UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________ FORM 8-K ________________________________ CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 15, 2020 ________________________________ MUFG Americas Holdings Corporation (Exact name of registrant as specified in its charter) ________________________________ Delaware 001-15081 94-1234979 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 1251 Avenue of the Americas New York, NY 10020 (Address of principal executive offices) (Zip Code) Tel. (212) 782-6800 Registrant’s telephone number, including area code ________________________________ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company [ ] 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. [ ]
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(Address of principal executive offices) (Zip Code)
Tel. (212) 782-6800Registrant’s telephone number, including area code
________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registeredNone Not Applicable Not Applicable
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
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. [ ]
2
Item 7.01 Regulation FD Disclosure.
On May 15, 2020, MUFG Americas Holdings Corporation (the “Company”) has made available on its website (www.unionbank.com) an Investor Presentation which provided information to investors about the Company, a copy of which is furnished herewith as Exhibit 99.1. All information in Exhibit 99.1 is presented as of the particular date or dates referenced therein, and the Company does not undertake any obligation to, and disclaims any duty to, update any of the information provided.
The information in this Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 under the Securities Exchange Act of 1934 and shall not be deemed to be incorporated by reference into the Company’s filings under the Securities Act of 1933, except as specifically incorporated by reference therein.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
Exhibit No. Description n
99.1 Investor Presentation for the Quarter Ended March 31, 2020.
3
EXHIBIT INDEX
Exhibit No. Description n
99.1 Investor Presentation for the Quarter Ended March 31, 2020.
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
MUFG AMERICAS HOLDINGS CORPORATION
Date: May 15, 2020 By: /s/ NEAL HOLLAND
NEAL HOLLANDController and Chief Accounting Officer
This presentation describes activities of MUFG Americas Holdings Corporation and its consolidated subsidiaries (the Company) unless otherwise
specified. This presentation should be read in conjunction with the financial statements, notes and other information contained in the Company’s most
recent annual report on Form 10-K and Quarterly Reports on Forms 10-Q and in any subsequent filings with the Securities and Exchange Commission
(SEC).
The following appears in accordance with the Private Securities Litigation Reform Act. This presentation includes forward-looking statements that involve
risks and uncertainties. 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," or words of similar
meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” "might," or “may.” They may also consist of annualized amounts based on
historical interim period results. There are numerous risks and uncertainties that could and will cause actual results to differ materially from those
discussed in the Company’s forward-looking statements. Many of these factors are beyond the Company’s ability to control or predict and could have a
material adverse effect on the Company’s financial condition, and results of operations or prospects. For more information about factors that could cause
actual results to differ materially from our expectations, refer to our reports filed with the SEC, including the discussions under “Management’s Discussion
& Analysis of Financial Condition and Results of Operations” and “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and Quarterly
Reports on Forms 10-Q and in any subsequent filings with the SEC and available on the SEC’s website at www.sec.gov. In addition to the aforementioned
factors, the COVID-19 global pandemic is adversely affecting us, our clients, and our third-party service providers, among others, and its impact may
adversely affect our business and results of operations over a period of time. Any factor described above, in this presentation, or in our SEC reports could,
by itself or together with one or more other factors, adversely affect our financial condition, results of operations and prospects. All forward-looking
statements contained herein are based on information available at the time of this presentation, and the Company assumes no obligation to update any
forward-looking statements.
This investor presentation includes the tangible common equity capital ratio to facilitate the understanding of the Company’s capital structure and for use
in assessing and comparing the quality and composition of the Company's capital structure to other financial institutions. This investor presentation also
includes the adjusted efficiency ratio to enhance the comparability of MUAH's efficiency ratio when compared with other financial institutions. This
presentation should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP financial
measures presented by other companies. Please refer to our separate reconciliation of non-GAAP financial measures in our 10-Q for the quarter ended
March 31, 2020.
