Also This Week: A South Carolina Bank Is Finding Opportunities along the West Coast;
UCBH Holdings Inc., the holding company of United Commercial Bank in San Francisco, entered into a cease and desist agreement with the Federal Deposit Insurance Corp. (FDIC) and the California Department of Financial Institutions. The 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.
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.
Separately, a subcommittee of UCBH's board completed an investigation regarding the recognition of impairment losses on its nonperforming loans and other real estate owned (OREO) assets. The subcommittee's report identified problems resulting both from weaknesses in the bank's internal controls and from deliberate and improper actions and omissions of certain unidentified 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.
The report raised serious concerns regarding the actions of a number of current and former officers at various levels of the bank's management. UCBH said it was addressing the concerns expressed by the subcommittee through additional training, reprimands, re-assignments and, in some instances, termination of employment. Among the casualties were Thomas S. Wu, who resigned as president and CEO, and Ebrahim Shabudin its chief operating officer and former chief credit officer.
United Commercial Bank with $12.8 billion in assets posted nonperforming assets as of June 30 of $840 million with another $37 million in real estate owned assets. Of the total amount of nonperforming assets, about 24% ($206 million) were related to commercial income producing properties. UCBH said it expects to sell approximately $101 million of nonperfoming and other assets this quarter.
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.
"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 CEO 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."
A South Carolina Bank Is Finding Opportunities along the West Coast
First Citizens Bank, the primary subsidiary of Raleigh, NC-based First Citizens BancShares, has acquired the banking operations of Venture Bank in Lacey, WA. First Citizens Bank has entered into an agreement with the FDIC to purchase substantially all of Venture Bank's assets and assume the majority of its liabilities. The FDIC serves as receiver of Venture Bank.
The agreement marks First Citizens' second participation in an FDIC transaction in the last eight weeks. In July, First Citizens acquired Temecula Valley Bank of Temecula, CA, and its 11 branches.
Venture Bank had 18 full-service branches along the Interstates 405 and 5 corridors in Washington's Puget Sound area including Redmond, Tacoma and Olympia. The purchase complements BancShares' existing franchise by connecting offices operated by the company's IronStone Bank subsidiary in Seattle and Portland, OR.
First Citizens Bank was selected to complete the transaction through a competitive bidding process. As of June 30, Venture Bank reported total assets of $968.4 million, loans of $683.4 million and total deposits of $917.7 million. Under the terms of the agreement, First Citizens Bank has the option to purchase any owned bank premises valued at $32.3 million or to assume the leases on any or all of the banking offices.
The loans and other real estate owned by Venture Bank purchased by First Citizens are covered by a loss share agreement between the FDIC and First Citizens which provides protection against losses to First Citizens Bank.
As of June 30, Venture Bank reported $1.2 billion in nonperforming loans and foreclosed properties, with less than 10% being commercial real estate-related.
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