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Chairman, President and CEO Thomas S. Wu Resigns and Chief
Operating Officer and Former Chief Credit Officer Ebrahim Shabudin to
Resign from the Company
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Company Agrees to Action Plan with FDIC and California
Department of Financial Institutions
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Investigation Subcommittee of the Board Audit Committee
Completes Independent Investigation
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Company Provides Update to Preliminary Second Quarter Financial
Information
SAN FRANCISCO--(BUSINESS WIRE)--Sep. 8, 2009--
The Board of Directors of UCBH Holdings, Inc., (NASDAQ: UCBH) the
holding company of United Commercial Bank (UCB™ or the “Bank”), today
announced that it has named Doreen Woo Ho as acting President and Chief
Executive Officer of the Company, succeeding Thomas S. Wu, who has
resigned from the Company and from its Board. Chief Operating Officer
and former Chief Credit Officer Ebrahim Shabudin is also resigning from
the Company.
The Board has also: 1) elected Lead Director Joseph J. Jou, who has over
20 years of banking experience including as founder and Vice Chairman of
First Continental Bank, as Chairman; 2) entered into an agreement with
the Federal Deposit Insurance Corporation (FDIC) and the California
Department of Financial Institutions (DFI) to enhance the strength and
stability of the Bank and its operations; 3) received and adopted the
findings and recommendations of the Investigation Subcommittee of the
Board Audit Committee’s independent investigation, which began on May
15, enabling the Company to move forward with its financial restatement;
and 4) accelerated certain of the Company’s capital planning
initiatives, including a review of all capital raising and strategic
alternatives to maximize shareholder value.
Chairman of the Board of Directors Joseph J. Jou said, “Doreen Woo Ho is
the right person to lead UCBH through this challenging period and
strengthen the foundation of the Company for our valued customers,
employees and shareholders. Since joining UCBH in January 2009, Doreen
has provided strong leadership to the Community Banking organization
and, since July, to the Commercial Banking business as well. Doreen has
consistently demonstrated effective leadership in driving operating
performance and value for clients in a number of executive management
roles over more than 35 years in the banking industry. The full Board is
confident in Doreen’s ability to the lead the Company.”
“UCBH has a strong franchise, and we are working intensely to address
our operating challenges and further strengthen our management team in
this difficult economic environment,” said acting President and Chief
Executive Officer Doreen Woo Ho. “Together with our regulators – the
FDIC, DFI and the Federal Reserve – we are moving forward to put the
Bank in a solid position for the future, while we continue to provide
our customers in the U.S. and China with our high standards of service
and our full range of lending, commercial banking and retail banking
products and services. As we do this, we are also pursuing a full range
of strategic alternatives to strengthen our capital foundation and to
maximize shareholder value.”
Ms. Ho’s and Mr. Jou’s appointments are subject to final review and
approval by the Company’s regulators, who have been informed of the
changes. In addition, Director Joseph E. Vaez has resigned from the
Board of Directors of the Company for personal reasons, but will
continue to actively advise the Company in a consulting capacity on risk
oversight, credit administration and regulatory matters. He will
continue to be engaged with the Risk Oversight Committee, and is
expected to be succeeded by Dennis Wu as Chairman of the Committee.
The Bank also announced that Craig On will continue as Chief Financial
Officer until the Company recruits a new person for that position. The
Company has requested that Mr. On re-assume his former position
as Deputy Chief Financial Officer at that time. The Company is also
actively engaged in a search for a Chief Credit Officer.
China Minsheng Banking Corp., Ltd. expressed continued support of UCBH
and the new leadership under Doreen Woo Ho. China Minsheng views its
investment in UCBH as long term and strategic, evidenced by the trade
finance and other business cooperation activities between the two banks.
Most recently, China Minsheng has sent 17 training participants to UCBH
for training in retail banking and other departments. China Minsheng’s
executive management is also planning to visit UCBH in late September to
further discuss and enhance the strategic cooperation between the two
banks.
Agreement with FDIC and DFI
The Bank also announced that it has entered into a consent agreement
(the “Agreement”) with the FDIC and the DFI on September 3, relating to
the issuance of an Order to Cease and Desist. This order formally
outlines specific steps the Bank must undertake to strengthen its
policies and procedures and enhance the soundness of the Bank.
The Agreement requires that the Bank perform an assessment of management
and address weaknesses in management policies and practices, Board
supervision, adequacy of capital, loan valuation reserves, loan quality,
lending and collections practices, operational issues, liquidity and
compliance. The Agreement will be further described in a Current Report
on Form 8-K to be filed by the Company with the Securities and Exchange
Commission.
Under the Agreement, the Bank will also submit a written three-year
strategic plan and profitability plan to the FDIC and the DFI, notify
both agencies in advance of any director and management changes, and
obtain prior written consent of both agencies before opening new
branches. The Agreement also requires the Company to obtain prior
approval from its regulators before paying dividends to shareholders.
