Company Quick10K Filing
Quick10K
Mufg Americas Holdings
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-09-16 Regulation FD, Exhibits
8-K 2019-08-09 Regulation FD, Exhibits
8-K 2019-05-15 Regulation FD, Exhibits
8-K 2019-03-07 Off-BS Arrangement
8-K 2019-02-27 Regulation FD, Exhibits
8-K 2018-12-12 Off-BS Arrangement, Other Events, Exhibits
8-K 2018-11-07 Regulation FD, Exhibits
8-K 2018-09-11 Amend Bylaw, Exhibits
8-K 2018-08-08 Regulation FD, Exhibits
CVON Convergeone Holdings 725
POWW Ammo 70
PBSV Pharma-Bio Serv 12
WISH Wright Investors 9
DOYU DouYu 0
GLYE Glyeco 0
SLDV Security Land & Development 0
TICK Ticket 0
ILCC International Leaders Capital 0
GFA Gafisa 0
UB 2019-06-30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part I. Financial Information
Item 1. Financial Statements
Note 1-Summary of Significant Accounting Policies and Nature of Operations
Note 2-Securities
Note 3-Loans and Allowance for Loan Losses
Note 4-Variable Interest Entities
Note 5-Securities Financing Arrangements
Note 6-Commercial Paper and Other Short-Term Borrowings
Note 7-Long-Term Debt
Note 8-Fair Value Measurement and Fair Value of Financial Instruments
Note 9-Derivative Instruments and Other Financial Instruments Used for Hedging
Note 10-Accumulated Other Comprehensive Income
Note 11-Employee Pension and Other Postretirement Benefits
Note 12-Commitments, Contingencies and Guarantees
Note 13-Business Segments
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 muah10qq22019ex311.htm
EX-31.2 muah10qq22019ex312.htm
EX-32.1 muah10qq22019ex321.htm
EX-32.2 muah10qq22019ex322.htm

Mufg Americas Holdings Earnings 2019-06-30

UB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 muah10qq22019.htm 10-Q Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
 
 
 
[X]
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended June 30, 2019
 
OR
 
 
 
[ ]
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from                        to                       
Commission File Number: 1-15081
MUFG Americas Holdings Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
 
94-1234979
 
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
1251 Avenue of the Americas, New York, NY
 
10020
 
 
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 
 
 
 
(Registrant's telephone number, including area code) (212) 782-6800
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
 
Accelerated filer o
 
 
 
 
 
Non-accelerated filer x 
 
Smaller reporting company o
 
 
 
 
 
Emerging growth company o
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o   No x 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
 
 
None
 
Not Applicable
 
Not Applicable
 
Number of shares of Common Stock outstanding at July 31, 2019: 131,935,124
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
 



MUFG Americas Holdings Corporation and Subsidiaries
Table of Contents

2


Glossary of Defined Terms
The following acronyms and abbreviations are used throughout this Form 10-Q, particularly in Part I, Item 1. “Financial Statements," Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Part II, Item 1A. “Risk Factors.”
ALCO
Asset Liability Management Committee
ALM
Asset Liability Management
AOCI
Accumulated other comprehensive income
ARC
Americas Risk Committee
ASU
Accounting Standards Update
BCBS
Basel Committee on Banking Supervision
BHC
U.S. Bank Holding Company
CCAR
Comprehensive Capital Analysis and Review
CD
Certificate of deposit
CECL
Current Expected Credit Loss
CLO
Collateralized loan obligation
CMBS
Commercial mortgage-backed security
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
EGRRCPA
Economic Growth, Regulatory Relief and Consumer Protection Act
ESBP
Executive Supplemental Benefit Plan
EURIBOR
Euro Interbank Offered Rate
Exchange Act
U.S. Securities Exchange Act of 1934
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
Federal Reserve
Board of Governors of the Federal Reserve System
FHLB
Federal Home Loan Bank
FICO
Fair Isaac Corporation
GAAP
Accounting principles generally accepted in the United States of America
GSIB
Global systemically important bank
HQLA
High quality liquid assets
LCR
Liquidity Coverage Ratio
LIBOR
London Inter-bank Offered Rate
LIHC
Low income housing tax credit
LLC
Limited Liability Company
LTV
Loan-to-value
MRM
Market Risk Management
MUAH
MUFG Americas Holdings Corporation
MUB
MUFG Union Bank, N.A.
MUFG
Mitsubishi UFJ Financial Group, Inc.
MUSA
MUFG Securities Americas Inc.
NY DFS
New York State Department of Financial Services
nm
Not meaningful
OCC
Office of the Comptroller of the Currency
OCI
Other comprehensive income
OREO
Other real estate owned
RMBS
Residential mortgage-backed security
SEC
Securities and Exchange Commission
SERP
Supplemental Executive Retirement Plan
TCJA
Tax Cuts and Jobs Act
TDR
Troubled debt restructuring
TLAC
Total Loss Absorbing Capacity
VIE
Variable interest entity

3


NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements, which include expectations for our operations and business and our assumptions for those expectations. Do not rely unduly on forward-looking statements. Actual results might differ significantly compared to our expectations. See Part I, Item 1A. “Risk Factors,” in our 2018 Form 10-K, Part II, Item 1A. “Risk Factors” in this Form 10-Q, and the other risks described in this Form 10-Q and in our 2018 Form 10-K, for factors to be considered when reading any forward-looking statements in this filing.
Forward-looking statements are subject to the "safe harbor" created by section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. We may make forward-looking statements in our SEC filings, press releases, news articles and when we are speaking on behalf of MUFG Americas Holdings Corporation and its subsidiaries. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words "believe," "expect," "target," "anticipate," "intend," "plan," "seek," "estimate," "potential," "project," "forecast," "outlook," words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," "might," or "may." These forward-looking statements are intended to provide investors with additional information with which they may assess our future potential. All of these forward-looking statements are based on assumptions about an uncertain future and are based on information known to our management at the date of these statements. We do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date any forward-looking statements are made.
In this document and other reports to the SEC, for example, we make forward-looking statements, which discuss our expectations about:
Our business objectives, strategies and initiatives, organizational structure, business growth, competitive position and prospects, and the effect of competition on our business and strategies
Our assessment of significant factors and developments that have affected or may affect our results
Our assessment of economic conditions and trends, economic and credit cycles and their impact on our business
The economic outlook for the U.S. in general, West Coast states and global economies
The impact of changes in interest rates resulting from changes in Federal Reserve policy or for other reasons, our strategy to manage our interest rate risk profile and other market risks, our outlook for short-term and long-term interest rates and their effect on our net interest margin, our investment portfolio, our balance sheet composition, our borrowers’ ability to service their loans and residential mortgage loans and refinancings
Pending and recent legislative and regulatory actions, and future legislative and regulatory developments, including the effects of legislation and other governmental measures, including the monetary policies of the Federal Reserve introduced in response to the financial crisis, and the ensuing recession affecting the banking system, financial markets and the U.S. economy, the Dodd-Frank Act, the EGRRCPA, changes to the deposit insurance assessment policies of the FDIC, the effect on and application of foreign and other laws and regulations to our business and operations, and anticipated fees, costs or other impacts on our business and operations as a result of these developments
Our strategies and expectations regarding capital levels and liquidity, our funding base, deposits, long-term debt, issuance of additional notes under the Bank's unsecured bank note program, our expectations regarding the capital, liquidity and enhanced prudential standards adopted by the U.S. bank regulators as a result of or under the Dodd-Frank Act and the BCBS capital and liquidity standards including the Federal banking agencies' TLAC regulation, and other recently adopted and proposed regulations by the U.S. federal banking agencies, and the effect of the foregoing on our business and expectations regarding compliance
Regulatory and compliance controls and processes and their impact on our business, including our operating costs and revenues

4


The costs and effects of legal actions, investigations, regulatory actions, criminal proceedings or similar matters, our anticipated litigation strategies, our assessment of the timing and ultimate outcome of legal actions, or adverse facts and developments related thereto
Our allowance for credit losses, including the conditions we consider in determining the unallocated allowance and our portfolio credit quality, probability of default and credit migration trends, and severity of loss upon default
Loan portfolio composition and risk rating trends, residential loan delinquency rates compared to the industry average, portfolio credit quality, our strategy regarding TDRs, and our intent to sell or hold loans we originate
Our intent to sell or hold, and the likelihood that we would be required to sell, or expectations regarding recovery of the amortized cost basis of, various investment securities
Our hedging strategies, positions, expectations regarding reclassifications of gains or losses on hedging instruments into earnings; and the sensitivity of our net income to various factors, including customer behavior relating to mortgage prepayments and deposit repricing
Expected rates of return, maturities, yields, loss exposure, growth rates, pension plan strategies, contributions and benefit payments, forecasted balance sheet activity and projected results
Tax rates and taxes, the possible effect of changes in taxable profits of the U.S. operations of MUFG on our state tax obligations and of expected tax credits or benefits
Critical accounting policies and estimates, the impact or anticipated impact of recent accounting pronouncements, guidance or changes in accounting principles and future recognition of impairments for the fair value of assets, including goodwill, financial instruments, intangible assets and other assets
Decisions to downsize, sell or close units, dissolve subsidiaries, expand our branch network, pursue acquisitions, purchase banking facilities and equipment, realign our business model or otherwise restructure, reorganize or change our business mix, or the transfer to MUAH by MUFG of its interests in U.S. subsidiaries, and their timing and impact on our business
Our expectations regarding the impact of acquisitions on our business and results of operations
The impact of changes in our credit ratings including methodology changes adopted by rating agencies
Maintenance of casualty and liability insurance coverage appropriate for our operations
The relationship between our business and that of MUFG Bank, Ltd. and MUFG, the impact of their credit ratings, operations or prospects on our credit ratings and actions that may or may not be taken by MUFG Bank, Ltd. and MUFG
Threats to the banking sector and our business due to cyber-security issues and attacks on financial institutions and other businesses, such as large retailers, and regulatory expectations relating to cyber-security
Our understanding that MUFG Bank, Ltd. will continue to limit its participation in transactions with Iranian entities and individuals to certain types of transactions
The objectives and effects on operations of our business integration initiative and its near term effect on our balance sheet, earnings and capital ratios
The effect of a possible return of the California drought on its economy and related governmental actions and the potential consequences of recent California wildfires or other natural disasters
Descriptions of assumptions underlying or relating to any of the foregoing
    
Readers of this document should not rely unduly on any forward-looking statements, which reflect only our management’s belief as of the date of this report. There are numerous risks and uncertainties that could cause actual outcomes and results to differ materially from those discussed in our forward-looking statements. Many of these factors are beyond our ability to control or predict and could have a material adverse effect on

5


our financial condition, results of operations or prospects. Such risks and uncertainties include, but are not limited to, those described or referred to in Part I, Item 1. “Business” under the captions “Competition” and “Supervision and Regulation” in our 2018 Form 10-K, and in Part II, Item 1A. “Risk Factors” and Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q, and in our other reports to the SEC.
Any factor described in this report or in our other reports could by itself, or together with one or more other factors, adversely affect our business, prospects, results of operations or financial condition.


