SAN FRANCISCO (
( UCBH) shares were falling Tuesday after the company reshuffled its executive ranks following an independent report that found it deliberately masked loan data and reached an agreement with regulators.
The holding company, whose main subsidiary is United Commercial Bank, said that chairman and CEO Thomas Wu has resigned from the company and from the board of directors, according to a release on Tuesday. Chief Operating Officer Ebrahim Shabudin, who was also the company's former chief credit officer, has also resigned. Chief Financial Officer Craig On has been asked to assume the role of deputy CFO, but will remain as CFO until a replacement is found, the company said.
Shares recently were falling 9.2% to $1.08.
Separately, director Joseph Vaez resigned from the board for personal reasons but will remain a strategic consultant to the company.
UCBH, which does business mainly with Chinese communities and American companies seeking business in China, also said it entered into an agreement with the Federal Deposit Insurance Corp. and the California Department of Financial Institutions on Sept. 3 regarding a cease and desist order in which it consented to "enhance the strength and stability of the bank and its operations," the release said. The company expects to agree to a similar settlement with the Federal Reserve Bank of San Francisco by the end of the month, it said.
UCBH has "accelerated" its capital planning initiatives, among other things, which will include "a review of all capital raising and strategic alternatives to maximize shareholder value," it said.
After concluding a separate independent investigation, the company found problems as a result of weak internal controls and "deliberate and improper actions and omissions of certain bank officers" into when the company recognized impairment losses on its nonperforming loans and other real-estate owned assets, UCBH said.
The problems were "driven by an apparent desire to downplay deteriorating financial conditions by delaying or abating risk rating downgrades and minimizing the bank's overall loan loss allowance," it said.
The firm previously said it planned to restate first quarter 2009 and full year 2008 financial results.
Lead director Joseph Jou, the former founder and vice chairman of First Continental Bank, has been named chairman. Doreen Woo Ho, who joined the company in January, has been named acting president and CEO, it said.
China Minsheng Banking Corp. owns roughly 10% of the company, but has agreements to acquire up to as much as 20% by the end of the year. United Commercial Bank has approximately 70 branches in the U.S., primarily in California. It also has branches in Hong Kong and China.
Lana Chan, an analyst at BMO Capital Markets, says the bank is "teetering around or could even fall below 'well capitalized' status at the higher end of its provision guidance," according to a note. "The best-case scenario for UCBH is a larger additional investment by China Minsheng -- the potential for this lends some downside support to the stock."
East West Bancorp
Cathay General Bancorp
stand to pick up deposit market share as UCBH sorts out its problems, Chan adds.
-- Written by Laurie Kulikowski in New York.