Interview by Bob Rehak

In June, I interviewed Milan Saunders, Chairman/CEO of Plains State Bank, and his daughter Lori Saunders, the bank’s COO. Both live in Kingwood Lakes with their respective families several blocks apart. I asked for this interview to learn how Harvey affected them personally and professionally, and to see whether the flood had a domino effect on other businesses beyond Houston. Spoiler alert: It did.

As we sit in a quiet corner of Amadeus, awaiting our meals, I ask Milan and Lori to start at the beginning. Both have photographic memories and brains that process information faster than computers. They begin with an almost hour-by-hour narrative of the storm’s approach. Clearly, almost a year later, the images remain vivid and painful.

Water and Plumbing Back Up

Milan: “Harvey approached the Houston area on Friday, August 25, and started dumping buckets of rain. Going into the weekend, we were tracking weather reports. On Saturday, things lightened up. Then the rains came back again. Sunday … a lot of rain. Monday … a lot of rain. By that afternoon, water was out of Lake Houston and it began to look pretty ominous. By Tuesday, water was also out of Lake Kingwood. We had only 18 inches between it and our threshold.”

Lori: “My plumbing was starting to back up on Sunday. That’s why I went over to Dad’s house.”

Milan: “Overnight, early Tuesday morning, water began to rise substantially. About 1 a.m., we wrapped the legs of our baby grand piano. In ‘94, we were spared, so I was thinking that, at worst, we would get a foot of water in the house.”

Reliving the Story While Retelling It

Milan continues the story in a series of rapid-fire images that seem to fade to black between each. “I went back to sleep. I was woken up at 6:30 in the morning. Came downstairs. At that point, I am standing in water up past my knees. I open the door and go outside. I am standing in water up to my belt. I see this rubber boat pulling in. First responders called out, ‘It’s a mandatory evacuation.’”

“I ask who they are. They say, ‘We’re firemen from Memphis, Tennessee.’ I say to myself, ‘Wait a minute!’ How did they know about it in time to get here from Memphis when I didn’t even know about it?”

“Somehow, we managed to get our dog, a giant German Shepherd, balanced on my lap. They took us up the next street, and we got out there.”

As we delve deeper, Milan increasingly uses present tense, as though he is re-living Harvey in real time. His jaw clenches. The gets that 1000-yard stare. He is in another place and another time now.

“The next challenge is finding a place to shelter for me, my wife, my daughter, my granddaughter and grandson…which we do that afternoon.”

“I’m also worrying about the bank. We had been closed for four days already. The law says banks can’t be closed for more than three days in a row. We had already contacted our regulators to let them know that we were experiencing some really harsh difficulties.”

Never in 50 Years of Banking

“All of our employees are basically stranded. 59 is shut down. The force of water running over the highway has moved the concrete barriers on it.”

“Plains State does business far beyond Houston. We are keeping in touch with our West Texas people to help our clients out there, but our headquarters is in Humble and no one can get to it.”

“If I had had any idea this was going to happen, we would have gotten hotel rooms on the other side of the river for our employees.”

One image intrudes on another as Milan talks of his experience. He jumps from subject to subject as we nosh on our linguine.

“I lost my telephone while rescuing my granddaughter’s cat,” he says. “I lost both cars.” He begins talking in a staccato shorthand almost like he’s running down a mental checklist, a pilot evaluating options for an emergency landing. “No cars. No phone. Can’t get across the river.”

“It really made it very difficult for us to run the bank. None of our offices experienced flooding; we just couldn’t get people to the offices to move electronic files. That’s where our connections to the Fed and our core processor are.”

Lori: “A few days later, as flood waters started to subside, some folks in law enforcement told us about a way to get across the river. It was a very long way without the 59 bridge, but it worked. Some of our managers were able to get into the bank and start taking care of customers.”

Milan: “We were down five days. I’ve never experienced that in 50 years of banking.”

Bob: “Were there any repercussions for being closed five days?”

Milan: “Overall, our clients down here were very understanding. The West Texas folks didn’t understand as well. One client is a school district. They had end of month payroll to make.”

“Luckily, the superintendent’s wife worked with first responders and knew what we were up against. We were able to explain those problems and I think we have that behind us now, but it was painful for everyone, including us. We built our reputation on service and reliability. Both were beyond our control at that point.”

Meanwhile, Back at the Ranch House…

Milan: It was just an unbelievable experience getting into that house. Water up to mid chest.  Probably a foolish thing to do. All kinds of things can happen. The water wasn’t moving that fast, but it was touching the breaker boxes. Water and electricity! Not a good combination!”

“We finally got the cat out of there, but my phone went in the drink, so I lost all communication.”

“The next day, my wife and Lori had to get to the house, so we borrowed a canoe. We saw our brother in law struggling in the water. When we tried to get him into the canoe, he flipped it over. Now Lori’s phone is under water, too.”

“The hardest part for my wife was the piano. We had bought it for our girls in 1977. It was a baby grand. The force of the water had flipped it over and ripped off two of the legs.”

Nightmare Followed by a Miracle

“We had 3.5 feet of nasty water and sewage in the house. It finally subsided on Thursday afternoon. Then another part in the story began. It was just as unbelievable how folks came out to help.”

