As the daily news reports from Louisiana and Mississippi attest, Hurricane
Katrina has had a devastating impact on the lives of innumerable people. In
the face of one of the nation's worst natural disasters, credit unions
need to re-establish their presence in the affected areas as soon as possible
to provide members and their families access to their savings.
In the New Orleans area, at June 30, there were 54 credit unions with 94 branches
that were most likely all closed by Katrina. Over 230,000 members do business
with these credit unions, holding $874 million in share drafts and nearly $600
million in loans. Many of these members depend upon their credit union as their
primary financial institution. 85 percent of these credit unions (46 of the
54) operate from a single branch, many of which are completely inaccessible..
Credit union staff and their families have been affected as well. Over 617
employees worked for these New Orleans-based credit unions and many may be without
work or shelter for weeks if not months. The number of credit union employees
and members is significantly larger when you include the damage from the greater
Louisiana and Mississippi.
According to Bucky Sebastian, chief executive of GTE Federal Credit Union ($2
billion, Tampa, FL), which operates four branches in New Orleans through a 2004
merger with NOME FCU, the paramount issue for the credit union community is
to meet the people's immediate needs. "The credit union community
must try to establish a presence near the affected areas as soon as possible
to show that we are here, here to help, and we are not leaving you." The
solution requires the credit union community to "think big" and act
quickly, says Sebastian.
While Katrina has had devastating effects on individuals and communities, it
has also adversely impacted the credit union institutions themselves. In New
Orleans alone, much of the collateral backing the $264 million in auto loans
and $163 million in real estate loans has been destroyed. In total only $367
million of the total $1 billion in assets are in investments, creating a half
billion shortfall between members' total savings and immediately usable
The issue becomes how are the members and credit unions alike going to resume
service and rebuild themselves without start-up capital. With the majority of
the affected credit unions operating with a single branch, how can they restore
member service in the quickest, most effective manner? What services are going
to be necessary to meet the unique needs of these members as they put their
lives back together over the next weeks, months, even years? How do the credit
unions recover as institutions to meet these needs and restore themselves?
In addressing the challenge from this event, credit unions should seize the
opportunity to collectively use the resources and uniqueness of the credit union
system to rebuild and create an even better credit union option for tomorrow.
For example why not charter a greater New Orleans community credit union right now, subcontract
the operations to an existing credit union, and transfer the shares and any
recoverable assets to this new entity? One place to go, one name, one operation.
The key will be to put an operational capability in place NOW.