Hurricane Michael's Brute Force Inspires Action

When Hurricane Michael roared out of the Gulf in 2018 with little warning, the Category 5 storm affected the population in the Southeast, especially the Panhandle of Florida. Many of our credit unions, whose goal was always to serve members during a time of great need, were impacted. Michael was one of only four Category 5 hurricanes to touch down in the U.S., and was responsible for 16 deaths and about $25 billion in damage.

The Panhandle, stretching from Tallahassee to Panama City, endured the greatest impact. Many credit unions were without power, and in some cases, heavily damaged. Our initial goal was to identify the status of each credit union and its branch locations. As we began to attempt to reach our credit unions, we realized this would be no easy task. Almost all communication channels were down. Social media pages were helpful in reaching some folks, texting worked at times, and occasionally a credit union leader would get a clear signal to call if they were in the right spot.

We soon learned that many credit union staff had experienced devastation or complete loss of their own homes and properties, and many were without power. Many had evacuated the impact zone, some never to return. The League of Southeastern Credit Unions and Affiliates joined forces with system partners to act.

We set up a war room as a base of operations in our Tallahassee office and held daily meetings to assess the situation. In 2018, we had worked with many system partners to organize the Southeastern Disaster Coordinating Council, so we were positioned to act quickly in helping those in need. This group not only included key system partners like the National Credit Union Foundation, CUNA Mutual Group, CO-OP Financial Services, PSCU and corporate credit unions, but also our state and federal regulators.

Setting Up a Designated Disaster Response Team

Our daily calls with members of the team kept us abreast of changes and credit unions with specific needs we could fill. Once identified, we then made arrangements to help the credit unions meet those needs. For example, if a credit union needed a generator, we would coordinate resources to deliver one. We served our credit unions with prepaid phones, generators, gasoline, flashlights, batteries, tarps, water, baby diapers and other resources that were desperately needed. In turn, they were often able to assist members not only financially, but with some immediate-need items as well.

Ensuring There's Sufficient Cash On Hand

It has always been true that "Cash is King" during a disaster. When communications and electrical power are down, debit and credit cards naturally don't work. If a storm appears likely, you should consider upping your cash order from your provider and increasing the amount on your next delivery. Make sure your ATMs and vaults are as full as possible given insurance requirements and limitations. Also make sure you have coordinated additional cash deliveries before the storm.

Another factor to consider is your ability to transfer money from one office to another, particularly if a branch is incapacitated. Local, state and National Guard personnel may be available to help secure transfers and provide security if you've developed those contacts prior to the storm. Also, talk to other credit unions outside the affected area as they may be able to help you meet your members' extraordinary high needs for cash.

Examining Potential Access to Essentials

The decision to have a backup generator at your facility is a significant one. You must conduct regular testing and preventative maintenance, and have enough fuel storage or supply so your generator can provide reliable power and allow your branch to operate normally.

If you don't have a generator to power your branch, it is a best practice to get an electrician to wire an outlet, so that when a power failure occurs and a suitable generator can be located, that branch office can be completely powered up to serve members.

Dehumidifiers are an important resource to have on hand in a high-humidity environment and/or if you experience any water damage. Mold is a huge problem that starts almost immediately after a storm hits. Have a list of remediation companies handy, or even better, establish a contractual relationship prior to the storm as part of your preparedness plan.

Keeping Lines of Communication Open

Communications were spotty at best in the immediate aftermath of Hurricane Michael. In the recent past, when we were not dealing with a Category 5 storm, the cellular networks remained intact for the most part. With Michael, that was not the case. We used Cricket phones, which are on the AT&T network and were less affected by the storm than most other carriers' phones.

Make sure you have both home and cell phone numbers for your staff members. Additionally, it's a good idea to collect alternative contact numbers (such as a spouse/significant other's cell number), as well as social media page links (Facebook, Twitter, etc.). This may end up being the only way you can make contact in the days following a significant storm.

Several credit unions used 4G hotspots to provide data communications to their core system. And these hotspots became a hot commodity. When 5G rolls out, it will most likely be the standard for the next major disaster.

Some credit unions completed transactions on paper and keyed the data in later. That was a duplication of effort, but it did allow them to serve members.

Planning the Work and Working the Plan

Credit unions should make sure they continually update their business continuity plan. There's never a bad time to review your plan and receive updates for your employee contact information.

One of the things regulators are stressing more is testing your disaster plan. You should have access to an Incident Response Form. Anytime something goes wrong at your credit union, fill this form out and keep it in your testing folder for your next regulatory exam. When the examiners ask you about your testing procedures, you can pull out these forms for any type of unusual event, such as a backhoe operator cutting your communication line or a power outage.

The After-Effects on Your CU's Net Worth Ratio

Credit unions in the areas affected by Hurricane Michael saw an unusually large growth in deposits because their members were receiving insurance checks and then depositing them. After a less severe tropical storm, roofing companies, general contractors and repair people are not overwhelmed with work, so the money flows in and then flows out in a reasonable time frame.

But when you are dealing with a Category 3, 4 or 5 storm, destruction is so widespread that licensed, insured roofing contractors will have a long waiting list. Many homeowners, rather than waiting, are doing some of these repairs themselves, and the insurance money that has inflated their credit unions' assets is just sitting there. And money that moves out is replaced by someone else's insurance check.

If your credit union had a nice capital to assets ratio of 10%, and then saw a 30% increase in deposits because of these reasons, your net worth ratio will decline to 7.69% – barely above the prompt corrective action level. You can also certainly expect a higher level of losses because so many small businesses are going to be closed for a period of time or even permanently. This will likely cause some of your members to lose their jobs in addition to suffering damages to their homes.

Disaster mitigation is about learning from experiences and making changes to minimize future problems, and we are proud of the way LSCU's teams and credit unions responded to this event. The critical lesson learned was not to wait until a disaster happens to set up your response team and emergency procedures. Your advance preparation is the key to taking care of credit unions and their members – a common goal everyone in our industry shares.

Impacts on Staff

I am still amazed by the selflessness our credit unions and their staff displayed in the aftermath of Hurricane Michael. Most of these dedicated employees were dealing with the same issues that members were – the loss of their homes and cars, dealing with insurance companies, and trying to find temporary housing and contractors.

Don't forget to take good care of members and employees, and check in often. Cleanup after a storm can be achieved quickly, but the emotional scars last much longer.