Working in close consultation with its regulators, the Company and the
Bank have already taken a number of specific actions to address many of
the issues identified in the Agreement, as the Company works to complete
its financial restatement. These include:
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Establishing the Risk Oversight Committee of the Company’s Board of
Directors;
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Implementing the Company’s comprehensive capital plan, including the
engagement of a financial advisor;
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Suspending and/or deferring the cash dividends on the Company’s common
and preferred stocks, and deferred interest payments on its trust
preferred securities;
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Completing a reassessment of the Bank’s credit risk profile and
building an appropriate loan loss allowance in the second quarter of
2009;
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Executing on strategies to improve credit quality and to develop core
business performance, including executing nonperforming asset
disposition strategies; and
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Initiating steps associated with its strategic plan, including
strengthening the Bank’s Community Banking and Commercial Banking
businesses in the U.S to improve profitability.
The Company expects to finalize a similar agreement with the Federal
Reserve Bank of San Francisco (FRB) by the end of the third quarter of
2009.
While the plan is being implemented, the Bank is also participating in
the FDIC’s Transaction Account Guarantee Program in which all funds in
non-interest bearing transaction deposit accounts are 100% insured.
These accounts include: all personal and business checking deposit
accounts that do not earn interest, Demand Deposit (DDA) accounts,
low-interest NOW accounts (NOW accounts that cannot earn more than 0.5%
interest) and Lawyer Trust IOLTA accounts. This insurance coverage on
non-interest bearing transaction accounts is over and above the $250,000
coverage already provided to customers. The FDIC recently announced that
this coverage will be extended through June 30, 2010.
All customers’ deposits in UCB’s Hong Kong Branch are fully guaranteed,
with no maximum limit, by the Hong Kong government until the end of 2010.
Conclusion of Independent Investigation
The Investigation Subcommittee of the Board Audit Committee
(“Subcommittee”) has completed its previously disclosed independent
investigation regarding the recognition of impairment losses on
nonperforming loans and other real estate owned (OREO) assets. This
represents an important step forward for UCBH and enables the Company to
complete its financial restatement as soon as practicable.
The Subcommittee’s report identified problems resulting both from
weaknesses in the Bank’s internal controls, consistent with the material
weakness previously reported, and from deliberate and improper actions
and omissions of certain Bank Officers. The report concluded that those
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.
Key findings include instances of:
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Inappropriate modification of loan terms to delay negative
consequences, including extending terms, lowering interest rates and
improper use of interest reserve accounts;
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Delay in recognition of risk rating downgrades and specific reserves;
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Misrepresentation or omission of relevant information in
communications with the Bank’s Finance Department and with UCBH’s
independent auditors, KPMG LLP; and
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Modification of documents in support of the above.
In connection with the above, the report raised serious concerns
regarding the actions of a number of current and former Officers at
various levels of the Bank’s management. The Board and management are
addressing the concerns expressed by the Subcommittee through
appropriate actions, which include additional training, reprimands,
re-assignments and, in some instances, termination of employment.
On September 4, 2009, the UCBH Board of Directors adopted the findings
and recommendations of the Subcommittee. In addition, the Subcommittee
has advised that, later this week, it will provide additional
recommendations relating to controls and procedures to address the
matters described above.
Business and Capital Update
The Company also provided an update to certain operating and financial
performance information for the second quarter of 2009 previously
disclosed on August 6. The financial information provided in this
release is subject to the implementation of the recommendations in the
Subcommittee’s report and the Company’s financial restatement.
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Reflecting credit loss assumptions associated with management’s
ongoing review of the loan portfolio, the Company expects that its
provision for loan losses for the second quarter will be in a range of
$360 million to $390 million.
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Net loan charge-offs for the second quarter of 2009 remain estimated
in a range of $275 million to $300 million.
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The allowance for loan losses is estimated to be in a range of $395
million to $415 million, or approximately 5.0% of total loans at June
30, 2009.
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The Company’s estimate of approximately $101 million in sales of
nonperforming and other assets during the quarter remains unchanged.
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Nonperforming assets are estimated to be in a range of $985 million to
$995 million at June 30, 2009.
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Total loan delinquencies for the second quarter of 2009 are estimated
to decline by approximately $148 million, or 57.6%, from 3.13% of
total loans in the first quarter of 2009 to 1.17% of total loans in
the second quarter of 2009.
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Net interest income on a tax-equivalent basis is estimated at $70.6
million for the second quarter of 2009.
The Company will be establishing a deferred tax asset valuation
allowance and is anticipating a goodwill impairment. Such deferred tax
asset valuation allowance and goodwill impairment will be reflected in
the Company’s financial position as of June 30, 2009. The deferred tax
asset valuation allowance is estimated to be in the range of $315
million to $340 million. The goodwill impairment is currently under
analysis and has not been finalized, but the amount is expected to be
material.
These updates reflect changes to some of the information included as
part of the Company’s FRY-9C regulatory “Call Report” for the period
ended June 30, 2009. The Company will file amended Call Reports for all
periods impacted by the financial restatement once it has concluded its
financial restatement efforts.
