MUFG Americas Holdings Corp - FORM 8-K - EX-99.1

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8-K - 8-K - MUFG Americas Holdings Corp	a14-11458_18k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE (TUESDAY, APRIL 29, 2014)

Contact:	Thomas Taggart	Mimi Mengis
	Corporate Communications	Investor Relations
	(415) 765-2249	(415) 765-3182

UNIONBANCAL CORPORATION REPORTS FIRST QUARTER NET INCOME OF $175 MILLION

SAN FRANCISCO — UnionBanCal Corporation (the Company), parent company of San Francisco-based Union Bank, N.A., today reported net income for the quarter of $175 million, down from $179 million for the prior quarter, and up from $148 million for the year-ago quarter.

First Quarter Highlights:

· Continued strong credit quality during the first quarter was reflected by low nonperforming assets and a net recovery of loans previously charged-off.

· Solid organic loan growth of $1.6 billion, or 2 percent, to $69.9 billion at March 31, 2014 compared with December 31, 2013 while maintaining disciplined underwriting standards and strong credit quality.

· Growth in residential mortgages and commercial mortgages were primary drivers of the organic loan growth in the first quarter.

· Total deposits grew $1.1 billion, or 1 percent, to $81.2 billion at March 31, 2014 compared with December 31, 2013, reflecting organic retail deposit growth.

· The Company continues to have a strong capital position.

· In late March, the Federal Reserve published its stress test results for the largest U.S. banks; the Federal Reserve did not object to the Company’s capital plan.

· Mitsubishi UFJ Financial Group, Inc. (MUFG), one of the world’s largest and most diversified financial groups with total assets of ¥258 trillion, or approximately $2.55 trillion, as of December 31, 2013, announced that effective July 1, 2014, it will integrate The Bank of Tokyo-Mitsubishi UFJ (BTMU) U.S. branch banking operations with the operations of Union Bank, N.A., and manage the combined U.S. banking operations under the new name MUFG Union Bank, N.A. All of BTMU’s Americas banking activities, including the newly unified U.S. organization, will be overseen by UnionBanCal Corporation, which will be renamed MUFG Americas Holdings Corporation.

Summary of First Quarter Results

First Quarter Total Revenue

For the first quarter 2014, total revenue (net interest income plus noninterest income) was $864 million, down $32 million compared with the fourth quarter 2013.

Net interest income decreased 3 percent and noninterest income decreased 5 percent. Net interest income for the first quarter 2014 was $683 million, down $23 million, or 3 percent, compared with the fourth quarter 2013. The decrease in net interest income was due substantially to lower interest income on our purchased credit-impaired (PCI) loan portfolio. Average total loans held for investment, excluding PCI loans, increased $1.8 billion, or 3 percent, compared with the fourth quarter 2013 primarily due to organic growth in residential mortgages along with commercial and industrial loans. The net interest margin was 2.87 percent, down 12 basis points from the prior quarter substantially due to lower yields in the PCI loan portfolio. Average total deposits increased $0.7 billion, or 1 percent, during the quarter compared with the fourth quarter 2013, primarily due to organic retail deposit growth. Substantially all of the growth in our deposits was in interest-bearing money market deposits.

For the first quarter 2014, noninterest income was $181 million, down $9 million, or 5 percent, compared with fourth quarter 2013, primarily due to lower net gains on the sale of securities and trading account income.

Compared to first quarter 2013, total revenue declined $40 million, with net interest income up 5 percent and noninterest income down 28 percent. Noninterest income decreased $70 million, or 28 percent, primarily due to lower net gains on the sale of securities. Net interest income increased $30 million compared with the year-ago quarter, primarily due to acquisitions and organic loan growth. This increase was partially offset by a 17 basis point decline in the net interest margin, which was primarily due to lower yields on loans and securities. Average total loans held for investment, excluding PCI loans, increased $8.8 billion, or 15 percent, compared with first quarter 2013, primarily due to organic loan growth and the PB Capital portfolio acquisition, which closed in the second quarter of 2013. Average total deposits increased $6.2 billion compared with the first quarter of 2013, primarily due to organic growth and acquisitions, with average interest bearing deposits up $4.4 billion, or 9 percent, and average noninterest bearing deposits up $1.7 billion, or 7 percent.

First Quarter Noninterest Expense

Noninterest expense for the first quarter 2014 was $660 million, down $29 million compared with the fourth quarter 2013. This decrease was substantially due to lower current quarter productivity initiative costs, pension expense and merger costs, partially offset by a higher provision for losses on unfunded credit commitments. Compared to the first quarter 2013, noninterest expense was down $53 million, or 7 percent. This decline was largely driven by lower current quarter merger costs and pension expense.

Balance Sheet

At March 31, 2014, the Company had total assets of $107.2 billion, up $1.3 billion compared with December 31, 2013, primarily due to securities and loan growth. At March 31, 2014, total deposits were $81.2 billion, up $1.1 billion compared with December 31, 2013, reflecting organic deposit growth. Core deposits at March 31, 2104 were $70.7 billion compared with $69.2 billion at December 31, 2013.

Credit Quality

Credit quality remained strong in the first quarter 2014 reflected by continued low levels of nonperforming assets and a net recovery of loans previously charged-off.

Excluding PCI loans and FDIC covered OREO, nonperforming assets ended the quarter at $467 million, or 0.44 percent of total assets; compared with $447 million or 0.43 percent of total assets, at December 31, 2013; and $520 million, or 0.54 percent of total assets, at March 31, 2013.

