UPDATE 2-UCBH top execs quit after panel finds irregularities

* Board panel finds improper actions by certain officers

* CEO, COO resign

* FDIC issues order to cease and desist

* Sees higher Q2 loan loss provision, NPAs

* Shares down as much as 8 pct

(Recasts, adds details, background, analysts comments, updates share movement)

By Brenton Cordeiro and Sweta Singh

BANGALORE, Sept 8 (Reuters) - UCBH Holdings Inc UCBH.O said two top executives resigned after a board audit panel raised concerns about the actions of several current and former officers, and the company agreed to a cease and desist order by regulators.

The San Francisco-based lender said it was looking at all possible strategic alternatives to strengthen its capital position.

The company's Chief Executive and Chairman Thomas Wu and Chief Operating Officer Ebrahim Shabudin, resigned, while Chief Financial officer Craig On has been demoted to the post of deputy CFO.

UCBH named Doreen Woo Ho as acting chief executive officer and Joseph Jou as chairman. [ID:nWNAB7315]

The independent investigation panel of UCBH board's audit committee identified problems resulting from weaknesses in the bank's internal controls and improper actions of certain officers, the company said.

UCBH added that the report concluded that the 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 it is addressing the concerns expressed by the panel through reprimands, reassignments and termination of employment, among others.

"We suspect the management changes relate, in part, to the results of its independent investigation," Morgan Stanley analyst Ken Zerbe wrote in a note to clients.

Zerbe said he is concerned with the outlook for UCBH given its growing credit and regulatory issues.

The company said the cease and desist order by the Federal Deposit Insurance Corp (FDIC) and the California Department of Financial Institutions (DFI) requires the company to outline specific steps it must undertake to strengthen its policies and enhance the soundness of the bank.

The agreement also requires UCBH to obtain prior approval from regulators before paying dividends to shareholders.

The company did not immediately comment on questions relating to the resignations and the findings of the subcommittee.

BLEAK OUTLOOK

The bank now sees second-quarter non-performing assets of $985 million to $995 million, up from its prior view of $835 million to $875 million.

UCBH, which largely serves the Chinese community in the United States, also raised its loan loss provision outlook for the second quarter to $360 million to $390 million, from the $300 million to $330 million it had forecast earlier.

UCBH is teetering around or could even fall below well capitalized status at the higher end of its provision guidance, analyst Lana Chan of BMO Capital Markets said.

"The best-case scenario for UCBH is a larger additional investment by China Minsheng -- the potential for this lends some downside support to the stock," Chan said.

Minsheng Banking Corp (600016.SS), China's oldest non-state lender, raised its stake in UCBH to 9.9 percent from 4.9 percent in December 2008. [ID:nSHA304125]

In May, the bank had said it would restate its results for the first quarter of 2009 and full-year 2008 after re-examining its non-performing assets portfolio.

The company's profitability has been under pressure for the past few quarters primarily due to rising provision for bad loans. The company raised $298.7 million through the U.S. Treasury's capital purchase program in November.

Shares of the parent of United Commercial Bank were trading down 7 percent at $1.11 Tuesday in afternoon trade on Nasdaq. The stock has lost about 80 percent of its value since January. (Reporting by Brenton Cordeiro in Bangalore; Editing by Pradeep Kurup)