Eagle Remains Patient, Alliance May Still Sell as Virginia Deal Unravels

Eagle Bancorp Inc. seems content to stay on the sidelines, while Alliance Bankshares Corp. is apt to find another buyer after the companies agreed to call off a merger.

Ronald Paul, Eagle's president and CEO, used a Tuesday presentation at a conference in New York hosted by FBR Capital Markets to tout growth without acquisitions for the $3.2 billion-asset company. "The organic side is where we're probably going to go," he said, largely by opening branches in Virginia.

Still, Paul said in an interview that the Bethesda, Md., company is open to acquisitions. "We're still very, very opportunistic," he told American Banker. "We're looking and we'd like to find something."

Bill Doyle, Alliance's president and CEO, did not return calls seeking comment. He said in Monday's press release that "an affiliation with a strategic partner" still makes sense for the $535 million-asset company. "We intend to continue working with our financial advisor to evaluate our strategic alternatives," he said.

Frank Williams Jr., a bank investor in Falls Church, Va. who successfully lobbied to get representation on Alliance's board, said he plans to push the Chantilly, Va., company to find a buyer. (One of his nominees resigned from the board in June.)

"I intend to be proactive and talk to the board and talk to the officers of [Alliance] about where they should look and what they should be doing," Williams said in a Tuesday interview. "I don't know that I want to call it an auction, but Alliance should invite whoever might be interested to come in and look at the bank."

Eagle and Alliance said in a press release that the merger fell apart over "irreconcilable differences of opinion regarding a number of matters," though neither company provided details.

The deal had its share of challenges. The original terms, unveiled in July, called for Eagle, to exchange 0.43 shares of its common stock for each Alliance share, pricing the acquisition at about $31.2 million and a steep discount to the seller's tangible book value.

Soon afterward, two shareholder lawsuits were filed challenging the deal. The projected closing was also delayed until early next year, after Alliance was unable to get a proxy completed for a planned Dec. 7 vote. The original plan had the sale set to close by Dec. 31.

Paul was demure on the reasons for the split. "Irreconcilable differences, I feel like it's a divorce," he said at the FBR conference.

"We went through therapy and couldn't work out our differences, so we decided to split," he added. "Eagle had decided that there were some issues that we just couldn't accept and we were able to negotiate a mutual release with Alliance."

Paul was equally coy during the interview. "Alliance, they're good guys and I wish them well," he said.

For Williams, the deal's demise was welcome news.

"I'm not real disappointed that the deal fell through," Williams said. "I hope by opening up the process and talking to more people that we will command a higher price."

Paul offered investors some guidance for Eagle's plans for organic growth, saying during the FBR conference that Alexandria is the most-likely location for a new branch in northern Virginia. Eagle already plans to open new branches in Merrifield and Reston, Va.

"We'll sprinkle in where we feel there is a void," Paul said during the FBR conference. "But we're not big branch people. Branches are an expensive billboard. Once we have one or two more branches in northern Virginia, we'll have that market covered. I'd much rather be spending my money toward people, because they come with a set of relationships and a book of business."

Matthew Schultheis, an analyst at Boennig & Scattergood Inc., said he never considered the Alliance deal as essential to Eagle's strategic plan.

"I expect them to continue to look at deals, but not necessarily to pull the trigger," Schultheis said. "They're a very geographically focused company [around Washington]. If it doesn't work geographically, they're not going to touch it."

Carter Bundy, an analsyt at Stifel Nicolaus & Co., said he expects Eagle's growth plan "will likely entail organic efforts only to bolster its northern Virginia presence."

Bundy said that approach alone should supply plenty of growth opportunity because Eagle has proven that it can post healthy growth without acquisitions.

In the third quarter, Eagle had year-over-year loan growth of 33% and deposit growth of 29%.

The company's deposits in the Washington area grew 23.1% in the 12-month period that ended June 30, to $1.6 billion, according to the most-recent data from the Federal Deposit Insurance Corp.