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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 (Mark One) ý[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JuneSeptember 30, 2014ORoOR[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Delaware
Delaware94-1234979 (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) 782-5911 UnionBanCal Corporation400 California Street, San Francisco, California 94104-1302(Former Name or former address, if changed since last report)þx No oþx No o
þ(Dox (Do not check if a smaller reporting company)
þxJulyOctober 31, 2014: 136,330,831
50Note 5—Loans and Allowance for Loan LossesIntroductionSIGNATURES"Risk“Risk Factors,"” in our 2013 Annual Report on Form 10-K, Part II, Item 1A. "Risk Factors"“Risk Factors” in this Form 10-Q, and the other risks described in this Form 10-Q and in our 2013 Annual Report on Form 10-K, for factors to be considered when reading any forward-looking statements in this filing."safe harbor"‘‘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 Securities and Exchange Commission (SEC) filings, press releases, news articles and when we are speaking on behalf of MUFG Americas Holdings Corporation. 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,"‘‘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,"‘‘will,’’ ‘‘would,’’ ‘‘should,’’ ‘‘could,’’ ‘‘might,’’ or "may."‘‘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.••••U.S.United States of America (U.S.) in general, West Coast states and global economies•borrowers'borrowers’ ability to service their loans and on residential mortgage loans and refinancings••••••
Results of operations: Net interest income Noninterest income Total revenue Noninterest expense Pre-tax, pre-provision income(2) (Reversal of) provision for loan losses Income before income taxes and including noncontrolling interests Income tax expense Net income including noncontrolling interests Deduct: Net loss from noncontrolling interests Net income attributable to MUAH Balance sheet (period average): Total assets Total securities Total loans held for investment Earning assets Total deposits MUAH stockholder's equity Performance ratios: Return on average assets(3) Return on average MUAH stockholder's equity(3) Efficiency ratio(4) Adjusted efficiency ratio(5) Net interest margin(3)(6) Net loans charged-off (recovered) to average total loans held for investment(3) Net loans charged-off to average total loans held for investment, excluding purchased credit-impaired loans and FDIC covered other real estate owned (OREO)(3)(10) Balance sheet (end of period): Total assets Total securities Total loans held for investment Nonperforming assets Core deposits(7) Total deposits Long-term debt MUAH stockholder's equity Credit ratios: Allowance for loan losses to total loans held for investment(8) Allowance for loan losses to nonaccrual loans(8) Allowance for credit losses to total loans held for investment(9) Allowance for credit losses to nonaccrual loans(9) Nonperforming assets to total loans held for investment and OREO Nonperforming assets to total assets Nonaccrual loans to total loans held for investment Credit ratios, excluding purchased credit-impaired loans and FDIC covered OREO(10): Allowance for loan losses to total loans held for investment(9) Allowance for loan losses to nonaccrual loans(8) Allowance for credit losses to total loans held for investment(9) Allowance for credit losses to nonaccrual loans(9) Nonperforming assets to total loans held for investment and OREO Nonperforming assets to total assets Nonaccrual loans to total loans held for investment Capital ratios: Common equity tier 1 risk-based capital ratio(11) Tier 1 common capital ratio(12) Tier 1 risk-based capital ratio(11) Total risk-based capital ratio(11) Tier 1 leverage ratio(11) Tangible common equity ratio(13) Common equity tier 1 risk-based capital ratio (U.S. Basel III standardized approach; fully phased-in)(14) interest rates, credit quality, economic trends and the capital markets are primary factors that affect our revenue sources. A summary of our financial results is discussed below. business integration initiative discussed below. this Form 10-Q. Assets Loans held for investment:(3) Commercial and industrial Commercial mortgage Construction Lease financing Residential mortgage Home equity and other consumer loans Loans, before purchased credit-impaired loans Purchased credit-impaired loans Total loans held for investment Securities Interest bearing deposits in banks Federal funds sold and securities purchased under resale agreements Trading account assets Other earning assets Total earning assets Allowance for loan losses Cash and due from banks Premises and equipment, net Other assets Total assets Liabilities Interest bearing deposits: Transaction and money market accounts Savings Time Total interest bearing deposits Commercial paper and other short-term borrowings(4) Long-term debt Total borrowed funds Total interest-bearing liabilities Noninterest bearing deposits Other liabilities Total liabilities Equity MUAH stockholder's equity Noncontrolling interests Total equity Total liabilities and equity Net interest income/spread (taxable-equivalent basis) Impact of noninterest bearing deposits Impact of other noninterest bearing sources Net interest margin Less: taxable-equivalent adjustment Net interest income Assets Loans held for investment:(3) Commercial and industrial Commercial mortgage Construction Lease financing Residential mortgage Home equity and other consumer loans Loans, before purchased credit-impaired loans Purchased credit-impaired loans Total loans held for investment Securities Interest bearing deposits in banks Federal funds sold and securities purchased under resale agreements Trading account assets Other earning assets Total earning assets Allowance for loan losses Cash and due from banks Premises and equipment, net Other assets Total assets Liabilities Interest bearing deposits: Transaction and money market accounts Savings Time Total interest bearing deposits Commercial paper and other short-term borrowings(4) Long-term debt Total borrowed funds Total interest bearing liabilities Noninterest bearing deposits Other liabilities Total liabilities Equity MUAH stockholder's equity Noncontrolling interests Total equity Total liabilities and equity Net interest income/spread (taxable-equivalent basis) Impact of noninterest bearing deposits Impact of other noninterest bearing sources Net interest margin Less: taxable-equivalent adjustment Net interest income Service charges on deposit accounts Securities gains, net Trust and investment management fees Credit facility fees Merchant banking fees Brokerage commissions and fees Trading account activities Card processing fees, net Other investment income Other, net Total noninterest income Salaries and other compensation Employee benefits Salaries and employee benefits Net occupancy and equipment Professional and outside services Software Regulatory assessments Low income housing credit investment amortization Intangible asset amortization Advertising and public relations Communications Data processing (Reversal of) provision for losses on unfunded credit commitments Other Total noninterest expense efficiency enhancements. The following table shows the calculation of this ratio for the three and Noninterest Expense Less: Foreclosed asset expense and other credit costs Less: (Reversal of) provision for losses on off-balance sheet commitments Less: Productivity initiative costs Less: LIHC investment amortization expense Less: Expenses of the LIHC consolidated variable interest entities (VIEs) Less: Merger and business integration costs Less: Net adjustments related to privatization transaction Less: Intangible asset amortization Net noninterest expense, as adjusted (a) Total Revenue Add: Net interest income taxable-equivalent adjustment Less: Accretion related to privatization-related fair value adjustments Less: Other credit costs Total revenue, as adjusted (b) Adjusted efficiency ratio (a)/(b) benefits totaling $9 million for the current year-to-date period. The amortized cost, gross unrealized gains, gross unrealized losses and fair values of securities are detailed in Note Loans held for investment: Commercial and industrial Commercial mortgage Construction Lease financing Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total loans held for investment, before purchased credit-impaired loans Purchased credit-impaired loans Total loans held for investment Interest checking Money market Total interest bearing transaction and money market accounts Savings Time Total interest bearing deposits Noninterest bearing deposits Total deposits Total interest bearing deposits include the following brokered deposits: Interest bearing transaction and money market accounts Time Total brokered deposits Core Deposits: Total deposits Less: Total brokered deposits Less: Total foreign deposits and non-brokered domestic time deposits of over $250,000 Total core deposits Capital Components Common equity tier 1 capital Tier 1 capital Tier 2 capital Total risk-based capital Risk-weighted assets Average total assets for leverage capital purposes Capital Ratios Common equity tier 1 capital (to risk-weighted assets) Tier 1 capital (to risk-weighted assets) Total capital (to risk-weighted assets) Tier 1 leverage(1) Capital Components Common equity tier 1 capital Tier 1 capital Tier 2 capital Total risk-based capital Risk-weighted assets Average total assets for leverage capital purposes Capital Ratios Common equity tier 1 capital (to risk-weighted assets) Tier 1 capital (to risk-weighted assets) Total capital (to risk-weighted assets) Tier 1 leverage(1) Total MUAH stockholder's equity Goodwill Intangible assets, except mortgage servicing rights (MSRs) Deferred tax liabilities related to goodwill and intangible assets Tangible common equity (a) Total assets Goodwill Intangible assets, except MSRs Deferred tax liabilities related to goodwill and intangible assets Tangible assets (b) Tangible common equity ratio (a)/(b) Tier 1 capital under Basel I Junior subordinated debt payable to trusts Tier 1 common equity (a) Risk-weighted assets under Basel I (b) Tier 1 common capital ratio (a)/(b) Common equity tier 1 capital under U.S. Basel III (transitional) Adjustments from U.S. Basel III (transitional) to U.S. Basel III (standardized approach; fully phased-in): Accumulated other comprehensive loss related to securities, pension and other benefits Other Total adjustments from U.S. Basel III (transitional) to U.S. Basel III (standardized approach; fully phased-in) Common equity tier 1 capital estimated under U.S. Basel III (standardized approach; fully phased-in) (a) Risk-weighted assets under U.S. Basel III (transitional) Adjustments from U.S. Basel III (transitional) to U.S. Basel III (standardized approach; fully phased-in) Total risk-weighted assets, estimated under U.S. Basel III (standardized approach; fully phased-in) (b) Common equity tier 1 capital to total risk-weighted assets estimated under U.S. Basel III (standardized approach; fully phased-in)(1) (a)/(b) Tier 1 capital under Basel I Junior subordinated debt payable to trusts Basel I Tier 1 common capital Adjustments from Basel I to U.S. Basel III: Accumulated other comprehensive loss related to securities available for sale, pension and other benefits Other Total adjustments from Basel I to U.S. Basel III Common equity tier 1 capital estimated under U.S. Basel III (a) Risk-weighted assets under Basel I Adjustments from Basel I to U.S. Basel III Total risk-weighted assets, estimated under U.S. Basel III (b) Common equity tier 1 capital to total risk-weighted assets estimated under U.S. Basel III (standardized approach; fully phased-in)(1) (a)/(b) 10‑K. Accordingly, our significant accounting policies on the allowance for credit losses are discussed in detail in Note 1 to our Consolidated Financial Statements in Part II, Item 8. Balance, beginning of period (Reversal of) provision for loan losses, excluding purchased credit-impaired loans (Reversal of) provision for purchased credit-impaired loan losses not subject to FDIC indemnification Increase/(Decrease) in allowance covered by FDIC indemnification Other Loans charged-off: Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Purchased credit-impaired loans Total loans charged-off Recoveries of loans previously charged-off: Commercial and industrial Commercial mortgage Construction Total commercial portfolio Home equity and other consumer loans Total consumer portfolio Purchased credit-impaired loans Total recoveries of loans previously charged-off Net loans recovered (charged-off) Ending balance of allowance for loan losses Components of allowance for loan losses and credit losses: Allowance for loan losses, excluding allowance on purchased credit-impaired loans Allowance for loan losses on purchased credit-impaired loans Total allowance for loan losses Allowance for losses on unfunded credit commitments Total allowance for credit losses Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total nonaccrual loans, before purchased credit-impaired loans Purchased credit-impaired loans Total nonaccrual loans OREO, before FDIC covered OREO FDIC covered OREO Total nonperforming assets Total nonperforming assets, excluding purchased credit-impaired loans and FDIC covered OREO Troubled debt restructurings: Accruing Nonaccruing (included in total nonaccrual loans above) Total troubled debt restructurings after considering the specific situation of the borrower and all relevant facts and circumstances related to the modification. For our consumer portfolio segment, TDRs are typically initially placed on nonaccrual and a minimum of six consecutive months of sustained performance is required before returning to accrual status. For our commercial portfolio segment, we generally determine accrual status for TDRs by performing an individual assessment of each loan, which may include, among other factors, the consideration of demonstrated performance by the borrower under the previous terms. Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total restructured loans, excluding purchased credit-impaired loans(1) Construction and commercial mortgage loans are secured by deeds of trust or mortgages. Construction loans are extended primarily to commercial property developers and to residential builders. At management of market risk and approves specific risk management programs, including those related to interest rate hedging, investment securities, wholesale funding and trading activities. Effect on net interest income: Increase 200 basis points as a percentage of base case net interest income Decrease 100 basis points as a percentage of base case net interest income Investment Securities Consolidated Financial Statements in Part II, Item 8. Total gross notional amount of ALM and other risk management derivatives ALM derivatives: Interest rate swap receive fixed contracts Total ALM derivatives Other risk management derivatives Total ALM and other risk management derivatives Fair value of ALM and other risk management derivatives ALM derivatives: Gross positive fair value Gross negative fair value Positive (negative) fair value of ALM derivatives, net Other risk management derivatives: Gross positive fair value Gross negative fair value Positive (negative) fair value of other risk management derivatives, net Positive (negative) fair value of ALM and other risk management derivatives, net enter into these agreements for the principal purpose of accommodating the needs of our customers. We generally take offsetting positions in these transactions to mitigate our exposure to market risk. As of Total gross notional amount of positions held for trading purposes: Interest rate contracts Commodity contracts Foreign exchange contracts(1) Equity contracts Other contracts Total Fair value of positions held for trading purposes: Gross positive fair value Gross negative fair value Positive fair value of positions, net Our primary sources of liquidity are core deposits (described below), our securities portfolio and wholesale funding. Wholesale funding includes unsecured funds raised from interbank and other sources, both domestic and international, including both senior and subordinated debt. Also included are secured funds raised by selling securities under repurchase agreements and 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 in adverse circumstances. We generally view our core deposits to be relatively stable. Secured borrowings via repurchase agreements and advances from the FHLB are also recognized as highly reliable funding sources, and we, therefore, maintain access to these sources primarily to meet our contingency funding needs. in Part I, Item 1A. "Risk Factors" in our 2013 Form Standard & Poor's Moody's A3 Fitch A detailed description of these reportable segments, refer to Note 14 to our Consolidated Financial Statements included in Part I, Item 1. Results of operations—Market View Net interest income Noninterest income Total revenue Noninterest expense (Reversal of) provision for loan losses Income before income taxes and including noncontrolling interests Income tax expense Net income attributable to MUAH Average balances—Market View Total loans held for investment Total assets Total deposits Average deposits increased Results of operations—Market View Net interest income Noninterest income Total revenue Noninterest expense (Reversal of) provision for loan losses Income before income taxes and including noncontrolling interests Income tax expense Net income attributable to MUAH Average balances—Market View Total loans held for investment Total assets Total deposits Corporate Banking Results of operations—Market View Net interest income Noninterest income Total revenue Noninterest expense (Reversal of) provision for loan losses Income before income taxes and including noncontrolling interests Income tax expense Net income attributable to MUAH Average balances—Market View Total loans held for investment Total assets Total deposits The following tables set forth the results for the Transaction Banking segment: Results of operations—Market View Net interest income Noninterest income Total revenue Noninterest expense (Reversal of) provision for loan losses Income before income taxes and including noncontrolling interests Income tax expense Net income attributable to MUAH Average balances—Market View Total loans held for investment Total assets Total deposits The following tables set forth the results for the Investment Banking & Markets segment: Results of operations—Market View Net interest income Noninterest income Total revenue Noninterest expense (Reversal of) provision for loan losses Income before income taxes and including noncontrolling interests Income tax expense Net income attributable to MUAH Average balances—Market View Total loans held for investment Total assets Total deposits Results of operations—Market View Net interest income Noninterest income Total revenue Noninterest expense (Reversal of) provision for loan losses Income before income taxes and including noncontrolling interests Income tax expense Net income (loss) including noncontrolling interests Deduct: net loss from noncontrolling interests Net income attributable to MUAH Average balances—Market View Total loans held for investment Total assets Total deposits For each financial reporting period, our most significant estimates are presented to and discussed with the Audit & Finance Committee of our Board of Directors. purchasers of the humanitarian goods were entities in or affiliated with Iran, including entities related to the Iranian government. The sellers of the humanitarian goods were entities permitted by U.S. and Japanese regulators. These transactions did not involve U.S. dollars nor clearing services of U.S. banks for the settlement of payments. These transactions were conducted through the use of special purpose yen accounts maintained with BTMU outside the United States by an Iranian financial institution which is affiliated with the Iranian government but through which these transactions were permitted to be settled. We understand that BTMU intends to continue to provide the settlement services in connection with the exports of humanitarian goods to Iran in close coordination with U.S. and Japanese authorities. ” Interest Income Loans Securities Other Total interest income Interest Expense Deposits Commercial paper and other short-term borrowings Long-term debt Total interest expense Net Interest Income (Reversal of) provision for loan losses Net interest income after (reversal of) provision for loan losses Noninterest Income Service charges on deposit accounts Trust and investment management fees Trading account activities Securities gains, net Credit facility fees Merchant banking fees Brokerage commissions and fees Card processing fees, net Other, net Total noninterest income Noninterest Expense Salaries and employee benefits Net occupancy and equipment Professional and outside services Intangible asset amortization Regulatory assessments (Reversal of) provision for losses on unfunded credit commitments Other Total noninterest expense Income before income taxes and including noncontrolling interests Income tax expense Net Income Including Noncontrolling Interests Deduct: Net loss from noncontrolling interests Net Income Attributable to MUFG Americas Holdings Corporation (MUAH) Net Income Attributable to MUAH Other Comprehensive Income (Loss), Net of Tax: Net change in cash flow hedges Net change in securities Net change in foreign currency translation adjustments Net change in pension and other postretirement benefits Total other comprehensive income (loss) Comprehensive Income (Loss) Attributable to MUAH Comprehensive loss from noncontrolling interests Total Comprehensive Income (Loss) Assets Cash and due from banks Interest bearing deposits in banks Federal funds sold and securities purchased under resale agreements Total cash and cash equivalents Trading account assets (includes $25 at June 30, 2014 and $8 at December 31, 2013 of assets pledged as collateral) Securities available for sale Securities held to maturity (Fair value: June 30, 2014, $8,251; December 31, 2013, $6,439) Loans held for investment Allowance for loan losses Loans held for investment, net Premises and equipment, net Goodwill Other assets Total assets Liabilities Deposits: Noninterest bearing Interest bearing Total deposits Commercial paper and other short-term borrowings Long-term debt Trading account liabilities Other liabilities Total liabilities Commitments, contingencies and guarantees—See Note 13 Equity MUAH stockholder's equity: Preferred stock: Authorized 5,000,000 shares; no shares issued or outstanding Common stock, par value $1 per share: Authorized 300,000,000 shares, 136,330,830 shares issued and outstanding as of June 30, 2014 and December 31, 2013 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total MUAH stockholder's equity Noncontrolling interests Total equity Total liabilities and equity Balance December 31, 2012 Net income (loss) Other comprehensive income (loss), net of tax Compensation—restricted stock units Other Net change Balance June 30, 2013 Balance December 31, 2013 Net income (loss) Other comprehensive income (loss), net of tax Compensation—restricted stock units Net change Balance June 30, 2014 Cash Flows from Operating Activities: Net income including noncontrolling interests Adjustments to reconcile net income to net cash provided by (used in) operating activities: (Reversal of) provision for loan losses (Reversal of) provision for losses on unfunded credit commitments Depreciation, amortization and accretion, net Stock-based compensation—restricted stock units Deferred income taxes Net gains on sales of securities Net decrease (increase) in trading account assets Net decrease (increase) in other assets Net increase (decrease) in trading account liabilities Net increase (decrease) in other liabilities Loans originated for sale Net proceeds from sale of loans originated for sale Pension and other benefits adjustment Other, net Total adjustments Net cash provided by (used in) operating activities Cash Flows from Investing Activities: Proceeds from sales of securities available for sale Proceeds from paydowns and maturities of securities available for sale Purchases of securities available for sale and held to maturity Proceeds from paydowns and maturities of securities held to maturity Purchases of premises and equipment Proceeds from sales of loans Net decrease (increase) in loans Proceeds from FDIC loss share agreements Net cash paid for acquisitions Other, net Net cash provided by (used in) investing activities Cash Flows from Financing Activities: Net increase (decrease) in deposits Net increase (decrease) in commercial paper and other short-term borrowings Proceeds from issuance of subordinated debt due to BTMU Proceeds from issuance of long-term debt Repayment of long-term debt Other, net Change in noncontrolling interests Net cash provided by (used in) financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Cash Paid During the Period For: Interest Income taxes, net Supplemental Schedule of Noncash Investing and Financing Activities: Net transfer of loans held for investment to loans held for sale Transfer of loans held for investment to other real estate owned assets (OREO) Under the proportional amortization method, reporting entities amortize the initial cost of the investment in proportion to tax credits and tax benefits received and recognize the amortization as a component of income tax expense. This guidance is effective for interim and annual periods beginning on January 1, operations. Certain Government-Guaranteed Residential Mortgage Loans upon Foreclosure Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity, which provides guidance on identifying whether the host contract in certain hybrid instruments is in the form of debt or equity. Such identification impacts the analysis of whether an embedded derivative exists in the instrument. The standard requires an entity to determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of the relevant facts and circumstances (commonly referred to as the whole-instrument approach). Under this approach, an entity would determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. The guidance is effective for interim and annual periods beginning on January 1, 2016, with early adoption permitted. Management does not expect the adoption of this guidance to significantly impact the Company’s financial position or result of operations. Net interest income Interest expense—deposits Noninterest income Trading account activities Brokerage commissions and fees Income before income taxes and including noncontrolling interests Net Income Attributable to MUAH Retained earnings Corporation Asset Liability Management securities: U.S. government-sponsored agencies Residential mortgage-backed securities: U.S. government agency and government-sponsored agencies Privately issued Privately issued—commercial mortgage-backed securities Collateralized loan obligations Asset-backed and other Asset Liability Management securities Other debt securities: Direct bank purchase bonds Other Equity securities Total securities available for sale Asset Liability Management securities: U.S. government-sponsored agencies Residential mortgage-backed securities: U.S. government agency and government-sponsored agencies Privately issued Privately issued—commercial mortgage-backed securities Collateralized loan obligations Asset-backed and other Asset Liability Management securities Other debt securities: Direct bank purchase bonds Other Equity securities Total securities available for sale Asset Liability Management securities: Residential mortgage-backed securities: U.S. government agency and government-sponsored agencies Privately issued Privately issued—commercial mortgage-backed securities Collateralized loan obligations Asset-backed and other Asset Liability Management securities Other debt securities: Direct bank purchase bonds Other Equity securities Total securities available for sale Asset Liability Management securities: Residential mortgage-backed securities: U.S. government agency and government-sponsored agencies Privately issued Privately issued—commercial mortgage-backed securities Collateralized loan obligations Asset-backed and other Asset Liability Management securities Other debt securities: Direct bank purchase bonds Other Equity securities Total securities available for sale loans unlike other types of CLOs that pay note holders through the trading and sale of underlying collateral. Unrealized losses typically arise from widening credit spreads and deteriorating credit quality of the underlying collateral. Cash flow analysis of the underlying collateral provides an estimate of other-than-temporary impairment, which is performed quarterly when the fair value of a security is lower than its amortized cost. Based on the analysis performed as of Asset Liability Management securities: U.S. government-sponsored agencies Residential mortgage-backed securities: U.S. government agency and government-sponsored agencies Privately issued Privately issued—commercial mortgage-backed securities Collateralized loan obligations Asset-backed and other Asset Liability Management securities Other debt securities: Direct bank purchase bonds Other Total debt securities available for sale Proceeds from sales Gross realized gains Gross realized losses U.S. government agency and government-sponsored agencies—residential mortgage backed securities U.S. government agency and government-sponsored agencies—commercial mortgage-backed securities U.S. Treasury U.S. government-sponsored agencies Total securities held to maturity U.S. government agency and government-sponsored agencies—residential mortgage backed securities U.S. government agency and government-sponsored agencies—commercial mortgage-backed securities Total securities held to maturity original purchase cost, adjusted for any accretion or amortization of a purchase discount or premium, less principal payments and any impairment previously recognized in earnings. U.S. government agency and government-sponsored agencies—residential mortgage backed securities U.S. government agency and government-sponsored agencies—commercial mortgage-backed securities U.S. Treasury U.S. government-sponsored agencies Total securities held to maturity U.S. government agency and government-sponsored agencies—residential mortgage backed securities U.S. government agency and government-sponsored agencies—commercial mortgage-backed securities Total securities held to maturity U.S. government agency and government-sponsored agencies—residential mortgage backed securities U.S. government agency and government-sponsored agencies—commercial mortgage backed securities U.S. Treasury U.S. government-sponsored agencies Total securities held to maturity Loans held for investment: Commercial and industrial Commercial mortgage Construction Lease financing Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total loans held for investment, before purchased credit-impaired loans Purchased credit-impaired loans(1) Total loans held for investment(2) Allowance for loan losses Loans held for investment, net Allowance for loan losses, beginning of period (Reversal of) provision for loan losses Loans charged-off Recoveries of loans previously charged-off Allowance for loan losses, end of period Allowance for loan losses, beginning of period (Reversal of) provision for loan losses Decrease in allowance covered by FDIC indemnification Loans charged-off Recoveries of loans previously charged-off Allowance for loan losses, end of period Allowance for loan losses, beginning of period (Reversal of) provision for loan losses Provision for purchased credit-impaired loan losses not subject to FDIC indemnification Other Loans charged-off Recoveries of loans previously charged-off Allowance for loan losses, end of period Allowance for loan losses, beginning of period (Reversal of) provision for loan losses Loans charged-off Recoveries of loans previously charged-off Allowance for loan losses, end of period The following tables show the allowance for loan losses and related loan balances by portfolio segment as of Allowance for loan losses: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total allowance for loan losses Loans held for investment: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total loans held for investment Allowance for loan losses: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total allowance for loan losses Loans held for investment: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total loans held for investment Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total nonaccrual loans, before purchased credit-impaired loans Purchased credit-impaired loans Total nonaccrual loans Troubled debt restructured loans that continue to accrue interest Troubled debt restructured nonaccrual loans (included in the total nonaccrual loans above) Commercial and industrial Commercial mortgage Construction Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total loans held for investment, excluding purchased credit-impaired loans Commercial and industrial Commercial mortgage Construction Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total loans held for investment, excluding purchased credit-impaired loans Loans 90 days or more past due and still accruing totaled Commercial and industrial Construction Commercial mortgage Total commercial portfolio Purchased credit-impaired loans Total Commercial and industrial Construction Commercial mortgage Total commercial portfolio Purchased credit-impaired loans Total Residential mortgage Home equity and other consumer loans Total consumer portfolio Purchased credit-impaired loans Total Residential mortgage Home equity and other consumer loans Total consumer portfolio Purchased credit-impaired loans Total loss share agreements, as discussed above. The amounts presented reflect unpaid principal balances less partial charge-offs. Residential mortgage Home equity and other consumer loans Total consumer portfolio Purchased credit-impaired loans Total Percentage of total Residential mortgage Home equity and other consumer loans Total consumer portfolio Purchased credit-impaired loans Total Percentage of total Residential mortgage Home equity loans Total consumer portfolio Purchased credit-impaired loans Total Percentage of total Residential mortgage Home equity loans Total consumer portfolio Purchased credit-impaired loans Total Percentage of total Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total restructured loans, excluding purchased credit-impaired loans(1) Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total The following table provides the recorded investment amounts of TDRs at the date of default, for which there was a payment default during the three and default occurred within the first twelve months after modification into a TDR. A payment default is defined as the loan being 60 days or more past due. Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total Commercial and industrial Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total The following tables show information about impaired loans by class as of Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total, excluding purchased credit-impaired loans Purchased credit-impaired loans Total Commercial and industrial Commercial mortgage Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total, excluding purchased credit-impaired loans Purchased credit-impaired loans Total Commercial and industrial Commercial mortgage Construction Total commercial portfolio Residential mortgage Home equity and other consumer loans Total consumer portfolio Total, excluding purchased credit-impaired loans Purchased credit-impaired loans Total Total outstanding balance Carrying amount Accretable yield, beginning of period Additions Accretion Reclassifications from nonaccretable difference during the period Accretable yield, end of period Low-income housing credit investments Leasing investments Total consolidated VIEs investments. represents the carrying amount of the LIHC investments Leasing investments Other investments Total unconsolidated VIEs investments. Federal funds purchased and securities sold under repurchase agreements with weighted average interest rates of 0.11% and 0.07% at June 30, 2014 and December 31, 2013 Commercial paper, with weighted average interest rates of 0.16% and 0.19% at June 30, 2014 and December 31, 2013, respectively Total commercial paper and other short-term borrowings Debt issued by MUFG Americas Holdings Corporation Senior debt: Fixed rate 3.50% notes due June 2022 Subordinated debt: Floating rate subordinated debt due December 2023. This note, which bears interest at 1.38% above 3-month LIBOR, had a rate of 1.61% at June 30, 2014 and 1.63% at December 31, 2013 Junior subordinated debt payable to trusts(1): Floating rate notes with maturities ranging from March 2033 to September 2036. These notes bear a combined weighted-average rate of 2.57% at June 30, 2014 and 2.60% at December 31, 2013 Total debt issued by MUFG Americas Holdings Corporation Debt issued by MUFG Union Bank, N.A. and other subsidiaries Senior debt: Fixed and floating Federal Home Loan Bank advances with maturities ranging from February 2015 to February 2016. These notes bear a combined weighted-average rate of 2.56% at June 30, 2014 and 2.55% at December 31, 2013 Floating rate notes due June 2014. These notes, which bear interest at 0.95% above 3-month LIBOR, had a rate of 1.19% at December 31, 2013 Fixed rate 3.00% notes due June 2016 Fixed rate 1.50% notes due September 2016 Floating rate notes due September 2016. These notes, which bear interest at 0.75% above 3-month LIBOR, had a rate of 0.98% at June 30, 2014 and 1.00% at December 31, 2013 Fixed rate 2.125% notes due June 2017 Fixed rate 2.625% notes due September 2018 Fixed rate 2.250% notes due May 2019 Floating rate notes due May 2017. These notes, which bear interest at 0.40% above 3-month LIBOR, had a rate of 0.62% at June 30, 2014 Note payable: Fixed rate 6.03% notes due July 2014 (related to consolidated VIE) Subordinated debt: Fixed rate 5.95% notes due May 2016 Subordinated debt due to BTMU: Floating rate subordinated debt due June 2023. This note, which bears interest at 1.2% above 3-month LIBOR, had a rate of 1.43% at June 30, 2014 and 1.45% at December 31, 2013 Capital lease obligations with a combined weighted-average interest rate of 4.88% at both June 30, 2014 and December 31, 2013 Total debt issued by MUFG Union Bank, N.A. and other subsidiaries Total long-term debt the fair value hierarchy, see Note 12 to the Consolidated Financial Statements in Part II, Item 8. Assets Trading account assets: U.S. Treasury U.S. government sponsored agencies State and municipal Interest rate derivative contracts Commodity derivative contracts Foreign exchange derivative contracts Equity derivative contracts Total trading account assets Securities available for sale: U.S. government sponsored agencies Residential mortgage-backed securities: U.S. government and government sponsored agencies Privately issued Privately issued—commercial mortgage-backed securities Collateralized loan obligations Asset-backed and other Other debt securities: Direct bank purchase bonds Other Equity securities Total securities available for sale Other assets: Interest rate hedging contracts Other derivative contracts Total other assets Total assets Percentage of Total Percentage of Total Company Assets Liabilities Trading account liabilities: Interest rate derivative contracts Commodity derivative contracts Foreign exchange derivative contracts Equity derivative contracts Securities sold, not yet purchased Total trading account liabilities Other liabilities: FDIC clawback liability Interest rate hedging contracts Other derivative contracts Total other liabilities Total liabilities Percentage of Total Percentage of Total Company Liabilities Assets Trading account assets: U.S. Treasury U.S. government sponsored agencies State and municipal Other loans Interest rate derivative contracts Commodity derivative contracts Foreign exchange derivative contracts Equity derivative contracts Total trading account assets Securities available for sale: U.S. government sponsored agencies Residential mortgage-backed securities: U.S government and government sponsored agencies Privately issued Privately issued—commercial mortgage-backed securities Collateralized loan obligations Asset-backed and other Other debt securities: Direct bank purchase bonds Other Equity securities Total securities available for sale Other assets: Interest rate hedging contracts Other derivative contracts Total other assets Total assets Percentage of Total Percentage of Total Company Assets Liabilities Trading account liabilities: Interest rate derivative contracts Commodity derivative contracts Foreign exchange derivative contracts Equity derivative contracts Securities sold, not yet purchased Total trading account liabilities Other liabilities: FDIC clawback liability Interest rate hedging contracts Other derivative contracts Total other liabilities Total liabilities Percentage of Total Percentage of Total Company Liabilities Asset (liability) balance, beginning of period Total gains (losses) (realized/unrealized): Included in income before taxes Included in other comprehensive income Purchases/additions Sales Settlements Asset (liability) balance, end of period Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period Asset (liability) balance, beginning of period Total gains (losses) (realized/unrealized): Included in income before taxes Included in other comprehensive income Purchases/additions Sales Settlements Asset (liability) balance, end of period Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period Securities available for sale: Direct bank purchase bonds Other liabilities: FDIC clawback liability Loans: Impaired loans Other assets: OREO Total Loans: Impaired loans Other assets: OREO Total Assets Cash and cash equivalents Securities held to maturity Loans held for investment, net of allowance for loan losses(1) FDIC indemnification asset Other assets Liabilities Deposits Commercial paper and other short-term borrowings Long-term debt Off-Balance Sheet Instruments Commitments to extend credit and standby and commercial letters of credit Assets Cash and cash equivalents Securities held to maturity Loans held for investment, net of allowance for loan losses(1) FDIC indemnification asset Other assets Liabilities Deposits Commercial paper and other short-term borrowings Long-term debt Off-Balance Sheet Instruments Commitments to extend credit and standby and commercial letters of credit and liability trading derivatives are included in trading account assets and trading account liabilities, respectively. Designated and qualifying as hedging instruments: Cash flow hedges Interest rate contracts Fair value hedges Interest rate contracts Not designated and qualifying as hedging instruments: Trading Interest rate contracts Commodity contracts Foreign exchange contracts Equity contracts Other contracts Total Trading Other risk management Total derivative instruments in interest income on loans caused by changes in the relevant LIBOR index. At Derivatives in cash flow hedging relationships Interest rate contracts Total Derivatives in cash flow hedging relationships Interest rate contracts Total The following table presents the gains (losses) on the Company's fair value hedges for the three and Interest rate risk on long-term debt Total Trading derivatives: Interest rate contracts Equity contracts Foreign exchange contracts Commodity contracts Other contracts Total Financial Assets: Derivative Assets Securities purchased under resale agreements Total Financial Liabilities: Derivative Liabilities Securities sold under repurchase agreements Total Financial Assets: Derivative Assets Securities purchased under resale agreements Total Financial Liabilities: Derivative Liabilities Securities sold under repurchase agreements Total For the Three Months Ended June 30, 2013 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt Net change Securities: Unrealized holding gains (losses) arising during the period on securities available for sale Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net Less: accretion of fair value adjustment on securities available for sale Less: accretion of fair value adjustment on held to maturity securities Less: amortization of net unrealized (gains) losses on held to maturity securities Net change Foreign currency translation adjustment Pension and other benefits: Recognized net actuarial gain (loss)(1) Net change(1) Net change in accumulated other comprehensive loss For the Three Months Ended June 30, 2014 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt Net change Securities: Unrealized holding gains (losses) arising during the period on securities available for sale Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net Less: accretion of fair value adjustment on securities available for sale Less: amortization of net unrealized (gains) losses on held to maturity securities Net change Foreign currency translation adjustment Pension and other benefits: Pension and other benefits arising during the period Amortization of prior service costs(1) Recognized net actuarial gain (loss)(1) Net change Net change in accumulated other comprehensive loss For the Six Months Ended June 30, 2013 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt Net change Securities: Unrealized holding gains (losses) arising during the period on securities available for sale Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net Less: accretion of fair value adjustment on securities available for sale Less: accretion of fair value adjustment on held to maturity securities Less: amortization of net unrealized (gains) losses on held to maturity securities Net change Foreign currency translation adjustment Pension and other benefits: Recognized net actuarial gain (loss)(1) Net change(1) Net change in accumulated other comprehensive loss For the Six Months Ended June 30, 2014 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt Net change Securities: Unrealized holding gains (losses) arising during the period on securities available for sale Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net Less: accretion of fair value adjustment on securities available for sale Less: amortization of net unrealized (gains) losses on held to maturity securities Net change Pension and other benefits: Pension and other benefits arising during the period Amortization of prior service costs(1) Recognized net actuarial gain (loss)(1) Net change Net change in accumulated other comprehensive loss Balance, March 31, 2013 Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive loss Balance, June 30, 2013 Balance, March 31, 2014 Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive loss Balance, June 30, 2014 Balance, December 31, 2012 Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive loss Balance, June 30, 2013 Balance, December 31, 2013 Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive loss Balance, June 30, 2014 Discount rate in determining benefit obligations Components of net periodic benefit cost: Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized net actuarial loss Total net periodic benefit cost Components of net periodic benefit cost: Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized net actuarial loss Total net periodic benefit cost Commitments to extend credit Issued standby and commercial letters of credit Other commitments Principal investments include direct investments in private and public companies. The Company issues commitments to provide equity and mezzanine capital financing to private and public companies through direct investments. The timing of future cash requirements to fund such commitments is generally dependent on the investment cycle. This cycle, the period over which privately held companies are funded by private equity investors and ultimately sold, merged, or taken public through an initial offering, can vary based on overall market conditions as well as the nature and type of industry in which the companies operate. services to institutional clients, wealth planning, deposits and risk management strategies, trust and estate administration, as well as investment sub-advisory services to unaffiliated funds. Products provided to its customers include traditional brokerage, managed accounts, annuities, mutual funds, fixed income products and insurance and customized lending. Results of operations—Market View Net interest income (expense) Noninterest income (expense) Total revenue Noninterest expense (Reversal of) provision for loan losses Income (loss) before income taxes and including noncontrolling interests Income tax expense (benefit) Net income (loss) including noncontrolling interests Deduct: net loss from noncontrolling interests Net income (loss) attributable to MUAH Total assets, end of period Results of operations—Market View Net interest income (expense) Noninterest income (expense) Total revenue Noninterest expense (Reversal of) provision for loan losses Income (loss) before income taxes and including noncontrolling interests Income tax expense (benefit) Net income (loss) including noncontrolling interests Deduct: net loss from noncontrolling interests Net income (loss) attributable to MUAH Total assets, end of period Results of operations—Market View Net interest income (expense) Noninterest income (expense) Total revenue Noninterest expense (Reversal of) provision for loan losses Income (loss) before income taxes and including noncontrolling interests Income tax expense (benefit) Net income (loss) including noncontrolling interests Deduct: net loss from noncontrolling interests Net income (loss) attributable to MUAH Total assets, end of period Results of operations—Market View Net interest income (expense) Noninterest income (expense) Total revenue Noninterest expense (Reversal of) provision for loan losses Income (loss) before income taxes and including noncontrolling interests Income tax expense (benefit) Net income (loss) including noncontrolling interests Deduct: net loss from noncontrolling interests Net income (loss) attributable to MUAH Total assets, end of period liquidity requirements, increased supervision, increased regulatory and compliance risks and costs and other operational costs and expenses, reduced In addition, for FBOs, if a BHC designates its existing BHC as its intermediate holding company (IHC), as discussed further below, then that existing BHC is not required to reflect any reorganization required in its 2015 capital plan and stress test results. However, the BHC subsidiary of the FBO is expected to reflect the effects of any transfers associated with the IHC rule in the BHC’s capital plan due April 5, 2016. from the BHC rules. For example, a larger FBO must certify to the Federal Reserve that it meets capital adequacy standards established by its home country supervisor that are consistent with the Basel Committee framework. If the FBO does not satisfy such requirements, the Federal Reserve may impose requirements, conditions or restrictions on its U.S. activities. 10‑K. The proposed phase-in period begins on January 1, 2016, with full compliance required by January 1, 2017. additional one-year extensions to conform their ownership interests in and sponsorship of certain collateralized loan obligations. These extensions would give banks until July 2017 to conform to the establish an assessment fee on all institutions with greater than $50 billion in assets to fund the Office of Financial Research. As we have greater than $50 billion in assets, under the final rule we are subject to this fee at the MUFG level. In August 2013, the Federal Reserve issued a final rule to implement Section 318 of the able to more efficiently utilize resources to comply with regulations and to more efficiently absorb increased regulatory compliance costs into their existing cost structure. the rule. The Company has established a compliance program which aims to ensure compliance with the rule for all new loans made after January 10, 2014. The California continues to have a relatively high unemployment rate. While California markets, including home prices, and the California economy in general have experienced a recovery, there can be no assurance that the recovery will continue. A substantial majority of our assets, deposits and interest and fee income is generated in California. As a result, poor economic conditions in California may cause us to incur losses associated with higher default rates and decreased collateral values in our loan portfolio. If the budgetary and fiscal difficulties of the California State government and California municipalities and other governmental units continue or economic conditions in California decline, In February 2014, the Boards and management bodies of MUAH and MUB, as well as BTMU and MUFG, approved a business integration initiative described in resources effectively. Also, our ability to constrain or reduce operating expense levels may be limited by the costs of increasing regulatory requirements and expectations. For the Three Months
Ended For the Six Months
Ended (Dollars in millions) June 30,
2014 June 30,
2013(1) Percent
Change June 30,
2014 June 30,
2013(1) Percent
Change $ 763 $ 672 14 % $ 1,446 $ 1,325 9 % 202 201 — 383 452 (15 ) 965 873 11 1,829 1,777 3 649 702 (8 ) 1,309 1,415 (7 ) 316 171 85 520 362 44 9 (3 ) 400 (7 ) (6 ) (17 ) 307 174 76 527 368 43 62 35 77 112 85 32 245 139 76 415 283 47 4 3 33 9 7 29 $ 249 $ 142 75 $ 424 $ 290 46 $ 107,871 $ 98,714 9 % $ 107,185 $ 97,687 10 % 22,865 23,183 (1 ) 22,739 22,507 1 71,104 63,673 12 70,203 62,122 13 97,405 89,292 9 96,756 88,179 10 81,221 75,350 8 80,829 74,807 8 14,657 12,599 16 14,524 12,591 15 0.92 % 0.58 % 0.79 % 0.59 % 6.80 4.53 5.84 4.61 67.23 80.37 71.56 79.59 60.30 69.45 63.91 68.56 3.15 3.03 3.02 3.03 0.04 0.05 — 0.07 0.04 0.06 — 0.07 For the Three Months Ended For the Nine Months Ended (Dollars in millions) September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013 Results of operations: Net interest income $ 707 $ 685 3 % $ 2,153 $ 2,010 7 % Noninterest income 388 234 66 771 686 12 Total revenue 1,095 919 19 2,924 2,696 8 Noninterest expense 805 689 17 2,114 2,104 — 290 230 26 810 592 37 (Reversal of) provision for loan losses (18 ) (16 ) (13 ) (25 ) (22 ) (14 ) 308 246 25 835 614 36 Income tax expense 67 55 22 179 140 28 241 191 26 656 474 38 5 7 (29 ) 14 14 — Net income attributable to MUAH $ 246 $ 198 24 $ 670 $ 488 37 Balance sheet (period average): Total assets $ 109,739 $ 101,534 8 % $ 108,039 $ 98,984 9 % Total securities 22,592 22,909 (1 ) 22,689 22,643 — Total loans held for investment 73,353 66,608 10 71,264 63,633 12 Earning assets 98,933 92,035 7 97,486 89,479 9 Total deposits 82,239 77,434 6 81,298 75,692 7 MUAH stockholder's equity 14,969 12,210 23 14,675 12,463 18 Performance ratios: 0.90 % 0.78 % 0.83 % 0.66 % 6.57 6.50 6.08 5.23 73.51 75.01 72.29 78.03 63.42 67.21 63.74 68.10 2.87 2.99 2.97 3.02 0.06 (0.01 ) 0.02 0.04 0.07 0.01 0.02 0.05 As of June 30,
2014 December 31,
2013(1) Percent
Change $ 108,820 $ 105,894 3 % 22,847 22,326 2 72,369 68,312 6 547 499 10 72,058 69,155 4 81,566 80,101 2 6,995 6,547 7 14,815 14,215 4 0.77 % 0.83 % 108.90 128.42 0.97 1.02 137.13 158.30 0.75 0.74 0.50 0.48 0.71 0.65 0.78 % 0.84 % 111.88 132.82 0.98 1.04 141.06 163.78 0.71 0.66 0.47 0.43 0.69 0.63 12.58 % n/a n/a 12.34 % �� 12.62 12.41 14.57 14.61 11.35 11.27 10.84 10.54 11.60 11.14
MUFG Americas Holdings Corporation and Subsidiaries
Highlights (Continued)(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. For additional information, see Note 2 to our Consolidated Financial Statements in Part I, Item 1. "Financial Statements" of this Form 10-Q.(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)Annualized.(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 foreclosed asset expense and other credit costs, (reversal of) provision for losses on unfunded credit commitments, certain costs related to productivity initiatives, low income housing credit (LIHC) investment amortization expense, expenses of the LIHC consolidated variable interest entities, merger and business integration costs, privatization-related expenses, and intangible asset amortization) as a percentage of adjusted total revenue (net interest income (taxable-equivalent basis) and noninterest income), excluding the impact of gains from productivity initiatives related to the sale of certain business units and premises, accretion related to privatization-related fair value adjustments, 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 Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Noninterest Income and Noninterest Expense" of this Form 10-Q for further information.(6)Net interest margin is presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent.(7)Core deposits exclude brokered deposits, foreign time deposits and domestic time deposits greater than $250,000.(8)The allowance for loan losses ratios are calculated using the allowance for loan losses against end of period total loans held for investment or total nonaccrual loans, as appropriate.(9)The allowance for credit losses ratios include the allowances for loan losses and for losses on unfunded credit commitments against end of period total loans held for investment or total nonaccrual loans, as appropriate.(10)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 the Bank and the FDIC. Management believes the exclusion of purchased credit-impaired loans and FDIC covered OREO from certain asset quality ratios that include nonaccrual 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.(11)The capital ratios displayed as of June 30, 2014 are calculated in accordance with the transition guidelines set forth in the U.S. federal banking agencies' revised capital framework for implementing the final U.S. Basel III regulatory capital rules. The capital ratios as of December 31, 2013 are calculated under Basel I rules.(12)The Tier 1 common capital ratio, calculated under Basel I rules, is the ratio of 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 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. Refer to Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital Management" in this Form 10-Q for further information.(13)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. Refer to Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital Management" in this Form 10-Q for further information.(14)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.n/anot applicable. As of September 30, 2014 December 31, 2013 Balance sheet (end of period): Total assets $ 110,879 $ 105,894 5 % Total securities 22,522 22,326 1 Total loans held for investment 74,635 68,312 9 Nonperforming assets 428 499 (14 ) 73,608 69,155 6 Total deposits 82,356 80,101 3 Long-term debt 6,984 6,547 7 MUAH stockholder's equity 15,051 14,215 6 Credit ratios: 0.71 % 0.83 % 131.28 128.42 0.92 1.02 171.42 158.30 Nonperforming assets to total loans held for investment and OREO 0.57 0.74 Nonperforming assets to total assets 0.39 0.48 Nonaccrual loans to total loans held for investment 0.54 0.65 0.71 % 0.84 % 134.80 132.82 0.93 1.04 176.28 163.78 Nonperforming assets to total loans held for investment and OREO 0.54 0.66 Nonperforming assets to total assets 0.36 0.43 Nonaccrual loans to total loans held for investment 0.53 0.63 Capital ratios: 12.66 % n/a n/a 12.34 % 12.70 12.41 14.60 14.61 11.43 11.27 10.79 10.54 11.93 11.14 (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 loan losses through a credit cycle. (2) Annualized. (3) The efficiency ratio is total noninterest expense as a percentage of total revenue (net interest income and noninterest income). (4) The adjusted efficiency ratio, a non-GAAP financial measure, is adjusted noninterest expense (noninterest expense excluding staff costs associated with fees from affiliates - support services, foreclosed asset expense and other credit costs, (reversal of) provision for losses on unfunded credit commitments, certain costs related to productivity initiatives, low income housing credit (LIHC) investment amortization expense, expenses of the LIHC consolidated variable interest entities, merger and business integration costs, privatization-related expenses, and intangible asset amortization) as a percentage of adjusted total revenue (net interest income (taxable-equivalent basis) and noninterest income), excluding the impact of fees from affiliates - support services, gains from productivity initiatives related to the sale of certain business units and premises, accretion related to privatization-related fair value adjustments, 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 Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Noninterest Income and Noninterest Expense" of this Form 10-Q for further information. (5) Net interest margin is presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (6) Core deposits exclude brokered deposits, foreign time deposits and domestic time deposits greater than $250,000. (7) The allowance for loan losses ratios are calculated using the allowance for loan losses against 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 against end of period total loans held for investment or total nonaccrual loans, as appropriate. (9) 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 the Bank and the FDIC. Management believes the exclusion of purchased credit-impaired loans and FDIC covered OREO from certain asset quality ratios that include nonaccrual 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. (10) The capital ratios displayed as of September 30, 2014 are calculated in accordance with the transition guidelines set forth in the U.S. federal banking agencies' revised capital framework for implementing the final U.S. Basel III regulatory capital rules. The capital ratios as of December 31, 2013 are calculated under Basel I rules. (11) The Tier 1 common capital ratio, calculated under Basel I rules, is the ratio of 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 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. Refer to Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Management" in this Form 10-Q for further information. (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 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. Refer to Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Management" in this Form 10-Q for further information. (13) Common Equity Tier 1 risk-based capital (standardized, fully phased-in basis) 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 transition provisions of the U.S. Basel III rules were fully phased-in for the periods in which the ratio is disclosed. Management reviews this ratio, which includes components of accumulated other comprehensive loss, along with other measures of capital as part of its financial analyses and has included this non-GAAP information, and the corresponding reconciliation from Common Equity Tier 1 capital (calculated according to the transition provisions under U.S. Basel III rules) because of current interest in such information by market participants. n/a not applicable. 10-K10‑K for the year ended December 31, 2013 (2013 Form 10-K)10‑K) along with the following discussion and analysis of our consolidated financial position and results of operations for the period ended JuneSeptember 30, 2014 in this Form 10-Q.10‑Q. Averages, as presented in the following tables, are substantially all based upon daily average balances.10-Q,10‑Q, terms such as "the“the Company," "we," "us"” “we,” “us” and "our"“our” refer to MUFG Americas Holdings Corporation (MUAH), one or more of its consolidated subsidiaries, or to all of them together.Tokyo-MitsubishiTokyo - Mitsubishi UFJ, Ltd. (BTMU) which is a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc. (MUFG). Prior to July 1, 2014, MUFG Americas Holdings Corporation was named UnionBanCal Corporation and MUFG Union Bank, N.A. was named Union Bank, N.A.$108.8$110.9 billion at JuneSeptember 30, 2014.Company'sCompany’s leadership is bi-coastalbicoastal with Retail Banking & Wealth Markets, Commercial Banking, and Transaction Banking leaders on the West Coast. Corporate Banking and Investment Banking & Markets leaders are based in New York City. The corporate headquarters (principal executive office) for MUB and MUAH is in New York City. MUB's main banking office is in San Francisco.Novemberthe fourth quarter of 2013, we completed the acquisition of First Bank Association Bank Services, a unit of First Bank, which provides a full range of banking services to homeowners associations and community management companies. We acquired approximately $570 million in deposits in this transaction.Corporation'sCorporation’s (PB Capital) $3.5 billion institutional commercial real estate (CRE) lending portfolio. The acquisition expanded our CRE presence in the U.S., and provided geographic and asset class diversification.secondthird quarter 2014 results and that could influence our future results. Further detailed information can be found elsewhere in this Form 10-Q. In addition, we ask that you carefully read this entire document and any other reports that we refer to in this Form 10-Q for more detailed information that will assist your understanding of trends, events and uncertainties that impact us."total revenue"“total revenue”). Net interest income is generated predominantly from interest earned from loans, investment securities and other interest-earning assets, less interest incurred on deposits and borrowings. The primary sources of noninterest income are revenues from service charges on deposit accounts, trust and investment management fees, trading account activities, credit facility fees, and merchant banking fees.fees, and fees from affiliates. In the secondthird quarter of 2014, revenue was comprised of 7965 percent net interest income and 2135 percent noninterest income. Changes insecondthird quarter of 2014, net income attributable to MUAH was $249$246 million, compared with $142$198 million in the secondthird quarter of 2013, substantially driven by higher net interest income.2013. Net interest income was $763$707 million in the secondthird quarter of 2014, compared with $672$685 million in the secondthird quarter of 2013. The increase in net interest income was primarilysubstantially due to growth in loans held for investment and a 12 basis point increase in the net interest margin driven by higher interest income on our purchased credit-impaired (PCI) loan portfolio, which was mostly due to early payoffs of certain loans.growth. In the secondthird quarter of 2014, noninterest expense was down $53income8%, primarily driven by lower current quarter salaries66 percent, and noninterest expense increased $116 million, or 17 percent. The increases in noninterest income and noninterest expense were largely due to fees from affiliates and increased employee benefits expense. Noninterest income was $202 million in the second quarter of 2014, up $1 millioncosts resulting from the second quarter of 2013.$547$428 million and $499 million as of JuneSeptember 30, 2014 and December 31, 2013, respectively. Net charge-offs were $7$12 million for the secondthird quarter of 2014 compared with $8net recoveries of $1 million for the secondthird quarter of 2013. For the quarter ended JuneSeptember 30, 2014, the provision for credit losses was $6$1 million compared with a provision reversal of $5$15 million for the quarter ended JuneSeptember 30, 2013.equity tierEquity Tier 1, Tier 1 and Total risk-based capital ratios, calculated in accordance with the transition guidelines set forth in the U.S. federal banking agencies' revised capital framework for implementing the final U.S. Basel III regulatory capital rules, were 12.5812.66 percent, 12.6212.70 percent and 14.5714.60 percent, respectively, at JuneSeptember 30, 2014. The tangible common equity ratio was 10.8410.79 percent at JuneSeptember 30, 2014.withunder the Bank.Bank's operations. The integration did not involve a legal entity combination, but rather an integration of personnel and certain business and support activities. As a result of this initiative, all of BTMU's banking activities in the Americas will beare managed by employees of the Bank, which includes the addition of approximately 2,300 U.S. employees offormerly employed by BTMU. This initiative also included the transfer of ownership of BTMU'sBTMU’s U.S. corporate customer list to the Bank. BTMU and the Bank agreed to certain policies, which generally contemplate that transactions entered into with BTMU'sBTMU’s U.S. corporate customers will have the opportunity to be booked at the Bank, subject to its independent credit evaluation and other considerations, such as complying with underwriting standards and lending limits, meeting financial return objectives, and other risk management and regulatory considerations. BTMU'sBTMU’s New York, Chicago and Los Angeles branches continue to record transactions and maintain relationships with BTMU'sBTMU’s customers not on the aforementioned customer list but supported by the consolidated workforce at the Bank. The BTMU branches also retain their functions and current roles in the foreign exchange and settlement businesses, and continue to provide services to Japanese customers. The operation of BTMU'sBTMU’s businesses in the Americas located outside of the U.S. (in Latin America and Canada) remains unchanged, but under the oversight of the Company.BTMU's businessBTMU’s businesses in the U.S. (including BTMU'sBTMU’s U.S. branches). In consideration for the Services, BTMU will paypays to the Bank fee income, which will reflectreflects market-based pricing. Costs related to the Services performed by the transferred employees will be recordedare primarily reflected in salaries and benefits.employee benefits expense. While this initiative will havehad the effect of increasing noninterest income and noninterest expense, it isdid not expected to have a significant impact on the Company's net income financial condition or capital ratiosduring the third quarter of 2014. For additional information, see “Noninterest Income and Noninterest Expense” in the near term.Reserve'sReserve’s recently released enhanced prudential standards for foreign banking organizations operating in the U.S. For additional information, see "Supervision“Supervision and Regulation—Regulation - Principal Federal Banking Laws—Laws - Dodd-Frank Act"Act” in Part I, Item 11. of our 2013 Form 10-K. For the Three Months Ended June 30, 2014 June 30, 2013 (Dollars in millions) Average
Balance Interest
Income/
Expense(1) Average
Yield/
Rate(1)(2) Average
Balance Interest
Income/
Expense(1) Average
Yield/
Rate(1)(2) $ 24,421 $ 202 3.33 % $ 21,701 $ 185 3.42 % 13,529 124 3.66 11,851 112 3.79 1,146 10 3.24 800 7 3.30 840 14 6.74 1,056 9 3.53 27,063 247 3.66 23,428 220 3.77 3,191 32 4.04 3,500 33 3.85 70,190 629 3.59 62,336 566 3.64 914 120 52.45 1,337 83 24.69 71,104 749 4.22 63,673 649 4.08 22,865 120 2.10 23,183 121 2.11 2,878 2 0.25 1,923 1 0.25 102 — 0.02 123 — 0.16 194 1 1.04 162 — 0.36 262 — 0.83 228 1 0.53 97,405 872 3.58 89,292 772 3.47 (561 ) (642 ) 1,450 1,355 642 704 8,935 8,005 $ 107,871 $ 98,714 $ 37,646 $ 35 0.38 $ 32,296 $ 26 0.32 5,590 1 0.09 5,666 2 0.13 10,761 25 0.91 12,710 33 1.06 53,997 61 0.45 50,672 61 0.49 2,521 2 0.20 3,224 1 0.18 6,923 41 2.39 5,326 35 2.64 9,444 43 1.80 8,550 36 1.71 63,441 104 0.65 59,222 97 0.66 27,224 24,678 2,298 1,945 92,963 85,845 14,657 12,599 251 270 14,908 12,869 $ 107,871 $ 98,714 768 2.93 % 675 2.81 % 0.19 0.19 0.03 0.03 3.15 3.03 5 3 $ 763 $ 672 For the Three Months Ended September 30, 2014 September 30, 2013 (Dollars in millions) Assets Commercial and industrial $ 25,746 $ 220 3.39 % $ 22,930 $ 192 3.32 % Commercial mortgage 13,643 122 3.57 12,936 117 3.62 Construction 1,336 10 3.12 827 7 3.30 Lease financing 811 12 5.69 973 12 4.92 Residential mortgage 27,967 250 3.58 24,157 225 3.72 Home equity and other consumer loans 3,164 32 4.08 3,384 33 3.87 Loans, before purchased credit-impaired loans 72,667 646 3.54 65,207 586 3.58 Purchased credit-impaired loans 686 48 27.70 1,401 82 23.46 Total loans held for investment 73,353 694 3.77 66,608 668 4.00 Securities 22,592 117 2.08 22,909 122 2.12 Interest bearing deposits in banks 2,380 2 0.26 2,050 1 0.25 Federal funds sold and securities purchased under resale agreements 106 — — 101 — 0.13 Trading account assets 164 — 0.66 134 1 0.43 Other earning assets 338 1 0.73 233 — 0.97 Total earning assets 98,933 814 3.28 92,035 792 3.43 Allowance for loan losses (566 ) (633 ) Cash and due from banks 1,597 1,315 Premises and equipment, net 626 694 Other assets 9,149 8,123 Total assets $ 109,739 $ 101,534 Liabilities Interest bearing deposits: Transaction and money market accounts $ 39,128 $ 33 0.34 $ 34,912 $ 31 0.36 Savings 5,574 2 0.08 5,633 2 0.13 Time 9,766 23 0.96 12,017 30 0.98 Total interest bearing deposits 54,468 58 0.42 52,562 63 0.47 2,820 1 0.17 3,376 2 0.20 Long-term debt 6,994 42 2.38 6,135 38 2.47 Total borrowed funds 9,814 43 1.75 9,511 40 1.66 Total interest-bearing liabilities 64,282 101 0.63 62,073 103 0.66 Noninterest bearing deposits 27,771 24,872 Other liabilities 2,474 2,110 Total liabilities 94,527 89,055 Equity MUAH stockholder's equity 14,969 12,210 Noncontrolling interests 243 269 Total equity 15,212 12,479 Total liabilities and equity $ 109,739 $ 101,534 Net interest income/spread (taxable-equivalent basis) 713 2.65 % 689 2.77 % Impact of noninterest bearing deposits 0.19 0.19 Impact of other noninterest bearing sources 0.03 0.03 Net interest margin 2.87 2.99 Less: taxable-equivalent adjustment 6 4 Net interest income $ 707 $ 685 (1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (2) Annualized. (3) Average balances on loans outstanding 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. (4) Includes interest bearing trading liabilities. (1)Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent.(2)Annualized.(3)Average balances on loans outstanding 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.(4)Includes interest bearing trading liabilities For the Six Months Ended June 30, 2014 June 30, 2013 (Dollars in millions) Average
