...And Advice From A Fla. CU That Was Hit By Andrew

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What can credit unions affected by Hurricanes Katrina and Rita expect over the next few months?

Many have drawn parallels between these storms and 1992's Hurricane Andrew, a category 5 storm that hit Miami-Dade County, Florida. So The Credit Union Journal asked Tropical Financial CU CEO Greg Blount to discuss what lessons learned from that experience can be applied to Katrina and Rita.

"First of all, you have to understand the difference between Andrew and Katrina," Blount prefaced the discussion. "Andrew was an extremely powerful storm, but it hit a relatively small area compared to Katrina, and it hit and area that wasn't as densely populated. So, there are differences."

But there are also similarities.

"Very early on we had a huge influx of deposits, primarily from insurance checks. We had about 10% increase in deposits within the first six months after the storm," Blount related. "A lot of it was insurance, which meant that a lot of that money left the credit union at some point, but we were flush with cash for a very long time, and in a way, that massive influx of deposits never entirely left."

On the lending side, Tropical had a number of members looking to replace vehicles that were totaled by the storm. "We had a number of car loans that were paid off by insurance checks," he observed. "But in a lot of cases, you'd see a $10,000 loan paid off, and then the member went out and bought a $20,000 car to replace it, and they needed a loan for that."

The mortgage side offered up a different mix.

"On the mortgage side, things were a bit scattered. There was a large number of people who chose to buy elsewhere because of how long it was going to take to rebuild here," he explained. "About 25% of our own staff was homeless, and it was 12 to 18 months before they could move back into their established homes or neighborhoods. But there was fairly adequate housing in Broward County just to the north of us. I'm not sure that would be the case today because South Florida is so much more built up than it was back then."

Another challenge credit unions affected by Katrina have to look forward to: helping members deal with contractors as they seek to repair and rebuild their homes. "We actually hired a full-time construction person to give our members guidance on the proper permitting, how to make sure they were working with reputable builders, etc.," Blount recalled. "For members in the impacted zip codes, we offered a six-month waiver of payments to give them some time to get their lives together before they had to start making payments, and we also made emergency loans, usually about $1,500 with no interest or payments for six months. For most people, six months was adequate, they knew by then if they had a job, at the very least."

One of the surprises to come out of Andrew: a much smaller spike in delinquencies, bankruptcies and charge-offs than was expected.

"But New Orleans is different. Andrew was a powerful, destructive storm, but at least the area didn't literally drown," he noted. "Some of the difficulties, in conversations with my associates, is that New Orleans had a large number of very small credit unions, and it will be very difficult for (them) to overcome some of these circumstances. To the best of my recollection, we didn't lose a single credit union in Dade County. I just don't know that they can come back from this without dramatic help from the industry, the regulators and the government."

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