Excluding PCI loans and FDIC covered OREO, net recoveries of loans previously charged-off were $6 million for the first quarter of 2014 compared with net charge-offs of $18 million for the fourth quarter 2013 and net charge-offs of $12 million for the first quarter 2013.

In the first quarter of 2014, the overall provision for credit losses was zero compared with a benefit of $21 million for the fourth quarter 2013 and a provision of $12 million for the first quarter 2013. The allowance for credit losses as a percentage of total loans, excluding PCI loans, was 1.02 percent at March 31, 2014, compared with 1.04 percent at December 31, 2013, and 1.30 percent at March 31, 2013. The allowance for credit losses as a percentage of nonaccrual loans, excluding PCI loans, was 156 percent at March 31, 2014 compared with 164 percent at December 31, 2013 and 158 percent at March 31, 2013.

Capital

The Company’s stockholder’s equity was $14.5 billion at March 31, 2014 compared with $14.2 billion at December 31, 2013. The Basel I Tier 1 and Total risk-based capital ratios were 12.64 percent and 14.85 percent, respectively, at March 31, 2014. The Basel I Tier 1 common capital ratio was 12.57 percent at March 31, 2014. The tangible common equity ratio was 10.65 percent at March 31, 2014.

The Company’s estimated Common equity tier 1 risk-based capital ratio was 11.42 percent at March 31, 2014. The Common equity tier 1 risk-based capital ratio was calculated using the standardized approach on a fully phased-in basis under the U.S. Basel III regulatory capital rules.

Non-GAAP Financial Measures

This press release contains certain references to financial measures identified as excluding PCI loans, FDIC covered OREO, privatization transaction impact, foreclosed asset expense, other credit costs, (reversal of) provision for losses on unfunded credit commitments, productivity initiative costs and gains, low income housing credit (LIHC) investment amortization expense, expenses of the LIHC consolidated variable interest entities, merger costs related to acquisitions, or intangible asset amortization, which are adjustments from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (GAAP). These financial measures, as used herein, differ from financial measures reported under GAAP in that they exclude unusual or non-recurring charges, losses or credits. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information which is important to a proper understanding of the Company’s business results. This press release also includes additional capital ratios (Basel I Tier 1 common capital, the tangible common equity and the Basel III Common equity tier 1 capital ratios) to facilitate the understanding of the Company’s capital structure and for use in assessing and comparing the quality and composition of UnionBanCal’s capital structure to other financial institutions. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies.

Forward-Looking Statements

The following appears in accordance with the Private Securities Litigation Reform Act. This press release 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,” “continue,” “expect,” “target,” “anticipate,” “intend,” “plan,” “estimate,” “potential,” “ project,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” 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 Securities and Exchange Commission (SEC), including the discussions under “Management’s Discussion & Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results

and condition. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statements.

Headquartered in San Francisco, UnionBanCal Corporation is a financial holding company and bank holding company with assets of $107.2 billion at March 31, 2014. Its principal subsidiary, Union Bank, N.A., provides an array of financial services to individuals, small businesses, middle-market companies, and major corporations. Union Bank, N.A. operated 422 branches, comprised primarily of retail banking branches in the West Coast states, along with branches in Texas, Illinois, New York and Georgia, as well as two international offices. UnionBanCal Corporation is a wholly owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd. which is a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc., one of the world’s largest and most diversified financial groups. Visit www.unionbank.com for more information.

###

UnionBanCal Corporation and Subsidiaries

Financial Highlights (Unaudited)

																Percent Change to
	As of and for the Three Months Ended															March 31, 2014 from
	March 31,			December 31,			September 30,			June 30,			March 31,			December 31,		March 31,
(Dollars in millions)	2014			2013			2013			2013 (1)			2013 (1)			2013		2013
Results of operations:
Net interest income	$	683		$	706		$	685		$	672		$	653		(3	)%	5	%
Noninterest income	181			190			234			201			251			(5	)	(28	)
Total revenue	864			896			919			873			904			(4	)	(4	)
Noninterest expense	660			689			689			702			713			(4	)	(7	)
Pre-tax, pre-provision income (2)	204			207			230			171			191			(1	)	7
(Reversal of) provision for loan losses	(16		)	(23		)	(16		)	(3		)	(3		)	30		(433	)
Income before income taxes and including noncontrolling interests	220			230			246			174			194			(4	)	13
Income tax expense	50			55			55			35			50			(9	)	—
Net income including noncontrolling interests	170			175			191			139			144			(3	)	18
Deduct: Net loss from noncontrolling interests	5			4			7			3			4			25		25
Net income attributable to UnionBanCal Corporation (UNBC)	$	175		$	179		$	198		$	142		$	148		(2	)	18

Balance sheet (end of period):
Total assets	$	107,237		$	105,894		$	105,484		$	102,279		$	96,975		1		11
Total securities	23,192			22,326			22,318			24,415			22,816			4		2
Total loans held for investment	69,933			68,312			67,170			65,843			60,882			2		15
Core deposits (3)	70,665			69,155			68,334			65,533			63,585			2		11
Total deposits	81,179			80,101			79,415			77,356			74,038			1		10
Long-term debt	6,545			6,547			7,803			6,058			5,314			—		23
UNBC stockholder’s equity	14,460			14,215			12,549			12,371			12,565			2		15

Balance sheet (period average):
Total assets	$	106,491		$	104,424		$	101,534		$	98,714		$	96,649		2		10
Total securities	22,611			22,282			22,909			23,183			21,824			1		4
Total loans held for investment	69,293			67,619			66,608			63,673			60,553			2		14
Earning assets	96,100			94,707			92,035			89,292			87,055			1		10
Total deposits	80,433			79,747			77,434			75,350			74,256			1		8
UNBC stockholder’s equity	14,390			12,604			12,210			12,599			12,584			14		14