6


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations
MUFG Americas Holdings Corporation and Subsidiaries
Consolidated Financial Highlights
 
 
For the Three Months Ended
 
 
 
For the Six Months Ended
 
 
(Dollars in millions)
 
June 30, 2019
 
June 30, 2018
 
Percent
Change
 
June 30, 2019
 
June 30, 2018
 
Percent
Change
Results of operations:
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
777

 
$
825

 
(6
)%
 
$
1,560

 
$
1,650

 
(5
)%
Noninterest income
 
649

 
596

 
9

 
1,281

 
978

 
31

Total revenue
 
1,426


1,421

 

 
2,841

 
2,628

 
8

Noninterest expense
 
1,154

 
1,083

 
7

 
2,324

 
2,167

 
7

Pre-tax, pre-provision income(1)
 
272

 
338

 
(20
)
 
517

 
461

 
12

(Reversal of) provision for credit losses
 
56

 
(19
)
 
395

 
94

 
(21
)
 
nm

Income before income taxes and including noncontrolling interests
 
216

 
357

 
(39
)
 
423

 
482

 
(12
)
Income tax expense (benefit)
 
20

 
28

 
(29
)
 
48

 
(14
)
 
443

Net income including noncontrolling interests
 
196

 
329

 
(40
)
 
375

 
496

 
(24
)
Deduct: Net loss (income) from noncontrolling interests               
 
3

 
15

 
(80
)
 
8

 
14

 
(43
)
Net income attributable to MUAH
 
$
199

 
$
344

 
(42
)
 
$
383

 
$
510

 
(25
)
Balance sheet (period average):
 
 
 
 
 

 

 
 
 

Total assets
 
$
170,336

 
$
159,342

 
7
 %
 
$
168,927

 
$
158,396

 
7
 %
Total securities
 
26,504

 
27,129

 
(2
)
 
26,801

 
27,287

 
(2
)
Securities borrowed or purchased under resale agreements
 
23,029

 
20,236

 
14

 
22,660

 
20,447

 
11

Total loans held for investment
 
88,308

 
82,017

 
8

 
87,725

 
81,339

 
8

Earning assets
 
156,368

 
146,015

 
7

 
155,175

 
144,870

 
7

Total deposits
 
93,919

 
84,372

 
11

 
92,311

 
83,992

 
10

Securities loaned or sold under repurchase agreements
 
28,084

 
26,890

 
4

 
27,618

 
27,009

 
2

MUAH stockholders' equity
 
17,120

 
18,309

 
(6
)
 
16,920

 
18,221

 
(7
)
Performance ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets(2)
 
0.47
%
 
0.86
%
 
 

 
0.45
%
 
0.64
%
 
 

Return on average MUAH stockholders' equity(2)
 
4.65

 
7.53

 
 

 
4.53

 
5.60

 
 

Return on average MUAH tangible common equity(2)(3)
 
6.09

 
9.46

 
 
 
5.93

 
7.09

 
 
Efficiency ratio(4)
 
80.94

 
76.18

 
 

 
81.80

 
82.45

 
 

Adjusted efficiency ratio (5)
 
76.68

 
72.39

 
 
 
77.82

 
74.00

 
 
Net interest margin(2)(6)
 
2.00

 
2.28

 
 

 
2.03

 
2.30

 
 

Net loans charged-off to average total loans held for investment(2)
 
0.09

 
0.01

 
 

 
0.09

 
0.03

 
 


7


MUFG Americas Holdings Corporation and Subsidiaries
Consolidated Financial Highlights (Continued)

 
 
As of
 
 
 
 
June 30, 2019
 
December 31, 2018
 
Percent
Change
Balance sheet (end of period):
 
 
 
 
 
 
Total assets
 
$
172,010

 
$
168,100

 
2
 %
Total securities
 
25,595

 
27,215

 
(6
)
Securities borrowed or purchased under resale agreements
 
24,006

 
22,368

 
7

Total loans held for investment
 
88,468

 
86,507

 
2

Nonperforming assets
 
603

 
422

 
43

Total deposits
 
94,588

 
90,979

 
4

Securities loaned or sold under repurchase agreements
 
28,917

 
27,285

 
6

Long-term debt
 
16,068

 
17,918

 
(10
)
MUAH stockholders' equity
 
17,266

 
16,508

 
5

Credit ratios:
 
 
 
 
 
 
Allowance for loan losses to total loans held for investment(7)
 
0.64
%
 
0.55
%
 
 

Allowance for loan losses to nonaccrual loans(7)
 
93.29

 
112.50

 
 

Allowance for credit losses to total loans held for investment(8)
 
0.76

 
0.71

 
 

Allowance for credit losses to nonaccrual loans(8)
 
111.22

 
145.61

 
 

Nonperforming assets to total loans held for investment and OREO
 
0.68

 
0.49

 
 

Nonperforming assets to total assets
 
0.35

 
0.25

 
 

Nonaccrual loans to total loans held for investment
 
0.68

 
0.49

 
 

Capital ratios:
 
 

 
 

 
 
Regulatory(9):
 
 
 
 
 
 
Common Equity Tier 1 risk-based capital ratio
 
13.82
%
 
13.96
%
 
 
Tier 1 risk-based capital ratio
 
13.82

 
13.96

 
 

Total risk-based capital ratio
 
14.49

 
14.60

 
 

Tier 1 leverage ratio
 
8.68

 
8.77

 
 

Other:
 
 
 
 
 
 
Tangible common equity ratio(10)
 
8.12
%
 
7.89
%
 
 



8


MUFG Americas Holdings Corporation and Subsidiaries
Consolidated Financial Highlights (Continued)

 
 