Balance Interest
Income/
Expense(1) Average
Yield/
Rate(1)(2) Average
Balance Interest
Income/
Expense(1) Average
Yield/
Rate(1)(2) $ 24,196 $ 400 3.34 % $ 21,522 $ 362 3.39 % 13,380 243 3.63 10,880 213 3.93 1,047 18 3.43 725 15 4.15 845 25 6.07 1,059 16 3.01 26,529 485 3.66 23,145 442 3.82 3,212 64 4.01 3,551 67 3.84 69,209 1,235 3.58 60,882 1,115 3.68 994 181 36.49 1,240 163 26.36 70,203 1,416 4.05 62,122 1,278 4.13 22,739 240 2.11 22,507 243 2.16 3,219 4 0.25 2,986 4 0.25 116 — 0.11 147 — 0.18 231 3 2.21 156 — 0.33 248 1 1.10 261 1 0.46 96,756 1,664 3.45 88,179 1,526 3.47 (569 ) (647 ) 1,475 1,377 643 704 8,880 8,074 $ 107,185 $ 97,687 $ 37,583 $ 71 0.38 $ 32,002 $ 48 0.30 5,581 2 0.10 5,760 4 0.13 10,986 50 0.92 12,514 69 1.11 54,150 123 0.46 50,276 121 0.49 2,576 3 0.21 2,534 2 0.19 6,736 82 2.43 5,366 71 2.66 9,312 85 1.82 7,900 73 1.86 63,462 208 0.66 58,176 194 0.67 26,679 24,531 2,268 2,122 92,409 84,829 14,524 12,591 252 267 14,776 12,858 $ 107,185 $ 97,687 1,456 2.79 % 1,332 2.80 % 0.19 0.20 0.04 0.03 3.02 3.03 10 7 $ 1,446 $ 1,325 (1)Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent.(2)Annualized.(3)Average balances on loans outstanding 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.(4)Includes interest bearing trading liabilities. For the Nine Months Ended September 30, 2014 September 30, 2013 (Dollars in millions) Assets Commercial and industrial $ 24,708 $ 620 3.36 % $ 21,996 $ 554 3.37 % Commercial mortgage 13,469 365 3.61 11,573 330 3.81 Construction 1,154 28 3.30 760 22 3.84 Lease financing 833 37 5.95 1,030 28 3.61 Residential mortgage 27,014 735 3.63 23,485 667 3.79 Home equity and other consumer loans 3,196 96 4.04 3,495 100 3.85 Loans, before purchased credit-impaired loans 70,374 1,881 3.57 62,339 1,701 3.64 Purchased credit-impaired loans 890 229 34.27 1,294 245 25.30 Total loans held for investment 71,264 2,110 3.95 63,633 1,946 4.08 Securities 22,689 357 2.10 22,643 365 2.15 Interest bearing deposits in banks 2,934 6 0.25 2,671 5 0.25 113 — 0.06 131 — 0.17 Trading account assets 208 3 1.80 149 1 0.36 Other earning assets 278 2 0.95 252 1 0.62 Total earning assets 97,486 2,478 3.39 89,479 2,318 3.46 Allowance for loan losses (568 ) (642 ) Cash and due from banks 1,512 1,356 Premises and equipment, net 638 701 Other assets 8,971 8,090 Total assets $ 108,039 $ 98,984 Liabilities Interest bearing deposits: Transaction and money market accounts $ 38,097 $ 104 0.37 $ 32,983 $ 79 0.32 Savings 5,579 4 0.09 5,717 6 0.13 Time 10,575 73 0.93 12,346 99 1.07 Total interest bearing deposits 54,251 181 0.45 51,046 184 0.48 2,658 4 0.19 2,814 4 0.19 Long-term debt 6,822 124 2.42 5,629 109 2.57 Total borrowed funds 9,480 128 1.79 8,443 113 1.78 Total interest bearing liabilities 63,731 309 0.65 59,489 297 0.67 Noninterest bearing deposits 27,047 24,646 Other liabilities 2,337 2,118 Total liabilities 93,115 86,253 Equity MUAH stockholder's equity 14,675 12,463 Noncontrolling interests 249 268 Total equity 14,924 12,731 Total liabilities and equity $ 108,039 $ 98,984 Net interest income/spread (taxable-equivalent basis) 2,169 2.74 % 2,021 2.79 % Impact of noninterest bearing deposits 0.19 0.20 Impact of other noninterest bearing sources 0.04 0.03 Net interest margin 2.97 3.02 Less: taxable-equivalent adjustment 16 11 Net interest income $ 2,153 $ 2,010 (1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (2) Annualized. (3) Average balances on loans outstanding 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. (4) Includes interest bearing trading liabilities. secondthird quarter of 2014 increased $91$22 million compared with the secondthird quarter of 2013. The increase in net interest income was primarilysubstantially due to growth in loans held for investment. Average loans held for investment before PCI loans increased $7.9$7.5 billion during the quarter ended JuneSeptember 30, 2014, compared with the quarter ended JuneSeptember 30, 2013, primarily due to organic growth in core customer segments within our commercial and our PB Capital acquisition, which closed late in the second quarter of 2013. Higher interest income from our PCI loan portfolio also contributed to theindustrial and residential mortgage portfolios. The increase in net interest income andfrom the loan growth described above was partially offset by lower average balances from our higher yielding PCI loan portfolio, which drove a net 12 basis point increasedecrease in the net interest margin. For the quarter ended June 30, 2014, interest income on our PCI portfolio, which declined 32 percent compared with the same period a year ago, included approximately $56 million resulting from early payoffs of certain commercial mortgage loans due to improving industry conditions.$3.3$1.9 billion, and average non-interest bearing deposits increased $2.5$2.9 billion, in the secondthird quarter of 2014 compared with the secondthird quarter of 2013, substantially due to core deposit growth including certain large escrow deposits.sixnine months ended JuneSeptember 30, 2014 and 2013: For the Three Months Ended For the Six Months Ended For the Three Months Ended For the Nine Months Ended Increase
(Decrease) Increase
(Decrease) June 30,
2014 June 30,
2013 June 30,
2014 June 30,
2013 September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013 (Dollars in millions) Amount Percent Amount Percent Amount Percent Amount Percent $ 50 $ 52 $ (2 ) (4 )% $ 101 $ 105 $ (4 ) (4 )% $ 52 $ 53 $ (1 ) (2 ) % $ 153 $ 158 $ (5 ) (3 ) % Trust and investment management fees 26 34 (8 ) (24 ) 78 107 (29 ) (27 ) Trading account activities 33 15 18 120 63 41 22 54 1 27 (26 ) (96 ) 3 123 (120 ) (98 ) 13 47 (34 ) (72 ) 16 170 (154 ) (91 ) 26 38 (12 ) (32 ) 52 73 (21 ) (29 ) 31 26 5 19 59 52 7 13 30 31 (1 ) (3 ) 89 83 6 7 27 23 4 17 51 39 12 31 38 29 9 31 89 68 21 31 13 11 2 18 26 22 4 18 14 12 2 17 40 34 6 18 14 21 (7 ) (33 ) 30 26 4 15 9 9 — — 17 18 (1 ) (6 ) 8 8 — — 25 26 (1 ) (4 ) 151 — 151 nm 151 — 151 nm 7 9 (2 ) (22 ) 19 12 7 58 11 7 4 57 30 19 11 58 24 (15 ) 39 260 25 (18 ) 43 239 12 (2 ) 14 nm 37 (20 ) 57 285 $ 202 $ 201 $ 1 — % $ 383 $ 452 $ (69 ) (15 )% $ 388 $ 234 $ 154 66 % $ 771 $ 686 $ 85 12 % (1) Fees from affiliates represents income resulting from the July 1, 2014 business integration initiative. nm not meaningful secondthird quarter of 2014 was $202$388 million, compared with $201$234 million in the secondthird quarter of 2013. In addition to the effects from our business integration initiative, trading account income increased due to an enhancement in the methodology used to measure counterparty credit quality and the Company's creditworthiness in the estimation of fair values on assets and liabilities held for trading purposes. Lower FDIC indemnification asset amortization expense during the third quarter of 2014 resulted in an increase in Other noninterest income. Noninterest income for the nine months ended September 30, 2014 increased to $771 million from $686 million in the same period in 2013. The increase was primarilysubstantially due to fees from affiliates resulting from the business integration initiative, lower FDIC indemnification asset amortization expense, which is included within other noninteresthigher trading account income and gains on the sale of other investments, whichhigher merchant banking fees. This increase was largely offset by decreases in gains on salessale of securities as well asand lower trust and investment management income. Noninterest income for the six months ended June 30, 2014 decreased to $383 million from $452 million in the same period in 2013. The decrease was substantially due to decreases in gains from the sale of securities and trust and investment management income partially offset by lower FDIC indemnification asset amortization expense and an increase in merchant banking fees. Trust and investment management income decreased in both periods largely due to the reorganization of the affiliated HighMark Funds into shares of unaffiliated mutual funds completed in the third quarter of 2013. For the Three Months Ended For the Six Months Ended For the Three Months Ended For the Nine Months Ended Increase
(Decrease) Increase
(Decrease) June 30,
2014 June 30,
2013 June 30,
2014 June 30,
2013 September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013 (Dollars in millions) Amount Percent Amount Percent Amount Percent Amount Percent $ 318 $ 323 $ (5 ) (2 )% $ 619 $ 635 $ (16 ) (3 )% $ 423 $ 310 $ 113 36 % $ 1,042 $ 946 $ 96 10 % 60 90 (30 ) (33 ) 147 199 (52 ) (26 ) 69 81 (12 ) (15 ) 216 279 (63 ) (23 ) 378 413 (35 ) (8 ) 766 834 (68 ) (8 ) 492 391 101 26 1,258 1,225 33 3 75 84 (9 ) (11 ) 146 159 (13 ) (8 ) 74 77 (3 ) (4 ) 220 236 (16 ) (7 ) 63 62 1 2 118 120 (2 ) (2 ) 66 66 — — 184 186 (2 ) (1 ) Intangible asset amortization 13 16 (3 ) (19 ) 39 49 (10 ) (20 ) Regulatory assessments 13 20 (7 ) (35 ) 44 60 (16 ) (27 ) (Reversal of) provision for losses on unfunded credit commitments 19 1 18 nm 32 14 18 129 22 19 3 16 42 40 2 5 26 20 6 30 68 60 8 13 16 20 (4 ) (20 ) 31 40 (9 ) (23 ) 20 20 — — 40 35 5 14 25 17 8 47 65 52 13 25 13 17 (4 ) (24 ) 26 33 (7 ) (21 ) 9 14 (5 ) (36 ) 16 31 (15 ) (48 ) 12 15 (3 ) (20 ) 28 46 (18 ) (39 ) 10 11 (1 ) (9 ) 21 22 (1 ) (5 ) 9 11 (2 ) (18 ) 30 33 (3 ) (9 ) 8 10 (2 ) (20 ) 16 20 (4 ) (20 ) 8 8 — — 24 29 (5 ) (17 ) (3 ) (2 ) (1 ) (50 ) 13 13 — — 38 34 4 12 74 68 6 9 48 47 1 2 122 114 8 7 $ 649 $ 702 $ (53 ) (8 )% $ 1,309 $ 1,415 $ (106 ) (7 )% $ 805 $ 689 $ 116 17 % $ 2,114 $ 2,104 $ 10 — % nm not meaningful secondthird quarter of 2014 was $649 million compared with $702$689 million in the secondthird quarter of 2013 and $2.1 billion for the nine months ended September 30, 2014 and 2013. Salaries and employee benefits decreased $35 million largelyincreased in both the three and nine months ended September 30, 2014 compared to the same periods in the prior year primarily due to increased employee costs as a result of our business integration initiative as discussed above, partially offset by lower pension expense, including the impact of pension plan amendments in April 2014. Noninterest expense for the six months ended June 30, 2014 decreased $106 million compared with the same period in 2013 largely due to lower pension expense and lower acquisition-related staff expenses. Advertising expense was lower during the six months ended June 30, 2014 due to a large advertising campaign in the comparable 2013 period.sixnine months ended JuneSeptember 30, 2014 and 2013: For the Three Months
Ended For the Six Months
Ended For the Three Months Ended For the Nine Months Ended (Dollars in millions) June 30,
2014 June 30,
2013 June 30,
2014 June 30,
2013 September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013 $ 649 $ 702 $ 1,309 $ 1,415 $ 805 $ 689 $ 2,114 $ 2,104 Less: Staff costs associated with fees from affiliates - support services 88 — 88 — 1 (3 ) — (4 ) (1 ) (2 ) (1 ) (6 ) (3 ) (2 ) 13 13 19 1 32 14 4 13 5 17 6 14 11 31 20 20 40 35 25 17 65 52 8 6 16 12 8 11 23 23 25 44 42 84 22 25 64 109 10 14 20 28 11 13 31 41 3 4 7 7 3 3 10 10 $ 581 $ 606 $ 1,166 $ 1,223 $ 624 $ 607 $ 1,791 $ 1,830 $ 965 $ 873 $ 1,829 $ 1,777 $ 1,095 $ 919 $ 2,924 $ 2,696 5 3 10 7 6 4 16 11 Less: Fees from affiliates - support services 94 — 94 — Less: Productivity initiative gains — 11 — 11 9 3 16 8 4 8 20 16 (2 ) 2 1 (7 ) 17 1 18 (6 ) $ 963 $ 871 $ 1,822 $ 1,783 $ 986 $ 903 $ 2,808 $ 2,686 60.30 % 69.45 % 63.91 % 68.56 % 63.42 % 67.21 % 63.74 % 68.10 % 2022 percent in the secondthird quarter of both 2014 and 2013. The effective income tax rate was 21 percent in the six monthnine-month period ended JuneSeptember 30, 2014, compared with 23 percent for the six monthnine-month period ended JuneSeptember 30, 2013. The overall decrease in the effective tax rate for the six monthnine-month period ended JuneSeptember 30, 2014 was primarily driven by a discrete tax benefit of $6.4 million.Operations—Operations - Income Tax Expense" and "“Changes in our tax rates could affect our future results"” in "Risk Factors"“Risk Factors” in Part I, Item 1A. and Note 18 to the Consolidated Financial Statements in Part II, Item 8. "Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K.43 to our Consolidated Financial Statements included in this Form 10-Q. Increase (Decrease) Increase (Decrease) June 30, 2014 December 31,
2013 September 30, 2014 December 31, 2013 (Dollars in millions) Amount Percent Amount Percent $ 25,162 $ 23,528 $ 1,634 7 % $ 26,429 $ 23,528 $ 2,901 12 % 13,549 13,092 457 3 13,766 13,092 674 5 1,248 905 343 38 1,436 905 531 59 829 854 (25 ) (3 ) 811 854 (43 ) (5 ) 40,788 38,379 2,409 6 42,442 38,379 4,063 11 27,619 25,547 2,072 8 28,425 25,547 2,878 11 3,178 3,280 (102 ) (3 ) 3,141 3,280 (139 ) (4 ) 30,797 28,827 1,970 7 31,566 28,827 2,739 10 71,585 67,206 4,379 7 74,008 67,206 6,802 10 784 1,106 (322 ) (29 ) 627 1,106 (479 ) (43 ) $ 72,369 $ 68,312 $ 4,057 6 % $ 74,635 $ 68,312 $ 6,323 9 % JuneSeptember 30, 2014 primarily due to organic growth in the residential mortgage and commercial and industrial and residential mortgage portfolios.cross-bordercross‑border outstandings reflect certain additional economic and political risks that differ from or are notgreater than those reflected in domestic outstandings. These risks include those arising from exchange rate fluctuations and restrictions on the transfer of funds. Our total cross-border outstandings for Canada, the only country where such outstandings exceeded one percent of total assets, were $1.7$1.6 billion and $1.4 billion at JuneSeptember 30, 2014 and December 31, 2013, respectively. The cross-border outstandings are based on category and domicile of ultimate risk and are comprised of balances with banks, trading account assets, securities available for sale, securities purchased under resale agreements, loans, accrued interest receivable, acceptances outstanding and investments with foreign entities.JuneSeptember 30, 2014, our sovereign and non-sovereign debt exposure to European countries was not material.JuneSeptember 30, 2014 and December 31, 2013. Increase
(Decrease) Increase (Decrease) June 30,
2014 December 31,
2013 September 30, 2014 December 31, 2013 (Dollars in millions) Amount Percent Amount Percent $ 6,100 $ 3,978 $ 2,122 53 % $ 6,163 $ 3,978 $ 2,185 55 % 32,405 32,639 (234 ) (1 ) 32,875 32,639 236 1 38,505 36,617 1,888 5 39,038 36,617 2,421 7 5,571 5,495 76 1 5,549 5,495 54 1 10,044 11,494 (1,450 ) (13 ) 9,093 11,494 (2,401 ) (21 ) 54,120 53,606 514 1 53,680 53,606 74 — 27,446 26,495 951 4 28,676 26,495 2,181 8 $ 81,566 $ 80,101 $ 1,465 2 % $ 82,356 $ 80,101 $ 2,255 3 % $ 2,698 $ 3,109 $ (411 ) (13 )% $ 2,676 $ 3,109 $ (433 ) (14 )% 3,065 3,384 (319 ) (9 ) 2,946 3,384 (438 ) (13 ) $ 5,763 $ 6,493 $ (730 ) (11 )% $ 5,622 $ 6,493 $ (871 ) (13 )% $ 81,566 $ 80,101 $ 1,465 2 % $ 82,356 $ 80,101 $ 2,255 3 % 5,763 6,493 (730 ) (11 ) 5,622 6,493 (871 ) (13 ) 3,745 4,453 (708 ) (16 ) 3,126 4,453 (1,327 ) (30 ) $ 72,058 $ 69,155 $ 2,903 4 % $ 73,608 $ 69,155 $ 4,453 6 % $1.5$2.3 billion and $2.9$4.5 billion, respectively, from December 31, 2013 to JuneSeptember 30, 2014, substantially due to certain large escrow deposits.deposits and overall deposit growth. Core deposits as a percentage of total deposits were 8889 percent at JuneSeptember 30, 2014 and 86 percent at December 31, 2013.JuneSeptember 30, 2014, management believes the capital ratios of the Company and MUB met all regulatory requirements of "well-capitalized"“well-capitalized” institutions.Reserve'sReserve’s Comprehensive Capital Analysis and Review (CCAR) program in January 2014. The CCAR evaluates capital planning processes and assesses capital adequacy levels under various scenarios to determine if bank holding companies would have sufficient capital to continue operations throughout times of economic and financial market stress. In March 2014, the Company disclosed the results of its annual company-run capital stress test in accordance with regulatory requirements and was subsequently informed by the Federal Reserve that it did not object to the Company'sCompany’s capital plan.(U.S. (U.S. Basel III). These rules supersede the U.S. federal banking agencies'agencies’ general risk-based capital rules (commonly known as "Basel I"“Basel I”), advanced approaches rules (commonly known as "Basel II"“Basel II”) that are applicable to certain large banking organizations, and leverage rules, and are subject to certain transition provisions.MUAH'sMUAH’s and MUB'sMUB’s risk-based capital ratios as of JuneSeptember 30, 2014 in accordance with the transition guidelines set forth in the U.S. Basel III rules. Risk-basedRisk‑based capital, risk-weighted assets, and risk-based capital ratios as of December 31, 2013 were calculated in accordance with the Basel I rules. U.S. Basel III U.S. Basel I (Dollars in millions) June 30,
2014 December 31,
2013 $ 11,900 n/a 11,933 11,471 1,845 2,028 $ 13,778 $ 13,499 $ 94,556 $ 92,410 $ 105,123 $ 101,813 U.S. Basel III U.S. Basel I June 30, 2014 December 31,
2013 June 30, 2014
Minimum
Regulatory
Requirement (Dollars in millions) Amount Ratio Amount Ratio Amount Ratio $ 11,900 12.58 % n/a n/a ³$ 3,782 4.0 % 11,933 12.62 11,471 12.41 % ³ 5,201 5.5 $ 13,778 14.57 13,499 14.61 ³ 7,564 8.0 11,933 11.35 11,471 11.27 ³ 4,205 4.0 U.S. Basel III U.S. Basel I (Dollars in millions) September 30, 2014 December 31, 2013 Capital Components Common Equity Tier 1 capital $ 12,189 n/a Tier 1 capital 12,219 $ 11,471 Tier 2 capital 1,832 2,028 Total risk-based capital $ 14,051 $ 13,499 Risk-weighted assets $ 96,239 $ 92,410 Average total assets for leverage capital purposes $ 106,874 $ 101,813 U.S. Basel III U.S. Basel I (Dollars in millions) September 30, 2014 December 31, 2013 September 30, 2014 Capital Ratios Amount Ratio Amount Ratio Amount Ratio Common Equity Tier 1 capital (to risk-weighted assets) $ 12,189 12.66 % n/a n/a ≥ $ 3,850 4.0 % Tier 1 capital (to risk-weighted assets) 12,219 12.70 $ 11,471 12.41 % ≥ 5,293 5.5 Total capital (to risk-weighted assets) 14,051 14.60 13,499 14.61 ≥ 7,699 8.0 12,219 11.43 11,471 11.27 ≥ 4,275 4.0 applicable U.S. Basel III U.S. Basel I (Dollars in millions) June 30,
2014 December 31,
2013 $ 11,724 n/a 11,724 11,274 1,578 1,716 $ 13,302 $ 12,990 $ 89,923 $ 87,129 $ 104,586 $ 101,269 U.S. Basel III U.S. Basel I June 30, 2014 June 30, 2014 December 31,
2013 Minimum
Regulatory
Requirement To Be
Well-Capitalized
Under Prompt
Corrective
Action
Provisions (Dollars in millions) Amount Ratio Amount Ratio Amount Ratio Amount Ratio $ 11,724 13.04 % n/a n/a ³$ 3,597 4.0 % ³ n/a n/a 11,724 13.04 11,274 12.94 ³ 4,946 5.5 ³ 5,395 6.0 13,302 14.79 12,990 14.91 ³ 7,194 8.0 ³ 8,992 10.0 11,724 11.21 11,274 11.13 ³ 4,183 4.0 ³ 5,229 5.0 U.S. Basel III U.S. Basel I (Dollars in millions) September 30, 2014 December 31, 2013 Capital Components Common Equity Tier 1 capital $ 11,987 n/a Tier 1 capital 11,987 $ 11,274 Tier 2 capital 1,570 1,716 Total risk-based capital $ 13,557 $ 12,990 Risk-weighted assets $ 91,566 $ 87,129 Average total assets for leverage capital purposes $ 106,278 $ 101,269 U.S. Basel III U.S. Basel I To Be Well-Capitalized Under Prompt Corrective Action Provisions (Dollars in millions) September 30, 2014 December 31, 2013 September 30, 2014 Capital Ratios Amount Ratio Amount Ratio Amount Ratio Amount Ratio Common Equity Tier 1 capital (to risk-weighted assets) $ 11,987 13.09 % n/a n/a ≥ $ 3,663 4.0 % ≥ n/a n/a Tier 1 capital (to risk-weighted assets) 11,987 13.09 $ 11,274 12.94 % ≥ 5,036 5.5 ≥ $ 5,494 6.0 % Total capital (to risk-weighted assets) 13,557 14.81 12,990 14.91 ≥ 7,325 8.0 ≥ 9,157 10.0 11,987 11.28 11,274 11.13 ≥ 4,251 4.0 ≥ 5,314 5.0 applicableCompany'sCompany’s capital structure to other financial institutions. These ratios are not codified within U.S. GAAP or federal banking regulations in effect at JuneSeptember 30, 2014. Therefore, they are considered non-GAAP financial measures. Our tangible common equity ratio calculation methods may differ from those used by other financial services companies.JuneSeptember 30, 2014 and December 31, 2013: September 30, 2014 December 31, 2013 (Dollars in millions) June 30, 2014 December 31, 2013 $ 14,815 $ 14,215 $ 15,051 $ 14,215 (3,227 ) (3,228 ) (3,227 ) (3,228 ) (262 ) (288 ) (249 ) (288 ) 99 105 20 105 $ 11,425 $ 10,804 $ 11,595 $ 10,804 $ 108,820 $ 105,894 $ 110,879 $ 105,894 (3,227 ) (3,228 ) (3,227 ) (3,228 ) (262 ) (288 ) (249 ) (288 ) 99 105 20 105 $ 105,430 $ 102,483 $ 107,423 $ 102,483 10.84 % 10.54 % 10.79 % 10.54 % (Dollars in millions) December 31, 2013 December 31, 2013 $ 11,471 $ 11,471 (66 ) (66 ) $ 11,405 11,405 $ 92,410 $ 92,410 12.34 % 12.34 % Company'sCompany’s fully phased-in Common equity tierEquity Tier 1 capital ratio calculated under the U.S. Basel III standardized approach at JuneSeptember 30, 2014 and December 31, 2013 was estimated to be 11.6011.93 percent and 11.14 percent, respectively. Management believes that the Company would satisfy all capital adequacy requirements under the U.S. Basel III rules on a fully phased-in basis if those requirements had been effective at both JuneSeptember 30, 2014 and December 31, 2013.equity tierEquity Tier 1 capital to total risk-weighted assets ratio under the U.S. Basel III standardized approach as of JuneSeptember 30, 2014 and December 31, 2013:Common equity tier 1 capital under U.S. Basel III (standardized approach; fully phased-in)(Dollars in millions) June 30, 2014
(Estimated) $ 11,900 (377 ) (130 ) (507 ) $ 11,393 $ 94,556 3,638 $ 98,194 11.60 % (1)Common equity tier 1 capital on a fully phased-in basis 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 fully phased-in U.S. Basel III rules were effective at June 30, 2014. Management reviews Common equity tier 1 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 Common equity tier 1 capital under Basel III (transitional), because of current interest in such information on the part of market participants.Common Equity Tier 1 capital under U.S. Basel III (standardized approach; fully phased-in) September 30, 2014 (Dollars in millions) (Estimated) Common Equity Tier 1 capital under U.S. Basel III (transitional) $ 12,189 Adjustments from U.S. Basel III (transitional) to U.S. Basel III (standardized approach; fully phased-in): Accumulated other comprehensive loss related to securities, pension and other benefits (388 ) Other (122 ) Total adjustments from U.S. Basel III (transitional) to U.S. Basel III (standardized approach; fully phased-in) (510 ) Common Equity Tier 1 capital estimated under U.S. Basel III (standardized approach; fully phased-in) (a) $ 11,679 Risk-weighted assets under U.S. Basel III (transitional) $ 96,239 Adjustments from U.S. Basel III (transitional) to U.S. Basel III (standardized approach; fully phased-in) 1,679 Total risk-weighted assets, estimated under U.S. Basel III (standardized approach; fully phased-in) (b) $ 97,918 11.93 % (1) Common Equity Tier 1 risk-based capital (standardized, fully phased-in basis) 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 transition provisions of the U.S. Basel III rules were fully phased-in for the period in which the ratio is disclosed. Management reviews this ratio, which includes components of accumulated other comprehensive loss, along with other measures of capital as part of its financial analyses and has included this non-GAAP information, and the corresponding reconciliation from Common Equity Tier 1 capital (calculated according to the transition provisions under U.S. Basel III rules) because of current interest in such information by market participants. (Dollars in millions) December 31, 2013
(Estimated) $ 11,471 (66 ) 11,405 (522 ) (95 ) (617 ) $ 10,788 $ 92,410 4,444 $ 96,854 11.14 % (1)Common equity tier 1 capital on a fully phased-in basis 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 fully phased-in U.S. Basel III rules were effective at December 31, 2013. Management reviews Common equity tier 1 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, because of current interest in such information on the part of market participants. December 31, 2013 (Dollars in millions) (Estimated) Tier 1 capital under Basel I $ 11,471 Junior subordinated debt payable to trusts (66 ) Basel I Tier 1 common capital 11,405 Adjustments from Basel I to U.S. Basel III: Accumulated other comprehensive loss related to securities available for sale, pension and other benefits (522 ) Other (95 ) Total adjustments from Basel I to U.S. Basel III (617 ) Common Equity Tier 1 capital estimated under U.S. Basel III (a) $ 10,788 Risk-weighted assets under Basel I $ 92,410 Adjustments from Basel I to U.S. Basel III 4,444 Total risk-weighted assets, estimated under U.S. Basel III (b) $ 96,854 11.14 % (1) Common Equity Tier 1 risk-based capital (standardized, fully phased-in basis) 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 transition provisions of the U.S. Basel III rules were fully phased-in for the period in which the ratio is disclosed. Management reviews this ratio, which includes components of accumulated other comprehensive loss, along with other measures of capital as part of its financial analyses and has included this non-GAAP information, and the corresponding reconciliation from Common Equity Tier 1 capital (calculated according to the transition provisions under U.S. Basel III rules) because of current interest in such information by market participants. borrower'sborrower’s ability and willingness to repay as scheduled. Our process also includes ongoing portfolio and credit management through portfolio diversification, lending limit constraints, credit review and approval policies, and extensive internal monitoring. For additional information regarding our credit risk management policies, refer to the section "Credit“Credit Risk Management"Management” included in "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” in our 2013 Form 10-K."Financial“Financial Statements and Supplementary Data"Data” and in the section "Allowance“Allowance for Credit Losses"Losses” included in Part II, Item 7. "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” in our 2013 Form 10-K.10‑K. For additional information regarding our allowance for loan losses, refer to Note 54 of our Consolidated Financial Statements in Part I, Item 1. "Financial Statements"“Financial Statements” of this Form 10-Q.$9$39 million to $559$529 million as of JuneSeptember 30, 2014, compared with $568 million at December 31, 2013. This decrease is primarilywas due to improving credit quality in our consumercommercial portfolio, which was partially offset by an extension of the loss emergence period observed within the commercial loan portfolio. The unallocated allowance was $25$20 million at JuneSeptember 30, 2014, compared with $77 million at December 31, 2013. This decrease primarily resulted from refinements to the methodology used to measure credit risk ascribed to the commercial loan portfolio segment, which previously had been estimated within the unallocated allowance for loan losses.0.710.54 percent at JuneSeptember 30, 2014 and 0.65 percent at December 31, 2013. Our ratio of allowance for loan losses to total loans held for investment decreased to 0.770.71 percent at JuneSeptember 30, 2014 from 0.83 percent at December 31, 2013. Annualized net loans charged-off to average total loans held for investment was 0.040.06 percent for the quarter ended JuneSeptember 30, 2014, compared with an annualized net loans charged-offrecovered to average total loans held for investment of 0.050.01 percent for the quarter ended JuneSeptember 30, 2013. Criticized credits in the commercial segment were $1.5$1.2 billion at JuneSeptember 30, 2014 and $1.3 billion at December 31, 2013. Criticized credits are those that have regulatory risk grades of "special“special mention," "substandard"” “substandard” or "doubtful."“doubtful.” Special mention credits are potentially weak, as the borrower has begun to exhibit deteriorating trends, which, if not corrected, could jeopardize repayment of the loan and result in further downgrade. Adversely classified credits are those that are internally risk graded as substandard or doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full satisfaction of the debt. A credit classified as doubtful has critical weaknesses that make full collection improbable on the basis of currently existing facts and conditions. For the Three
Months
Ended June 30, For the Six
Months
Ended June 30, For the Three Months Ended September 30, For the Nine Months Ended September 30, (Dollars in millions) 2014 2013 2014 2013 2014 2013 2014 2013 $ 557 $ 638 $ 568 $ 653 $ 559 $ 625 $ 568 $ 653 9 (3 ) (9 ) (6 ) (18 ) (16 ) (27 ) (22 ) — — 2 — — — 2 — — (2 ) — — — (2 ) — (2 ) — — (1 ) — — — (1 ) — (6 ) (11 ) (11 ) (12 ) (15 ) (6 ) (26 ) (18 ) (2 ) (1 ) (3 ) (3 ) — (2 ) (3 ) (5 ) Construction — (1 ) — (1 ) (8 ) (12 ) (14 ) (15 ) (15 ) (9 ) (29 ) (24 ) (2 ) (3 ) (3 ) (10 ) — (2 ) (3 ) (12 ) (2 ) (5 ) (4 ) (11 ) (2 ) (2 ) (6 ) (13 ) (4 ) (8 ) (7 ) (21 ) (2 ) (4 ) (9 ) (25 ) — — — (3 ) (1 ) — (1 ) (3 ) (12 ) (20 ) (21 ) (39 ) (18 ) (13 ) (39 ) (52 ) 3 7 14 10 3 5 17 15 1 2 1 2 2 4 3 6 — — 3 — — 1 3 1 4 9 18 12 5 10 23 22 1 1 2 2 — 2 2 4 1 1 2 2 — 2 2 4 — 2 — 3 1 2 1 5 5 12 20 17 6 14 26 31 (7 ) (8 ) (1 ) (22 ) (12 ) 1 (13 ) (21 ) $ 559 $ 625 $ 559 $ 625 $ 529 $ 608 $ 529 $ 608 $ 556 $ 624 $ 556 $ 624 $ 526 $ 607 $ 526 $ 607 3 1 3 1 3 1 3 1 559 625 559 625 529 608 529 608 145 136 145 136 162 131 162 131 $ 704 $ 761 $ 704 $ 761 $ 691 $ 739 $ 691 $ 739 other real estate owned (OREO).OREO. Nonaccrual loans are those for which management has discontinued accrual of interest because there exists significant uncertainty as to the full and timely collection of either principal or interest, or such loans have become contractually past due 90 days with respect to principal or interest. OREO includes property where the Bank acquired title through foreclosure or "deed“deed in lieu"lieu” of foreclosure. For a more detailed discussion of the accounting for nonaccrual loans, see Note 1 to our Consolidated Financial Statements included in Part II, Item 8. "Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K. Increase (Decrease) June 30, 2014 December 31, 2013 September 30, 2014 December 31, 2013 Increase (Decrease) (Dollars in millions) Amount Percent Amount Percent $ 161 $ 44 $ 117 266 % $ 71 $ 44 $ 27 61 % 47 51 (4 ) (8 ) 34 51 (17 ) (33 ) 208 95 113 119 105 95 10 11 243 286 (43 ) (15 ) 239 286 (47 ) (16 ) 46 46 — — 46 46 — — 289 332 (43 ) (13 ) 285 332 (47 ) (14 ) 497 427 70 16 390 427 (37 ) (9 ) 17 15 2 13 13 15 (2 ) (13 ) 514 442 72 16 403 442 (39 ) (9 ) 14 20 (6 ) (30 ) 12 20 (8 ) (40 ) 19 37 (18 ) (49 ) 13 37 (24 ) (65 ) $ 547 $ 499 $ 48 10 % $ 428 $ 499 $ (71 ) (14 )% $ 511 $ 447 $ 64 14 % $ 402 $ 447 $ (45 ) (10 )% $ 297 $ 367 $ (70 ) (19 )% $ 300 $ 367 $ (67 ) (18 )% $ 248 $ 225 $ 23 10 % $ 189 $ 225 $ (36 ) (16 )% $ 545 $ 592 $ (47 ) (8 )% $ 489 $ 592 $ (103 ) (17 )% A significant portion of the increase of $117 million in nonperforming commercial and industrial loans from December 31, 2013 to June 30, 2014 was due to one large loan, which was placed on nonaccrual status in the second quarter of 2014 and subsequently paid off.JuneSeptember 30, 2014 and December 31, 2013. Refer to Note 54 to our Consolidated Financial Statements in Part I, Item 1. "Financial Statements" in this Form 10-Q for more information. As a Percentage of
Ending Loan Balances (Dollars in millions) June 30,
2014 December 31,
2013 June 30,
2014 December 31,
2013 $ 173 $ 212 0.69 % 0.90 % 36 38 0.27 0.29 209 250 0.51 0.65 308 315 1.12 1.23 26 24 0.83 0.73 334 339 1.09 1.18 $ 543 $ 589 0.76 % 0.88 % (1)Amounts exclude $2 million and $3 million of TDRs covered by FDIC loss share agreements at June 30, 2014 and December 31, 2013, respectively. (Dollars in millions) September 30, 2014 December 31, 2013 September 30, 2014 December 31, 2013 Commercial and industrial $ 125 $ 212 0.47 % 0.90 % Commercial mortgage 26 38 0.19 0.29 Total commercial portfolio 151 250 0.36 0.65 Residential mortgage 306 315 1.08 1.23 Home equity and other consumer loans 30 24 0.97 0.73 Total consumer portfolio 336 339 1.07 1.18 $ 487 $ 589 0.66 % 0.88 % (1) Amounts exclude $2 million and $3 million of TDRs covered by FDIC loss share agreements at September 30, 2014 and December 31, 2013, respectively. $11$4 million and $5 million at JuneSeptember 30, 2014 and December 31, 2013, respectively. These amounts exclude purchased credit-impaired loans, which are generally accounted for within loan pools, of $103$65 million and $124 million at JuneSeptember 30, 2014 and December 31, 2013, respectively. The past due status of individual loans included within purchased credit-impaired loan pools is not a meaningful indicator of credit quality, as potential credit losses are measured at the loan pool level against prior expectations of cash flow performance.JuneSeptember 30, 2014 or December 31, 2013.JuneSeptember 30, 2014, 4944 percent of the Company'sCompany’s construction loan portfolio was domiciled in California. The commercial mortgage loan portfolio consists of loans secured by commercial income properties. At JuneSeptember 30, 2014, 6768 percent of the Company'sCompany’s commercial mortgage loans were made to borrowers located in California, 5 percent to borrowers in New York, and 7 percent to borrowers in the state of Washington.JuneSeptember 30, 2014, payment terms on 4846 percent of our residential mortgage loans require a monthly payment that covers the full amount of interest due, but does not reduce the principal balance. At origination, these interest-only loans had strong credit profiles and had weighted average loan-to-value (LTV) ratios of approximately 6766 percent. The remainder of the portfolio consists of regularly amortizing loans.JuneSeptember 30, 2014 and December 31, 2013, respectively. To manage risk associated with lending commitments, we review all equity-secured lines annually for creditworthiness and reduce or freeze limits, to the extent permitted by laws and regulations. See Note 54 to our Consolidated Financial Statements in Part I, Item 1. "Financial Statements"“Financial Statements” in this Form 10-Q for additionalCompany'sCompany’s risk tolerance by outlining standards for measuring market and liquidity risks, creates Board-level limits for specific market risks, establishes Asset Liability Management Committee (ALCO) responsibilities and requires independent review and oversight of market and liquidity risk activities.Company'sCompany’s activities. ALCO, as authorized by the RCC, is responsible for themanager of Global CapitalCompany's Investment Banking and Markets (GCM)segment is responsible for managing price risk through theit's trading activities conducted in GCM.activities. The Market Risk Management (MRM) unit is responsible for the monitoring of market risk and functions independently of all operating and management units.(Dollars in millions) June 30,
2014 December 31,