Performance ratios:
Return on average assets (4)	0.66		%	0.68		%	0.78		%	0.58		%	0.61		%
Return on average UNBC stockholder’s equity (4)	4.87			5.66			6.50			4.53			4.68
Return on average assets excluding the impact of privatization transaction and merger costs related to acquisitions (4) (5)	0.72			0.75			0.81			0.66			0.72
Return on average UNBC stockholder’s equity excluding the impact of privatization transaction and merger costs related to acquisitions (4) (5)	6.11			7.41			8.01			6.17			6.69
Efficiency ratio (6)	76.38			76.89			75.01			80.37			78.84
Adjusted efficiency ratio (7)	67.95			67.08			67.21			69.45			67.72
Net interest margin (4) (8)	2.87			2.99			2.99			3.03			3.04

Capital ratios:
Tier 1 risk-based capital ratio (9) (10)	12.64		%	12.41		%	11.17		%	11.55		%	12.54		%
Total risk-based capital ratio (9) (10)	14.85			14.61			13.11			13.63			14.02
Tier 1 leverage ratio (10)	11.27			11.27			10.22			10.36			10.70
Tier 1 common capital ratio (9) (10) (11)	12.57			12.34			11.10			11.47			12.45
Tangible common equity ratio (12)	10.65			10.54			9.01			9.08			10.02
Common equity tier 1 risk-based capital ratio (U.S. Basel III standardized approach; fully phased-in) (10) (13)	11.42			11.14			n/a			n/a			n/a

Refer to Exhibit 11 for footnote explanations.

Exhibit 1

UnioBanCal Corporation and Subsidiaries

Credit Quality (Unaudited)

																Percent Change to
	As of and for the Three Months Ended															March 31, 2014 from
	March 31,			December 31,			September 30,			June 30,			March 31,			December 31,		March 31,
(Dollars in millions)	2014			2013			2013			2013			2013			2013		2013

Credit Data:
(Reversal of) provision for loan losses, excluding purchased credit-impaired loans	$	(18	)	$	(22	)	$	(16	)	$	(3	)	$	(3	)	18	%	(500	)%
(Reversal of) provision for purchased credit-impaired loan losses not subject to FDIC indemnification	2			(1		)	—			—			—			300		nm
(Reversal of) provision for losses on unfunded credit commitments	16			2			1			(2		)	15			nm		7
Total (reversal of) provision for credit losses	$	—		$	(21	)	$	(15	)	$	(5	)	$	12		(100	)	(100	)

Net loans charged-off (recovered)	$	(6	)	$	11		$	(1	)	$	8		$	14		(155	)	(143	)
Nonperforming assets	506			499			574			589			607			1		(17	)
Criticized loans held for investment (14)	1,317			1,274			1,270			1,362			1,545			3		(15	)

Credit Ratios:
Allowance for loan losses to:
Total loans held for investment	0.80		%	0.83		%	0.91		%	0.95		%	1.05		%
Nonaccrual loans	119.58			128.42			119.04			120.11			122.62
Allowance for credit losses to (15) :
Total loans held for investment	1.01			1.02			1.10			1.16			1.27
Nonaccrual loans	151.35			158.30			144.63			146.34			149.24
Net loans charged-off (recovered) to average total loans held for investment (4)	(0.04		)	0.07			(0.01		)	0.05			0.10
Nonperforming assets to total loans held for investment and Other Real Estate Owned (OREO)	0.72			0.74			0.85			0.89			1.00
Nonperforming assets to total assets	0.47			0.48			0.54			0.58			0.63
Nonaccrual loans to total loans held for investment	0.67			0.65			0.76			0.79			0.85

Excluding purchased credit-impaired loans and FDIC covered OREO (16):
Allowance for loan losses to:
Total loans held for investment	0.80		%	0.84		%	0.92		%	0.97		%	1.06		%
Nonaccrual loans	123.14			132.82			123.53			125.69			129.56
Allowance for credit losses to (15) :
Total loans held for investment	1.02			1.04			1.12			1.18			1.30
Nonaccrual loans	156.05			163.78			150.14			153.18			157.75
Net loans charged-off (recovered) to average total loans held for investment (4)	(0.04		)	0.11			0.01			0.06			0.08
Nonperforming assets to total loans held for investment and OREO	0.68			0.66			0.78			0.81			0.87
Nonperforming assets to total assets	0.44			0.43			0.49			0.52			0.54
Nonaccrual loans to total loans held for investment	0.65			0.63			0.75			0.77			0.82

Refer to Exhibit 11 for footnote explanations.

Exhibit 2

UnionBanCal Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

	For the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in millions)	2014			2013			2013			2013(1)			2013(1)
Interest Income
Loans	$	667		$	695		$	668		$	649		$	629
Securities	115			115			118			118			118
Other	5			6			2			2			3
Total interest income	787			816			788			769			750

Interest Expense
Deposits	62			64			63			61			60
Commercial paper and other short-term borrowings	1			1			2			1			1
Long-term debt	41			45			38			35			36
Total interest expense	104			110			103			97			97

Net Interest Income	683			706			685			672			653
(Reversal of) provision for loan losses	(16		)	(23		)	(16		)	(3		)	(3		)
Net interest income after (reversal of) provision for loan losses	699			729			701			675			656

