As Tropical Storm Erika spins toward Florida, credit unions are remembering Hurricane Katrina, which made landfall on the Gulf coast ten years ago Saturday.
Though much of the news coverage related to Katrina has focused on New Orleans, Mississippi also endured catastrophic loss of life and damage to property. In Pascagoula, 92% of the homes were flooded (a much higher percentage than New Orleans), while Waveland and Bay St Louis had fewer than five properties undamaged. Moreover, the entire state of Mississippi was without power for at least a week.
Gulf Coast Community: Mississippi Drowning
One of the worst-hit credit unions in the region was Gulf Coast Community Federal Credit Union, of Gulfport, Miss., a city that suffered immense damage during the storm.
Debbie Pidek, executive vice president of communications at the $86-million credit union, said that while no staff were killed by the floodwaters and storm, of their three branches, "one branch was totaled, another had water [damage] as a result of the storm surge, and our main office-branch had roof damage. "
But Pidek related that her credit union began serving members at its headquarters within two days of the storm "even though we were still without power."
Thankfully, because Gulf Coast Community's data center is located in another state, it was able to provide real-time balances for members as soon as electricity was restored.
"Several weeks later we were able to serve members at the other branch locations through mobile branches that were generously donated by credit unions in other states," citing, among others, ENT FCU, a $4.2-billion credit union based in Colorado Springs, Colo.; and Kellogg Community FCU, a $453-million institution based in Battle Creek, Mich.
Pidek also noted that Gulf Coast Community apparently endured no instances of fraud, nor did the credit union suffer any significant losses in membership.
"In fact, our membership growth has been steady and positive in the years following Katrina," she stated.
Gulf Coast Community received a great deal of assistance from the Mississippi Credit Union Association (MCUA) as well as the National Credit Union Foundation (NCUF), she added.
Naturally, Katrina served as a wake-up call for Gulf Coast Community in terms of preparing for future natural catastrophes.
"We have always had a disaster recovery plan but based on some of the lessons learned from Katrina, we have upgraded the plan and now [stage] mock disasters on an annual basis," she explained. "One specific aspect of our plan that was updated [after] Katrina is that we now have satellite phones ready for our managers since one of the more difficult issues following Katrina was the lack of any viable communication channels. Both cell towers and land-lines were down so we were unable to easily communicate with our staff."
And since many employees lost their homes and everyone in the southern Mississippi area suffered a loss of electrical power for an extended period, Gulf Coast Community has installed a shower facility for employees as well as a natural gas generator that will provide power to the entire main office branch should it be needed.
"We believe we are as prepared [for another disaster] as any organization possibly can be," Pidek concluded.
Navigator Navigates Perilous Waters
Robert Fertitta, now president & CEO of Navigator Credit Union, a $301-million institution based in the southern coastal town of Pascagoula, Miss., witnessed the rage of Katrina up close when he was still CFO of the CU.
Navigator, he said, had two branches that were nearly completely destroyed, including the administration building, which housed the credit union's IT center, while another three branches were flooded by the rising waters.
On the whole, Fertitta, estimates his credit union incurred direct financial losses of about $2.5-million, most of which was insured. "The largest uninsured expenses were probably legal expenses in dealing with an insurer," he explained.
Still, Navigator was able to deliver services to its members (even those who had fled the area) soon after Katrina ravaged the Gulf Coast, through some creative and innovative means.
"[Members'] ATM and debit cards continued to work without interruption," he said. "Just prior to the storm making landfall, a positive balance file (PBF) was provided to our ATM/debit card processor, which stood in for our core processors and approved transactions based upon the actual account balances contained in the PBF. Once the interface between the core and the card processor was restored, those transactions posted to the core."
Indeed, on Sept. 1, just three days after Katrina made landfall, Navigator was able to open outlying branches using trial balance information and hand-written receipts. "Even though there was not any electricity nor working phones or data lines, the Gautier branch was opened with tables in the parking lot. Again, using a trial balance and hand-written receipts, staff began distributing up to $250 and handing out water provided probably by [Federal Emergency Management Agency] to those standing in a block-long line."
Fertitta also noted Navigator's core system was restored at its "hot site" near Atlanta, Ga., more than 500 miles away. "Each night, the hand-written receipts were ferried to Atlanta with a new trial balance exchange in a parking lot midway between Gautier and Atlanta," he noted. "With the help of LGE Community Credit Union of Marietta, Ga., ACH [Automated Clearing House transactions] and checks were posted from a file from the Federal Reserve. This was the normal routine until electricity and data lines were restored about two weeks after the storm. At about the same time, a call center was set up in Mobile, Ala., with employees being transported there each day."
Nonetheless, one Navigator branch never re-opened and another took more than a year to be rebuilt. During that time period, employees were spread out over an 80-square-mile area at wherever space could be found.
"As CFO, my office consisted of my car and a cell [phone] which began working after about a week," he quipped.
In addition, thousands of people (including credit union employees) fled the coast and never came back, resulting in membership losses. However, Fertitta asserted such resulting membership losses were not a "critical issue" for Navigator.
Fertitta praised the assistance he received not only from the Mississippi National Guard, but also from other credit unions, including, among many other institutions, Tinker Federal Credit Union of Shawnee, Okla. (which sent an RV that had office space and an ATM); Redstone Federal Credit Union of Huntsville, Alabama, and Boeing Wichita Credit Union (now Meritrust Credit Union) of Wichita, Kan., both of which sent mobile ATMs as well as staff to meet and assist members at its sponsor's facility.
As for future catastrophes, Fertitta asserted Navigator has had a disaster recovery plan in place for more than 20 years and successfully implemented and restored a core system in 1998 after Hurricane Georges with "little interruption of service" to members.
Navigator has also had flood insurance for years prior to Katrina and may have been the only credit union on the coast to have had it during Katrina. "We have refined our disaster recovery system multiple times to include the latest technology that allows our core to fail over to another site," he stated. "Additionally, plans are continuously updated to quickly restore our multiple delivery channels."
Interestingly, according to Filene Research Institute, in the months after Katrina, while New Orleans lost credit union members, Mississippi-based credit unions actually gained membership
"Some areas in Mississippi that are on higher ground took in refugees from the New Orleans area and were quicker to rebuild," said Ben Rogers, research director at Filene. He added that the potential membership base in the Mississippi area grew by 11.6%, while the New Orleans potential membership base declined by 9.8% in the months after Katrina.
One of the key players in the Mississippi credit union movement, Charles Elliott, president and CEO of MCUA, commented that to truly understand the impact of Hurricane Katrina, "you must comprehend that people lost their past, their present and their future. For some, there was no evidence they ever existed."
Elliott further noted that CUNA, CUNA Mutual, credit union leagues, state foundations, credit unions, corporates, vendors, and individuals throughout the country contributed well over $3 million through the National Credit Union Foundation.
"We had 144 credit union employees in Mississippi that lost their homes and over $1 million in grants were distributed to them," he said. "For most of them, this was the only money they received from any source We also provided group and individual counseling to approximately 550 employees. We delivered motor homes, cash and just about everything else that was needed."
