Daddy Issues
NYSE: CUBI
It’s not uncommon to see a son take over the family business from his father but it’s rare to see this occur in public markets.
The dad in question promoted his son to CEO and granted him a ton of performance-based RSUs based on an aggressive stock price target. This definitely raises an eyebrow but I find the timing of the grant even more peculiar.
Customers Bancorp Inc. (CUBI), formerly known as New Century Bank, was started in 2009 when Jay Sidhu helped recapitalize the bank coming out of the GFC. Jay had previously been the CEO of Sovereign Bank and grew CUBI through traditional acquisitions, as well as acquiring banks directly from the FDIC.
Jay’s history is not without controversy, as one can see in the slide deck that Relational Investors put out in 2006 during his time at Sovereign Bank. Many of the problems stemmed from shortfalls in corporate governance, as well as related-party transactions. I’m curious if Mike has any insight here given that he was working at Relational around this time.
While a history of governance issues isn’t something to get excited about, I think that Jay’s background and willingness to push the limits is informative of what he’s likely to do in the future. At the end of the day, people don’t really change.
Jay owns and controls ~6% of CUBI today, but his influence over the board likely eclipses this percentage by a significant amount. For example, Daniel Rothermel was the lead director at Sovereign Bank and is currently the lead director at CUBI, in addition to sitting on the compensation committee. The board has a staggered structure in place and recent changes cement Jay’s power over the board.
On July 25, 2025, CUBI announced that Jay is transitioning to executive chairman, while his son Sam will succeed him as CEO. To be fair, Sam has been CEO of Customers Bank since July 2021 (Customers Bank is the wholly owned operating subsidiary of CUBI).
Per the press release, this transition is set to occur on January 1, 2026 and Sam received a large equity grant in connection with his appointment.
What caught my eye is that Sam was given this large grant on July 23, 2025 (per the Form 4), but his appointment isn’t effective until January 1, 2026. Five months of timing difference is a bit peculiar.
The composition of Sam’s one-time equity grant was also intriguing:
225,000 performance-based RSUs
Vest upon two hurdles:
$125 stock price hurdle during the performance period starting January 1, 2026, continuing five years thereafter
Time vesting condition if he is employed as of January 1, 2031
If the incentive award vests, a two-year holding period will apply
During the first three years of the performance period, Sam will not be entitled to receive any one-time grants outside of regular, annual STIP and LTIP grants
This grant sticks out to me for a few reasons:
CUBI stock traded at $62.55 on the grant date, which would require a doubling of the stock price over the next five years to achieve the price hurdle of $125
If achieved, the award is worth ~$28MM based on a stock price of $125
CUBI’s CEO has typically been paid ~$1MM in salary and ~$2MM in equity awards. This one-time grant is very large.
The grant isn’t being given on January 1, 2026, the start date for the performance period. It’s being given on the date of the announcement, five months earlier.
CUBI has never awarded a grant with a stock price hurdle, other than this.
The company’s performance-based RSUs are typically based on return on equity, relative TSR, and average non-performing assets.
As a new father myself, I don’t understand why he’d set the bar so high on his son. Jay (the father) has a history of bending the rules from a governance perspective, so why not do the same with your son’s equity award.
As of today, CUBI trades at ~1.1x book value, and has typically earned a ~10% return on equity. Today’s most recent book value of ~$56 compounded at 10% per annum for the next five years would result in a future tangible book value of ~$90. Assuming all else is constant, CUBI would then need to trade at ~1.4x book value for the performance-based RSUs to pay off.
Is this a case of a father making things overly difficult for his son, or does he simply want it to appear that way knowing that blue skies are ahead?
“♡ Like” this piece if your dad didn’t give you 1-foot hurdles.