L. William Seidman Courage Award: Mississippi River Bank, Belle Chasse, LA

In the chaos left behind by Hurricane Katrina, Mike Bush, chief executive officer and director of Mississippi River Bank in tiny Belle Chasse, Louisiana, often finds himself doing the sort of things they just don’t teach at banking school.

There was the day he helped salvage what was left of the $100 million bank’s branch in Buras, about 60 miles south of New Orleans. It was swimming in 17 feet of water for nearly a month, leaving little more than the concrete slab, parking lot, and structural steel. A short while later, frustrated by the unresponsiveness of vendors and under pressure from keyless customers who wanted access to their safe deposit boxes, Bush hired a road contractor to jackhammer open the vault and heft the contents to his main office.

On one November morning, blue roof tarp covered the floors of the privately held bank’s boardroom as Bush cracked open the green-metal boxes himself, while anxious customers waited to pull out waterlogged valuables. “I figured out all you need is one of those deals like a body-and-fender guy uses to pull out dents. You drill a hole, screw the thing into that hole, hit it with a flat hammer, and the lock mechanism pops out. Then you stick a chisel in the hole, hit that two or three times to break the rest of the mechanism out, and the door pops open,” says Bush, explaining the procedure. He pauses, then adds, “I’ve checked my job description, and this isn’t on it. But it was becoming a public relations nightmare for us. … We’re helping people check one more thing off their lists and get some normalcy back to their lives.”

Such efforts have become commonplace along Katrina’s storm path. Most of us have seen the footage of looting and destruction on CNNu00e2u20ac”the lawlessness of the Superdome, the submerged neighborhoods. In the midst of such mayhem, the struggles of the hundreds of the region’s bankers and board members, scrambling to serveu00e2u20ac”and hang ontou00e2u20ac”customers and to get their institutions back on dry footing after one of the most devastating natural disasters in U.S. history, might not merit quite the same attention. But they’re heroic, nonetheless, which is why Bank Director has named the directors of Mississippi River Bank as recipients of its second annual L. William Seidman Courage Awardu00e2u20ac”although a great many bank directors in Alabama, Louisiana, and Mississippi deserve equal recognition for the way they coped with Katrina and its aftermath.

The challenges faced by Mississippi River’s board are largely emblematic of those encountered across the region. Katrina has shuttered the submerged Buras branch indefinitely, and caused about $100,000 in wind damage to its other two offices in Belle Chasse and Harvey. Nearly half of the bank’s 47 employees fled and haven’t returned; some likely never will.

During the chaos, the directors have had to balance personal hardship with their board duties. Lawrence Tabony Jr., a chief deputy tax collector and 23-year director, lost his 153-year-old home near Pointe al a Hacheu00e2u20ac”and most everything elseu00e2u20ac”in the storm. Yet he was on the phone with Bush the day after the storm, worrying about how the bank would communicate with its customers and cash checks. “There’s nothing you can really do after you lose everything you own,” says Tabony, who felt fortunate to have grabbed the family pictures before he fled.

In Katrina’s immediate aftermath, dispersed directors helped management devise a strategy to open temporary offices. Since then, they’ve held the hands of jittery customers who, like Tabony, have been left with virtually nothing. And they’ve held special meetings about the bank’s business, including one in November, more than two months after the storm, to review more than 200 of the company’s largest loans that are responsible for some 85% of its portfolio.

The results of that session make Mississippi River what Bush calls a “pleasant anomaly” amid the destruction: Despite the devastation, just two clients had filed for bankruptcy, and both of those were poised to fail before the storm. “We can’t ascertain even one loan where we can say that, because of Katrina, we’re going to lose money,” Bush says.

What a bank whose entire book of business lies in the Katrina’s bull’s-eye has dodged calamity is nothing to be ashamed of. On the contrary, Mississippi River’s success is, in many ways, a tribute to the preparation and quick action of its management and board.

Set in Plaquemines Parish, just south of New Orleans, the bank operates in a virtual no-man’s land bordered by levees holding back its namesake river on one side, and marshes on the other. Many people live in manufactured housing, and property values are significantly lower than in New Orleansu00e2u20ac”a blessing, since most flood insurance policies cap out at $100,000 in coverage. The bank’s primary niche is lending to the parish’s two biggest industries: oil and gas and seafood. In total, business loans account for about 96% of its $68 million loan portfolio.

From the bank’s beginnings in 1980, board members have been chosen “not because they owned stock, but because of their expertise,” says Charles McCarty, a retired oil-and-gas manufacturing executive, as well as the bank’s chairman and a founder. The nine directorsu00e2u20ac”including an attorney, an insurance agent, a retired state legislator, and a parish assessoru00e2u20ac”are collegial and extremely hands-on. Every loan over $50,000 must be approved by the entire boardu00e2u20ac”no problem, McCarty says, since no director has missed a meeting in five years.

