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Monday, 29 October 2007 01:55

Planning Speeds Banks Recovery From Fire

Written by  Mark Phillips
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As fire ripped through the heart of Bank of the Sierra early Oct. 2, bank officials enacted a disaster plan to keep the five-branch independent up and running. The 1 a.m. blaze gutted the bank’s corporate offices, destroying its mainframe computer and central data bank containing customer account information.

But because of past banking disasters going back to 1982, when a blaze toppled a large Minneapolis bank, Bank of the Sierra had a formula to follow. “Even as we stood and watched it burn, we mapped out who we had to call and what we had to do,” said Jim Holly, bank president.

The bank’s disaster contingency plan, crafted by a Minnesota-based company, promptly came into play. “Some things we would have done intuitively, but the plan compressed the time it took to do them,” Holly said. In the last year, department heads had become familiar enough with the 150-page document that they could quickly identify key people, critical tasks and required equipment.

Joel Arel, certified disaster recovery planner and president of Minnesota-based Arel Technologies Inc., flew in to meet with bank officials Oct. 3. “Our disaster contingency plan worked because people had already thought the event through,” Arel said. This is the first time one of Arel’s 750 clients has suffered a major fire. “It’s a rare occurrence, sure, but it’s also an absolute reality," Arel said.

Arel is the first to say that contingency plans are only as good as the people who set them in motion. Bank of the Sierra officer Dave Mello agrees. “Everyone pulled together and pitched in. People worked around the clock,” he said.

Using backup data nine hours after the blaze began, tellers stood at branch windows at opening time, 10 a.m., ready to transact business as if nothing had happened, as if the blaze had just blown smoke.
Behind the scenes, however, department heads scrambled to resolve a crisis. “The daily transactions weren’t a problem. The problem was in the back room,” said Gilbert Small, bank vice president and CEO. “The challenge was to process the work once we received it over the counter.” Cash deposits, loan payments, interest accruals, all the data channeled daily through Bank of the Sierra’s computer center before the fire would have to be rerouted in the aftermath of what fire officials called the worst fire in city history.

Bank of the Sierra, with assets of $160 million, is the largest independent bank in Tulare County with 18,000 deposit accounts and 10,000 loan accounts. Before the fire, all five branches were connected to the bank’s computer center by telephone lines. The computer center processed between 25,000 and 40,000 individual entries a day.

In the two weeks before the fire, customers had flocked to the bank to refinance loans because of low interest rates, adding to the mounting pressure on the bank to remain current in its accounts.

Bank of the Sierra contracts with Bank Up, a data processing hot site. By 7 a.m., Oct. 2, six hours after the fire started, the San Ramon-based company was ready to receive by courier Bank of the Sierra’s boxed up daily entries.

Meanwhile, a Denver company, Data Assurance, provided Bank of the Sierra with a mainframe computer. Entries posted in San Ramon were downloaded in Denver, printed and flown back to Porterville daily.
Six days after the fire, the bank had caught up. Postings were current by all accounts--and right on schedule according to the bank’s disaster plan.

By Small’s thinking, without the plan, the back room recovery might have taken another week still. “And for the bank and some of our customers, that could have been a critical week,” he said.

In the five days after the fire, bank employees and a file restoration team sifted through the rubble and were able to salvage key documents. Important account histories stored in $3,000 fireproof file cabinets lined with volcanic material were saved. Water-damaged files were freeze-dried and shipped to a file restoration center in Heyward.
By Oct. 28, a Virginia company was completing restoration of the last of key computer tapes damaged in the blaze. On the computer tapes were over-the-counter deposit transactions made the day of the fire. The deposits were being processed when fire erupted and ripped through the computer center.

In all, between 800 and 1,000 deposit transactions were still unaccounted for, more than two weeks after the fire. “As you begin to reach a final assessment, gaps begin to crop up,” Holly said.

While waiting for tape restoration work to be completed, bank officials worked with customers to reconstruct the deposit transactions. In the meantime, the bank simply paid all checks on good faith, a policy Holly wasn’t eager to release in the weeks after the fire.

Contracts with Bank Up and Data Assurance evolved out of contingency planning last year.

For banks, disaster contingency plans are mandated by federal regulators. Small said banks became more vulnerable to fire during the rise of the computer age because information was centralized and confined. “If the confined area is struck, more information is struck,” Small said.

Disaster contingency became a focal issue in banking after a Thanksgiving Day 1982 blaze that destroyed headquarters for Northwest National Bank in Minneapolis, Minn., what Arel calls the worst bank fire in history.

Reprinted with permission from The Porterville Recorder, Porterville, Calif. Mark Phillips is the newspapers’ business editor.

This article adapted from Vol. 5 #1.

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