Noninterest Income
Service charges on deposit accounts	51			51			53			52			53
Trust and investment management fees	26			28			34			38			35
Trading account activities	16			20			15			21			5
Securities gains, net	2			8			47			27			96
Credit facility fees	28			28			31			26			26
Merchant banking fees	24			25			29			23			16
Brokerage commissions and fees	13			12			12			11			11
Card processing fees, net	8			8			8			9			9
Other, net	13			10			5			(6		)	—
Total noninterest income	181			190			234			201			251

Noninterest Expense
Salaries and employee benefits	388			406			391			413			421
Net occupancy and equipment	71			70			77			84			75
Professional and outside services	55			64			66			62			58
Intangible asset amortization	13			16			16			17			16
Regulatory assessments	15			14			20			20			20
(Reversal of) provision for losses on unfunded credit commitments	16			2			1			(2		)	15
Other	102			117			118			108			108
Total noninterest expense	660			689			689			702			713

Income before income taxes and including noncontrolling interests	220			230			246			174			194
Income tax expense	50			55			55			35			50
Net Income including Noncontrolling Interests	170			175			191			139			144
Deduct: Net loss from noncontrolling interests	5			4			7			3			4
Net Income attributable to UNBC	$	175		$	179		$	198		$	142		$	148

Refer to Exhibit 11 for footnote explanations.

Exhibit 3

UnionBanCal Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)

	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in millions except for per share amount)	2014			2013			2013			2013 (1)			2013 (1)
Assets
Cash and due from banks	$	1,792		$	1,863		$	1,719		$	1,405		$	1,265
Interest bearing deposits in banks	2,883			4,329			5,471			1,899			3,776
Federal funds sold and securities purchased under resale agreements	32			11			122			50			50
Total cash and cash equivalents	4,707			6,203			7,312			3,354			5,091
Trading account assets (includes $9 at March 31, 2014; $8 at December 31, 2013; $13 at September 30, 2013; $4 at June 30, 2013; and $40 at March 31, 2013 of assets pledged as collateral)	841			851			776			844			1,119
Securities available for sale	15,366			15,817			16,872			23,510			21,801
Securities held to maturity (Fair value: March 31, 2014, $7,810; December 31, 2013, $6,439; September 30, 2013, $5,450; June 30, 2013, $891; and March 31, 2013, $1,036)	7,826			6,509			5,446			905			1,015
Loans held for investment	69,933			68,312			67,170			65,843			60,882
Allowance for loan losses	(557		)	(568		)	(608		)	(625		)	(638		)
Loans held for investment, net	69,376			67,744			66,562			65,218			60,244
Premises and equipment, net	641			688			685			699			707
Goodwill	3,227			3,228			3,168			3,186			2,952
Other assets	5,253			4,854			4,663			4,563			4,046
Total assets	$	107,237		$	105,894		$	105,484		$	102,279		$	96,975

Liabilities
Deposits:
Noninterest bearing	$	26,881		$	26,495		$	26,126		$	25,655		$	24,679
Interest bearing	54,298			53,606			53,289			51,701			49,359
Total deposits	81,179			80,101			79,415			77,356			74,038
Commercial paper and other short-term borrowings	2,660			2,563			3,078			3,792			2,228
Long-term debt	6,545			6,547			7,803			6,058			5,314
Trading account liabilities	531			540			614			566			742
Other liabilities	1,611			1,675			1,767			1,866			1,818
Total liabilities	92,526			91,426			92,677			89,638			84,140

Equity
UNBC Stockholder’s Equity:
Common stock, par value $1 per share:
Authorized 300,000,000 shares; 136,330,830 shares issued and outstanding as of March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013	136			136			136			136			136
Additional paid-in capital	7,196			7,191			5,985			5,979			5,997
Retained earnings	7,687			7,512			7,333			7,135			6,993
Accumulated other comprehensive loss	(559		)	(624		)	(905		)	(879		)	(561		)
Total UNBC stockholder’s equity	14,460			14,215			12,549			12,371			12,565
Noncontrolling interests	251			253			258			270			270
Total equity	14,711			14,468			12,807			12,641			12,835
Total liabilities and equity	$	107,237		$	105,894		$	105,484		$	102,279		$	96,975

Refer to Exhibit 11 for footnote explanations.

Exhibit 4

UnionBanCal Corporation and Subsidiaries

Net Interest Income (Unaudited)

	For the Three Months Ended
	March 31, 2014							December 31, 2013
				Interest		Average					Interest		Average
	Average			Income/		Yield/		Average			Income/		Yield/
(Dollars in millions)	Balance			Expense (8)		Rate (4)(8)		Balance			Expense (8)		Rate (4)(8)
Assets
Loans held for investment: (17)
Commercial and industrial	$	23,969		$	198	3.34	%	$	23,176		$	196	3.35	%
Commercial mortgage	13,230			119		3.61		12,984			123		3.78
Construction	946			8		3.67		868			7		3.46
Lease financing	849			11		5.41		981			8		3.43
Residential mortgage	25,990			238		3.66		25,143			231		3.67
Home equity and other consumer loans	3,233			32		3.99		3,305			35		4.13
Loans, before purchased credit-impaired loans	68,217			606		3.58		66,457			600		3.60
Purchased credit-impaired loans	1,076			61		22.90		1,162			96		32.75
Total loans held for investment	69,293			667		3.88		67,619			696		4.10
Securities	22,611			120		2.12		22,282			118		2.12
Interest bearing deposits in banks	3,565			2		0.25		4,242			3		0.26
Federal funds sold and securities purchased under resale agreements	131			—		0.18		138			—		0.09
Trading account assets	267			2		3.08		203			2		4.36
Other earning assets	233			1		1.40		223			1		1.89
Total earning assets	96,100			792		3.31		94,707			820		3.45
Allowance for loan losses	(577		)					(618		)
Cash and due from banks	1,499							1,553
Premises and equipment, net	645							678
Other assets	8,824							8,104
Total assets	$	106,491						$	104,424
Liabilities
Interest bearing deposits:
Transaction and money market accounts	$	37,519		36		0.38		$	36,636		35		0.38
Savings	5,572			1		0.11		5,576			1		0.13
Time	11,214			25		0.92		11,431			28		0.96
Total interest bearing deposits	54,305			62		0.47		53,643			64		0.48
Commercial paper and other short-term borrowings (18)	2,632			1		0.21		2,562			1		0.22
Long-term debt	6,546			41		2.47		7,094			45		2.52
Total borrowed funds	9,178			42		1.82		9,656			46		1.91
Total interest bearing liabilities	63,483			104		0.66		63,299			110		0.69
Noninterest bearing deposits	26,128							26,104
Other liabilities	2,237							2,160
Total liabilities	91,848							91,563
Equity
UNBC Stockholder’s equity	14,390							12,604
Noncontrolling interests	253							257
Total equity	14,643							12,861
Total liabilities and equity	$	106,491						$	104,424

