Back to GetFilings.com
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2000
Commission File No.: 0-24947
UCBH HOLDINGS, INC.
(exact name of registrant as specified in its charter)
DELAWARE 94-3072450
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 VAN NESS AVENUE, SAN FRANCISCO, CALIFORNIA 94102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 928-0700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of class)
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, i.e., persons other than directors and executive officers, of
the registrant is $486,303,361 and is based upon the last sales price as quoted
on The Nasdaq Stock Market for February 16, 2001.
As of February 16, 2001, the Registrant had 9,412,305 shares
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 2000, ARE INCORPORATED BY REFERENCE INTO PART II OF THIS FORM 10-K.
PORTIONS OF THE PROXY STATEMENT FOR THE APRIL 26, 2001 ANNUAL MEETING OF
STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.
2
Form 10-K
- -----------------------------------------------------------------------------------------------
PART I ITEM 1. BUSINESS..............................................................1
OUR MARKET AREA.......................................................1
OUR CURRENT BANKING SERVICES..........................................1
OUR LENDING ACTIVITIES................................................2
DEPOSITS..............................................................5
COMPETITION...........................................................5
OUR HISTORICAL OPERATIONS.............................................6
SUPERVISION AND REGULATION............................................7
EMPLOYEES............................................................10
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT...............11
ITEM 2. PROPERTIES...........................................................11
ITEM 3. LEGAL PROCEEDINGS....................................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................12
- -----------------------------------------------------------------------------------------------
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS..........................................12
ITEM 6. SELECTED FINANCIAL DATA..............................................12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................12
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE...............................12
- -----------------------------------------------------------------------------------------------
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................13
ITEM 11. EXECUTIVE COMPENSATION...............................................13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................13
- -----------------------------------------------------------------------------------------------
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......14
- -----------------------------------------------------------------------------------------------
SIGNATURES................................................................................15
i
3
ITEM 1. BUSINESS
The Form 10-K contains statements about the future that may or may not
materialize. When we use words like "anticipate," "believe," "estimate," "may,"
"intend," or "expect," we are speculating about what will happen in the future.
The outcome may be materially different from our speculations. We believe that
certain factors identified elsewhere in this Form 10-K could cause a different
outcome. There may also be other factors that could cause a different outcome.
UCBH Holdings, Inc. (the "Company", "we", "us," or "our") is a Delaware
corporation that is registered with the Board of Governors of the Federal
Reserve System as a bank holding company. We conduct our principal business
through our wholly-owned banking subsidiary, United Commercial Bank ("UCB" or
the "Bank"), which makes up almost all of our consolidated assets and revenues.
UCB is a California state-chartered commercial bank.
OUR MARKET AREA
We concentrate on marketing our services in the San Francisco Bay area,
which includes the City of San Francisco, the South Bay, and the East Bay, the
Sacramento/Stockton metropolitan area, and the Los Angeles metropolitan area,
focusing on the areas with a high concentration of ethnic Chinese. The ethnic
Chinese markets within our primary market area recently have grown rapidly.
Using the 1998 Census update, we believe there were an estimated 3.9 million
Asian and Pacific Islanders living in California. Based on 1995 and 1996
demographic data, we believe there were approximately 250,000 Asians and Pacific
Islanders living in San Francisco County, which is approximately 32% of the
total population of the county.
We currently have 29 offices in the State of California. We opened a
commercial banking and construction lending regional office in Pasadena,
California, to help us take advantage of opportunities in the Los Angeles area,
especially in the ethnic Chinese areas. We have tailored our products and
services to meet the financial needs of these growing Asian and ethnic Chinese
communities. We believe that this approach, together with the relationships of
our management and Board of Directors with the Asian and ethnic Chinese
communities, provides us with an advantage in competing for customers in our
market area. We are the leading financial institution focused on serving the
ethnic Chinese community within the United States.
OUR CURRENT BANKING SERVICES
Through our branch network, we provide a wide range of personal and
commercial banking services to small-and medium-sized businesses, business
executives, professionals and other individuals. We offer multilingual services
to all of our customers in English, Cantonese and Mandarin.
We offer the following deposit products:
- Business checking, savings accounts and money market accounts
- Personal checking, savings accounts and money market accounts
- Time deposits (certificates of deposit)
- Individual Retirement Accounts (IRAs)
We offer a full complement of loans, including the following types of
loans:
- Commercial real estate loans (residential and nonresidential)
- Construction loans to small- and medium-sized developers for
construction of single family homes, multifamily and commercial
properties
- Commercial, accounts receivable and inventory loans to small- and
medium-sized businesses with annual revenues generally ranging from
$500,000 to $20.0 million
- Short-term trade finance facilities for terms of less than one year
to U.S. importers, exporters and manufacturers
- Loans guaranteed by the Small Business Administration ("SBA")
- Residential real estate loans
1
4
Our commercial borrowers are engaged in a wide variety of manufacturing,
wholesale trade and service businesses.
We also provide a wide range of specialized services, including
international trade services for business clients, MasterCard and Visa merchant
deposit services, cash management services and e-business services.
We created two new divisions that will be very important to our business
going forward: the Asia Banking Division and the International Banking Division.
Both divisions are staffed with seasoned professionals with many years of
international banking experience. The activities of each division, while
different in focus, will complement each other and the Commercial Banking
Division. The Asia Banking Division, established in June of 2000, will build new
and strengthen existing relationships with clients doing business in Asia,
primarily in Hong Kong, China and Taiwan.
The mission of the International Banking Division, established in the
fourth quarter of the year, is to enhance UCB's presence in the international
trade finance community and to promote the Bank as a full service provider in
that arena. We have been engaged in international trade finance activities for
the past three years. In creating this new division, we plan to take these
activities to the next level. We are committed to building this business and we
are confident in our ability to do so. Unlike larger financial institutions, we
can provide a greater degree of personalized service, responding and adapting
more quickly to customer needs.
An exciting technological milestone for the Bank was the launching of
our Internet portal, ibankUNITED.com. This interactive site, available in both
English and Chinese versions, provides easy access to online banking services
and offers a host of new features. Visitors to the site can track a stock
portfolio, make travel arrangements, shop, and get up-to-the-minute information
about events in their local community. We believe the portal will serve as a
strong platform to promote the Bank, deliver advanced products and e-business
services, and provide new sources of fee income.
OUR LENDING ACTIVITIES
UNDERWRITING AND CREDIT ADMINISTRATION. Our Board of Directors has
established basic lending policies. Our policies require that loans meet minimum
underwriting criteria. The Board has granted limited loan approval authority to
certain officers of the Bank. The Board requires that the collateral for all
real estate loans be valued by an independent outside real estate appraiser. Any
loan requests over individual officer limits must be approved by the President.
Our Credit Review Committee, which includes Thomas S. Wu (President and Chief
Executive Officer), Jonathan H. Downing (Senior Vice President, Chief Financial
Officer and Treasurer), William T. Goldrick (Senior Vice President and Chief
Credit Officer), Sylvia Loh (Senior Vice President and Director of Commercial
Banking) and Peter C. Sim (Vice President and Risk Manager), among others,
reviews and ratifies all loans over $750,000. Loans over $2.0 million are
reviewed and ratified by the Board of Directors.
As part of our credit administration process, we conduct an internal
asset credit quality review. Additionally, an outside credit review agency,
composed of former bankers and former bank regulators, reviews all commercial
loans over $100,000. Our President, Chief Credit Officer, and Chief Financial
Officer meet every two weeks to review delinquencies, nonperforming assets,
classified assets and other relevant information to evaluate credit risk within
our loan portfolio. The results are reviewed by the Board of Directors
quarterly.
2
5
LOAN PORTFOLIO. At December 31, 2000, our loan portfolio was composed of
the following loans:
(Dollars Percentage
in Millions) of Gross Loans
------------ --------------
Commercial real estate loans $ 598.0 31%
Multifamily mortgage loans 514.7 27
Construction loans 131.9 7
Commercial business loans 99.4 5
Residential mortgage (one to four family) loans 574.2 29
Other consumer loans 16.3 1
-------- --
Total $1,934.5 100%
======== ==
OUR COMMERCIAL LENDING - GENERAL. Our Commercial Banking Division is
staffed with experienced commercial lending officers. Below is a description of
the types of commercial loans we offer.
Commercial Real Estate (Nonresidential) Mortgages. We originate medium-term
commercial real estate loans that are secured by commercial or industrial
buildings. These properties are either used by their owners for business
purposes (known as owner-user properties) or have income derived from tenants
(known as investment properties).
We solicit borrowers in the following ways:
- Through referrals from our branch offices
- Through direct solicitation of borrowers and real estate brokers by
our commercial lending officers
- Through analysis provided by our database software system, which
provides key information on substantially all commercial real estate
loans in our primary market area
- Through referrals from existing customers
At December 31, 2000, we had approximately 638 commercial real estate
loans with a total aggregate balance of $598.0 million. The average balance of
these loans was $937,000.
During the year ended December 31, 2000, new commercial real estate loan
commitments were $248.4 million, as compared to $267.1 million for 1999, and
$129.8 million for 1998. At December 31, 2000, we had $164.6 million of
commercial real estate loans in our pipeline. However, we cannot guarantee that
all the loans in the pipeline will close.
Commercial real estate loans are generally larger and involve more risk
than residential mortgages. Payments on commercial real estate loans are
generally dependent on the successful operation or management of the properties.
Therefore, repayment is more closely tied to the state of the real estate market
and the general economy. We attempt to reduce these risks through our
conservative underwriting standards and credit review processes.
Multifamily Mortgages. We originate multifamily mortgage loans which are
generally secured by five to 50-unit residential buildings. Substantially all of
our multifamily mortgage loans are secured by properties located in our primary
market area. We obtain full credit information on multifamily mortgage borrowers
and independently verify their income and assets. We also consider their ability
to manage the multifamily property and to assume responsibility for the debt if
there are unforeseen expenses or vacancies. We offer both fixed-rate and
adjustable-rate multifamily mortgage loans. Our adjustable-rate multifamily
loans are generally fixed for either one or six months and then adjust every six
months based upon the LIBOR index. Multifamily loans are generally amortized
over 30 years with balloon payments in 10 or 15 years.
At December 31, 2000, we had approximately 1,251 multifamily mortgage
loans with an aggregate outstanding principal balance of $514.7 million. The
average balance of such a loan was $411,000. To avoid an overconcentration of
these loans, we limit our total multifamily mortgage loans to not more than 35%
of our total
3
6
loans. At December 31, 2000, multifamily loans were 26.6% of our total loans. In
1998, we began to re-emphasize the origination of multifamily mortgage loans,
and originated $128.6 million of multifamily loans during 2000, as compared to
$135.4 million in 1999 and $54.5 million in 1998.
Construction Loans. We originate construction loans primarily for the
construction of entry-level and first-time move-up housing within California
and also for multifamily and commercial properties. We make these loans to
experienced builders and developers with whom we have relationships in our
primary market area. As of December 31, 2000, we had approximately 127
outstanding construction loans, with an aggregate principal balance of $131.9
million. The average balance of such loans was $1.0 million. Construction
commitments were $202.5 million in 2000, $179.5 million in 1999 and $127.3
million in 1998.
We generally originate construction loans in amounts up to 70% of either
the appraised value of the property, as improved, or the sales price, whichever
is lower. The funds are disbursed on a percentage of completion basis or as
construction thresholds are met. We normally require the guarantee of principals
of corporate or partnership borrowers. Construction loans have adjustable
interest rates tied to the prime rate. Construction loans are generally prime
based and are written for a one-year term and may have up to a one-year renewal
option.
Construction financing generally has a higher degree of credit risk than
long-term loans on improved, owner-occupied real estate. The risk is dependent
largely on the value of the property when completed as compared to the estimated
cost, including interest, of building it. If the estimated value is inaccurate,
we may have a completed project with a value too low to assure full repayment of
the loan.
Commercial Business Loans. We provide commercial business loans to
customers for working capital purposes for accounts receivable and inventory and
loans to finance equipment, accounts receivable and inventory. Working capital
loans are subject to annual review, and are generally made against security
interests in inventory and accounts receivable. Equipment loans have terms of up
to five years, and are secured by the underlying equipment. Interest rates are
normally based on the prime rate.
During 2000, new commercial business loan commitments were $96.1
million, as compared to $79.7 million in 1999, and $63.8 million in 1998.
Unlike mortgage loans, which generally are made based on the borrower's
operation of the business or building, in the case of nonresidential and
multifamily which are secured by real estate, for which a value can more easily
be determined, commercial business loans involve more risk because repayment is
substantially dependent on the cash flow of the borrower's business. Also, any
collateral securing the loan may depreciate, may be difficult to value, and may
fluctuate in value depending on the success of the business.
Commercial Lines of Credit. We provide commercial lines of credit to
small- and medium-sized companies to finance their accounts receivable and
inventory on a short-term basis (less than one year) and/or to finance their
equipment and working capital on a long-term basis (over one year).
We structure our short-term financing to allow the borrower to complete
its trade cycle from the purchase of inventory to collection of receivables. The
line of credit may also include an option for the issuance of letters of credit
to overseas suppliers/sellers to permit the borrower to obtain inventory.
We also originate and fund loans that qualify for guaranty issued by the
Small Business Administration. The SBA currently normally guarantees from 75% to
80% of the principal and accrued interest of such loans. We make these loans to
eligible small businesses to finance working capital, the purchase of equipment
or the purchase of real estate. Depending on the purpose of the loan, terms
generally range from seven to 25 years. We typically require that SBA loans be
secured by inventories and receivable or by real property generally if
commercial real estate is being financed. SBA loans originated during 2000,
1999, and 1998 have been included in commercial real estate and commercial
business loans.
OUR CONSUMER LENDING - GENERAL. We make consumer loans, primarily
residential mortgage (one to four family) loans for our customers. We also
provide home equity loans.
4
7
Residential Mortgages (One to Four Family). In conjunction with our
transition from a thrift to a commercial bank, we have placed our emphasis on
the origination of commercial loans and reduced our emphasis on the origination
of consumer loans. The majority of our consumer loan originations are
residential mortgage (one to four family) loans. We originated $34.7 million of
residential mortgage (one to four family) loans in 2000, $59.6 million in 1999
and $303.8 million in 1998. We offer fixed-rate and adjustable-rate loans,
including intermediate fixed-rate mortgages. Intermediate fixed-rate mortgages
have fixed interest rates for three or five years and then adjust annually
afterward. Our fixed-rate loans have terms of 15 or 30 years and have
due-on-sale clauses, which allow us to declare the loan immediately due and
payable if the loan is assumed without our consent.
We also offer ARM loans, with interest rates that are fixed for six
months and then adjust every six months. Our intermediate fixed-rate loans have
interest rates that are fixed for three or five years, and then adjust annually.
Our ARM loans generally have periodic (not more than 2%) and lifetime (not more
than 6%) caps on the increase or decrease in interest rates. Our current
production of ARM loans are tied to the one-year U.S. Treasury CMT Index.
At December 31, 2000, we had approximately 3,534 residential mortgage
(one to four family) loans, totaling $574.2 million. At that date, the balance
of an average residential mortgage (one to four family) loan in our portfolio
was approximately $162,000.
Home Equity and Other Consumer Loans. We also make consumer loans,
almost all of which are home equity lines of credit secured by residential real
estate. These lines generally consist of floating rate loans tied to the prime
rate.
DEPOSITS
Our depositors are primarily ethnic Chinese households, small- and
medium-sized businesses owned by ethnic Chinese, and ethnic Chinese business
executives, professionals and other individuals. We offer a range of deposit
products that are traditionally provided by commercial banks. For
interest-bearing deposits, the interest rates we pay vary depending on the size,
term and type of deposit. We set our interest rates based on our need for funds
and market competition. As of December 31, 2000, less than 3% of our deposits
were held by customers located outside of the United States. Additionally, the
100 depositors with the largest aggregate account balances held less than 15% of
our total deposits. At December 31, 2000, our weighted average cost of deposits
was 4.75%.
COMPETITION
The banking and financial services industry in California generally, and
in our market area specifically, is highly competitive. The industry has become
increasingly competitive recently due in part to changes in regulation, changes
in technology and product delivery systems, and the consolidation of the
industry. We compete for loans, deposits and customers with the following types
of institutions:
- Commercial banks
- Savings and loan associations
- Securities and brokerage companies
- Mortgage companies
- Insurance companies
- Finance companies
- Money market funds
- Credit unions
- Other nonbank financial service providers
Many of these competitors are much larger in total assets and
capitalization, have greater access to capital markets and offer a broader array
of financial services than we do. To compete with these other financial services
providers, we rely on local promotional activities, personal relationships
established by our officers, directors and bilingual employees with customers,
and specialized services tailored to meet our customers' needs.
5
8
We compete for deposits in the ethnic Chinese markets with other banks
that serve the Asian community in California. We believe we have three major
competitors targeting the ethnic Chinese market in California. These competitors
have branch locations in many of the same neighborhoods as we do, provide
similar loan, savings and financial services, and market their services in
similar Asian publications and media in California.
OUR HISTORICAL OPERATIONS
Up until our change in business strategy in 1996, our operations consisted
of traditional thrift activities of originating residential mortgage (one to
four family) loans which we pooled and sold in the secondary market while
servicing loans for FannieMae, Freddie Mac and Ginnie Mae, as well as for
private investors. We also originated multifamily mortgages and commercial real
estate mortgages which we kept in our portfolio.
As a result of increased competition in the mortgage banking business,
profit margins contracted and loan servicing rights declined in value, due in
part to higher levels of prepayments.
Our Board of Directors decided to shift our business focus from that of a
traditional thrift to a full-service commercial bank. They saw opportunities to
further improve our long-term prospects, in part by taking advantage of our
significant market share and our cross selling opportunities to the ethnic
Chinese and Asian communities in our market area.
We realigned responsibilities among senior management, and hired new
officers who have experience in commercial banking and in Small Business
Administration lending within our market area. In January 1998, Thomas S. Wu was
appointed the President and Chief Executive Officer of the Bank and assumed the
responsibility of successfully shifting our business focus to commercial banking
services and products. Mr. Wu has over 20 years of diversified domestic and
international commercial banking experience. Sylvia Loh was appointed head of
the newly established Commercial Banking Division in January 1996. She also has
over 20 years of commercial banking and trade finance experience with major
financial institutions. In January 1997, William T. Goldrick was recruited and
appointed Senior Vice President and Chief Credit Officer to establish commercial
lending policies and procedures and to strengthen our credit evaluation. He has
over 40 years of commercial banking experience. He is also responsible for our
regulatory compliance.
In 1996, we established a Commercial Banking Division to offer an array of
commercial bank services and products mainly to our customers in ethnic Chinese
communities. Since its establishment, we recorded approximately $953.1 million
in new commercial loan commitments. To support our commercial banking
activities, we implemented a commercial banking data processing system that
replaced our previous system that was designed for thrift institutions. The
installation was completed in February 1998. We also opened a commercial,
construction and Small Business Administration lending office in Pasadena,
California, in the second quarter of 1998. We hired a team of commercial loan
officers with extensive commercial lending experience and a group of three SBA
banking officers, all previously affiliated with one of the leading lenders
focusing on SBA lending to Asians, to staff the new office. Additionally, we
transferred the lead managers of construction lending to the Pasadena office to
cultivate new construction lending relationships in southern California.
In January 1998, the Bank changed its name to United Commercial Bank from
United Savings Bank, F.S.B., to reflect our new focus on commercial banking. On
July 31, 1998, the Bank converted from a federal thrift to a
California-chartered commercial bank, and UCBH Holdings, Inc. became a bank
holding company.
We are working to expand our presence in the Asian and ethnic Chinese
markets through our multilingual ATMs, and through our multilingual telephone
banking system, customer service, loan officers, and multilingual Internet
portal. We have established mini-branches in or adjacent to Asian supermarkets
in selected areas as another means of increasing our market share and deposit
base.
At December 31, 1997, our stockholders' equity was $62.6 million or 4.0% of
total assets. As a result of the capital raised in April 1998 and the retention
of earnings, our stockholders' equity increased to $133.6 million by December
31, 2000, and our consolidated Tier I capital increased from $63.9 million at
December 31, 1997 to $175.3 million at December 31, 2000.
6
9
We believe that these measures positioned us to take advantage of the
opportunities that are presented in our market area, and help us to better serve
the growing ethnic Chinese market in California.
