← Problems to Profit
Problems to Profit
Ray Owen on Business Banking, Small Business Loans & the Lending Mistakes That Cost You Big
01:10:18
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- [00:04]
Preston Brown
Welcome back to Problems to Profit. Guys, I'm very excited. We have an amazing guest today. To this point, all of the guests have been wonderful introductions that have been made to me by, by, by different amazing people. Today I actually get to do somebody that I'm doing business with. He's a friend. He's mentored me on different, you know, areas around banking and finance and, and, and deal review. And I think that he is going to be maybe one of the most valuable podcasts that we've done. So I, you know, it is with great pleasure that I get to introduce my friend, Ray Owen. He runs a bank here in El Paso, Texas, called Bank of Texas. He is not just a banker. He's not just the guy that sits behind a desk and loans you your own money back and gets arrogant and, and anal and like, like, like some of the stereotypes are like, the good ones are amazing, the bad ones are. But, but he's also a guy that'll sit down and teach you. And, you know, he's quiet, he's humble, he's real. And for some reason I was able to get him out here to have a nice bourbon whiskey with me and get some of the brilliance in his head out and onto this camera and share this wisdom with you so that he can help you turn your problems into profit. Ray, thank you so much for joining us.
- [01:22]
Ray Owen
Thank you for having me. I'm excited to be here.
- [01:24]
Preston Brown
All right, Ray, so with Problems to Profit, we like to hear the problems to profit part. That made you the man. You are the success story, because people are going to glean a lot out of that. Would you mind sharing with us some of what made Ray Owen? Ray Owen?
- [01:38]
Ray Owen
Sure. Well, I've been extremely blessed in my life. I, I grew up in a family that my dad worked for a cattle feed yard and then managed a farm. And I learned to work with my dad at a really early age. I started working with my dad when I was about 8. Hoed cotton with my mom as an 1112 year old. And really my wife likes to say I've had a job since I was 8 years old. And there's a lot of truth to that. My family did not have much in the way of financial resources. My dad probably never made more than $30,000 a year his entire life. So when I started to get older, my mother knew that the only way for me to, or felt like the only way for me to move past where they were economically was for me to get a college degree. So she was going to have nothing more Than me getting a college degree, though. So she encouraged that. From the time I was really, really young. So I worked toward that and tried to make good grades and, you know, all that sort of stuff. I went to Texas Tech University, thought I wanted to be involved in banking. Kind of a crazy reason I decided that is, frankly, just because I didn't know anything different. So decided I wanted to be in banking. Thought I wanted to be in ag banking. Got a degree in ag economics from Texas Tech. Got out of Texas Tech in 1987, which was kind of a mini banking crisis. At that time, real estate in Texas was in a bad place. The entire Texas economy was in a bad place. Banks really weren't hiring. I didn't have a degree from the business college at Tech. I had a degree in ag economics. Had taken a bunch of accounting and stuff. So there were some banks that would not even interview me because I didn't have the degree that they wanted. And many weren't hiring anyway. Were not hiring anyway. I got very fortunate to get hired onto a bank training program at a bank in Lubbock. And to this day, I tell the young lady that at that time that hired me, I would be driving a tractor somewhere. Not that that's bad, but I would literally be doing that if it were not for her giving me that chance. Got involved in that bank credit training program at the bank in Lubbock. Stayed there two or three years. Worked for a bank in Arizona for a few years, Decided to come back to Texas. Worked for a really small bank in Pecos, Texas, and then that bank sold, came to El Paso and worked for Wells Fargo for a while. And then I worked at a bank with some friends of mine that was at that time called State National Bank. They wound up selling. And 15 years ago, a longtime friend of mine came to me and asked if I would be interested in starting a new bank with him. And we started at that time we started bank of Texas, and back in September, we completed our 15th anniversary. We bought a really small bank in a town southeast of Lubbock called Jayton, and then basically moved into Midland, where my partner is, and El Paso, where I am. So that's how we got started. And the little bank we bought was 18, 20 million dollars in assets. And we've grown our bank to now 520 to 540 million dollars, depending on the day. Wow.
- [05:23]
Preston Brown
Wow. So you took a bank from 18 million in assets to 500 and mid 500 millions in 15 years. What does that growth trajectory look like? Because growth's an expensive process.
- [05:37]
Ray Owen
It is. Honestly, when you look at banks that are startups or near startup, I don't consider ourselves to be a startup per se because we actually bought an existing operation, though it was very small. But many, many banks have had growth trajectories substantially greater than ours. We made the decision that rather than take the approach of build it and they will come to, let's grow as. Let's grow our loan portfolio as our deposit base allows without being overly aggressive on either side, the deposit side or the loan side. And so I would consider our growth to be relatively modest when you compare it to other banks in similar situations. We have been conservative on the lending side, and in 15 years in business, we've had no loan losses ever. That's not because we just don't loan any money. In reality, we're probably more loaned up than the vast majority of our peers. So we make a lot of loans relative to our deposit base. We just, to a degree, we've been lucky. But also, I'd like to think that we've been smart also.
- [06:54]
Preston Brown
Well, I was looking your bank up online and just kind of researching things about different banks. And I'm no expert. I'm a business guy, not a banker, but I look at banks as businesses, too.
- [07:05]
Ray Owen
Absolutely.
- [07:06]
Preston Brown
And you all seem to have just a higher efficiency rating as a bank by the numbers. Like, not, not, not me blowing smoke than most other banks out there, which I'm sure gives you opportunities both in margin and in working with your customers and in fees and rate because of that.
- [07:26]
Ray Owen
All true.
- [07:27]
Preston Brown
How do you, you know, and I don't know that I want to start there. I do want to get into the efficiency of banking because I think that's something that people need to look for. And the viewers watching this podcast, I mean, what I'm hoping you'll get out of this is I'm hoping you'll understand that a bank is a business and how to tune your relationship, your valued partnership in whatever market you're in to a bank that fits and best serves you as the business that can work with you at your level, your stage of entrepreneurship. But let's start here. Ray, what is a bank? If you were to just describe what is a bank? How does a bank work?
