Company Quick10K Filing
MUFG Americas
Price-0.00 EPS-7
Shares132 P/E0
MCap-0 P/FCF-0
Net Debt4,996 EBIT950
TEV4,996 TEV/EBIT5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-02-26
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-02
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-03
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-09
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-10
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-11
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-14
10-K 2011-12-31 Filed 2012-03-26
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-17
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-12
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-10
8-K 2020-08-07 Regulation FD, Exhibits
8-K 2020-05-15
8-K 2020-02-26
8-K 2019-12-09
8-K 2019-11-08
8-K 2019-09-16
8-K 2019-08-09
8-K 2019-05-15
8-K 2019-03-07
8-K 2019-02-27
8-K 2018-12-12
8-K 2018-11-07
8-K 2018-09-11
8-K 2018-08-08
8-K 2018-05-09
8-K 2018-03-01

UB 10Q Quarterly Report

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 muahq22020ex311.htm
EX-31.2 muahq22020ex312.htm
EX-32.1 muahq22020ex321.htm
EX-32.2 muahq22020ex322.htm

MUFG Americas Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
175140105703502012201420172020
Assets, Equity
1.50.90.3-0.2-0.8-1.42012201420172020
Rev, G Profit, Net Income
10.06.02.0-2.0-6.0-10.02012201420172020
Ops, Inv, Fin

10-Q 1 muah10qq22020.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, 2020
 
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
 
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
 
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 
Number of shares of Common Stock outstanding at July 31, 2020: 132,076,912
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
CARES Act
Coronavirus Aid, Relief, and Economic Security Act
CCAR
Comprehensive Capital Analysis and Review
CD
Certificate of deposit
CECL
Current Expected Credit Loss
CLO
Collateralized loan obligation
CMBS
Commercial mortgage-backed security
COVID-19
Coronavirus Disease 2019
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
EAD
Exposure at default
ECA
Executive Committee for the Americas
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
Fitch
Fitch Ratings
GAAP
Accounting principles generally accepted in the United States of America
GSIB
Global systemically important bank
IBOR
Inter-bank Offered Rate
LGD
Loss given default
LIBOR
London Inter-bank Offered Rate
LIHC
Low income housing tax credit
LLC
Limited Liability Company
LTV
Loan-to-value
Moody's
Moody's Investors Service
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.
nm
Not meaningful
OCI
Other comprehensive income
OFAC
U.S. Treasury's Office of Foreign Assets Control
OREO
Other real estate owned
PD
Probability of default
PPP
Paycheck Protection Program of the SBA
RMBS
Residential mortgage-backed security
S&P
Standard & Poor's Global Ratings
SBA
Small Business Administration
SEC
Securities and Exchange Commission
SERP
Supplemental Executive Retirement Plan
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 2019 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 2019 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 effects of the coronavirus pandemic on the U.S. and global economies, and on our business and results of operations, and the actions of governments to reduce the spread of the virus and to mitigate the resulting economic consequences, and the effect of the foregoing on our business
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, the Dodd-Frank Act, the EGRRCPA, as well as the Federal CARES Act enacted in March 2020 in an effort to mitigate the consequences of the coronavirus pandemic and the governmental actions in response thereto, 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, including the requirement that all CCAR

4


firms, including MUAH, conduct additional stress testing and resubmit their capital plans to the Federal Reserve within 45 days after the Federal Reserve releases new supervisory scenarios, 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
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, and our economic forecasts considered in determining the provision for credit losses
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, and the potential impact on our critical accounting estimates resulting from the significant ongoing uncertainty caused by the COVID-19 pandemic, 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
Technological challenges and our Transformation and Rewiring Programs and our other technology-related programs and initiatives and our expectations regarding their implementation and performance, including the impact and timing of completion of our Transformation and Rewiring programs

5


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 possible risks resulting from the replacement of LIBOR, the Company's exposure to IBOR-based rates, and the Company's LIBOR transition program and expectations regarding its effectiveness
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 and related electrical power outages 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 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 2019 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,
2020
 
June 30,
2019
 
Percent
Change
 
June 30,
2020
 
June 30,
2019
 
Percent
Change
Results of operations:
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
787