Forward-Looking Statements and Non-GAAP Financial Measures
Supporting Clients, Colleagues, and Communities affected by COVID-19
• Provided approximately $2.5 billion of loans toapprox. 13,500 clients1 under Waves 1 and 2 ofthe SBA Paycheck Protection Program
• MUFG Union Bank is preparing to participate in theMain Street Lending Program, further programdetails are expected from the Federal Reserve andDepartment of Treasury
• Provided 90-day temporary credit to clientaccounts that are overdrawn at the time EconomicImpact Payment is deposited or cashed
• Implemented mortgage payment relief options forflexible payments and suspension of late chargeassessments and delinquency reporting to creditbureau agencies
• Union Bank’s deposit assistance relief includeswaived fees upon request, enhanced processesto eliminate the need to visit a branch, increasedmobile deposit limits to accelerate access tofunds, and we will not be netting overdraftsagainst the government’s stimulus checks program
Supporting Clients through the CARES Act Colleagues
• Quickly ramped up technology to enable 80%+MUFG Americas2 colleagues to work from home
• Employee Relief Funding of $400,0001 foremployees in the US, which includes 100%contributions by all participating corporate entities,100% of Executive Committee members, and ~50%of Senior Leadership Team members
• All Union Bank branch staff in CA, WA, and ORreceived relief pay of up to $1,500; also, all MUFGAmericas colleagues in the US who became ill orneeded to attend to family matters receivedadditional time off
Since the CARES Act was enacted on March 27th, MUFG Union Bank took swift action to serve and support ourconsumer, small business, business banking, and now middle market clients through financial relief efforts.MUFG is also supporting colleagues and has made a philanthropic financial commitment to respond to localcommunity needs globally in response to COVID-19.
• $3 million commitment to support localcommunities globally to accelerate the path torecovery
Communities
1. As-of May 7, 20202. Colleagues from the U.S., Canada and Latin America
• Mitsubishi UFJ Financial Group (MUFG) U.S. franchise is the 11th largest among U.S. banks with combined total assetsof $341.4 billion1 as of 12/31/2019
• Strong footprint in affluent West Coast markets complemented by national reach via Global Corporate & InvestmentBanking and digital reach via PurePoint2
• Experienced local management team and a majority of independent board members
• High quality loan portfolio with historically strong credit performance – non-performing assets and net charge-offsgenerally below peer group
• Strong credit ratings and benefit from ownership by MUFG, one of the world’s largest financial organizations
• Strong balance sheet with high-quality capital base and strong liquidity – Tier 1 risk-based capital ratio of 13.88% (vs.9.95% reference banks average3)
Overview of U.S. Presence
1. Source: 12/31/19 FR Y-7Q2. MUAH will be transitioning PurePoint Financial to a fully digital offering and closed the 22 Financial Centers effective February 20, 2020.3. Reference banks consist of 12 CCAR-filing public regional banks (CFG, CMA, COF, FITB, HBAN, KEY, MTB, PNC, RF, TFC, USB, ZION) plus the four largest U.S. money center banks (BAC, C, JPM, WFC). Reference Banks’ average based on
reporting through April 27, 2020 (Source: SNL Financial)4
Significant presence in the United States through MUFG Americas Holdings Corp. (MUAH), its Intermediate HoldingCompany, as well as through MUFG branches, collectively referred to as Combined U.S. Operations (CUSO)
• Total Assets: $2.9 trillion,5th largest globally
across 50+ countries• Deposits: $1.7 trillion, 6th
largest globally
• Total Assets: $341billion3
• Loans: $183 billion, 9th
largest among U.S.Banks3
• Deposits: $200 billion3
• Locations: 352branches4
• Employees: ~13,240FTE5
