PA investors in deal for failed NY bank; FDIC to lose $60M+
Jay Sidhu's bank nears its first $1 billion
Customers 1st Bank of Wyomissing and Phoenixville agreed Friday to take over money-losing USA Bank of Port Chester, NY.
How much? "There's no cost. We acquired all the deposits and all the assets," and will "share in the losses" with the Federal Deposit Insurance Corp., says Richard Ehst, Customers 1st's president. ADD: FDIC expects to lose more than $60 million on the deal, which solvent banks will pay. Customers 1st has no estimate yet of how much it may lose.
Customers 1st (formerly New Century Bank) says it's raised $70 million in capital, and quadrupled assets to $800 million, since chairman Jay S. Sidhu, Ehst's old boss at the former Sovereign Bancorp, bought control from Steve Forbes' brother-in-law Kenneth Mumma and other investors last year.
"We're very grateful to the Federal Reserve and the FDIC for the opportunity," Ehst said. The bank's financial backers include London-based investor Bhanu Choudhrie, retired Teleflex Inc. medical-unit head John J. Sickler, Clipper Magazine president Steven J. Zuckerman, Alco Industries chief executive T. Lawrence Way, Sidhu and Mumma, plus ex-Sovereign director Daniel K. Rothermel.
Bank USA serves Westchester County, NY and Fairfield County, Conn., two of the richest suburbs in the U.S. But the two offices, "just literally a Par Four apart" in that country-club country, won't finance hedge fund managers, Ehst told me. "We're a bank for the 'mass affluent,'" with per capita incomes of $75,000 on up." (Not huge by NYC standards.)
I noted that being in a rich area didn't save USA Bank from losses. "They got in trouble because they ended up financing construction projects on large homes and land development," commercial real estate, Ehst said. "Small business and residential is our sweet spot." No construction loans? "No. No way. No commercial real estate" for Customers 1st.
In a statement, Sidhu promised "to take advantage of the void created by the banking crisis." More deals? "The market we like is New York, Pennsylvania, New Jersey, and Maryland," Ehst said. (Also down to Florida, according to the company's public filings; Sidhu is chairman of a Florida bank.) "If something attractive becomes available" there'll be more mergers. Though Customers 1st is also building new branches, in Bucks County, among other markets. Jim Collins, another Sovereign veteran, will run USA Bank, for now.