Eagle Bancorp Inc. has optionality as it works to clean up its credit quality issues and fill two key C-suite roles.
The Bethesda, Maryland-based company is on the hunt for both a new CEO and chief credit officer after current President and CEO Susan Riel announced her departure for sometime in 2026 and former Chief Credit Officer Kevin Geoghegan stepped down, effective Dec. 31.
The departures come amid persistent credit issues related to Eagle's Washington, DC, office real estate portfolio that have been compounded by recent recessionary events in the region. In the third quarter, new issues in multifamily took investors and analysts by surprise and invited heightened concern. The company is working to fill the soon-to-be-vacant roles by reviewing both internal and external candidates, but it has other options too, such as selling, industry experts said.
"It's fair to assume that a sale of the whole company has to be on the table as well," Keefe Bruyette & Woods (KBW) analyst Catherine Mealor said in an interview, citing the industry's uptick in M&A in 2025.
When asked about the potential to sell to another bank during its third-quarter earnings call, which occurred prior to Riel's retirement announcement, the CEO said "the Board will focus on anything that adds value to our shareholders, and we'll consider whatever other options come our way."
Succession challenges are a common reason banks engage in M&A.
In July, Pinnacle Financial Partners Inc. President and CEO Terry Turner said succession planning is the only reason the company would consider M&A. About a week later, the company announced its merger of equals with Synovus Financial Corp., with Synovus' CEO set to remain at the helm of the combined company.
Other banks that sold while searching for a CEO successor include Heartland Financial USA Inc., which announced the retirement of its CEO in February 2024. Less than three months later, in late April 2024, Heartland's sale to UMB Financial Corp. was made public.
Hurdles to a deal
If Eagle eyes a deal, its buyer options could be limited.
"The buyer is going to have to come in and feel very comfortable with the credit and that it's marked appropriately," KBW's Mealor said. But Eagle's capital levels could "provide a cushion against any additional marks that a buyer might want to take and feel they need to take," she added.
The bank's common equity Tier 1 ratio was 13.58% at Sept. 30.
Investors' reactions to recent M&A transactions could also make buyers wary, said Andrew Liesch, head of bank strategy at executive search firm Travillian, in an interview.
"You want to make sure it's the right partner that you're going to get the right stock reaction in the transaction," Liesch said. If Eagle is "able to find a buyer and somebody that can also absorb whatever credit marks may be there, that would be something they should look at."
Eagle's stock price is already depressed, currently trading at 0.48x tangible book value, after reporting several quarters of disappointing credit quality results.
Year to date, Eagle's stock was down 32.4% as of market close Nov. 20, while the KBW Nasdaq Bank Index was up over 16% so far this year. The company's stock has taken large dips after each earnings report — down 11.4% after the first quarter, 21.2% after the second quarter and 13.7% after the third quarter results. The news of Riel's departure initially sent its stock down 8% in early morning trading Nov. 4, but it recovered some and closed down 2.9% compared with Nov. 3.
Advancing alone
Eagle also has the option to move forward independently with a new top executive and chief credit officer that could come in, clean up the loan book and shake up the credit culture.
A clean-up job might attract more candidates because the new CEO would be able to make their mark on the go-forward strategy, Liesch said. When stepping into the top role at a high-performing bank, "that new CEO is not going to be able to come in and make too much of a difference to the strategy that's already working like a well-oiled machine."
An ideal CEO candidate is someone who "has a track record of helping to improve bank profitability" that can "come in and really take a fresh eye to the company," Liesch added.
Mealor agreed, saying the best candidate would be an "expert in turnaround."
Some analysts believe the bank should mostly have its hands around its credit issues now following extensive internal and external credit reviews during the third quarter, which led to the uptick in net charge-offs and criticized and classified loans.
"Investors should be prepared for a new chapter at [Eagle]," Janney Montgomery Scott Research Director Christopher Marinac wrote in a Nov. 4 note, anticipating normalized charge-offs and provisioning in 2027.
But others are not so sure.
"Office issues have obviously been the thorn in [Eagle's] side, and the past couple of quarters have included some drastic, swift actions (and probably appropriate, in our opinion) that have helped the bank rip off the band-aid/turn the page here," Piper Sandler analyst Justin Crowley wrote in a Nov. 3 note.
"Nonetheless, we do think there are some lingering questions including what final marks look like (as disposals occur) and how the recent migration within the [multifamily] book shakes out," Crowley concluded.