1. Net of intercompany eliminations2. MUFG: Total Assets, Loans, and Deposits as of 12/31/2019 using an exchange rate of USD 1.00 = JPY 109.56; global rankings for Total Assets and Deposits are as of 12/31/2018; locations, employees, and countries are as of 12/31/20193. MUFG U.S.: Total Assets of $341 billion, Loans of $183 billion, and Deposits of $200 billion; including intercompany adjustments as of December 31, 20194. MUAH has transitioned PurePoint Financial to a fully digital offering and closed the 22 Financial Centers effective February 20, 20205. Source: MUAH's 12/31/2019 10-K filing, number of full-time equivalent (FTE) employees for MUAH only
We serve ourcorporate andinvestment bankingclients under theMUFG Brand; ourconsumer, wealth,and commercialbanking clientsunder the UnionBank brand; and ourdirect bankingbusiness under thePurePoint brand
2019Acquired IntrepidInvestmentBankers
Acquired TradePayable Services(TPS), a leadingsupply chainfinance platform,from GE Capital
Acquired FirstStateInvestments (US)LLC assubsidiary ofMUFG FundServices, a directsubsidiary ofMUAH
Today
7
2010 - 2013 2020Union Bank willuse the FISModernBankingPlatform to co-develop andco-engineersystems thatwill be core tothe bankingtransformationprogram
To effectively compete and meet our clients' needs, we are pursuing a multi-year effort to reduce our cost base anddrive continuous improvement. We are targeting a range of $250-$300 million in benefits for the first phase of the
Rewiring Program by 20231, some of which will be offset by reinvestment in technology, regulatory compliance andgrowth initiatives.
We are implementing the program through structural initiatives driven by four areas:
Effort launched in 2018 to drive value to the bottom line with implementation and rigorous tracking;accompanied by organization change management program to sustain lower cost base over time;objective is to close cost gap to US peers.
1. Not including any potential reductions in expenses and associated fees transfer-priced to MUFG U.S. branches that may also result from the program
Leverage strategic locations to reduce our high costfootprint and outsource certain activities that can beperformed efficiently and safely by third-party centersof excellence
Simplify our operations and automate manualprocesses to increase employee productivity
Reduce spend on consultants, travel andentertainment, and other third-party and discretionaryspend
Break down silos and combine like functions in sharedservice centers; increase spans and reduce layers
The Regional Bank is one of the largest regional bank holding companies in the United States,serving customers nationally through PurePoint Financial and in the West Coast leveraging
$10.7B Commercial & Industrial loansas of 3/31/2020
~7% Mid-market Commercial WestCoast Share5
$4.1B Unsecured Consumer Loansas of 3/31/20202
1. As of 3/31/20202. Does not include credit card portfolio3. Source: Data as of 3/20/20, sourced from Inside Nonconforming Newsletter4. Source: Commercial Mortgage Alert as of 12/31/17 5. Source: Based on % of lead relationships as a % of the total market, 2018 Greenwich Associates Market Tracking Program (Union Bank - CA/OR/WA - $20MM - 2B - Full Year 2018) 6. Source: SNL Financial as of 6/30/19, Pro Forma ownership which captures any known M&A or branch closure activity up to the current date, $500M deposit cap applied as a proxy for Retail deposits 7. Source: SNL Financial as of 6/30/19, Pro Forma ownership which captures any known M&A or branch closure activity up to the current date, no deposit cap applied
• Covers wholesale and investmentbanking customer loans across theUnited States included in MUAH'stotal commercial loan portfolio ofover $49 billion1
• Consists of industry segmentsacross MUAH, which are served bya broad suite of products acrossMUAH, including credit, TransactionBanking and securities products
MEO: Managing Executive OfficerREA: Regional Executive for the Americas
