NCUA: Storms Lead To 'Manageable' PCA Spikes

Register now

From the regulator's perspective, credit unions affected by Hurricanes Katrina, Rita and Wilma largely have bounced back from the havoc wrought by those storms, but some issues still remain.

"There's a certain amount of anxiety on the Gulf Coast," said NCUA Region IV Director C. Keith Morton. "They are still somewhat beleaguered, they're short of staff. But we continue to work together with them, and they can overcome the challenges they face."

Morton said there have been five mergers in his region since the storms, most of which were in process before the storms hit.

"Some were because staffing after the storms was sporadic. Only one was due to financial concerns," he related. "Credit unions as a whole performed well, but there are some lingering issues."

For example, as would be expected, delinquencies and loan increases rose after Katrina battered the area. "But they were actually pretty manageable," Morton suggested. "Credit unions in the region have attracted a lot of deposits, and in some cases that has triggered PCA, but we are trying to be reasonable and work with them, because we know why this is happening. They've got net worth restoration plans in place."

But with stretches of New Orleans just as storm-battered nine months after the fact and the official start of 2006's hurricane season here, many credit union members have yet to return home and may never return. One credit union still hasn't returned to its own building, and a number of credit unions have decided not to reopen certain branches, not because the credit union isn't in a position to do so, but because the community the branch once served simply no longer exists.

The situation is less dire-but no less challenging-in NCUA Region III.

"Compared to Louisiana, I'm living in Nirvana," said Alonzo Swann, director of NCUA Region III. "My region is at a point that is much better than anticipated. Loan losses were not as great as we expected. Share growth is up 25% in Mississippi, but things are as stable as we could ever hope for."

Swann said there have been a couple of mergers in his region after Katrina, but they're not storm related. Indeed, one of the mergers was planned well before the hurricane and just didn't officially happen until after the storm had passed. "There are a couple of branches that are not opening, but all but one small credit union are back in their own buildings," he related. "The last one is a small credit union that is operating in a trailer on its property."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER