BATON ROUGE, La. – A month ago at a Baton Rouge Credit Union Chapter Meeting, Louisiana Credit Union League President Anne Cochran identified several business challenges for credit unions impacted by Hurricanes Katrina and Rita. At the time, the issues took a back seat to employee safety and housing concerns, but as credit unions begin the quest for some type of normalcy, those challenges are beginning to become more obvious. Tangible challenges for credit unions include the restoration of damaged facilities and the restructuring of jobs as a result of changes to operations or employees relocating to other parts of the country. Much harder to quantify are the uncertainties that revolve around the credit unions' financial status. "There will continue to be field-of-membership issues for credit unions whose members have scattered across the country," Cochran reported in an Oct. 31 update to LCUL credit unions. "There is uncertainty about how many members will return to the area and what they'll be returning to – especially in terms of jobs and housing." For example, the St. Bernard Parish public schools have been closed for more than two months. How many families with school-aged children have relocated permanently and will not return to the area? Clean-up efforts in the greatly destroyed area could take a year, and concerns over the safety of the levees in New Orleans and the negative impact of the Murphy Oil spill on the environment have influenced many former residents to stay away. What will this do to the membership total of 3,665 at the $16 million Chalmette-based St. Bernard Parish School Board Employees Federal Credit Union? It's too soon to tell. Campus Federal Credit Union, with $317 million in assets, likened this period of uncertainty to "doing triage." "About 40 percent of our membership is near the poverty income level. Some are not property owners, so they may take jobs elsewhere," said CEO John Milazzo. "We may lose some members, but we may have an opportunity to bring in new members, as well." "On the lending front," Cochran's report continued, "credit union lending stopped momentarily in some cases, a few weeks in others, and this will impact year-end financial statements. Many credit unions have waived fees for members during this period of crisis and those actions too will impact year-end profitability." Many credit unions extended loan payments for 90 days following the hurricane, so it will take some time for delinquencies to surface. Some also raised ATM and debit card withdrawal limits in the days immediately prior to the hurricane coming ashore, so that evacuees could access additional funds for traveling. Additionally, some credit unions allowed offline shared branching transactions for several days until they could get their operations restored following the hurricane, which resulted in a large increase in overdrafts. Credit unions report that most members have willingly repaid the overdrafts, but fraud also has occurred. How will these extraordinary practices affect capital-to-asset ratios and provision for loan losses? Again, the outcome is not yet clear. "Credit union members' delinquencies will increase," Cochran continued. "With people dispersed, collection efforts may be next to impossible. The issue of collateral and whether credit unions will be able to repossess it in delinquencies is still uncertain. If you drive through New Orleans, there are still stacks of abandoned cars, and yachts and boats overturned on shore." The League must deal with its own financial questions, as well. Will affected credit unions require relief from League membership dues for the next year, and what are the implications? "We have calculated our 04/l/06 thru 03/3l/07 (next fiscal year) membership dues that could be `at risk' for credit unions in the Katrina affected areas, which amount to $207,000 based upon June 30, 2005 assets," Cochran stated. "CUNA dues for the affected credit unions are approximately $50,000." Louisiana Credit Union League, along with the credit unions impacted by Hurricanes Katrina and Rita, will continue monitoring these developments. "Louisiana has always been a well-capitalized state (credit unions), but delinquencies have tended to run high, so we don't know how this will affect us," Cochran told CU Times. "We want to see credit unions get in touch with members, so they don't have to write off these loans." -

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