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 POs, certain IOs and mezzanine securities issued by certain Freddie Mac K-Series securitizations with an aggregate net carrying value of $506.5 million and $468.0 million at June 30, 2018 and December 31, 2017, respectively (see Note 10). The Consolidated K-Series is comprised of seven multi-family CMBS investments as of June 30, 2018 and December 31, 2017.

The condensed consolidated balance sheets of the Consolidated K-Series at June 30, 2018 and December 31, 2017, respectively, are as follows (dollar amounts in thousands):



Balance Sheets	June 30, 2018		December 31, 2017
Assets
Multi-family loans held in securitization trusts	$	9,345,360	$	9,657,421
Receivables	32,246		33,562
Total Assets	$	9,377,606	$	9,690,983
Liabilities and Equity
Multi-family CDOs	$	8,838,841	$	9,189,459
Accrued expenses	31,818		33,136
Total Liabilities	8,870,659		9,222,595
Equity	506,947		468,388
Total Liabilities and Equity	$	9,377,606	$	9,690,983

The multi-family loans held in securitization trusts had aggregate unpaid principal balances of approximately $9.3 billion and $9.4 billion at June 30, 2018 and December 31, 2017, respectively. The multi-family CDOs had aggregate unpaid principal balances of approximately $9.3 billion and $9.4 billion at June 30, 2018 and December 31, 2017, respectively. As of June 30, 2018 and December 31, 2017, the current weighted average interest rate on these multi-family CDOs was 4.05% and 3.92%, 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 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 six months ended June 30, 2018 and 2017, respectively, are as follows (dollar amounts in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
Statements of Operations	2018		2017		2018		2017
Interest income	$	85,629	$	75,752	$	170,721	$	137,056
Interest expense	74,686		66,873		149,165		120,805
Net interest income	10,943		8,879		21,556		16,251
Unrealized gain on multi-family loans and debt held in securitization trusts, net	12,019		1,447		19,564		2,831
Net income	$	22,962	$	10,326	$	41,120	$	19,082

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 June 30, 2018 and December 31, 2017, respectively, are as follows:



	June 30, 2018		December 31, 2017
California	14.7	%	14.7	%
Texas	12.7	%	12.7	%
New York	6.5	%	6.5	%
Maryland	5.5	%	5.5	%