2013 September 30, 2014 December 31, 2013 $ 132.9 $ 153.3 $ 116.1 $ 153.3 4.76 % 5.63 % 4.19 % 5.63 % $ (82.9 ) $ (62.8 ) $ (53.9 ) $ (62.8 ) (2.98 )% (2.31 )% (1.95 )% (2.31 )% secondthird quarter of 2014, the Bank'sBank’s asset sensitive profile decreased slightly due to changes in both the current balance sheet composition and forecasted balance sheet activity over the next twelve months. We believe that our simulation provides management with a comprehensive view of the sensitivity of net interest income to changes in interest rates over the measurement horizon. However, as with any financial model, the underlying assumptions are inherently uncertain and subject to refinement. In particular, two significant models used in interest rate risk measurement address residential mortgage prepayment speeds and non-maturity deposit rate and balance behaviors. The mortgage prepayment model is periodically calibrated to reflect changes in customer behavior, but given the unprecedented rate and credit environment, may be prone to lowered predictive capability when determining the borrower's propensity or ability to prepay their mortgage. The deposit model uses the Company'sCompany’s historical deposit pricing to forecast future deposit pricing in its scenarios. Management'sManagement’s response to future rate scenarios may deviate from historic responses as the financial crisis may have changed future competitive responses and customer behaviors with respect to deposit repricing. Actual results may differ from those derived in the simulation analysis due to extraordinary market events, unanticipated changes in customer behavior, market interest rates, product pricing, and investment, funding and hedging activities.JuneSeptember 30, 2014 and December 31, 2013, our ALM securities portfolio balances were $21.0$20.7 billion and $20.2 billion, respectively. Our ALM securities portfolio consists of securities issued by the U.S. Treasury, U.S. government-sponsored agencies, residential mortgage-backed securities, CMBS, CLOs, and asset-backed securities and had an expected weighted average life of 4.84.7 years at JuneSeptember 30, 2014. At JuneSeptember 30, 2014, approximately $6.1$6.5 billion of the portfolio was pledged to secure trust and public deposits and for other purposes as required or permitted by law. During the secondthird quarter of 2014, we purchased $0.7$1.3 billion and sold $0.3$0.6 billion of securities, as part of our investment portfolio strategy, while $0.8$0.9 billion of ALM securities matured, were paid down, or were called. To reduce the impact of price volatility on accumulated other comprehensive income and in consideration of changes in regulatory capital requirements under U.S. Basel III rules, the Bank increased securities held to maturity from 32 percent of total ALM securities at December 31, 2013 to 3941 percent of total ALM securities at JuneSeptember 30, 2014.portfolio'sportfolio’s effective duration was 3.8 years at JuneSeptember 30, 2014, compared to 4.0 years at December 31, 2013. Effective duration is a measure of price sensitivity of a bond portfolio to immediate parallel shifts in interest rates. An effective duration of 3.8 years suggests an expected price decrease of approximately 3.8 percent for an immediate 1.0 percent parallel increase in interest rates.$1.9$1.8 billion of direct bank purchase bonds that are largely managed within our Commercial Banking operating segment. These instruments are accounted for as securities, but underwritten as loans with terms that are closely aligned with traditional commercial loan features, and are subject to national bank regulatory lending authority standards. These instruments typically are not issued in bearer form, nor are they registered with the SEC or the Depository Trust Company. Additionally, these instruments generally contain certain transferability restrictions and are not assigned external credit ratings.$4.4$5.8 billion as we entered into receive fixed interest rate swap contracts to hedge floating rate commercial loans and fixed rate debt issuances.109 to our Consolidated Financial Statements in Part I, Item 1. "Financial Statements"“Financial Statements” of this Form 10-Q and Note 13 to our"Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K.(Dollars in millions) June 30,
2014 December 31,
2013 Increase
(Decrease) September 30, 2014 December 31, 2013 Increase (Decrease) $ 8,700 $ 4,300 $ 4,400 $ 10,100 $ 4,300 $ 5,800 8,700 4,300 4,400 10,100 4,300 5,800 248 185 63 251 185 66 $ 8,948 $ 4,485 $ 4,463 $ 10,351 $ 4,485 $ 5,866 $ 40 $ 8 $ 32 $ 6 $ 8 $ (2 ) 2 13 (11 ) 34 13 21 38 (5 ) 43 (28 ) (5 ) (23 ) $ 2 $ 2 $ — 1 2 (1 ) 5 4 1 4 4 — (3 ) (2 ) (1 ) (3 ) (2 ) (1 ) $ 35 $ (7 ) $ 42 $ (31 ) $ (7 ) $ (24 ) JuneSeptember 30, 2014, we had notional amounts of $47.0$46.1 billion of interest rate derivative contracts, $3.6$4.3 billion of foreign exchange derivative contracts and $4.5$4.1 billion of commodity derivative contracts. WeJune$1.2$1.2 billion $1.3, $1.2 billion and $4.0$3.9 billion of foreign exchange, commodity and equity contracts, respectively, represented our exposure to the embedded bifurcated derivatives and the related hedges contained in our market-linked certificates of deposit.JuneSeptember 30, 2014 and December 31, 2013, and the change in fair value between JuneSeptember 30, 2014 and December 31, 2013:(Dollars in millions) June 30,
2014 December 31,
2013 Increase
(Decrease) $ 47,006 $ 44,427 $ 2,579 5,776 5,714 62 4,835 4,978 (143 ) 4,034 4,027 7 — 140 (140 ) $ 61,651 $ 59,286 $ 2,365 $ 1,225 $ 1,074 151 1,120 952 168 $ 105 $ 122 $ (17 ) (1)Excludes spot contracts with a notional amount of $0.5 billion and $0.7 billion at June 30, 2014 and December 31, 2013, respectively.(Dollars in millions) September 30, 2014 December 31, 2013 Increase (Decrease) Total gross notional amount of positions held for trading purposes: Interest rate contracts $ 46,106 $ 44,427 $ 1,679 Commodity contracts 5,268 5,714 (446 ) 5,520 4,978 542 Equity contracts 3,909 4,027 (118 ) Other contracts — 140 (140 ) Total $ 60,803 $ 59,286 $ 1,517 Fair value of positions held for trading purposes: Gross positive fair value $ 1,243 $ 1,074 $ 169 Gross negative fair value 1,048 952 96 Positive fair value of positions, net $ 195 $ 122 $ 73 (1) Excludes spot contracts with a notional amount of $0.5 billion and $0.7 billion at September 30, 2014 and December 31, 2013, respectively. Bank'sBank’s financial condition or overall safety and soundness is adversely affected by an inability, or perceived inability, to meet its contractual, including contingent, obligations. The objective of liquidity risk management is to maintain a sufficient amount of liquidity and diversity of funding sources to allow the Bank to meet obligations in both stable and adverse conditions.Bank'sBank’s liquidity and contingency planning strategies and is responsible for identifying, managing and reporting on liquidity risk. MRM, which is part of the Enterprise Wide Risk Reporting and Analysis unit, partners with Corporate Treasury to establish sound policy and effective risk controls. We are also subject to a consolidated Contingency Funding Plan that identifies actions to be taken to help ensure adequate liquidity if an event should occur that disrupts or adversely affects the Bank'sBank’s normal funding activities.Bank'sBank’s capacity to raise incremental unsecured and secured funding. Stress testing, which incorporates both bank-specific, systemic market scenarios, as well as a combination scenario that adversely affects the Bank'sBank’s liquidity position and profile, facilitates the identification of appropriate remedial measures to help ensure that the Bank maintains adequate liquidity in adverse conditions. Such measures may include extending the maturity profile of liabilities, optimizing liability levels through pricing strategies, adding new funding sources, altering dependency on certain funding sources and financing or selling assets.$0.1$0.6 billion from $11.9 billion at December 31, 2013 to $12.0$12.5 billion at JuneSeptember 30, 2014. Total deposits increased $1.5$2.3 billion from $80.1 billion at December 31, 2013 to $81.6$82.4 billion at JuneSeptember 30, 2014.JuneSeptember 30, 2014, our core deposits totaled $72.1$73.6 billion and our total loan-to-total core deposit ratio was 99.7101.4 percent.Bank'sBank’s liquidity needs, including the following:•JuneSeptember 30, 2014, the Bank had $0.8 billion of borrowings outstanding with the FHLB, and the Bank had a remaining combined unused borrowing capacity from the FHLB and the Federal Reserve Bank of $37.6$38.0 billion.•$1.0$0.3 billion from $14.1 billion at December 31, 2013 to $15.1$14.4 billion at JuneSeptember 30, 2014.•JuneSeptember 30, 2014. In May 2014, the Bank issued $750 million in senior notes under this program.•JuneSeptember 30, 2014, $1.1 billion of debt or other securities were available for issuance under this shelf registration statement. We do not have any firm commitments in place to sell securities under this shelf registration statement.•of Japan's credit rating and credit ratings of most major Japanese banks, including BTMU, see"“The Bank of Tokyo-Mitsubishi UFJ'sUFJ’s and Mitsubishi UFJ Financial Group'sGroup’s credit ratings and financial or regulatory condition could adversely affect our operations"operations”10-K.10-K and "Our credit ratings are important in order to maintain liquidity" in Part II, Item 1A. “Risk Factors” in this Form 10-Q. The following table provides our credit ratings as of JuneSeptember 30, 2014:MUFG
Union Bank, N.A.MUFG
Americas
Holdings
CorporationLong-term A+ A Short-term A-1 A-1 Long-term A2 Long-termA2 Short-term P-1 — Long-term A Long-termA Short-term F1 F1 October 2013,September 2014, the OCC, the Federal Reserve and the FDIC jointly issued a proposedadopted the final rule that wouldto implement a standardized quantitative liquidity requirement generally consistent with the liquidity coverage ratio (LCR) standards established by the Basel Committee on Banking Supervision. The LCR would generally apply to banking organizations with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposures. The LCR rules arerule is designed to ensure that covered banking organizations maintain an adequate level of cash and high quality liquid assets (HQLA), such as central bank reserves and government and corporate debt, to meet estimated net liquidity needs in a short-term stress scenario using liquidity inflow and outflow assumptions provided in the rulesrule (net cash outflow). The proposal wouldAn institution’s LCR is the amount of its HQLA, as defined and calculated in accordance with the reductions and limitations in the rule, divided by its net cash outflow, with the quotient expressed as a percentage. While the LCR generally applies to banking organizations with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposures, the final rule also applyapplies a less stringent, modified LCR to bank holding companies that are not internationally active, but have more than $50 billion in total assets (such as the Company). Under the proposed modified LCR rule, financial institutions would have tomust maintain, following a phase-in period, an LCR equal to at least 100 percent based on the entity's total projected net cash outflows over the next 2130 calendar days, effectively using net cash outflow assumptions equal to 70 percent of the outflow assumptions prescribed for internationally active banking organizations. The proposed phase-in period would beginbegins on January 1, 2015,2016, with full compliance required by January 1, 2017.proposal and its potentialfinal rule's impact on its businesses; however, the Company expects to meet or exceed the final LCR requirementrequirements within the regulatory timelines. For information regarding this proposed rule, see"“The effects of changes or increases in, or supervisory enforcement of, banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us"us” in Part II, Item 1A. "Risk Factors"“Risk Factors” of this Form 10-Q."“We are subject to operational risks, including cybersecurity risks"” in Part I, Item 1A. "Risk Factors"“Risk Factors” of our 2013 Form 10-K. Operational risk is mitigated through a system of internal controls that are designed to keep these risks at appropriate levels.Company'sCompany’s reportable segments was revised to reflect our new internal management structure resulting from the BTMU Americas Holdings business integration initiative announced in 2013. We now have five reportable segments: Retail Banking & Wealth Markets, Commercial Banking, Corporate Banking, Transaction Banking, and Investment Banking & Markets. Prior period segment results have been revised to conform to the current period presentation. For a more"Financial Statements"“Financial Statements” of this Form 10-Q."Financial Statements"“Financial Statements” of this Form 10-Q.Retail Banking & Wealth Markets For the Three Months
Ended
June 30, Increase
(Decrease) For the Six Months
Ended
June 30, Increase
(Decrease) Retail Banking & Wealth Markets Retail Banking & Wealth Markets For the Three Months Ended
September 30, Increase (Decrease) For the Nine Months Ended
September 30, Increase (Decrease) (Dollars in millions) 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent Results of operations - Market View $ 362 $ 332 $ 30 9 % $ 709 $ 669 $ 40 6 % $ 340 $ 333 $ 7 2 % $ 1,049 $ 1,002 $ 47 5 % 87 94 (7 ) (7 ) 166 187 (21 ) (11 ) 83 103 (20 ) (19 ) 249 289 (40 ) (14 ) 449 426 23 5 875 856 19 2 423 436 (13 ) (3 ) 1,298 1,291 7 1 340 366 (26 ) (7 ) 675 730 (55 ) (8 ) 329 346 (17 ) (5 ) 1,004 1,075 (71 ) (7 ) (2 ) (7 ) 5 71 (8 ) (15 ) 7 47 (1 ) (13 ) 12 92 (9 ) (28 ) 19 68 111 67 44 66 208 141 67 48 95 103 (8 ) (8 ) 303 244 59 24 44 27 17 63 82 56 26 46 37 41 (4 ) (8 ) 119 96 23 24 $ 67 $ 40 $ 27 68 $ 126 $ 85 $ 41 48 $ 58 $ 62 $ (4 ) (8 ) $ 184 $ 148 $ 36 24 Average balances - Market View $ 34,267 $ 30,858 $ 3,409 11 % $ 33,725 $ 30,656 $ 3,069 10 % $ 35,118 $ 31,457 $ 3,661 12 % $ 34,194 $ 30,926 $ 3,268 11 % 35,821 32,583 3,238 10 35,294 32,401 2,893 9 36,699 33,043 3,656 11 35,767 32,510 3,257 10 40,274 37,049 3,225 9 40,290 36,292 3,998 11 40,278 38,415 1,863 5 40,285 37,008 3,277 9 95 percent and 119 percent during the three and sixnine months ended JuneSeptember 30, 2014 compared with the same periods in 2013, driven by organic deposit generation.Commercial Banking For the Three Months
Ended
June 30, Increase
(Decrease) For the Six Months
Ended
June 30, Increase
(Decrease) Commercial Banking Commercial Banking For the Three Months Ended
September 30, Increase (Decrease) For the Nine Months Ended
September 30, Increase (Decrease) (Dollars in millions) 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent Results of operations - Market View $ 277 $ 217 $ 60 28 % $ 504 $ 423 $ 81 19 % $ 249 $ 240 $ 9 5 % $ 764 $ 671 $ 93 14 % 58 49 9 18 106 92 14 15 57 51 6 14 163 142 21 15 335 266 69 26 610 515 95 18 306 291 15 6 927 813 114 14 104 102 2 2 209 199 10 5 114 99 15 16 323 297 26 9 (10 ) 3 (13 ) (433 ) 6 30 (24 ) (80 ) 7 (20 ) 27 (129 ) 12 9 3 33 241 161 80 50 395 286 109 38 185 212 (27 ) (11 ) 592 507 85 17 65 40 25 63 99 69 30 43 42 62 (20 ) (28 ) 146 134 12 9 $ 176 $ 121 $ 55 45 $ 296 $ 217 $ 79 36 $ 143 $ 150 $ (7 ) (4 ) $ 446 $ 373 $ 73 20 Average balances - Market View $ 30,691 $ 25,598 $ 5,093 20 % $ 30,106 $ 24,305 $ 5,801 24 % $ 32,240 $ 28,087 $ 4,153 15 % $ 30,776 $ 25,557 $ 5,219 20 % 34,492 28,577 5,915 21 33,952 27,129 6,823 25 36,068 31,786 4,282 13 34,616 28,776 5,840 20 13,061 11,685 1,376 12 12,934 11,764 1,170 10 13,126 11,780 1,346 11 12,931 11,443 1,488 13 growth, includinggrowth. Net interest income during the nine months ended September 30, 2014 also included the effect of our PB Capital acquisition which closed late in the second quarter of 2013, and better than expected interest income on PCI loans, which was mostly due to early payoffs of certain loans. The increase in noninterest income was primarily driven by an increase in credit facility fees, merchant banking fees and trading account activities. The secondthird quarter 20142013 reversal of the provision for loan losses reflected a general improvement in customer credit quality, which for the six months ended June 30, 2014 was offset by modest deterioration in certain customers' credit quality. The six months ended June 30, 2013 provision for loan losses includes the impact of an extension of the wholesale loss emergence period, which previously had been estimated within the unallocated allowance.1211 percent and 1013 percent during the three and sixnine months ended JuneSeptember 30, 2014 compared with the same periods in 2013, driven by organic deposit generation.Company'sCompany’s other segments, Corporate Banking offers its customers a range of noncredit services, which include global treasury management and capital market solutions, and foreign exchange and various interest rate risk and commodity risk management products.Corporate Banking For the Three Months
Ended
June 30, Increase
(Decrease) For the Six Months
Ended
June 30, Increase
(Decrease) Corporate Banking Corporate Banking For the Three Months Ended
September 30, Increase (Decrease) For the Nine Months Ended
September 30, Increase (Decrease) (Dollars in millions) 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent Results of operations - Market View $ 43 $ 31 $ 12 39 % $ 74 $ 60 $ 14 23 % $ 46 $ 34 $ 12 22 % $ 124 $ 101 $ 23 23 % 22 18 4 22 40 35 5 14 44 22 22 91 84 58 26 45 65 49 16 33 114 95 19 20 90 56 34 47 208 159 49 31 16 12 4 33 31 26 5 19 40 13 27 173 72 41 31 76 9 (4 ) 13 (325 ) (7 ) 2 (9 ) (450 ) (6 ) 6 (12 ) (220 ) (13 ) 7 (20 ) (286 ) 40 41 (1 ) (2 ) 90 67 23 34 56 37 19 34 149 111 38 34 16 15 1 7 35 26 9 35 22 15 7 33 58 44 14 34 $ 24 $ 26 $ (2 ) (8 ) $ 55 $ 41 $ 14 34 $ 34 $ 22 $ 12 35 $ 91 $ 67 $ 24 34 Average balances - Market View $ 4,722 $ 4,046 $ 676 17 % $ 4,692 $ 3,846 $ 846 22 % $ 4,610 $ 4,066 $ 544 13 % $ 4,713 $ 3,943 $ 770 20 % 5,046 4,284 762 18 5,001 4,088 913 22 4,996 4,344 652 15 5,048 4,197 851 20 4,672 2,002 2,670 133 4,008 2,162 1,846 85 4,718 2,594 2,124 82 4,314 2,634 1,680 64 the organic growth in average loans held for investment. The second quarter 2014reversal of provision for loan losses reflected a modest deterioration in certain customers' credit quality, which for the six months ended June 30, 2014 was offset by a reversal of the provision for loan losses driven by general improvement in overall customer credit quality.Company'sCompany’s other segments to provide working capital management and asset servicing solutions, including deposits and treasury management, trade finance, and institutional trust and custody, to the Company'sCompany’s customers. This segment also manages the digital banking channels for retail, small business, wealth management and commercial clients, as well as commercial product development. The client base consists of financial institutions, corporations, government agencies, insurance companies, mutual funds, investment managers and non-profit organizations.Transaction Banking For the Three Months
Ended
June 30, Increase
(Decrease) For the Six Months
Ended
June 30, Increase
(Decrease) Transaction Banking Transaction Banking For the Three Months Ended
September 30, Increase (Decrease) For the Nine Months Ended
September 30, Increase (Decrease) (Dollars in millions) 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent Results of operations - Market View $ 94 $ 95 $ (1 ) (1 )% $ 194 $ 206 $ (12 ) (6 )% $ 110 $ 108 $ 2 — % $ 323 $ 335 $ (12 ) (4 ) % 39 41 (2 ) (5 ) 79 79 — — 44 41 3 10 124 120 4 3 133 136 (3 ) (2 ) 273 285 (12 ) (4 ) 154 149 5 2 447 455 (8 ) (2 ) 88 91 (3 ) (3 ) 177 184 (7 ) (4 ) 91 87 4 5 268 271 (3 ) (1 ) 2 (4 ) 6 (150 ) 3 (3 ) 6 (200 ) (6 ) 4 (10 ) (250 ) (3 ) 1 (4 ) (400 ) 43 49 (6 ) (12 ) 93 104 (11 ) (11 ) 69 58 11 13 182 183 (1 ) (1 ) 17 20 (3 ) (15 ) 36 41 (5 ) (12 ) 27 23 4 16 71 72 (1 ) — $ 26 $ 29 $ (3 ) (10 ) $ 57 $ 63 $ (6 ) (10 ) $ 42 $ 35 $ 7 10 $ 111 $ 111 $ — (1 ) Average balances - Market View $ 173 $ 55 $ 118 215 % $ 173 $ 53 $ 120 226 % $ 101 $ 53 $ 48 91 % $ 149 $ 53 $ 96 181 % 1,722 1,401 321 23 1,641 1,439 202 14 1,822 1,433 389 27 1,702 1,442 260 18 34,894 31,785 3,109 10 34,254 32,097 2,157 7 36,436 32,609 3,827 12 34,990 32,269 2,721 8 NetFor the nine months ended September 30, 2014, net interest income decreased as a result of a lower funds transfer pricing credit on Transaction Banking'sBanking’s deposit liabilities due to a lower cost of funds partially offset by larger average deposit balances. During the three and sixnine months ended JuneSeptember 30, 2014, average deposits increased 1012 percent and 78 percent compared to the same periods in 2013, reflecting organic growth and the impact of our First Bank Association Bank Services acquisition in the fourth quarter of 2013.Company'sCompany’s other segments to provide customers structured credit services, including project finance; foreign exchange, interest rate and energy risk management solutions; and to facilitate merchant and investment banking-related transactions. Additionally, the segment'ssegment’s leasing arm provides lease and other financing services to corporate customers.Investment Banking & Markets For the Three Months
Ended
June 30, Increase
(Decrease) For the Six Months
Ended
June 30, Increase
(Decrease) Investment Banking & Markets Investment Banking & Markets For the Three Months Ended
September 30, Increase (Decrease) For the Nine Months Ended
September 30, Increase (Decrease) (Dollars in millions) 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent Results of operations - Market View $ 43 $ 43 $ — — % $ 89 $ 89 $ — — % $ 45 $ 47 $ (2 ) (4 ) % $ 134 $ 136 $ (2 ) (1 ) % 57 54 3 6 107 101 6 6 138 39 99 254 245 140 105 75 100 97 3 3 196 190 6 3 183 86 97 113 379 276 103 37 28 25 3 12 55 50 5 10 54 25 29 116 109 75 34 45 15 7 8 114 30 4 26 nm (8 ) 5 (13 ) (240 ) 23 9 14 156 57 65 (8 ) (12 ) 111 136 (25 ) (18 ) 137 56 81 143 247 192 55 29 12 17 (5 ) (29 ) 23 36 (13 ) (36 ) 42 14 28 186 63 50 13 26 $ 45 $ 48 $ (3 ) (6 ) $ 88 $ 100 $ (12 ) (12 ) $ 95 $ 42 $ 53 129 $ 184 $ 142 $ 42 30 Average balances - Market View $ 4,006 $ 4,015 $ (9 ) — % $ 4,073 $ 4,151 $ (78 ) (2 )% $ 4,026 $ 4,278 $ (252 ) (6 ) % $ 4,057 $ 4,194 $ (137 ) (3 ) % 6,508 6,368 140 2 6,521 6,630 (109 ) (2 ) 6,825 6,489 336 5 6,624 6,586 38 1 3,401 3,399 2 — 3,474 3,338 136 4 3,270 3,633 (363 ) (10 ) 3,405 3,438 (33 ) (1 ) three and sixnine months ended JuneSeptember 30, 2014 increased due to modest deterioration in certain customers'customers’ credit quality. "Other"Company'sCompany’s privatization transaction; the elimination of the fully taxable-equivalent basis amount; and the difference between the marginal tax rate and the consolidated effective tax rate. In addition, "Other"“Other” includes the Asian Corporate Banking segment, which offers a range of credit, deposit, and investment management products and services to companies located primarily in the U.S. that are affiliated with companies headquartered in Japan and other Asian countries; Corporate Treasury, which is responsible for ALM, wholesale funding, and the ALM investment securities and derivatives hedging portfolios; and the FDIC covered assets.Other For the Three
Months
Ended June 30, Increase
(Decrease) For the Six Months
Ended June 30, Increase
(Decrease) Other Other For the Three Months Ended
September 30, Increase (Decrease) For the Nine Months Ended
September 30, Increase (Decrease) (Dollars in millions) 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent 2014 2013 Amount Percent Results of operations - Market View $ 36 $ 30 $ 6 20 % $ 48 $ 31 $ 17 55 % $ 19 $ 9 $ 10 (100 ) % $ 48 $ 20 $ 28 140 % (6 ) (4 ) (2 ) (50 ) (13 ) 50 (63 ) (126 ) 86 32 54 150 72 84 (12 ) (14 ) 30 26 4 15 35 81 (46 ) (57 ) 105 41 64 270 120 104 16 15 111 138 (27 ) (20 ) 235 291 (56 ) (19 ) 218 151 67 44 452 442 10 2 3 3 — — (12 ) (24 ) 12 50 (13 ) 4 (17 ) (317 ) (25 ) (18 ) (7 ) (39 ) (84 ) (115 ) 31 27 (188 ) (186 ) (2 ) (1 ) (100 ) (114 ) 14 11 (307 ) (320 ) 13 4 (53 ) (48 ) (5 ) (10 ) (92 ) (72 ) (20 ) (28 ) (50 ) (58 ) 8 11 (148 ) (137 ) (11 ) (9 ) (31 ) (67 ) 36 54 (96 ) (114 ) 18 16 (50 ) (56 ) 6 12 (159 ) (183 ) 24 14 4 3 1 33 9 7 2 29 5 7 (2 ) (29 ) 14 14 — — $ (27 ) $ (64 ) $ 37 58 $ (87 ) $ (107 ) $ 20 19 $ (45 ) $ (49 ) $ 4 10 $ (145 ) $ (169 ) $ 24 15 Average balances - Market View $ 275 $ 538 $ (263 ) (49 )% $ 297 $ 490 $ (193 ) (39 )% $ 286 $ 386 $ (100 ) (26 ) % $ 294 $ 454 $ (160 ) (35 ) % 27,699 27,340 359 1 28,051 27,788 263 1 26,966 26,591 375 1 27,680 27,383 297 1 4,333 4,926 (593 ) (12 ) 4,529 4,773 (244 ) (5 ) 4,040 4,584 (544 ) (12 ) 4,360 4,708 (348 ) (7 ) sixthree months ended JuneSeptember 30, 2014, noninterest income decreased compared to the same period in 2013increased primarily due to a decrease in gains onfee income associated with the sale of securities, partially offset bybusiness integration initiative and a decrease in FDIC indemnification asset amortization expense, which is included within noninterest income.income, partially offset by a decrease in gains from the sale of securities. Noninterest expense decreasedincreased primarily due to a decrease in merger costs andexpenses associated with the business integration initiative, partially offset by lower pension expense during the three and six months ended June 30, 2014 compared to the same periods in 2013.expense. The reversal of the provision for loan losses in the sixnine months ended JuneSeptember 30, 2014 and 2013 reflects the decrease in the unallocated allowance which is included in Other. During the first quarter of 2014, the business segments'segments’ allowances for loan losses were updated to reflect various refinements in the methodology used to measure credit risk ascribed to their loan portfolios, which previously had been estimated within the unallocated allowance. During the first quarter of 2013, Commercial Banking'sBanking’s allowance for loan losses was updated to reflect an extension of the wholesale loss emergence period, which previously had been estimated within the unallocated allowance. MUAH'sand FDIC indemnification asset, the assumptions used in measuring our pension obligations, and assumptions regarding our effective tax rates.secondthird quarter of 2014.1934 (Exchange1934(Exchange Act), which requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under specified Executive Orders. The scope of activities that must be reported includes activities not prohibited by U.S. law and conducted outside the United States in compliance with applicable local law. Because we are indirectly wholly-owned by MUFG, a Japanese corporation, our disclosure includes activities, transactions or dealings conducted outside the United States by non-U.S. affiliates of MUFG which are not controlled by us. We have requested that MUFG provide us a description of reportable activity under Section 13(r) and have received the following information:JuneSeptember 30, 2014, a non-U.S. affiliate of MUFG engaged in business activities with entities in or affiliated with Iran, including counterparties owned or controlled by the Iranian government. These activities were consistent with rules and regulations applicable to MUFG'sMUFG’s non-U.S. affiliate. Specifically, MUFG'sMUFG’s non-U.S. banking subsidiary, BTMU, issued letters of credit and guarantees and provided remittance and other settlement services mainly in connection with customer transactions related to the purchase and exportation of Iranian crude oil to Japan, and in some cases, in connection with other petroleum-related transactions with Iran by its customers. These transactions did not involve U.S. dollars nor clearing services of U.S. banks for the settlement of payments, and were reviewed for compliance with applicable U.S. and non-U.S. laws and regulations. For the quarter ended JuneSeptember 30, 2014, the aggregate interest and fee income relating to these transactions was less than ¥25¥35 million, representing less than 0.005 percent of MUFG'sMUFG’s total interest and fee income. Some of these transactions were conducted through the use of non-U.S. dollar correspondent accounts and other similar settlement accounts maintained with BTMU outside the United States by Iranian financial institutions and other entities in or affiliated with Iran. In addition to such accounts, BTMU receives deposits in Japan from and provides settlement services in Japan to fewer than ten Iranian government-related entities and fewer than 100 Iranian government-related individuals such as Iranian diplomats, and maintains settlement accounts outside the United States for certain other financial institutions specified in Executive Order 13382, which settlement accounts were frozen in accordance with applicable laws and regulations. For the quarter ended JuneSeptember 30, 2014, the average aggregate balance of deposits held in these accounts represented less than 0.05 percent of the average balance of MUFG'sMUFG’s total deposits. The fee income from the transactions attributable to these account holders was less than ¥1 million, representing less than 0.001 percent of MUFG'sMUFG’s total fee income. BTMU also holds loans that were arranged prior to changes in applicable laws and regulations to borrowers in or affiliated with Iran, including entities owned by the Iranian government, the outstanding balance of which was less than ¥500 million, representing less than 0.001 percent of MUFG'sMUFG’s total loans, as of JuneSeptember 30, 2014. For the quarter ended JuneSeptember 30, 2014, the aggregate gross interest and fee income relating to these loan transactions was less than ¥25 million, representing less than 0.005 percent of MUFG'sMUFG’s total interest and fee income.10-Q10‑Q under the caption "Risk Management—“Risk Management - Market Risk Management"Management” and to Part II, Item 1A. of this Form 10-Q10‑Q under the caption "Risk“Risk Factors."Procedures.Procedures. Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of JuneSeptember 30, 2014. This conclusion is based on an evaluation conducted under the supervision, and with the participation, of management. Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in this filing is recorded, processed, summarized and reported in a timely manner and in accordance with the SEC'sSEC’s rules and regulations and to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.Reporting.Reporting. During the secondthird quarter of 2014, there were no changes in our internal control over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting. For the
Three Months
Ended June 30, For the
Six Months
Ended June 30, For the Three Months Ended
September 30, For the Nine Months Ended
September 30,(Dollars in millions) 2014 2013 2014 2013 2014 2013 2014 2013 $ 749 $ 649 $ 1,416 $ 1,278 $ 693 $ 668 $ 2,109 $ 1,946 115 118 230 236 113 118 343 354 3 2 8 5 2 2 10 7 867 769 1,654 1,519 808 788 2,462 2,307 61 61 123 121 58 63 181 184 2 1 3 2 1 2 4 4 41 35 82 71 42 38 124 109 104 97 208 194 101 103 309 297 763 672 1,446 1,325 707 685 2,153 2,010 9 (3 ) (7 ) (6 ) (18 ) (16 ) (25 ) (22 ) 754 675 1,453 1,331 725 701 2,178 2,032 50 52 101 105 52 53 153 158 26 38 52 73 26 34 78 107 14 21 30 26 33 15 63 41 1 27 3 123 13 47 16 170 31 26 59 52 30 31 89 83 27 23 51 39 38 29 89 68 13 11 26 22 14 12 40 34 9 9 17 18 8 8 25 26 Fees from affiliates 151 — 151 — 31 (6 ) 44 (6 ) 23 5 67 (1 ) 202 201 383 452 388 234 771 686 378 413 766 834 492 391 1,258 1,225 75 84 146 159 74 77 220 236 63 62 118 120 66 66 184 186 13 17 26 33 13 16 39 49 16 20 31 40 13 20 44 60 (3 ) (2 ) 13 13 19 1 32 14 107 108 209 216 128 118 337 334 649 702 1,309 1,415 805 689 2,114 2,104 307 174 527 368 308 246 835 614 62 35 112 85 67 55 179 140 245 139 415 283 241 191 656 474 4 3 9 7 5 7 14 14 $ 249 $ 142 $ 424 $ 290 $ 246 $ 198 $ 670 $ 488 For the Three
Months
Ended June 30, For the Six
Months
Ended June 30, For the Three Months Ended September 30, For the Nine Months Ended September 30, (Dollars in millions) 2014 2013 2014 2013 2014 2013 2014 2013 $ 249 $ 142 $ 424 $ 290 $ 246 $ 198 $ 670 $ 488 25 (3 ) 16 (3 ) (40 ) 11 (24 ) 8 87 (330 ) 155 (394 ) (22 ) (55 ) 133 (449 ) 2 (2 ) — (3 ) (3 ) — (3 ) (3 ) 4 17 12 35 7 18 19 53 118 (318 ) 183 (365 ) (58 ) (26 ) 125 (391 ) 367 (176 ) 607 (75 ) 188 172 795 97 (4 ) (3 ) (9 ) (7 ) (5 ) (7 ) (14 ) (14 ) $ 363 $ (179 ) $ 598 $ (82 ) $ 183 $ 165 $ 781 $ 83 (Dollars in millions except for per share amount) June 30,
2014 December 31,
2013 (Dollars in millions, except per share amount) September 30,
2014 December 31,
2013 $ 1,911 $ 1,863 $ 1,593 $ 1,863 2,353 4,329 2,772 4,329 65 11 154 11 4,329 6,203 4,519 6,203 941 851 Trading account assets (includes $14 at September 30, 2014 and $8 at December 31, 2013 of assets pledged as collateral) 883 851 14,670 15,817 14,064 15,817 8,177 6,509 Securities held to maturity (Fair value $8,491 at September 30, 2014 and $6,439 at December 31, 2013) 8,458 6,509 72,369 68,312 74,635 68,312 (559 ) (568 ) (529 ) (568 ) 71,810 67,744 74,106 67,744 632 688 617 688 3,227 3,228 3,227 3,228 5,034 4,854 5,005 4,854 $ 108,820 $ 105,894 $ 110,879 $ 105,894 $ 27,446 $ 26,495 $ 28,676 $ 26,495 54,120 53,606 53,680 53,606 81,566 80,101 82,356 80,101 2,870 2,563 3,876 2,563 6,995 6,547 6,984 6,547 664 540 596 540 1,666 1,675 1,777 1,675 93,761 91,426 95,589 91,426 Commitments, contingencies and guarantees—See Note 12
— — — — 136 136 Authorized 300,000,000 shares, 136,330,831 shares issued and outstanding as of September 30, 2014 and 136,330,830 as of December 31, 2013 136 136 7,184 7,191 7,223 7,191 7,936 7,512 8,191 7,512 (441 ) (624 ) (499 ) (624 ) 14,815 14,215 15,051 14,215 244 253 239 253 15,059 14,468 15,290 14,468 $ 108,820 $ 105,894 $ 110,879 $ 105,894 MUAH Stockholder's Equity (in millions, except shares) Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling
Interests Total
Equity $ 136 $ 5,994 $ 6,845 $ (514 ) $ 264 $ 12,725 — — 290 — (7 ) 283 — — — (365 ) — (365 ) — (15 ) — — — (15 ) — — — — 13 13 — (15 ) 290 (365 ) 6 (84 ) $ 136 $ 5,979 $ 7,135 $ (879 ) $ 270 $ 12,641 $ 136 $ 7,191 $ 7,512 $ (624 ) $ 253 $ 14,468 — — 424 — (9 ) 415 — — — 183 — 183 — (7 ) — — — (7 ) — (7 ) 424 183 (9 ) 591 $ 136 $ 7,184 $ 7,936 $ (441 ) $ 244 $ 15,059 MUAH Stockholder's Equity (Dollars in millions) Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling
Interests Total
EquityBalance December 31, 2012 $ 136 $ 5,994 $ 6,845 $ (514 ) $ 264 $ 12,725 Net income (loss) — — 488 — (14 ) 474 Other comprehensive income (loss), net of tax — — — (391 ) — (391 ) Compensation—restricted stock units — (9 ) — — — (9 ) Other — — — — 8 8 Net change — (9 ) 488 (391 ) (6 ) 82 Balance September 30, 2013 $ 136 $ 5,985 $ 7,333 $ (905 ) $ 258 $ 12,807 Balance December 31, 2013 $ 136 $ 7,191 $ 7,512 $ (624 ) $ 253 $ 14,468 Net income (loss) — — 670 — (14 ) 656 Other comprehensive income (loss), net of tax — — — 125 — 125 Compensation—restricted stock units — 1 — — — 1 — 31 — — — 31 — — 9 — — 9 Net change — 32 679 125 (14 ) 822 Balance September 30, 2014 $ 136 $ 7,223 $ 8,191 $ (499 ) $ 239 $ 15,290 For the Six
Months
Ended June 30, For the Nine Months Ended September 30, (Dollars in millions) 2014 2013 2014 2013 $ 415 $ 283 $ 656 $ 474
