Loans and Leases

The following table presents our recorded investment in loans and leases, by segment and class, as of the dates indicated:



(In millions)	June 30, 2013			December 31, 2012
Institutional:
Investment funds:
U.S.	$	10,871		$	8,376
Non-U.S.	2,438			829
Commercial and financial:
U.S.	721			613
Non-U.S.	802			520
Purchased receivables:
U.S.	248			276
Non-U.S.	75			118
Lease financing:
U.S.	359			380
Non-U.S.	752			784
Total institutional	16,266			11,896
Commercial real estate:
U.S.	165			411
Total loans and leases	16,431			12,307
Allowance for loan losses	(22		)	(22		)
Loans and leases, net of allowance for loan losses	$	16,409		$	12,285

Aggregate short-duration advances to our clients included in the investment-funds and commercial-and-financial classes in the institutional segment were $6.18 billion and $3.30 billion as of June 30, 2013 and December 31, 2012, respectively.

The following tables present our recorded investment in each class of loans and leases by credit quality indicator as of the dates indicated:



	Institutional								Commercial Real Estate
June 30, 2013	Investment Funds		Commercial and Financial		Purchased Receivables		Lease Financing		Property Development		Other		Total Loans and Leases
(In millions)	Investment Funds		Commercial and Financial		Purchased Receivables		Lease Financing		Property Development		Other		Total Loans and Leases
Investment grade	$	12,942	$	1,445	$	323	$	1,076	$	—	$	29	$	15,815
Speculative	367		57		—		35		131		5		595
Special mention	—		21		—		—		—		—		21
Total	$	13,309	$	1,523	$	323	$	1,111	$	131	$	34	$	16,431



	Institutional								Commercial Real Estate
December 31, 2012	Investment Funds		Commercial and Financial		Purchased Receivables		Lease Financing		Property Development		Other		Total Loans and Leases
(In millions)	Investment Funds		Commercial and Financial		Purchased Receivables		Lease Financing		Property Development		Other		Total Loans and Leases
Investment grade	$	8,937	$	1,041	$	394	$	1,137	$	—	$	29	$	11,538
Speculative	268		92		—		27		377		5		769
Total	$	9,205	$	1,133	$	394	$	1,164	$	377	$	34	$	12,307

Loans and leases are categorized in the rating categories presented in the table above that align with our internal risk-rating framework. Management considers the ratings to be current as of June 30, 2013. We use an internal risk-rating system to assess our risk of credit loss for each loan or lease. This risk-rating process incorporates the use of risk-rating tools in conjunction with management judgment. Qualitative and quantitative inputs are captured in a systematic manner, and following a formal review and approval process, an internal credit rating based on our credit scale is assigned.

In assessing the risk rating assigned to each individual loan or lease, among the factors considered are the borrower's debt capacity, collateral coverage, payment history and delinquency experience, financial flexibility and earnings strength, the expected amounts and sources of repayment, the level and nature of contingencies, if any, and the industry and geography in which the borrower operates. These factors are based on an evaluation of historical and current information, and involve subjective assessment and interpretation. Credit counterparties are evaluated and risk-rated on an individual basis at least annually.

The following table presents our recorded investment in loans and leases, disaggregated based on our impairment methodology, as of the dates indicated:



	June 30, 2013						December 31, 2012
(In millions)	Institutional		Commercial Real Estate		Total Loans and Leases		Institutional		Commercial Real Estate		Total Loans and Leases
Loans and leases:
Individually evaluated for impairment	$	11	$	136	$	147	$	11	$	411	$	422
Collectively evaluated for impairment⁽¹⁾	16,255		29		16,284		11,885		—		11,885
Total	$	16,266	$	165	$	16,431	$	11,896	$	411	$	12,307

⁽¹⁾As of both June 30, 2013 and December 31, 2012, the entire $22 million allowance for loan losses was related to institutional loans collectively evaluated for impairment.

The following tables present information related to our recorded investment in impaired loans and leases as of the dates, or for the periods, indicated:



	June 30, 2013						December 31, 2012
(In millions)	Recorded Investment		Unpaid Principal Balance		Related Allowance⁽¹⁾		Recorded Investment		Unpaid Principal Balance		Related Allowance⁽¹⁾
With no related allowance recorded:
CRE—property development	$	130	$	143	$	—	$	197	$	224	$	—
CRE—property development—acquired credit-impaired	—		34		—		—		34		—
CRE—other—acquired credit-impaired	—		21		—		—		64		—
Total CRE	$	130	$	198	$	—	$	197	$	322	$	—

⁽¹⁾As of both June 30, 2013 and December 31, 2012, we maintained an allowance for loan losses of $22 million associated with loans and leases that were not impaired.



	Three Months Ended June 30,								Six Months Ended June 30,
	Average Recorded Investment				Interest Revenue Recognized				Average Recorded Investment				Interest Revenue Recognized
(In millions)	2013		2012		2013		2012		2013		2012		2013		2012
With no related allowance recorded:
CRE—property development	$	148	$	199	$	10	$	4	$	166	$	199	$	14	$	8
CRE—other—acquired credit-impaired	—		6		—		—		—		23		—		—
With an allowance recorded:
CRE—other—acquired credit-impaired	—		—		—		—		—		—		—		—
Total CRE	$	148	$	205	$	10	$	4	$	166	$	222	$	14	$	8

As of both June 30, 2013 and December 31, 2012, we held an aggregate of approximately $130 million and $197 million, respectively, of commercial real estate, or CRE, loans which were modified in troubled debt restructurings. No impairment loss was recognized upon restructuring of the loans, as the discounted cash flows of the modified loans exceeded the carrying amount of the original loans as of the modification date. During the six months ended June 30, 2013 and the year ended December 31, 2012, no loans were modified in troubled debt restructurings.

The following table presents activity in the allowance for loan losses for the periods indicated:



	Three Months Ended June 30,
	2013						2012
(In millions)	Institutional		Commercial Real Estate		Total Loans and Leases		Institutional		Commercial Real Estate			Total Loans and Leases
Allowance for loan losses:
Beginning balance	$	22	$	—	$	22	$	22	$	—		$	22
Provisions	—		—		—		—		(1		)	(1		)
Recoveries	—		—		—		—		1			1
Ending balance	$	22	$	—	$	22	$	22	$	—		$	22



	Six Months Ended June 30,
	2013						2012
(In millions)	Institutional		Commercial Real Estate		Total Loans and Leases		Institutional		Commercial Real Estate			Total Loans and Leases
Allowance for loan losses:
Beginning balance	$	22	$	—	$	22	$	22	$	—		$	22
Provisions	—		—		—		—		(1		)	(1		)
Recoveries	—		—		—		—		1			1
Ending balance	$	22	$	—	$	22	$	22	$	—		$	22

Loans and leases are reviewed on a regular basis, and any provisions for loan losses that are recorded reflect management's estimate of the amount necessary to maintain the allowance for loan losses at a level considered appropriate to absorb estimated incurred losses in the loan-and-lease portfolio.