MUFG Bank
MUAH/MUB
MUFG
Ranjana ClarkHead of Transaction Banking
TRANSACTION BANKING
Daisuke BitoHead of Japanese CorporateBanking for the Americas
JAPANESE CORPORATEBANKING
Michael Coyne General Counsel
Johannes WorsoeChief Financial Officer
Masatoshi Komoriya Chief of Staff
Greg SeiblyHead of Regional Banking
Donna DellossoChief Risk Officer
RISKREGIONAL BANK
FINANCE LEGAL
Michael ThomChief Corporate AdministrativeOfficer
CORPORATE ADMINISTRATIONS
Amy Ward Chief Human Resources Officer
HUMAN RESOURCES
MEO, Regional Executive for the Americas, Deputy Chief Executive, Global Corporate & Investment BankingBusiness Unit and CEO for MUAH, Global Commercial BankingBusiness UnitPresident & CEO
MEO, Regional Executive for the Americas andMEO of Global Corporate & Investment Banking Business Group
Stephen Cummings
Kevin CroninHead of Corporate & InvestmentBanking - North America
17
GLOBAL CORPORATE &INVESTMENT BANKING
CHIEF OF STAFF
William MansfieldRegional Head of Global Markets /CEO MUSA
MUFG SECURITIES AMERICAS(MUSA)
Board Members
Independent Board Members Shareholder Appointees
• Stephen Cummings• Kazuo Koshi • Masahiro Kuwahara• Kazuto Uchida
MUFG Bank
MUAH/MUB
MUFG
MEO, Deputy REA and Executive in charge of Latin America andCanadian Regions
Executive ChairmanPMO (as MUFG/MUFG Bank Deputy REA)
MEO and Deputy Regional Executive for the Americas
Kazuo Koshi
• Toby S. Myerson• Roberta (Robin) A. Bienfait• Michael D. Fraizer• Mohan S. Gyani
• Ann F. Jaedicke• Suneel Kamlani• Barbara L. Rambo• Dean A. Yoost
Christopher HigginsChief Information & OperationsOfficer Head of the Transformation Program
2019 SHARP (Service Honors and Rewards Programs) Awards - BronzeFreddie Mac
Ranjana Clark and Bita Ardalan, Most Powerful Women in BankingAmerican Banker Magazine
Best Regional Banks Kiplinger's
Corporate Equality IndexEarning a perfect score for the sixth consecutive year, Human Rights Campaign Foundation
Bloomberg Gender Equality Index
Top Lead Arranger for Clean-Energy and Energy-Smart Technologies FinancingSeven of Last Nine Years, Bloomberg’s New Energy Finance League Table
MUFG Americas takes pride in our Achievements in Banking and Serving Our Communities
CRA Rating of OutstandingCommunity Service Action Plan Goals
MUFG Union Bank Achievements
Philanthropic Commitment to Communities
61,088 hoursVolunteer hours3 completed byMUFG Union Bank employeesin 2019
10 million+Individuals provided with basicneeds1
7,900+New businesses created1
The MUFG Union Bank Foundation invests in small business technical assistance andaccess to capital programs with the goal of helping entrepreneurs expand theirbusinesses
$41 billionIn total pledged commitments underour 5-year Community ServiceAction Plan1
Compared to the first quarter of 2019, net income decreased by $490 million
• Net loss attributable to MUAH was $306 million for the three months ended March 31, 2020, largely due to the provisionfor credit losses of $470 million.
• The provision for credit losses in the first quarter of 2020 was largely driven by the impact of COVID-19 and thecorresponding deterioration in the economic environment. The global pandemic from the spread of COVID-19 hassignificantly impacted the U.S. and California economies and caused significant ongoing economic uncertainty, whichmay affect our critical accounting estimates, including our assumptions used to estimate the allowance for credit lossesand used in our goodwill impairment analysis.
• In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which providesnew guidance on the accounting for credit losses for instruments that are within its scope. The Company adopted theASU on January 1, 2020, and recorded an increase to the allowance for credit losses of $199 million, primarily due to anincrease in the allowance for consumer loans, offset by a $52 million deferred tax asset, and a $147 million cumulative-effect adjustment reduction to retained earnings.
