During the worst of the flooding in the summer of '93, six feet of water seeped into the first floor of Peoples Savings Bank of Rhineland, Mo., and employees came to work in a boat.

The bank, however, managed to keep its head above water -- and a year later it's doing just fine.

Flood insurance helped to repair the facility, but the bank -- along with much of the town's former business district -- likely will move to higher ground.

"We're fleeing, so to speak," said Carl Lensing, president and chief executive of the $46 million-asset bank, which sustained about $100,000 in damage.

You wouldn't know it from Mr. Lensing's experience, but midwestern community banks aren't doing as poorly as some might have predicted after 1993's mammoth floods. A year after the worst flooding of the century, bankers say the system of economic damage containment worked, and in some cases is even creating economic boomlets in the new lay of the land.

"Based on the loan portfolio, none of them are hurting," said Warren Heller, director of research for Veribanc Inc., a Wakefield, Mass., bank research and rating firm.

Using third-quarter 1993 data, he found last year that most banks in the 431 Midwest cities and counties affected by flooding of the Mississippi River and its tributaries incurred miinimal damage from their borrowers' problems.

By the fourth quarter and beyond, Mr. Heller said, he saw no statistically discernible effect from the flood.

No banks have failed because of the flooding, he said, and it doesn't appear that any will. "The banks in the Midwest are unusually healthy," he said.

Earl Fuller, an agricultural economist at the University of Minnesota, concurred. "There really isn't a lot of stress on the local banking community." He applauded the many assistance program made available to stricken communities.

Help has come through government programs like the Small Business Administration's disaster assistance program, which as of Aug. 28, 1994, had approved more than $626 million in low-interest loans to Midwest flood victim.

And the Department of Agriculture has paid out nearly $1.5 billion in crop-loss payments, with more than half that amount going to Minnesota and Iowa.

"The government action to maintain the economic viability of the farm communities and recreate the infrastructure in the community were adequate to really maintain cash flow very well," Mr. Fuller said. "Probably the rural economy is as strong as it was had there been no flood."

In addition, farm income and spending, while depressed from a year ago, is improving, said Edward Lotterman, an agricultural economist with the Federal Reserve Bank of Minneapolis.

Rates of loan renewal and extension still also are slightly below normal, but better than last year, he said. But the loan restructuring that has occurred "seems to have taken the emergency aspect out of it," he said.

Even Frank Ziegler Jr., who had to redo the interior of $400 million-asset Lemay Bank and Trust Co., St. Louis County, Mo., found a silver lining to the destruction.

"I'm probably more excited about our future than I was before," said Mr Ziegler, president and chief operating officer. "Nobody wants to say, `I'm glad it happened,' [but] I think it's going to give us some opportunities to really grow."

He recalled the details of last summer as if it was yesterday.

A tributary of the Mississippi River backed up and the bank's electricity was shut off. Only data processing and proof operations remained in the bank's main office -- in one room lighted and cooled by diesel-powered generator.

Then, employees had to evacuate the building because propane tanks in water nearby could have ignited.

Because no one was left to maintain Lemay Bank's pumps, three feet of water invaded the main lobby, among other things, damaging the contents of about 1,600 safe-deposit boxes.

Mr. Ziegler declined to disclose a dollar amount of damage because the bank is involved in a lawsuit regarding the propane tanks that forced the evacuation. He called it "a substantial loss."

Lemay also will move to a building it is erecting in a flood-safe site. "It actually puts us in a more viable area," Mr. Ziegler said. That's not hard to do, since its current two-block commercial district is virtually gone. In addition, a nearby bridge has been down for repairs, limiting customer traffic.

Yet people visited other locations. "Profitabilitywise -- even with the losses we suffered -- we almost matched profits from the year before," Mr. Ziegler said.

In Illinois, $17 million-asset State Bank of Prairie du Rocher, spent $6,000 on flood-related expenses such as boarding up windows, sandbagging and sealing windows and the vault with silicone, and temporarily moving operations to a former ice cream shop in nearby Ruma.

"We physically moved everything out of the bank for three-and-a-half weeks," said David Barbeau, executive vice president. But the mandatory evacuation was precautionary and the levee never broke. Still, the expense was worth it, he said. "That's really negligible when you consider you could've lost a $400,000 building," Mr. Barbeau, who isn't expecting major loan losses from customers.

In Wayne Finnern's part of southern Minnesota, the problem wasn't overflowing rivers. It was June 1993 rainfall more than three times the usual four inches, flooding crops.

"Crops here ranged from 20% to 80% of a normal yield," said the president and chief executive of $34 million-asset Farmers State Bank, Madelia, Minn.

But again, crop insurance and disaster assistance prevented major problems with borrowers. "We did have to restructure 10% of our loans," Mr. Finnern said. "It wasn't like it was the end of the world."

Back in Rhineland, Mo., the Missouri River flooded around July I and didn't completely recede until October.

Although Peoples Bank never lost power or ceased operations, it moved safe deposit boxes into a trailer with a 24-hour armed guard.

And previous lesser flooding in the area had prompted the bank to open a branch in nearby Herman and to add a second floor where important documents are kept.

So when the water came in, they went upstairs. Mr. Lensing, too, said he hasn't seen deterioration of credit.

"I never thought it would affect [the bank! economically," he said. "We have no losses. Our customer base is extremely stable." But, the bank probably has missed growth opportunities from lost business, he said.

"It's kind of like having a stint in the military -- your career is put on hold," Mr. Lensing said. "We couldn't do aggressive banking under those circumstances."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.