(1)
Pre-tax, pre-provision income is total revenue less noninterest expense. Management believes that this is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(2)
Annualized.
(3)
Return on tangible common equity, a non-GAAP financial measure, is net income excluding intangible asset amortization divided by average tangible common equity. Management believes that this ratio provides useful supplemental information regarding the Company's business results. The methodology for determining tangible common equity may differ among companies. See "Non-GAAP Financial Measures" in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q for additional information.
(4)
The efficiency ratio is total noninterest expense as a percentage of total revenue (net interest income and noninterest income).
(5)
The adjusted efficiency ratio, a non-GAAP financial measure, is adjusted noninterest expense (noninterest expense excluding costs associated with services provided to MUFG Bank, Ltd. branches in the U.S.) as a percentage of adjusted total revenue (net interest income and noninterest income excluding fees from affiliates for services provided to MUFG Bank, Ltd.'s branches in the U.S. and the impact of the TCJA). Management believes adjusting the efficiency ratio for the fees and costs associated with services provided to MUFG Bank, Ltd. branches in the U.S. enhances the comparability of MUAH's efficiency ratio when compared with other financial institutions. Management believes adjusting revenue for the impact of the TCJA enhances comparability between periods. See "Non-GAAP Financial Measures" in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q for additional information.
(6)
Yields, interest income and net interest margin are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.
(7)
The allowance for loan losses ratios are calculated using the allowance for loan losses as a percentage of end of period total loans held for investment or total nonaccrual loans, as appropriate.
(8)
The allowance for credit losses ratios include the allowances for loan losses and for losses on unfunded credit commitments as a percentage of end of period total loans held for investment or total nonaccrual loans, as appropriate.
(9)
These capital ratios are calculated in accordance with the guidelines set forth in the U.S. federal banking agencies' final U.S. Basel III regulatory capital rules.
(10)
The tangible common equity ratio, a non-GAAP financial measure, is calculated as tangible common equity divided by tangible assets. The methodology for determining tangible common equity may differ among companies. The tangible common equity ratio facilitates the understanding of the Company's capital structure and is used to assess and compare the quality and composition of the Company's capital structure to other financial institutions. See "Capital Management" in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q for additional information.







9


Please refer to our Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K) along with the following discussion and analysis of our consolidated financial position and results of operations for the period ended June 30, 2019 in this Form 10-Q. Averages, as presented in the following tables, are substantially all based upon daily average balances.
As used in this Form 10-Q, terms such as the "Company,” “we,” “us” and “our” refer to MUFG Americas Holdings Corporation (MUAH), one or more of its consolidated subsidiaries, or to all of them together. As permitted by General Instruction H(2) of Form 10-Q, we have abbreviated Management's Discussion and Analysis into a management's narrative analysis of the results of operations.
Introduction
We are a financial holding company, bank holding company and intermediate holding company whose principal subsidiaries are MUFG Union Bank, N.A. (MUB or the Bank) and MUSA. We are owned by MUFG Bank, Ltd. and MUFG. MUFG Bank, Ltd. is a wholly-owned subsidiary of MUFG.
The Company has four reportable segments: Regional Bank, U.S. Wholesale & Investment Banking, Transaction Banking and MUSA. We service U.S. Wholesale & Investment Banking, certain Transaction Banking, and MUSA customers through the MUFG brand and serve Regional Bank and Transaction Banking customers through the Union Bank brand. We provide a wide range of financial services to consumers, small businesses, middle-market companies and major corporations, both nationally and internationally.
The Company also provides various business, banking, financial, administrative and support services, and facilities for MUFG Bank, Ltd. in connection with the operation and administration of MUFG Bank, Ltd.'s business in the U.S. (including MUFG Bank, Ltd.'s U.S. branches). The Bank and MUFG Bank, Ltd. are parties to a master services agreement whereby the Bank earns fee income in exchange for services and facilities provided.
The Company’s leadership team is bicoastal with Regional Bank and Transaction Banking leaders on the West Coast while U.S. Wholesale & Investment Banking and MUSA leaders are based in New York City. The corporate headquarters (principal executive office) for MUB, MUSA and MUAH is in New York City. MUB's main banking office is in San Francisco. The Company had consolidated assets of $172.0 billion at June 30, 2019.
Executive Overview
We are providing you with an overview of what we believe are the most significant factors and developments that affected our second quarter 2019 results and that could influence our future results. Further detailed information can be found elsewhere in this Form 10-Q. In addition, you should carefully read this entire document and any other reports that we refer to in this Form 10-Q for more detailed information to assist your understanding of trends, events and uncertainties that impact us.
Our sources of revenue are net interest income and noninterest income (collectively “total revenue”). Net interest income is generated predominantly from interest earned from loans, investment securities, securities borrowed or purchased under resale agreements, trading account assets and other interest-earning assets, less interest incurred on deposits and borrowings, securities loaned or sold under repurchase agreements and other interest-bearing liabilities. The primary sources of noninterest income are revenues from investment banking and syndication fees, service charges on deposit accounts, trust and investment management fees, trading account activities, credit facility fees, and fees from affiliates. Changes in interest rates, credit quality, economic trends and the capital markets are primary factors that affect our revenue sources. In the second quarter of 2019, revenue was comprised of 54% net interest income and 46% noninterest income. A summary of our financial results is discussed below.
Our primary sources of liquidity are core deposits, securities and wholesale funding. Core deposits exclude brokered deposits, foreign time deposits, domestic time deposits greater than $250,000, and certain other deposits not considered to be core customer relationships. Wholesale funding includes unsecured funds raised from MUFG Bank, Ltd. and affiliates, interbank and other sources, both domestic and international, funding secured by certain assets, or by borrowing from the FHLB. We evaluate and monitor the stability and reliability of our various funding sources to help ensure that we have sufficient liquidity when adverse situations arise.