For the Three Months EndedMarch 31, December 31, March 31,
(Dollars in millions) 2020 2019 2019Results of operations:Net interest income $ 774 $ 779 $ 783Noninterest income 612 707 632Total revenue 1,386 1,486 1,415Noninterest expense 1,201 1,121 1,170Pre-tax, pre-provision income1 185 365 245(Reversal of) provision for credit losses 470 63 38Income before income taxes and including noncontrolling interests (285) 302 207Income tax expense (benefit) 25 52 28Net income including noncontrolling interests (310) 250 179Deduct: Net loss (income) from noncontrolling interests 4 5 5Net (loss) income attributable to MUAH $ (306) $ 255 $ 184
2020 First Quarter MUAH Results
201. 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
MUAH Balance Sheet and Profitability Highlights as of Period End
1. Annualized based on year to date activity2. Net interest margin is presented on a taxable-equivalent basis using the federal statutory tax rate of 21% for 2019 and 20203. The efficiency ratio is total noninterest expense as a percentage of total revenue (net interest income and noninterest income)4. Non-GAAP financial measure in our 10-Q for quarter ended March 31, 2020 and March 31, 2019 and the 10-K for the year ended December 31, 2019
Compared to the previous year:• Total assets decreased $5.0 billion
driven by a decline in securitiesborrowed or purchased underrepo of $7.1 billion, securitiesavailable for sale of $2.7 billion,securities held to maturity of $1.5billion and goodwill of $1.6 billion,offset by increase in interestbearing deposits in banks of $2.8billion, other assets of $2.4 billionand and trading account assets of$0.9 billion.
• Loans held for investmentincreased primarily due to growthin the commercial and industrial,commercial mortgage and otherconsumer partially offset by adecrease in the residentialmortgage and home equityportfolio.
• Total deposits increased $5.6billion primarily due to moneymarket and noninterest bearingdeposits.
As of Period End
March 31, December 31, March 31,(Dollars in millions) 2020 2019 2019Balance sheet (end of period)Total assets $ 165,696 $ 170,810 $ 170,707Total loans held for investment 89,786 88,213 87,587Total securities 24,008 27,210 28,216Securities borrowed or purchased under repo 15,715 23,943 22,860Trading account assets 11,799 10,377 10,889Total deposits 98,475 95,861 92,905Securities loaned or sold under repo 22,623 28,866 27,425Long-term debt 16,686 17,129 17,335Trading account liabilities 2,456 3,266 3,896MUAH stockholders' equity 16,448 16,280 16,897
Performance ratiosNet interest margin 1,2 2.02% 1.99% 2.06%Return on average assets 1 (0.72) (0.43) 0.44Return on average MUAH stockholders'equity 1 (7.41) (4.35) 4.41Return on tangible common equity 1,4 (8.30) 6.29 5.76Efficiency ratio 3 86.65 107.18 82.67Adjusted efficiency ratio 4 84.23 74.69 78.96
21
• $165.7 billion in total assets, of which MUB has $135.0 billion and MUSA has $27.5 billion• Assets comprised primarily of high-quality mortgage / C&I loans ($89.8 billion) and highly liquid securities ($24.0
billion), among others• Strong deposit base ($98.5 billion) supported with wholesale funding
Securities Purchased under Repo and Borrowed Trading Assets & Other
Cash and Cash Equivalents
1Q19 2Q19 3Q19 4Q19 1Q20
87 88 89 88 88
27 27 26 27 2622 23 23 23 2111 11 12 11 12
Money Market Savings Interest Checking
Time Deposit Non-Interest Bearing
1Q19 2Q19 3Q19 4Q19 1Q20
33 33 33 35 3910 9 9 9 94 4 4 5 215 17 17 16 14
31 32 33 32 34
Earning Assets3 ($B) Deposit Growth4 ($B)
Positive Balance Sheet Growth Trends
1. Average balance for the year ended March 31, 2020. May not total 100% due to rounding2. Period-end total loans held for investment, including all nonperforming loans and purchased credit-impaired loans. May not total 100% due to rounding 3. Average quarterly balances and growth rate may not total due to rounding4. Ending quarterly balances and growth rate may not total due to rounding
