How to hurricane-proof your bank

Missouri City/Sugar Land, Texas, was one area hit hard by Hurricane Harvey in 2017.

Hurricanes Harvey and Irma devastated parts of Florida and Texas—and affected a number of community banks. One year on, we check in with two of those banks.

By William Atkinson

Before 2017, the U.S. had never experienced two Category 4 hurricane landfalls in the same year. Last year, hurricanes Harvey and Irma hit within just two weeks of each other. Hurricane Harvey first hit Texas on Aug. 25, 2017, and made landfall two more times in the next four days. It caused an estimated $180 billion in damage and left 250,000 people without power.

One community bank hit by Hurricane Harvey was $400 million-asset The First State Bank in Louise, Texas. “We have nine locations, four of which are in coastal areas,” says Kinnan Stockton, president. “Because of that, we have spent a number of years creating business continuity plans for hurricanes.” For example, they learned the importance of having enough cash on hand to meet customer needs.

“You have to be concerned about people panicking and having a run on the bank,” Stockton says. “We had this planned ahead of time. We also have redundant systems in place so customers can use their debit cards.”

When the bank realized that Hurricane Harvey would make landfall in its area, it started preparing itself and its employees. “Fortunately, we were far enough to the east of landfall that we didn’t get the brunt of the storm,” says Stockton. “For us, the main problem wasn’t from the winds but from the flooding that occurred afterwards.”

Operationally, The First State Bank’s business continuity plans worked well. However, getting employees back into their homes and then back to work was another challenge. “A lot of our employees ended up being displaced because of the storm,” says Stockton. “Several of them moved out of the area ahead of time, and others later due to mandatory evacuations. Afterwards, a lot of them couldn’t get back because of the flooding, and when they were able to return, their homes were flooded.”

As a result, when the bank reopened its branches, it had to do so with skeleton crews. Even after that, some employees were displaced for several weeks and weren’t able to return to work, because they had no place to live. “We tried to rent some mobile homes for them to stay in, but that wasn’t even possible, because demand was so high,” says Stockton. “There was nothing to rent or lease. In the end, they helped each other through it. A lot of employees stayed with each other or with other friends or relatives.”

Florida feels the heat
Hurricane Irma made landfall in Florida on Sept. 10, 2017. Power outage estimates ranged from up to 6.2 million in Florida, 560,000 in Georgia, 68,000 in South Carolina, 31,000 in North Carolina and 1,400 in Alabama. While power was restored to most people in these states within a week, some utilities remained engaged in rebuilds for much longer.

Like The First State Bank, $560 million-asset Axiom Bank, N.A. in Maitland, Fla., wrestled with employee issues more than structural ones. “Our branches received minimal damage from the hurricane, because most of them are located inside Walmarts,” says Ron Strand-Sorrell, chief operating officer. “We did have some minor flooding at a couple of the branches.”

Getting to and from the bank’s corporate offices in Orange County was also difficult due to flooding.

“The one thing that hit us the most, and the one thing we hadn’t really anticipated ahead of time, was the fact that many of our employees had to be evacuated from their homes, some of them completely out of the state,” says Strand-Sorrell. Even those who were able to stay had no utilities, so they lost all of their food and water. Some employees were without electricity for nearly three weeks, and many employees with children had to make other childcare arrangements after many daycare centers closed due to power outages.

Quick stat

6.2 million

Estimated power outages in Florida following Hurricane Irma

“After the hurricane, we set up a disaster relief committee, which is still in place,” Strand-Sorrell says. “If this were to happen again, we would work to have a better delivery channel. Our process would involve communicating with our employees continuously throughout the process. Ahead of time, we would remind them of the importance of having their own emergency kits and escape routes, and being able to get to the things they need: water, food and generators.” Axiom Bank also has employees with trucks who have volunteered to be part of the disaster relief committee to deliver essential items to people in need.

Preparation is everything
Hurricanes and tropical storms are problems that aren’t going away. The best thing community banks can do is envision the worst-case scenario and prepare for it. According to Denver-based Agility Recovery, which provides business continuity and disaster recovery services, we can learn three lessons from hurricanes Harvey and Irma.

1. Know your power requirements. “Regardless of the nature of a natural disaster, power seems to be the number-one asset that everyone either seems to struggle to maintain or recover,” says Scott Teel, senior director of corporate communications for Agility Recovery. “Have an electrician come out and determine your power requirements.”

2. Have access to multiple vendors. “After disasters, generators and fuel are in very high demand,” Teel says. “You can’t just call the local equipment rental yard and get what you need. They may be impacted by the disaster, too. Even if they aren’t, their equipment is going to be in very high demand, so you need to build relationships with multiple vendors in multiple geographical areas.”

3. Prepare your employees. “As a bank executive, you can’t help your bank recover on your own,” says Teel. “You need your employees.” The first step, he says, is to help your employees be ready. “If your employees aren’t prepared at home to have the ability to take care of their families, chances are they are not going to come to work,” he says. It doesn’t take a lot of time or money to help them prepare for a natural disaster. “It is easy to download resources for them in advance from sources such as FEMA and the [American] Red Cross,” he says. “Then, you can hold workshops to discuss these steps in advance.”

William Atkinson is a writer in Illinois.