SUPERVISION AND REGULATION
INTRODUCTION
Both UCBH Holdings, Inc., as a bank holding company, and United Commercial
Bank, as a commercial bank, are extensively regulated under both federal and
state law. The following is a summary of certain laws and regulations that
govern the activities of the Company and the Bank. This summary is not a
complete description of the regulations that pertain to the Company and the
Bank, and is qualified in its entirety by reference to the actual laws and
regulations.
REGULATION OF BANK HOLDING COMPANIES
The Company is a bank holding company registered with the Board of Governors
of the Federal Reserve System and is subject to the Bank Holding Company Act of
1956, as amended, and the regulations of the Federal Reserve. The Company files
quarterly and annual reports with the Federal Reserve, as well as any other
information that the Federal Reserve may require under the Bank Holding Company
Act. The Federal Reserve examines the Company, and its non-bank subsidiary (a
Delaware Statutory Business Trust). The Company is also a bank holding company
under California law, and is examined by the California Department of Financial
Institutions.
The Federal Reserve has the authority to require that the Company stop an
activity, whether conducted itself or through a subsidiary or affiliate, if the
Federal Reserve believes that the activity poses a significant risk to the
financial safety, soundness or stability of the Bank. The Federal Reserve can
also regulate provisions of certain debt of bank holding companies, including
imposing ceilings on interest rates and requiring reserves on such debt. In
certain cases, the Company will have to file written notice and obtain approval
from the Federal Reserve before repurchasing or redeeming its equity securities.
Additionally, the Federal Reserve imposes capital requirements on the Company as
a bank holding company.
REGULATION OF THE BANK
Bank Regulators. The Bank is a California state-chartered commercial bank,
and is supervised, examined and regulated by the Commissioner of the California
Department of Financial Institutions (the "DFI"), as well as by the Federal
Deposit Insurance Corporation (the "FDIC"). Either of these regulators may take
remedial action if it determines that financial condition, capital resources,
asset quality, earnings prospects, management, or liquidity aspects of the
Bank's operations are unsatisfactory. Either of these agencies may also take
action if the Bank or its management is violating or has violated any law or
regulation. No regulator has taken any such actions against the Bank in the
past.
Safety and Soundness Standards. The FDIC and the Federal Reserve have
adopted guidelines that establish standards for safety and soundness of banks.
They are designed to identify potential safety and soundness problems and ensure
that banks address those concerns before they pose a risk to the deposit
insurance fund.
If the FDIC or the Federal Reserve determines that an institution fails to
meet any of these standards, the agency can require the institution to prepare
and submit a plan to come into compliance. If the agency determines that the
plan is unacceptable or is not implemented, the agency must, by order, require
the institution to correct the deficiency.
The FDIC and the Federal Reserve also have safety and soundness regulations
and accompanying guidelines on asset quality and earnings standards. The
guidelines provide six standards for establishing and maintaining a system to
identify problem assets and prevent those assets from deteriorating.
The guidelines also provide standards for evaluating and monitoring earnings
and for ensuring that earnings are sufficient to maintain adequate capital and
reserves. If an institution fails to comply with a safety and soundness
7
10
standard, the agency may require the institution to submit and implement an
acceptable compliance plan, or face enforcement action.
Capital Requirements. The Bank is subject to the risk-based capital
guidelines of the FDIC. These guidelines provide a framework that is more
sensitive to differences in risk between banking institutions. The amount of
regulatory capital the Bank is required to have is dependent on the
risk-weighting of its assets. The ratio of its regulatory capital to its
risk-weighted assets is called its "risk-based capital ratio." Assets and
certain off-balance-sheet items are allocated to four categories based on the
risk inherent in the asset, and are weighted from 0% to 100%. The higher the
category, the more risk the Bank is subject to and thus more capital that is
required.
The guidelines divide a bank's capital into two tiers. The first tier (known
as "Tier I") includes common equity, retained earnings, certain non-cumulative
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries. Goodwill and other intangible assets (except for
mortgage servicing rights and purchased credit card relationship, subject to
certain limitations) are subtracted from Tier I capital.
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan losses (subject to certain limitations). Certain items are
required to be deducted from Tier II capital. Banks must maintain a total
risk-based capital ratio of 8%, of which at least 4% must be Tier I capital.
In addition, the FDIC has regulations prescribing a minimum Tier I leverage
ratio (Tier I capital to total adjusted assets, as specified in the
regulations). These regulations require that banks that meet certain criteria
(including having the highest examination rating and not experiencing or
expecting significant growth) maintain a minimum Tier I leverage ratio of 3%.
Effective April 1, 1999, all other banks must have a Tier I leverage ratio of
4%. The FDIC may impose higher limits on individual institutions when particular
circumstances exist. If a bank is experiencing or anticipating significant
growth, the FDIC may expect it to have capital ratios well above the minimum. At
December 31, 2000, the Bank's tangible and core capital ratios were 6.95%, and
its risk-based capital ratio was 10.97%.
In 1995, the FDIC, along with the other federal banking agencies, adopted a
regulation that provided that the agencies will consider the bank's exposure to
interest rate risk in assessing a bank's capital adequacy. They will consider
the quality of the bank's interest rate risk management process, the overall
financial condition of the bank and the level of other risks the bank is exposed
to. They may require an institution with a high level of interest rate risk to
hold additional capital. The agencies also have issued a joint policy statement
providing guidelines on interest rate risk management, including a discussion of
the factors the agency will consider in evaluating interest rate risk.
Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 requires the federal banking regulators to take "prompt
corrective action" against undercapitalized institutions. The regulators have
established the following capital levels to implement these provisions:
- Well capitalized has total risk-based capital ratio of 10% or
greater, Tier I risk-based capital ratio of 6% or greater, a leverage
ratio of 5% or greater, and is not subject to any written agreement,
order, capital directive, or prompt corrective action directive.
- Adequately capitalized has total risk-based capital ratio of 8% or
greater, Tier I risk-based capital ratio of 4% or greater, and a
leverage ratio of 4% or greater (3% or greater if rated Composite 1
under the CAMELS rating system).
- Undercapitalized has total risk-based capital ratio of less than 8%,
Tier I risk-based capital ratio of less than 4%, or a leverage ratio
of less than 4% (3% if rated Composite 1 under the CAMELS rating
system).
- Significantly undercapitalized has a total risk-based capital ratio
of less than 6%, Tier I risk-based capital ratio of less than 3%, or
a leverage capital ratio of less than 3%.
- Critically undercapitalized has a ratio of tangible equity to total
assets that is equal to less than 2%.
8
11
Federal regulators are required to take prompt corrective action to solve
the problems of those institutions that fail to satisfy their minimum capital
requirements. As an institution's capital level falls, the level of restrictions
becomes increasingly severe and the institution is allowed less flexibility in
its activities.
As of December 31, 2000, the Bank was a well capitalized institution under
the definitions.
Community Reinvestment Act. Under the Community Reinvestment Act ("CRA"), as
implemented by FDIC regulations, a bank has an obligation, consistent with safe
and sound operation, to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs, nor does it limit a bank's discretion
to develop the types of products and services that it believes are best suited
to its community. It does require that federal banking regulators, when
examining an institution, assess the institution's record of meeting the credit
needs of its community and to take such record into account in evaluating
certain applications. As a state-chartered bank, the Bank is subject to the fair
lending requirements and reporting obligations involving home mortgage lending
operations of the CRA. Federal regulators are required to provide a written
examination of an institution's CRA performance using a four-tiered descriptive
rating system. These ratings are available to the public. Based upon
examinations by the Office of Thrift Supervision ("OTS") in 1996 and 1998, the
Bank's federal regulator at the time of examination, the Bank's CRA ratings were
"Outstanding."
GRAMM-LEACH-BLILEY FINANCIAL MODERNIZATION ACT OF 1999
Management does not believe that the Gramm-Leach-Bliley Financial
Modernization Act of 1999 ("Modernization Act") will have a material adverse
effect on the operations of the Company or the Bank in the near term. However,
to the extent that it permits banks, securities firms, and insurance companies
to affiliate, the financial services industry may experience further
consolidation.
Under the Modernization Act, federal banking regulators are required to
adopt rules that will limit the ability of banks and other financial
institutions to disclose nonpublic information about consumers to nonaffiliated
third parties. These limitations will require disclosure of privacy policies to
consumers and, in some circumstances, will allow consumers to prevent disclosure
of certain personal information to a nonaffiliated third party. Federal banking
regulators issued final rules on May 10, 2000. Pursuant to the rules, financial
institutions must provide: initial notices to customers about their privacy
policies, describing the conditions under which they may disclose nonpublic
personal information to nonaffiliated third parties and affiliates; annual
notices of their privacy policies to current customers; and a reasonable method
for customers to "opt out" of disclosures to nonaffiliated third parties.
The rules were effective November 13, 2000, but compliance is optional
until July 1, 2001. These privacy provisions will affect how consumer
information is transmitted through diversified financial companies and conveyed
to outside vendors. It is not possible at this time to assess the impact of the
privacy provisions on the Company's financial condition or results of
operations.
In December 2000 pursuant to the requirements of the Modernization Act,
the federal bank and thrift regulatory agencies adopted consumer protection
rules for the sale of insurance products by depository institutions. The rule is
effective on April 1, 2001. The final rule applies to any depository institution
or any person selling, soliciting, advertising, or offering insurance products
or annuities to a consumer at an office of the institution or on behalf of the
institution. The regulation requires oral and written disclosure before the
completion of the sale of an insurance product or annuity that such product: is
not a deposit or other obligation of, or guaranteed by, the depository
institution or its affiliate; is not insured by the FDIC or any other agency of
the United States, the depository institution or its affiliates; and has certain
risks of investment, including the possible loss of value.
The depository institution may not condition an extension of credit on
the consumer's purchase of an insurance product or annuity from the depository
institution or from any of its affiliates, or on the consumer's agreement not to
obtain, or a prohibition on the consumer from obtaining, an insurance product or
annuity from an unaffiliated entity. Furthermore, to the extent practicable, a
depository institution must keep insurance and annuity sales activities
physically segregated from the areas where retail deposits are routinely
accepted from the general public. Finally, the rule addresses cross marketing
and referral fees.
