Written by: Leonard Parker | Houston Business News | 08th October
Even though he grew up in Abilene, Victor Pierson has always loved the beach. After all, he would spend summers in Port Aransas with his aunt and uncle.
When Galveston-based Moody National Bank offered him a position as executive vice president and chief credit officer, he jumped at the offer. That was in 1985. Today, Pierson serves as CEO of the bank.
In those 36 years, Pierson has watched the bank grow to approximately 200 employees and 15 locations, 13 of which are in the Houston area. Recently, Moody National Bank made a $100 million donation to the Rice University Foundation, which Pierson says is one of the many things the bank has done to better the community.
How did Moody National Bank help businesses during the pandemic? Early in the pandemic, we waived all service charges on deposit accounts and NSF charges. With the assistance of the Galveston Economic Development Partnership, in conjunction with Texas First Bank and Hometown Bank, we arranged a special loan program for businesses, similar to the program we developed after Hurricane Ike. Then, the PPP program came out and despite a few hiccups, it absolutely did its job and kept businesses afloat. We weren't an SBA lender before that, but we got approval about four days before the PPP program was implemented. We were engaged in the PPP program for our customers without any profit perspective to bring in new business. We wanted to take care of our customers and the community.
What was the outcome of that process? In the first program round, we did 641 loans worth $85.5 million. We've gotten forgiveness requested on all but one of those 641 loans. We've done over $50 million in funding, and over half of those have already requested forgiveness. It’s a program that had a purpose, and it's accomplished what its purpose was.
How have things changed for the bank during the past year? It's hard to believe that we're 18 months into this Covid-19 situation. The unknowns were really scary. It's not just for Moody National Bank but I think for the entire financial industry. The liquidity in the system has caused the financial system to just explode. Before Covid-19, the loan-to-deposit ratios across the board were much higher than where they're at today. Our loan pipeline and deposits are strong. An issue is that all of our customers are sitting there with all this liquidity and they have a loan with about 5% interest. It's a better use of their money to pay off their loans. We're seeing a lot of loan pay-downs. Even though we're making a lot of loans, we're not seeing any net growth even though 2021 is having a record loan production. We've got a loan portfolio of, let's say, $850 million. We're going do north of $300 million in loans this year without any net growth because we'll have about $300 million payoffs. The other issue is the federal government lowering the interest rates was conducive to economic growth but with all this liquidity there's none, from our perspective. We're trying to loan the money out but we're having all these payoffs. We have no really good vehicle to invest these extra deposits that can earn hardly anything.
How does this affect consumers? People that have always done everything the correct way to save for their retirement are currently not able to earn hardly anything on their deposits. Hopefully, at some point, our interest rate system will get back into balance into a more traditional structure, because we're at extremely low rates relative to history. Currently, the projected federal funds rate is sitting at 0% to 0.25%. In the most recent Federal Reserve meeting, they're projecting rates will increase to 0.75% by the end of 2022 and 1% by the end of 2023.
What has been the biggest challenge? Well, there are a lot of challenges. Early on in the pandemic, we were a big lender to the hospitality industry and what's called the North American Industry Classification System (NAICS) section 72, which are hotels, restaurants and RV parks. The challenge early on was not knowing how the pandemic would affect our loan portfolio. Even though Galveston took a hit, it did pretty well in 2020. However, 2021 has been a record year for hotel/motel tax in Galveston. The June hotel tax in Galveston set an all-time record. Previously, 2018 had the highest and 2019 was about 1% to 2% less than 2018. Obviously, 2020 is a wash out, but 2021 is about 8% ahead of 2018. Galveston hotels are just having a great year. Now, this delta variant came and things dropped a little bit, but it was timed with school starting, which is a normal time for hotel revenue to drop a little bit. Things can be difficult in Galveston even when there’s not a pandemic. Galveston businesses have to worry about hurricanes and rain. What makes this year different is many people weren't flying yet, and Galveston is a “drive to” destination, which I really think helped our local businesses.
What are some ways the bank preps for hurricanes or other disasters? One, we have a lot of experience on our management team. Almost the entire team was here for multiple weather events, whether it was Hurricane Ike or any of the other tropical storms or the winter storm we had in February. We do an annual table-top planning. Strangely enough, I thought the one we did in October of 2019 was a total waste of my time because we did an exercise on a pandemic. At the time, I thought that would never happen. The irony is what I initially thought was waste of money was probably the best thing we ever did. The Covid-19 pandemic played out exactly like our facilitator said it would. We went through what we needed to do. It was such help. We have the practical experience of going through a lot, coupled with ongoing training annually.
What are some ways businesses can financially prepare for any disaster? Businesses need to have a reserve cushion. You need to have as much of your risk mitigated as you can through insurance and other means. I think businesses in Houston are more resilient now because of the 1980s. In 2015, the price of oil was going down and Houston did not handle its regional economy as it was in the 80s. In 2015, Houston kept going like gangbusters because it diversified. Since it's more diversified, it's more resilient. That's reflective of businesses having that experience, having gone through tough times. Everybody's trying to prepare for all these different alternatives.
This interview has been edited for length and clarity.
Victor Pierson, CEO, Moody National Bank
Hometown: Abilene, Texas
Family: Wife, son and two daughters
Favorite drink: During the day, iced tea. In the evening, a glass of red blend.
Recently read: “The Man Who Ran Washington: The life and times of James A. Baker III” by Peter Baker and Susan Glasser
Favorite movie: “It’s a Wonderful Life”