- [08:04]
Ray Owen
Okay, so good question, because a lot of people don't really have a concept of what it is we actually do. And in reality, banking is a very simple business in the way that we do it. And I tell lots of my customers, and I'm frankly being honest and I've probably said it to you, Preston. The business that I run in banking, I view it as to be much simpler to run than your businesses because it's very, it's very simple frankly. What we do is we take in deposits and then we turn around and loan those funds back out and try to make a margin on it. You can kind of look at it in such a way as we're renting money and then renting it back out to someone else and just trying to make a spread on it. Managing a bank is really kind of down to two or three things. The most important thing is don't make bad loans. Okay? Because having, having losses on loans can take years to recoup in terms of profitability. So the number one thing is don't make bad loans. The second thing is manage your interest rate risk. Meaning we don't want to go out and put on a whole bunch of fixed rate loans, say back when rates were really low at 4 or 5%. If we had gone out and put on a bunch of loans at 4 or 5% back then, fixed them for 15 years, and the source of funds that we were using to loan those out was on one year CDs, which at that time would have been 1% or less. And then when rates go up, we can't keep those CDs and so our margin would get mashed.
- [09:55]
Preston Brown
Okay.
- [09:55]
Ray Owen
Really simple.
- [09:56]
Preston Brown
So, so I think some of the more sophisticated entrepreneurs are going to understand that. But I want to, I want to, I want to dive in and ask a question there to maybe clarify the CDs versus the loans. Like with my business and with most businesses out there, if we want money, we're going to either go and try to get an investor or we're going to go to a bank and generally present a business plan or an asset that we can collateralize and borrow money.
- [10:22]
Ray Owen
Correct.
- [10:23]
Preston Brown
But, but banks borrow money too. In, in a sense. Correct. Okay, like, but it's, it's, it's, it's a different way of borrowing money than, than say a structured loan agreement. Like I would go to you ncat. Where, where does a bank get the money that they're loaning out? Because if you have a 500 plus million dollar bank, that's not all your money. You're not just a guy with 500 plus million dollars.
- [10:47]
Ray Owen
Correct. Okay. So, so banks have to have, just like any business, banks have to have some equity, some stake in the game also. So generally speaking, you can say that banks will generally have 10% of their assets will be the stockholder's equity. That number can range from 8% to 12% or 13%. But it's kind of a round figure that you can look at is 10%. So if a bank is going to have $100 million in assets, say the shareholders will have $10 million invested in that. Right. So then the remainder of those assets is borrowed. Exactly as you say. That's a great way to put it. We're borrowing it largely from our customers that deposit with us in a way. If you've got money on deposit with a bank, whether it be in a checking account, a money market or a cd, in a way you've got it loaned to the bank. That's a really good way to put it. So yeah, that's where we get our money is from our deposit customers and then we turn around and loan it back out to our customer borrowers.
- [11:57]
Preston Brown
Assets are to a bank and assets it's bank. I love the banking business because it's so interesting and you'll HEAR all the YouTubers talk about how banks are creating money or banks are doing this. But assets to a bank, if I go put $100,000 in a bank, that's an asset that the bank had.
- [12:19]
Ray Owen
Correct. It's actually both. It's an asset and a liability. Okay. Because we're going to take your money and either loan it out, invest it in short term securities, or just let it sit in our checking account or our savings account. But it's, it's. So the money that you gave us, it becomes an asset to us, but it's also a liability back to you because we still owe you that money.
- [12:41]
Preston Brown
I love that. Now at the same time, If I put 100 grand in the bank, I've given you an asset which is also a liability, which is why you pay me a rate on my deposit. And that's almost like if I borrow money from you, you charge me interest. If I put money with you, I get a rate back. So it's almost a financing agreement between.
- [13:00]
Ray Owen
The borrower and the bank in a way.
- [13:01]
Preston Brown
The same way that it is between the depositor and the bank in a way. So there's an asset and liability. Now the moment you take my cash and you loan it to somebody, it's still an asset.
- [13:12]
Ray Owen
Correct. It's just a different asset. I took it out of. Think of it as the bank savings account. The money that we have on deposit with the Federal Reserve or another bank or whatever, that's money in our account. So if I loan it out, it Just changes from my asset in a savings account, if you will, to my asset as the loan. It's still an asset to us. It just moved from this to that. Much the same way that if, that if you were a home builder and you had a lot, a lot that you were going to build on, once you build a house, well, it's not a lot anymore. It's a house.
- [13:49]
Preston Brown
Let me ask another question because I'm loving this and thank you for sharing this because I think a lot of people don't understand this. If you have a $500 million bank, that means that you just have $500 million of cash sitting in that bank, right?
- [14:02]
Ray Owen
No.
- [14:03]
Preston Brown
So that $500 million is not there, correct?
- [14:07]
Ray Owen
In a way, that's right. We do have $500 million in assets. But depending on the bank and depending on how the bank structured, a bank's assets will be invested in three or four different places. The first one is loans, we all know what loans are. The second place that a bank will invest its funds, its depositors funds will be in bonds and bond portfolios. And those bond portfolios can be US Treasuries, municipals, that kind of thing. The third place that it can be invested is in short term investments funds on deposit with the Federal Reserve. Think of it as a bank savings account. That's how I think of it. When we part money with the Federal Reserve each day I think of it as that, that's our savings account, that's our excess liquidity. And then the fourth place that a bank invests will be in its fixed assets, in its buildings, equipment, that sort of thing. So if you look at a bank, most banks, that's the vast majority of their assets, cash, liquid assets, cash and, or liquid assets, marketable securities, meaning bond portfolios, loans and fixed assets.
- [15:25]
Preston Brown
Now banks have to make loans to.
- [15:29]
Ray Owen
Survive in today's world, that is true. When I first got into banking in the 80s, interest rates were such that a bank could actually make a pretty decent profit by not lending out very much because they could go buy securities and paid a low enough rate on deposits that they could make enough spread without having to lend much. That changed long ago. So now it's very difficult for a bank to make a reasonable profit without lending money. Very, very difficult.
- [16:04]
Preston Brown
So then banks, assuming they have healthy deposits and good assets when running their business, if they need loans, and I think this is going to be critical for people to hear and understand what are you looking for in a loan? Can you kind of go over the seas of credit sure, sure.
