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News Now

CU System
Shared branching cooperation helped CUs survive Fourth of series
MADISON, Wis. (9/2/10)--As Hurricane Earl churns in the Atlantic, credit union leagues in Louisiana and Mississippi analyzed another hurricane's impact on the region's credit unions--Hurricane Katrina, which hit the coast Aug. 29, 2005. Two factors played key roles in credit unions' survival: shared branching and credit unions' cooperative nature. When Katrina hit, "the following days were filled with unexpected challenges for Louisiana credit unions and their members," said Anne Cochran, president of the Louisiana Credit Union League (LCUL). "However, the 'people helping people' philosophy in which the movement is based provided the financial and emotional support needed to survive this disaster of epic proportion," she told News Now.
Click to view larger image A typical scene throughout New Orleans, six weeks after Hurricane Katrina struck, was the pile of debris by the roadside, seen from inside of Greater New Orleans FCU's lobby in Metairie, La. (Photo provided by Greater New Orleans FCU)
The league knows first-hand about others' generosity. The building housing its headquarters in Harahan, La., was flooded, and like many in New Orleans, it evacuated to Baton Rouge. "Thanks to Bayou FCU’s generosity, league staff assembled in Baton Rouge at a local branch facility. This became a focal point for local, statewide and national credit union communication," Cochran said. "Because there was a central point for league staff to assemble and work efficiently, the league was able to provide assistance to 120 credit unions by locating resources needed to operate after the hurricane hit. "There was an outpouring of compassion and support from the entire national and international credit union system," she said. "Because of the financial support, credit union employees were able to return to work faster, allowing branches to open faster in order to service their members." Shared branching was also a key factor. "The crisis bolstered the value of shared branching. Several credit unions came on to Shared Branching through the financial support from other credit unions around the country. LCUL was able to connect 21 credit unions to shared branching within 24-to-48 hours." How did that compare with banks in the area undergoing the same challenges? "Compared to banks throughout the state, Louisiana credit unions fared better," she said. "They were open for service faster due to the Shared Branching system already in existence. This was instrumental in getting cash into evacuated members' hands quickly. Credit unions share a unique support system that you don’t see at a bank. Shared branching proved to be the most valuable resource for both credit unions and their members," she said. Since the hurricane, credit union mergers have totaled 17 in Louisiana. "We are still feeling the effects of Hurricane Katrina, but we were able to take away valuable lessons from the event," said Cochran. The league's and Shared Branching corporation's disaster recovery plans have been revamped and are tested annually. Also the league "now provides credit unions with in-depth disaster preparedness resources on our website as well as an annual packet mailed to CEOs. As far as credit unions are concerned, they, too, take a much closer look at their disaster recovery plans. Now, Shared Branching is a vital part of that plan,” she said. In Mississippi, "we didn't lose any credit unions. We've had some mergers but they weren't because of Katrina," Charles Elliott, president of the Mississippi Credit Union Association (MCUA) told News Now. In 2005, "we had 70 credit unions affected, with about 13 credit unions directly affected," he said. Two-thirds of the credit unions in the state went without electricity, many for four or more days. But along the coast the effects were dire. A month after Katrina that more than 125 credit union employees in the state lost their homes completely or had homes that were uninhabitable (News Now Sept. 19, 2005). They were among the more than 171,000 dwellings in the six Gulf Coast counties that were destroyed or damaged. Pascagoula-based Navigator CU lost its main facility, its data processing system and its telephone communications system. That facility has been totally gutted and rebuilt, Elliott said. "All the data processing now has hot sites, and operations are backed up." That is echoed by Keesler FCU, based in Biloxi, Miss. In an article about disaster recovery in Bank Systems & Technology (July 28), Larry Mayo, vice president of information technologies at the $1.9 million asset credit union, said the 17-branch credit union saw one of its branches completely washed away and all branches took on water in some form in Katrina's wake. Luckily the credit union's data center wasn't flooded, he said, but the credit union had no communications. Since then his board has provided funds to build a better disaster recovery plan, he said. The credit union has a redundant data center 350 miles away and set up IBM storage area networks with encrypted replication between the main data center in Biloxi and the new location, as well as a third-level disaster recovery site. If a disaster impacts the credit union's data center, primary systems will be up and running again within half an hour, the article said. During Katrina, some financial institutions based their disaster recovery plan on backup tape restoration. But for many companies almost one-fourth of the tapes were unusable when they arrived at the disaster recovery center. Tapes, said Mayo, aren't the most reliable resource, and as cloud computing evolves, credit unions will have more alternatives. Still, Mayo keeps a backup tape as a last resort. Shared Branching saved the day in Mississippi, too. "Before Katrina, we didn't have any Gulf Coast credit unions participating in Shared Branching. Navigator FCU and Keesler FCU were not members then, but when the hurricane hit, Shared Branching expedited its process for them and got them into the system very quickly," Elliott said. "Now, most of the big credit unions are on CUSC CO-OP, our shared branching system here." "We learned a lot going through the process. Everyone knows the role they will play in the future. We responded to the best of our abilities. Some things worked better than others," Elliott said. "Counseling was a huge issue [for credit union employees]. Credit unions didn't get involved in this until December (2005)." MSCUA provided counseling, and more than 500 credit union employees participated (News Now Jan. 24, 2006). "The system also learned a lot about grants, raising funds under challenging conditions," he said. Summing things up, Elliott said, "we can handle what we went through before--unless it's a 500-year hurricane--a category 6." He, like every other person interviewed for this series expressed appreciation for the movement's cooperative efforts during the crisis. "We owe a world of thanks to everyone that helped us at that time. They truly made a difference. We will remember that forever," Elliott said.
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