Net interest income/spread (taxable-equivalent basis)				688		2.65	%				710		2.76	%
Impact of noninterest bearing deposits						0.19							0.20
Impact of other noninterest bearing sources						0.03							0.03
Net interest margin						2.87							2.99
Less: taxable-equivalent adjustment				5							4
Net interest income				$	683						$	706

Refer to Exhibit 11 for footnote explanations.

Exhibit 5

UnionBanCal Corporation and Subsidiaries

Net Interest Income (Unaudited)

	For the Three Months Ended
	March 31, 2014							March 31, 2013
				Interest		Average					Interest		Average
	Average			Income/		Yield/		Average			Income/		Yield/
(Dollars in millions)	Balance			Expense (8)		Rate (4)(8)		Balance			Expense (1)(8)		Rate (1)(4)(8)
Assets
Loans held for investment: (17)
Commercial and industrial	$	23,969		$	198	3.34	%	$	21,341		$	177	3.37	%
Commercial mortgage	13,230			119		3.61		9,898			101		4.10
Construction	946			8		3.67		650			8		5.21
Lease financing	849			11		5.41		1,062			7		2.49
Residential mortgage	25,990			238		3.66		22,858			222		3.88
Home equity and other consumer loans	3,233			32		3.99		3,602			34		3.84
Loans, before purchased credit-impaired loans	68,217			606		3.58		59,411			549		3.72
Purchased credit-impaired loans	1,076			61		22.90		1,142			80		28.33
Total loans held for investment	69,293			667		3.88		60,553			629		4.19
Securities	22,611			120		2.12		21,824			121		2.21
Interest bearing deposits in banks	3,565			2		0.25		4,223			3		0.25
Federal funds sold and securities purchased under resale agreements	131			—		0.18		171			—		0.19
Trading account assets	267			2		3.08		151			—		0.29
Other earning assets	233			1		1.40		133			—		0.64
Total earning assets	96,100			792		3.31		87,055			753		3.48
Allowance for loan losses	(577		)					(653		)
Cash and due from banks	1,499							1,399
Premises and equipment, net	645							705
Other assets	8,824							8,143
Total assets	$	106,491						$	96,649
Liabilities
Interest bearing deposits:
Transaction and money market accounts	$	37,519		36		0.38		$	31,705		22		0.28
Savings	5,572			1		0.11		5,855			2		0.14
Time	11,214			25		0.92		12,314			36		1.17
Total interest bearing deposits	54,305			62		0.47		49,874			60		0.49
Commercial paper and other short-term borrowings (18)	2,632			1		0.21		1,837			1		0.21
Long-term debt	6,546			41		2.47		5,406			36		2.68
Total borrowed funds	9,178			42		1.82		7,243			37		2.05
Total interest bearing liabilities	63,483			104		0.66		57,117			97		0.68
Noninterest bearing deposits	26,128							24,382
Other liabilities	2,237							2,302
Total liabilities	91,848							83,801
Equity
UNBC Stockholder’s equity	14,390							12,584
Noncontrolling interests	253							264
Total equity	14,643							12,848
Total liabilities and equity	$	106,491						$	96,649

Net interest income/spread (taxable-equivalent basis)				688		2.65	%				656		2.80	%
Impact of noninterest bearing deposits						0.19							0.20
Impact of other noninterest bearing sources						0.03							0.04
Net interest margin						2.87							3.04
Less: taxable-equivalent adjustment				5							3
Net interest income				$	683						$	653

Refer to Exhibit 11 for footnote explanations.

Exhibit 6

UnionBanCal Corporation and Subsidiaries

Loans and Nonperforming Assets (Unaudited)

	March 31,		December 31,		September 30,		June 30,		March 31,
(Dollars in millions)	2014		2013		2013		2013		2013

Loans held for investment (period end)
Loans held for investment:
Commercial and industrial	$	23,654	$	23,528	$	23,125	$	22,266	$	21,433
Commercial mortgage	13,568		13,092		12,905		13,008		9,918
Construction	1,019		905		855		808		659
Lease financing	845		854		972		984		1,060
Total commercial portfolio	39,086		38,379		37,857		37,066		33,070
Residential mortgage	26,602		25,547		24,714		23,835		23,146
Home equity and other consumer loans	3,194		3,280		3,336		3,456		3,542
Total consumer portfolio	29,796		28,827		28,050		27,291		26,688
Loans held for investment, before purchased credit-impaired loans	68,882		67,206		65,907		64,357		59,758
Purchased credit-impaired loans	1,051		1,106		1,263		1,486		1,124
Total loans held for investment	$	69,933	$	68,312	$	67,170	$	65,843	$	60,882