- [16:25]
Ray Owen
You know, they. When I got into banking in a bank credit training program, they taught us this, this five C's of credit. And it's kind of changed. The nomenclature has changed just a little bit over time, but I actually had to go refresh my memory about it to make sure that I remembered how. What all these things were. But essentially, banks look at four or five different things. Character is the main one. That's the main thing that I look at. Okay. And character means a lot of different things. It's not only do you have the integrity to pay the loan back, it's do you have the. Do you have the. In a way, it's pride that you'll do everything in your power to pay that loan back, even in the event that you get in a jam. And then the other part of character to me is how well do you know your business? How well do you know what the business that you're in or what you're trying to get into? And I try to gauge that by just being asking a bunch of questions and trying to see how much have you really thought about the good and the bad of this business that you're in or the business that you want to get in. Capacity. When I got into banking, the term that's now used as capacity was more really called cash flow. Do you have the earnings stream to be able to service the debt? But now they use the word capacity. If you're talking about commercial loans, business loans, if you're talking about consumer loans, they kind of use. They gauge that by the debt to income ratio. We don't do much consumer. But capacity is that collateral. Do you have an asset to back this thing up if something goes sideways? They use the term capital. To me, capital is kind of like your secondary ability to repay. Do you have equity in other assets? Do you have an outside cash flow stream that can help in the event that this thing that I'm lending to doesn't work? I kind of think capital and capacity go together just a little bit. A lot of these things kind of go together. Collateral, obviously, that's. That's what a bank's looking to. In the event that something goes south. No bank ever wants to take someone's collateral. I want everyone to understand that banks don't want to own your collateral because that means things have gone haywire. And rarely will a bank be able to sell the asset that you've given as collateral for as much as you would be able to sell it. Nobody wants to own your collateral. Don't ever think that they do, because they don't. There's all kinds of issues from a bank standpoint, if it gets to the point that they have to get your collateral. And then the last one, the last One of the five Cs, today, they use the term conditions. And really that's the economy, the industry that you're investing in. The loan terms, are we structuring the loan in such a way that. That it makes sense and you have the ability to repay. If I made someone a loan and structured it in a way that well, there's just really no way they can pay it well, that's stupid on my part, obviously, but also that's part of conditions. So just kind of to recap character, capacity, capital conditions, and collateral. Those are the five Cs that I was taught. They've changed over time, but I don't even really think about them. Like I said, I kind of had to look them up again just to remember some of the nomenclature. But that's what we look at. As I said, banking is a simple business. I look at it like the lending side of the bank as a simple business, too.
- [20:32]
Preston Brown
I want to. I love these Cs, and thank you for going over them, because for me, these Cs were critically important in even our relationship. I mean, they probably all boil down to 1C, which is common sense.
- [20:46]
Ray Owen
That's a good way to put it.
- [20:48]
Preston Brown
But, you know, last year, like, I. I actually delayed launching this podcast for a year because I was in a hellscape situation with a con artist and a crazy, you know, litigation event. And. And you. You were the only bank that came in to help me in that situation, even though the collateral, which now is better at that point, was highly compromised due to clouds on title and issues like that. But you still found a way to help me. And. And when you were looking at that loan with me, which. Which, by the way, I greatly appreciate, because now that that situation's solved, I don't want. I didn't want to be the hypocrite going out and doing a business podcast when I had a big issue with my own business. Like. Like, I kind of feel like if the pastor has got a problem in his marriage, he shouldn't be at the pulpit talking. And one of the reasons I wanted you on this podcast is because you helped me in that situation. You helped me to the tune of seven figures or more when I really needed it. You had all these Cs, but collateral, and you were even saying, nobody wants to take the asset was down Most banks wouldn't do that. Now, most banks didn't have the relationship you had with me at the same time. Can you talk about. And you're welcome to use my situation as an example. I have no problem sharing the whole point of this. But. But how did you come to that? Because other people are gonna get in situations. Even good business people are gonna get in situations 100%. How did you come to that? That, hey, I'm gonna help this guy and you can use my situation as an example. That way you're not going into anybody else's business. It's your and mine. How did you come to that?
- [22:21]
Ray Owen
Okay, well, first let me say that I learned from a very successful customer of mine about 20 years ago. He told me, he said, ray, and this guy was extremely successful in lots of businesses. And he told me, ray, every deal doesn't work. I had never really stepped back and thought about that, but absolutely true. And this was a guy that was exceptionally successful. So I've remembered that since he told me, every deal does not work, meaning every investment you get into doesn't work. Every business investment you get into doesn't work. Every home you build doesn't work. Every loan you make doesn't necessarily work. So I've remembered that. And why is that important? Because it's important to remember that it's not going to be smooth sailing all the time for your customer or the bank. But back to this, to your question about why did I help. Well, first of all, as you said, you and I had a relationship and we had some history. If you had walked in to my bank and this was the first thing that we had ever talked about doing, would I have done that? No, I wouldn't have, because I didn't know you, but I knew you. You and I had done business for two or three years. I had learned that, hey, this is a smart guy. He knows his business. And more importantly, I had learned that this is a guy that even if things go to hell, he's going to do everything he can to pay me back. So that's the most important part. Now, obviously, then I looked at the situation and tried to analyze it as best I could, which a lot of that came from you. Will this situation work its way out? And I came to the conclusion that I believed that it would, that you would work this out. And the conditions were such that in the end, it'll all be okay. And if it's not, I knew that you had the willingness and ability to pay us back, even if that didn't work. I knew, I knew you could. So that's kind of what it came down to.
- [24:31]
Preston Brown
So, and, and, and this is a piece that I want all the listeners to hear is the relationship piece, because you, you said something a little earlier in the conversation. And, and I'm taking notes as you talk, and I hope everybody's taking notes because, like, you're, you're getting gold here. And, and it's not easy to get guys like Ray to sit in a camera, you know, and a podcast room and share all this. And these are gems. But you said banks don't do, at least local banks, a ton of consumer loans, which is different. So, you know, at least the way I underwrite the banking business model, if I go to a credit union or like a mortgage broker or somebody like that, that's using kind of that Fair Isaacson Company debt management program, and that's all fine, they're going to look at your credit, they're going to look at your income, they're going to get your tax return. And the customers they're going to work with is so broad that everybody has to fit in this box. And if you're in the box, you're great. But the banks, like the local banks and the regional banks, you guys don't get to do that quite the same way. You have a far smaller group of customers, your customers, mainly, even though you'd love for everybody to come and open an account and create deposits, your main customers, whether it's lending customers and probably your deposit customers as well, are the entrepreneurs correct? They're the business people.
- [25:51]
Ray Owen
That's true.
- [25:51]
Preston Brown
Okay. And a lot of them are the business people that are taking their money to the big banks and the Chase and the Wells Fargo and the bank of America that will never look at them. They're not even on the size, scale or scope to see them, don't care about them. Like Elon Musk might be on their radar, but the local plumber is not.
