On a Superstorm Rebound

With hands-on help from community banks, many New York and New Jersey families and small businesses affected by Hurricane Sandy are on the road to recovery

By Michael J. Blankenheim

Nearly a year after Hurricane Sandy, Staten Island’s Midland Pharmacy is making a comeback, thanks to a rebuilding loan from Victory State Bank.

“If it wasn’t for Victory, I would’ve handed the keys in to the bank that holds our mortgage and walked away,” says Lou Spadafora, co-owner of the community pharmacy.

Whether one calls it Hurricane Sandy or Superstorm Sandy, the extreme storm that struck the Northeast coast in late October last year was profound in its destruction. With estimates of damage from the storm as high as $62 billion, the only hurricane to cause more physical and economic harm upon the United States was Katrina in 2005.

Hurricane Sandy’s ravages were the greatest in New Jersey and New York. But even though nearly a year has passed, communities large and small throughout the region are still recovering economically. And community banks continue to aid those local residents and small businesses affected.

Questions in Staten Island

“Biblical” and “devastating” was how Staten Island’s local newspaper, the Staten Island Advance, described Hurricane Sandy’s impact. The storm drove 12-foot-deep torrents through the streets of the New York City borough, killing 23 people and knocking out power to more than 139,000 homes.

Midland Pharmacy is located only blocks from the shore in the community of Midland Beach. When Sandy hit with 8 feet of water, the 1,900-square-foot pharmacy sustained $473,000 in physical damage, Spadafora says. In the one blow, the storm destroyed the entire inventory of prescription and over-the-counter drugs, the computer system and other equipment and inventory. “Everything was gone, everything.”

Spadafora and his business partner, Jerry Della Ragione, applied for a reconstruction loan through the U.S. Small Business Administration but were turned down because they mistakenly had not had their flood insurance renewed after it was canceled a decade ago. The two approached several banks but could not obtain a rebuilding loan.

“The big banks don’t want to make these loans because they view them as bad money,” Spadafora says.

Spadafora put the word out through his customers and community leaders that he needed help, which eventually led him to Staten Island’s Victory State Bank. The one-year, simple interest construction loan, which Spadafora says he will seek to have refinanced into a 15-year loan, provided the only way he could continue business.

“I was driven to see a bankruptcy attorney,” Spadafora says. “There was nothing else we could’ve done except hang it up.”

By April of this year, Spadafora and his partner set up temporary shop in a nearby smaller rental storefront. There they provided prescription-only services. Rebuilding began, and the goal was to reopen at the old location by July or August.

At the temporary location, Spadafora says, he was conducting about 30 percent of the business he was doing before the storm. “We’re coming back, but it’s slow, and many, many other businesses are in worse shape than we are.”

Ralph M. Branca, president and CEO of Victory State Bank, agrees. Immediately after the storm’s disaster, Victory State Bank reached out to each of its business customers to determine what the $276 million-asset community bank could do to aid them, recalls Branca. The bank provided many low-cost loans, waived some transaction fees and provided payment holidays for existing borrowers. “We employed a multifaceted approach,” Branca offers.

But nearly a year after the storm, hundreds of Staten Island homes and businesses remain in ruins. Branca, who is also chairman of the Staten Island Chamber of Commerce, says many residents and business owners are extremely frustrated with the glacial-like pace of obtaining critical rebuilding aid, insurance payments and zoning decisions from the city and other agencies.

Just one example: Congress approved billions in relief funding soon after the storm. New York City released its action plan to use those funds in March, but it was not until May that the federal government approved that plan to spend $1.77 billion in relief money for Staten Island and New York City.

When it comes to economic recovery from Sandy for Staten Island, rather than being at the end of the tunnel, “the light is just starting to enter the tunnel,” Branca says.

“This is going to be a long process. There are a lot of question marks for people, for residents especially, and businesses to a large extent. What can they do? Can they rebuild? Are they going to get any grants, get any money from the federal government for community block development grants?”