Nonperforming Assets (period end)
Nonaccrual loans:
Commercial and industrial	$	89	$	44	$	62	$	69	$	49
Commercial mortgage	46		51		88		62		57
Total commercial portfolio	135		95		150		131		106
Residential mortgage	266		286		293		315		326
Home equity and other consumer loans	49		46		48		50		59
Total consumer portfolio	315		332		341		365		385
Nonaccrual loans, before purchased credit-impaired loans	450		427		491		496		491
Purchased credit-impaired loans	16		15		20		24		29
Total nonaccrual loans	466		442		511		520		520

OREO	17		20		22		25		29
FDIC covered OREO	23		37		41		44		58

Total nonperforming assets	$	506	$	499	$	574	$	589	$	607

Total nonperforming assets, excluding purchased credit-impaired loans and FDIC covered OREO	$	467	$	447	$	513	$	521	$	520

Loans 90 days or more past due and still accruing (19)	$	4	$	5	$	8	$	7	$	3

Refer to Exhibit 11 for footnote explanations.

Exhibit 7

UnionBanCal Corporation and Subsidiaries

Allowance for Credit Losses (Unaudited)

	As of and for the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in millions)	2014			2013			2013			2013			2013

Analysis of Allowance for Credit Losses
Balance, beginning of period	$	568		$	608		$	625		$	638		$	653
(Reversal of) provision for loan losses, excluding purchased credit-impaired loans	(18		)	(22		)	(16		)	(3		)	(3		)
(Reversal of) provision for purchased credit-impaired loan losses not subject to FDIC indemnification	2			(1		)	—			—			—
Increase (decrease) in allowance covered by FDIC indemnification	—			(6		)	(2		)	(2		)	2
Other	(1		)	—			—			—			—
Loans charged-off:
Commercial and industrial	(5		)	(18		)	(6		)	(11		)	(1		)
Commercial mortgage	(1		)	(2		)	(2		)	(1		)	(2		)
Construction	—			—			(1		)	—			—
Total commercial portfolio	(6		)	(20		)	(9		)	(12		)	(3		)
Residential mortgage	(1		)	(1		)	(2		)	(3		)	(7		)
Home equity and other consumer loans	(2		)	(4		)	(2		)	(5		)	(6		)
Total consumer portfolio	(3		)	(5		)	(4		)	(8		)	(13		)
Purchased credit-impaired	—			—			—			—			(3		)
Total loans charged-off	(9		)	(25		)	(13		)	(20		)	(19		)

Recoveries of loans previously charged-off:
Commercial and industrial	11			6			5			7			3
Commercial mortgage	—			—			4			2			—
Construction	3			—			1			—			—
Lease financing	—			1			—			—			—
Total commercial portfolio	14			7			10			9			3
Home equity and other consumer loans	1			—			2			1			1
Total consumer portfolio	1			—			2			1			1
Purchased credit-impaired	—			7			2			2			1
Total recoveries of loans previously charged-off	15			14			14			12			5
Net loans recovered (charged-off)	6			(11		)	1			(8		)	(14		)

Ending balance of allowance for loan losses	557			568			608			625			638
Allowance for losses on unfunded credit commitments	148			132			131			136			138
Total allowance for credit losses	$	705		$	700		$	739		$	761		$	776

Components of allowance for loan losses:
Allowance for loan losses, excluding allowance on purchased credit-impaired loans	$	554		$	567		$	607		$	624		$	637
Allowance for loan losses on purchased credit-impaired loans	3			1			1			1			1
Total allowance for loan losses	$	557		$	568		$	608		$	625		$	638

Exhibit 8

UnionBanCal Corporation and Subsidiaries

Securities (Unaudited)

Securities Available for Sale

									Fair Value			Fair Value
	March 31, 2014				December 31, 2013				Change from			% Change from
	Amortized		Fair		Amortized		Fair		December 31,			December 31,
(Dollars in millions)	Cost		Value		Cost		Value		2013			2013
Asset Liability Management securities:
U.S. government-sponsored agencies	$	72	$	72	$	73	$	73	$	(1	)	(1	)%
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	8,754		8,529		9,194		8,900		(371		)	(4	)
Privately issued	207		210		220		222		(12		)	(5	)
Privately issued - commercial mortgage-backed securities	1,876		1,830		1,947		1,870		(40		)	(2	)
Collateralized loan obligations	2,642		2,642		2,670		2,673		(31		)	(1	)
Asset-backed and other	24		25		34		35		(10		)	(29	)
Asset Liability Management securities	13,575		13,308		14,138		13,773		(465		)	(3	)
Other debt securities:
Direct bank purchase bonds	1,986		1,987		1,968		1,960		27			1
Other	67		63		81		76		(13		)	(17	)
Equity securities	7		8		7		8		—			—
Total securities available for sale	$	15,635	$	15,366	$	16,194	$	15,817	$	(451	)	(3	)

Securities Held to Maturity

									Carrying Amount		Carrying Amount
	March 31, 2014				December 31, 2013				Change from		% Change from
	Carrying		Fair		Carrying		Fair		December 31,		December 31,
(Dollars in millions)	Amount (20)		Value		Amount (20)		Value		2013		2013
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	$	5,466	$	5,443	$	4,995	$	4,934	$	471	9	%
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	1,751		1,762		1,514		1,505		237		16
U.S. Treasury	484		481		—		—		484		nm
U.S. government-sponsored agencies	125		124		—		—		125		nm
Total securities held to maturity	$	7,826	$	7,810	$	6,509	$	6,439	$	1,317	20

Exhibit 9

UnionBanCal Corporation and Subsidiaries

Reconciliation of Non-GAAP Measures (Unaudited)

The following table presents a reconciliation between certain Generally Accepted Accounting Principles (GAAP) amounts and specific non-GAAP measures as used to compute selected non-GAAP financial ratios.