- [26:09]
Ray Owen
True.
- [26:10]
Preston Brown
And here I was a guy doing business with another banker, and you helped me in a pinch. And I mean, I think I keep healthy deposits at your bank and I helped you proportionately as well, in different ways. And have with the relationship.
- [26:28]
Ray Owen
Exactly.
- [26:29]
Preston Brown
But can you explain more on who is your customer and where they make mistakes when they're banking? Because if I talk to most entrepreneurs about bankers, the banker is the guy that sits behind a desk and doesn't give a shit about them. And what I try to explain, and this is where I want you to go into it, if you got a $500 million bank and 10% is owned by the owners, then the owners are worth $50 million, like as a group.
- [26:54]
Ray Owen
Okay, and round, round figures. That's exactly right.
- [26:56]
Preston Brown
Now, if you're an entrepreneur where it's somewhere $150 million, you've been on their journey, they understand you. How do I get the relationship with the local banker who's going to give a shit about me?
- [27:13]
Ray Owen
Sure, Good question. I mean, I want to talk just a minute about something you brought up about consumer banking versus commercial banking, et cetera. Well, in our situation, we made decision from the get go that we were going to focus on the segment of banking that we felt like we knew, which was commercial. Consumer is a different animal. I've never really been involved in consumer banking much, honestly. We just decided that we wanted to stick to what we knew. That doesn't mean we don't do any consumer banking. We take consumer deposits, as you say, and make a few consumer loans. It's. That's not our focus. We don't feel like it's what we're good at. And the other part of it is, Frank, in all honesty, the bigger banks largely are very good at that, and so are the credit unions very good at that line of business. And so we just kind of decided, you know what, we're going to sort of stay out of that and let them do that part and we're going to do the commercial side. So, you know, back to your question about is it possible or how difficult is it for a small business entrepreneur to bank at a bigger bank?
- [28:25]
Preston Brown
Well, and let me frame it this way. If I'm an entrepreneur, how do I find a banker that'll care about me?
- [28:31]
Ray Owen
Maybe you got to kick a lot of rocks to find out. I mean, I guess what I would say to any commercial or to any entrepreneur that's kind of just getting started. Talk to your entrepreneur friends. I've always found that, that like in my business, the best way for me to get new customers is from referrals from existing customers. Okay. We don't go out and make a bunch of cold calls on people. We don't do any of that. We don't really do any advertising. I rely on the word of mouth of my customers to get me new customers. So I would kind of turn that around on an entrepreneur. Talk to your people, to your friends in business and say, hey, who do you bank with? What bank do you bank with? What banker do you bank with? Use that as the first way to find a place to bank. And in reality, the truth is it's not impossible to find a good banker at a big bank. It's really not. It's more about the person and that person's ability to maneuver through whatever policies and procedures their bank has. Now in some ways the big banks, their policies and procedures can be so overwhelming that there is no maneuvering through it. But you know, for certain lines of business and businesses that have the right kind of history, et cetera, the big banks can work. But you got to have that person, you got to have that relationship. You start, you know, banks got into 20, 25 years ago making it where, well, you apply online and then you email your tax returns in and all that. Well, that works just fine. If your loan request fits in the box and your business fits in the box, you can do just fine like that. But most businesses, most entrepreneurs don't fit in that small box. And then it's a matter of finding the person that will listen and hear your story and try to figure out, is there a way I can make this work? It's all about finding the right person. And it can be at a big bank more challenging, but can be, but ask your friends, that's the best place to start.
- [30:45]
Preston Brown
So let me, let me kind of ask it. I'm going to ask you to kind of wear two hats and answer the question two ways if you can. I want you to play the game where you're the employee at Wells Fargo again and then I also want you to be the owner of bank of Texas. Okay. And I'm going to ask you as Ray the employee and Ray the banker.
- [31:00]
Ray Owen
Okay.
- [31:01]
Preston Brown
Ray the employee at Wells Fargo. I come to you as Preston Brown, let's say hard money lender. Can you design a specific loan program for me for my $5 million lending company and run it up the chain? And I'd like this done in 30 or 45 days so that we can get this all handled and managed. Ray, the Wells Fargo employee, likely not.
- [31:21]
Ray Owen
That's a line of business that at least when I was there, they didn't like particularly. But, but you as the home builder, they like that line of business under certain parameters. No, on the hard money side, in all likelihood, because it's an industry that maybe they don't particularly want to be involved in.
- [31:40]
Preston Brown
So lines of business and banks appetites in regards to those lines of bank business are going to be a critical thing.
- [31:47]
Ray Owen
It's important that a borrower should look.
- [31:49]
Preston Brown
For is like, hey, what are the niches that this bank appreciates Exactly.
- [31:53]
Ray Owen
And if you find the person to talk to that really knows how their bank functions and what they like to do and not like to do and will be honest with you and you meet that person and you say, hey, I want to get into this hard money lending. If the banker understands the bank that they work for and what they really like to do, they'll be honest and tell you that's not something that we like. And that's okay. If I'm a business person, I'd rather have a quick no than a long drawn out no.
- [32:26]
Preston Brown
You'll tell me when. Hey man, I have too much commercial real estate or too much residential real estate. And if we're talking types.
- [32:34]
Ray Owen
Right.
- [32:34]
Preston Brown
Can you explain how like sometimes a bank can be overexposed in one area and not be motivated because of regulators?
- [32:41]
Ray Owen
Sure, sure. So you know, we have. Regulators is a good word to use. So all banks are regulated by either the Federal Reserve, the FDIC and, or their state banking departments. And we're all regulated by a combination of those three. So meaning when I say regulated, meaning they watch what we do. There's rules that we have to follow. Some of these are not hard and fast rules. Some of them are more guidelines. But commercial real estate is one that, that is a, I would call it a guideline. Well, there's only, the regulators don't want you to be overexposed in any one industry. Commercial real estate, oil and gas, whatever. But. So they put up these kind of guidelines and say we don't want you to have more than X percent of your equity invested in this line of business. Commercial real estate is a good example. Doesn't mean you can't do more than their guideline. It just means if you're going to do it, we want you to be a little bit more careful about it. So if you find a bank that has an excessive amount of commercial real estate, they may be way more picky about the new loan request that you bring them. But commercial real estate is a good example of that. It's really the only one that, that banks in our region have to deal with much.