Major Deposit Share in Key California Locations1,2
Metropolitan Statistical Area (MSA) / State Rank Share (%)Santa Maria-Santa Barbara, CA 2 14.80San Diego-Chula Vista-Carlsbad, CA 4 13.25Salinas, CA 5 8.70Los Angeles-Long Beach-Anaheim, CA 4 8.69Fresno, CA 4 6.98Oxnard-Thousand Oaks-Ventura, CA 5 5.82Sacramento-Roseville-Folsom, CA 5 4.71Riverside-San Bernardino-Ontario, CA 6 4.08San Francisco-Oakland-Berkeley, CA 7 2.52San Jose-Sunnyvale-Santa Clara, CA 10 2.24
Overall California 4 5.91
Commercial DepositsRetail Deposits• Focus on core deposit growth while optimizing total bank-
wide funding costs across Union Bank and PurePointFinancial
• Launch new and innovative products to drive acquisitionand improve retention
• Execute COVID-19 responses to provide Consumer andSmall Business deposit relief efforts
• Align product and platform build-outs to increase PxVand drive core balance growth
• Focus on key customer segments, with improvedcustomer segmentation, data and reporting, and pricingstrategies
Deposit Breakdown ($B)3
1. Source: SNL Financial as of 6/30/19, “Pro Forma” ownership which captures any known M&A or branch closure activity up to the current date, no deposit cap applied2. The above balances do not include PurePoint deposits which are primarily placed with customers outside MUB's West Coast markets3. Period-end total deposits may not total 100% due to rounding
Home Equity Total Delinquency (60 Days + Past Due) 3,4
Residential Mortgage Performance Trends(60 days Past Due + in Foreclosure) 3
Residential Mortgage and Home Equity Loans Continue to Perform Well
1. At origination2. Excluding loans serviced by third-party service providers and loans covered by FDIC loss share agreements, includes PCI loans3. Data Source: Consumer Lending Monthly Summary and Key Statistics; Source: Residential – Mortgage Bankers Association, Home Equity-American Bankers Association4. National (SA) is seasonally adjusted American Bankers Association data; Benchmark metrics are reported on a one quarter lag
Largely secured, California-focused commercial real estate-purposed loans1 with strong credit performance
1. Commercial real estate-purposed loans are comprised of commercial mortgage loans, construction loans and C&I loans to borrowers with real estate-exposed businesses; does not include CMBS in the investment or trading portfolios2. Excludes loans not secured by real estate; subsets of California reported by Metropolitan Statistical Area (MSA); may not add to 100% due to rounding
1. Source: SNL Financial and company reports2. Total Loans for MUAH is based on Total Loans Held for Investment; Total Loans for Reference Banks' Average is based on gross loans which includes loans held for sale3. Reference Banks consist of 12 CCAR-filing public regional banks depicted on slide 3 plus the four largest U.S. money center banks. Reference Banks’ average based on reporting through April 25, 2020 (Source: SNL Financial) 4. Annualized ratio5. Criticized loans held for investment reflect loans in the commercial portfolio segment that are monitored for credit quality based on regulatory ratings. Amounts exclude small business loans, which are monitored by business credit score and
delinquency status
MUAH Reference Banks' Average
1.0%
0.5%
0.0%
-0.5%
1Q19 2Q19 3Q19 4Q19 1Q20
0.08% 0.09%
0.36%0.45%
0.29%
0.47% 0.45% 0.50% 0.54% 0.57%
Criticized Percent of Total Loans Held For Investment
Nonaccrual Loans % of Total Loans Held For Investment
• Under the joint agency Tailoring Rules, Category IV firms (such as MUAH) are required to maintain a liquidity buffer that is sufficient to meetthe projected net stress cash-flow need over a 30-day planning horizon under the firm's internal liquidity stress test and subject to monthlytailored liquidity reporting requirements.