	As of and for the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in millions)	2014			2013			2013			2013 (1)			2013 (1)
Net income attributable to UNBC	$	175		$	179		$	198		$	142		$	148
Net adjustments for merger costs related to acquisitions, net of tax	11			12			15			27			24
Net adjustments for privatization transaction, net of tax	1			2			(14		)	(8		)	(1		)
Net income attributable to UNBC, excluding impact of privatization transaction and merger costs related to acquisitions	$	187		$	193		$	199		$	161		$	171

Average total assets	$	106,491		$	104,424		$	101,534		$	98,714		$	96,649
Less: Net adjustments related to privatization transaction	2,272			2,297			2,309			2,318			2,330
Average total assets, excluding impact of privatization transaction	$	104,219		$	102,127		$	99,225		$	96,396		$	94,319
Return on average assets (4)	0.66		%	0.68		%	0.78		%	0.58		%	0.61		%
Return on average assets, excluding impact of privatization transaction and merger costs related to acquisitions (4) (5)	0.72			0.75			0.81			0.66			0.72

Average UNBC stockholder’s equity	$	14,390		$	12,604		$	12,210		$	12,599		$	12,584
Less: Adjustments for merger costs related to acquisitions	(118		)	(105		)	(93		)	(64		)	(48		)
Less: Net adjustments for privatization transaction	2,302			2,306			2,319			2,337			2,353
Average UNBC stockholder’s equity, excluding impact of privatization transaction and merger costs related to acquisitions	$	12,206		$	10,403		$	9,984		$	10,326		$	10,279
Return on average UNBC stockholder’s equity (4)	4.87		%	5.66		%	6.50		%	4.53		%	4.68		%
Return on average UNBC stockholder’s equity, excluding impact of privatization transaction and merger costs related to acquisitions (4) (5)	6.11			7.41			8.01			6.17			6.69

Noninterest expense	$	660		$	689		$	689		$	702		$	713
Less: Foreclosed asset expense and other credit costs	—			2			(2		)	(3		)	(1		)
Less: (Reversal of) provision for losses on unfunded credit commitments	16			2			1			(2		)	15
Less: Productivity initiative costs	1			20			14			13			4
Less: Low income housing credit (LIHC) investment amortization expense	20			24			17			20			15
Less: Expenses of the LIHC consolidated VIEs	8			6			11			6			6
Less: Merger costs related to acquisitions	17			25			25			44			40
Less: Net adjustments related to privatization transaction	10			14			13			14			14
Less: Intangible asset amortization	3			3			3			4			3
Noninterest expense, as adjusted (a)	$	585		$	593		$	607		$	606		$	617

Total revenue	$	864		$	896		$	919		$	873		$	904
Add: Net interest income taxable-equivalent adjustment	5			4			4			4			3
Less: Productivity initiative gains	—			6			11			—			—
Less: Accretion related to privatization-related fair value adjustments	6			8			8			3			5
Less: Other credit costs	2			1			1			2			(9		)
Total revenue, as adjusted (b)	$	861		$	885		$	903		$	872		$	911
Adjusted efficiency ratio (a)/(b) (7)	67.95		%	67.08		%	67.21		%	69.45		%	67.72		%

Total UNBC stockholder’s equity	$	14,460		$	14,215		$	12,549		$	12,371		$	12,565
Less: Goodwill	3,227			3,228			3,168			3,186			2,952
Less: Intangible assets, except mortgage servicing rights (MSRs)	275			288			287			321			337
Less: Deferred tax liabilities related to goodwill and intangible assets	(102		)	(105		)	(110		)	(118		)	(122		)
Tangible common equity (c)	$	11,060		$	10,804		$	9,204		$	8,982		$	9,398
Total assets	$	107,237		$	105,894		$	105,484		$	102,279		$	96,975
Less: Goodwill	3,227			3,228			3,168			3,186			2,952
Less: Intangible assets, except MSRs	275			288			287			321			337
Less: Deferred tax liabilities related to goodwill and intangible assets	(102		)	(105		)	(110		)	(118		)	(122		)
Tangible assets (d)	$	103,837		$	102,483		$	102,139		$	98,890		$	93,808
Tangible common equity ratio (c)/(d) (12)	10.65		%	10.54		%	9.01		%	9.08		%	10.02		%

Tier 1 capital, determined in accordance with Basel I regulatory requirements	$	11,658		$	11,471		$	10,153		$	9,931		$	10,031
Less: Junior subordinated debt payable to trusts	66			66			66			66			66
Basel I Tier 1 common capital (e)	11,592			11,405			10,087			9,865			9,965
Accumulated other comprehensive loss related to securities available for sale and pension and other benefits	(448		)	(522		)	n/a			n/a			n/a
Other	(91		)	(95		)	n/a			n/a			n/a
Common equity tier 1 capital estimated under U.S. Basel III (f)	$	11,053		$	10,788		$	n/a		$	n/a		$	n/a
Risk-weighted assets, determined in accordance with regulatory requirements (g)	$	92,208		$	92,410		$	90,900		$	85,979		$	80,018
Add: Adjustments from Basel I to U.S. Basel III	4,555			4,444			n/a			n/a			n/a
Total risk-weighted assets, estimated under U.S. Basel III (h)	$	96,763		$	96,854		$	n/a		$	n/a		$	n/a
Common equity tier 1 risk-based capital ratio (f)/(h) (10) (13)	11.42			11.14			n/a			n/a			n/a
Tier 1 common capital ratio (e)/(g) (9) (10) (11)	12.57			12.34			11.10			11.47			12.45

Refer to Exhibit 11 for footnote explanations.