- [34:15]
Preston Brown
Okay. So asking specific questions to your banker.
- [34:19]
Ray Owen
Yep.
- [34:19]
Preston Brown
Like with you, it's easy because you just, you'll just tell me. But if I'm a client, like a lot of bankers, they're an employee at the bank. There's always some posturing going on. I don't think they're dishonest, but they also want to, they're very concerned about making sure everything looks good and is right. And so they don't know what they can and can't say. Like they're not a principal owning a piece of the pie. But with a specific question, they might answer it and say, look, man, we are. We are pretty filled up in that area. Which would be an indication that, hey, man, go talk to another bank and another bank for sure. And that leads me to a question of, in today's environment, like maybe 50 years ago, it was okay to have kind of one bank. Now, if you're doing 5 million, 10 million in revenue, do bankers really frown on it if you have two or three banks?
- [35:01]
Ray Owen
I don't.
- [35:01]
Preston Brown
That you're looking at.
- [35:02]
Ray Owen
I don't. I think it's appropriate risk management for the business to some degree, for the bank, too. I think it's great to have more than one banking relationship. And I almost always encourage my customers to have another relationship or two out there just because I think it's just prudent because you never know, you know, what might change in our bank. That's not something that I think about or worry about. But in banks that I've worked at in the past, there's been situations where maybe the bank sells and then so the new owner comes in and goes, well, man, we've got way too much commercial real estate. We're not going to do anymore. Well, shoot, that might change overnight. Well, then you need another place to go. Back in the 80s when late 80s and early 90s when home builders had problems, nobody wanted to do home builder loans back then, right. So there were some kind of private lending that got done back then. But the ones the home builders that wound up getting through all that obviously had the equity to sustain it, but also manage to get some other banking relationships. Don't have all your eggs in one basket. It's a good idea to have multiple relationships.
- [36:30]
Preston Brown
And I want to qualify this because, I mean, we're talking to kind of different levels of entrepreneurs on this podcast. If you're a startup entrepreneur, you need to find a good bank, find a good place, and this is not your worry. This is not your concern. When you're worried about scaling in an arbitrage economy where the government's borrowing, where businesses are borrowing, where everybody on Wall Street's borrowing for the most part, where banks are borrowing, I mean, everybody's borrowing like we live in an arbitrage economy. If you're a startup, find a good bank and move. But when you start needing loan programs, which you're going to use debt to scale, at that point, that's where you start saying, okay, I need to go and talk to my, my bank that I've started with about, here are my goals, here are my agendas, and this is what I want to do and see what their appetite is. And that's maybe when they start adding their second or third. You don't need 20 banks.
- [37:18]
Ray Owen
Right.
- [37:19]
Preston Brown
What makes a borrower appealing to a bank outside of deposits and outside of like the Cs?
- [37:26]
Ray Owen
Yep.
- [37:27]
Preston Brown
And you know, if we can just go here and I'll talk our relationship, a lot of times I'll call you and I'll ask you for advice, which I take. And I think you've noticed that I was looking back on our history, you more often loan me money when I ask for advice than when I ask for a loan. And just based on my notes. Now, I think also to give that a fair caveat, I take your advice and I listen. If you say, hey, you need to add this to your balance sheet, I do that. So it's not like, like you can't go use advice as a tactic. But when you have a relationship with a borrower, I sense that you're looking for a give and take relationship where it's a two way conversation.
- [38:05]
Ray Owen
Sure. I like my customers to be open and honest and upfront about everything. You know, I have a good friend that's been in business here a long, long time, has a very successful business and his son is kind of beginning to take over the management of that business for him. And he told me, he's told me this many times. He said, I tell my son, you tell the banks when you have a problem and you tell them early because banks don't like surprises. Very wise, very wise. Don't let a bank find out about something bad in your business on the street. So communication is exceptionally important. And just like you do with me, you'll call me and say, hey, I'm thinking about doing this or that. What do you think? And that's the kind of relationship I want with my customers. I want it to be a conversation, as you say, I want it to be open and I like to know what you're doing. I don't have to know every little move my customers make. But if you're thinking about something big, yeah, let your banker know.
- [39:13]
Preston Brown
You always give me advice. You don't always give me the advice I want. Like I was, I was asking you advice on, on hard money. I mean, it was probably six months ago when I was looking at, you know, the opportunity to acquire another company. I don't Want to mention names. And you said, yeah, dude, you know, Zia is kind of your main thing right now. I mean, you got a lot of eggs in that basket. Maybe, maybe, maybe stick. And I, you know, I didn't end a conversation, but I put it down the road 10 years in my head based on that advice. But if I'm honest, like being kind of the growth natured guy, which I think entrepreneurs have to be in a lot of cases, it wasn't the advice I really wanted to hear. I mean, but probably it was the advice that I needed to hear. So I want to talk about what a borrower, consumer entrepreneur, somebody looking at banking relationships should look for. And I want to go, I'm going to go through like what I think.
- [40:09]
Ray Owen
Okay.
- [40:10]
Preston Brown
And I'd like you to just kind of comment on every point.
- [40:12]
Ray Owen
Okay.
- [40:12]
Preston Brown
I found personally that the banking relationships that have served me the best have kind of a banking equity position that is not dramatically above my assets and net worth. Like, like, in other words, it's within 50 or $100 million of my assets or net worth. For me, like if I go to a billion dollar bank or, I'm sorry, probably like a 2 or $3 billion bank, I don't get noticed when I walk into a $500 million bank. I'm a respected member of the depositor community. So something size of business to size of entrepreneur. Like if you've got a business doing $50 million in revenue, would that be a fair, safe way to say that you should probably go look at $500 million banks?
- [41:03]
Ray Owen
The answer is it depends to some degree I agree with your assessment that it's that the size of your business correlates to the size of bank that you should be doing business with. To some degree I agree with that. But, but I think it depends on the culture of the bank and it depends on the relationship manager that you're dealing with. It's all about people. Everything's about people. It's not so much about the size of the bank, it's more about the people in the bank and the culture of that bank and what they like to do. Now to some degree, you're right, it's more difficult to do business with a trillion dollar bank if you're a small business person. But if you, again, if you happen to fit in the programs that that trillion dollar bank has for small entrepreneurs, if you happen to fit in that box, it might be okay. It's just most people don't fit in that box.