 
$
777

 
1
 %
 
$
1,561

 
$
1,560

 
 %
Noninterest income
 
809

 
649

 
25

 
1,421

 
1,281

 
11

Total revenue
 
1,596


1,426

 
12

 
2,982

 
2,841

 
5

Noninterest expense
 
1,178

 
1,154

 
2

 
2,379

 
2,324

 
2

Pre-tax, pre-provision income(1)
 
418

 
272

 
54

 
603

 
517

 
17

(Reversal of) provision for credit losses
 
361

 
56

 
nm
 
831

 
94

 
nm

Income (loss) before income taxes and including noncontrolling interests
 
57

 
216

 
(74)
 
(228
)
 
423

 
(154
)
Income tax expense (benefit)
 
39

 
20

 
95

 
64

 
48

 
33

Net income (loss) including noncontrolling interests
 
18

 
196

 
(91)
 
(292
)
 
375

 
(178
)
Deduct: Net loss (income) from noncontrolling interests               
 
4

 
3

 
33

 
8

 
8

 

Net income (loss) attributable to MUAH
 
$
22

 
$
199

 
(89)
 
$
(284
)
 
$
383

 
(174
)
Balance sheet (period average):
 
 
 
 
 

 

 
 
 

Total assets
 
$
169,012

 
$
170,336

 
(1
)%
 
$
168,978

 
$
168,927

 
 %
Total securities
 
23,663

 
26,504

 
(11
)
 
24,806

 
26,801

 
(7
)
Securities borrowed or purchased under resale agreements
 
15,173

 
23,029

 
(34
)
 
18,303

 
22,660

 
(19
)
Total loans held for investment
 
88,586

 
88,308

 

 
88,116

 
87,725

 

Earning assets
 
154,448

 
156,368

 
(1
)
 
155,015

 
155,175

 

Total deposits
 
102,666

 
93,919

 
9

 
99,533

 
92,311

 
8

Securities loaned or sold under repurchase agreements
 
21,629

 
28,084

 
(23
)
 
24,396

 
27,618

 
(12
)
MUAH stockholders' equity
 
16,849

 
17,120

 
(2
)
 
16,688

 
16,920

 
(1
)
Performance ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets(2)
 
0.05
 %
 
0.47
%
 
 

 
(0.34
)%
 
0.45
%
 
 

Return on average MUAH stockholders' equity(2)
 
0.52

 
4.65

 
 

 
(3.40
)
 
4.53

 
 

Return on average MUAH tangible common equity(2)(3)
 
0.70

 
6.09

 
 
 
(3.74
)
 
5.93

 
 
Efficiency ratio(4)
 
73.82

 
80.94

 
 

 
79.78

 
81.80

 
 

Adjusted efficiency ratio (5)
 
68.14

 
76.68

 
 
 
75.55

 
77.82

 
 
Net interest margin(2)(6)
 
2.05

 
2.00

 
 

 
2.03

 
2.03

 
 

Net loans charged-off to average total loans held for investment(2)
 
(0.24
)
 
0.09

 
 

 
(0.26
)
 
0.09

 
 



7


MUFG Americas Holdings Corporation and Subsidiaries
Consolidated Financial Highlights (Continued)
 
 
 
 
 
 
 
 
 
As of
 
 
 
 
June 30,
2020
 
December 31,
2019
 
Percent
Change
Balance sheet (end of period):
 
 
 
 
 
 
Total assets
 
$
167,350

 
$
170,810

 
(2
)%
Total securities
 
23,734

 
27,210

 
(13
)
Securities borrowed or purchased under resale agreements
 
17,081

 
23,943

 
(29
)
Total loans held for investment
 
86,535

 
88,213

 
(2
)
Nonperforming assets
 
621

 
329

 
89

Total deposits
 
102,572

 
95,861

 
7

Securities loaned or sold under repurchase agreements
 
22,087

 
28,866

 
(23
)
Long-term debt
 
16,785

 
17,129

 
(2
)
MUAH stockholders' equity
 
16,658

 
16,280

 
2

Credit ratios:
 
 
 
 
 
 
Allowance for loan losses to total loans held for investment(7)
 
1.68
%
 
0.61
%
 
 

Allowance for loan losses to nonaccrual loans(7)
 
233.74

 
164.19

 
 