10


Performance Highlights
Net income attributable to MUAH was $199 million and $383 million for the three and six months ended June 30, 2019, respectively. Net income attributable to MUAH decreased $145 million and $127 million, respectively, compared with the same periods in 2018, primarily due to a decline in net interest income from higher borrowing costs and an increase in the provision for credit losses. These decreases were partially offset by a nonrecurring loss in the first quarter of 2018 which resulted in an increase in noninterest income during the six months ended June 30, 2019. During the first quarter of 2018 the Company recorded its share of losses on certain renewable energy investments of $164 million as a result of the TCJA.
The provision for credit losses was $94 million for the six months ended June 30, 2019, compared with a reversal of $21 million for the six months ended June 30, 2018. The provision for credit losses in 2019 was primarily due to growth in unsecured consumer loan balances and the impact of specific reserves for certain impaired loans. The reversal of provision for credit losses in 2018 reflected general improvement in portfolio credit quality and refinements to the qualitative considerations used in our reserve methodology during the second quarter of 2018.
Capital Ratios
The Company's capital ratios continued to exceed all well-capitalized and minimum regulatory thresholds for BHCs, as applicable. The U.S. Basel III Common Equity Tier 1, Tier 1 and Total risk-based capital ratios were 13.82%, 13.82% and 14.49%, respectively, at June 30, 2019. The Tier 1 leverage ratio was 8.68% at June 30, 2019.
    

11


Financial Performance
Net Interest Income
The following tables show the major components of net interest income and the net interest margin.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
June 30, 2019
 
June 30, 2018
 
 
 
 
Average
Balance
 
Interest
Income/
Expense(1)
 
Average
Yield/
Rate(1)(2)
 
Average
Balance
 
Interest
Income/
Expense(1)
 
Average
Yield/
Rate(1)(2)
(Dollars in millions)
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for investment:(3)
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
25,511

 
$
282

 
4.44
%
 
$
23,532

 
$
242

 
4.12
%
Commercial mortgage
 
15,581

 
163

 
4.17

 
14,500

 
152

 
4.21

Construction
 
1,638

 
23

 
5.86

 
1,716

 
20

 
4.79

Lease financing
 
1,295

 
24

 
7.49

 
1,477

 
16

 
4.22

Residential mortgage
 
38,406

 
336

 
3.50

 
37,111

 
324

 
3.49

Unsecured consumer and home equity
 
5,877

 
108

 
7.37

 
3,681

 
59

 
6.48

Total loans held for investment
 
88,308

 
936

 
4.25

 
82,017

 
813

 
3.97

Securities
 
26,504

 
147

 
2.21

 
27,129

 
164

 
2.42

Securities borrowed or purchased under resale agreements
 
23,029

 
84

 
1.47

 
20,236

 
157

 
3.11

Interest bearing deposits in banks
 
7,424

 
46

 
2.50

 
3,913

 
18

 
1.84

Federal funds sold
 

 

 

 

 

 

Trading account assets
 
10,553

 
90

 
3.45

 
12,386

 
107

 
3.44

Other earning assets
 
550

 
4

 
3.24

 
334

 
1

 
1.30

Total earning assets
 
156,368

 
1,307

 
3.35

 
146,015

 
1,260

 
3.46

Allowance for loan losses
 
(513
)
 
 

 
 
 
(459
)
 
 

 
 
Cash and due from banks
 
1,895

 
 

 
 
 
1,814

 
 

 
 

Other assets(4)
 
12,586

 
 

 
 
 
11,972

 
 

 
 

Total assets
 
$
170,336

 
 

 
 
 
$
159,342

 
 

 
 

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Transaction and money market accounts
 
$
36,977

 
$
94

 
1.02
%
 
$
36,385

 
$
51

 
0.56
%
Savings
 
9,482

 
23

 
1.00

 
8,951

 
14

 
0.65

Time
 
16,140

 
98

 
2.42

 
5,907

 
21

 
1.44

Total interest bearing deposits
 
62,599

 
215

 
1.38

 
51,243

 
86

 
0.68

Commercial paper and other short-term borrowings
 
8,354

 
52

 
2.50

 
9,157

 
42

 
1.84

Securities loaned or sold under repurchase agreements
 
28,084

 
105

 
1.50

 
26,890

 
178

 
2.65

Long-term debt
 
16,562

 
127

 
3.08

 
14,532

 
94

 
2.57

Total borrowed funds
 
53,000

 
284

 
2.15

 
50,579

 
314

 
2.48

Trading account liabilities
 
3,476

 
26

 
3.05

 
3,739

 
29

 
3.16

Total interest bearing liabilities
 
119,075

 
525

 
1.77

 
105,561

 
429

 
1.63

Noninterest bearing deposits
 
31,320

 
 

 
 
 
33,129

 
 

 
 

Other liabilities(5)
 
2,755

 
 

 
 
 
2,244

 
 

 
 

Total liabilities
 
153,150

 
 

 
 
 
140,934

 
 

 
 

Equity
 
 
 
 
 
 
 
 
 
 
 
 
MUAH stockholders' equity
 
17,120

 
 

 
 
 
18,309

 
 

 
 

Noncontrolling interests
 
66

 
 

 
 
 
99

 
 

 
 

Total equity
 
17,186

 
 

 
 
 
18,408

 
 

 
 

Total liabilities and equity
 
$
170,336

 
 

 
 
 
$
159,342

 
 

 
 

Net interest income/spread (taxable-equivalent basis)
 
 

 
782

 
1.58
%
 
 

 
831

 
1.83
%
Impact of noninterest bearing deposits
 
 

 
 

 
0.37

 
 

 
 

 
0.39

Impact of other noninterest bearing sources
 
 

 
 

 
0.05

 
 

 
 

 
0.06

Net interest margin
 
 

 
 

 
2.00

 
 

 
 

 
2.28

Less: taxable-equivalent adjustment
 
 

 
5

 
 

 
 

 
6

 
 

Net interest income               
 
 

 
$
777

 
 

 
 

 
$
825

 
 

 
 
(1)
Yields, interest income and net interest margin are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.
(2)
Annualized.
(3)
Average balances of loans held for investment include nonaccrual loans. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield.
(4)
Other assets include noninterest bearing trading account assets.
(5)
Other liabilities include noninterest bearing trading account liabilities.


