Ex-Sovereign boss Sidhu seeks $115M bank IPO

Customers Bancorp Inc., the Wyomissing, Berks County-based bank started by Jay S. Sidhu after he left Sovereign Bancorp, plans to raise $115 million in a public stock offering, Sidhu told the Securities and Exchange Commission in this filing.

Sidhu built Customers into a $2 billion-plus-asset bank, focusing on small-business owners, nonprofits and consumers, from offices in the Philadelphia, Reading, and Princeton areas and in New York's northern suburbs.

Sidhu started Customers First with a 2009 investment in the former New Century Bank, a troubled Phoenixville lender run by Kenneth Mumma, publisher Steve Forbes' brother-in-law. Mumma served as a consultant to the bank until last year.

Since then, Sidhu has been using his own resources and investments by fellow ex-Sovereign directors and Indian expatriates to buy small East Coast banks and bank offices, including the former Berkshire Bank in Reading, InterState Net Bank in New Jersey, and USA Bank in suburban New York. Sidhu wants to use the IPO proceeds to buy more banks and bank assets, including discounted troubled loans from the Federal Deposit Insurance Corp.

It's a strategy similar to the grab-bag expansion he used to build Sovereign into the largest savings bank based in Pennsylvania, starting in 1985. Sidhu was forced out of Sovereign in 2006 by activist investors Ralph Whitworth and Tony Terracciano, who thought they could boost the share price. They failed, and Sovereign was acquired at a fraction of its former value by Spain-based Banco Santander; it is now run from offices in Boston. Meanwhile Sidhu has recruited some of his former Sovereign deputies, including veteran Pennsylvania banker Dick Ehst, to top jobs at Customers.

Customers First directors, besides Sidhu, include Reading investor Daniel K. Rothermel , accountant and former Wilkes College trustee chairman John R. Miller, Alco Industries chairman T. Lawrence Way, and Clipper Magazine chairman Steven J. Zuckerman.

The bank has also asked the Federal Reserve to approve its largest individual investor, India-born, London-based Bhanu Choudhrie, as a director.

Choudhrie has invested $8.7 million in Customers First; Zuckerman, $2.1 million; Way, $1.4 million; and Sidhu, $1.25 million, according to the proxy statement. The bank has also raised more than $18 million from share sales to three investment firms: Thomas Cherian's UK-based Amberland Properties, New York-based Commerce Street Financial Partners LP, and Sumant Kapur's Singapore-based Rodella Assets Inc.

Sidhu and Choudhrie are also directors of Atlantic Coast Financial Corp., which borrowed more than $36 million from Customers First in 2009-10 last year, and paid it all back, according to the proxy.