The sudden resignation of Philip Sherringham as the chief executive of People's United Financial Inc. in Bridgeport, Conn., on Monday has left observers wondering what went wrong at a company where so much is going right.

The consensus seems to be that Sherringham had a rocky relationship with board members, some of whom are frustrated that he did not deploy the $22 billion-asset People's excess capital quickly enough.

"He's a marvelously talented executive in many ways that made a big contribution, shepherding People's through a large public offering and a major acquisition," said John Carusone, the president of the Bank Analysis Center Inc. in Hartford, Conn. "It has always, however, been rumored that there has been a cultural strain with Mr. Sherringham at the helm of the ship."

People's has one of the cleanest balance sheets in the country — its ratio of nonperforming loans to loans stood at 1.36% at March 31, and its tangible common equity ratio was 18.6%. And it's been sitting on a mountain of excess capital since completing a second-step conversion three years ago that raised $3.44 billion.

But despite its promise to double or triple its size through acquisitions, People's has been unable to leverage the capital, and its share price has plateaued.

Some observers said People's may have felt that it had to make a change and Sherringham was the most visible change it could make.

"It's like in baseball, you get rid of the manager," said Richard Weiss, an analyst with Janney Montgomery Scott.

Sherringham joined People's in 2003 as chief financial officer, and took over as chief executive when former CEO John Klein died in early 2008 after a four-year battle with cancer. When the financial markets started melting down, investors looked to People's to buy struggling franchises. It did three acquisitions, but that's not as many as some expected.

In 2008, People's acquired the $3.8 billion-asset Chittenden Corp. in Burlington, Vt. In February, it closed the acquisition of Financial Federal Corp., an equipment financing company with $1.5 billion of assets. And on April 16, it picked up its first failed bank, the $237 million-asset Butler Bank in Lowell, Mass.

"One could argue that a lot of opportunities have been missed by that bank," said Damon DelMonte, an analyst with KBW Inc.'s Keefe, Bruyette & Woods Inc. "I think maybe the board recognized that and felt that it was time for them to move into a different direction."

George Carter, People's chairman, said as much during a conference call Monday.

"Despite our strong position today, as we look forward toward the future, the board believes that new leadership is necessary to take the company to the next level and to realize its full potential," he said.

People's chief administrative officer, Jack Barnes, will fill the CEO position while the company launches a national search for a replacement.

Carter said Sherringham's departure was not triggered by a single event, and that the board had been mulling the decision to replace him "for a few weeks." He also made clear that People's would not change its strategy of pursuing whole-bank acquisitions and failed-bank deals.

When asked if the board was unhappy with the pace of capital deployment, Carter hedged.

"I wouldn't say that we were unhappy," he said. "I would say that we are extremely interested in moving forward to hopefully make the right acquisition."

Among the factors that may have played into the decision was a difference in priorities, said Matthew Kelley, an analyst for Sterne Agee & Leach Inc.

Sherringham wanted to focus on large acquisitions outside People's markets, Kelley said. But the board wanted to pursue a more comprehensive strategy, including in-market acquisitions, more substantial organic growth and potential stock repurchases.

"I think it was a reordering of the priorities of how to deploy the capital that ultimately led to the difference of opinion that has resulted in his departure," he said.

As to who will lead People's going forward, Carter said the temporary CEO, Barnes, has thrown his hat in the ring.

Mark Fitzgibbon, an analyst with Sandler O'Neill & Partners LP, said he expects interest from outside candidates.

"I think it's a dream job," he said. "You have a large bank with a clean balance sheet and a war chest of capital. I would think there'd be a long line of applicants for this job."

People's would not provide contact information for Sherringham, and attempts to reach him were unsuccessful.

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