Fraudulent activity at New York-based payroll company could be behind a multimillion-dollar loan default at Berkshire Bank, according to an SEC filing by the bank’s holding company.

Berkshire owns a participating interest of approximately $16 million in a commercial lending arrangement, Berkshire Hills Bancorp revealed in an 8-K filing on Friday, Sept. 20. The lead lender in the arrangement has notified Berkshire Bank that the loan recently defaulted “due to potentially fraudulent activity,” according to the filing.

The Albany Business Journal reported on Monday that the loan involves MyPayrollHR, a cloud-based payroll and human resources company that operated out of Clifton Park, New York, and shut down in early September. Pioneer Bank was the lead lender for MyPayrollHR.

Holding company Pioneer Bancorp said in a Sept. 11 SEC filing that the total outstanding loan amount was $36 million. Like Berkshire Bank, Pioneer Bank has a $16 million exposure in the outstanding loan amount. Pioneer Bank also had $19 million in deposit activity, according to the filing.

Berkshire also expects the situation will reduce its third quarter net income and net income per share, the filing said, but the bank has no other accounts with the borrower.

“The bank believes that this incident, as it relates to the bank, is isolated to the subject lending arrangement,” the filing said. “The bank does not have any other accounts or business arrangements with this borrower, its related entities, or its principals.”

Berkshire Bank did not responded to requests for comment Monday. The FBI and New York’s Department of Financial Services are investigating MyPayrollHR.

Berkshire Hills Bancorp’s stock price was down between 3 percent and 5 percent for much of the day on Monday.

Berkshire Bank Faces $16M Exposure After Commercial Loan Defaults

by Diane McLaughlin time to read: 1 min