(7 ) (6 ) (25 ) (22 ) 13 13 32 14 201 229 237 381 13 10 24 15 71 (28 ) 88 38 (3 ) (123 ) (16 ) (170 ) (90 ) 364 (31 ) 432 106 145 309 (63 ) 124 (329 ) 56 (281 ) (211 ) 64 (203 ) 50 (96 ) (52 ) (309 ) (183 ) 181 76 327 155 (91 ) (347 ) (80 ) (285 ) (9 ) (9 ) (19 ) 33 202 7 390 114 617 290 1,046 588 598 5,585 1,200 8,109 1,169 2,015 1,789 2,925 (2,426 ) (9,996 ) (3,627 ) (11,666 ) 374 212 773 344 (45 ) (53 ) (62 ) (84 ) 190 199 330 365 (4,270 ) (2,640 ) (6,690 ) (4,132 ) (11 ) 7 Proceeds from (payments to) FDIC under loss share agreements (12 ) 6 — (3,688 ) — (3,688 ) (270 ) 13 (421 ) 47 (4,691 ) (8,346 ) (6,720 ) (7,774 ) 1,465 3,052 2,255 5,111 307 2,429 1,313 1,715 — 750 — 750 749 — 749 1,999 (300 ) (300 ) (305 ) (550 ) (21 ) (25 ) (22 ) (26 ) — 13 — 8 2,200 5,919 3,990 9,007 (1,874 ) (2,137 ) (1,684 ) 1,821 6,203 5,491 6,203 5,491 $ 4,329 $ 3,354 $ 4,519 $ 7,312 $ 210 $ 204 (13 ) 21 199 214 — 17 For the Nine Months Ended September 30, (Dollars in millions) 2014 2013 Cash Paid During the Period For: Interest $ 294 $ 266 Income taxes, net 19 25 Supplemental Schedule of Noncash Investing and Financing Activities: Net transfer of loans held for investment to loans held for sale 386 381 Transfer of loans held for investment to other real estate owned assets 11 30 Carrying amount of assets acquired 70 — Carrying amount of liabilities acquired 30 — 10-Q10‑Q and Rule 10-0110‑1 of Regulation S-X of the Rules and Regulations of the Securities and Exchange Commission (SEC). However, they do not include all of the disclosures necessary for annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the secondthird quarter of 2014 are not necessarily indicative of the operating results anticipated for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in MUFG Americas Holdings Corporation'sour Annual Report on Form 10-K10‑K for the year ended December 31, 2013 (2013 Form 10-K)10‑K).management'smanagement’s expectations of how they may change in the future, it is reasonably possible that actual results could differ significantly from those estimates. This could materially affect the Company'sCompany’s results of operations and financial condition in the near term. Significant estimates made by management in the preparation of the Company'sCompany’s financial statements include, but are not limited to, the fair value of assets acquired and liabilities assumed (Note 3)2), the evaluation of other-than-temporary impairment on investment securities (Note 4)3), the allowance for credit losses (Note 5)4), purchased credit-impaired loans (Note 5)4), goodwill impairment, pension accounting (Note 12), income taxes, fair value of financial instruments (Note 9)8), and hedge accounting (Note 10). MUFG Americas Holdings Corporation (MUAH) is a financial holding company9) and bank holding company whose principal subsidiary is MUFG Union Bank, N.A. (the Bank or MUB)pension accounting (Note 11). The Company provides a wide range of financial services to consumers, small businesses, middle-market companies and major corporations nationally and internationally. Effective July 1, 2014, the U.S. branch banking operations of the Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) were integrated with the Bank. The integration did not involve a legal entity combination, but rather an integration of personnel and certain business activities. As part of this integration, approximately 2,300 U.S. employees of BTMU became employees of the Bank and BTMU's U.S. corporate customer list was transferred to the Bank. As a result, the Bank and BTMU entered into a master services agreement, which provides for employees of the Bank to perform and make available various business, banking, financial, and administrative and support services (the Services) and facilities for BTMU in connection with the operation and administration of BTMU's business in the U.S. (including BTMU's U.S. branches). In consideration for the Services, BTMU will pay to the Bank fee income, which will reflect market-based pricing. Costs related to the Services performed by the transferred employees will be recorded in salaries and benefits. While this initiative will have the effect of increasing noninterest income and noninterest expense, it is not expected to have a significant impact on the Company's net income, financial condition or capital ratios in the near term.FASBFinancial Accounting Standards Board (FASB) issued ASU 2014-01,Accounting Standards Update (ASU) 2014-1, Accounting for Investments in Qualified Affordable Housing Projects,whichamends guidance on the accounting for investments in qualified affordable housing projects and permits reporting entities to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method, if certain conditions are met.Note 1—Summary of Significant Accounting Policies, Nature of Operations and Other Developments (Continued)2015.2015 with early adoption permitted. The guidance is required to be applied retrospectively to all periods presented. Management is currently assessingpresented upon adoption. The Company does not expect the impactadoption of this guidance onto significantly impact the Company'sCompany’s financial position andor results of operations, and is considering adopting the standard in 2014.2014-04,2014-4,Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure, which provides guidance on when an in-substance repossession or foreclosure of residential real estate has occurred and when a creditor should derecognize the consumer mortgage loan and recognize the residential real estate. The guidance clarifies that an in-substance repossession or foreclosure occurs upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure, or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. In addition, the standard requires additional interim and annual disclosures. The guidance is effective for interim and annual periods beginning on January 1, 2015, with early adoption permitted. Management does not expect the adoption of this guidance to significantly impact the Company'sCompany’s financial position or results of operations.2014-08,2014-8, Presentation of Financial Statements and Property, Plant and Equipment and Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the criteria for reporting discontinued operations and requires additional disclosures for discontinued operations which meet the new criteria. The amendments in ASU 2014-082014-8 limit discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have or will have a major effect on an entity'sentity’s operations and financial results. The guidance is effective for interim andCompany'sCompany’s financial position andor results of operations.2014-09,2014-9, Revenue from Contracts with Customers, which provides guidance on the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard applies to all contracts with customers, except financial instruments, guarantees, lease contracts, insurance contracts, and certain non-monetary exchanges. It provides the following five-step revenue recognition model: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In addition, the standard requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The standard is effective for interim and annual periods beginning on January 1, 2017. Management is currently assessing the impact of this guidance on the Company'sCompany’s financial position and results of operations.Table of ContentsTNote 1—Summary of Significant Accounting Policies, Nature of Operationsransfers and Other Developments (Continued)Transfers and Servicing—Servicing - Amendments to Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures RequirementsDisclosureCompany'sCompany’s financial position or results of operations.employee'semployee’s requisite service period is a performance condition under the accounting guidance for share-based awards.The standard clarifies that the performance target would not be reflected in estimating the fair value of the award at the grant date. Instead, compensation cost for the award would be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The guidance is effective for interim and annual periods beginning on January 1, 2016, with early adoption permitted. Management does not expect the adoption of this guidance to significantly impact the Company'sCompany’s financial position or results of operations.Note 2—CorrectionPrior Period Amounts DuringIn August 2014, the third quarterFASB issued ASU 2014-14, Classification of 2013,Certain Government-Guaranteed Residential Mortgage Loans upon Foreclosure, which provides guidance on the Company corrected prior period errors relatedaccounting for the classification of foreclosed loans that are fully-government-guaranteed. The guidance clarifies that a residential mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the loan has both of the following characteristics: (1) The loan has a government guarantee that is not separable from the loan before foreclosure entitling the creditor to the recognitionfull unpaid principal balance of incomethe loan, and expense associated with market-linked certificates(2) At the time of deposit. These errors affected historicalforeclosure, the creditor has the intent to make a claim on the guarantee and the ability to recover the full unpaid principal balance of the loan through the guarantee. The guidance is effective for interim and annual periods beginning in 2009 through June 30, 2013. The Company recognized certain noninterest income amounts inon January 1, 2015, with early adoption permitted. Management does not expect the period in whichadoption of this guidance to significantly impact the market-linked certificatesCompany’s financial position or results of deposit originated. These amounts should have been deferred and recognized as a reduction of interest expense over the contractual term of the related certificates of deposit. These errors were not material to any of the Company's previously issued financial statements. In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 108,operations.Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108), the consolidated statements of income and comprehensive income for the three and six months ended June 30, 2013 and changes in stockholder's equity for the year ended December 31, 2012 have been adjusted to reflect the correction of these errors.Correction of Prior Period Amounts (Continued) The following tables show the affected line items within the consolidated financial statements:Consolidated Statements of Income: For the Three Months Ended
June 30, 2013 For the Six Months Ended
June 30, 2013 (Dollars in millions) As Previously
Reported Adjustment As
Corrected As Previously
Reported Adjustment As
Corrected $ 67 $ (6 ) $ 61 $ 132 $ (11 ) $ 121
24 (3 ) 21 32 (6 ) 26 12 (1 ) 11 24 (2 ) 22 172 2 174 365 3 368
141
1
142
288
2
290 Consolidated Balance Sheet and Statements of Changes in Stockholder's Equity: December 31, 2012 (Dollars in millions) As Previously
Reported Adjustment As
Corrected $ 6,875 $ (30 ) $ 6,845 Note 3—Business CombinationsCorporation's (PB Capital)Corporation’s institutional commercial real estate (CRE) lending division for $3.7 billion in cash. The acquisition expands the Company'sCompany’s CRE presence in the U.S., and provides geographic and asset class diversification. Excluding the effects of purchase accounting adjustments, the Company acquired approximately $3.5 billion in loans. The final values of the assets acquired totaled $3.4 billion, resulting in goodwill of $238 million, which was allocated to the Company'sCompany’s Commercial Banking reporting segment.4—3—SecuritiesJuneSeptember 30, 2014 and December 31, 2013, the amortized cost, gross unrealized gains, gross unrealized losses, and fair values of securities are presented below. June 30, 2014 September 30, 2014 (Dollars in millions) Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ — $ — $ — $ — U.S. Treasury $ 70 $ — $ — $ 70 8,281 3 127 8,157 7,886 1 148 7,739 188 4 1 191 175 3 1 177 1,824 14 25 1,813 Privately issued - commercial mortgage-backed securities 1,770 9 34 1,745 2,543 13 22 2,534 2,438 5 21 2,422 18 1 — 19 13 1 — 14 12,854 35 175 12,714 12,352 19 204 12,167 1,888 42 33 1,897 1,819 42 28 1,833 54 — 2 52 54 — 2 52 6 1 — 7 10 3 1 12 $ 14,802 $ 78 $ 210 $ 14,670 $ 14,235 $ 64 $ 235 $ 14,064 December 31, 2013 (Dollars in millions) Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ 73 $ — $ — $ 73 9,194 2 296 8,900 220 4 2 222 1,947 8 85 1,870 2,670 25 22 2,673 34 1 — 35 14,138 40 405 13,773 1,968 35 43 1,960 81 — 5 76 7 1 — 8 $ 16,194 $ 76 $ 453 $ 15,817 4—3—Securities (Continued) December 31, 2013 (Dollars in millions) Asset Liability Management securities: U.S. government-sponsored agencies $ 73 $ — $ — $ 73 Residential mortgage-backed securities: U.S. government agency and government-sponsored agencies 9,194 2 296 8,900 Privately issued 220 4 2 222 Privately issued - commercial mortgage-backed securities 1,947 8 85 1,870 Collateralized loan obligations 2,670 25 22 2,673 Asset-backed and other 34 1 — 35 Asset Liability Management securities 14,138 40 405 13,773 Other debt securities: Direct bank purchase bonds 1,968 35 43 1,960 Other 81 — 5 76 Equity securities 7 1 — 8 Total securities available for sale $ 16,194 $ 76 $ 453 $ 15,817 Company'sCompany’s securities available for sale with a continuous unrealized loss position at JuneSeptember 30, 2014 and December 31, 2013 are shown below, identified for periods less than 12 months, and 12 months or more. June 30, 2014 September 30, 2014 Less than 12 months 12 months or more Total Less than 12 months 12 months or more Total (Dollars in millions) Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses $ 429 $ 1 $ 7,195 $ 126 $ 7,624 $ 127 $ 598 $ 2 $ 6,849 $ 146 $ 7,447 $ 148 7 — 56 1 63 1 10 — 52 1 62 1 115 — 931 25 1,046 25 Privately issued - commercial mortgage-backed securities 219 1 922 33 1,141 34 1,697 18 224 4 1,921 22 465 2 1,244 19 1,709 21 — — 1 — 1 — — — 1 — 1 — 2,248 19 8,407 156 10,655 175 1,292 5 9,068 199 10,360 204 301 7 939 26 1,240 33 190 6 865 22 1,055 28 — — 24 2 24 2 4 — 22 2 26 2 5 — — — 5 — 2 — 5 1 7 1 $ 2,554 $ 26 $ 9,370 $ 184 $ 11,924 $ 210 $ 1,488 $ 11 $ 9,960 $ 224 $ 11,448 $ 235 December 31, 2013 December 31, 2013 Less than 12 months 12 months or more Total Less than 12 months 12 months or more Total (Dollars in millions) Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses $ 8,508 $ 293 $ 147 $ 3 $ 8,655 $ 296 $ 8,508 $ 293 $ 147 $ 3 $ 8,655 $ 296 72 2 18 — 90 2 72 2 18 — 90 2 1,274 80 58 5 1,332 85 Privately issued - commercial mortgage-backed securities 1,274 80 58 5 1,332 85 1,879 21 10 1 1,889 22 1,879 21 10 1 1,889 22 — — 1 — 1 — — — 1 — 1 — 11,733 396 234 9 11,967 405 11,733 396 234 9 11,967 405 537 18 778 25 1,315 43 537 18 778 25 1,315 43 15 1 34 4 49 5 15 1 34 4 49 5 5 — — — 5 — 5 — — — 5 — $ 12,290 $ 415 $ 1,046 $ 38 $ 13,336 $ 453 $ 12,290 $ 415 $ 1,046 $ 38 $ 13,336 $ 453 JuneSeptember 30, 2014, the Company did not have the intent to sell any securities in an unrealized loss position before a recovery of the amortized cost, which may be at maturity. The Company also believes that it is more likely than not that it will not be required to sell the securities prior to recovery of amortized cost.corporationagency or a government-sponsored enterprise (GSE)agency such as Fannie Mae, Freddie Mac, and Ginnie Mae. These securities are collateralized by residential mortgage loans and may be prepaid at par prior to maturity. The unrealized losses on agency residential mortgage-backed securities resulted from changes in interest rates and not from changes in credit quality. At JuneSeptember 30, 2014, the Company expects to recover the entire amortized cost basis of these securities because the Company determined that the strength of the issuers'issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Company from losses.The Company estimated the unrealized loss for each security by assessing the loans collateralizing each security. The Company estimates the portion of loss attributable to credit based on the expected cash flowsCash flow analysis of the underlying collateral using estimatesprovides an estimate of current key assumptions, such as default rates, loss severity and prepayment rates.other-than-temporary impairment, which is performed quarterly when the fair value of a security is lower than its amortized cost. Based on the analysis performed as of JuneSeptember 30, 2014, the Company expects to recover the entire amortized cost basis of these securities.Company'sCompany’s collateralized loan obligations (CLOs) consist of Cash Flow CLOs. A Cash Flow CLO is a structured finance product that securitizes a diversified pool of loan assets into multiple classes of notes. Cash Flow CLOs pay the note holders through the receipt of interest and principal repayments from the underlyingNote 4—Securities (Continued)JuneJuneSeptember 30, 2014, the Company expects to recover the entire amortized cost basis of these securities. June 30, 2014 September 30, 2014 (Dollars in millions) One Year or Less Over One Year
Through Five
Years Over Five Years
Through Ten
Years Over Ten Years Total Fair Value $ — $ — $ — $ — $ — U.S. Treasury $ 70 $ — $ — $ — $ 70 1 35 559 7,562 8,157 — 15 477 7,247 7,739 — — 5 186 191 — 4 — 173 177 — — 35 1,778 1,813 — — 35 1,710 1,745 — 263 467 1,804 2,534 — 146 384 1,892 2,422 — 11 8 — 19 — 7 7 — 14 1 309 1,074 11,330 12,714 70 172 903 11,022 12,167 28 457 917 495 1,897 33 640 676 484 1,833 — 17 4 31 52 — 17 4 31 52 $ 29 $ 783 $ 1,995 $ 11,856 $ 14,663 $ 103 $ 829 $ 1,583 $ 11,537 $ 14,052 Note 4—Securities (Continued) For the Three
Months Ended
June 30, For the Six
Months Ended
June 30, For the Three Months Ended September 30, For the Nine Months Ended September 30, (Dollars in millions) 2014 2013 2014 2013 2014 2013 2014 2013 $ 264 $ 487 $ 598 $ 5,585 $ 602 $ 2,524 $ 1,200 $ 8,109 6 27 8 126 13 55 21 181 — — — — — 3 — 3 JuneSeptember 30, 2014 and December 31, 2013, the amortized cost, gross unrealized gains and losses recognized in other comprehensive income (OCI), carrying amount, gross unrealized gains and losses not recognized in OCI, and fair values of securities held to maturity are presented below. June 30, 2014 Recognized in OCI Not Recognized in OCI (Dollars in millions) Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Carrying
Amount Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ 5,734 $ 6 $ 71 $ 5,669 $ 42 $ 13 $ 5,698 1,836 — 87 1,749 48 5 1,792 484 — — 484 2 — 486 275 — — 275 1 1 275 $ 8,329 $ 6 $ 158 $ 8,177 $ 93 $ 19 $ 8,251 September 30, 2014 Recognized in OCI Not Recognized in OCI (Dollars in millions) U.S. Treasury $ 485 $ — $ — $ 485 $ — $ 1 $ 484 U.S. government-sponsored agencies 125 — — 125 — — 125 U.S. government agency and government-sponsored agencies - residential mortgage-backed securities 6,165 6 69 6,102 30 25 6,107 U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities 1,830 — 84 1,746 37 8 1,775 Total securities held to maturity $ 8,605 $ 6 $ 153 $ 8,458 $ 67 $ 34 $ 8,491 December 31, 2013 Recognized in OCI Not Recognized in OCI (Dollars in millions) Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Carrying
Amount Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ 5,065 $ 7 $ 77 $ 4,995 $ 8 $ 69 $ 4,934 1,606 — 92 1,514 3 12 1,505 $ 6,671 $ 7 $ 169 $ 6,509 $ 11 $ 81 $ 6,439 December 31, 2013 Recognized in OCI Not Recognized in OCI (Dollars in millions) U.S. government agency and government-sponsored agencies - residential mortgage-backed securities $ 5,065 $ 7 $ 77 $ 4,995 $ 8 $ 69 $ 4,934 U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities 1,606 — 92 1,514 3 12 1,505 Total securities held to maturity $ 6,671 $ 7 $ 169 $ 6,509 $ 11 $ 81 $ 6,439 Note 4—Securities (Continued)Company'sCompany’s securities held to maturity with a continuous unrealized loss position at JuneSeptember 30, 2014 and December 31, 2013 are shown below, separately for periods less than 12 months, and 12 months or more. June 30, 2014 Less than 12 months 12 months or more Total Unrealized Losses Unrealized Losses Unrealized Losses (Dollars in millions) Fair
Value Recognized
in OCI Not
Recognized
in OCI Fair
Value Recognized
in OCI Not
Recognized
in OCI Fair
Value Recognized
in OCI Not
Recognized
in OCI $ 496 $ — $ 3 $ 2,758 $ 71 $ 10 $ 3,254 $ 71 $ 13 146 — 1 1,456 87 4 1,602 87 5 — — — — — — — — — 150 — 1 — — — 150 — 1 $ 792 $ — $ 5 $ 4,214 $ 158 $ 14 $ 5,006 $ 158 $ 19 September 30, 2014 Less than 12 months 12 months or more Total Unrealized Losses Unrealized Losses Unrealized Losses (Dollars in millions) U.S. Treasury $ 340 $ — $ 1 $ — $ — $ — $ 340 $ — $ 1 U.S. government agency and government-sponsored agencies - residential mortgage-backed securities 1,520 — 11 2,609 69 14 4,129 69 25 U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities 138 — — 1,537 84 8 1,675 84 8 Total securities held to maturity $ 1,998 $ — $ 12 $ 4,146 $ 153 $ 22 $ 6,144 $ 153 $ 34 December 31, 2013 Less than 12 months 12 months or more Total Unrealized Losses Unrealized Losses Unrealized Losses (Dollars in millions) Fair
Value Recognized
in OCI Not
Recognized
in OCI Fair
Value Recognized
in OCI Not
Recognized
in OCI Fair
Value Recognized
in OCI Not
Recognized
in OCI $ 3,873 $ 76 $ 68 $ 54 $ 1 $ 1 $ 3,927 $ 77 $ 69 1,016 46 10 489 46 2 1,505 92 12 $ 4,889 $ 122 $ 78 $ 543 $ 47 $ 3 $ 5,432 $ 169 $ 81 December 31, 2013 Less than 12 months 12 months or more Total Unrealized Losses Unrealized Losses Unrealized Losses (Dollars in millions) U.S. government agency and government-sponsored agencies - residential mortgage-backed securities $ 3,873 $ 76 $ 68 $ 54 $ 1 $ 1 $ 3,927 $ 77 $ 69 U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities 1,016 46 10 489 46 2 1,505 92 12 Total securities held to maturity $ 4,889 $ 122 $ 78 $ 543 $ 47 $ 3 $ 5,432 $ 169 $ 81 Note 4—Securities (Continued) June 30, 2014 Over One Year
Through Five
Years Over Five Years
Through Ten
Years Over Ten Years Total (Dollars in millions) Carrying
Amount Fair
Value Carrying
Amount Fair
Value Carrying
Amount Fair
Value Carrying
Amount Fair
Value $ 2 $ 2 $ — $ — $ 5,667 $ 5,696 $ 5,669 $ 5,698 49 50 789 828 911 914 1,749 1,792 244 245 240 241 — — 484 486 — — 275 275 — — 275 275 $ 295 $ 297 $ 1,304 $ 1,344 $ 6,578 $ 6,610 $ 8,177 $ 8,251 September 30, 2014 Over Ten Years Total (Dollars in millions) U.S. Treasury $ 485 $ 484 $ — $ — $ — $ — $ 485 $ 484 U.S. government-sponsored agencies 25 25 100 100 — — 125 125 U.S. government agency and government-sponsored agencies - residential mortgage-backed securities 2 2 — — 6,100 6,105 6,102 6,107 U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities 49 50 791 820 906 905 1,746 1,775 Total securities held to maturity $ 561 $ 561 $ 891 $ 920 $ 7,006 $ 7,010 $ 8,458 $ 8,491 Company'sCompany’s policy is to obtain possession of collateral with a market value equal to or in excess of the principal amount loaned under resale agreements. Collateral is valued daily, and the Company may require counterparties to deposit additional collateral or return collateral pledged, when appropriate.JuneSeptember 30, 2014, the Company had $6.1$6.5 billion of securities available for sale pledged as collateral where the secured party cannot resell or repledge such securities. Available for sale securities of $0.6 billion have been pledged to secure borrowing, $0.3borrowings, $0.2 billion to support unrealized losses on derivative transactions reported in trading liabilities and $5.2$5.7 billion to secure public and trust deposits.JuneSeptember 30, 2014 and December 31, 2013, the Company accepted securities as collateral that it is permitted by contract to sell or repledge of $44$153 million (none($61 million of which has been repledged) and $10 million (none of which has been repledged), respectively. These securities were received as collateral for secured lending.lending activities and are not recognized on the Company's balance sheet.5—4—Loans and Allowance for Loan LossesJuneSeptember 30, 2014 and December 31, 2013:(Dollars in millions) June 30,
2014 December 31,
2013 $ 25,162 $ 23,528 13,549 13,092 1,248 905 829 854 40,788 38,379 27,619 25,547 3,178 3,280 30,797 28,827 71,585 67,206 784 1,106 72,369 68,312 (559 ) (568 ) $ 71,810 $ 67,744
:(1)Includes $199 million and $251 million as of June 30, 2014 and December 31, 2013 respectively, of loans for which the Company will be reimbursed a substantial portion of any future losses under the terms of the FDIC loss share agreements. Of these FDIC covered loans, $16 million and $15 million as of June 30, 2014 and December 31, 2013, respectively, were not accounted for under accounting guidance for loans acquired with deteriorated credit quality.(2)Includes $130 million and $88 million at June 30, 2014 and December 31, 2013, respectively, for net unamortized discounts and premiums and deferred fees and costs.(Dollars in millions) September 30, 2014 December 31, 2013 Loans held for investment: Commercial and industrial $ 26,429 $ 23,528 Commercial mortgage 13,766 13,092 Construction 1,436 905 Lease financing 811 854 Total commercial portfolio 42,442 38,379 Residential mortgage 28,425 25,547 Home equity and other consumer loans 3,141 3,280 Total consumer portfolio 31,566 28,827 Total loans held for investment, before purchased credit-impaired loans 74,008 67,206 627 1,106 74,635 68,312 Allowance for loan losses (529 ) (568 ) Loans held for investment, net $ 74,106 $ 67,744 (1) Includes $165 million and $251 million as of September 30, 2014 and December 31, 2013, respectively, of loans for which the Company will be reimbursed a portion of any future losses under the terms of the Federal Deposit Insurance Corporation (FDIC) loss share agreements. Of these FDIC covered loans, $13 million and $15 million as of September 30, 2014 and December 31, 2013, respectively, were not accounted for under accounting guidance for loans acquired with deteriorated credit quality. (2) Includes $124 million and $88 million at September 30, 2014 and December 31, 2013, respectively, for net unamortized discounts and premiums and deferred fees and costs. For the Three Months Ended June 30, 2014 For the Three Months Ended September 30, 2014 (Dollars in millions) Commercial Consumer Purchased
Credit-
Impaired Unallocated Total Commercial Consumer Unallocated Total $ 479 $ 55 $ 3 $ 20 $ 557 $ 482 $ 49 $ 3 $ 25 $ 559 7 (3 ) — 5 9 (15 ) 2 — (5 ) (18 ) (8 ) (4 ) — — (12 ) (15 ) (2 ) (1 ) — (18 ) 4 1 — — 5 5 — 1 — 6 $ 482 $ 49 $ 3 $ 25 $ 559 $ 457 $ 49 $ 3 $ 20 $ 529 For the Three Months Ended September 30, 2013 (Dollars in millions) Commercial Consumer Unallocated Total Allowance for loan losses, beginning of period $ 480 $ 106 $ 1 $ 38 $ 625 (Reversal of) provision for loan losses (27 ) (35 ) — 46 (16 ) — — (2 ) — (2 ) Loans charged-off (9 ) (4 ) — — (13 ) Recoveries of loans previously charged-off 10 2 2 — 14 Allowance for loan losses, end of period $ 454 $ 69 $ 1 $ 84 $ 608 5—4—Loans and Allowance for Loan Losses (Continued) For the Three Months Ended June 30, 2013 For the Nine Months Ended September 30, 2014 (Dollars in millions) Commercial Consumer Purchased
Credit-
Impaired Unallocated Total Commercial Consumer Unallocated Total $ 486 $ 113 $ 1 $ 38 $ 638 $ 421 $ 69 $ 1 $ 77 $ 568 (3 ) — — — (3 ) 43 (13 ) — (57 ) (27 ) — — (2 ) — (2 ) Provision for purchased credit-impaired loan losses not subject to FDIC indemnification — — 2 — 2 Other (1 ) — — — (1 ) (12 ) (8 ) — — (20 ) (29 ) (9 ) (1 ) — (39 ) 9 1 2 — 12 23 2 1 — 26 $ 480 $ 106 $ 1 $ 38 $ 625 $ 457 $ 49 $ 3 $ 20 $ 529 For the Six Months Ended June 30, 2014 (Dollars in millions) Commercial Consumer Purchased
Credit-
Impaired Unallocated Total $ 421 $ 69 $ 1 $ 77 $ 568 58 (15 ) — (52 ) (9 ) — — 2 — 2 (1 ) — — — (1 ) (14 ) (7 ) — — (21 ) 18 2 — — 20 $ 482 $ 49 $ 3 $ 25 $ 559 For the Six Months Ended June 30, 2013 For the Nine Months Ended September 30, 2013 (Dollars in millions) Commercial Consumer Purchased
Credit-
Impaired Unallocated Total Commercial Consumer Unallocated Total $ 418 $ 124 $ 1 $ 110 $ 653 $ 418 $ 124 $ 1 $ 110 $ 653 65 1 — (72 ) (6 ) 38 (34 ) — (26 ) (22 ) Decrease in allowance covered by FDIC
indemnification — — (2 ) — (2 ) (15 ) (21 ) (3 ) — (39 ) (24 ) (25 ) (3 ) — (52 ) 12 2 3 — 17 22 4 5 — 31 $ 480 $ 106 $ 1 $ 38 $ 625 $ 454 $ 69 $ 1 $ 84 $ 608 Table of ContentsNote 5—Loans and Allowance for Loan Losses (Continued)JuneSeptember 30, 2014 and December 31, 2013: June 30, 2014 September 30, 2014 (Dollars in millions) Commercial Consumer Purchased
Credit-
Impaired Unallocated Total Commercial Consumer Unallocated Total $ 43 $ 20 $ — $ — $ 63 $ 27 $ 17 $ — $ — $ 44 439 29 — 25 493 430 32 — 20 482 — — 3 — 3 — — 3 — 3 $ 482 $ 49 $ 3 $ 25 $ 559 $ 457 $ 49 $ 3 $ 20 $ 529 $ 284 $ 334 $ 2 $ — $ 620 $ 187 $ 337 $ 2 $ — $ 526 40,504 30,463 — — 70,967 42,255 31,229 — — 73,484 — — 782 — 782 — — 625 — 625 $ 40,788 $ 30,797 $ 784 $ — $ 72,369 $ 42,442 $ 31,566 $ 627 $ — $ 74,635 December 31, 2013 (Dollars in millions) Commercial Consumer Purchased
Credit-
Impaired Unallocated Total $ 19 $ 20 $ — $ — $ 39 402 49 — 77 528 — — 1 — 1 $ 421 $ 69 $ 1 $ 77 $ 568 $ 266 $ 339 $ 3 $ — $ 608 38,113 28,488 — — 66,601 — — 1,103 — 1,103 $ 38,379 $ 28,827 $ 1,106 $ — $ 68,312 5—4—Loans and Allowance for Loan Losses (Continued) December 31, 2013 (Dollars in millions) Commercial Consumer Unallocated Total Allowance for loan losses: Individually evaluated for impairment $ 19 $ 20 $ — $ — $ 39 Collectively evaluated for impairment 402 49 — 77 528 Purchased credit-impaired loans — — 1 — 1 Total allowance for loan losses $ 421 $ 69 $ 1 $ 77 $ 568 Loans held for investment: Individually evaluated for impairment $ 266 $ 339 $ 3 $ — $ 608 Collectively evaluated for impairment 38,113 28,488 — — 66,601 Purchased credit-impaired loans — — 1,103 — 1,103 Total loans held for investment $ 38,379 $ 28,827 $ 1,106 $ — $ 68,312 JuneSeptember 30, 2014 and December 31, 2013:2013:(Dollars in millions) June 30,
2014 December 31,
2013 September 30, 2014 December 31, 2013 $ 161 $ 44 $ 71 $ 44 47 51 34 51 208 95 105 95 243 286 239 286 46 46 46 46 289 332 285 332 497 427 390 427 17 15 13 15 $ 514 $ 442 $ 403 $ 442 $ 297 $ 367 $ 300 $ 367 $ 248 $ 225 $ 189 $ 225 JuneSeptember 30, 2014 and December 31, 2013:2013: June 30, 2014 September 30, 2014 Aging Analysis of Loans Aging Analysis of Loans (Dollars in millions) Current 30 to 89
Days Past
Due 90 Days
or More
Past Due Total Past
Due Total Current Total $ 25,946 $ 33 $ 12 $ 45 $ 25,991 $ 27,126 $ 91 $ 23 $ 114 $ 27,240 13,444 98 7 105 13,549 13,715 45 6 51 13,766 1,248 — — — 1,248 1,432 4 — 4 1,436 40,638 131 19 150 40,788 42,273 140 29 169 42,442 27,419 120 80 200 27,619 28,231 118 76 194 28,425 3,144 17 17 34 3,178 3,109 18 14 32 3,141 30,563 137 97 234 30,797 31,340 136 90 226 31,566 $ 71,201 $ 268 $ 116 $ 384 $ 71,585 $ 73,613 $ 276 $ 119 $ 395 $ 74,008 December 31, 2013 Aging Analysis of Loans (Dollars in millions) Current Total Commercial and industrial $ 24,310 $ 66 $ 6 $ 72 $ 24,382 Commercial mortgage 13,004 68 20 88 13,092 Construction 891 14 — 14 905 Total commercial portfolio 38,205 148 26 174 38,379 Residential mortgage 25,342 114 91 205 25,547 Home equity and other consumer loans 3,238 23 19 42 3,280 Total consumer portfolio 28,580 137 110 247 28,827 $ 66,785 $ 285 $ 136 $ 421 $ 67,206 Note 5—Loans and Allowance for Loan Losses (Continued) December 31, 2013 Aging Analysis of Loans (Dollars in millions) Current 30 to 89
Days Past
Due 90 Days
or More
Past Due Total Past
Due Total $ 24,310 $ 66 $ 6 $ 72 $ 24,382 13,004 68 20 88 13,092 891 14 — 14 905 38,205 148 26 174 38,379 25,342 114 91 205 25,547 3,238 23 19 42 3,280 28,580 137 110 247 28,827 $ 66,785 $ 285 $ 136 $ 421 $ 67,206 $11$4 million and $5 million at JuneSeptember 30, 2014 and December 31, 2013, respectively. Purchased credit-impaired loans that were 90 days or more past due and still accruing totaled $103$65 million and $124 million at JuneSeptember 30, 2014 and December 31, 2013, respectively.Company'sCompany’s loan portfolios by applying specific monitoring policies and procedures that vary according to the relative risk profile and other characteristics within the various loan portfolios. For further information related to the credit quality indicators the Company uses to monitor the portfolio, see Note 5 to the Consolidated Financial Statements in Part II, Item 8. "Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K.$167$135 million and $213 million covered by Federal Deposit Insurance Corporation (FDIC)FDIC loss share agreements, at JuneSeptember 30, 2014 and December 31, 2013, respectively. The amounts presented reflect unpaid principal balances less charge-offs. June 30, 2014 September 30, 2014 (Dollars in millions) Pass Special Mention Classified Total Pass Special Mention Classified Total $ 24,701 $ 603 $ 439 $ 25,743 $ 26,271 $ 552 $ 340 $ 27,163 1,254 9 — 1,263 1,416 21 — 1,437 12,975 182 217 13,374 13,240 140 192 13,572 38,930 794 656 40,380 40,927 713 532 42,172 49 127 187 363 43 51 160 254 $ 38,979 $ 921 $ 843 $ 40,743 $ 40,970 $ 764 $ 692 $ 42,426 Note 5—Loans and Allowance for Loan Losses (Continued) December 31, 2013 December 31, 2013 (Dollars in millions) Pass Special Mention Classified Total Pass Special Mention Classified Total $ 23,346 $ 576 $ 313 $ 24,235 $ 23,346 $ 576 $ 313 $ 24,235 879 14 — 893 879 14 — 893 12,562 142 228 12,932 12,562 142 228 12,932 36,787 732 541 38,060 36,787 732 541 38,060 48 204 362 614 48 204 362 614 $ 36,835 $ 936 $ 903 $ 38,674 $ 36,835 $ 936 $ 903 $ 38,674 $32$30 million and $38 million of loans covered by FDIC loss share agreements, at JuneSeptember 30, 2014 and December 31, 2013, respectively: June 30, 2014 September 30, 2014 (Dollars in millions) Accrual Nonaccrual Total Accrual Nonaccrual Total $ 27,376 $ 243 $ 27,619 $ 28,186 239 $ 28,425 3,132 46 3,178 3,095 46 3,141 30,508 289 30,797 31,281 285 31,566 222 — 222 208 — 208 $ 30,730 $ 289 $ 31,019 $ 31,489 $ 285 $ 31,774 December 31, 2013 December 31, 2013 (Dollars in millions) Accrual Nonaccrual Total Accrual Nonaccrual Total $ 25,261 $ 286 $ 25,547 $ 25,261 $ 286 $ 25,547 3,234 46 3,280 3,234 46 3,280 28,495 332 28,827 28,495 332 28,827 242 — 242 242 — 242 $ 28,737 $ 332 $ 29,069 $ 28,737 $ 332 $ 29,069 JuneSeptember 30, 2014 and December 31, 2013.2013. These tables exclude loans covered by FDICNote 5—Loans and Allowance for Loan Losses (Continued) June 30, 2014 FICO scores (Dollars in millions) 720 and above Below 720 No FICO
Available(1) Total $ 21,339 $ 5,554 $ 515 $ 27,408 2,248 790 80 3,118 23,587 6,344 595 30,526 87 123 12 222 $ 23,674 $ 6,467 $ 607 $ 30,748 77 % 21 % 2 % 100 % December 31, 2013 FICO scores (Dollars in millions) 720 and above Below 720 No FICO
Available(1) Total $ 19,614 $ 5,301 $ 459 $ 25,374 2,283 839 81 3,203 21,897 6,140 540 28,577 94 135 15 244 $ 21,991 $ 6,275 $ 555 $ 28,821 76 % 22 % 2 % 100 % September 30, 2014 FICO scores (Dollars in millions) 720 and above Below 720 Total Residential mortgage $ 22,103 $ 5,604 $ 488 $ 28,195 Home equity and other consumer loans 2,209 777 83 3,069 Total consumer portfolio 24,312 6,381 571 31,264 Purchased credit-impaired loans 84 110 14 208 Total $ 24,396 $ 6,491 $ 585 $ 31,472 Percentage of total 77 % 21 % 2 % 100 % (1)Represents loans for which management was not able to obtain an updated FICO score (e.g., due to recent profile changes). June 30, 2014 December 31, 2013 LTV ratios FICO scores (Dollars in millions) Less than
80 Percent 80-100 Percent Greater than
100 Percent No LTV
Available(1) Total 720 and above Below 720 Total $ 25,486 $ 1,733 $ 134 $ 55 $ 27,408 $ 19,614 $ 5,301 $ 459 $ 25,374 2,445 299 149 51 2,944 Home equity and other consumer loans 2,283 839 81 3,203 27,931 2,032 283 106 30,352 21,897 6,140 540 28,577 150 50 20 — 220 94 135 15 244 $ 28,081 $ 2,082 $ 303 $ 106 $ 30,572 $ 21,991 $ 6,275 $ 555 $ 28,821 92 % 7 % 1 % — % 100 % 76 % 22 % 2 % 100 % (1) Represents loans for which management was not able to obtain an updated FICO score (e.g., due to recent profile changes). September 30, 2014 LTV ratios (Dollars in millions) Less than 80
Percent 80-100 Percent Greater than 100 Percent Total Residential mortgage $ 26,442 $ 1,611 $ 101 $ 41 $ 28,195 Home equity loans 2,412 276 129 49 2,866 Total consumer portfolio 28,854 1,887 230 90 31,061 Purchased credit-impaired loans 142 44 20 — 206 Total $ 28,996 $ 1,931 $ 250 $ 90 $ 31,267 Percentage of total 93 % 6 % 1 % — % 100 % 5—4—Loans and Allowance for Loan Losses (Continued) December 31, 2013 LTV ratios (Dollars in millions) Less than
80 Percent 80-100 Percent Greater than
100 Percent No LTV
Available(1) Total $ 23,209 $ 1,884 $ 228 $ 53 $ 25,374 2,487 362 202 52 3,103 25,696 2,246 430 105 28,477 152 57 31 — 240 $ 25,848 $ 2,303 $ 461 $ 105 $ 28,717 90 % 8 % 2 % — % 100 % (1)Represents loans for which management was not able to obtain refreshed property values. December 31, 2013 LTV ratios (Dollars in millions) 80-100 Percent Total Residential mortgage $ 23,209 $ 1,884 $ 228 $ 53 $ 25,374 Home equity loans 2,487 362 202 52 3,103 Total consumer portfolio 25,696 2,246 430 105 28,477 Purchased credit-impaired loans 152 57 31 — 240 Total $ 25,848 $ 2,303 $ 461 $ 105 $ 28,717 Percentage of total 90 % 8 % 2 % — % 100 % (1) Represents loans for which management was not able to obtain refreshed property values. Company'sCompany’s recorded investment in troubled debt restructurings (TDRs) as of JuneSeptember 30, 2014 and December 31, 2013.2013. The summary includes those TDRs that are on nonaccrual status and those that continue to accrue interest. The Company had $52$31 million and $43 million in commitments to lend additional funds to borrowers with loan modifications classified as TDRs as of JuneSeptember 30, 2014 and December 31, 2013, respectively.(Dollars in millions) June 30,
2014 December 31,
2013 $ 173 $ 212 36 38 209 250 308 315 26 24 334 339 $ 543 $ 589 (1)Amounts exclude $2 million and $3 million of TDRs covered by FDIC loss share agreements at June 30, 2014 and December 31, 2013, respectively.(Dollars in millions) September 30, 2014 December 31, 2013 Commercial and industrial $ 125 $ 212 Commercial mortgage 26 38 Total commercial portfolio 151 250 Residential mortgage 306 315 Home equity and other consumer loans 30 24 Total consumer portfolio 336 339 $ 487 $ 589 (1) Amounts exclude $2 million and $3 million of TDRs covered by FDIC loss share agreements at September 30, 2014 and December 31, 2013, respectively. secondthird quarter of 2014, TDR modifications in the commercial portfolio segment were primarily composed of interest rate changes, maturity extensions, covenant waivers, conversions from revolving lines of credit to term loans, or some combination thereof. In the consumer portfolio segment, primarily all of the modifications were composed of interest rate reductions and maturity extensions. There were no charge-offs of $2 million related to TDR modifications for the sixnine months ended JuneSeptember 30, 2014 and none for the year ended December 31, 2013. For the commercial and consumer portfolio segments, the allowance for loan losses for TDRs is measured on an individual loan basis or in pools with similar risk characteristics.5—4—Loans and Allowance for Loan Losses (Continued)sixnine months ended JuneSeptember 30, 2014 and 2013: For the Three Months Ended
June 30, 2014 For the Six Months Ended
June 30, 2014 (Dollars in millions) Pre-Modification
Outstanding Recorded
Investment(1) Post-Modification
Outstanding Recorded
Investment(2) Pre-Modification
Outstanding Recorded
Investment(1) Post-Modification
Outstanding Recorded
Investment(2) $ 76 $ 76 $ 80 $ 80 7 7 18 18 83 83 98 98 4 4 10 9 2 2 4 4 6 6 14 13 $ 89 $ 89 $ 112 $ 111 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2014 (Dollars in millions)
Outstanding
Recorded
Investment(1)
Outstanding
Recorded
Investment(2)
Outstanding
Recorded
Investment(1)
Outstanding
Recorded
Investment(2)Commercial and industrial $ 25 $ 25 $ 105 $ 105 Commercial mortgage 2 2 20 20 Total commercial portfolio 27 27 125 125 Residential mortgage 7 7 17 16 Home equity and other consumer loans 5 5 9 9 Total consumer portfolio 12 12 26 25 Total $ 39 $ 39 $ 151 $ 150 (1) Represents the recorded investment in the loan immediately prior to the restructuring event. (2) Represents the recorded investment in the loan immediately following the restructuring event. It includes the effect of paydowns that were required as part of the restructuring terms. For the Three Months Ended September 30, 2013 For the Nine Months Ended September 30, 2013 (Dollars in millions)
Outstanding
Recorded
Investment(1)
Outstanding
Recorded
Investment(2)
Outstanding
Recorded
Investment(1)
Outstanding
Recorded
Investment(2)Commercial and industrial $ 2 $ 2 $ 127 $ 124 Commercial mortgage 45 45 60 60 Total commercial portfolio 47 47 187 184 Residential mortgage 20 20 75 74 Home equity and other consumer loans 2 2 6 5 Total consumer portfolio 22 22 81 79 Total $ 69 $ 69 $ 268 $ 263 (1) Represents the recorded investment in the loan immediately prior to the restructuring event. (2) Represents the recorded investment in the loan immediately following the restructuring event. It includes the effect of paydowns that were required as part of the restructuring terms.