Allowance for credit losses to total loans held for investment(8)
 
1.80

 
0.73

 
 

Allowance for credit losses to nonaccrual loans(8)
 
251.28

 
197.34

 
 

Nonperforming assets to total loans held for investment and OREO
 
0.72

 
0.37

 
 

Nonperforming assets to total assets
 
0.37

 
0.19

 
 

Nonaccrual loans to total loans held for investment
 
0.72

 
0.37

 
 

Capital ratios:
 
 

 
 

 
 
Regulatory(9):
 
 
 
 
 
 
Common Equity Tier 1 risk-based capital ratio
 
14.48
%
 
14.10
%
 
 
Tier 1 risk-based capital ratio
 
14.48

 
14.10

 
 

Total risk-based capital ratio
 
15.65

 
14.73

 
 

Tier 1 leverage ratio
 
8.94

 
8.88

 
 

Other:
 
 
 
 
 
 
Tangible common equity ratio(10)
 
8.88
%
 
8.45
%
 
 



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 (loss) 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.). 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. 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 and all applicable amendments.
(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, 2019 (2019 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, 2020 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, Global Corporate & Investment Banking - U.S., Transaction Banking and MUSA. We service Global Corporate & Investment Banking - U.S., 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 Global Corporate & Investment Banking - U.S. 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 $167.4 billion at June 30, 2020.
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 2020 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 2020, revenue was comprised of 49% net interest income and 51% 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


In order to better serve our clients and reduce our cost base, we have launched two multi-year initiatives that we believe are critical to our success: our technology-focused Transformation Program and our continuous improvement, cost-reduction focused Rewiring Program. The Transformation Program is based on three pillars: transformation of our core banking systems, data analytics and functionality, and technology modernization. The Rewiring Program targets four areas: workforce geographic distribution, organizational design, procurement, and process simplification and automation.
Performance Highlights
Net income (loss) attributable to MUAH was $22 million and ($284 million) for the three and six months ended June 30, 2020, respectively, compared with $199 million and $383 million in the same periods in 2019. The decreases in net income were largely due to the provision for credit losses of $361 million and $831 million for the three and six months ended June 30, 2020, respectively. The provision for credit losses for the three and six months ended June 30, 2020 was substantially driven by the impact of COVID-19 and the corresponding deterioration in the economic environment. The global pandemic from the spread of COVID-19 and governmental responses thereto have significantly impacted the U.S. and California economies and caused significant ongoing economic uncertainty, which may affect our critical accounting estimates, including our assumptions used to estimate the allowance for credit losses and used in our goodwill impairment analysis, and may adversely affect our business and results of operations in many other ways, the ultimate impact of which cannot be predicted at this time. See "Critical Accounting Estimates” in this Management's Discussion and Analysis of Financial Condition and Results of Operations and "Risk Factors" in Part II. Item 1A in this Form 10-Q.

On January 1, 2020, the Company adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which provides new guidance on the accounting for credit losses for instruments that are within its scope. This new guidance, commonly referred to as the CECL model, primarily impacts the Company's loans and certain off-balance sheet credit exposures and requires an entity to recognize its estimate of credit losses expected over the life of the financial instrument or exposure by incorporating forward-looking information, such as reasonable and supportable forecasts, in the entity's assessment of the collectability of financial assets. Incorporating forward-looking information into the estimate of credit losses may result in more volatility in the allowance for credit losses and related provision, particularly when the economic environment is more uncertain, such as during the first six months of 2020. Upon adoption, the Company recorded an increase to the allowance for credit losses of $199 million, primarily due to an increase in the allowance for consumer loans. The Company elected to calculate its regulatory capital ratios using the CECL five-year transition option as prescribed by the U.S. regulatory banking agencies. See "Risk Management - Credit Risk Management" in this Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 and Note 3 to our Consolidated Financial Statements in this Form 10-Q.
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 14.48%, 14.48% and 15.65%, respectively, at June 30, 2020. The Tier 1 leverage ratio was 8.94% at June 30, 2020.
    

11


Financial Performance
Net Interest Income
The following tables show the major components of net interest income and net interest margin.
 