Exhibit 10

UnionBanCal Corporation and Subsidiaries

Footnotes

(1)		During the third quarter of 2013, the Company corrected prior period errors related to the recognition of income and expense associated with market-linked certificates of deposits. The Company concluded that these errors were not material to the periods in which the corrections were made.
(2)		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 loan losses through a credit cycle.
(3)		Core deposits exclude brokered deposits, foreign time deposits and domestic time deposits greater than $250,000.
(4)		Annualized.
(5)		These ratios exclude the impact of the privatization transaction and merger costs related to acquisitions. Management believes that these ratios provide useful supplemental information regarding UnionBanCal’s business results. Please refer to Exhibit 10 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
(6)		The efficiency ratio is total noninterest expense as a percentage of total revenue (net interest income and noninterest income).
(7)		The adjusted efficiency ratio, a non-GAAP financial measure, is adjusted noninterest expense (noninterest expense excluding privatization-related expenses and fair value amortization/accretion, foreclosed asset expense and other credit costs, (reversal of) provision for losses on unfunded credit commitments, low income housing credit (LIHC) investment amortization expense, expenses of the LIHC consolidated variable interest entities, merger costs related to acquisitions, certain costs related to productivity initiatives, and intangible asset amortization) as a percentage of adjusted total revenue (net interest income (taxable-equivalent basis) and noninterest income), excluding the impact of privatization, gains from productivity initiatives related to the sale of certain business units and premises, and other credit costs. Management discloses the adjusted efficiency ratio as a measure of the efficiency of our operations, focusing on those costs most relevant to our business activities. Please refer to Exhibit 10 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
(8)		Yields, interest income and net interest margin are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent.
(9)		Effective September 30, 2013, the Company updated the methodologies applied to the calculation of its regulatory capital ratios as the result of recent regulatory correspondence, which clarified the treatment of certain off-balance sheet credit exposures. If the Company had applied the new methodology on a retrospective basis, the Tier 1 risk-based capital ratio would have been 11.04% and 11.97% as of June 30, 2013 and March 31, 2013, respectively; the Total risk-based capital ratio would have been 13.03% and 13.40% as of June 30, 2013 and March 31, 2013, respectively; and the Tier 1 common capital ratio would have been 10.97% and 11.90% as of June 30, 2013 and March 31, 2013, respectively.
(10)		Estimated as of March 31, 2014.
(11)		The Tier 1 common capital ratio is the ratio of Basel I Tier 1 capital, less qualifying trust preferred securities, to risk-weighted assets. The Tier 1 common capital ratio, a non-GAAP financial measure, facilitates the understanding of UnionBanCal’s capital structure and is used to assess and compare the quality and composition of UnionBanCal’s capital structure to other financial institutions. Please refer to Exhibit 10 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
(12)		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 UnionBanCal’s capital structure and is used to assess and compare the quality and composition of UnionBanCal’s capital structure to other financial institutions. Please refer to Exhibit 10 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
(13)		Common equity tier 1 risk-based capital is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies as if the U.S. Basel III rules (standardized approach on a fully phased-in basis, which includes accumulated other comprehensive loss elements as prescribed by the U.S. Basel III rules) were effective at December 31, 2013. Management reviews common equity tier 1 risk-based capital along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation from Tier 1 capital determined in accordance with Basel I regulatory requirements, because of current interest in such information on the part of market participants.
(14)		Criticized loans held for investment reflect loans in the commercial portfolio segment that are monitored for credit quality based on internal ratings. Amounts exclude small business loans, which are monitored by business credit score and delinquency status.
(15)		The allowance for credit losses ratios include the allowances for loan losses and losses on unfunded credit commitments.
(16)		These ratios exclude the impact of all purchased credit-impaired loans and FDIC covered OREO. Purchased credit-impaired loans and OREO related to the April 2010 acquisitions of certain assets and assumption of certain liabilities of Frontier Bank and Tamalpais Bank are covered under loss share agreements between Union Bank, N.A. and the Federal Deposit Insurance Corporation. Management believes the exclusion of purchased credit-impaired loans and FDIC covered OREO from certain asset quality ratios that include nonperforming loans, nonperforming assets, net loans charged off, total loans held for investment and the allowance for loan losses or credit losses in the numerator or denominator provides a better perspective into underlying asset quality trends.
(17)		Average balances on loans held for investment include all nonperforming loans. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield.
(18)		Includes interest bearing trading liabilities.
(19)		Excludes loans totaling $123 million, $124 million, $203 million, $210 million, and $125 million that are 90 days or more past due and still accruing at March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013, respectively, which consist of loans accounted for within loan pools in accordance with the accounting standards for purchased credit-impaired loans. The past due status of individual loans within the pools is not a meaningful indicator of credit quality, as potential credit losses are measured at the loan pool level.
(20)		Carrying amount reflects amortized cost except for balances transferred from available for sale to held to maturity securities. Those balances reflect amortized cost plus any unrealized gains or losses at the date of transfer.

nm = not meaningful

n/a = not applicable

Exhibit 11

MUFG Americas Holdings Corp - FORM 8-K - EX-99.1 - April 29, 2014

Attached files

MUFG Americas Holdings Corp Reports