Miami bank shifts to Plan B after merger collapses

Apollo Bank in Miami entered 2020 expecting to become part of a credit union yet ended the year as it began — on its own.

The $850 million-asset bank agreed in December 2019 to be sold to Suncoast Credit Union in Tampa, Fla., in what would have been the biggest deal of its kind. But the coronarius pandemic scuttled those plans last May, and the merger was mutually terminated.

So Apollo’s management team kicked off 2021 with an entirely different growth plan, for both the bank and the Miami area, in spite of the ongoing pandemic. More digital offerings and increased focus on commercial lending are in the works.

Another sale is highly unlikely, said Chairman and CEO Eddy Arriola.

“We’re only looking ahead with plans to grow for years to come,” Arriola said, noting that the $11 billion-asset Suncoast’s offer had been “too good to refuse” in terms of the price and assurances to keep Apollo’s employees.

Suncoast and Apollo never disclosed the price, though most credit union-bank mergers are cash transactions since the buyers have no stock to exchange. And the accounting for goodwill allows credit unions to pay higher prices than most potential bank buyers.

Apollo, which was not looking to sell when it was approached by Suncoast, took a step back after the deal fell through before deciding to forge ahead over the next decade as an independent bank.

Miami, Arriola said, is rebounding quickly.

Though the pandemic is still creating challenges, Florida’s opposition to strict lockdowns and the absence of a state income tax — along with favorable weather and Miami’s cosmopolitan allure — are helping the area recover.

Florida’s unemployment rate fell to 6.1% in December, down from 6.3% a month earlier and less than half what it was at the height of the pandemic, according to U.S. Bureau of Labor Statistics. Unemployment was also below the 6.7% national rate for December.

Technology firms, venture capitalists and entrepreneurs are fleeing Los Angeles, San Francisco, Chicago and New York, where taxes and pandemic restrictions remain high, and are coming to South Florida. They are bringing jobs and lending opportunities for banks in the market.

“We’re a really unique market,” Arriola said. “We started the recovery process much sooner and faster here, and it’s only getting better. The in-migration of businesses is strong and steady. … It’s bustling.”

While any indicators are anecdotal — official data will track months later — Arriola said new business development is strong. Office space is in demand, unlike many other large cities, and rent levels are holding steady. New office buildings are going up and construction cranes pepper central Miami, including in the city’s Brickell financial district, where Apollo is based.

“If you were to walk around Brickell, other than people wearing masks, I’m not sure you’d know we were in a pandemic,” Arriola said. “We look into 2021, we are very optimistic here in Miami.”

Against that backdrop, Arriola said, Apollo is upgrading its apps and its digital business banking platforms. It is actively hiring lenders in anticipation of a spike in demand as early as the second half of this year.

Apollo recently hired Miami banking veteran Ramon Rodriguez as its president — a newly created position — to oversee its lending and credit teams, client services and the global banking division. Rodriguez previously served as director of commercial banking and treasury management at City National Bank of Florida.

“My strengths are on the lending side, driving growth,” Rodriguez said. “That’s why I’m here.”

Rodriguez agreed with Arriola that there is an abundance of pent-up commercial loan demand in South Florida, along with a growing universe of wealth management opportunities. Big banks loom large in the area, but he said small and midsize borrowers value local decision-making and expertise.

Community banks focused on business lending are relatively scarce in Miami, Rodriguez said, leaving a wide-open runway for Apollo to double or even triple in size by focusing on organic growth over the next decade.

Apollo is open to revisiting M&A down the road — as a buyer.

But Arriola said a scarcity of community banks means there are few prospective sellers. The handful of attractive small banks in the area seem to share Apollo’s upbeat view, making it less likely that any of them will be willing to strike a deal.

Still, Arriola said, other credit unions are likely to make overtures to Miami-area banks. That fits into a broader narrative that overall M&A activity will accelerate in high-growth markets such as South Florida.

“We’ve had a lot of buyers say, ‘We’d like to get something closed by the end of 2021,’ ” said Kirk Hovde, head of investment banking at Hovde Group. “And that’s a big change from six months ago.”

Deal talks “continue to intensify, with the general consensus being that 2021 will see a flurry of activity to make up for what was a slow 2020,” said Jared Shaw, an analyst at Wells Fargo Securities.