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BATON ROUGE, La. – As credit unions along the Gulf Coast from Mobile to New Orleans continue to work on the second and third stages of recovery from the storm, the recovery effort itself has become a part of their headaches. Two of the hard hit ones, the $209 million ASI FCU and the $80 million Shell New Orleans FCU report some of the problems common among many of the Gulf Coast credit unions. Members receiving recovery checks, assistance checks and insurance checks are depositing them, driving the credit unions’ deposits sharply upward and their asset situation sharply downward. This uptake in deposits and downturn in assets is taking place just at the time when the real damage to the credit unions’ bottom lines is also beginning to make itself felt, the CEOs of the credit unions said. ASI FCU is a community development credit union, one of the largest members of the National Federation of Community Development Credit Unions. Katrina hit the credit union hard, forcing it to evacuate to Baton Rouge, where some of the credit union’s call center operations are still located, in the wake of the New Orleans flooding. “We eventually will come out of this,” explained Audrey Cerise, CEO of the credit union whose assets in the wake of the storm have increased to $248 million, flooded as they have been by federal disaster relief checks. “But we are going to need time and it’s not clear we are going to be allowed to have the time we need.” Cerise called the sudden 60% increase in the credit union’s share draft and share accounts and the corresponding drop in the credit union’s capital position a “pseudo problem” that will eventually work itself out as members use the funds to restore their lives. The more serious problems will be the loan losses that still have yet to show themselves as lost jobs and income begin to make themselves felt in the bottom lines of loans, as well as the almost 10,000 credit union members who overdrew their accounts at ATMs in the wake of the storm, she explained. In an event that bore an eerie similarity to the events after the September 11 attacks on New York City, nearly 10,000 of ASI’s almost 80,000 members overdrew their accounts through their ATMs, for a total overdraw of almost $4 million. After the 9/11 attacks, roughly 4,000 of the then-$1 billion Municipal Credit Union’s, members overdrew their accounts for a total of roughly $15 million. In Municipal’s case, the vast majority of the Manhattan-headquartered CU’s members who overdrew their accounts did so by less than little more than $100 and approached the credit union to replace the funds, although by the time the credit union settled the accounts it needed to call upon the prosecutor and the police to bring the most recalcitrant and egregiously overdrawing members to heel. In ASI’s case, Cerise said that many of its members have already sought to return the funds that they overdrew, explaining that they hadn’t wanted to do it and that they had done so because the hurricane arrived between paychecks and they need the $100, $200 or $300 to try to get out of town. “But the ones who worry us are the ones who appeared to have just sat in front of the ATM, playing them like slot machines,” Cerise said. “They haven’t approached us to give back any of the money and I am not expecting that they will,” she said. The worst offender in the ATM pillaging was one member who withdrew almost $7,000 from the machines, she said. The credit union raised the offline limits for withdrawals from ATMs and debit cards to $300 and $500 because it anticipated its members would need the money and even though it recognized some risk for losses, a policy calculation similar to the one Municipal made. And like Municipal, Cerise said that ASI was focused on helping its members ride out a catastrophic storm which put all of their lives at risk, not to mention just their property and the credit union doesn’t regret helping its members, even though some of them abused the help. The loan losses are going to take longer to hit full force, Cerise said. Many of ASI’s members came from among the poorest of New Orleans residents, the folks who were often evacuated from their rooftops or from the Superdome. Some of them who had regular employment worked for the city’s tourist industry, which has not come back yet, or from other parts of the economy which likewise remain broken. The others lacked regular work altogether but, whether they had work or not, the storm’s evacuation dispersed them all over the country, to places from which they may not want to return or be able to return, Cerise pointed out. Special Action staff from NCUA have been in the CU already, Cerise said, noting that ASI was not a troubled credit union on August 28 and that it is still not, and she added that some big credit unions have been calling her, telling her that NCUA had suggested they might come in and offer some help. “I don’t mean any disrespect, but when NCUA suggested that they come into help I got the feeling they might have looked to come in to see if we would be a good fit [for a merger],” she said. “And we aren’t planning on going anywhere,” she added. As of press time, the NCUA had not made any specific comment about ASI’s situation. The situation with the $80 million Shell New Orleans FCU has some similarities but also some differences, according to its CEO, Courtland Crouchet. Shell has benefited somewhat from being part of the broad umbrella of Shell and its related institutions. That has meant that the credit union was offered space in which to begin it post-Katrina operations very quickly in the $294 million People’s Trust FCU, headquartered in Houston, the former Shell Employees FCU. It has also meant that many of Shell’s members have been able to keep their jobs and had jobs to keep. But Crouchet explained that many of the same pressures are being felt at his credit union. “We have seen our deposits increase by about 10%,” Crochet explained, “and since there is a lot of uncertainty about homes and circumstances our members are being pretty frugal about how they spend that money,” he added. The credit union’s offices are on the second floor of a downtown New Orleans building so it received only wind and some water damage, but the whole neighborhood and the condition of the city overall make it unlikely that the credit union will be able to return for as long as a year, Crouchet said, while in the meantime it is seeking to help its members address both their damage and the lower than anticipated insurance checks. “So far we have made $400,000 in zero percent loans to our members, loans to help them address property damage and overcome insurance deductibles which are a lot bigger than anyone anticipated,” Crouchet said. He said that many policies had “small print” and other clauses which have served to hike the cost of the recovery beyond what many of his members expected that they would have to pay and that the credit union stepped in to help confident that other credit unions would back their effort. “And so far, I am pleased that they have,” Crouchet said, adding that the credit union had begun to seek zero percent CD deposits from other credit unions that it can, in turn, loan out to members. “We haven’t begun to see the beginning of the end yet,” Crouchet said, “but we are committed to helping our members get through all this as best they can and we ask that credit unions keep offering us their help.” -

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