Activist Investor, Diligence Capital Management, Seeks Board Shakeup at Eagle Bancorp
Diligence Capital Management, an activist investor, is advocating for a board overhaul at Eagle Bancorp, a Maryland-based lender grappling with office loan issues and presently in search of its next CEO. This initiative by Diligence Capital Management, which owns 27,500 shares in Eagle, is the latest instance of activist investors publicly advocating for changes at banks they perceive as underperforming. The firm is calling for the appointment of directors who have experience in bank turnaround, with a particular focus on James Soltesz, the current chairman of the board.
Why the Proposed Change?
James Abbott, CEO and chief investment officer of Diligence Capital Management, expressed his concerns regarding Eagle’s time-sensitive problems. Abbott argues that Soltesz lacks the necessary experience to address these issues, and he is keen on seeing individuals with bank turnaround expertise leading the company. “It would be like throwing me, who has zero NFL experience, into an NFL football game and saying, ‘Go try to win,’” Abbott stated.
Diligence’s campaign at Eagle resonates with a growing trend of activist investors pushing for changes at publicly traded banks they identify as underperformers. Examples of such activism in the past year include HoldCo Asset Management’s public confrontation with management at Comerica Inc., KeyCorp, Columbia Banking System, Eastern Bankshares, and First Interstate BancSystem.
The Proposed Candidates
In an open letter to Eagle’s board, Diligence proposed three candidates as directors: David Hooston, a chief financial officer at four bank-holding companies; Keith Maio, a former chief risk officer at Zions Bancorp; and Abbott himself, who previously served as Zions’ director of investor relations and external communications.
Eagle’s Response
Eagle, in a written statement, affirmed its commitment to maintaining an open dialogue with its shareholders, including Diligence. The bank stated its willingness to consider ideas that may enhance its success and expressed its anticipation to continue engaging with Diligence.
Eagle’s Underlying Problems
Eagle’s issues can be traced back to 2019 when its founder, chairman, and CEO, Ronald Paul, resigned amidst allegations of improper insider lending. The COVID-19 pandemic also took a significant toll on the bank. The pandemic-induced low occupancy rates in many office buildings posed challenges for lenders like Eagle with outsized exposure to commercial real estate.
Going Forward
Diligence Capital Management’s push for a board shakeup at Eagle Bancorp signifies an increased trend of activist investors demanding changes in publicly traded banks they view as underperforming. This move by Diligence could potentially set a precedent for other activist investors to demand similar changes in other banks.
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