Directors long have factored the possibility of a disruptiveu00e2u20ac”even devastatingu00e2u20ac”hurricane into their contingency planning. The company’s back-office is housed off-site, in Birmingham, Alabama, specifically for that purpose. “We’ve always figured it’s best not to have all your eggs in one basket,” McCarty says. The board’s lending diligence, meanwhile, has always included especially close scrutiny of the insurance coverage on any collateral. All property loans require flood insuranceu00e2u20ac”no exceptions allowedu00e2u20ac”and loan terms are reviewed annually to ensure compliance.

Once the evacuation order was issued, a well-choreographed emergency plan kicked into effect. Cash and original loan documents were transported out of vulnerable locations, and the bank opened its branches on a Saturdayu00e2u20ac”it doesn’t keep regular Saturday hoursu00e2u20ac”to allow customers to retrieve valuables from their safe deposit boxes. “We followed the plan right down the line,” McCarty says.

Bush awoke the day of the storm, a Sunday, assuming he’d ride things out, as he had most other hurricanes. By 8:30 a.m., after glimpsing the latest radar shot on TV, he was on the road to Starkville, Mississippi. Some directors fled to Houston; others to northern Louisiana. Pretty much anyone with the means was somewhere else, but no one knew exactly where.

As initial news reports revealed the destruction in New Orleans, directors fretted over the fate of the bank’s staff. David Waltemath, a 12-year director and New Orleans real estate developer, was in Houston when the storm hit. “My first concern was, ‘Where are all the officers and personnel? Did they get out?’” he says. Most phone lines were down, and cell phone circuits were overwhelmed by the high volume of calls.

When he finally got through to Bush, Waltemath also had begun thinking about the bank’s loan clients. “How much of our business was gone? Did our assets have enough insurance? Where will future business come from?” he remembers asking. “It’s a profitable, well-capitalized bank. But literally two-thirds of the parish was gone. Could we continue?”

Two days after the storm, Bush arrived in Baton Rouge, the state capital and de facto hometown for many storm refugees. At the offices of the Community Bankers of Louisiana, where he’s a board member, Bush encountered more than 40 other bankers in similarly dire straits. “Almost everyone had serious damage,” although few knew the extent.

The decision to locate the bank’s data processing center in Alabama gave Bush an immediate leg up. Later that day, “I was able to call up the whole bank on my laptop.” But it couldn’t help out what emerged as the chief early challenge: lack of a physical location to allow panicky customers access to cash in their accounts. “I had a brain, but I didn’t have a body.”

Almost immediately, some customers began talking about shifting their accounts to other financial institutions that had physical operating capabilities. “Most of our [largest] customers are businesses, and I knew if they couldn’t find a way to get their employees’ checks cashed, they’d start moving their accounts,” Bush says.

After consulting with several board members, an informal action plan was devised to come up with a physical presence and establish a way to communicate with employees, customers, and board members. In less than a day, with the help of technical experts from the CBL, Mississippi River had two working websitesu00e2u20ac”an online presence that Bush, because Plaquemines is so close-knit, never felt was needed before. “It was a great way to get the word out,” McCarty says.

Lining up a physical presence was a bit tougher, but cooperation from regulators and fellow bankers helped save the day. Bush gives credit to John Ducrest, commissioner of the Louisiana Office of Financial Institutions, for cutting through red tape to expedite the process. “He got in front and said, ‘Forget about the FDIC or Washington. Whatever we have to do to get you a physical presence, we’ll do it.’” Within days, two banksu00e2u20ac”MidSouth Bank in Lafayette and the Bank of St. Francisville, just north of Baton Rougeu00e2u20ac”stepped up to offer room to Bush’s team. “There was an amazing amount of cooperation among the bankers,” he says.

On Sept. 28, about a month after Katrina, Mississippi River’s board met formally for the first time. The chief item on the agenda was approving the company’s regularly scheduled dividend payment.

After discussion, the board voted unanimously to pay the $2 per-share dividend, worth about $650,000. “Paying the dividend would send out a signal that we were in a strong position,” Waltemath explains. “And we had enough capital [$11.3 million according to June’s call report] to support it.” It didn’t hurt that most of the 200 shareholders were locals. “We figured there were people in the community who could use the money,” Tabony says.

Mississippi River’s recovery, like that of the community it serves, remains a work in progress. With time, deposit levels will subside to normal levels, and Bush expects that up to $10 million in loansu00e2u20ac”about 15% of the portfoliou00e2u20ac”will be paid off as insurance claims. Finding new loans to replace those will be a challenge, but Bush says business is already rebounding for some oil-and-gas and fishing clients. The Buras branch will eventually reopen, he adds, once customers return to the area.

What can be said for certain is that the preparation and decisive action of directors has positioned the bank as an enabler of the local recovery, not just another victim. “The board’s response was very professional,” Waltemath says. “We had a good plan before [the storm], and everyone asked the right questions afterward.”

And that’s the kind of thing they do teach in banking school.

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