Digging out from the Deluge
Newkirk, Kristine M., Independent Banker
The Red River Valley bustles In the aftermath of the Midwest's massive spring flooding
Early 1997 arrived like a Biblical curse in the Red River Valley across North Dakota and Minnesota. First the heavy snowfall came, enveloping the Midwest in record snowfall and punishing cold. Then came the rapid thaw in April, which brought the SOO-year deluge and a scope of destruction not seen in generations.
Before it was over, the Red River, swelling to 10 times its normal size, crested 26 feet above flood stage, inundating thousands of acres of farmland and forcing the evacuation of thousands of people. In one of the natural disaster's spookiest scenes, electrical fires engulfed 11 buildings in the still-flooded downtown of Grand Forks, N.D., one of the hardest hit communities. Flood damage throughout the agricultural region was estimated at $2 billion.
A year later, the rebuilding in Grand Forks and elsewhere throughout the valley continues. Homeowners, businesses and community life are on the mend. In fact, since the floodwaters finally receded to reveal the muddy ruins, a construction boom, fed by hundreds of millions of dollars in insurance and disaster aid, has boosted the area's economic comeback.
One year ago, such glowing prospects seemed incomprehensible to those affected first-hand by the flooding. But as nine out of 10 businesses have reopened and residents have come back to rebuild, local economies are perking up. Credit quality is manageable and unemployment is at an alltime low. Some bankers in the Valley even go so far as to say the flood has had a negligible effect on their bank's financial condition.
"Businesses are rebuilding," says Bill Lee, chairman, president and CEO of the Community National Bank of Grand Forks. "We have a strong economy that will fuel an economic boom here for two to five years."
As a result, the Red River Valley's community banks, on the whole, have rebounded remarkably well, industry and government officials agree. Banks in the region are flush with deposits and busy issuing loans.
"The banks in the area didn't miss a beat," Allen Olson, president and CEO of the Independent Community Bankers of Minnesota, reports. "All emergency plans worked and the regulators are very proud of the banks because they all survived."
Community banks across the flooded region also pitched in to do what they could to people through the disaster. Some banks provided temporary office space to other banks that were flooded out, and many others generously offered their employees and financial resources to recovery efforts.
Assessing the Damage
When the electricity went out in Grand Forks, eight feet of raw sewage backed up into the lower level of Community National Bank's main office, destroying $750 million worth of computer equipment and seeping into 1,000 safety deposit boxes. Lee estimates the bank's damage and clean-up costs totaled about $2 million, much of which was covered by insurance. Most costs went toward completing a new 3,000square-foot addition to house the bank's essential operations center.
Despite those flood-related expenses, however, Community National Bank's year-end report showed that the bank was firmly back on solid ground eight months after the crisis, Lee reports.
Return on average assets for the year was close to 1.0 percent; a normal year for Community National Bank would have yielded between 1.3 and 1.4 percent. Loan delinquencies, although running about 1 percent higher than usual at 2.9 percent, were manageable, Lee says.
The rebuilding after the flood prompted double-digit growth at Community National Bank, further mitigating the disaster s financial impact. Relief money pumped into the city through the Small Business Administration, insurance proceeds, federal and state relief programs, and private donations boosted the area's bank deposits by 20 percent.
In all, Community National Bank, which had $86 million in assets in April before the flood hit, had $112 million in assets at year-end 1997. …