Answering those questions for those families and business owners would help them put their lives and livelihoods back on line, Branca says.

Quick response in Long Island

According to the Federal Emergency Management Agency, Hurricane Sandy damaged more than 95,000 buildings in Long Island’s Nassau and Suffolk counties. Of those buildings, 182 were destroyed.

At the First National Bank of Long Island, those numbers were more than nameless statistics: 21 homes in the bank’s mortgage portfolio were either washed away by Sandy or damaged to the point that they had to be rebuilt.

Michael N. Vittorio, the bank’s president and CEO, says the leadership at the $2 billion-asset community bank decided it was vital to respond to help those distressed homeowners with a “non-cookie-cutter approach.” He and three other colleagues formed a special committee that met personally with each of those families.

For them, First National Bank of Long Island suspended mortgage principals and interest payments for three months and awarded cash grants to some of the families. The bank also walked the families through the insurance filing procedures and liberalized its endorsement processes to facilitate immediate claims and payouts.

“We then put the money on the side and used it as a building fund to help them reconstruct their homes,” Vittorio says. “We ate the engineering costs associated with the rebuilds, which normally you don’t do on a construction loan, but the circumstances were dramatic and traumatic for these people.”

To make matters worse, soon after Hurricane Sandy, a severe snowstorm with frigid temperatures hit Long Island, knocking out electricity to many residents for as many as 12 days. With First National Bank of Long Island able to re-open many of its 36 branches within several days, senior citizens and families with young children were invited to use bank conference rooms to stay warm. “It was our pleasure, truly our pleasure, to be able to do that,” Vittorio recalls.

Vittorio says Hurricane Sandy’s lingering economic impact remains huge. “There are still thousands of people on Long Island who remain dislocated, who still haven’t received insurance proceeds, who still don’t have their homes repaired or are in the process of repairing their homes.”

Across the city, the storm response at Flushing Bank was immediate. The 17-branch community bank, which has $4.5 billion in assets, operates locations in Brooklyn, Queens and Nassau County on Long Island. The bank quickly surveyed the needs of its customers and ended up working with 102 customers affected, says John R. Buran, the bank’s president and CEO.

Depending upon a borrower’s situation, Flushing Bank waived late charges, deferred principal and interest, or provided emergency loans or loan modifications.

Buran says the bank’s initial response was just the beginning in helping people and businesses recover economically. “They’re waiting for the insurance check and then waiting for the right people to come in to make the necessary changes,” he says. “Right now, the contracting business in Long Island, Queens and Brooklyn is booming, so it’s a little difficult to secure the right type of help.”

Giving back in Hoboken

The city of Hoboken sits partly below sea level on the Hudson River, directly across from New York City. Sandy caused the river to rise and overwhelm Hoboken, and an estimated 500 million gallons of water flooded the city’s streets. Putrid water remained for days, and the National Guard had to rescue and evacuate some 21,000 people from the area.

The economic disruption was huge. “Its Restaurants Empty and Its Trains Stalled, Hoboken Encounters Storm’s Increasing Toll,” read a New York Times headline more than a month after the storm.

But in the wake of Sandy, the city and its residents came together. They formed the Rebuild Hoboken Relief Fund, raising more than $250,000. Haven Savings Bank responded with its own donation of $250,000, and then played a major role in hosting a $300-a-plate fundraiser that more than 400 people attended.

John H. Wessling III, Haven Savings Bank’s president and CEO, says it was the 75-year-old community bank’s social obligation to make the donation. “Yes, $250,000 is a large amount of money to come up with,” he says. But as a mutual institution with no shareholders and 13 percent capital, he adds, the $700 million-asset community bank’s solid financial foundation allowed it to make the donation.

“To our board of directors, it wasn’t an issue or problem,” he says. “The board felt that because this city had given so much to us, that the city made us who we are, we should give back.”

For many of its customers, Haven Savings Bank deferred loan payments and put others on payment plans of six, eight and nine years. “We did whatever we could to make it a little easier on people.”