9
12
In January 2000, the banking agencies adopted guidelines requiring
financial institutions to establish an information security program to: identify
and assess the risks that may threaten customer information; develop a written
plan containing policies and procedures to manage and control these risks;
implement and test the plan; and adjust the plan on a continuing basis to
account for changes in technology, the sensitivity of customer information and
internal or external threats to information security.
Each institution may implement a security program appropriate to its
size and complexity and the nature and scope of its operations. The guidelines
are effective July 1, 2001.
EMPLOYEES
At December 31, 2000, we had 387 full-time equivalent employees. None of
the employees are covered by a collective bargaining agreement. We consider our
relationship with our employees to be satisfactory.
10
13
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table presents certain information regarding the executive
officers of the Company and the Bank:
- -----------------------------------------------------------------------------------------------
NAME AGE POSITION WITH THE COMPANY AND THE BANK AND
PAST FIVE YEARS EXPERIENCE
- -----------------------------------------------------------------------------------------------
Thomas S. Wu 42 President and Chief Executive Officer since January
1, 1998. Previously Executive Vice President and
Director of the Bank since September 1997.
Previously was Director of Customer Care for Pacific
Link Communications Limited in Hong Kong. Served as
Senior Vice President, Head of Retail Banking of the
Bank from 1992 to 1996.
- -----------------------------------------------------------------------------------------------
Louis E. Barbarelli 58 Senior Vice President, Chief Information Officer
and Director of Operations
- -----------------------------------------------------------------------------------------------
Jonathan H. Downing 49 Senior Vice President, Chief Financial Officer and
Treasurer
- -----------------------------------------------------------------------------------------------
William T. Goldrick 69 Senior Vice President and Chief Credit Officer
since January 1997. Previously, Mr. Goldrick was
Senior Vice President, Senior Credit Officer for
America California Bank from 1995 to 1997; was
Chief Lending Officer of National American Bank
from 1992 to 1995.
- -----------------------------------------------------------------------------------------------
Joseph Kwok 59 Senior Vice President and Director of Asia Banking
Division
- -----------------------------------------------------------------------------------------------
Dennis A. Lee 58 Senior Vice President and Corporate Counsel
- -----------------------------------------------------------------------------------------------
Sylvia Loh 45 Senior Vice President and Director of Commercial
Banking. Previously, Ms. Loh was Vice President,
Relationship Manager for Bank of America until 1996.
- -----------------------------------------------------------------------------------------------
Deanne Miller 52 Senior Vice President and Director of Human
Resources
- -----------------------------------------------------------------------------------------------
ITEM 2. PROPERTIES
The Company's principal offices are located at 711 Van Ness Avenue in San
Francisco, California, which serves as the Company's and the Bank's
headquarters. The Bank leases substantially all of its remaining branch
facilities under noncancellable operating leases, many of which contain renewal
options and some of which have escalation clauses.
At December 31, 2000, premises and equipment owned by the Company, both
individually and in aggregate, were not material in relation to the Company's
total assets.
ITEM 3. LEGAL PROCEEDINGS
Because of the nature of the Company's business, it is subject to various
threatened or filed legal actions. Although the amount of the ultimate exposure,
if any, cannot be determined at this time, the Company, based upon the advice of
counsel, does not expect the final outcome of threatened or filed suits to have
a material adverse effect on its financial position.
11
14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders or otherwise during
the fourth quarter of the year ended December 31, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information on the principal market for and trading price of the Company's
common stock, the number of holders of such stock, and dividend payments is
incorporated by reference from page 35 and from Note 11 on page 55 of the
Company's 2000 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to page
17 of the Company's 2000 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated by reference to pages
18 through 36 of the Company's 2000 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated by reference to pages
34 to 35 of the Company's 2000 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to pages
37 through 68 of the Company's 2000 Annual Report to Shareholders. See Item 14
of this report for information concerning financial statements and schedules
filed with this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
12
15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to directors required by this item is incorporated
by reference to pages 5 to 9 of the Company's Proxy Statement for the 2001
Annual Meeting of Shareholders, to be filed with the Commission on March 12,
2001. Additional information required by Item 10 with respect to executive
officers is set forth in Part I, Additional Item, hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to page
12 and pages 15 to 20 of the Company's Proxy Statement for the 2001 Annual
Meeting of Stockholders, to be filed with the Commission on March 12, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to pages
3 through 7 of the Company's Proxy Statement for the 2001 Annual Meeting of
Stockholders, to be filed with the Commission on March 12, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
13
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) The report of independent accountants and the following consolidated
financial statements of the Company are incorporated herein by reference
to the 2000 Annual Report to Shareholders. Page number references are to
the 2000 Annual Report to Shareholders.
Page of Annual Report
---------------------
UCBH Holdings, Inc.
Report of Independent Accountants........................................37
Consolidated Balance Sheets at December 31, 2000 and 1999................38
Consolidated Statements of Income for the
Years Ended December 31, 2000, 1999, and 1998...........................39
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 2000, 1999, and 1998...................40
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2000, 1999, and 1998...........................41
Notes to Consolidated Financial Statements.........................42 to 67
Unaudited Supplemental Information.......................................68
(2) All schedules are omitted because they are not required or applicable,
or the required information is shown in the Consolidated Financial
Statements, or the notes thereto.