 
For the Three Months Ended
 
 
June 30, 2020
 
June 30, 2019
 
 
 
 
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
 
$
30,079

 
$
212

 
2.83
%
 
$
25,511

 
$
282

 
4.44
%
Commercial mortgage
 
16,827

 
132

 
3.15

 
15,581

 
163

 
4.17

Construction
 
1,656

 
13

 
3.17

 
1,638

 
23

 
5.86

Lease financing
 
986

 
11

 
4.40

 
1,295

 
24

 
7.49

Residential mortgage and home equity
 
34,876

 
280

 
3.21

 
40,618

 
364

 
3.59

Other consumer
 
4,162

 
93

 
9.00

 
3,665

 
80

 
8.71

Total loans held for investment
 
88,586

 
741

 
3.35

 
88,308

 
936

 
4.25

Securities
 
23,663

 
134

 
2.27

 
26,504

 
147

 
2.21

Securities borrowed or purchased under resale agreements
 
15,173

 
33

 
0.87

 
23,029

 
84

 
1.47

Interest bearing deposits in banks
 
15,640

 
4

 
0.09

 
7,424

 
46

 
2.50

Trading account assets
 
10,276

 
96

 
3.72

 
10,553

 
90

 
3.45

Other earning assets
 
1,110

 
5

 
2.01

 
550

 
4

 
3.24

Total earning assets
 
154,448

 
1,013

 
2.63

 
156,368

 
1,307

 
3.35

Allowance for loan losses
 
(1,141
)
 
 

 
 
 
(513
)
 
 

 
 
Cash and due from banks
 
1,978

 
 

 
 
 
1,895

 
 

 
 

Other assets(4)
 
13,727

 
 

 
 
 
12,586

 
 

 
 

Total assets
 
$
169,012

 
 

 
 
 
$
170,336

 
 

 
 

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Transaction and money market accounts
 
$
43,041

 
$
31

 
0.28
%
 
$
36,977

 
$
94

 
1.02
%
Savings
 
9,438

 
12

 
0.51

 
9,482

 
23

 
1.00

Time
 
12,335

 
54

 
1.76

 
16,140

 
98

 
2.42

Total interest bearing deposits
 
64,814

 
97

 
0.60

 
62,599

 
215

 
1.38

Commercial paper and other short-term borrowings
 
4,640

 
9

 
0.79

 
8,354

 
52

 
2.50

Securities loaned or sold under repurchase agreements
 
21,629

 
13

 
0.25

 
28,084

 
105

 
1.50

Long-term debt
 
16,771

 
88

 
2.09

 
16,562

 
127

 
3.08

Total borrowed funds
 
43,040

 
110

 
1.03

 
53,000

 
284

 
2.15

Trading account liabilities
 
3,152

 
15

 
2.01

 
3,476

 
26

 
3.05

Total interest bearing liabilities
 
111,006

 
222

 
0.80

 
119,075

 
525

 
1.77

Noninterest bearing deposits
 
37,852

 
 

 
 
 
31,320

 
 

 
 

Other liabilities(5)
 
3,222

 
 

 
 
 
2,755

 
 

 
 

Total liabilities
 
152,080

 
 

 
 
 
153,150

 
 

 
 

Equity
 
 
 
 
 
 
 
 
 
 
 
 
MUAH stockholders' equity
 
16,849

 
 

 
 
 
17,120

 
 

 
 

Noncontrolling interests
 
83

 
 

 
 
 
66

 
 

 
 

Total equity
 
16,932

 
 

 
 
 
17,186

 
 

 
 

Total liabilities and equity
 
$
169,012

 
 

 
 
 
$
170,336

 
 

 
 

Net interest income/spread (taxable-equivalent basis)
 
 

 
791

 
1.83
%
 
 

 
782

 
1.58
%
Impact of noninterest bearing deposits
 
 

 
 

 
0.20

 
 

 
 

 
0.37

Impact of other noninterest bearing sources
 
 

 
 

 
0.02

 
 

 
 

 
0.05

Net interest margin
 
 

 
 

 
2.05

 
 

 
 

 
2.00

Less: taxable-equivalent adjustment
 
 

 
4

 
 

 
 

 
5

 
 

Net interest income               
 
 

 
$
787

 
 

 
 

 
$
777

 
 

 
 
(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, 2020
 
June 30, 2019
 
 
 