- [41:55]
Preston Brown
Here's the other thing I Look for do I get time? Like, and not an excessive amount of time, but I want to talk to whoever's my banker or my person there and I'd like them to be not, you know, you know, the, what is it called? Like if you go to some banks, everybody's got the vice president name tag, you know what I mean? I want to talk to somebody who I know is at least in the upper echelon of the bank. I don't need to go to the president of the bank every time, but I want to talk to somebody that can talk to the president of the bank. Because if you're not willing to give me say half an hour to an hour a month to discuss ideas, to talk to the market to figure out what's going on, then there's no way you're ever going to design a loan program around my business.
- [42:30]
Ray Owen
100% agree with that. You want somebody that, that has a true interest in you and your business. And it's a two way street. Obviously, just like you've said a couple of times, you got to do something for the bank, meaning pay them interest, pay them on time and let them know what's going on in your business and have deposits. It's a two way street. But if you feel like that you're dealing with a person in the bank that has no interest in you, either move on to a different person in that bank or move on to a different bank because you're 100% right about that. You got to have somebody that's interested in you.
- [43:09]
Preston Brown
I look at size as the consumer going to the bank to consume and I should say entrepreneur going to the bank to consume because I'm not the regular consumer. I look at size of the bank compared to size of my business. That's one thing I look at. I look at am I worth their time? And then I look at, and I don't know that I know how to term this, but credibility of feedback. And what I would say that means is if we talk about something and verbally agree and obviously there's always a committee and obviously there's always like a board to review it and ask questions to do underwriting. But what does that process look like? If we agreed that we're doing something in August and then yeah, we get it done, but it's getting done in June of the next year, the time value is substantially diminished versus if we agreed to something in August and hey, you know what, we funded it in September or October, there's 45 or 60 days of hey, we gotta underwrite, we gotta order some appraisals, we gotta do this. Or maybe there was a, hey, you know, we're gonna go to design this loan program for this guy, so we wanna run it by the board. And you guys have boards of. And maybe that's something to talk about too. Boards of lots of different folks with different expertises that look at things as part of your. What could go wrong. But I look at the credibility of feedback that I'm getting based on the conversations that I've had when I get time.
- [44:32]
Ray Owen
Sure. So in terms of the timeframe of how quickly you can get an answer, that's what you're asking. And not just get an answer, but get something close. Well, what I would, what I would say to business people when they're talking to bankers about that is understand, get some, get some feedback from them up front, hey, realistically, when can I expect that you guys might have an approval? And then how much longer is it going to take to get funded and put the banker on the spot? And if they can't, if the banker and, or the bank can't deliver in a reasonable amount of time, that or it takes way longer than they said. Well, then next time, next go around, maybe that's something to consider.
- [45:20]
Preston Brown
Well, and it's not always way longer, Ray. Sometimes it's the deal isn't the same deal.
- [45:24]
Ray Owen
True, true. And that's another thing. Now understand that I've never seen that.
- [45:30]
Preston Brown
With you, but I have seen that with other lenders where I go and I ask a question and four months later I've been through like five levels of renegotiation and I'm looking at this like, do I even want to do this anymore?
- [45:40]
Ray Owen
Well, to some degree that's a product of how that bank is structured in terms of approval authorities and that kind of thing. You know, I've worked at a couple of. Actually I've worked at three, what I would call big banks in my career. And sometimes what happens in these bigger banks is everyone in the approval chain, sometimes they want to put their own little mark on the transaction. Oh, I'm going to add this covenant or oh, I'm going to raise this pricing, or, oh, I want them to pledge this additional piece of collateral. And yeah, I'm not saying that sometimes those things aren't good, but they become extremely aggravating for the customer and lots of times don't do the bank much good at all. So sometimes that happens. If that happens to you as a business person more than a couple of times might start looking for somewhere else to go because, and it's not always that you should blame your banker, your relationship manager, whatever you want to call them, your account officer. Because a lot of times that stuff's out of the control that happens in.
- [46:55]
Preston Brown
The procedures of that bank.
- [46:57]
Ray Owen
It changes a layer two up the chain. What's great if you're a business person is to be able to find a banker that one knows their bank, knows what they like to do, and knows what the issues are going to be and let you know up front, hey, you want to get this loan to buy some lots? Well, in our bank, you're going to have to put 35% down. And so I'm not going to blow smoke up your ass that you're going to be able to get it with 20% down. Our bank wants 35% down. You got to do it that way. So you want somebody that understands what is expected in their bank and is willing to tell you up front this is what the deal's going to be. And if they can't do that, then it's one of two problems. One, they're not being honest or two, they don't really know. They don't know their bank well enough.
- [47:49]
Preston Brown
Oh, and I'm loving this because this is gold, because I think you're giving everybody the magic, the magic ticket right now, which is what to look for in their banker and where to go put their eggs in that basket. Right? And the last thing I look for, and this is interesting because I don't want to say this wrong because, because I look for information sharing without any jeopardy. Does that make sense? And what I mean by jeopardy is I don't, I don't want information on any other business, but I do. I mean, I, I get deals from commercial bankers. Like commercial bankers will, will give me enough information, be like, hey dude, you know, we're seeing this in the market. You should go look at this. And then I go dive in and I find stuff and I find availability. They'll, they'll say, you know, our best performing portfolios are X and our worst performing portfolios, they won't give me names and they, they shouldn't, but they can say, hey man, here's where opportunities are lying right now. And that's kind of the last thing I look at. And that's why I was kind of calling market feedback. Right? It's the feedback and not just how you do it. It's the feedback of whether it's what it looked like at the beginning is the same as it looked like at the end. Like, I want the girl I dated to be the same girl I married. Right. But it's also. You do better if I do better.
- [49:06]
Ray Owen
Absolutely.
- [49:07]
Preston Brown
If I make 10 million this year instead of 5 million this year, likely there's more money in your bank, which you get to loan out and increase your income with is pretty high. How does a banker, or how does a client go about asking questions for industry information without jeopardizing the banker or creating.
- [49:26]
Ray Owen
Sure, sure.
- [49:27]
Preston Brown
Obviously there's a client privilege situation that you have with all your clients.
- [49:31]
Ray Owen
100%. Yeah. And no bank wants to give out confidential information.
- [49:36]
Preston Brown
And can't.
