Pandemic halts Suncoast Credit Union's acquisition of Apollo Bank

Dive Brief:

Tampa, Florida-based Suncoast Credit Union and Miami-based Apollo Bank terminated their merger agreement this week due to the impact of the coronavirus pandemic, the credit union's CEO, Kevin Johnson, told Banking Dive on Wednesday.
Suncoast, Florida's largest credit union, signed a definitive agreement to acquire Apollo Bank in December. The merger would have positioned the credit union to expand its footprint into the Miami market. Terms of the deal were not disclosed.
The deal's demise further puts the brakes on a larger trend of credit unions scooping up banks. A record 16 such tie-ups were announced last year, nearly double the nine from 2018. Six of last year's 16 deals involved Florida institutions.

Dive Insight:

Only two credit unions have announced bank acquisitions in 2020. Wings Financial Credit Union, based in Apple Valley, Minnesota, agreed in February to buy $224 million-asset Neighborhood National Bank. Tinker Federal Credit Union in Oklahoma City last month agreed to buy $285 million-asset Prime Bank of Edmond, Oklahoma.

A third deal was stifled in January, when the Colorado Banking Board rejected Elevations Credit Union's attempt to buy Cache Bank & Trust. Just days before the board was set to vote on the tie-up, the Colorado Bankers Association wrote a letter arguing that credit unions can't be "authorized purchasers" of banks, according to language in state statutes.

Suncoast’s planned purchase of Apollo Bank would have accelerated the credit union's expansion into the desirable Miami market, Johnson told Banking Dive in December.

"The Miami market is the most populous market in the state and we just felt like Suncoast, being what it is, we owe it to Florida and Miami to have a presence down there to offer great financial services options to those consumers in that market," he said.

The coronavirus pandemic, however, affected the value of the deal, Johnson said.

"The COVID-19 virus changed the value of our agreement and left us with an unpredictable future," he said. "Thankfully, while we regret the situation, Apollo and Suncoast amicably agreed that termination of the agreement was the most viable solution."

Apollo Bank Chairman and CEO Eddy Arriola said, given recent events, the position of the regulatory bodies changed as it relates to the deal, impacting timing.

"[I]t became quite clear that we weren’t going to be able to close on the time frame expected," he told the Miami Herald.

Johnson said it is possible the two entities could revisit the merger once the pandemic is over.

“From the beginning, we have appreciated the similar values both organizations hold, so anything is possible, but there is no agreement or understanding to do so,” he said.

The credit union still plans to pursue its expansion plans when conditions improve.

"When the time and circumstances are right for it, yes, we will pursue our goal of growing our footprint, bringing the value and values of credit union membership to untapped markets, including Miami," Johnson said.

Michael Bell, a lawyer at Howard & Howard in Royal Oak, Michigan, told Banking Dive last week that acquisitions, for a large part, are "not killed but paused" for the duration of the pandemic.

"Depending on when [the crisis] ends, I expect all of those things that are paused to heat right up. So either the end of this year will be really busy or 2021 will be busier than it was going to be."

The financial health of potential buyers and sellers has not been holding up deals, Bell said. Rather, bank and credit union resources are tied up dealing with the crisis, he said.

Most CEOs are more focused on protecting their employees and customers than looking at deals, Dennis Holthaus, a managing director at Skyway Capital Markets in Tampa, told Banking Dive.

"Buyers are certainly on hold right now, but they are still interested in looking at acquiring a bank as a means of gaining scale and expanding their field of membership," Holthaus said. "But they also need to see how this environment will impact their own earnings and capital levels."

Sellers, meanwhile, are also sitting on the sidelines, possibly facing less favorable pricing than they would have found a few months ago.

Credit union-bank purchases have been met with pushback from community bankers and trade groups who say tax exemptions give credit unions an unfair advantage.

Thirty-two credit unions have acquired bank assets over the past seven years, National Credit Union Administration Chairman Rodney Hood told the House Financial Services Committee at a December hearing.

The Independent Community Bankers of America has slammed the practice, and accused some credit unions of neglecting their mission to serve low-income households.