President's Message: Tales from the Flood

Thomas C. Melzer

As president of the St. Louis Fed, I often have an opportunity to sit down and talk with bankers throughout the Eighth Federal Reserve District. Over the years, I've enjoyed listening to stories—some of them remarkable—about their jobs, families and the communities in which they live. None of these stories, however, have been as memorable as those I've heard about how the banking community survived the Great Flood of '93.

At the height of the flood, bankers up and down the Mississippi, Missouri and Illinois rivers were forced to evacuate or take drastic measures to remain open. At the Bank of Calhoun County in Hardin, Ill., for example, employees constructed a sandbag wall to hold back rising water around the bank that at times reached five feet. At Farmers and Merchants Bank in LaGrange, Mo., employees rigged a pulley system to a johnboat to haul customers across flooded streets, while other employees worked around the clock pumping out water and moving computer equipment to higher ground. Amazingly, some of these same employees were in danger of losing their own homes to the rising water.

Of the 19 banks that did evacuate, all found alternate locations from which to conduct daily business. One served customers from a library, another from a firehouse, still another from a dance hall. In mid-Missouri, one generous bank even opened its doors to temporarily house a displaced competitor. Because of the way the banking community responded, no Eighth District bank was forced to close because of the flood.

In late July, the St. Louis Fed conducted a survey of more than 200 banks in flood-affected areas. We discovered that, despite their best efforts, several banks did sustain costly blows. Thirty-one banks reported that their operations were significantly affected by flooded roads and bridges, 19 banks sustained physical damage to either their main office or a branch, and at least one building is considered a total loss.

As part of the survey, we also asked bankers about the flood's effects on their loan portfolios. Although most believed it was premature to provide estimates about credit quality, two-thirds said they do expect some adverse effects. In fact, one bank in 10 thought more than 10 percent of its loans would be affected.

In the long run, the flood of '93 will probably have little, if any, effect on overall bank profits. Much of this success is because the banking community proved that it can be both resourceful and resilient under adverse conditions.

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