Macro Economic

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Macro Economic Banking TrendsFocus on The
Effects of Recent Hurricanes
November 30, 2005FDIC Division of Insurance and
Research Dallas Regional Office
Contact Alan Bush (972 761 2072)
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REBUILDING PROCESS
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Discussion Topics

• Economic Fallout
• The Housing Market
• The Demographic Shift
• The Hurricanes Challenge Factors of a New
  Paradigm
• Drilling Down to Determine FDIC Risk

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An Analytical Starting PointEconomic Concerns
Are Focused On The Red Zone Particularly Areas
Nearest To The Coast
Source FEMA, Declared disaster areas as a
result of Hurricanes Katrina and Rita
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A Major Demographic Shift Has Occurred

• What Are The Implications?

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The Number Of Houses Damaged Is Staggering

• Hurricane Katrina alone destroyed an estimated
  350,000 homes and damaged 300,000 more along the
  Gulf Coast.
• At the state level, the percentage of dwellings
  that were destroyed, damaged, or affected by
  Hurricane Katrina represents 33 and 20 of
  Louisiana and Mississippi housing stock,
  respectively.
• A note about data quality and consistency.

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Recovery Will Be a Three Step Process

• The Recovery Remediation Stage
• The Reconstruction Stage
• Ultimately will be determined by the return of
  existing critical economic drivers energy,
  trade, and tourism.
• The Return to Normalcy Stage - But What will
  Normal Be?

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Location Will Dictate Recovery Patterns and
They Will Vary Greatly

• Storm Surge, Flooding and Wind Damage
• Proximity to Failed Levees
• Insurance Recovery, Renewal and Availability
• New Building Codes
• Decisions and financial ability to return and/or
  rebuild

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Reasons for an Uncertain Footprint
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Learning about the Damage Severity
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and applying that to our own use.
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Work in Process Applying Banking, Demographic
and Economic Data to Focus on Heightened Areas of
Risk
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Leveraging Data and Drilling Down to Analyze
Economic Expectations and FDIC Risk
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Focusing on Insured Institutions
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Learning More Via Direct Contact and Other Data,
FDIC Identified Insured Institutions Exhibiting
Elements of Heightened Risk
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The Banking Industry Faces A Confluence Of Issues

• Insurance (property casualty and business
  continuity)
• Environmental damage to real estate collateral
• Changing finances of borrowers
• Assessing asset quality, customer base and local
  economy
• A bifurcated loan portfolio
• Does the business model still apply?