Activist investor Diligence Capital Management is doubling down on its suggestion to replace three board members at Bethesda, Maryland-based EagleBank with directors who have “extensive” experience with bank turnarounds.

“Diligence believes that at this stage, it is critical for the board to include leadership with direct experience in bank restructurings, credit rehabilitation and remediation of bank regulatory issues,” the Salt Lake City-based investor wrote Friday in an open letter to Eagle.

Diligence first floated the board changes – along with four proposals – in December, after Eagle had reported consecutive quarters with earnings losses of $69.8 million and $67.5 million, respectively. The bank, which leans heavily into commercial real estate, disclosed a slight rebound in January – $7.6 million in profit for the fourth quarter – but is on the hunt for its next CEO.

Eagle CEO Susan Riel, who helped establish the bank in 1998, said in November she would retire this year but stay in her role during the search for her successor. She did, however, step down as chair of the bank, and Eagle’s then-lead independent director, Jim Soltesz, stepped in to head the board.

Diligence bought Eagle stock last July. Riel’s departure and the separation of Eagle’s CEO and chair roles were among suggestions the activist investor made to the bank as far back as October.

“We were encouraged with the quick progress,” Jim Abbott, Diligence’s CEO and chief investment officer, said in Friday’s letter. “However, we are disappointed at a lack of timely adoption of our other proposals.”

Diligence wants Eagle to develop a three-year performance improvement plan with specific benchmarks — and for executive compensation to tie into those metrics. It also wants transparency into the bank’s plan to dispose of problem loans, and it is pushing for the chair and CEO roles to continue to be separate until certain key performance indicators are met.

Eagle’s woes have persisted for some time. The bank agreed in 2022 to pay a $22.9 million penalty to the Securities and Exchange Commission and the Federal Reserve to settle claims that its former CEO, Ronald Paul, engaged in insider lending. Paul retired in 2019, citing health concerns. He has since been banned from working in the banking industry and fined $521,000.

In its letter Friday, Diligence said Eagle has declined three times to discuss with the activist investor a plan to enhance governance, strengthen risk oversight and improve disclosures and accountability.

“Diligence strongly prefers to engage with companies privately and in a collaborative manner,” the investor said Friday. “However … Diligence [now] believes that more public discourse is warranted in the interest of transparency to all shareholders, to expedite a process that appears to have slowed since November.”

At least one activist investor campaign – HoldCo Asset Management’s push last July for Dallas-based Comerica to sell – had some measure of success. Fifth Third bought the bank for $10.9 billion, although HoldCo sued over the deal, asserting that Comerica could have received a better deal.

Other campaigns have made waves, too. Dunkirk, New York-based Lake Shore Bancorp last week agreed to elect a board member of activist investor The Stilwell Group’s choice at its next annual meeting.

Abbott told American Banker on Monday that, as he understands it, the search firm Eagle hired to help find its next CEO narrowed its candidates to a list of three by January.

"Time is of the essence," Abbott told the publication. "We don't have all day to put somebody in place."

Apart from that, however, Diligence continues to push three board candidates for election this spring at Eagle: Keith Maio, a former chief risk officer at Salt Lake City-based Zions Bancorporation; David Hooston, who has served as CFO at four bank holding companies; and Abbott, who previously served as director of investor relations and external communications at Zions.

Hooston was among the finalists for Eagle’s CEO role as of January, Abbott confirmed to American Banker.

Soltesz, Eagle’s chair, is among the board members Diligence wants to replace.

Eagle said in a statement that it maintains regular dialogue with its shareholders.

"We welcome their views and are always open to ideas that may support our success," the bank said.

Diligence, in its letter, emphasized that it doesn’t want a proxy fight.

“It is not in the best interest of the Company or its shareholders to engage in an expensive and highly distracting proxy contest if a reasonable collaboration agreement can be achieved,” the investor wrote. “All energies should be precisely focused on expeditiously restoring Eagle Bancorp to a much healthier institution.”