 
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
 
$
28,336

 
$
472

 
3.36
%
 
$
25,390

 
$
562

 
4.46
%
Commercial mortgage
 
16,910

 
284

 
3.36

 
15,469

 
324

 
4.19

Construction
 
1,598

 
29

 
3.67

 
1,621

 
44

 
5.53

Lease financing
 
995

 
22

 
4.47

 
1,263

 
37

 
5.84

Residential mortgage and home equity
 
35,973

 
600

 
3.34

 
40,631

 
736

 
3.63

Other consumer
 
4,304

 
195

 
9.11

 
3,351

 
144

 
8.63

Total loans held for investment
 
88,116

 
1,602

 
3.65

 
87,725

 
1,847

 
4.23

Securities
 
24,806

 
256

 
2.07

 
26,801

 
312

 
2.33

Securities borrowed or purchased under resale agreements
 
18,303

 
157

 
1.72

 
22,660

 
418

 
3.73

Interest bearing deposits in banks
 
12,218

 
31

 
0.51

 
6,749

 
82

 
2.46

Federal funds sold
 

 

 

 
2

 

 
7.11

Trading account assets
 
10,599

 
187

 
3.55

 
10,692

 
183

 
3.46

Other earning assets
 
973

 
11

 
2.25

 
546

 
9

 
3.36

Total earning assets
 
155,015

 
2,244

 
2.91

 
155,175

 
2,851

 
3.69

Allowance for loan losses
 
(951
)
 
 

 
 
 
(493
)
 
 
 
 
Cash and due from banks
 
2,050

 
 

 
 
 
1,818

 
 
 
 
Other assets(4)
 
12,864

 
 

 
 
 
12,427

 
 
 
 
Total assets
 
$
168,978

 
 

 
 
 
$
168,927

 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Transaction and money market accounts
 
$
41,630

 
$
107

 
0.52
%
 
$
37,035

 
$
180

 
0.98
%
Savings
 
9,195

 
26

 
0.58

 
9,552

 
47

 
1.00

Time
 
13,675

 
136

 
2.00

 
14,529

 
172

 
2.38

Total interest bearing deposits
 
64,500

 
269

 
0.84

 
61,116

 
399

 
1.32

Commercial paper and other short-term borrowings
 
5,116

 
36

 
1.41

 
8,798

 
108

 
2.48

Securities loaned or sold under repurchase agreements
 
24,396

 
132

 
1.10

 
27,618

 
460

 
3.36

Long-term debt
 
16,668

 
197

 
2.36

 
16,806

 
258

 
3.07

Total borrowed funds
 
46,180

 
365

 
1.59

 
53,222

 
826

 
3.13

Trading account liabilities
 
3,322

 
39

 
2.40

 
3,680

 
55

 
3.02

Total interest-bearing liabilities
 
114,002

 
673

 
1.19

 
118,018

 
1,280

 
2.19

Noninterest bearing deposits
 
35,033

 
 

 
 

 
31,195

 
 

 
 

Other liabilities(5)
 
3,171

 
 

 
 

 
2,726

 
 

 
 

Total liabilities
 
152,206

 
 

 
 

 
151,939

 
 

 
 

Equity
 
 
 
 
 
 
 
 
 
 
 
 
MUAH stockholders' equity
 
16,688

 
 

 
 

 
16,920

 
 

 
 

Noncontrolling interests
 
84

 
 

 
 

 
68

 
 

 
 

Total equity
 
16,772

 
 

 
 

 
16,988

 
 

 
 

Total liabilities and equity
 
$
168,978

 
 

 
 

 
$
168,927

 
 

 
 

Net interest income/spread (taxable-equivalent basis)
 
 

 
1,571

 
1.72
%
 
 
 
1,571

 
1.50
%
Impact of noninterest bearing deposits
 
 

 


 
0.28

 
 

 
 
 
0.46

Impact of other noninterest bearing sources
 
 

 
 

 
0.03

 
 

 
 
 
0.07

Net interest margin
 
 

 
 

 
2.03

 
 

 
 
 
2.03

Less: taxable-equivalent adjustment
 
 

 
10

 
 
 
 

 
11

 
 
Net interest income               
 
 

 
$
1,561

 
 

 
 

 
$
1,560

 
 