- [49:36]
Ray Owen
Yeah. And can't. And if they do, then be worried because they. Yeah, they should not be doing that. And nobody does that stuff. But shoot. I think it's a great idea to ask your banker, hey, what do you know about this industry? If it's something new you're thinking about getting into, what do you know about this industry? What do you think about it? Do you have any clients involved in this industry? You know, names. But do you. Do you know any. What do you know about it? I think that's great. Banks get to see a lot of different things.
- [50:10]
Preston Brown
How about like, even. Even something as simple as areas of town that are doing better than other areas of town. Like, I mean, you could tell me without saying any names, you know, office rents are way better here than there.
- [50:21]
Ray Owen
Sure, sure.
- [50:22]
Preston Brown
I mean, you know, I don't know if I'd look in that area with that personal, per, you know, that specific product type.
- [50:29]
Ray Owen
A good banker will be honest and tell you when, you know, I don't know. You know, I don't know. And you've probably asked me things before and I've said, you know what? I don't know anything about that. But if they know something about it and they're the right kind of banker, they want you to be successful. So they want you to have the information that is okay for them to give you to make you successful. A good banker wants you to be successful, and information is a big part of being successful.
- [50:59]
Preston Brown
All right, I have one last question, and this has been gold, so thank you very much, by the way. I'm really appreciating all this information. I know it's going to help folks. But I have one last question, and this is just more of a personal, emotional question that I have to ask because I find it interesting, like, if I go look at the Fed's balance sheet and at the Fed's income statement, they don't seem to be doing very well. What do you think is a bank that does make money being regulated by an organization that's supposedly a bank that really loses more money than any bank that they regulate?
- [51:31]
Ray Owen
Yeah, so that's a challenging question.
- [51:34]
Preston Brown
Isn't the kind of the stupid lead and the smart.
- [51:36]
Ray Owen
I think you could look at it like that. So part of the reason that the Fed is not doing too well, part of it is that they bought a bunch of government securities when rates were really low, and a lot of banks did, too. So you're stuck with those securities that are earning a low rate of return and there's no way out. You just got to wait it out. And there's banks in that boat, too. We talked earlier about banks have to loan money. Well, that's true today, but still most banks, not the case with us. But most banks will have 10 to 40% of their assets invested in bonds. Well, that's fine and dandy, but the banks that have gotten themselves in a bit of a jam, they bought these securities back when rates were 2%. Well, you can't go sell those things because if you go sell them, you're going to take a big loss. So you just have to wait it out to a degree. That's the boat that the Federal Reserve is in, that they've got to wait till these securities pay off and they can reinvest them at higher yields. That's not all the problems with the Federal Reserve, but there's all kinds of problems with the Federal Reserve. But.
- [53:07]
Preston Brown
So I love asking you questions, and I apologize, I lied because I told you that was my last question. But every question you answer gives me more questions. And this is something that I think borrowers also need to look at and entrepreneurs, when they're finding their bank. What are the biggest threats to the banking industry as a whole right now? Like, I mean, is it, you know, bonds? Is it, you know, commercial real estate? Is it, like, what. What should an entrepreneur look at if they want a bank that's still limber and flexible and able to move, that's not subject to some of these threats? If you could give us the top three threats to the banking industry.
- [53:41]
Ray Owen
Generally speaking, the banking industry is in pretty good shape today. Actually. It's in really good shape and has been for years. If you take out of that equation or that statement, Silicon Valley and the two or three banks that. That imploded two years ago or three years ago.
- [54:01]
Preston Brown
Okay, First Republic.
- [54:02]
Ray Owen
Yeah, First Republic, Silicon Valley. And I think there's One more, but those imploded for a different reason that we can talk about if you want. Generally speaking, the industry's in okay shape. You want to deal with a bank that is adequately capitalized, meaning they've got 9 or 10% equity in their business that doesn't have a history of, of losses, operating losses, loan losses, et cetera. So you want to do business with banks like that. It's harder to find that information about banks, but usually you can find some stuff on their websites or some publicly traded or public information. But the threats, the threats that are always out there in banking are industry wide downturns, commercial real estate, housing, oil and gas. But by and large those industries are okay today and have kind of been well managed. You have pockets of problems. You know, you're here on the, on the business channels. All these banks have too much in the way of loans on office buildings. And that's true, office buildings are, have problems, especially on the coast and even some in the middle part of the country. But by and large banks have done a pretty good job of diversifying their risks. So the threats against banking are always industry issues. Though I don't see one that I see as a gigantic problem is regulation or covering. That's the next one. That's the next one. So regulatory issues can be a thing. A lot of the regulatory pressure in the last three or four years has been more on the consumer side. The Consumer Financial Protection Bureaus, the cfpb, this is something that's gotten a lot of power of late frankly, don't affect us smaller banks much, especially if we're not doing much consumer. But for sure they affect the big banks. I feel like, and if you read the public information, there's some in the Wall Street Journal today that the new administration is probably going to dial back some of that regulatory pressure on banks, thank God, which is a good thing by and large. Now obviously you don't want to give banks free reign to just go apeshit and go back to the stupid things we did in the 80s because that was bad for banks and bad for business. Regulation can be overdone just like anything. So I feel good about the regulatory environment and where it's headed. We'll wait and see. But I feel like that's going to get better back to Silicon Valley and that kind of thing. If you want, I can kind of speak briefly about what happened there.
- [56:54]
Preston Brown
You know, I want to go in a. I do want that. And we'll go a few minutes longer because this is super interesting, but I Also want to like kind of advertise banks to our listeners. And what I mean by that is banks pay taxes, correct?
- [57:11]
Ray Owen
Correct.
- [57:12]
Preston Brown
So banks are at a disadvantage in theory to a credit union that doesn't pay taxes. From a rate and fee standpoint, they.
- [57:21]
Ray Owen
Can be for sure. We're at a disadvantage in that whether the bank pays taxes, if it's a C corporation or their shareholders pay taxes because it's an S corp. For sure, for sure. There is, there is some inequity there.
- [57:37]
Preston Brown
So what I have found, and this is what I want to advertise and maybe get you in here and then we can go to the Silicon Valley bank and First Republic because that's just interesting stuff. But I have found that by nature of the market gives some advantages to credit unions on taxation, which at the end of the day is just an expense that makes them cheaper. Is bankers, because of that market advantage given to credit unions have become much more sophisticated. I mean, I'm not going to lie, my bankers have been my guides. They have been my guideposts. They've dove in and understood my business just because they weren't entitled to an easier world that some of the credit unions had. They've been more flexible with loan programs, they've taken more time to underwrite me and more of an interest in my business. And frankly, because of some of what I think is the obvious disadvantage created by regulation with that specific situation, it's almost forced bankers as kind of a market to care that much more to maintain their business and be flexible to help the entrepreneur and the small business is what made this country. Would you agree with kind of that assessment?