(3)(a) Exhibits:
The exhibits filed as a part of this Form 10-K are as follows (filed
herewith unless otherwise noted):
3.1 Amended and Restated Certificate of Incorporation of UCBH Holdings,
Inc.*
3.2 Bylaws of UCBH Holdings, Inc.*
4.0 Form of Stock Certificate of UCBH Holdings, Inc.*
4.1 Indenture of UCBH Holdings, Inc., dated April 17, 1998, relating to
Series B Junior Subordinated Debentures**
4.2 Form of Certificate of Series B Junior Subordinated Debenture**
4.3 Certificate of Trust of UCBH Trust Co.**
4.4 Amended and Restated Declaration of Trust of UCBH Trust Co.**
4.5 Form of Series B Capital Security Certificate for UCBH Trust Co.**
4.6 Form of Series B Guarantee of the Company relating to the Series B
Capital Securities**
10.1 Employment Agreement between United Commercial Bank and Thomas S. Wu*
10.2 Employment Agreement between UCBH Holdings, Inc. and Thomas S. Wu*
10.3 Form of Termination and Change in Control Agreement between United
Commercial Bank and certain executive officers*
10.4 Form of Termination and Change in Control Agreement between UCBH
Holdings, Inc. and certain executive officers*
10.5 UCBH Holdings, Inc. 1998 Stock Option Plan***
13.0 2000 Annual Report to Shareholders
21.0 Subsidiaries of UCBH Holdings, Inc. (see Item 1 -- Business)
23.1 Consent of PricewaterhouseCoopers LLP
- --------
* Incorporated herein by reference to the Exhibit of the same number in
the Company's Registration Statement on Form S-1 filed with the SEC on
July 1, 1998 (SEC File No. 333-58325).
** Incorporated herein by reference to the Exhibit of the same number in
the Company's Registration Statement on Form S-4 filed with the SEC on
July 1, 1998 (SEC File No. 333-58335).
*** Incorporated herein by reference to the Exhibit of the same number in
the Company's Form 10-Q for the quarter ended June 30, 1999 filed with
the SEC on August 6, 1999 (SEC File No. 0-24947).
(b) Reports on Form 8-K
None.
14
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2001 UCBH HOLDINGS, INC.
By /s/ Jonathan H. Downing
------------------------
Jonathan H. Downing
Senior Vice President,
Chief Financial Officer,
Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Name Date
/s/ Thomas S. Wu President, Chief Executive February 20, 2001
- ------------------------------- Officer and Director
Thomas S. Wu (principal executive officer)
/s/ Jonathan H. Downing Senior Vice President, Chief February 20, 2001
- ------------------------------- Financial Officer, Treasurer
Jonathan H. Downing and Director
(principal financial officer)
/s/ Sandra Go First Vice President February 20, 2001
- ------------------------------ and Controller
Sandra Go (principal accounting officer)
/s/ Sau-wing Lam Chairman of the Board of February 20, 2001
- ------------------------------ Directors
Sau-wing Lam
/s/ Li-Lin Ko Director February 20, 2001
- -----------------------------
Li-Lin Ko
/s/ Ronald S. McMeekin Director February 20, 2001
- -----------------------------
Ronald S. McMeekin
/s/ Dr. Godwin Wong Director February 20, 2001
- -----------------------------
Dr. Godwin Wong
/s/ Joseph S. Wu Director February 20, 2001
- -----------------------------
Joseph S. Wu
15
18
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of UCBH Holdings,
Inc.*
3.2 Bylaws of UCBH Holdings, Inc.*
4.0 Form of Stock Certificate of UCBH Holdings, Inc.*
4.1 Indenture of UCBH Holdings, Inc., dated April 17, 1998, relating to
Series B Junior Subordinated Debentures**
4.2 Form of Certificate of Series B Junior Subordinated Debenture**
4.3 Certificate of Trust of UCBH Trust Co.**
4.4 Amended and Restated Declaration of Trust of UCBH Trust Co.**
4.5 Form of Series B Capital Security Certificate for UCBH Trust Co.**
4.6 Form of Series B Guarantee of the Company relating to the Series B
Capital Securities**
10.1 Employment Agreement between United Commercial Bank and Thomas S. Wu*
10.2 Employment Agreement between UCBH Holdings, Inc. and Thomas S. Wu*
10.3 Form of Termination and Change in Control Agreement between United
Commercial Bank and certain executive officers*
10.4 Form of Termination and Change in Control Agreement between UCBH
Holdings, Inc. and certain executive officers*
10.5 UCBH Holdings, Inc. 1998 Stock Option Plan***
13.0 2000 Annual Report to Shareholders
21.0 Subsidiaries of UCBH Holdings, Inc. (see Item 1 -- Business)
23.1 Consent of PricewaterhouseCoopers LLP
- --------
* Incorporated herein by reference to the Exhibit of the same number in
the Company's Registration Statement on Form S-1 filed with the SEC on
July 1, 1998 (SEC File No. 333-58325).
** Incorporated herein by reference to the Exhibit of the same number in
the Company's Registration Statement on Form S-4 filed with the SEC on
July 1, 1998 (SEC File No. 333-58335).
*** Incorporated herein by reference to the Exhibit of the same number in
the Company's Form 10-Q for the quarter ended June 30, 1999 filed with
the SEC on August 6, 1999 (SEC File No. 0-24947).
16