Note 4—Loans and Allowance for Loan Losses (Continued)(1)Represents the recorded investment in the loan immediately prior to the restructuring event.(2)Represents the recorded investment in the loan immediately following the restructuring event. It includes the effect of paydowns that were required as part of the restructuring terms. For the Three Months Ended
June 30, 2013 For the Six Months Ended
June 30, 2013 (Dollars in millions) Pre-Modification
Outstanding Recorded
Investment(1) Post-Modification
Outstanding Recorded
Investment(2) Pre-Modification
Outstanding Recorded
Investment(1) Post-Modification
Outstanding Recorded
Investment(2) $ 49 $ 47 $ 125 $ 121 4 4 15 15 53 51 140 136 30 30 55 54 3 2 4 3 33 32 59 57 $ 86 $ 83 $ 199 $ 193 (1)Represents the recorded investment in the loan immediately prior to the restructuring event.(2)Represents the recorded investment in the loan immediately following the restructuring event. It includes the effect of paydowns that were required as part of the restructuring terms.sixnine months ended JuneSeptember 30, 2014 and 2013, and where theNote 5—Loans and Allowance for Loan Losses (Continued)(Dollars in millions) For the Three
Months Ended
June 30,
2014 For the Six
Months Ended
June 30,
2014 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2014 $ 6 $ 6 $ 4 $ 10 3 3 4 7 9 9 8 17 2 4 1 5 — 1 — 1 2 5 1 6 $ 11 $ 14 $ 9 $ 23 (Dollars in millions) For the Three
Months Ended
June 30,
2013 For the Six
Months Ended
June 30,
2013 For the Three Months Ended September 30, 2013 For the Nine Months Ended September 30, 2013 $ 3 $ 8 $ 2 $ 10 3 8 2 10 7 9 3 12 1 1 — 1 8 10 3 13 $ 11 $ 18 $ 5 $ 23 loan'sloan’s effective interest rate.WhenThe Company records an impairment allowance, when the value of an impaired loan is less than the recorded investment in the loan, the Company records an impairment allowance.loan.Note 5—Loans and Allowance for Loan Losses (Continued)JuneSeptember 30, 2014 and December 31, 2013: June 30, 2014 Recorded Investment Unpaid Principal Balance (Dollars in millions) With an
Allowance Without an
Allowance Total Allowance
for Impaired
Loans With an
Allowance Without an
Allowance $ 242 $ 4 $ 246 $ 40 $ 250 $ 7 31 7 38 3 35 9 273 11 284 43 285 16 215 93 308 20 231 107 5 21 26 — 6 35 220 114 334 20 237 142 493 125 618 63 522 158 2 — 2 — 2 1 $ 495 $ 125 $ 620 $ 63 $ 524 $ 159 December 31, 2013 September 30, 2014 Recorded Investment Unpaid Principal Balance Recorded Investment Unpaid Principal Balance (Dollars in millions) With an
Allowance Without an
Allowance Total Allowance
for Impaired
Loans With an
Allowance Without an
Allowance Total $ 117 $ 104 $ 221 $ 16 $ 121 $ 114 $ 123 $ 36 $ 159 $ 25 $ 144 $ 39 33 12 45 3 36 15 28 — 28 2 32 — 150 116 266 19 157 129 151 36 187 27 176 39 220 95 315 20 236 108 195 111 306 17 208 128 4 20 24 — 4 34 6 25 31 — 7 38 224 115 339 20 240 142 201 136 337 17 215 166 374 231 605 39 397 271 352 172 524 44 391 205 2 1 3 — 2 6 1 1 2 — 1 2 $ 376 $ 232 $ 608 $ 39 $ 399 $ 277 $ 353 $ 173 $ 526 $ 44 $ 392 $ 207 5—4—Loans and Allowance for Loan Losses (Continued) December 31, 2013 Recorded Investment Unpaid Principal Balance (Dollars in millions) Total Commercial and industrial $ 117 $ 104 $ 221 $ 16 $ 121 $ 114 Commercial mortgage 33 12 45 3 36 15 Total commercial portfolio 150 116 266 19 157 129 Residential mortgage 220 95 315 20 236 108 Home equity and other consumer loans 4 20 24 — 4 34 Total consumer portfolio 224 115 339 20 240 142 Total, excluding purchased credit-impaired loans 374 231 605 39 397 271 Purchased credit-impaired loans 2 1 3 — 2 6 Total $ 376 $ 232 $ 608 $ 39 $ 399 $ 277 sixnine months ended JuneSeptember 30, 2014 and 2013 for the commercial, consumer and purchased credit-impaired loans portfolio segments. For the Three Months Ended June 30, For the Six Months Ended June 30, For the Three Months Ended September 30, For the Nine Months Ended September 30, 2014 2013 2014 2013 2014 2013 2014 2013 (Dollars in millions) Average
Recorded
Investment Recognized
Interest
Income Average
Recorded
Investment Recognized
Interest
Income Average
Recorded
Investment Recognized
Interest
Income Average
Recorded
Investment Recognized
Interest
Income $ 219 $ 1 $ 265 $ 5 $ 219 $ 4 $ 250 $ 8 $ 203 $ — $ 257 $ 2 $ 204 $ 4 $ 249 $ 8 35 — 53 1 37 2 60 1 33 — 48 — 35 2 56 1 — 1 2 — — 1 13 — — — 2 — — 1 10 — 254 2 320 6 256 7 323 9 236 — 307 2 239 7 315 9 310 3 288 2 312 6 282 5 307 2 300 3 310 8 287 8 26 — 22 1 25 1 21 1 28 — 23 — 27 1 22 1 336 3 310 3 337 7 303 6 335 2 323 3 337 9 309 9 ��� 590 5 630 9 593 14 626 15 571 2 630 5 576 16 624 18 2 — 4 — 2 — 4 — 2 — 4 — 2 — 4 — $ 592 $ 5 $ 634 $ 9 $ 595 $ 14 $ 630 $ 15 $ 573 $ 2 $ 634 $ 5 $ 578 $ 16 $ 628 $ 18 $199$386 million and $214$381 million of loans from held for investment to held for sale and sold $190$330 million and $199$365 million in loans during the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively.Company'sCompany’s purchased credit-impaired loans as of JuneSeptember 30, 2014 and December 31, 2013.(Dollars in millions) June 30,
2014 December 31,
2013 $ 1,196 $ 1,733 $ 768 $ 1,091 (Dollars in millions) September 30, 2014 December 31, 2013 Total outstanding balance $ 1,054 $ 1,733 Carrying amount $ 614 $ 1,091 sixnine months ended JuneSeptember 30, 2014 and 2013 was as follows: For the Three
Months Ended
June 30, For the Six
Months Ended
June 30, For the Three Months Ended September 30, For the Nine Months Ended September 30, (Dollars in millions) 2014 2013 2014 2013 2014 2013 2014 2013 $ 382 $ 501 $ 378 $ 590 $ 347 $ 479 $ 378 $ 590 — 31 — 31 — — — 31 (118 ) (81 ) (178 ) (160 ) (47 ) (81 ) (225 ) (241 ) 83 28 147 18 14 17 161 35 $ 347 $ 479 $ 347 $ 479 $ 314 $ 415 $ 314 $ 415 6—5—Variable Interest Entitiesentity'sentity’s losses or the right to receive the entity'sentity’s returns, or the ability to direct the significant activities of the entity. The following discusses the Company'sCompany’s consolidated and unconsolidated VIEs.Company'sCompany’s consolidated balance sheet at JuneSeptember 30, 2014.2014. June 30, 2014 Consolidated Assets Consolidated Liabilities September 30, 2014 Interest
Bearing
Deposits in
Banks Loans
Held for
Investment,
net Consolidated Assets Consolidated Liabilities (Dollars in millions) Other
Assets Total
Assets Long-Term
Debt Other
Liabilities Total
Liabilities Interest Bearing Deposits in Banks Loans Held for Investment, net Other Assets Total Assets Long-Term Debt Other Liabilities Total Liabilities $ 9 $ — $ 251 $ 260 $ 4 $ — $ 4 $ 9 $ — $ 239 $ 248 $ — $ — $ — 5 712 101 818 — 83 83 6 654 157 817 — 80 80 $ 14 $ 712 $ 352 $ 1,078 $ 4 $ 83 $ 87 $ 15 $ 654 $ 396 $ 1,065 $ — $ 80 $ 80 funds'funds’ economic performances and also has the obligation to absorb losses of the funds that could potentially be significant to the funds. Neither creditors nor equity investors in the LIHC investments have any recourse to the general credit of the Company, and the Company'sCompany’s creditors do not have any recourse to the assets of the consolidated LIHC investments.entities'entities’ economic performances. The Company also has the right to receive potentially significant benefits or the obligation to absorb potentially significant losses of these entities.Company'sCompany’s carrying amounts related to the unconsolidated VIEs and location on the consolidated balance sheetssheet at JuneSeptember 30, 2014.2014. The table also presents the Company'sCompany’s maximum exposure to loss resulting from its involvement with these VIEs. The maximum exposure to lossNote 6—Variable Interest Entities (Continued)Company'sCompany’s involvement plus any legally binding unfunded commitments in the unlikely event that all of the assets in the VIEs become worthless. June 30, 2014 September 30, 2014 Unconsolidated Assets Unconsolidated
Liabilities Unconsolidated Assets Unconsolidated Liabilities (Dollars in millions) Securities
Available
for Sale Loans
Held for
Investment Other
Assets Total
Assets Other
Liabilities Total
Liabilities Maximum
Exposure to
Loss Securities Available for Sale Loans Held for Investment Other Assets Total Assets Other Liabilities Total Liabilities Maximum Exposure to Loss $ 26 $ 132 $ 1,053 $ 1,211 $ 398 $ 398 $ 1,211 $ 25 $ 137 $ 1,020 $ 1,182 $ 352 $ 352 $ 1,182 — 44 838 882 — — 898 — 43 832 875 — — 892 — 21 27 48 — — 50 — 21 29 50 — — 52 $ 26 $ 197 $ 1,918 $ 2,141 $ 398 $ 398 $ 2,159 $ 25 $ 201 $ 1,881 $ 2,107 $ 352 $ 352 $ 2,126 entities.entities'entities’ performance, and therefore is not considered the primary beneficiary and does not consolidate these entities.investments.7—6—Commercial Paper and Other Short-Term Borrowings(Dollars in millions) June 30,
2014 December 31,
2013 $ 137 $ 39 2,733 2,524 $ 2,870 $ 2,563 (Dollars in millions) September 30, 2014 December 31, 2013 Federal funds purchased and securities sold under repurchase agreements, with weighted average interest rates of 0.09% and 0.07% at September 30, 2014 and December 31, 2013 $ 302 $ 39 Commercial paper, with weighted average interest rates of 0.14% and 0.19% at September 30, 2014 and December 31, 2013, respectively 3,322 2,524 Term federal funds purchased, with a weighted average interest rate of 0.14% at September 30, 2014 252 — Total commercial paper and other short-term borrowings $ 3,876 $ 2,563 8—7—Long-Term Debt(Dollars in millions) June 30,
2014 December 31,
2013 $ 397 $ 397 300 300 66 66 763 763 $ 800 $ 800 — 300 699 699 499 499 500 500 499 499 1,000 1,000 502 — 250 — 4 4 715 718 750 750 14 15 6,232 5,784 $ 6,995 $ 6,547 (Dollars in millions) September 30, 2014 December 31, 2013 Debt issued by MUFG Americas Holdings Corporation Senior debt: Fixed rate 3.50% notes due June 2022 $ 398 $ 397 Subordinated debt: Floating rate subordinated debt due December 2023. This note, which bears interest at 1.38% above 3-month LIBOR, had a rate of 1.61% at September 30, 2014 and 1.63% at December 31, 2013 300 300 Floating rate notes with maturities ranging from March 2033 to September 2036. These notes bear a combined weighted-average rate of 2.58% at September 30, 2014 and 2.60% at December 31, 2013 66 66 Total debt issued by MUFG Americas Holdings Corporation 764 763 Debt issued by MUFG Union Bank, N.A. and other subsidiaries Senior debt: Fixed Federal Home Loan Bank advances with maturities ranging from February 2015 to February 2016. These notes bear a combined weighted-average rate of 2.56% at September 30, 2014 and 2.55% at December 31, 2013 $ 800 $ 800 Floating rate notes due June 2014. These notes, which bear interest at 0.95% above 3-month LIBOR, had a rate of 1.19% at December 31, 2013 — 300 Fixed rate 3.00% notes due June 2016 699 699 Fixed rate 1.50% notes due September 2016 499 499 Floating rate notes due September 2016. These notes, which bear interest at 0.75% above 3-month LIBOR, had a rate of 0.99% at September 30, 2014 and 1.00% at December 31, 2013 500 500 Fixed rate 2.125% notes due June 2017 499 499 Fixed rate 2.625% notes due September 2018 1,000 1,000 Fixed rate 2.250% notes due May 2019 497 — Floating rate notes due May 2017. These notes, which bear interest at 0.40% above 3-month LIBOR, had a rate of 0.64% at September 30, 2014 250 — Note payable: Fixed rate 6.03% notes due July 2014 (related to consolidated VIE) — 4 Subordinated debt: Fixed rate 5.95% notes due May 2016 712 718 Subordinated debt due to BTMU: Floating rate subordinated debt due June 2023. This note, which bears interest at 1.2% above 3-month LIBOR, had a rate of 1.43% at September 30, 2014 and 1.45% at December 31, 2013 750 750 14 15 Total debt issued by MUFG Union Bank, N.A. and other subsidiaries 6,220 5,784 Total long-term debt $ 6,984 $ 6,547 (1) Long-term debt assumed through acquisitions (1)Long-term debt assumed through PCBC acquisition8—Long-Term7—Long Term Debt (Continued)Bank'sBank’s $8 billion bank note program under which the Bank may issue, from time to time, senior unsecured debt obligations with maturities of more than one year from their respective dates of issue and subordinated debt obligations with maturities of five5 years or more from their respective dates of issue. After issuing the Senior Notes, there is $1.9 billion available for issuance under the program.9—8—Fair Value Measurement and Fair Value of Financial InstrumentsCompany'sCompany’s creditworthiness in determining the fair value of its trading assets and liabilities. For further information related to the valuation methodologies used for certain financial assets and financial liabilities measured at fair value, see Note 12 to the Consolidated Financial Statements in Part II, Item 8. "Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K.Company'sCompany’s estimate about market data. Based on the observability of the significant inputs used, the Company classifies its fair value measurements in accordance with the three-level hierarchy as defined by U.S. GAAP. This hierarchy is based on the quality, observability, and reliability of the information used to determine fair value. For further information related toNote 9—Fair Value Measurement and Fair Value of Financial Instruments (Continued)"Financial“Financial Statements and Supplementary Data"Data” in our VC'sVC’s responsibilities include reviewing fair value measurements and categorizations within the fair value hierarchy and monitoring the use of pricing sources, mark-to-model valuations, dealer quotes, and other valuation processes. The VC reports to the Company'sCompany’s Risk & Capital Committee and meets at least quarterly."Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K.9—8—Fair Value Measurement and Fair Value of Financial Instruments (Continued)JuneSeptember 30, 2014 and December 31, 2013, by major category and by valuation hierarchy level: June 30, 2014 (Dollars in millions) Level 1 Level 2 Level 3 Netting
Adjustment(1) Fair Value $ — $ 25 $ — $ — $ 25 — 121 — — 121 — 24 — — 24 1 790 6 (150 ) 647 — 108 9 (48 ) 69 — 23 2 (10 ) 15 — — 286 (246 ) 40 1 1,091 303 (454 ) 941 — — — — — — 8,157 — — 8,157 — 191 — — 191 — 1,813 — — 1,813 — 2,534 — — 2,534 — 19 — — 19 — — 1,897 — 1,897 — 4 48 — 52 7 — — — 7 7 12,718 1,945 — 14,670 — 40 — — 40 — — 2 — 2 — 40 2 — 42 $ 8 $ 13,849 $ 2,250 $ (454 ) $ 15,653 — % 89 % 14 % (3 )% 100 % — % 12 % 2 % — % 14 % $ 4 $ 667 $ — $ (408 ) $ 263 — 98 9 (79 ) 28 — 53 2 (23 ) 32 — — 287 — 287 — 54 — — 54 4 872 298 (510 ) 664 — — 102 — 102 — 2 — — 2 — 2 3 — 5 — 4 105 — 109 $ 4 $ 876 $ 403 $ (510 ) $ 773 1 % 113 % 52 % (66 )% 100 % — % 1 % — % — % 1 % (1)Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts. September 30, 2014 (Dollars in millions) Level 1 Level 2 Level 3 Fair Value Assets Trading account assets: U.S. Treasury securities $ — $ 15 $ — $ — $ 15 U.S. government sponsored agency securities — 125 — — 125 State and municipal securities — 11 — — 11 Interest rate derivative contracts 1 786 6 (178 ) 615 Commodity derivative contracts — 89 5 (85 ) 9 Foreign exchange derivative contracts 1 91 1 (59 ) 34 Equity derivative contracts — — 264 (190 ) 74 Total trading account assets 2 1,117 276 (512 ) 883 Securities available for sale: U.S. Treasury — 70 — — 70 Residential mortgage-backed securities: U.S. government and government sponsored agencies — 7,739 — — 7,739 Privately issued — 177 — — 177 Privately issued - commercial mortgage-backed securities — 1,745 — — 1,745 Collateralized loan obligations — 2,422 — — 2,422 Asset-backed and other — 14 — — 14 Other debt securities: Direct bank purchase bonds — — 1,833 — 1,833 Other — 4 48 — 52 Equity securities 12 — — — 12 Total securities available for sale 12 12,171 1,881 — 14,064 Other assets: Interest rate hedging contracts — 6 — (6 ) — Other derivative contracts — — 1 — 1 Total other assets — 6 1 (6 ) 1 Total assets $ 14 $ 13,294 $ 2,158 $ (518 ) $ 14,948 Percentage of Total 1 % 88 % 14 % (3 )% 100 % Percentage of Total Company Assets — % 12 % 2 % — % 14 % Liabilities Trading account liabilities: Interest rate derivative contracts $ — $ 651 $ — $ (507 ) $ 144 Commodity derivative contracts — 76 5 (26 ) 55 Foreign exchange derivative contracts 1 52 1 (12 ) 42 Equity derivative contracts — — 263 — 263 Securities sold, not yet purchased — 92 — — 92 Total trading account liabilities 1 871 269 (545 ) 596 Other liabilities: FDIC clawback liability — — 103 — 103 Interest rate hedging contracts — 34 — (31 ) 3 Other derivative contracts — 1 3 — 4 Total other liabilities — 35 106 (31 ) 110 Total liabilities $ 1 $ 906 $ 375 $ (576 ) $ 706 Percentage of Total — % 128 % 53 % (81 )% 100 % Percentage of Total Company Liabilities — % 1 % 1 % (1 )% 1 % (1) Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts. 9—8—Fair Value Measurement and Fair Value of Financial Instruments (Continued) December 31, 2013 (Dollars in millions) Level 1 Level 2 Level 3 Netting
Adjustment(1) Fair Value $ — $ 8 $ — $ — $ 8 — 116 — — 116 — 5 — — 5 — 140 — — 140 1 705 7 (212 ) 501 — 67 9 (66 ) 10 1 30 2 (18 ) 15 — — 253 (197 ) 56 2 1,071 271 (493 ) 851 — 73 — — 73 — 8,900 — — 8,900 — 222 — — 222 — 1,870 — — 1,870 — 2,673 — — 2,673 — 35 — — 35 — — 1,960 — 1,960 — 18 58 — 76 8 — — — 8 8 13,791 2,018 — 15,817 — 8 — — 8 — 1 1 — 2 — 9 1 — 10 $ 10 $ 14,871 $ 2,290 $ (493 ) $ 16,678 — % 89 % 14 % (3 )% 100 % — % 14 % 2 % — % 16 % $ 3 $ 606 $ — $ (379 ) $ 230 — 53 8 (33 ) 28 1 26 2 (11 ) 18 — — 254 — 254 — 10 — — 10 4 695 264 (423 ) 540 — — 96 — 96 — 13 — — 13 — 1 3 — 4 — 14 99 — 113 $ 4 $ 709 $ 363 $ (423 ) $ 653 1 % 109 % 55 % (65 )% 100 % — % 1 % — % — % 1 % (1)Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts. December 31, 2013 (Dollars in millions) Level 1 Level 2 Level 3 Fair Value Assets Trading account assets: U.S. Treasury securities $ — $ 8 $ — $ — $ 8 U.S. government sponsored agency securities — 116 — — 116 State and municipal securities — 5 — — 5 Other loans — 140 — — 140 Interest rate derivative contracts 1 705 7 (212 ) 501 Commodity derivative contracts — 67 9 (66 ) 10 Foreign exchange derivative contracts 1 30 2 (18 ) 15 Equity derivative contracts — — 253 (197 ) 56 Total trading account assets 2 1,071 271 (493 ) 851 Securities available for sale: U.S. government sponsored agencies — 73 — — 73 Residential mortgage-backed securities: U.S government and government sponsored agencies — 8,900 — — 8,900 Privately issued — 222 — — 222 Privately issued - commercial mortgage-backed securities — 1,870 — — 1,870 Collateralized loan obligations — 2,673 — — 2,673 Asset-backed and other — 35 — — 35 Other debt securities: Direct bank purchase bonds — — 1,960 — 1,960 Other — 18 58 — 76 Equity securities 8 — — — 8 Total securities available for sale 8 13,791 2,018 — 15,817 Other assets: Interest rate hedging contracts — 8 — — 8 Other derivative contracts — 1 1 — 2 Total other assets — 9 1 — 10 Total assets $ 10 $ 14,871 $ 2,290 $ (493 ) $ 16,678 Percentage of Total — % 89 % 14 % (3 )% 100 % Percentage of Total Company Assets — % 14 % 2 % — % 16 % Liabilities Trading account liabilities: Interest rate derivative contracts $ 3 $ 606 $ — $ (379 ) $ 230 Commodity derivative contracts — 53 8 (33 ) 28 Foreign exchange derivative contracts 1 26 2 (11 ) 18 Equity derivative contracts — — 254 — 254 Securities sold, not yet purchased — 10 — — 10 Total trading account liabilities 4 695 264 (423 ) 540 Other liabilities: FDIC clawback liability — — 96 — 96 Interest rate hedging contracts — 13 — — 13 Other derivative contracts — 1 3 — 4 Total other liabilities — 14 99 — 113 Total liabilities $ 4 $ 709 $ 363 $ (423 ) $ 653 Percentage of Total 1 % 109 % 55 % (65 )% 100 % Percentage of Total Company Liabilities — % 1 % — % — % 1 % (1) Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts. 9—8—Fair Value Measurement and Fair Value of Financial Instruments (Continued)sixnine months ended JuneSeptember 30, 2014 and 2013. Level 3 available for sale securities at JuneSeptember 30, 2014 and 2013 primarily consist of direct bank purchase bonds. The Company'sCompany’s policy is to recognize transfers in and out of Level 1, 2 and 3 as of the end of a reporting period. For the Three Months Ended For the Three Months Ended June 30, 2014 June 30, 2013 September 30, 2014 September 30, 2013 (Dollars in millions) Trading
Assets Securities
Available
for Sale Other
Assets Trading
Liabilities Other
Liabilities Trading
Assets Securities
Available
for Sale Other
Assets Trading
Liabilities Other
Liabilities Other Assets $ 273 $ 2,046 $ 1 $ (266 ) $ (103 ) $ 186 $ 1,592 $ 1 $ (187 ) $ (96 ) $ 303 $ 1,945 $ 2 $ (298 ) $ (105 ) $ 182 $ 1,762 $ 2 $ (183 ) $ (94 ) 35 — 1 (36 ) (2 ) (5 ) — 1 5 2 (17 ) — (1 ) 19 (1 ) 39 — — (38 ) (3 ) — 7 — — — — 18 — — — — 5 — — — — (7 ) — — — — 14 — — — 1 192 — — — — 53 — — — 13 237 — — — — — — (1 ) — — — — (1 ) — — — — — — — — — (5 ) — (5 ) (122 ) — 5 — — (40 ) — — — (10 ) (122 ) — 10 — (8 ) (29 ) — 8 — $ 303 $ 1,945 $ 2 $ (298 ) $ (105 ) $ 182 $ 1,762 $ 2 $ (183 ) $ (94 ) $ 276 $ 1,881 $ 1 $ (269 ) $ (106 ) $ 226 $ 1,963 $ 2 $ (218 ) $ (97 ) $ 35 $ — $ 1 $ (36 ) $ (2 ) $ (5 ) $ — $ 1 $ 5 $ 2 $ (17 ) $ — $ (1 ) $ 19 $ (1 ) $ 39 $ — $ — $ (38 ) $ (3 ) For the Six Months Ended For the Nine Months Ended June 30, 2014 June 30, 2013 September 30, 2014 September 30, 2013 (Dollars in millions) Trading
Assets Securities
Available
for Sale Other
Assets Trading
Liabilities Other
Liabilities Trading
Assets Securities
Available
for Sale Other
Assets Trading
Liabilities Other
Liabilities Other Assets $ 271 $ 2,018 $ 1 $ (264 ) $ (99 ) $ 136 $ 1,499 $ — $ (136 ) $ (95 ) $ 271 $ 2,018 $ 1 $ (264 ) $ (99 ) $ 136 $ 1,499 $ — $ (136 ) $ (95 ) 36 — 1 (37 ) (6 ) 42 — 1 (43 ) 1 19 — — (18 ) (7 ) 81 — 1 (81 ) (2 ) — 15 — — — — 37 — — — — 20 — — — — 30 — — — 3 137 — — — 4 329 1 — — 3 190 — — — 17 566 1 — — — — — (4 ) — — (14 ) — (4 ) — — — — (4 ) — — (14 ) — (9 ) — (7 ) (225 ) — 7 — — (89 ) — — — (17 ) (347 ) — 17 — (8 ) (118 ) — 8 — $ 303 $ 1,945 $ 2 $ (298 ) $ (105 ) $ 182 $ 1,762 $ 2 $ (183 ) $ (94 ) $ 276 $ 1,881 $ 1 $ (269 ) $ (106 ) $ 226 $ 1,963 $ 2 $ (218 ) $ (97 ) $ 36 $ — $ 1 $ (37 ) $ (6 ) $ 42 $ — $ 1 $ (43 ) $ 1 $ 19 $ — $ — $ (18 ) $ (7 ) $ 81 $ — $ 1 $ (81 ) $ (2 ) 9—8—Fair Value Measurement and Fair Value of Financial Instruments (Continued)Company'sCompany’s significant Level 3 assets and liabilities at JuneSeptember 30, 2014. June 30, 2014 (Dollars in millions) Level 3 Fair
Value Valuation Technique(s) Significant Unobservable Input(s) Range of Inputs Weighted
Average Valuation Technique(s) Significant Unobservable Input(s) Range of Inputs Weighted Average $ 1,897 Return on equity Market-required return on capital 8.0 - 10.0 % 9.9 % $ 1,833 Return on equity Market-required return on capital 8.0 - 10.0 % 9.9 % Probability of default 0.0 - 8.0 % 0.5 % Probability of default 0.0 - 25.0 % 0.5 % Loss severity 10.0 - 60.0 % 31.6 % Loss severity 10.0 - 60.0 % 31.3 % $ 102 Discounted cash flow Probability of default 0.1 - 100.0 % 56.2 % $ 103 Discounted cash flow Probability of default 0.1 - 100.0 % 53.1 % Loss severity 0.0 - 100.0 % 40.0 % Loss severity 0.0 - 100.0 % 41.3 % sixnine months ended JuneSeptember 30, 2014 and 2013 that were still held on the consolidated balance sheet as of the respective periods ended, the following tables present the fair value of such financial instrumentsassets by the level of valuation assumptions used to determine each fair value adjustment. June 30, 2014 Loss for the
Three Months
Ended
June 30, 2014 Loss for the
Six Months
Ended
June 30, 2014 September 30, 2014 (Dollars in millions) Fair
Value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 $ 198 $ — $ — $ 198 $ (6 ) $ (35 ) $ 89 $ — $ — $ 89 $ 2 $ (33 ) 14 — — 14 (1 ) (3 ) Other real estate owned (OREO) 13 — — 13 (2 ) (5 ) $ 212 $ — $ — $ 212 $ (7 ) $ (38 ) $ 102 $ — $ — $ 102 $ — $ (38 ) June 30, 2013 Loss for the
Three Months
Ended
June 30, 2013 Loss for the
Six Months
Ended
June 30, 2013 September 30, 2013 (Dollars in millions) Fair
Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 $ 91 $ — $ — $ 91 $ (11 ) $ (23 ) $ 85 $ — $ — $ 85 $ (12 ) $ (35 ) 37 — — 37 (3 ) (6 ) 21 — — 21 (1 ) (7 ) Private equity investments — — — — (5 ) (5 ) $ 128 $ — $ — $ 128 $ (14 ) $ (29 ) $ 106 $ — $ — $ 106 $ (18 ) $ (47 ) Note 9—Fair Value Measurement and Fair Value of Financial Instruments (Continued)JuneSeptember 30, 2014 and as of December 31, 2013: June 30, 2014 (Dollars in millions) Carrying
