Two years ago, Eddy Arriola would walk out of Apollo Bank's Miami headquarters to face a half-empty condominium tower and patches of dirt.
Today that tower is filled with residents and two more condo projects are being built around the bank in a popular urban area called Brickell.
"I didn't expect it to happen this quickly," says Arriola, the $219.5 million-asset bank's chairman. "In hindsight, it shows us that Miami truly is incredibly resilient and is on par with international cities."
Other banks in South Florida are benefiting from foreign investors' purchases of residential lots. Total loans rose 2.2% in the second quarter from a quarter earlier at banks based in the Miami area, according to SNL Financial data compiled by the accounting firm Saltmarsh, Cleaveland & Gund. Loans grew 1.7% statewide.
The momentum building in Miami is unlike anything most local bankers say they have seen for a city recently considered more dead in the water than the rest of Florida.
"You used to go into work every day and wonder what the next piece of bad news would be; if it was one thing, you were lucky," says Dave Seleski, the president and chief executive of Stonegate Bank in Fort Lauderdale. "Now, when I go down to Miami on calls, it almost feels like there never was a recession."
Miami is gearing up for the fastest turnaround in the state, with lower real estate inventory and seven straight quarters of higher housing prices, according to the Miami Association of Realtors. To bankers this means opportunities for loan growth and a quicker shot at recoveries from foreclosed properties.
Miami had more profitable banks in the second quarter and posted the highest amount of year-to-date income among eight Florida regions, at $186 million, according to Saltmarsh Cleaveland.
Banks are reaching the point where they have enough earnings to sell off distressed assets and "take a hit" without it hurting capital, Arriola says. "It seems like banks are able to [afford] their losses now and move forward."
Banks based in the Miami area had the highest amount of year-to-date chargeoffs among eight Florida regions, at $461.6 million at June 30, according to Saltmarsh Cleaveland. Nonaccrual loans at banks based around Miami fell 5% in the second quarter from a quarter earlier.
"Anything with four walls and a roof moves pretty quick and usually for the appraised value," Seleski says. "We're moving properties in less than 90 days."
The resurgence is largely a result of foreign investors buying real estate in Dade and Broward counties rather than natural economic improvements, observers say. Miami historically has support from Latin American investors, but buyers in Italy, France, Hong Kong and Singapore have joined a growing group of investors looking to escape the global and European financial crisis.
"Quarter after quarter, [banks in] the South Florida region continue to show better progress than some other areas," says Paula Johannsen, a managing director in the Tampa, Fla., office of Monroe Securities. "Early on in the cycle we thought it was going to be ugly, but the [foreign] presence has really boosted inventory down there."
Miami-Dade had a 4.2-month supply of housing inventory in June, compared with 6.4 months nationwide, according to the Miami Association of Realtors. Miami's condo market has posted the greatest improvement. The median sales price of a condo rose 34% in June from a year earlier, though the median remains relatively low at $160,000.
"Last year, we sold more homes than ever and even higher than the peak of the real estate boom in 2005," says Lynda Fernandez, the vice president of public relations at the Miami Association of Realtors.
Marc Sarnoff, a Miami city commissioner, said in a speech in July that 15 to 17 cranes could be employed to build condos by the end of 2013, compared with just four cranes operating in the city now.
Still, there are concerns about whether foreign capital can sustain a full economic revival in South Florida. Investors are selective, preferring places near schools and international hubs. This could exclude some banks from the spotty boon and overlook cities in Florida that lack international appeal.
"You can be on one side of the expressway and see all these boarded-up houses, and then on the other side of the expressway not far away, there's Lennar [Homes] building new houses," says Carl Hudson, director of the Center for Real Estate Analytics at the Federal Reserve Bank of Atlanta.
Muting the recovery is the fact that foreign buyers are more apt to use cash than loans. About 65% of all home sales completed in June involved cash, according to the Miami Association of Realtors.
Such investors often put in 50% cash, and "anti-money-laundering laws might make it tougher for banks to lend to them directly," says Sam Haskell, a managing director at Sterne, Agee & Leach. "To the degree that local contractors are helping with the new construction, it creates jobs … and it should create ancillary loan demand."
Industry observers say demand is coming back.
Arriola says that he recently financed a pizza franchise owner who wants to build a fifth site in Brickell, where a slew of new condos are going up.
"It was only over the last quarter where we heard businesses saying, 'Let us expand,' " Arriola says. "We're still on the cusp of community banks taking advantage of this opportunity."