage loans held in securitization trusts, net	44,030		—		—		—		44,030
Residential mortgage loans held in securitization trust, at fair value	—		—		1,328,886		—		1,328,886
Multi-family loans held in securitization trusts, at fair value	—		17,816,746		—		—		17,816,746
Receivables and other assets	1,328		59,417		5,244		14,626		80,615
Total assets	$	45,358	$	17,876,163	$	1,334,130	$	14,733	$	19,270,384

Residential collateralized debt obligations	$	40,429	$	—	$	—	$	—	$	40,429
Residential collateralized debt obligations, at fair value	—		—		1,052,829		—		1,052,829
Multi-family collateralized debt obligations, at fair value	—		16,724,451		—		—		16,724,451
Accrued expenses and other liabilities	14		57,873		2,643		75		60,605
Total liabilities	$	40,443	$	16,782,324	$	1,055,472	$	75	$	17,878,314



	Financing VIEs						Other VIEs
	Multi-family CMBS re-securitization⁽¹⁾		Distressed Residential Mortgage Loan Securitization⁽²⁾		Residential Mortgage Loan Securitizations		Consolidated K-Series⁽³⁾		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	—	$	708	$	708
Investment securities available for sale, at fair value held in securitization trusts	52,700		—		—		—		—		52,700
Residential mortgage loans held in securitization trusts, net	—		—		56,795		—		—		56,795
Distressed residential mortgage loans held in securitization trusts, net	—		88,096		—		—		—		88,096
Multi-family loans held in securitization trusts, at fair value	1,107,071		—		—		10,572,776		—		11,679,847
Real estate held for sale in consolidated variable interest entities	—		—		—		—		29,704		29,704
Receivables and other assets	4,243		10,287		1,061		37,679		23,254		76,524
Total assets	$	1,164,014	$	98,383	$	57,856	$	10,610,455	$	53,666	$	11,984,374

Residential collateralized debt obligations	$	—	$	—	$	53,040	$	—	$	—	$	53,040
Multi-family collateralized debt obligations, at fair value	1,036,604		—		—		9,985,644		—		11,022,248
Securitized debt	30,121		12,214		—		—		—		42,335
Mortgages and notes payable in consolidated variable interest entities	—		—		—		—		31,227		31,227
Accrued expenses and other liabilities	4,228		444		26		37,022		1,166		42,886
Total liabilities	$	1,070,953	$	12,658	$	53,066	$	10,022,666	$	32,393	$	11,191,736

The Company has completed four residential mortgage loan securitizations (other than the distressed residential mortgage loan securitizations discussed above) since inception; the first three were accounted for as permanent financings and have been included in the Company’s accompanying consolidated financial statements. The fourth was accounted for as a sale and, accordingly, is not included in the Company’s accompanying consolidated financial statements.

As of December 31, 2019, the Company evaluated its investment securities available for sale, preferred equity, mezzanine loan and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that, as of December 31, 2019, it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. As of December 31, 2018, the Company evaluated its multi-family CMBS investments in two Freddie Mac-sponsored multi-family loan K-Series securitizations and its investment securities available for sale, preferred equity, mezzanine loan and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that, as of December 31, 2018, except for The Clusters, it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. The following tables present the classification and carrying value of unconsolidated VIEs as of December 31, 2019 and 2018, respectively (dollar amounts in thousands):



	December 31, 2019
	Investment securities available for sale, at fair value		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
ABS	$	49,214	$	—	$	—	$	49,214
Preferred equity investments in multi-family properties	—		173,825		106,083		279,908
Mezzanine loans on multi-family properties	—		6,220		—		6,220
Equity investments in entities that invest in residential properties and loans	—		—		65,572		65,572
Total assets	$	49,214	$	180,045	$	171,655	$	400,914



	December 31, 2018
	Investment securities available for sale, at fair value, held in re-securitization trusts		Receivables and other assets		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
Multi-family CMBS	$	52,700	$	72	$	—	$	—	$	52,772
Preferred equity investments in multi-family properties	—		—		154,629		40,472		195,101
Mezzanine loans on multi-family properties	—		—		10,926		—		10,926
Equity investments in entities that invest in residential properties	—		—		—		10,954		10,954
Total assets	$	52,700	$	72	$	165,555	$	51,426	$	269,753

Our maximum loss exposure on the investment securities available for sale, preferred equity and mezzanine loan investments, and investments in unconsolidated entities is approximately $400.9 million at December 31, 2019. Our maximum loss exposure on the investment securities available for sale, held in re-securitization trusts, preferred equity and mezzanine loan investments, and investments in unconsolidated entities was approximately $269.8 million at December 31, 2018. The Company’s maximum exposure does not exceed the carrying value of its investments.