Amount Fair
Value Level 1 Level 2 Level 3 $ 4,329 $ 4,329 $ 4,329 $ — $ — 8,177 8,251 — 8,251 — 70,988 71,934 — — 71,934 101 11 — — 11 4 4 — — 4
$ 81,566 $ 81,713 $ — $ 81,713 $ — 2,870 2,870 — 2,870 — 6,995 7,167 — 7,167 —
$ 290 $ 290 $ — $ — $ 290
2013:(1)Excludes lease financing, net of related allowance. December 31, 2013 (Dollars in millions) Carrying
Amount Fair
Value Level 1 Level 2 Level 3 $ 6,203 $ 6,203 $ 6,203 $ — $ — 6,509 6,439 — 6,439 — 66,898 68,132 — — 68,132 141 95 — — 95 3 3 — — 3
$ 80,101 $ 80,228 $ — $ 80,228 $ — 2,563 2,563 — 2,563 — 6,547 6,709 — 6,709 —
$ 273 $ 273 $ — $ — $ 273 September 30, 2014 (Dollars in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 4,519 $ 4,519 $ 4,519 $ — $ — Securities held to maturity 8,458 8,491 — 8,491 — 73,304 74,355 — — 74,355 FDIC indemnification asset 78 4 — — 4 Other assets 5 5 — — 5 Liabilities Deposits $ 82,356 $ 82,435 $ — $ 82,435 $ — Commercial paper and other short-term borrowings 3,876 3,876 — 3,876 — Long-term debt 6,984 7,108 — 7,108 — Off-Balance Sheet Instruments Commitments to extend credit and standby and commercial letters of credit $ 267 $ 267 $ — $ — $ 267 (1)Excludes lease financing, net of related allowance.Note 9—Fair Value Measurement and Fair Value of Financial Instruments (Continued)(1) Excludes lease financing, net of related allowance. December 31, 2013 (Dollars in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 6,203 $ 6,203 $ 6,203 $ — $ — Securities held to maturity 6,509 6,439 — 6,439 — 66,898 68,132 — — 68,132 FDIC indemnification asset 141 95 — — 95 Other assets 3 3 — — 3 Liabilities Deposits $ 80,101 $ 80,228 $ — $ 80,228 $ — Commercial paper and other short-term borrowings 2,563 2,563 — 2,563 — Long-term debt 6,547 6,709 — 6,709 — Off-Balance Sheet Instruments Commitments to extend credit and standby and commercial letters of credit $ 273 $ 273 $ — $ — $ 273 (1) Excludes lease financing, net of related allowance. "Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K.10—9—Derivative Instruments and Other Financial Instruments Used For HedgingCompany'sCompany’s exposure to interest rate risk. When entering into derivatives on behalf of customers the Company generally acts as a financial intermediary by offsetting a significant portion of the market risk for these derivatives with third parties. The Company may also enter into derivatives for other risk management purposes and, subject to certain limits, may take market risk when buying and selling derivatives for its own account. All derivative instruments are recognized as assets or liabilities on the consolidated balance sheets at fair value.potential loss increditworthiness of the event of counterparty defaultCompany in estimating the fair value amount of the derivative instrument.JuneSeptember 30, 2014 and December 31, 2013, respectively. Asset and liability values are presented gross, excluding the impact of legally enforceable master netting and CSA agreements. The fair value of asset and liability derivatives designated and qualifying as hedging instruments and derivatives designated as other risk management are included in other assets and other liabilities, respectively. The fair value of assetNote 10—Derivative Instruments and Other Financial Instruments Used For Hedging (Continued) September 30, 2014 December 31, 2013 June 30, 2014 December 31, 2013 Fair Value Fair Value Fair Value Fair Value Notional Asset Liability Notional Asset Liability (Dollars in millions) Notional
Amount Asset
Derivatives Liability
Derivatives Notional
Amount Asset
Derivatives Liability
Derivatives Amount Derivatives Derivatives Amount Derivatives Derivatives
$ 8,200 $ 37 $ 2 $ 4,300 $ 8 $ 13 $ 9,600 $ 6 $ 32 $ 4,300 $ 8 $ 13
500 3 — — — — 500 — 2 — — —
47,006 797 671 44,427 713 609 46,106 793 651 44,427 713 609 5,776 117 107 5,714 76 61 5,268 94 81 5,714 76 61 5,329 25 55 5,645 33 29 5,998 93 54 5,645 33 29 4,034 286 287 4,027 253 254 3,909 264 263 4,027 253 254 — — — 140 — — — — — 140 — — 62,145 1,225 1,120 59,953 1,075 953 61,281 1,244 1,049 59,953 1,075 953
248
2
5
185
2
4 251 1 4 185 2 4 $ 71,093 $ 1,267 $ 1,127 $ 64,438 $ 1,085 $ 970 $ 71,632 $ 1,251 $ 1,087 $ 64,438 $ 1,085 $ 970 million and $2 million on other risk management derivatives for the three and sixnine months ended JuneSeptember 30, 2014, respectively, compared to net losses of $1 million and net losses of $5 million on other risk management derivatives for the three and sixnine months ended JuneSeptember 30, 2013, respectively, which are included in other noninterest income.Company'sCompany’s hedging strategy, see Note 13 to the Consolidated Financial Statements in Part II, Item 8. "Financial“Financial Statements and Supplementary Data"Data” in our 2013 Form 10-K.$8.2$9.6 billion at JuneSeptember 30, 2014 to hedge the risk of changes in cash flows attributable to changes in the designated benchmark interest rate on LIBOR indexed loans. To the extent effective, payments received (or paid) under the swap contract offset fluctuationsNote 10—Derivative Instruments and Other Financial Instruments Used For Hedging (Continued)JuneSeptember 30, 2014, the weighted average remaining life of the active cash flow hedges was approximately 3.853.54 years.JuneSeptember 30, 2014, the Company expects to reclassify approximately $95$115 million of income from accumulated other comprehensive income to net interest income during the twelve months ending JuneSeptember 30, 2015. This amount could differ from amounts actually realized due to changes in interest rates, hedge terminations and the addition of other hedges subsequent to JuneSeptember 30, 2014.Company'sCompany’s consolidated statements of income and changes in stockholder'sstockholder’s equity for derivatives designated as cash flow hedges for the three and sixnine months ended JuneSeptember 30, 2014 and 2013: Amount of Gain or
(Loss) Recognized in
OCI on Derivative
Instruments
(Effective Portion) Gain or (Loss) Reclassified
from Accumulated OCI into
Income (Effective Portion) Gain or (Loss) Recognized in
Income on Derivative
Instruments (Ineffective
Portion and Amount Excluded
from Effectiveness Testing) For the Three Months
Ended June 30, For the Three Months
Ended June 30, For the Three Months
Ended June 30, For the Three Months Ended September 30, For the Three Months Ended September 30, For the Three Months Ended September 30, (Dollars in millions) 2014 2013 Location 2014 2013 Location 2014 2013 2014 2013 Location 2014 2013 Location 2014 2013 Interest income $ 27 $ 8 Interest income $ 32 $ 13 $ 70 $ 3 Interest expense 2 (1 ) Noninterest expense $ (1 ) $ — $ (32 ) $ 30 Interest expense 2 (1 ) Noninterest expense $ (1 ) $ — $ 70 $ 3 $ 29 $ 7 $ (1 ) $ — $ (32 ) $ 30 $ 34 $ 12 $ (1 ) $ — Amount of Gain or
(Loss) Recognized in
OCI on Derivative
Instruments
(Effective Portion) Gain or (Loss) Reclassified
from Accumulated OCI into
Income (Effective Portion) Gain or (Loss) Recognized in
Income on Derivative
Instruments (Ineffective
Portion and Amount Excluded
from Effectiveness Testing) For the Six Months
Ended June 30, For the Six Months
Ended June 30, For the Six Months
Ended June 30, For the Nine Months Ended September 30, For the Nine Months Ended September 30, For the Nine Months Ended September 30, (Dollars in millions) 2014 2013 Location 2014 2013 Location 2014 2013 2014 2013 Location 2014 2013 Location 2014 2013 Interest income $ 49 $ 15 Interest income $ 81 $ 28 $ 78 $ 9 Interest expense 3 (1 ) Noninterest expense $ (1 ) $ — $ 46 $ 39 Interest expense 5 (1 ) Noninterest expense $ — $ — $ 78 $ 9 $ 52 $ 14 $ (1 ) $ — $ 46 $ 39 $ 86 $ 27 $ — $ — ��� Note 10—Derivative Instruments and Other Financial Instruments Used For Hedging (Continued)sixnine months ended JuneSeptember 30, 2014: For the Three Months Ended
June 30, 2014 For the Six Months Ended
June 30, 2014 (Dollars in millions) Derivative Hedged
Item Hedge
Ineffectiveness Derivative Hedged
Item Hedge
Ineffectiveness $ 3 $ (3 ) $ — $ 3 $ (3 ) $ — $ 3 $ (3 ) $ — $ 3 $ (3 ) $ — For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2014 (Dollars in millions) Derivative Hedged Item Hedge Ineffectiveness Derivative Hedged Item Hedge Ineffectiveness Interest rate risk on long-term debt $ (5 ) $ 6 $ 1 $ (2 ) $ 3 $ 1 Total $ (5 ) $ 6 $ 1 $ (2 ) $ 3 $ 1 market-linkedmarket‑linked CDs with a matched over-the-counter option. Both the embedded derivative (when bifurcated) and hedge options are recorded at fair value with the realized and unrealized changes in fair value recorded in noninterest income within trading account activities.statementstatements of income under the heading trading account activities for the three and sixnine months ended JuneSeptember 30, 2014 and 2013: Gain or (Loss)
Recognized in Income on
Derivative Instruments Gain or (Loss)
Recognized in Income on
Derivative Instruments For the Three Months Ended For the Six Months Ended For the Three Months Ended For the Nine Months Ended (Dollars in millions) June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013 September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013 $ 9 $ 10 $ 19 $ 9 $ 15 $ 12 $ 34 $ 21 — — 1 — 2 (10 ) 3 (4 ) 2 5 6 8 7 5 13 13 (1 ) 1 1 — 6 1 7 1 2 — 1 1 — 1 1 2 $ 12 $ 16 $ 28 $ 18 $ 30 $ 9 $ 58 $ 33 Note 10—Derivative Instruments and Other Financial Instruments Used For Hedging (Continued)JuneSeptember 30, 2014 and December 31, 2013: June 30, 2014 September 30, 2014 Gross Amounts Not Offset in
Balance Sheet (Dollars in millions) Gross Amounts
of Recognized
Assets/Liabilities Gross Amounts
Offset in
Balance Sheet Net Amounts
Presented in
Balance Sheet Financial
Instruments Cash Collateral
Received/Pledged Net Amount Net Amount $ 1,267 $ 454 $ 813 $ 50 $ — $ 763 $ 1,251 $ 518 $ 733 $ 75 $ — $ 658 45 — 45 44 — 1 153 — 153 153 — — $ 1,312 $ 454 $ 858 $ 94 $ — $ 764 $ 1,404 $ 518 $ 886 $ 228 $ — $ 658 $ 1,127 $ 510 $ 617 $ 220 $ — $ 397 $ 1,087 $ 576 $ 511 $ 126 $ — $ 385 25 — 25 25 — — 74 — 74 74 — — $ 1,152 $ 510 $ 642 $ 245 $ — $ 397 $ 1,161 $ 576 $ 585 $ 200 $ — $ 385 December 31, 2013 December 31, 2013 Gross Amounts Not Offset in
Balance Sheet (Dollars in millions) Gross Amounts
of Recognized
Assets/Liabilities Gross Amounts
Offset in
Balance Sheet Net Amounts
Presented in
Balance Sheet Financial
Instruments Cash Collateral
Received/Pledged Net Amount Net Amount $ 1,085 $ 493 $ 592 $ 79 $ — $ 513 $ 1,085 $ 493 $ 592 $ 79 $ — $ 513 10 — 10 10 — — 10 — 10 10 — — $ 1,095 $ 493 $ 602 $ 89 $ — $ 513 $ 1,095 $ 493 $ 602 $ 89 $ — $ 513 �� $ 970 $ 423 $ 547 $ 144 $ — $ 403 $ 970 $ 423 $ 547 $ 144 $ — $ 403 8 — 8 8 — — 8 — 8 8 — — $ 978 $ 423 $ 555 $ 152 $ — $ 403 $ 978 $ 423 $ 555 $ 152 $ — $ 403 11—10—Accumulated Other Comprehensive LossJuneSeptember 30, 2014 and 2013:2013:(Dollars in millions) Before
Tax
Amount Tax
Effect Net of
Tax $ 3 $ (1 ) $ 2 (7 ) 2 (5 ) (4 ) 1 (3 ) (503 ) 197 (306 ) (27 ) 11 (16 ) (23 ) 10 (13 ) (3 ) 1 (2 ) 11 (4 ) 7 (545 ) 215 (330 ) (3 ) 1 (2 ) 29 (12 ) 17 29 (12 ) 17 $ (523 ) $ 205 $ (318 ) $ 70 $ (28 ) $ 42 (29 ) 12 (17 ) 41 (16 ) 25 156 (61 ) 95 (1 ) — (1 ) (18 ) 8 (10 ) 5 (2 ) 3 142 (55 ) 87 �� 4 (2 ) 2 (4 ) 2 (2 ) (4 ) 2 (2 ) 15 (7 ) 8 7 (3 ) 4 $ 194 $ (76 ) $ 118 (Dollars in millions) For the Three Months Ended September 30, 2013 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period $ 30 $ (12 ) $ 18 Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt (13 ) 6 (7 ) Net change 17 (6 ) 11 Securities: Unrealized holding gains (losses) arising during the period on securities available for sale 145 (56 ) 89 Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net (47 ) 18 (29 ) Less: accretion of fair value adjustment on securities available for sale (31 ) 11 (20 ) Less: accretion of fair value adjustment on held to maturity securities (1 ) 1 — Less: amortization of net unrealized (gains) losses on held to maturity securities (156 ) 61 (95 ) Net change (90 ) 35 (55 ) Foreign currency translation adjustment 1 (1 ) — Pension and other benefits: 29 (11 ) 18 29 (11 ) 18 Net change in accumulated other comprehensive loss $ (43 ) $ 17 $ (26 ) For the Three Months Ended September 30, 2014 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period $ (32 ) $ 13 $ (19 ) Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt (34 ) 13 (21 ) Net change (66 ) 26 (40 ) Securities: Unrealized holding gains (losses) arising during the period on securities available for sale 10 (4 ) 6 Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net (13 ) 5 (8 ) Less: accretion of fair value adjustment on securities available for sale (35 ) 13 (22 ) Less: amortization of net unrealized (gains) losses on held to maturity securities 4 (2 ) 2 Net change (34 ) 12 (22 ) Foreign currency translation adjustment (6 ) 3 (3 ) Pension and other benefits: (6 ) 2 (4 ) 16 (5 ) 11 10 (3 ) 7 Net change in accumulated other comprehensive loss $ (96 ) $ 38 $ (58 ) (1) These amounts are included in the computation of net periodic pension cost. For further information, see Note 11 to these consolidated financial statements. (1)These amounts are included in the computation of net periodic pension cost. For further information, see Note 12 to these consolidated financial statements.11—10—Accumulated Other Comprehensive Loss (Continued)sixnine months ended JuneSeptember 30, 2014 and 2013:2013:(Dollars in millions) Before
Tax
Amount Tax
Effect Net of
Tax $ 9 $ (3 ) $ 6 (14 ) 5 (9 ) (5 ) 2 (3 ) (503 ) 197 (306 ) (123 ) 49 (74 ) (38 ) 16 (22 ) (11 ) 4 (7 ) 25 (10 ) 15 (650 ) 256 (394 ) (5 ) 2 (3 ) 58 (23 ) 35 58 (23 ) 35 $ (602 ) $ 237 $ (365 ) $ 78 $ (31 ) $ 47 (52 ) 21 (31 ) 26 (10 ) 16 272 (107 ) 165 (3 ) 1 (2 ) (24 ) 10 (14 ) 10 (4 ) 6 255 (100 ) 155 (4 ) 2 (2 ) (4 ) 2 (2 ) 29 (13 ) 16 21 (9 ) 12 $ 302 $ (119 ) $ 183 (Dollars in millions) For the Nine Months Ended September 30, 2013 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period $ 39 $ (15 ) $ 24 Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt (27 ) 11 (16 ) Net change 12 (4 ) 8 Securities: Unrealized holding gains (losses) arising during the period on securities available for sale (358 ) 141 (217 ) Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net (170 ) 67 (103 ) Less: accretion of fair value adjustment on securities available for sale (69 ) 27 (42 ) Less: accretion of fair value adjustment on held to maturity securities (12 ) 5 (7 ) Less: amortization of net unrealized (gains) losses on held to maturity securities (131 ) 51 (80 ) Net change (740 ) 291 (449 ) Foreign currency translation adjustment (4 ) 1 (3 ) Pension and other benefits: 87 (34 ) 53 87 (34 ) 53 Net change in accumulated other comprehensive loss $ (645 ) $ 254 $ (391 ) For the Nine Months Ended September 30, 2014 Cash flow hedge activities: Unrealized net gains (losses) on hedges arising during the period $ 46 $ (18 ) $ 28 Less: Reclassification adjustment for net (gains) losses on hedges included in interest income for loans and interest expense on long-term debt (86 ) 34 (52 ) Net change (40 ) 16 (24 ) Securities: Unrealized holding gains (losses) arising during the period on securities available for sale 282 (111 ) 171 Reclassification adjustment for net (gains) losses on securities available for sale included in securities gains, net (16 ) 6 (10 ) Less: accretion of fair value adjustment on securities available for sale (59 ) 23 (36 ) Less: amortization of net unrealized (gains) losses on held to maturity securities 14 (6 ) 8 Net change 221 (88 ) 133 Foreign currency translation adjustment (6 ) 3 (3 ) Pension and other benefits: Pension and other benefits arising during the period (4 ) 2 (2 ) (10 ) 4 (6 ) 45 (18 ) 27 31 (12 ) 19 Net change in accumulated other comprehensive loss $ 206 $ (81 ) $ 125 (1) These amounts are included in the computation of net periodic pension cost. For further information, see Note 11 to these consolidated financial statements. (1)These amounts are included in the computation of net periodic pension cost. For further information, see Note 12 to these consolidated financial statements.11—10—Accumulated Other Comprehensive Loss (Continued)For the Three Months Ended June 30, 2013 and 2014:(Dollars in millions) Net
Unrealized
Gains (Losses)
on Cash Flow
Hedges Net
Unrealized
Gains (Losses)
on Securities Foreign
Currency
Translation
Adjustment Pension and
Other
Benefits
Adjustment Accumulated
Other
Comprehensive
Loss $ 24 $ 95 $ — $ (680 ) $ (561 ) 2 (314 ) (2 ) — (314 ) (5 ) (16 ) — 17 (4 ) $ 21 $ (235 ) $ (2 ) $ (663 ) $ (879 ) $ 7 $ (260 ) $ (5 ) $ (301 ) $ (559 ) 42 95 2 (2 ) 137 (17 ) (8 ) — 6 (19 ) $ 32 $ (173 ) $ (3 ) $ (297 ) $ (441 ) For the Three Months Ended September 30, 2013 and 2014: (Dollars in millions) Balance, June 30, 2013 $ 21 $ (235 ) $ (2 ) $ (663 ) $ (879 ) Other comprehensive income (loss) before reclassifications 18 (26 ) — — (8 ) Amounts reclassified from accumulated other comprehensive loss (7 ) (29 ) — 18 (18 ) Balance, September 30, 2013 $ 32 $ (290 ) $ (2 ) $ (645 ) $ (905 ) Balance, June 30, 2014 $ 32 $ (173 ) $ (3 ) $ (297 ) $ (441 ) Other comprehensive income (loss) before reclassifications (19 ) (14 ) (3 ) — (36 ) Amounts reclassified from accumulated other comprehensive loss (21 ) (8 ) — 7 (22 ) Balance, September 30, 2014 $ (8 ) $ (195 ) $ (6 ) $ (290 ) $ (499 ) For the Six Months Ended June 30, 2013 and 2014:(Dollars in millions) Net
Unrealized
Gains (Losses)
on Cash Flow
Hedges Net
Unrealized
Gains (Losses)
on Securities Foreign
Currency
Translation
Adjustment Pension and
Other
Benefits
Adjustment Accumulated
Other
Comprehensive
Loss $ 24 $ 159 $ 1 $ (698 ) $ (514 ) 6 (320 ) (3 ) — (317 ) (9 ) (74 ) — 35 (48 ) $ 21 $ (235 ) $ (2 ) $ (663 ) $ (879 ) $ 16 $ (328 ) $ (3 ) $ (309 ) $ (624 ) 47 165 — (2 ) 210 (31 ) (10 ) — 14 (27 ) $ 32 $ (173 ) $ (3 ) $ (297 ) $ (441 ) For the Nine Months Ended September 30, 2013 and 2014: (Dollars in millions) Balance, December 31, 2012 $ 24 $ 159 $ 1 $ (698 ) $ (514 ) Other comprehensive income (loss) before reclassifications 24 (346 ) (3 ) — (325 ) Amounts reclassified from accumulated other comprehensive loss (16 ) (103 ) — 53 (66 ) Balance, September 30, 2013 $ 32 $ (290 ) $ (2 ) $ (645 ) $ (905 ) Balance, December 31, 2013 $ 16 $ (328 ) $ (3 ) $ (309 ) $ (624 ) Other comprehensive income (loss) before reclassifications 28 143 (3 ) (2 ) 166 Amounts reclassified from accumulated other comprehensive loss (52 ) (10 ) — 21 (41 ) Balance, September 30, 2014 $ (8 ) $ (195 ) $ (6 ) $ (290 ) $ (499 ) 12—11—Employee Pension and Other Postretirement Benefits Pension Benefits Other Benefits April 30,
2014 December 31,
2013 April 30,
2014 December 31,
2013 4.50 % 4.90 % 4.20 % 4.60 % Pension Benefits Other Benefits April 30, 2014 December 31, 2013 April 30, 2014 December 31, 2013 Discount rate in determining benefit obligations 4.50 % 4.90 % 4.20 % 4.60 % sixnine months ended JuneSeptember 30, 2014 and 2013.2013. As a result of the amendments to the pension and health benefit plans and resulting remeasurements, 2014 total net periodic benefit cost will decrease from approximately $71 million to approximately $39 million. Pension
Benefits Other Benefits Superannuation,
SERP(1)
and ESBP(2) Pension Benefits Other Benefits For the Three
Months
Ended
June 30, For the Three
Months
Ended
June 30, For the Three
Months
Ended
June 30, For the Three Months Ended
September 30, For the Three Months Ended
September 30, For the Three Months Ended
September 30,(Dollars in millions) 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 $ 18 $ 21 $ 2 $ 3 $ — $ — $ 21 $ 23 $ 2 $ 4 $ — $ — 26 24 3 3 1 1 25 25 3 2 1 1 (47 ) (42 ) (4 ) (4 ) — — (49 ) (42 ) (5 ) (4 ) — — (3 ) — (1 ) — — — (4 ) — (2 ) — — — 14 27 — 2 1 — 16 26 — 2 — 1 $ 8 $ 30 $ — $ 4 $ 2 $ 1 $ 9 $ 32 $ (2 ) $ 4 $ 1 $ 2 Pension Benefits Other Benefits For the Nine Months Ended
September 30, For the Nine Months Ended
September 30, For the Nine Months Ended
September 30,(Dollars in millions) 2014 2013 2014 2013 2014 2013 Components of net periodic benefit cost: Service cost $ 60 $ 66 $ 8 $ 11 $ 1 $ — Interest cost 79 74 9 8 3 3 Expected return on plan assets (144 ) (125 ) (14 ) (12 ) — — Amortization of prior service cost (7 ) — (3 ) — — — Recognized net actuarial loss 43 80 1 5 1 2 Total net periodic benefit cost $ 31 $ 95 $ 1 $ 12 $ 5 $ 5 (1) Supplemental Executives Retirement Plan (SERP). (2) Executive Supplemental Benefit Plans (ESBP). Employee Pension and Other Postretirement Benefits (Continued) Pension
Benefits Other Benefits Superannuation,
SERP(1)
and ESBP(2) For the Six
Months
Ended
June 30, For the Six
Months
Ended
June 30, For the Six
Months
Ended
June 30, (Dollars in millions) 2014 2013 2014 2013 2014 2013 $ 39 $ 43 $ 5 $ 7 $ 1 $ — 54 49 6 6 2 2 (95 ) (83 ) (9 ) (8 ) — — (3 ) — (1 ) — — — 28 54 — 3 1 1 $ 23 $ 63 $ 1 $ 8 $ 4 $ 3 (1)Supplemental Executives Retirement Plan (SERP).(2)Executive Supplemental Benefit Plans (ESBP).Note 13—Commitments, Contingencies and Guarantees(Dollars in millions) June 30, 2014 September 30, 2014 $ 34,724 $ 34,899 5,887 $ 6,106 180 $ 179 JuneSeptember 30, 2014, the carrying amount of the Company's risk participations in bankers' acceptances and standby and commercial letters of credit totaled $4.4$4.3 million. Estimated exposure to loss related to these commitments is covered by the allowance for losses on off-balance sheet commitments. The carrying amounts of the standby and commercial letters of credit and the allowance for losses on off-balance sheet commitments are included in other liabilities on the consolidated balance sheet.Note 13—Commitments, Contingencies and Guarantees (Continued)JuneSeptember 30, 2014, the current exposure to loss under these contracts totaled $23$14 million, and the maximum potential exposure to loss in the future was estimated at $48$38 million.Company'sCompany’s reporting segments were revised to reflect a new internal management structure resulting from the BTMU Americas Holdings business integration initiative announced in 2013. The Company now has five reportable segments: Retail Banking & Wealth Markets, Commercial Banking, Corporate Banking, Transaction Banking, and Investment Banking & Markets. Prior period segment results have been revised to conform to current period presentation. Below is a detailed description of these reportable segments.358354 full-service branches in California and 4546 full-service branches in Washington and Oregon, as well as through ATMs, call centers, web-based and mobile internet banking applications and through alliances with other financial institutions. Community Banking provides checking and deposit products and services; bill and loan payment, merchant, and various types of financing and investment services; and products including credit cards.Note 14—Business Segments (Continued)Company'sCompany’s other segments, Corporate Banking offers its customers a range of noncredit services, which include global treasury management and capital market solutions, and foreign exchange and various interest rate risk and commodity risk management products.Company'sCompany’s other segments to provide working capital management and asset servicing solutions, including deposits and treasury management, trade finance, and institutional trust and custody, to the Company'sCompany’s customers. This segment also manages the digital banking channels for retail, small business, wealth management and commercial clients, as well as commercial product development. The client base consists of financial institutions, corporations, government agencies, insurance companies, mutual funds, investment managers and non-profit organizations.Company'sCompany’s other segments to provide customers structured credit services, including project finance; foreign exchange, interest rate and energy risk management solutions; and to facilitate merchant and investment banking-related transactions. Additionally, the segment'ssegment’s leasing arm provides lease and other financing services to corporate customers.
