Our loans held-for-investment are accounted for at amortized cost and our loans held-for-sale are accounted for at the lower of cost or fair value, unless we have elected the fair value option for either. The following tables summarize our investments in mortgages and loans as of March 31, 2021 and December 31, 2020 (dollars in thousands):

(1)	Calculated using LIBOR or other applicable index rates as of March 31, 2021 and December 31, 2020 for variable rate loans.

(2)	Represents the WAL of each respective group of loans as of the respective balance sheet date. The WAL of each individual loan is calculated using amounts and timing of future principal payments, as projected at origination or acquisition.

(3)

First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan. The application of this methodology resulted in mezzanine loans with carrying values of $917.8 million and $877.3 million being classified as first mortgages as of March 31, 2021 and December 31, 2020, respectively.

(4)	Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation. If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan.

(5)	During the three months ended March 31, 2021, $30.7 million of infrastructure loans held-for-sale were reclassified into loans held-for-investment.

(6)	During the three months ended March 31, 2021, a net amount of $69.5 million of residential loans held-for-sale were reclassified into loans held-for-investment.

(7)	Residential loans have a weighted average remaining contractual life of 28.9 years and 27.9 years as of March 31, 2021 and December 31, 2020, respectively.

(8)	During the three months ended March 31, 2021, $142.2 million of commercial loans held-for-investment were reclassified into loans held-for-sale.

As of March 31, 2021, our variable rate loans held-for-investment were as follows (dollars in thousands):


	Carrying		Weighted-average
March 31, 2021	Value		Spread Above Index
Commercial loans	$	9,969,387	4.3	%
Infrastructure loans		1,595,615	3.8	%
Total variable rate loans held-for-investment	$	11,565,002	4.2	%

Credit Loss Allowances

As discussed in Note 2, we do not have a history of realized credit losses on our HFI loans and HTM securities, so we have subscribed to third party database services to provide us with industry losses for both commercial real estate and infrastructure loans. Using these losses as a benchmark, we determine expected credit losses for our loans and securities on a collective basis within our commercial real estate and infrastructure portfolios.

For our commercial loans, we utilize a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading CMBS data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We provide specific loan-level inputs which include loan-to-stabilized-value (“LTV”) and debt service coverage ratio (DSCR) metrics, as well as principal balances, property type, location, coupon, origination year, term, subordination, expected repayment dates and future fundings. We also select from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. We categorize the results by LTV range, which we consider the most significant indicator of credit quality for our commercial loans, as set forth in the credit quality indicator table below. A lower LTV ratio typically indicates a lower credit loss risk.

The macroeconomic forecasts do not differentiate among property types or asset classes. Instead, these forecasts reference general macroeconomic growth factors which apply broadly across all assets. However, the COVID-19 pandemic has had a more negative impact on certain property types, principally retail and hospitality, which have

withstood extended government mandated closures, and more recently office, which is experiencing lower demand due to remote working arrangements. The broad macroeconomic forecasts do not account for such differentiation. Accordingly, we have selected a more adverse macroeconomic recovery forecast related to these property types in determining our credit loss allowance.

For our infrastructure loans, we utilize a database of historical infrastructure loan performance that is shared among a consortium of banks and other lenders and compiled by a major bond credit rating agency. The database is representative of industry-wide project finance activity dating back to 1983. We derive historical loss rates from the database filtered by industry, sub-industry, term and construction status for each of our infrastructure loans. Those historical loss rates reflect global economic cycles over a long period of time as well as average recovery rates. We categorize the results between the power and oil and gas industries, which we consider the most significant indicator of credit quality for our infrastructure loans, as set forth in the credit quality indicator table below.

As discussed in Note 2, we use a discounted cash flow or collateral value approach, rather than the industry loan loss approach described above, to determine credit loss allowances for any credit deteriorated loans.

We regularly evaluate the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral, as well as the financial and operating capability of the borrower. Specifically, the collateral’s operating results and any cash reserves are analyzed and used to assess (i) whether cash flow from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the collateral’s liquidation value. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the collateral. In addition, we consider the overall economic environment, real estate or industry sector, and geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as property operating statements, occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

The significant credit quality indicators for our loans measured at amortized cost, which excludes loans held-for-sale, were as follows as of March 31, 2021 (dollars in thousands):


	Term Loans												Revolving Loans		Total		Credit
	Amortized Cost Basis by Origination Year												Amortized Cost		Amortized		Loss
As of March 31, 2021	2021		2020		2019		2018		2017		Prior		Total		Cost Basis		Allowance
Commercial loans:
Credit quality indicator:
LTV < 60%	$	1,152,309	$	709,735	$	1,314,912	$	1,225,605	$	729,227	$	425,570	$	—	$	5,557,358	$	7,015
LTV 60% - 70%		859,035		480,542		1,530,002		825,212		39,916		82,088		—		3,816,795		31,535
LTV > 70%		—		240,217		599,518		312,972		—		61,426		—		1,214,133		16,661
Credit deteriorated		—		—		—		28,986		—		11,977		—		40,963		8,266
Defeased and other		—		—		—		—		—		18,201		—		18,201		—
Total commercial	$	2,011,344	$	1,430,494	$	3,444,432	$	2,392,775	$	769,143	$	599,262	$	—	$	10,647,450	$	63,477
Infrastructure loans:
Credit quality indicator:
Power	$	—	$	77,525	$	220,901	$	397,619	$	124,959	$	371,072	$	10,057	$	1,202,133	$	5,074
Oil and gas		—		19,902		267,727		100,803		—		—		5,050		393,482		3,733
Total infrastructure	$	—	$	97,427	$	488,628	$	498,422	$	124,959	$	371,072	$	15,107	$	1,595,615	$	8,807
Residential loans held-for-investment, fair value option																150,712		—
Loans held-for-sale																844,631		—
Total gross loans															$	13,238,408	$	72,284

