Note 6 - Consolidated K-Series

9 Months Ended

Sep. 30, 2014

Disclosure Text Block Supplement [Abstract]

Financial Instruments Disclosure [Text Block]

6.                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 statements of operations. Our investment in the Consolidated K-Series is limited to the multi-family CMBS comprised of first loss tranche PO securities and/or certain IOs issued by certain K-Series securitizations with an aggregate net carrying value of $298.2 million and $240.0 million at September 30, 2014 and December 31, 2013, respectively (see Note 7).  

The condensed consolidated balance sheets of the Consolidated K-Series at September 30, 2014 and December 31, 2013, respectively, are as follows (dollar amounts in thousands):

Balance Sheets	September 30, 2014		December 31, 2013
Assets
Multi-family loans held in securitization trusts	$	8,303,169	$	8,111,022
Receivables		29,133		30,222
Total Assets	$	8,332,302	$	8,141,244
Liabilities and Equity
Multi-family CDOs	$	8,005,013	$	7,871,020
Accrued expenses		28,684		29,766
Total Liabilities		8,033,697		7,900,786
Equity(1)		298,605		240,458
Total Liabilities and Equity	$	8,332,302	$	8,141,244

The multi-family loans held in securitization trusts had unpaid principal balance of approximately $7.9 billion and $8.0 billion at September 30, 2014 and December 31, 2013, respectively. The multi-family CDOs had unpaid principal balance of approximately $7.9 billion and $8.0 billion at September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014 and December 31, 2013, the current weighted average interest rate on these multi-family CDOs was 4.30% and 4.16%, respectively.

The Company does not have any claims to the assets or obligations for the liabilities of the Consolidated K-Series (other than the security represented by our first loss piece).  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 13).

The condensed consolidated statements of operations of the Consolidated K-Series for the three and nine months ended September 30, 2014 and 2013, respectively, is as follows (dollar amounts in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Statements of Operations	2014		2013		2014		2013
Interest income	$	75,891	$	61,179	$	226,336	$	160,981
Interest expense		69,310		56,199		207,167		148,107
Net interest income		6,581		4,980		19,169		12,874
Unrealized gain on multi-family loans and debt held in securitization trusts, net		18,115		6,338		43,060		22,370
Net Income	$	24,696	$	11,318	$	62,229	$	35,244

 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, 2014 and December 31, 2013, respectively, are as follows:

	September 30, 2014			December 31, 2013
California		13.3	%		14.0	%
Texas		12.2	%		13.7	%
New York		7.5	%		7.2	%
Florida		6.8	%		6.5	%
Washington		5.4	%		5.3	%