OtherNote 14—Business Segments (Continued)Other "Other"Company'sCompany’s balance sheet and to manage those risks within the guidelines established by ALCO. For additional discussion regarding these risk management activities, see Part I, Item 2. "Quantitative“Quantitative and Qualitative Disclosures About Market Risk"Risk” in this Form 10-Q."Other"“Other” is comprised of certain corporate activities of the Company; the net impact of the funds transfer pricing charges and credits allocated to the reportable segments; the residual costs of support groups; the unallocated allowance; goodwill, intangible assets, and the related amortization/accretion associated with the Company'sCompany’s privatization transaction; the elimination of the fully taxable-equivalent basis amount; the difference between the marginal tax rate and the consolidated effective tax rate; and the FDIC covered assets."market view"“market view” perspective in measuring the business segments. The market view is a measurement of customer markets aggregated to show all revenues generated and expenses incurred from all products and services sold to those customers regardless of where product areas organizationally report. Therefore, revenues and expenses are included in both the business segment that provides the service and the business segment that manages the customer relationship. The duplicative results from this internal management accounting view are eliminated in "Reconciling“Reconciling Items."”As of and for the Three Months Ended September 30, 2014: (Dollars in millions) Retail Banking & Wealth Markets Commercial Banking Corporate Banking Transaction Banking Investment Banking & Markets Other Reconciling Items MUFG Americas Holdings Corporation Results of operations - Market View Net interest income (expense) $ 340 $ 249 $ 46 $ 110 $ 45 $ 19 $ (102 ) $ 707 Noninterest income (expense) 83 57 44 44 138 86 (64 ) 388 Total revenue 423 306 90 154 183 105 (166 ) 1,095 Noninterest expense 329 114 40 91 54 218 (41 ) 805 (Reversal of) provision for loan losses (1 ) 7 (6 ) (6 ) (8 ) (13 ) 9 (18 ) Income (loss) before income taxes and including noncontrolling interests 95 185 56 69 137 (100 ) (134 ) 308 Income tax expense (benefit) 37 42 22 27 42 (50 ) (53 ) 67 Net income (loss) including noncontrolling interests 58 143 34 42 95 (50 ) (81 ) 241 Deduct: net loss from noncontrolling interests — — — — — 5 — 5 Net income (loss) attributable to MUAH $ 58 $ 143 $ 34 $ 42 $ 95 $ (45 ) $ (81 ) $ 246 Total assets, end of period $ 37,224 $ 37,088 $ 5,077 $ 1,814 $ 6,160 $ 27,157 $ (3,641 ) $ 110,879 As of and for the Three Months Ended June 30, 2014:(Dollars in millions) Retail
Banking &
Wealth
Markets Commercial
Banking Corporate
Banking Transaction
Banking Investment
Banking &
Markets Other Reconciling
Items MUFG
Americas
Holdings
Corporation $ 362 $ 277 $ 43 $ 94 $ 43 $ 36 $ (92 ) $ 763 87 58 22 39 57 (6 ) (55 ) 202 449 335 65 133 100 30 (147 ) 965 340 104 16 88 28 111 (38 ) 649 (2 ) (10 ) 9 2 15 3 (8 ) 9 111 241 40 43 57 (84 ) (101 ) 307 44 65 16 17 12 (53 ) (39 ) 62 67 176 24 26 45 (31 ) (62 ) 245 — — — — — 4 — 4 $ 67 $ 176 $ 24 $ 26 $ 45 $ (27 ) $ (62 ) $ 249 $ 36,417 $ 35,423 $ 4,916 $ 1,938 $ 6,199 $ 27,485 $ (3,558 ) $ 108,820 As of and for the Three Months Ended June 30, 2013:As of and for the Three Months Ended September 30, 2013: As of and for the Three Months Ended September 30, 2013: (Dollars in millions) Retail
Banking &
Wealth
Markets Commercial
Banking Corporate
Banking Transaction
Banking Investment
Banking &
Markets Other Reconciling
Items MUFG
Americas
Holdings
Corporation Retail Banking & Wealth Markets Commercial Banking Corporate Banking Transaction Banking Investment Banking & Markets Other Reconciling Items MUFG Americas Holdings Corporation Results of operations - Market View $ 332 $ 217 $ 31 $ 95 $ 43 $ 30 $ (76 ) $ 672 $ 333 $ 240 $ 34 $ 108 $ 47 $ 9 $ (86 ) $ 685 94 49 18 41 54 (4 ) (51 ) 201 103 51 22 41 39 32 (54 ) 234 426 266 49 136 97 26 (127 ) 873 436 291 56 149 86 41 (140 ) 919 366 102 12 91 25 138 (32 ) 702 346 99 13 87 25 151 (32 ) 689 (7 ) 3 (4 ) (4 ) 7 3 (1 ) (3 ) (13 ) (20 ) 6 4 5 4 (2 ) (16 ) 67 161 41 49 65 (115 ) (94 ) 174 103 212 37 58 56 (114 ) (106 ) 246 27 40 15 20 17 (48 ) (36 ) 35 41 62 15 23 14 (58 ) (42 ) 55 40 121 26 29 48 (67 ) (58 ) 139 62 150 22 35 42 (56 ) (64 ) 191 — — — — — 3 — 3 — — — — — 7 — 7 $ 40 $ 121 $ 26 $ 29 $ 48 $ (64 ) $ (58 ) $ 142 $ 62 $ 150 $ 22 $ 35 $ 42 $ (49 ) $ (64 ) $ 198 $ 33,008 $ 31,153 $ 4,364 $ 1,507 $ 5,585 $ 28,525 $ (1,863 ) $ 102,279 $ 33,550 $ 32,219 $ 4,649 $ 1,569 $ 6,380 $ 29,648 $ (2,531 ) $ 105,484 As of and for the Six Months Ended June 30, 2014:(Dollars in millions) Retail
Banking &
Wealth
Markets Commercial
Banking Corporate
Banking Transaction
Banking Investment
Banking &
Markets Other Reconciling
Items MUFG
Americas
Holdings
Corporation $ 709 $ 504 $ 74 $ 194 $ 89 $ 48 $ (172 ) $ 1,446 166 106 40 79 107 (13 ) (102 ) 383 875 610 114 273 196 35 (274 ) 1,829 675 209 31 177 55 235 (73 ) 1,309 (8 ) 6 (7 ) 3 30 (12 ) (19 ) (7 ) 208 395 90 93 111 (188 ) (182 ) 527 82 99 35 36 23 (92 ) (71 ) 112 126 296 55 57 88 (96 ) (111 ) 415 — — — — — 9 — 9 $ 126 $ 296 $ 55 $ 57 $ 88 $ (87 ) $ (111 ) $ 424 $ 36,417 $ 35,423 $ 4,916 $ 1,938 $ 6,199 $ 27,485 $ (3,558 ) $ 108,820 As of and for the Six Months Ended June 30, 2013:As of and for the Nine Months Ended September 30, 2014: As of and for the Nine Months Ended September 30, 2014: (Dollars in millions) Retail
Banking &
Wealth
Markets Commercial
Banking Corporate
Banking Transaction
Banking Investment
Banking & Markets Other Reconciling
Items MUFG
Americas
Holdings
Corporation Retail Banking & Wealth Markets Commercial Banking Corporate Banking Transaction Banking Investment Banking & Markets Other Reconciling Items MUFG Americas Holdings Corporation Results of operations - Market View $ 669 $ 423 $ 60 $ 206 $ 89 $ 31 $ (153 ) $ 1,325 $ 1,049 $ 764 $ 124 $ 323 $ 134 $ 48 $ (289 ) $ 2,153 187 92 35 79 101 50 (92 ) 452 249 163 84 124 245 72 (166 ) 771 856 515 95 285 190 81 (245 ) 1,777 1,298 927 208 447 379 120 (455 ) 2,924 730 199 26 184 50 291 (65 ) 1,415 1,004 323 72 268 109 452 (114 ) 2,114 (15 ) 30 2 (3 ) 4 (24 ) — (6 ) (9 ) 12 (13 ) (3 ) 23 (25 ) (10 ) (25 ) 141 286 67 104 136 (186 ) (180 ) 368 303 592 149 182 247 (307 ) (331 ) 835 56 69 26 41 36 (72 ) (71 ) 85 119 146 58 71 63 (148 ) (130 ) 179 85 217 41 63 100 (114 ) (109 ) 283 184 446 91 111 184 (159 ) (201 ) 656 — — — — — 7 — 7 — — — — — 14 — 14 $ 85 $ 217 $ 41 $ 63 $ 100 $ (107 ) $ (109 ) $ 290 $ 184 $ 446 $ 91 $ 111 $ 184 $ (145 ) $ (201 ) $ 670 $ 33,008 $ 31,153 $ 4,364 $ 1,507 $ 5,585 $ 28,525 $ (1,863 ) $ 102,279 $ 37,224 $ 37,088 $ 5,077 $ 1,814 $ 6,160 $ 27,157 $ (3,641 ) $ 110,879 As of and for the Nine Months Ended September 30, 2013: (Dollars in millions) Retail Banking & Wealth Markets Commercial Banking Corporate Banking Transaction Banking Investment Banking & Markets Other Reconciling Items MUFG Americas Holdings Corporation Results of operations - Market View Net interest income (expense) $ 1,002 $ 671 $ 101 $ 335 $ 136 $ 20 $ (255 ) $ 2,010 Noninterest income (expense) 289 142 58 120 140 84 (147 ) 686 Total revenue 1,291 813 159 455 276 104 (402 ) 2,696 Noninterest expense 1,075 297 41 271 75 442 (97 ) 2,104 (Reversal of) provision for loan losses (28 ) 9 7 1 9 (18 ) (2 ) (22 ) Income (loss) before income taxes and including noncontrolling interests 244 507 111 183 192 (320 ) (303 ) 614 Income tax expense (benefit) 96 134 44 72 50 (137 ) (119 ) 140 Net income (loss) including noncontrolling interests 148 373 67 111 142 (183 ) (184 ) 474 Deduct: net loss from noncontrolling interests — — — — — 14 — 14 Net income (loss) attributable to MUAH $ 148 $ 373 $ 67 $ 111 $ 142 $ (169 ) $ (184 ) $ 488 Total assets, end of period $ 33,550 $ 32,219 $ 4,649 $ 1,569 $ 6,380 $ 29,648 $ (2,531 ) $ 105,484 under-employment,under‑employment, negatively impacted the credit performance of mortgage loans and resulted in significant write-downswrite‑downs of asset values by financial institutions, including government-sponsoredgovernment‑sponsored entities as well as commercial and investment banks. These write-downs,write‑downs, initially of mortgage-backedmortgage‑backed securities but spreading to credit default swaps and other derivative securities, residential and commercial real estate loans and small business and other commercial loans, in turn, caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. These adverse economic conditions also led to an increased level of commercial and consumer delinquencies, reduced consumer confidence, increased market volatility and widespread reduction of business activity generally. The resulting economic pressure on consumers and lack of confidence in the financial markets adversely affected our business, financial condition and results of operations in 2009 and this effect continued, although to a lesser degree, in 2010. Although the economic conditions in our markets, including California in particular, and in the U.S. generally have shown improvement since 2011, there can be no assurance that these conditions will continue to improve. California is facing a severe drought which may negatively impact its economy, particularly in the agricultural sector, as other markets improve. These conditions may again decline in the near future and could be influenced by any continuing controversy over federal spending and debt limits. In addition, turbulent political and economic conditions in foreign countries have negatively impacted the U.S. financial markets and economy in general and may do so in the future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institutions industry. In particular, we may face the following risks in connection with these events:••••••Dodd-FrankDodd‑Frank Act (see"Substantial “Substantial competition could adversely affect us" in "Risk Factors"us” in Part I,II, Item 1A of our 2013 Form 10-K)10-K.).•"Critical“Critical Accounting Estimates-Annual Goodwill Impairment Analysis"Analysis” in Part II, Item 7 of our 2013 Form 10-K.•pre-2008pre‑2008 levels, although our assessment decreased in 2011 compared to 2010 and did not increase in 2012 or 2013, but in future years may be subject to further premium increases which could increase our costs. Refer to "Supervision“Supervision and Regulation"Regulation” in Part I,Item 1 of our 2013 Form 10-K10‑K for additional information regarding FDIC actions relating to deposit insurance assessments.Dodd-FrankDodd‑Frank Act. This important legislation has affected U.S. financial institutions, including MUAH and MUB, in many ways, some of which have increased, or may increase in the future, the cost of doing business and present other challenges to the financial services industry. Due to our size of over $50 billion in assets, we are regarded as "systemically significant"“systemically significant” to the financial health of the U.S. economy and, as a result, are subject to additional regulations as discussed further below. Various provisions of the law have been implemented by rules and regulations of the federal banking agencies, but certain provisions of the law are yet to be implemented by the federal banking agencies and therefore the full scope and impact of the law on banking institutions generally and on our business cannot be fully determined at this time. The law contains many provisions that may have particular relevance to the business of MUAH and the Bank.MUB. The Dodd-FrankDodd‑Frank Act created the CFPB, which has direct supervision and examination authority over banks with more than $10 billion in assets, including the Bank.MUB. While the full effect of these provisions of the Dodd-FrankDodd‑Frank Act on the BankMUB cannot be predicted at this time, they have resulted in adjustments to our FDIC deposit insurance premiums, and can be expected to result in increased capital andfee-basedfee‑based revenues and restrictions on some aspects of our operations, as well as increased interest expense on our demand deposits, some or all of which may be material.Dodd-FrankDodd‑Frank Act regarding enhanced prudential standards for large bank holding companies like the Company and other systemically important firms. The proposed rules included new requirements relating to capital planning, liquidity risk management, counterparty credit exposure limits, overall risk management standards, stress testing, debt-to-equitydebt‑to‑equity limits, resolution planning and early remediation. In November 2012, the Federal Reserve issued final rules regarding stress testing requirements. The OCC also adopted similar rules for large national banks such as MUB. The stress testing rules govern the timing and type of stress testing activities required of large bank holding companies and banks as well as rules governing testing controls, oversight and disclosure requirements. In July 2014, the Federal Reserve and the OCC published proposed rules which would amend certain aspects of the capital plan and stress test rules, subject to a transition period, to adjust the timing of the annual stress testing cycle from January 5 to April 5 each year. In October 2014, the Federal Reserve adopted final rules largely identical to the proposed rules and also published the summary instructions and guidance for the 2015 CCAR exercise. Among other changes, the proposed amended rulefinal rules would limit a bank holding company'sBHC’s ability to make capital distributions to the extent that its actual capital issuances are less than the amount indicated in its capitalReserve'sReserve’s resolution plan, capital plan, and stress testing rules, as well as the final rule regarding enhanced prudential standards. (The resolution, capital plan and stress testing rules are discussed below in this section.risk factor.) The final enhanced prudential standards rule addresses a diverse array of regulatory areas, each of which is highly complex. In some instances, the rule implements new financial regulatory requirements and in other instances it overlaps other regulatory reforms already in existence (such as the Basel III capital and liquidity reforms and stress testing requirements discussed elsewhere in this report). For larger domestic BHC's,BHC’s, the final enhanced prudential standards rule formalizes governance and oversight processes with respect to various prudential standards already in place through the Federal Reserve'sReserve’s other rule-makings,rule‑makings, as noted above and elsewhere in this section, but also imposes certain additional requirements such as an internal liquidity stress testing regime (intended to be complementary to the Federal Reserve'sReserve’s liquidity coverage ratio proposal discussed below) and maintenance of a related liquidity buffer.Committee'sCommittee’s completion of its work on developing a large financial institution exposure framework, which was completed in April 2014. The Basel Committee's final large exposures framework includes a general limit applied to all of a bank's exposures to a single counterparty or group of connected counterparties (i.e., counterparties that are interdependent and likely to fail simultaneously), which is set at 25% of a bank's Tier 1 capital, and a stricter limit of 15% of Tier 1 capital that will apply to exposures between global systemically important banks. The Federal Reserve also delayed adopting proposed rules implementing the early remediation requirements under the Dodd-FrankDodd‑Frank Act, which remain under consideration.non-branchnon‑branch assets in the U.S. operate in the U.S. through an intermediate holding company (IHC) structure. The FBO is required to hold its interest in any U.S. subsidiary through the IHC, which will be its top-tiertop‑tier U.S. subsidiary. U.S. branches of FBOs, such as those of BTMU, and foreign bank agencies are excluded from this requirement. The final FBO rules provide for an initial compliance date for FBOs of July 1, 2016 and generally defer application of a leverage ratio to IHC'sIHC’s until 2018. However, larger BHCs, such as the Company, will become subject to enhanced prudential standards applicable to larger BHCs on January 1, 2015, whether or not they are also a subsidiary of an FBO, and those BHCs that are also FBO subsidiaries will remain subject to the BHC standards until a U.S. IHC is formed or designated and becomes subject to the parallel requirements under the FBO rules. The FBO rules allow an IHC, with the prior written approval of the Federal Reserve, to opt out of the "advanced approaches"“advanced approaches” rules of the Federal Reserve for calculating risk-weighted assets under the Federal Reserve'sReserve’s Basel III capital rules; an IHC which elects to opt out of the advanced approaches would calculate its risk-weighted assets under a "standardized"“standardized” approach. MUAH has initiated discussions with the Federal Reserve to explore opting-out of the advanced approaches for the holding company only. For additional information, see "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operations - Capital Management"Management” in this Form 10-Q. MUFG, BTMU and the Company are analyzing the impact of these rules on their U.S. operations and will make appropriate structural, operational and financial changes to comply with these rules, as well as preparing a requiredwhich will be described in the Company’s enhanced prudential standards implementation plan that will be filed with the Federal Reserve by January 1, 2015. Further changes may be required following the Federal Reserve’s review of the implementation plan. For additional information, see "Supervision“Supervision and Regulation—Regulation - Regulatory Capital and Liquidity Standards"Standards” and "—Principal“ -Principal Federal Banking Laws-Dodd-Frank Act"Laws-Dodd‑Frank Act” in Part I, Item 1 of our 2013 Form 10-K."Supervision“Supervision and Regulation-Regulatory Capital and Liquidity Standards"Standards” in Item 1 of Part I of our 2013 Form 10-K10‑K and "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations-Regulatory Capital Changes"Changes” in Item 7 of Part II of our 2013 Form 10-K.10‑K. MUAH timely filed its annual capital plan under the Federal Reserve'sReserve’s Comprehensive Capital Analysis and Review ("CCAR"(“CCAR”) Program in January 2014. The CCAR evaluates capital planning processes and assesses capital adequacy levels under various scenarios to determine if bank holding companies would have sufficient capital to continue operations throughout times of economic and financial market stress. In March 2014, MUAH disclosed the results of its annual company-run capital stress test in accordance with regulatory requirements and was subsequently informed by the Federal Reserve that it did not object to the Company'sCompany’s capital plan. However, it has been reported that various other bank holding companies did receive objections to their CCAR submissions from the Federal Reserve and there can be no assurance that MUAH will not receive such objections with respect to its future annual submissions under the CCAR Program. If the Federal Reserve were to object to a future CCAR submission by MUAH, this could have adverse consequences for our business prospects including limiting our ability to grow either organically or otherwise.October 2013,September 2014, the U.S. banking agencies requested comment on proposed rules that wouldOCC, the Federal Reserve and the FDIC jointly adopted the final rule to implement the LCR, which is a standardized quantitative liquidity requirement generally consistent with the liquidity coverage ratio (LCR) standard included inestablished by the Basel III framework of the Basel Committee.Committee on Banking Supervision. The proposed rules areLCR rule is designed to ensure that covered banking organizations maintain an adequate level of cash and high quality liquid assets (HQLA), such as central bank reserves and government and corporate debt, to meet estimated net liquidity needs in a short-term stress scenario using liquidity inflow and outflow assumptions provided in the rulesrule (net cash outflow). An institution'sinstitution’s LCR is the amount of its HQLA, as defined and calculated in accordance with the reductions and limitations in the rules,rule, divided by its net cash outflow, with the quotient expressed as a ratio. The comment period closed January 31, 2014, but a final rule has yetpercentage. While the LCR generally applies to be published. The LCR standard would apply to all internationally active banking organizations-generally, thoseorganizations with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposure. The proposalexposures, the final rule also would applyapplies a less stringent, modified LCR to bank holding companies that are not internationally active, but have more than $50 billion in total assets (such as the Company). Under the proposed modified LCR rules,rule, financial institutions would have tomust maintain, following a phase-in period, an LCR equal to at least 100 percent based on the entity's total projected net cash outflows over the next 2130 calendar days, effectively using net cash outflow assumptions equal to 70 percent of the outflow assumptions prescribed for internationally active banking organizations.proposed modified LCR rules arerule is generally less stringent thanconsistent with the LCR requirement included in the Basel III framework, in certain respects they areit is more restrictive. For example, the proposed rule requires daily calculation of the LCR and would phase-in the LCR more quickly than required under the Basel III framework, with full compliance required beginning January 1, 2017. Although the impact on the Company will not be fully known until the rules are final,rule is fully-implemented, we expect to be in compliance with the requirements of the rule when they becomeit becomes effective.Company'sCompany’s business activities, including lending, and its ability to expand, either organically or through acquisitions. It could also result in the Company taking steps to increase its capital or being limited in its ability to pay dividends or otherwise return capital to its shareholder, or selling or refraining from acquiring assets. In addition, the new liquidity standards could require the Company to increase its holdings of highly liquid short-termshort‑term investments, thereby reducing the Company'sCompany’s ability to invest in longer-termlonger‑term or less liquid assets even if more desirable from a balance sheet management perspective. Moreover, although these new requirements are being phased in over time, U.S. federal banking agencies have been taking into account expectations regarding the ability of banks to meet these new requirements, including under stressed conditions, in approving actions that represent uses of capital, such as dividend increases and acquisitions.Dodd-FrankDodd‑Frank Act, commonly known as the Volcker Rule. The final rule generally prohibits banking entities from engaging in short-termshort‑term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account. The final rules provide exemptions for certain activities, including certain types of market making, underwriting, hedging of specific, identifiable risks of individual or aggregated positions, and trading in U.S. government, agency, state and municipal obligations. These exemptions are limited if they involve a material conflict of interest, a material exposure to high-riskhigh‑risk assets or trading strategies, or a threat to the institution'sinstitution’s safety and soundness or to that of the U.S. financial system. The rules also exempt trading for customers in a fiduciary capacity or in riskless principal trades, subject to certain requirements.non-conformingnon‑conforming private equity brandfund interests after the Volker Rule was proposed.Act'sAct’s requirements in this respect. We do expect our compliance costs to increase as a result of the rule. See "Supervision“Supervision and Regulation"Regulation” in Part I, Item 1 of our 2013 Form 10-K10‑K for additional information.Dodd-FrankDodd‑Frank Act will have a significant impact on our Global Capital Markets activities due to enhanced oversight of derivatives and swap activities by multiple regulatory agencies (the U.S. Commodities Futures Trading Commission, the SEC and the bank regulators). In addition, certain types of non-conformingnon‑conforming swap transactions, such as commodity derivatives, may be required to be "pushed out"“pushed out” of the Bank into a separate non-banknon‑bank affiliate.JanuarySeptember 2014, the OCC proposedadopted guidelines that would establish minimum standards for the design and implementation of a risk governance framework for large national banks with average total consolidated assets of $50 billion or more, as well as potentially smaller insured depository institutions. The proposed guidelines are intended to build upon and formalize "heightened expectations"“heightened expectations” for risk governance developed by the OCC in 2010 and are intended to improve examiners'examiners’ ability to assess compliance with the OCC'sOCC’s expectations. The proposed guidelines establish specific risk management-relatedmanagement‑related roles and responsibilities for three designated functions: a bank's "front line"bank’s “front line” units, independent risk management, and internal audit. The guidelines would require these three designated functions to maintain independence from each other and impose substantial risk management-relatedmanagement‑related and other responsibilities on a bank'sbank’s board of directors and chief executive officer. Although the Company has had in place a robust corporate governance framework which substantially complies with the proposed guidelines, these guidelines if adopted as proposed, could require changes in our management and internal processes and may result in an increased level of regulatory oversight into our management and internal processes, which could potentially result in increased regulatory and compliance risks and an increase in our compliance and operational costs and expenses.newly-adoptednewly‑adopted capital rules of the federal banking agencies and the FBO rules of the Federal Reserve, referred to above, as well as the various proposed regulations described above, if adopted, along with other regulations which may be adopted in the future, may also generally increase our cost of doing business and lead us to stop or reduce our offerings of various credit products.government-sponsoredgovernment‑sponsored entities Fannie Mae and Freddie Mac (GSEs) and reducing or eliminating over time the role of the GSEs in guaranteeing mortgages and providing funding for mortgage loans, as well as the implementation of reforms relating to borrowers, lenders, and investors in the mortgage market, including reducing the maximum size of a loan that the GSEs can guarantee, phasing in a minimum down payment requirement for borrowers, improving underwriting standards, and increasing accountability and transparency in the securitization process. While the specific nature of these reforms and their impact on the financial services industry in general, and on MUB in particular, is uncertain at this time, such reforms, if enacted, are likely to have a substantial impact on the mortgage market and could potentially reduce our income from mortgage originations by increasing mortgage costs or lowering originations. The GSE reforms could also reduce real estate prices, which could reduce the value of collateral securing outstanding mortgage loans. This reduction of collateral value could negatively impact the value or perceived collectability of these mortgage loans and may increase our allowance for loan losses. Such reforms may also include changes to the Federal Home Loan Bank System, which could adversely affect a significant source of funding for lending activities by the banking industry, including the Bank. These reforms may also result in higher interest rates on residential mortgage loans, thereby reducing demand, which could have an adverse impact on our residential mortgage lending business.Obama'sObama’s proposed 2015 U.S. budget includes a "Financial“Financial Crisis Responsibility Fee"Fee” that would apply to banks with greater than $50 billion in assets. This fee would be effective January 1, 2016 and would be intended to recover taxpayer funds provided to U.S. financial institutions through the U.S. Treasury'sTreasury’s Troubled Asset Relief Program (TARP). On May 21, 2012, the U.S. Treasury announced its final rule toDodd-FrankDodd‑ Frank Act which imposed a new supervisory assessment on all institutions with greater than $50 billion in assets, which is being assessed at the MUFG level, and is based on an average of the total combined assets of MUFG from U.S. operations, net of U.S. intercompany balances and allowed transactions. Therefore, our operating costs over time can be expected to increase due to these assessments, which are based, among other things, on the projected operating expenses of this new office and the aggregate assessable assets of the subject banks.so-called "responsibleso‑called “responsible banking acts"acts”, and other cities are considering the adoption of similar ordinances. These city ordinances generally require banks that hold city government deposits to provide detailed accounts of their lending practices in low-incomelow‑income communities, as well as their participation in foreclosure prevention and home loan principal reduction programs. Performance under these ordinances is used as a basis for awarding the city'scity’s financial services contracts. The adoption of these ordinances by municipalities for which the Bank is a provider of cash management or other banking services could result in increased regulatory and compliance costs and other operational costs and expenses, making this business less desirable to the Bank and potentially resulting in reduced opportunities for the Bank to provide these services.and the Federal Reserve and other regulators may adversely affect our activities and investments and those of our subsidiaries in the future.Dodd-FrankDodd‑Frank Act and a long-standinglong‑standing policy of the Federal Reserve, a bank holding company is expected to act as a source of financial and managerial strength for its subsidiary banks. As a result of that policy, we may be required to commit financial and other resources to our subsidiary bank in circumstances where we might not otherwise do so. Among the instruments of monetary policy available to the Federal Reserve are (a) conducting open market operations in U.S. Government securities, (b) changing the discount rates on borrowings by depository institutions and the federal funds rate, and (c) imposing or changing reserve requirements against certain borrowings by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the Federal Reserve can be expected to have a material effect on our business, prospects, results of operations and financial condition."Supervision“Supervision and Regulation"Regulation” in Part I, Item 1 of our 2013 Form 10-K10‑K for discussion of certain additional existing and proposed laws and regulations that may affect our business."cram-downs,"“cram‑downs,” which would empower courts to modify the terms of mortgage and home equity loans including the ability to reduce the principal amounts to reflect lower underlying property values. Although this legislation has not moved forward at this time, legislation of this typecram-down.cram‑down. The availability of principal reductions or other mortgage loan modifications could make bankruptcy a more attractive option for troubled borrowers, leading to increased bankruptcy filings and accelerated defaults.banks'banks’ abilities to charge overdraft services and interchange fees on debit card transactions. Under the final rule, effective October 1, 2011, the maximum permissible interchange fee that a bank may receive is the sum of $0.21 per transaction and five basis points multiplied by the value of the transaction, with an additional upward adjustment of no more than $0.01 per transaction if a bank develops and implements policies and procedures reasonably designed to achieve fraud-fraud‑ prevention standards set by regulation. In July 2013, a Federal district court, in a case brought by a retailer trade association, held that this rule was not valid under the Dodd-Frank Act'sAct’s standard that the fee be "reasonable“reasonable and proportional"proportional” to the cost of processing the debit card transactions and improperly included certain categories of costs in applying the statutory standard. The Federal Reserve appealed the decision, and the ruling was stayed. The district court'scourt’s decision could have had the effect of leading to further restrictions on the fee revenues that banks receive from the business of debit card transactions. However, in March 2014, a panel of the U.S. Court of Appeals for the District of Columbia Circuit issued a ruling reversing the district court'scourt’s ruling almost in its entirety. The appellate court concluded that the Federal Reserve had reasonably interpreted the statute to allow card issuers to recover certain costs that are incremental to costs incurred in the authorization, clearance and settlement of debit card transactions. The retailer trade association has taken actions to seek an appeal.appealed the decision, filing a writ of certiorari with the U.S. Supreme Court. Pending the effect of any further appeals or other proceedings in the litigation, the appellate court'scourt’s decision will generally leave in place the Federal Reserve'sReserve’s new restrictions on charges for overdraft services and interchange fees on debit card transactions. These restrictions are resulting in decreased revenues and increased compliance costs for the banking industry and MUB, and there can be no assurance that alternative sources of revenues can be implemented to offset the impact of these developments. See "Supervision“Supervision and Regulation-Other Federal Laws and Regulations Affecting Banks-Overdraft and Interchange Fees; Interest on Demand Deposits"Deposits” in Item 1 of Part I of our 2013 Form 10-K10‑K for additional information.Ability-to-PayAbility‑to‑Pay and Qualified Mortgage Rule that all newly originated residential mortgages must meet, effective with new applications received as of January 10, 2014. The Ability-to-PayAbility‑to‑Pay and Qualified Mortgage Rule establishes guidelines that the lender must follow when reviewing an applicant'sapplicant’s income, obligations, assets, liabilities and credit history and requires that the lender make a reasonable and good faith determination of an applicant'sapplicant’s ability to repay the loan according to its terms. The rule also establishes the concept of a "Qualified Mortgage"“Qualified Mortgage” which is defined under the rule to include those mortgage loans with regularly scheduled, substantially equal periodic payments, terms of thirty years or less, and total points and fees not exceeding three percent of the loan amount, among other criteria. Loans meeting the criteria for a "Qualified Mortgage"“Qualified Mortgage” are entitled to a presumption that the lender complied with the rule's Ability-to-Payrule’s Ability‑to‑Pay requirements. Under the rule, the borrower has a defense to foreclosure unless the lender establishes the borrower'sborrower’s ability to repay or that the loan was a Qualified Mortgage or met other exceptions toAbility-to-Pay and Qualified Mortgage RuleCFPB has also issued a rule providing for simplified disclosure forms for mortgage transactions, which will be required to be given to consumers for mortgage applications received on or after August 1, 2015. These rules and any new regulatory requirements promulgated by the CFPB could have an adverse impact on our residential mortgage lending business as the industry adapts to the rule and any additional regulations. Our business strategy, product offerings and profitability may change as the market adjusts to the new rulerules and any additional regulations and as these requirements are interpreted by the regulators and courts.short-termshort‑term and long-termlong‑term market interest rates or between different interest rate indices, can impact, and has in past years impacted, our net interest margin (that is, the difference between the interest rates we charge on interest earning assets, such as loans, and the interest rates we pay on interest-bearinginterest‑bearing liabilities, such as deposits or other borrowings). This impact could result in a decrease in our interest income relative to interest expense. Increases in interest rates may also adversely impact the value of our investment securities portfolio and impact loan performance by making it more difficult for borrowers with adjustable rate loans to service their debts. For the past several years, the banking industry has operated in an extremely low interest rate environment relative to historical averages, and the Federal Reserve has pursued highly accommodative monetary policies (including a very low federal funds rate and substantial purchases of long-termlong‑term U.S. Treasury and agency securities) in an effort to facilitate growth in the U.S. economy and a reduction in levels of unemployment. This environment has placed downward pressure on the net interest margins of U.S. banks, including the Company. We cannot predict with any certainty whether or to what extent these Federal Reserve policies will continue.indicated in June 2014 that it expects to further reduce and ultimately end its asset purchases by October 2014. However, the Federal Reserve has continued to indicateindicated that it expects to maintain the current very low target range for the federal funds rate for a considerable periodsome time while it assesses progress toward its objectives of maximum employment and 2 percent inflation and that even after employment and inflation are near its objectives, economic conditions may warrant for some time after its asset purchase program has ended.keeping the target federal funds rate below longer-term normal levels. We cannot predict with any certainty the time during which, nor the extent to which, these Federal Reserve policies will continue. It is also unclear when the Federal Reserve will begin and how rapidly the Federal Reserve willto unwind its asset holdings.holdings, as well as the pace at which it may do so. However, as the Federal Reserve unwinds its position, it is expected that excess reserves will be drained from the banking system, which will decrease the overall level of deposits in the system. This could lead to a decline in deposits at some institutions and to increased price competition for stable deposits, which could hamper the improvement in net interest margins that banks are anticipating from rising rates.industry-specificindustry‑specific economic factors. For example, a significant portion of our total loan portfolio is related to residential real estate, especially in California. Increases in residential mortgage loan interest rates could have an adverse effect on our operations by depressing new mortgage loan originations, and could negatively impact our title and escrow deposit levels. Additionally,California markets have experienced a continued or further downturnstrong recovery in home prices since the areashousing market crisis; however, home price growth has begun to moderate and some fundamentals of the residential real estate and housing industries in California whichmarket have not experienced recovery, orremained soft through the recovery. A renewed downturn in those which have, could have an adverse effect on our operations and the quality of our real estate loan portfolio. These factors could adversely impact the quality of our residential construction and residential mortgage portfolios in various ways, including by decreasing the value of the collateral for our mortgage loans. Furthermore, California is facing a severe drought which may adversely affect commercial loan customers, particularly in the agricultural sector. These factors could also negatively affect the economy in general and thereby our overall loan portfolio.government-sponsoredgovernment‑sponsored enterprises Fannie Mae and Freddie Mac expired on September 30, 2011, and the high balance loan limit was reduced to $625,500. This limit applied to high cost areas where the median home price exceeded the conforming loan limit, including many areas within our markets. This reduction could result in higher mortgage rates for borrowers purchasing homes that exceed the new limit, which, in turn, could reduce the pool of eligible buyers for high value homes, reduce mortgage originations and negatively impact the collateral value of homes in high cost areas. Any of these results could have an adverse impact on our residential mortgage lending business.write-downs,write‑downs, and could put downward pressure on property values and have other adverse impacts on our residential lending business.industry-specificindustry‑specific economic factors and are impacting the performance of our commercial real estate and commercial and industrial portfolios. The commercial real estate industry in the U.S., and in California in particular, was adversely impacted by the recessionary environment and lack of liquidity in the financial markets. The home building and mortgage industry in California also were especially adversely impacted by the deterioration in residential real estate markets. Poor economic conditions and financial access for commercial real estate developers and homebuilders could adversely affect property values, resulting in higher nonperforming assets and charge-offscharge‑offs in this sector. Our commercial and industrial portfolio, and the communications and media industry, the retail industry, and the energy industry in particular, were also adversely impacted by recessionary market conditions. Continued volatility in fuel prices and energy costs could adversely affect businesses in several of these industries, while a prolonged slump in natural gas and coal prices could have adverse consequences for some of our borrowers in the energy sector. Conditions remain uncertain in various industries and could produce elevated levels of charge-offs. Industry-charge‑offs. Industry‑ specific risks are beyond our control and could adversely affect our portfolio of loans, potentially resulting in an increase in nonperforming loans or charge-offscharge‑offs and a slowing of growth or reduction in our loan portfolio. Forgovernment'sgovernment’s budgetary and fiscal difficulties. California continues to have a relatively high unemployment rate. Also, certainCertain California real estate markets have experienced some of the worst property value declines in the U.S.California's 2013-14California’sstate'sstate’s fiscal and budgetary challenges will be readily resolved. In addition, the impact of increased rates of income taxation on the level of economic activity in California cannot be predicted at this time. Also, municipalities and other governmental units within California have been experiencing budgetary difficulties, and several California municipalities have filed for protection under the Bankruptcy Code. As a result, concerns also have arisen regarding the outlook for the governmental obligations of California municipalities and other governmental units.further, we expect that our level of problem assets could increase and our prospects for growth could be impaired. The severe drought being experienced by California may also cause further difficulties for the California economy, particularly in the agricultural sector.Tokyo-MitsubishiTokyo‑Mitsubishi UFJ could adversely affect usBTMU'sBTMU’s risk management processes, BTMU manages global credit and other types of exposures and concentrations on an aggregate basis, including exposures and concentrations at MUAH. Therefore, at certain levels or in certain circumstances, our ability to approve certain credits or other banking transactions and categories of customers is subject to the concurrence of BTMU. We may wish to extend credit or furnish other banking services to the same customers as BTMU. Our ability to do so may be limited for various reasons, including BTMU'sBTMU’s aggregate exposure and marketing policies.directors'directors’ and officers'officers’ ownership interests in MUFG'sMUFG’s common stock or service as a director or officer or other employee of both us and BTMU could create or appear to create potential conflicts of interest, especially since both we and BTMU compete in U.S. banking markets. As a result of the business integration initiative involving the operations in the United States and elsewhere in the Americas of MUAH, MUB, MUFG and BTMU, as described in "Management's”Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operations - Executive Overview—Overview - Business Integration Initiative"Initiative” in Part I, Item 2 of this Form 10-Q,10-Q; a number of the executive officers of MUAH and MUB have also become executive officers of BTMU'sBTMU’s U.S. branch operations, which could increase or appear to increase the risks of potential conflicts of interests with MUFG and BTMU. While the corporate governance policies adopted by MUAH, MUB, MUFG and BTMU address such potential conflicts of interest, there can be no assurance that these policies will prevent conflicts of interest which may have an adverse impact on our business.longer-termlonger‑term cost savings; continued growth; or the overall performance of the acquired company or combined entity. We also may encounter difficulties in obtaining required regulatory approvals and unexpected contingent liabilities can arise from the businesses we acquire. Acquisitions may also lead us to enter geographic and product markets in which we have limited or no direct prior experience. Further, the asset quality or other financial characteristics of a business or assets we may acquire may deteriorate after an acquisition closes, which could result in impairment or other expenses and charges which would reduce our operating results."Management's“Management’s Discussion & Analysis of Financial Condition and Results of Operations—Executive Overview—BusinessAnalysis-Executive Overview-Business Integration Initiative"Initiative” in Part I, Item 2 of this formForm 10-Q. This integration initiative became effective July 1, 2014. While not a legal entity combination but an integration of operations and management, there are risks involved with this initiative, including regulatory and execution risks comparable to those of any business combination. As part of this integration initiative, ownership of the U.S.BTMU'sBTMU’s U.S. business to the Bank, and BTMU and the Bank agreed to certain policies which generally contemplate that new credit and other transactions entered into with BTMU'sBTMU’s U.S. corporate customers will have the opportunity to be booked at the Bank, subject to its independent credit evaluation and other considerations, such as complying with underwriting considerations and lending limits, meeting financial return objectives, and other risk management and regulatory considerations. In addition, on July 1, 2014, approximately 2,300 BTMU U.S. employees became employees of the Bank, and BTMU and the Bank entered into a master services agreementMaster Services Agreement under which the Bank will perform and make available various business, banking, financial and administrative support services and facilities for BTMU in connection with the operation and administration of BTMU'sBTMU’s business in the U.S. (including at the BTMU U.S. branches). In consideration for these services, in accordance with applicable regulatory requirements requiring market-based pricing, BTMU will pay to the Bank fee income which will reflect market-based pricing in accordance with applicable regulatory requirements. Costs related tofor the Bank’s provision of certain transaction and support services, performed byincluding the transferred employees will be recorded incosts of employee salaries and benefits. The extent, if any, that this expectation is not fulfilled, could have a negative effect on the Bank's results of operations. These new customer relationships and new lines of business present significant opportunities for the Bank, but, as with any such major initiative, there are various risks and challenges to successfully implementing this initiative, including the possibility of customer reluctance to change their relationships from BTMU to the Bank, challenges in successfully integrating the personnel whose employment has moved from BTMU to the Bank, responses from competitors, generating sufficient business revenues and service fee income to offset increased operating costs at the Bank, regulatory considerations, and other risks and challenges. There can be no assurance that we can successfully manage these risks and challenges, and failure to do so could have a material adverse effect on our financial condition and results of operation.write-offs,write‑offs, including those related to goodwill and other intangible assets, which could have a material adverse effect on our business, results of operations and financial condition and may involve additional risks, including difficulties in obtaining any required regulatory approvals, the diversion of management'smanagement’s attention from other business concerns, the disruption of our business and the potential loss of key employees.competitors'competitors’ similar initiatives, including the business integration initiative effective July 1, 2014, as described in "Management's“Management’s Discussion &and Analysis of Financial Condition and Results of Operations—Operations - Executive Overview—Overview - Business Integration Initiative"Initiative” in Part I, Item 2 of this form 10-Q,Form 10-Q; adoption of the U.S. Basel III and other enhanced capital and liquidity guidelines, various strategic initiatives, an uncertain economic environment, a challenging regulatory environment, including the effects of the Dodd-FrankDodd‑Frank Act and regulations adopted thereunder, and integration of new employees, including key members of management. Our ability to execute our core operations and to implement other important initiatives may be adversely affected if our resources are insufficient or if we are unable to allocate availablecustomers'customers’ expectations or applicable regulatory requirements, governmental enforcement actions, corporate governance and acquisitions, social media, cyber-securitycyber‑ security breaches, or from actions taken by regulators and community organizations in response to those activities. We fund our operations, in substantial part, independently of BTMU and MUFG and believe our business is not necessarily closely related to the global business or outlook of BTMU or MUFG. However, negative public opinion could also result from regulatory concerns regarding, or supervisory or other governmental actions in the U.S. or Japan against us or MUB, or BTMU or MUFG. Negative public opinion can adversely affect our ability to keep, attract and retain lending, deposit and other customers and employees and can expose us to claims and litigation and regulatory actions and increased liquidity risk. Actual or alleged conduct by one of our businesses can result in negative public opinion about our other businesses. If we are not successful in managing the risks and challenges to implementing the business integration initiative effective July 1, 2014, as described in "Management's”Management’s Discussion &and Analysis of Financial Condition and Results of Operations—Operations - Executive Overview—Overview - Business Integration Initiative"Initiative” in Part I, Item 2 of this form 10-Q,Form 10-Q; there could be negative reactions on the part of our customer base.framework'sframework’s underlying assumptions, such as our modeling methodologies, may not be effective under all conditions and circumstances. If our risk management framework proves ineffective, we could suffer unexpected losses and our business, financial condition, results of operations or prospects could be materially adversely affected, and there also could be consequent adverse regulatory implications in any such event. Implementation of the business integration initiative effective July 1, 2014, as described in "Management's”Management’s Discussion &and Analysis of Financial Condition and Results of Operations—Operations - Executive Overview—Overview - Business Integration Initiative"Initiative” in Part I, Item 2 of this formForm 10-Q, could increase our risk management challenges in light of the new customer relationships and lines of business, among other reasons. MUFG AMERICAS HOLDINGS CORPORATION (Registrant)
Date: August 8,November 7, 2014
By:By:
/s/ KATSUMI HATAO
Date: August 8,November 7, 2014
By:By:
/s/ JOHN F. WOODS
Date: August 8,November 7, 2014
By:By:
/s/ ROLLAND D. JURGENSExhibit
No.Description31.1 Description 3.1 3.2 10.1 10.2 31.1
31.231.2
32.132.1
32.232.2
101101
JuneSeptember 30, 2014, is formatted in XBRL interactive data files: (i) Consolidated Statements of Income; (ii) Consolidated Statements of Comprehensive Income; (iii) Consolidated Balance Sheets; (iv) Consolidated Statements of Changes in Stockholder's Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Financial Statements(1)(1)Filed herewith.(2)In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.(1) Filed herewith. (2) In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act. (3) Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed July 1, 2014. (4) Incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K filed July 1, 2014.