As of March 31, 2021, we had credit deteriorated commercial loans with an amortized cost basis of $41.0 million, of which $29.0 million had no credit loss allowance. These loans were on nonaccrual status, with the cost recovery method of interest income recognition applied. In addition to these credit deteriorated loans, we had a $187.6 million commercial loan and $20.2 million of residential loans that were 90 days or greater past due at March 31, 2021. In March 2021, $7.3 million relating to the $187.6 million commercial loan that was 90 days or greater past due was converted to equity interests pursuant to a consensual transfer under pre-existing equity pledges of additional collateral (see Note 7). The $187.6 million commercial loan, along with a $14.8 million infrastructure loan in forbearance, were placed on nonaccrual status during the three months ended March 31, 2021, but are not considered credit deteriorated as we presently expect to recover all amounts due. Any loans which are modified to provide for the deferral of interest are not considered past due and are accounted for in accordance with our revenue recognition policy on interest income.

The following tables present the activity in our credit loss allowance for funded loans and unfunded commitments (amounts in thousands):


	Funded Commitments Credit Loss Allowance
	Loans Held-for-Investment					Total
Three Months Ended March 31, 2021	Commercial			Infrastructure		Funded Loans
Credit loss allowance at December 31, 2020	$	69,611		$	7,833	$	77,444
Credit loss provision (reversal), net		1,880			717		2,597
Charge-offs		(7,757)	(1)		—		(7,757)
Recoveries		—			—		—
Transfers		(257)			257		—
Credit loss allowance at March 31, 2021	$	63,477		$	8,807	$	72,284


	Unfunded Commitments Credit Loss Allowance (2)
	Loans Held-for-Investment
Three Months Ended March 31, 2021	Commercial		Infrastructure		Total
Credit loss allowance at December 31, 2020	$	5,258	$	812	$	6,070
Credit loss reversal, net		(2,122)		(143)		(2,265)
Credit loss allowance at March 31, 2021	$	3,136	$	669	$	3,805
Memo: Unfunded commitments as of March 31, 2021 (3)	$	1,291,304	$	65,791	$	1,357,095

(1)	Relates to an unsecured promissory note deemed uncollectible in connection with a residential conversion project located in New York City. The note was previously considered credit deteriorated and was fully reserved.

(2)	Included in accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

(3)	Represents amounts expected to be funded (see Note 21).

Loan Portfolio Activity

The activity in our loan portfolio was as follows (amounts in thousands):


	Held-for-Investment Loans
Three Months Ended March 31, 2021	Commercial		Infrastructure		Residential		Held-for-Sale Loans		Total Loans
Balance at December 31, 2020	$	9,583,949	$	1,412,440	$	90,684	$	1,052,835	$	12,139,908
Acquisitions/originations/additional funding		2,196,813		99,311		—		375,270		2,671,394
Capitalized interest (1)		36,646		—		—		—		36,646
Basis of loans sold (2)		—		—		—		(571,927)		(571,927)
Loan maturities/principal repayments		(1,021,393)		(18,055)		(9,210)		(44,326)		(1,092,984)
Discount accretion/premium amortization		15,824		921		—		—		16,745
Changes in fair value		—		—		(290)		(9,188)		(9,478)
Unrealized foreign currency translation loss		(14,082)		(181)		—		—		(14,263)
Credit loss provision, net		(1,880)		(717)		—		—		(2,597)
Transfer to/from other asset classifications or between segments		(211,904)		93,089		69,528		41,967		(7,320)
Balance at March 31, 2021	$	10,583,973	$	1,586,808	$	150,712	$	844,631	$	13,166,124


	Held-for-Investment Loans
Three Months Ended March 31, 2020	Commercial		Infrastructure		Residential		Held-for-Sale Loans		Total Loans
Balance at December 31, 2019	$	8,517,054	$	1,397,448	$	671,572	$	884,150	$	11,470,224
Cumulative effect of ASC 326 effective January 1, 2020		(10,112)		(10,328)		—		—		(20,440)
Acquisitions/originations/additional funding		1,089,096		62,929		100,720		646,160		1,898,905
Capitalized interest (1)		36,072		—		—		—		36,072
Basis of loans sold (2)		—		—		(604)		(789,259)		(789,863)
Loan maturities/principal repayments		(689,972)		(37,051)		(48,620)		(20,680)		(796,323)
Discount accretion/premium amortization		11,559		411		—		110		12,080
Changes in fair value		—		—		(25,619)		9,485		(16,134)
Unrealized foreign currency translation loss		(83,263)		—		—		(4,056)		(87,319)
Credit loss provision, net		(37,527)		(5,805)		—		—		(43,332)
Transfer to/from other asset classifications		—		(26,333)		(422,691)		449,024		—
Balance at March 31, 2020	$	8,832,907	$	1,381,271	$	274,758	$	1,174,934	$	11,663,870

(1) Represents accrued interest income on loans whose terms do not require current payment of interest.

(2) See Note 11 for additional disclosure on these transactions.