12


 
 
For the Six Months Ended
 
 
June 30, 2019
 
June 30, 2018
 
 
 
 
Average
Balance
 
Interest
Income/
Expense(1)
 
Average
Yield/
Rate(1)(2)
 
Average
Balance
 
Interest
Income/
Expense(1)
 
Average
Yield/
Rate(1)(2)
(Dollars in millions)
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for investment:(3)
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
25,390

 
$
562

 
4.46
%
 
$
23,497

 
$
468

 
4.01
%
Commercial mortgage
 
15,469

 
324

 
4.19

 
14,418

 
300

 
4.16

Construction
 
1,621

 
44

 
5.53

 
1,764

 
40

 
4.59

Lease financing
 
1,263

 
37

 
5.84

 
1,491

 
31

 
4.22

Residential mortgage
 
38,416

 
679

 
3.54

 
36,584

 
635

 
3.47

Unsecured consumer and home equity
 
5,566

 
201

 
7.26

 
3,585

 
113

 
6.38

Total loans held for investment
 
87,725

 
1,847

 
4.23

 
81,339

 
1,587

 
3.92

Securities
 
26,801

 
312

 
2.33

 
27,287

 
329

 
2.42

Securities borrowed or purchased under resale agreements
 
22,660

 
418

 
3.73

 
20,447

 
283

 
2.79

Interest bearing deposits in banks
 
6,749

 
82

 
2.46

 
3,313

 
29

 
1.76

Federal funds sold
 
2

 

 
7.11

 
10

 

 
2.23

Trading account assets
 
10,692

 
183

 
3.46

 
12,006

 
199

 
3.34

Other earning assets
 
546

 
9

 
3.36

 
468

 
4

 
1.75

Total earning assets
 
155,175

 
2,851

 
3.69

 
144,870

 
2,431

 
3.37

Allowance for loan losses
 
(493
)
 
 

 
 
 
(466
)
 
 
 
 
Cash and due from banks
 
1,818

 
 

 
 
 
1,827

 
 
 
 
Other assets(4)
 
12,427

 
 

 
 
 
12,165

 
 
 
 
Total assets
 
$
168,927

 
 

 
 
 
$
158,396

 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Transaction and money market accounts
 
$
37,035

 
$
180

 
0.98
%
 
$
36,674

 
$
92

 
0.50
%
Savings
 
9,552

 
47

 
1.00

 
8,763

 
25

 
0.58

Time
 
14,529

 
172

 
2.38

 
5,624

 
37

 
1.34

Total interest bearing deposits
 
61,116

 
399

 
1.32

 
51,061

 
154

 
0.61

Commercial paper and other short-term borrowings
 
8,798

 
108

 
2.48

 
8,855

 
75

 
1.72

Securities loaned or sold under repurchase agreements
 
27,618

 
460

 
3.36

 
27,009

 
316

 
2.36

Long-term debt
 
16,806

 
258

 
3.07

 
14,241

 
174

 
2.43

Total borrowed funds
 
53,222

 
826

 
3.13

 
50,105

 
565

 
2.27

Trading account liabilities
 
3,680

 
55

 
3.02

 
3,671

 
51

 
2.82

Total interest-bearing liabilities
 
118,018

 
1,280

 
2.19

 
104,837

 
770

 
1.48

Noninterest bearing deposits
 
31,195

 
 

 
 

 
32,931

 
 

 
 

Other liabilities(5)
 
2,726

 
 

 
 

 
2,308

 
 

 
 

Total liabilities
 
151,939

 
 

 
 

 
140,076

 
 

 
 

Equity
 
 
 
 
 
 
 
 
 
 
 
 
MUAH stockholders' equity
 
16,920

 
 

 
 

 
18,221

 
 

 
 

Noncontrolling interests
 
68

 
 

 
 

 
99

 
 

 
 

Total equity
 
16,988

 
 

 
 

 
18,320

 
 

 
 

Total liabilities and equity
 
$
168,927

 
 

 
 

 
$
158,396

 
 

 
 

Net interest income/spread (taxable-equivalent basis)
 
 

 
1,571

 
1.50
%
 
 
 
1,661

 
1.89
%
Impact of noninterest bearing deposits
 
 

 


 
0.46

 
 

 
 
 
0.35

Impact of other noninterest bearing sources
 
 

 
 

 
0.07

 
 

 
 
 
0.06

Net interest margin
 
 

 
 

 
2.03

 
 

 
 
 
2.30

Less: taxable-equivalent adjustment
 
 

 
11

 
 
 
 

 
11

 
 
Net interest income               
 
 

 
$
1,560

 
 

 
 

 
$
1,650

 
 

 
 
(1)
Yields, interest income and net interest margin are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.
(2)
Annualized.
(3)
Average balances of loans held for investment include nonaccrual loans. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield.
(4)
Other assets include noninterest bearing trading account assets.
(5)
Other liabilities include noninterest bearing trading account liabilities.
    

13


Net interest income for the three and six months ended June 30, 2019 decreased $48 million and $90 million, respectively, compared with the same periods in 2018 due to a decline in the net interest margin partially offset by an increase in earning assets. The net interest margin decreased 28 and 27 basis points, respectively, primarily due to an increase in funding costs, partially offset by the favorable effect of noninterest bearing deposits. Earning assets increased primarily due to increases in interest bearing deposits in banks, and commercial and industrial, commercial mortgage, residential mortgage, and unsecured consumer loans, partially offset by a decrease in trading account assets.
Noninterest Income and Noninterest Expense    
The following tables display our noninterest income and noninterest expense for the three and six months ended June 30, 2019 and 2018.
Noninterest Income
 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
 
 
 
 
Increase
(Decrease)
 
 
 
 
 
Increase
(Decrease)
 
 
June 30, 2019
 
June 30, 2018
 
 
June 30, 2019
 
June 30, 2018
 
(Dollars in millions)
 
Amount
 
Percent
 
Amount
 
Percent
Service charges on deposit accounts
 
$
40

 
$
45

 
$
(5
)
 
(11
)%
 
$
82

 
$
90

 
$
(8
)
 