 
 
(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, 2020 was nearly flat compared with the same periods in 2019 due to the positive contribution of securities borrowing and lending transactions at MUSA, substantially offset by a decrease in net interest income from the Company's other lending activities, almost entirely at MUB. Rates on securities loaned or sold under repurchase agreements decreased more than yields on securities borrowed or purchased under resale agreements resulting in an increase in the net interest income from these transactions despite a decrease in the related balances. The decrease in net interest income from the other lending activities was primarily due to yields on earning assets declining more than funding costs in a declining rate environment. Earning assets decreased largely due to decreases in securities borrowed or purchased under resale agreements, residential mortgage and home equity loans, and securities, partially offset by increases in interest bearing deposits in banks, and commercial and industrial and commercial mortgage loans.
Noninterest Income and Noninterest Expense    
The following tables display our noninterest income and noninterest expense for the three and six months ended June 30, 2020 and 2019.
Noninterest Income
 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
 
 
 
 
Increase
(Decrease)
 
 
 
 
 
Increase
(Decrease)
 
 
June 30,
2020
 
June 30,
2019
 
 
June 30,
2020
 
June 30,
2019
 
(Dollars in millions)
 
Amount
 
Percent
 
Amount
 
Percent
Service charges on deposit accounts
 
$
34

 
$
40

 
$
(6
)
 
(15
)%
 
$
75

 
$
82

 
$
(7
)
 
(9
)%
Trust and investment management fees
 
29

 
29

 

 

 
58

 
58

 

 

Trading account activities
 
37

 
17

 
20

 
118
 
1

 
36

 
(35
)
 
(97)
Securities gains, net
 
57

 
22

 
35

 
159
 
110

 
23

 
87

 
378
Credit facility fees
 
26

 
24

 
2

 
8

 
50

 
47

 
3

 
6

Brokerage commissions and fees
 
15

 
19

 
(4
)
 
(21
)
 
33

 
39

 
(6
)
 
(15
)
Card processing fees, net
 
11

 
14

 
(3
)
 
(21
)
 
25

 
27

 
(2
)
 
(7
)
Investment banking and syndication fees
 
164

 
102

 
62

 
61

 
284

 
226

 
58

 
26

Fees from affiliates
 
393

 
353

 
40

 
11

 
754

 
695

 
59

 
8

Other, net
 
43

 
29

 
14

 
48

 
31

 
48

 
(17
)
 
(35
)
Total noninterest income
 
$
809

 
$
649

 
$
160

 
25

 
$
1,421

 
$
1,281

 
$
140

 
11

Noninterest income increased during the three and six months ended June 30, 2020 compared with the same periods in 2019 primarily due to increases in gains on sale of securities, investment banking and syndication fees, and fees from affiliates for services provided to MUFG Bank, Ltd. under the master services agreement. For the six months ended June 30, 2020 compared with the same period in 2019, these increases were partially offset by a decrease in trading account activities which included certain counterparty valuation adjustments. The decline in other, net for the six months ended June 30, 2020 compared with the same period in 2019 was largely due to a decrease in the fair value of mortgage servicing rights in the first quarter of 2020. The Company uses derivatives to offset changes in the fair value of mortgage servicing rights. Changes in the fair value of these derivatives were included in trading account activities.

14


Noninterest Expense
 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
 
 
Increase
(Decrease)
 
 
 
 
 
Increase
(Decrease)
 
 
June 30,
2020
 
June 30,
2019
 
 
June 30,
2020
 
June 30,
2019
 
(Dollars in millions)
 
 
Amount
 
Percent
 
Amount
 
Percent
Salaries and employee benefits
 
$
697

 
$
696

 
$
1

 
 %
 
$
1,373

 
$
1,381

 
$
(8
)
 
(1
)%
Net occupancy and equipment
 
106

 
103

 
3

 
3

 
222

 
215

 
7

 
3

Professional and outside services
 
173

 
161

 
12

 
7

 
345

 
321

 
24

 
7

Software
 
85

 
72

 
13

 
18

 
175

 
152

 
23

 
15

Regulatory assessments
 
17

 
12

 
5

 
42

 
30

 
28

 
2

 
7

Intangible asset amortization
 
5

 
10

 
(5
)
 
(50
)