As announced on July 14, 2009, UCBH has engaged a financial advisor to
develop a comprehensive capital plan for a variety of scenarios, and has
begun executing a multi-step strategy to significantly increase its
tangible common equity levels, including a review of all capital raising
and strategic alternatives to maximize shareholder value.
About this Press Release
As previously disclosed on May 20, 2009 in a Form 8-K, Item 4.02(a)
Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review, UCBH is in the process of
restating its consolidated financial statements as of and for the year
ended December 31, 2008. Accordingly, the Company will not file its 2008
Form 10-K/A or its Form 10-Q for the quarter ended March 31, 2009 or for
the quarter ended June 30, 2009 until after the completion of such
restatement. UCBH can give no assurance that the updated financial
information in this release will not be further adjusted when the
restated financial statements have been audited. The Company intends to
complete the restatement of its consolidated financial statements for
fiscal year 2008, as well as any necessary 2008 quarterly periods, as
promptly as practicable now that the independent investigation has been
completed, and file with the Securities and Exchange Commission an
amended Annual Report on Form 10-K/A for the year ended December 31,
2008 (as well as any necessary amended quarterly reports for 2008
periods), and a Quarterly Report on Form 10-Q for each of the
appropriate quarters of 2009.
This release contains updated selected second quarter financial
information that is not expected to be impacted by the restatement of
the Company’s consolidated financial statements, as well as some
selected financial information that could be impacted by such
restatement. Where possible, estimates have been provided for items that
are expected to be impacted. In certain instances, these estimates are
provided in the form of a range of financial results within which
management reasonably expects the final results will fall. These
estimates are preliminary in nature and subject to change, including as
a result of the restatement.
About UCBH Holdings, Inc.
UCBH Holdings, Inc. is the holding company for United Commercial Bank, a
state-chartered commercial bank, which is a leading bank in the United
States serving the Chinese communities and American companies doing
business in Greater China. Together, the Bank and its subsidiaries,
including United Commercial Bank (China) Limited, operate 50 California
branches/offices located in the San Francisco Bay Area, Sacramento,
Stockton, Los Angeles and Orange counties, nine branches in New York,
five branches in metropolitan Atlanta, three branches in New England,
two branches in the Pacific Northwest, a branch in Houston, branches in
Hong Kong, Shanghai and Shantou, China, and representative offices in
Beijing, Guangzhou and Shenzhen, China, and Taipei, Taiwan. UCB, with
headquarters in San Francisco, provides commercial banking services to
small- and medium-sized businesses and professionals in a variety of
industries, as well as consumer and private client services to
individuals. The Bank offers a full range of lending activities,
including commercial real estate and construction loans, commercial
credit facilities, international trade finance, asset-based financing,
cash management, loans guaranteed by the U.S. Small Business
Administration, commercial, multifamily and residential mortgages, home
equity lines of credit, and online banking services for businesses and
consumers. For additional information, visit the web site for United
Commercial Bank at www.ibankUNITED.com
or the web site for UCBH Holdings, Inc. at www.ucbh.com.
Forward-Looking Statements
Certain statements contained in this release may include
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based
upon specific assumptions that may or may not prove correct.
Forward-looking statements are also subject to known and unknown risks,
uncertainties and other factors relating to the Company’s and the Bank’s
operations and business environment, all of which are difficult to
predict, and many of which are beyond the control of the Company and the
Bank. The factors include, among others: the timing of the completion,
and the results, of the previously announced restatement of the
Company’s consolidated financial statements; any failure by the Company
successfully to address its material weaknesses in internal controls
over its financial statements; any regulatory actions arising out of the
foregoing; the current dislocations in global credit and capital
markets; economic and business conditions in the areas and markets in
which the Company and the Bank operate, particularly those affecting
loans secured by real estate; deterioration or improvement in the
ability of the Bank’s borrowers to pay their debts to the Bank; market
fluctuations such as those affecting interest and foreign exchange rates
and the value of securities in which the Bank invests; competition from
other financial institutions, whether banks, investment banks, insurance
companies or others; the ability of the Bank to assimilate acquisitions,
enter new markets and lines of business, and open new branches,
successfully; changes in business strategies; changes in tax law and
governmental regulation of financial institutions; demographic changes;
and other risks and uncertainties, including those discussed in the
documents the Company files with the Securities and Exchange Commission
(“SEC”). The foregoing may cause the actual results and performance of
the Company and the Bank to be materially different from the results and
performance indicated or suggested by the forward-looking statements.
Further description of the risks and uncertainties are included in
detail in the Company’s current, quarterly and annual reports, as filed
with the SEC.
Source: UCBH Holdings, Inc.
UCBH Holdings, Inc.
Douglas Mitchell, 415-315-2800
Senior Vice
President, Director of Investor Relations and Capital Management
Craig
S. On, 415-315-2800
Executive Vice President and Chief Financial
Officer
or
EVC Group
Investor Relations:
Douglas M.
Sherk or Jenifer Kirtland, 415-896-6820
Media Relations:
Steve
DiMattia, 646-201-5445
