Stormy Weather, Boon or Bust for Banks

Stormy Weather, Boon or Bust for Banks

Stormy Weather, Boon or Bust for Banks

It was a good run. Almost 12 years since a major hurricane made landfall in the continental U.S, that  was Wilma in October of 2005. But that all changed when Hurricane Harvey came barreling onto the Texas coast on August 25th. The category 4 storm decided to hover there for almost a week leaving flooding and destruction in its wake.

It wasn’t long before Irma, an even stronger storm set its sights on the US, first on Puerto Rico and the Virgin Islands then on Florida and points north. Irma was brutal in Florida, particularly in the area around the middle and lower Keys. But even with bridges out of commission, these islands are relatively easy to get to. The same cannot be said for Puerto Rico and the U.S. Virgin Islands.

Making matters worse, these Caribbean territories got hit again 14 days later by Maria, a category 5 hurricane. Jeremy Peters of The New York Times wrote, “Hurricane Maria drowned what Irma didn’t destroy” – 9/27/2017. Peters was specifically writing about the Virgin Islands, which has Red Cross aid but has been lacking the press and support that Puerto Rico has been getting. Perhaps even more disheartening is that these islands (St. Croix, St. John and St. Thomas) rely on Puerto Rico’s ports to receive their own supplies and relief.

As of Thursday, 9/28/17, there are at least 85 bank branches out of 329 (26%) open in Puerto Rico, although the hours have been shortened:

Puerto Rico Bank Branches Open for Business

And more are being added every day. There are also hundreds of ATMs working across the island, although power is spotty and there have been issues with the machines running out of desperately needed cash. (Many of the grocery stores that are open are only accepting cash at this time as they are unable to process credit or debit cards or welfare payments.)

We are only aware of two (one bank and one credit union branch) open in the Virgin Islands.

The Federal Reserve Bank of New York is working to make sure Puerto Rican banks have what they need to get and stay running.

“The Federal Reserve Bank of New York’s cash operations in Puerto Rico are working, and we have adequate inventory to meet demand from depository institutions on the island.”  -New York Fed 9/27/2017

We have not seen any such statement yet regarding the U.S. Virgin Islands, which are also a part of the New York Fed’s district.

Once basic needs are met and people have time to recover from the shock, we have seen, and history has shown, the process of rebuilding will begin. This regrowth, while grueling, has the potential to be a boon for local financial institutions. Of course, if not handled prudently, it could also be a bust.

Here are some things we will be looking for:

  • There is the obvious need for construction loans, both commercial and residential. Institutions that make mortgage loans that qualify for guarantees from government sponsored enterprises (i.e. Fannie Mae, Freddie Mac) can turn around and sell those loans rather quickly giving them the ability to provide more loans.
  • People need a temporary place to live while they wait so loans for both hotels and multi-family dwellings will rise.
  • Businesses have the same basic needs, but with the addition of short-term loans to fund such things as payroll and replenishing lost inventory while they wait for insurance money to roll in.

What they will be in need of is money to lend, which is where you come in. We will let you know if they are looking for CDs to do so. Page 7 contains a list of all banks and credit unions operating in Puerto Rico and the U.S. Virgin Islands. You’ll also see we included those operating in Guam, on the other side of the globe. Guam has not faced any tropical storms or the like recently, but it is another U.S. territory and a September 6, 2017 SEC filing got our attention.

BankGuam Holding Company, the parent of ****Bank of Guam, in a stock offering, warned investors of the possibility of a nuclear strike by North Korea. In this event, the financial institutions here would be faced with similar challenges to those in the Caribbean. The difference is that about one-third of the land in Guam is occupied by American military bases. While a military strike on Guam could decimate the civilian population, with the help of the U.S. military, the re-build would likely proceed rapidly.