• Unpledged securities of $21.3 billion; ability to meet expected obligations for at least 18 months without access to funding
• Key sources of funding consist primarily of deposits ($98.5 billion), supplemented by wholesale funding ($22.1 billion)
• Diversified wholesale funding mix, primarily including borrowings from the Federal Home Loan Bank (FHLB) of San Francisco, the parent(Total Loss Absorbing Capacity debt), and unsecured term debt in the capital markets
• Cash and cash equivalents increased $2.3 billion between4Q19 and 1Q20, which partially offsets the $3.0 billiondecrease in the Investment Portfolio
• Agency residential mortgage-backed securities consist ofsecurities guaranteed by a U.S. government corporation,such as Ginnie Mae, or a government-sponsored agencysuch as Freddie Mac or Fannie Mae
• Commercial mortgage-backed securities are collateralizedby commercial mortgage loans and are generally subject toprepayment penalties
• CLOs consist of structured finance products that securitizea diversified pool of loan assets into multiple classes ofnotes
• Other debt securities primarily consist of direct bankpurchase bonds, which are not rated by external creditrating agencies
Investment Portfolio1($ in billions)
1. Source: Fair value of securities in MUAH 10-Q Filing as of March 31, 2020 and December 31, 2019 respectively2. Source: MUAH 10-Q Filing as of March 31, 2020 31
High Quality Securities Financing Portfolio (MUSA)
Assets Liabilities
20,000
15,000
10,000
5,000
0
$(M
illio
ns)
O/N and Continuous 2-30 days 31-90 days > 90 days
$5,956 $5,726 $6,125
$2,385
$15,841
$1,596
$8,903
$762
52.6%
32.6%
7.0%
2.7%5.1%
38.7%
48.4%
5.8%3.7%
3.4%
Assets2 Liabilities2
• Securities financing activity largely conductedthrough MUSA
• Securities financing portfolio is primarilycollateralized by high quality, liquid assets
• Approximately 85% is collateralized by U.S.Treasuries and Agency MBS and 15% isbacked by equities, credit and other
• Robust risk management framework governssecured financing profile including guidelinesand limits for tenor gaps, counterpartyconcentration and stressed liquidity outflows
1. Includes continuous maturities which include open trades and term evergreen transactions that are primarily used to fund inventory2. Total assets and liabilities may not total 100% due to rounding
Interest Rate Risk Management of Exposures Other Than Trading
Net Interest Income (NII) Sensitivity ($MM)
+200bps
-100bps
Gra
dual
par
alle
l yie
ld c
urve
shi
ft ov
er12
-mon
th h
oriz
on
33
For additional information regarding estimates and assumptions used in our net interest income sensitivity analysis see “Market RiskManagement - Interest Rate Risk Management” in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition andResults of Operations” in our 2019 Form 10-K.
1. Reference Banks consist of 12 CCAR-filing public regional banks listed on slide 4 plus the four largest U.S. money center banks. Reference Banks’ average based on reporting through April 27, 2020 (Source: SNL Financial)
2. Non-GAAP financial measures. Refer to our separate reconciliation of non-GAAP financial measures in our 10-K for the for the years ended December 31, 2019 and our 10-Q for quarters March 31, 2020, September 30, 2019 and June 30,2019
MUAH's capital ratios exceed the average of the Reference Banks1
Capital ratios:
Reference Banks'Average1 MUAH Capital Ratios
March 31, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019Regulatory:
Common Equity Tier 1 risk-based capital ratio 9.95% 13.88% 14.10% 13.81% 13.82%
Tier 1 risk-based capital ratio 11.19 13.88 14.10 13.81 13.82Total risk-based capital ratio 13.42 14.79 14.73 14.48 14.49Tier 1 leverage ratio 9.17 8.91 8.88 8.62 8.68Other:
Tangible common equity ratio2 7.82 8.84 8.45 8.19 8.12
34
MUAH reports its regulatory capital ratios under the standardized approach of the U.S. Basel III Rules. Under the revisedEnhanced Prudential Standards (EPS) and joint agency capital and liquidity Tailoring Rules, MUAH is subject to Category IVrequirements; supervisory stress testing under the Federal Reserve’s (FRB) Comprehensive Capital Analysis & Review(CCAR) program is required every other year on even years and MUAH will be included in the FRB 2020 CCAR supervisorystress testing process. In March 2020, the FRB extended the deadline until April 5, 2021 for the information required in theannual FR Y-14A schedule submissions, other than “Schedule C – Regulatory Capital Instruments” for purposes of the annualcapital plan required submission for Category IV Firms.