(9
)%
Trust and investment management fees
 
29

 
30

 
(1
)
 
(3
)
 
58

 
59

 
(1
)
 
(2
)
Trading account activities
 
17

 
(10
)
 
27

 
270

 
36

 
(8
)
 
44

 
nm
Securities gains, net
 
22

 
3

 
19

 
nm
 
23

 
3

 
20

 
nm
Credit facility fees
 
24

 
23

 
1

 
4

 
47

 
46

 
1

 
2

Brokerage commissions and fees
 
19

 
19

 

 

 
39

 
37

 
2

 
5

Card processing fees, net
 
14

 
13

 
1

 
8

 
27

 
25

 
2

 
8

Investment banking and syndication fees
 
102

 
88

 
14

 
16

 
226

 
177

 
49

 
28

Fees from affiliates
 
353

 
299

 
54

 
18

 
695

 
575

 
120

 
21

Other, net
 
29

 
86

 
(57
)
 
(66
)
 
48

 
(26
)
 
74

 
285

Total noninterest income
 
$
649

 
$
596

 
$
53

 
9

 
$
1,281

 
$
978

 
$
303

 
31

Noninterest income increased during the three and six months ended June 30, 2019 compared with the same periods in 2018 primarily due to increases in trading account activities, gains on sale of securities, investment banking and syndication fees, and fees from affiliates from services provided to MUFG Bank, Ltd. under the master services agreement, partially offset by a decline in the fair value of mortgage servicing rights (included in other, net). In addition, the six months ended June 30, 2018, included the Company's share of losses on certain renewable energy investments of $164 million as a result of the TCJA (included in other, net).

14


Noninterest Expense
 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
 
 
Increase
(Decrease)
 
 
 
 
 
Increase
(Decrease)
 
 
June 30, 2019
 
June 30, 2018
 
 
June 30, 2019
 
June 30, 2018
 
(Dollars in millions)
 
 
Amount
 
Percent
 
Amount
 
Percent
Salaries and employee benefits
 
$
696

 
$
678

 
$
18

 
3
 %
 
$
1,381

 
$
1,348

 
$
33

 
2
 %
Net occupancy and equipment
 
103

 
85

 
18

 
21

 
215

 
175

 
40

 
23

Professional and outside services
 
161

 
114

 
47

 
41

 
321

 
246

 
75

 
30

Software
 
72

 
70

 
2

 
3

 
152

 
140

 
12

 
9

Regulatory assessments
 
12

 
22

 
(10
)
 
(45
)
 
28

 
45

 
(17
)
 
(38
)
Intangible asset amortization
 
10

 
7

 
3

 
43

 
17

 
14

 
3

 
21

Other
 
100

 
107

 
(7
)
 
(7
)
 
210

 
199

 
11

 
6

Total noninterest expense
 
$
1,154

 
$
1,083

 
$
71

 
7

 
$
2,324


$
2,167

 
$
157

 
7


The increase in noninterest expense for the three and six months ended June 30, 2019 compared with the same period in 2018 was largely driven by increases in costs associated with services provided to MUFG Bank, Ltd. under the master services agreement.

Income Tax Expense
In the second quarter of 2019, income tax expense was $20 million and the effective tax rate was 9%, compared with $28 million and an effective tax rate of 8% in the second quarter of 2018. For the six months ended June 30, 2019, income tax expense was $48 million and the effective tax rate was 11%, compared with negative 3% in the comparative prior year period. The income tax benefit and the negative effective tax rate for the six months ended June 30, 2018 were primarily due to an adjustment to certain prior period state income taxes during the first quarter of 2018. Excluding that adjustment, the effective tax rate for the six months ended June 30, 2018 would have been 8%.
For additional information regarding income tax expense, see "Income Tax Expense" in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations", “The changes in the U.S. tax laws, the majority of which were effective January 1, 2018, will impact our business and results of operations in a variety of ways, some of which are expected to be positive and others which may be negative” and “Our effective tax rates, and our future results can also be affected by our participation for state income tax purposes as a member of MUFG’s unitary group in the U.S. and by other factors” in Part I, Item 1A. "Risk Factors" and Note 17 "Income Taxes" to our Consolidated Financial Statements in Part II, Item 8. “Financial Statements and Supplementary Data” in our 2018 Form 10-K.

15


Balance Sheet Analysis
Securities
Our securities portfolio is primarily used for liquidity and interest rate risk management purposes, to invest cash resulting from excess liquidity, and to a lesser extent, to support our business development objectives. We strive to maximize total return while managing this objective within appropriate risk parameters. Securities available for sale are substantially comprised of U.S. Treasury securities, U.S. government-sponsored agency securities, RMBSs, CMBSs, Cash Flow CLOs, and direct bank purchase bonds. Direct bank purchase bonds are instruments that are issued in bond form, accounted for as securities, but underwritten as loans with features that are typically found in commercial loans, and are subject to national bank regulatory lending authority standards. These instruments typically are not issued in bearer form, nor are they registered with the SEC or the Depository Trust Company. Additionally, these instruments generally contain certain transferability restrictions and are not assigned external credit ratings. Securities held to maturity consist of U.S. Treasury securities, U.S. government-sponsored agency securities and U.S. government-sponsored agency RMBSs and CMBSs.
The amortized cost, gross unrealized gains, gross unrealized losses and fair values of securities, and securities pledged as collateral, are detailed in Note 2 "Securities" to our Consolidated Financial Statements in Part I, Item 1. "Financial Statements" in this Form 10-Q.
Loans Held for Investment
The following table shows loans held for investment outstanding by loan type at the end of each period presented.
 
