UCBH Holdings Inc.'s troubles have deepened, as the San Francisco company ousted its chief executive of 18 years and another top manager amid allegations of fraud.

The $13.8 billion-asset UCBH, which caters to Chinese immigrants, said an investigation by its board found that "certain bank officers" had tried to disguise credit problems and misled the company's finance department and outside auditors.

It did not say which officers were responsible, but it concurrently announced the resignations of Thomas S. Wu as chairman, president and CEO, and Ebrahim Shabudin as chief credit officer. UCBH also disclosed that it is now operating under a cease-and-desist order from regulators.

Though the company has been struggling for some time — it said in May that it would have to restate first-quarter and 2008 results — the allegations and the shake-up stunned some analysts.

"I knew things were deteriorating, but I thought Tommy was in control," said Chris Stulpin, an analyst at D.A. Davidson & Co.

Wu's former assistant said he was not available for comment on Tuesday. Shabudin did not return a call seeking comment.

Julianna Balicka, an analyst with KBW Inc.'s Keefe Bruyette & Woods Inc., agreed that "the bluntness in which they say 'fraud' is shocking."

However, she said, it is not surprising UCBH's loan problems were more severe than it was reporting, since it had changed its methodology for loans more than once in recent years, always so that it reported higher profits.

Doreen Woo Ho, who joined UCBH in January from Wells Fargo & Co., was promoted to acting president and CEO. Joseph Jou, an independent director, was elected chairman.

"Obviously, the management shake-up seems pretty clearly related to the cease-and-desist order and the internal investigation claims that management was involved in trying to downplay the extent of problems and recognition of losses," said Joe Gladue, an equity analyst with B. Riley & Co.

UCBH would not make executives available for interviews on Tuesday.

Wu built UCBH's United Commercial Bank into a leading commercial bank serving Chinese-American communities and American companies doing business in China.

He led United Commercial as it grew from a small thrift to being a contender for the title of largest U.S. bank targeting Chinese-Americans, with branches in several major metropolitan markets both here and abroad.

Ho was hired in January to fill the newly created position of president of community banking.

A former Vietnam correspondent for Time magazine, she spent 25 years at Citibank before joining Wells in 1998 to head its consumer credit group.

From 1998 to 2007 she oversaw the company's rapid growth in consumer lending, particularly in home equity loans.

More recently Ho was the head of Wells' enterprise marketing group, where she oversaw global branding, advertising and marketing programs.

At UCBH she was put in charge of attracting both retail and business deposits. But now she has a much more challenging task.

Judging from the preliminary second-quarter results the company released Tuesday, analysts said UCBH now needs as much as $450 million of fresh capital and that its best hope may be in finding a buyer.

Its options are few, given the price the stock is trading at and the limited number of shares it is currently able to issue. It could sell bits of itself or the whole thing.

"The most obvious thing to do would be a common stock offering," Gladue said. "But that would be difficult, because the amount they have to raise is greater than the current market capitalization of the company" — roughly $140 million on Tuesday.

"There is some franchise value," he said. "They have a lot of valuable parts," such as its domestic branch network and a subsidiary in China. "So the other thing they could do is sell assets."

Balicka wrote in a note to clients Tuesday that a sale would be the most likely outcome for UCBH, "possibly an FDIC-assisted transaction."

Lana Chan, a senior bank analyst with Bank of Montreal's BMO Capital Markets, said there is another option. China Minsheng Bank Corp. Ltd. agreed to acquire up to 20% of UCBH in October 2007. So far, the Chinese company has acquired 9.9% of the U.S. company. It originally had until June 30 to buy the remaining 10.1%; in July the deadline was extended to Dec. 31.

China Minsheng still appears intent on going through with the investment. UCBH said Tuesday that the Chinese company has "expressed continued support of UCBH and the new leadership." China Minsheng recently sent 17 of its employees to UCBH to train in retail banking and other departments, UCBH said, and the Chinese company's management team is expected to visit UCBH late this month "to further discuss and enhance the strategic cooperation between the two banks."

Though the planned infusion would not begin to plug UCBH's capital hole, "the best-case scenario is a larger investment from China Minsheng," Chan said.

She noted that China Minsheng is reportedly planning to do an initial public offering to raise capital, which could make a bigger infusion for UCBH a possibility.

"I can't see a better option than that, especially given their stock price," Chan said.

Still, the amount of capital needed would mean China Minsheng would take control of UCBH — something that U.S. regulators might not been keen about.

UCBH said the board's probe into the company's credit policies found problems with internal controls and "deliberate and improper actions and omissions."

"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 company said.

Key findings included: inappropriate modification of loan terms to delay negative consequences; delaying recognizing of risk rating downgrades and specific reserves; misrepresenting or omitting relevant information to the bank's finance department and independent auditors; and altering documents to support those misrepresentations and omissions.

The company said the bank subsidiary entered into a cease-and-desist order on Sept. 3 with the Federal Deposit Insurance Corp. and the California Department of Financial Institutions, and the holding company expects to have a similar agreement with the Federal Reserve in the third quarter.

Among the agreed-upon items are a risk oversight committee to be established by the board, implementing a comprehensive capital plan and strategic plan, suspending dividends and interest payments on trust-preferred securities, and implementing a plan to improve credit quality.

The outlook for the company's second-quarter results deteriorated.

Provisioning for loan losses increased to as much as $390 million. UCBH said in August that it expected to provision as much as $350 million. Expectations for nonperforming assets for the quarter also increased. It had said it expected to have as much as $875 million in nonperforming assets at the end of June, but increased that number to $995 million.

The company also said that it is expecting a material loss on goodwill.

Before amending its call report, UCBH was already showing deteriorating capital levels.

The bank's total risk-based capital fell to undercapitalized, at 7.92% on June 30, down from 13.36% at March 31.

"Hopefully, the change of management will allow them to move forward, but second-quarter losses are even worse than originally expected," Gladue said.

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