MUAH submitted its 2020 Annual Capital Plan and “Schedule C – Regulatory Capital Instruments” schedule to the FRB by thedeadline of April 6, 2020 for its required annual Capital Plan submission.
MUAH continues to be subject to the FRB annual Horizontal Capital Review (HCR) supervisory review processes. For the2020 HCR review, the FRB announced it would perform a limited scope monitoring exercise versus an examination inrecognition that firms are managing through stress. The FRB’s 2020 HCR monitoring and outreach will focus onunderstanding the current challenges and risks related to the ongoing COVID-19 stress event and management’s associatedrisk mitigation and capital planning responses.
For the rating agencies, strong capital and conservative asset quality help offset MUAH’s lower profitability and ahigher level of wholesale funding relative to peers
Reference Banks’ Credit Ratings (5/14/2020)Holding Company Ratings Bank Ratings
Capital One Financial Corp. BBB Baa1 A- BBB+ Baa1 A-
Citizens Financial Group BBB+ NR BBB+ A- Baa1 BBB+
Regions Financial Corp. BBB+ Baa2 BBB+ A- Baa2 BBB+
Zions Bancorporation - - - BBB+ Baa2 BBB+
1. On November, 21, 2019, Moody's affirmed MUFG's ratings with a stable outlook. On December 4, 2019, Moody's affirmed the ratings of MUAH and MUB and the outlook was changed to negative from stable.
2. On April 24, 2020, S&P revised MUAH and MUB’s outlook to stable from positive. The change in outlook is followed by S&P’s revision to the MUFG Group’s outlook to stable from positive due to S&P's expectation that economic strain from the COVID-19pandemic will put prolonged pressure on the asset quality and revenue of MUFG lowering the likelihood of MUFG Group.
3. On May 1, 2020, Fitch affirmed MUAH, MUB and MUSA's long and short-term ratings. The Rating Watch Negative (assigned on April 16, 2020) has been removed and a negative outlook has been assigned due to concerns on the impact from COVID-19.On April 8, 2020, Fitch downgraded MUFG and MUFG Bank to A-/F1 outlook stable from A/F1 outlook negative. The downgrade was based on Fitch's view of a weaker and more challenging operating environment for Japanese banks as a result ofCOVID-19.
External Issued to MUFG Bank External Issued to MUFG Bank$400MM 3.50% Notes due 6/2022 $3,250MM Floating Rate Term Loan due 12/2022 -- --$400MM 3.00% Notes due 2/2025 $125MM Floating Rate Term Loan due 12/2022
$1,625MM Floating Rate Term Loan due 12/2023$1,765MM Floating Rate Term Loan due 12/2023€21.5MM Floating Rate Term Loan due 12/2023
MUFG Union Bank, N.A.Senior Subordinated Preferred
External Issued to MUFG Bank External Issued to MUFG Bank$1000MM 3.15% Notes due 4/2022 -- --$300MM Floating Rate Notes due 3/2022$700MM 2.10% Notes due 12/2022$300MM Floating Rate Notes due 12/2022
Other MUAH SubsidiariesSenior Subordinated Preferred
External Issued to MUFG Bank / Affiliates External Issued to MUFG Bank / Affiliates-- $250MM Floating Rate Term Loans due 12/2020 - 5/2021 -- --
$109MM Fixed Rate Term Loans due 9/2020 - 6/2023
1. Excludes non-recourse debt, junior subordinated debt, FHLB Loans and capital leases2. Based on various float and fixed rate borrowings due between 2020 and 2023
Long-Term Debt Redemption Schedule - Next 10 Years