Hoboken Mayor Dawn Zimmer says the community bank’s effort was a major boost for the city’s financial fund, which provided grants to local businesses and residents. “This six-figure donation from a business with deep roots in Hoboken shows the bank’s true dedication to its hometown,” she said in a statement.

On the New Jersey shore

Hurricane Sandy also rampaged through New Jersey and over its shoreline and iconic boardwalks. The giant storm killed 34 people and severely damaged or destroyed 360,000 homes and apartments.

Fast-forward to May 2013: New Jersey Gov. Chris Christie and President Barrack Obama declared that large sections of the shore were rebuilt and open for the state’s vital summer tourism business. And an important part of that rebuilding process involved community banks.

State Banking and Insurance Commissioner Ken Kobylowski praised New Jersey community banks in particular for quickly releasing $600 million in Sandy-related insurance claims to homeowners. “By continuing these actions, New Jersey banks are doing a great service to state consumers impacted by Superstorm Sandy,” he said in a statement.

One of those community banks is Manasquan Savings Bank, which has eight branches dotting the Jersey Shore. The impact of Sandy on the $850 million-asset mutual institution, says bank President and CEO James S. Vaccaro, was a “trifecta” of hardships in that “there was the impact upon our customers, we had our employees displaced, and we also had our branches sustain physical damage.”

Regarding its economic assistance to the community, Manasquan Savings Bank conducted an energetic outreach to its residential and business customers to determine their needs after the storm, Vaccaro says. For residential customers, that involved getting insurance claims processed in 24 to 48 hours whenever possible. Rather than use a costly third party, bank staff members acted as free property appraisers or assessors. The bank also granted many borrowers flexibility in making loan payments.

“We mobilized forces and utilized a methodology of common sense to get things moving as rapidly as possible,” Vaccaro says.

For many local small businesses, Manasquan Savings Bank offered short-term credit to provide temporary bridge funding until insurance checks arrived. “I know a lot of people came out with programmatic-type issues in terms of special lending rates and the like,” Vaccaro explains. “We felt it was much more important to understand the specific needs of our customer base on a one-on-one basis.”

Vaccaro agreed with Christie that much of the damaged infrastructure along New Jersey’s shore has been revamped, noting that the boardwalk in nearby Belmar, a major tourist attraction, has been rebuilt. But, in areas such as Bay Head and Sea Bright, very little rebuilding has occurred. “This is a multiyear [reconstruction] project, and obviously, it’s going to take a lot of time, a lot of support, a lot of effort and a lot of community to get us back to where we were.”

Another New Jersey community bank that quickly moved to aid its customers disrupted by the storm is Two River Community Bank headquartered in Middleton, N.J. The bank’s staff members volunteered to help with community relief efforts and raised funds for several storm-related charities. With power down and no computers, one of the bank’s 16 branches reverted back to conducting business the old fashioned way—making notations on ledgers.

Two River Community Bank also reached out to several hundred commercial customers to give financial guidance regarding their rebuilding and repair efforts. Those processes can be complex for the uninitiated, says William D. Moss, the $730 million-asset bank’s president and CEO, so it was crucial for the bank to play the role of facilitator.

“We literally said we’ll host the meetings at the bank,” Moss recalls. “We said, ‘We need the New Jersey Economic Development Authority here, we need the accountants here, we need the lawyers, we need the business owners, etc.’ That way we got everybody in the room at the same time to move things along.”

Moss says the full economic recovery from Sandy will take the Jersey shore several years. He notes that the state’s recreational boating industry, including several local marinas, was hit particularly hard by the storm. “Unfortunately, you can go up and down the shore and see there are many, many businesses that will never reopen, and many, many businesses that had to relocate,” he says. “The bottom line is there is short-term pain. Longer term, however, you’ll see economic recovery as buildings are rebuilt and new businesses emerge.”

Michael J. Blankenheim is a writer in Bowie, Md.