 
 
 
 
 
Increase (Decrease)
 
 
June 30,
2019
 
December 31, 2018
 
(Dollars in millions)
 
Amount
 
Percent
Loans held for investment:
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
25,226

 
$
24,919

 
$
307

 
1
 %
Commercial mortgage
 
15,769

 
15,354

 
415

 
3

Construction
 
1,656

 
1,613

 
43

 
3

Lease financing
 
1,276

 
1,249

 
27

 
2

Total commercial portfolio
 
43,927

 
43,135

 
792

 
2

Residential mortgage
 
38,369

 
38,439

 
(70
)
 

Unsecured consumer and home equity          
 
6,172

 
4,933

 
1,239

 
25

Total consumer portfolio
 
44,541

 
43,372

 
1,169

 
3

Total loans held for investment
 
$
88,468

 
$
86,507

 
$
1,961

 
2


Loans held for investment increased from December 31, 2018 to June 30, 2019, primarily due to growth in the commercial and industrial, commercial mortgage and unsecured consumer loan portfolios.

16


Deposits
The table below presents our deposits as of June 30, 2019 and December 31, 2018.
 
 
 
 
 
 
Increase (Decrease)
 
 
June 30, 2019
 
December 31, 2018
 
(Dollars in millions)
 
Amount
 
Percent
Interest checking
 
$
3,863

 
$
3,598

 
$
265

 
7
 %
Money market
 
32,519

 
34,373

 
(1,854
)
 
(5
)
Total interest bearing transaction and money market accounts
 
36,382

 
37,971

 
(1,589
)
 
(4
)
Savings
 
9,375

 
9,515

 
(140
)
 
(1
)
Time
 
17,106

 
11,739

 
5,367

 
46

Total interest bearing deposits
 
62,863

 
59,225

 
3,638

 
6

Noninterest bearing deposits
 
31,725

 
31,754

 
(29
)
 

Total deposits
 
$
94,588

 
$
90,979

 
$
3,609

 
4


Total deposits increased $3.6 billion from December 31, 2018 to June 30, 2019 due to an increase in time deposits, partially offset by a decrease in money market accounts due to a decline in Regional Bank and Transaction Banking deposits. The increase in time deposits was primarily related to brokered deposits and PurePoint Financial, the direct banking division of the Bank.
Securities Financing Arrangements
The Company enters into securities purchased under agreements to resell, securities sold under agreements to repurchase, and securities borrowing and lending transactions to facilitate customer match-book activity, cover short positions and to fund the Company's trading inventory. These balances are almost entirely attributable to MUSA. See Note 5 "Securities Financing Arrangements" to our Consolidated Financial Statements in Part I, Item 1. "Financial Statements" in this Form 10-Q for additional information.


17



Capital Management
Both MUAH and MUB are subject to various capital adequacy regulations issued by the U.S. federal banking agencies, including requirements to complete an annual capital plan and to maintain minimum regulatory capital ratios. As of June 30, 2019, management believes the capital ratios of MUAH and MUB exceeded all regulatory requirements of “well-capitalized” institutions.
MUAH is subject to regulatory requirements to develop and maintain a capital plan which must be reviewed and approved by its Board of Directors (or designated subcommittee thereof). The Board of Directors approved the Company's annual capital plan in March 2019. MUAH was granted regulatory administrative relief in 2019 and was not required to submit its capital plan to the Federal Reserve or participate in the 2019 CCAR process. MUAH remains subject to future cycles of the Federal Reserve CCAR program.
MUAH and MUB are required to maintain minimum capital ratios under the standardized approach in accordance with the BCBS capital guidelines for U.S. banking organizations issued by the U.S. federal banking agencies (U.S. Basel III Rules). Among other requirements, the U.S. Basel III Rules require a minimum Common Equity Tier 1 capital ratio of 4.5% and a capital conservation buffer of 2.5% (for a total minimum Common Equity Tier 1 capital ratio of 7.0%) and a Tier 1 leverage ratio of 4%.
The following tables summarize the calculation of MUAH’s risk-based capital ratios in accordance with the U.S. Basel III rules as of June 30, 2019 and December 31, 2018.
MUFG Americas Holdings Corporation
 
 
U.S. Basel III
(Dollars in millions)
 
June 30, 2019
 
December 31, 2018
Capital Components
 
 
 
 
Common Equity Tier 1 capital
 
$
14,583

 
$
14,256

Tier 1 capital
 
$
14,583

 
$
14,256

Tier 2 capital
 
706

 
648

Total risk-based capital
 
$
15,289

 
$
14,904

Risk-weighted assets
 
$
105,501

 
$
102,088

Average total assets for leverage capital purposes
 
$
168,002

 
$
162,550

 
 
U.S. Basel III
 
Minimum Capital Requirement with Capital Conservation Buffer (1)
(Dollars in millions)
 
June 30, 2019
 
December 31, 2018
 
June 30, 2019
Capital Ratios
 
Amount
 
Ratio
 
Amount
 
Ratio
 
Amount
 
Ratio
Common Equity Tier 1 capital (to risk-weighted assets)
 
$
14,583

 
13.82
%
 
$
14,256

 
13.96
%
 
 
$
7,385

 
7.000
%
Tier 1 capital (to risk-weighted assets)
 
14,583

 
13.82

 
14,256

 
13.96

 
 
8,968

 
8.500

Total capital (to risk-weighted assets)
 
15,289

 
14.49

 
14,904

 
14.60

 
 
11,078

 
10.500

Tier 1 leverage(2)
 
14,583

 
8.68

 
14,256

 
8.77

 
 
6,720

 
4.000

 
 
(1)Beginning January 1, 2019, the minimum capital requirement includes a capital conservation buffer of 2.5%.
(2)Tier 1 capital divided by quarterly average assets (excluding certain disallowed assets, primarily goodwill and other intangibles).


18


The following tables summarize the calculation of MUB’s risk-based capital ratios in accordance with the guidelines set forth in the U.S. Basel III rules as of June 30, 2019 and December 31, 2018.
MUFG Union Bank, N.A.
 
 
U.S. Basel III