Banker & Tradesman photo / file

The same asset management company that raised concerns about Boston Private’s proposed sale now wants to know why Berkshire Bank decided to hire a new CEO instead of pursuing other alternatives, including a sale.

HoldCo Asset Management on Monday sent a letter to J. Williar Dunlaevy, Berkshire’s independent board chair, requesting full transparency regarding the process “that resulted in the hiring of yet another CEO – the fourth in less than three years – instead of pursuing other strategic alternatives including a sale or merger,” HoldCo said in a statement announcing the letter.

The letter was sent two weeks after Berkshire Bank announced that Nitin Mhatre, previously with Webster Bank, would become the new CEO effective Jan. 29.

HoldCo and its managed funds own 1,672,679 shares of common stock of the bank’s parent company, Berkshire Hills Bancorp Inc., representing approximately 3.3 percent of the Berkshire’s outstanding shares, according to HoldCo’s statement.

In its letter, HoldCo said it began acquiring Berkshire shares in August 2020 “because we believed they were significantly undervalued primarily due to (1) the market’s overly harsh assessment of the Company’s credit outlook and (2) investor concerns about senior leadership, namely the abrupt departures of two CEOs in the last two years without any explanation whatsoever.”

Berkshire CEO Richard Marotta had resigned on Aug. 10. The move came after Berkshire Bank took a $554 million goodwill impairment charge that created a $549 million loss for the bank in the second quarter.

The bank had announced at the time of Marotta’s resignation that the board would initiate a search for a new CEO. Marotta had replaced longtime CEO Michael Daly in 2018. HoldCo in its letter included Sean Gray as one of four Berkshire CEO’s. Gray, the bank’s president and chief operating officer, had been named acting CEO in August.

In its letter, HoldCo cited comments attributed to Berkshire Bank’s chief financial officer, James Moses, at a recent industry conference, noting that Moses reportedly did not believe that the board had considered a sale or partnership during the CEO search and thought Berkshire should have a shareholder buyback program in place.

The letter, which was signed by HoldCo’s co-founders, Vik Ghei and Michael Zaitzeff, asked why the board decided to hire a new CEO “to attempt a herculean turnaround of the bank,” and why it was reluctant to return excess capital to shareholders.

“The Board’s failure to evaluate all strategic alternatives, including a sale, merger, and/or capital return program appears to us to be a breach of its fiduciary duties that should outrage all shareholders,” Ghei and Zaitzeff said. “In short, it is time for the Board to open the kimono.”

In an emailed statement to Banker & Tradesman, Berkshire spokesperson John Lovallo said the company welcomes constructive dialogue with investors on ways to enhance shareholder value.

“The Board and management team are fully aligned on the long-term strategic direction of the Bank,” Lovallo said in the statement. “Under the leadership of our new Chief Executive Officer – Nitin Mhatre, a seasoned banking executive with a solid reputation for delivering performance with a purpose – we are focused on improving shareholder value through initiatives including footprint optimization, rationalizing our balance sheet, digitization and automation of processes for further efficiencies, focus on core products and services to enhance relationships and the customer experience and continued management of asset quality through this pandemic cycle.”

Lovallo added that the performance of Berkshire’s stock over last six months reflected the results of some of these initiatives. He also said that Berkshire was looking forward to engaging with HoldCo.