UCBH Holdings, Inc. 8.50% Non-Cumulative Perpetual Convertible Series B Investors Investigation

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Company Name(s): 
UCBH Holdings
Affected Securities: 

According to the investigation by a law firm the investigation focuses on potential violations of the Securities Act of 1933 and Securities Exchange Act of 1934 by certain of its UCBH officers, directors and underwriters by issuing between April 24, 2008 through and including September 8, 2009 materially inaccurate financial statements to the investing public. UCBH Holdings announced on May 12, 2009, that UCBH was delaying the filing of its Quarterly Report with the Securities and Exchange Commission for the 2009 fiscal first quarter and, as a result of an ongoing assessment of the adequacy of its allowance for loan losses, additional general reserve provisions to its allowance for loan losses were possible, and that any additional provisioning would further increase its net loss for the quarter ended March 31, 2009. Shares of UCBH declined more than 20%, to close on May 13, 2009, at $1.66 per share on heavy volume.

On March 16, 2009, UCBH Holdings filed its Form 10-K for the year ended December 31, 2008 and issued a press release stating that it had recorded an additional loan loss provision of approximately $40 million in the fourth quarter of 2008. UCBH Holdings 10-K form included a March 16, 2009 letter from the its auditors, KPMG LLP, stating that a material weakness in UCBH Holdings Inc.’s internal control related to policies and procedures for monitoring and responding to certain financial reporting risks had “resulted in a material misstatement of the Company’s loan loss allowance and provision for loan losses as of and for the year ended December 31, 2008 that has been corrected prior to the issuance of the Company’s 2008 consolidated financial statements.” Then on April 23, 2009, UCBH Holdings reported its first quarter 2009 financial results, including a net loss of $97 million, or $0.78 per diluted share, for the three months ended March 31, 2009. The net loss was primarily attributable to a $178.5 million loan loss provision. On May 12, 2009, UCBH Holdings filed a Notification of Late Filing with the SEC with respect to its Quarterly Report on Form 10-Q for the period ended March 31, 2009. UCBH stated that it was unable to timely file the Form 10-Q because it had not completed its financial statements and, more specifically, the UCBH Holdings assessment of the adequacy of the allowance for loan losses and the evaluation of potential goodwill impairment had not yet been completed.

The Notification of Late Filing also stated as follows:“ While the Company does not anticipate changes to its reported nonperforming asset levels, it is possible that the Company will make additional general reserve provisions to its allowance for loan losses at March 31, 2009. Any additional provisioning will further increase the Company’s net loss for the quarter ended March 31, 2009. A reasonable estimate of any such additional provisioning cannot be made until the ongoing assessment…is finalized.” On May 20, 2009, UCBH Holdings disclosed in a filing with the SEC that the management of the company had recommended to the Audit Committee of the Board of Directors, and the Audit Committee agreed, that its consolidated financial statements as of and for the year ended December 31, 2008, should be restated and that the previously disclosed consolidated financial statements, as well as the related reports from its independent registered public accounting firm for the period ended December 31, 2008, could not be relied on. Further, UCBH stated as follows: “The restatement will result in material adjustments to the loan loss provision and related allowance for loan losses…” Also on May 20, 2009, UCBH announced the postponement of its Annual Meeting of Shareholders scheduled for May 21, 2009 until the completion of the restatement of its consolidated financial statements for the year ended December 31, 2009.And on May 12, 2009, the date of UCBH Holdings disclosure that the allowance for loan loss might be increased, UCBH’s publicly traded common stock declined $0.51 per share or about 20%, to close at $2.10 per share. The next day, May 13, 2009, UCBH’s common stock declined an additional $0.44 per share, or about 21%, to close at $1.66 per share.

Following the May 20, 2009 disclosure that the Company would be restating its consolidated financials for the year ended December 31, 2008, UCBH’s common stock declined $0.08 per share, or about 5%, to close at $1.61. On September 8, 2009 UCBH Holdings announced that its CEO Thomas Wu and its Chief Credit Officer Ebrahim Shabudin were resigning. UCBH Holdings has also entered into a consent decree with the FDIC to remedy the accounting and regulatory problems. As a result of the accounting improprieties, UCBH Holdings must restate its financial statements for each quarter and the full fiscal year of 2008 caused UCBH Holding's stock price to fall significantly.