“The outpouring of help from the people of Kingwood, led by the churches, was amazing. With the help from strangers, we got everything torn out and the dehumidifiers going.”

Secrets of Dealing with Contractors

“Then I had to find some contractors who could get the rest done. Luckily, we deal with contractors all the time; I knew some very good ones. I hired one who builds hotels and high-end townhomes. I cut a cost-plus deal with him.”

“I saw that a real shortage of qualified contractors was coming, so I did everything I could to sweeten the deal, but built in safeguards for us. I gave him two houses – mine and Lori’s. I guaranteed him payment every Friday night. We made up our minds about what we wanted and didn’t change anything. All he had to do was show every day and carry on the work continuously. As a result, we had two or three subs on the job site every day and avoided a lot of the problems that others have had getting contractors to show. If guys are working, you want to pay them every Friday so that they’re back on Monday.”

“My wife is fluent in Spanish, so we could converse with subcontractors. That was another advantage.”

Repairs Completed in Record Time, But Now…

“We got the house all done by the first of December. Right now, I’m just wrestling with the insurance guys. They think I should have been able to get it done for half. But it’s unreasonable to look back and say that.”

“The IRS says you should be able to take $104 per square foot, no questions asked. Shopping for the best price in town is probably not the best idea at a time like this.”

Bob: “How long did it take the bank to get back to normal?”

Lori: “Other banks were having trouble getting personnel in. But after Labor Day, most of our staff was able to get into the bank. I remember coming to work Tuesday and seeing all the cars in the parking lot, and thinking, ‘Wow!’  We’d just been through a war zone…the craziest worst week of our lives. And there all of our people were!”

Milan: “We were also very fortunate that only three of our employees had flooded houses and two of those are sitting here with you.”

“The Craziest, Worst Week of Our Lives” Turns into a 3-Year Project

Bob: “How did you manage to cope with the business being down and your homes being destroyed at the same time?”

Lori: “You go into survival mode. You rely on others. I have really good managers. They just stepped up, personally and professionally. They knew what we were going through.”

“We lost everything. Now looking back…I wonder how we did get through it. It was just one day at a time.”

“We knew good contractors and had great relationships with them. Not everyone had that luxury. When I drive down my street now, it breaks my heart. I still see dumpsters in the driveways and portacans…all of it. They’re still far away from getting their houses back together again.”

Bob: “What percentage of your street is finished remodeling?”

Lori: Maybe 20%. At least 80% are still not back in.”

Milan: “We have 42 houses in our part of Kingwood Lakes; only one escaped flooding. There aren’t ten that are completely finished restoring. You see lots of travel trailers. I’ve said all along that this is a three-year project and my opinion hasn’t changed.”

Fighting the Adjusters

Bob: “What’s the most common problem people have?”

Milan: “They’re all struggling with the insurance adjusters. Each adjuster sees things differently.”

“One friend’s adjuster told him that $70/sf was a starting point and that if you have cabinetry involved, you’re up to $100/sf. That matches up to what the IRS said. But some of these adjusting companies are trying to be too safe, in my opinion. They split everything up into a unit-pricing process that takes waaaay too long.”

“When a cost-plus contractor shows up, he’s going to give you a quote for labor and all the receipts for materials. He’s not going to break out trim costs or caulking per square inch! Our first adjuster’s report was 40 PAGES!”

“By comparison, when our bank makes loans on a $700K house, the builder gives us pro formacosts on ONE sheet of paper. You can NOT analyze a house on a per-square-inch basis. These guys just don’t get it.”

“The other thing that has happened is that prices have all escalated by 30%.”

The Value of a Banker Who Knows Your Business

Bob: “Do you have any customers that were forced out of business by Harvey?”

Milan: “No. But many were affected.”

“We had a Holiday Inn Express in Rockport that was severely damaged. But the regulators were very proactive and encouraged banks to give people time, suspend payments, look for ways to assist them.”

“We had a dozen clients in different places that were badly affected, and we’ve worked with them.”

The Hardest Hit Clients Didn’t Have Flood Insurance

Lori: “The hardest hit were clients without flood insurance. They weren’t required to have it.
Not in a flood plain, you know!”

Milan: “We’re one of the top ten SBA lenders in this district. We’re up there with Chase and Wells. SBA requires flood insurance if you are in the 100-year flood plain. But the people that were the most affected were not in the 100-year flood plain and so consequently, they didn’t have any insurance.”

“I’ve had flood insurance for 50 years because my first house was in Bellaire. My second house was in Pearland. One time they had 35 inches in Alvin and there was no way out. We had to be rescued by helicopters down there, so when I moved to Kingwood, I insisted on flood insurance.”

Recommendations for Improving the System

Bob: “What would you change politically to help prevent another flood like Harvey?”

Milan: “Oversight needs to be regional. I think the SJRA worried too much about Lake Conroe and not enough about what would happen downstream. They need to communicate better, too. It’s incredible that guys in Memphis got the news before we did. Regional coordination and prompt notification. Those will be big parts of the answer.”

Nature Always Wins

Bob: “You work with a lot of developers. Do you have any observations about development near rivers?”

Milan: “You can’t outsmart nature. Nature always wins. We need to give Mother Nature her room.”

 

Posted By Bob Rehak on July 24, 2018

330 Days since Hurricane Harvey