- [58:51]
Ray Owen
Yeah, to a degree. With the caveat that you can find a good banker and a good credit union maybe is willing to help you, kind of like a bank would. The fact remains that they do have a competitive advantage because of this taxation deal. That's never going to change. Back 20 years or so ago when the credit union started getting into commercial banks or commercial banking, real estate, commercial real estate lending and business banking and that kind of thing, we as commercial banks and bankers, we all looked at it like, oh man, that's terrible. And they've got an advantage over us and all. True, but it's not going to change the political environment. We're in a place now where credit unions are going to continue to expand. And so I'm not willing to say anything bad about a credit union other than they have a competitive advantage over us because of the taxation issue.
- [59:52]
Preston Brown
But would you agree that it has Made bankers more sophisticated and better with business owners, entrepreneurs and small business owners underwriting. I mean. Cause I've found that. And look, I do business with credit unions and banks, but I have found en masse, there's always the exception that proves. But generally speaking, en masse, my bankers could a lot of times be my cfo. I mean, they're not, obviously, but they can sit and underwrite my business. I send the same set of financials to a credit union. I've got to hold their hand and walk them through it.
- [60:23]
Ray Owen
Understood. And part of that is that as an industry, even though they kind of got into commercial banking 20 years or so ago here in El Paso and across the country too, it's a maturing process for them as an industry in terms of getting the right people and the right procedures and kind of learning how to do what, you know, I'm 60 years old. I've been doing this for 40 years almost. But they're just in their infancy in getting there. So in time, will they have people that can understand your business, analyze your business financials to the same degree that your commercial bankers have? I think that they will, frankly. You talk about threats to our industry. I wouldn't call them a threat. But in today's world, the banks that are being sold today, the smaller commercial banks that are being sold, the vast majority are being acquired by credit unions.
- [61:29]
Preston Brown
Wow. Okay. So I mean, that is. That's talent being bought. Credit unions.
- [61:36]
Ray Owen
Exactly, exactly.
- [61:37]
Preston Brown
They're not just getting the loan portfolio, they're buying the talent.
- [61:40]
Ray Owen
Right.
- [61:40]
Preston Brown
So I mean, Maybe in another 10, 20 years, that sophistication level increases where they could be a threat for sure. Okay, that's super interesting.
- [61:48]
Ray Owen
I consider them a. I don't want to use the word threat, but they can be extremely competitive from a rate standpoint when they want to be locally and across the country, if it's a line of business that they like and a borrower that they like, they'll lots of times price us commercial banks out of it just because they're trying to dig their way in. And many have done a really, really good job of it.
- [62:16]
Preston Brown
That's interesting. Okay, now, I would love to keep you all day, but I know I can't because you have other customers. And I appreciate you doing this favor for me, but I'd love to end on, just kind of share with us a little bit of what happened with that recent banking crisis with Silicon Valley and all that.
- [62:34]
Ray Owen
All right. So when we talked about. Early on, we talked about banks, and I told You I said to me, banking is a simple business, don't make bad loans. In the 80s, that's what broke banks. They made a bunch of bad loans to a degree, small degree in some ways. That was kind of regulator created too because they overreacted, et cetera. But don't make bad loans. The second thing is don't let your overhead get out of whack. We didn't talk about that much and you talked about our overhead and we're very efficient and we are. We choose to kind of made a choice to be that way, not necessarily the right or wrong way to do it. We liked keeping our overhead low. So. But you got to manage your cost just like every business in the country does. The final thing is you have to manage the interest rate risk. What happened with Silicon Valley and some of these other banks, if you recall during when interest rates were exceptionally low, the fed funds rate was 0.1, basically interest was 0. That's when you could get a 4% or 5% commercial loan or 2% or 3% mortgage loan. These banks had this flood of deposit money. Silicon Valley, the example there, they had so much money from IPOs and private equity, et cetera, flowing into these tech companies in Silicon Valley. And so there was just all this cash floating around, all this money. Well, Silicon Valley took all that money. Hey, well, not all of it, but they took a big chunk and went, oh gosh, we're paying nothing on this, or almost nothing. Great, what are you going to invest it in? Well, in hindsight, the smart thing to do would have been to invest it in either high quality loans, which they didn't do much of, or short term duration securities. Well, they didn't. They took that money that they were paying nothing on and they went and bought long term bonds at low interest rates. So all great, you, you're earning a 2% spread or whatever, except when rates start to go up and then it's a double whammy, you can't go sell those securities because you'll take a monstrous loss if you do and you have to pay to keep those deposits. So it just became the perfect storm for them and it was just poor interest rate risk management.
- [65:08]
Preston Brown
Now those banks got bailed out too, to the point that the bank didn't, but the depositors did. What's the point of FDIC insurance if the insurance is not necessary because the bailout happens?
- [65:20]
Ray Owen
Yeah, I see two sides to that equation, honestly, from the citizen American people standpoint. I see. Okay, well, shoot. Why, why have any limitation on FDIC insurance if, if the FDIC fund is going to come in and cover 2, 3, 4, 10 million dollar depositors, why, why even have it if the FDIC is going to have to pay for it? Realize that the FDIC fund is paid for by banks. We pay insurance premiums, it's an insurance fund, we pay into that. From the banker standpoint, this is what I would point out to you, that the level of FDIC insurance, the 250,000 that we all kind of know, that hasn't changed in 20 or 30 years. Well, 30 years ago a $250,000 depositor was a good sized depositor. Today they're not. Today it's not. So that needs to be greatly revised. Here's the problem. And this kind of was a bigger issue, a bigger topic of conversation back in that Silicon Valley crisis in the spring of. Was it 22 or 21? I don't remember. But what, what happened when those banks started failing? People got nervous. People across the country got nervous about their deposits, right? Where did, where did a lot of those deposits go? To the big banks. Why? Because banks, because people perceive that they're too big to fail. So a lot of that money that might have left smaller banks like me, because they're like, ah, you know, I'm a bad example. We didn't lose any deposits because of that. But banks that did lose some where they went elsewhere because they were afraid, hey, I'm over the $250,000 limit, so I got to take some of my money out of ABC bank and wherever you are, where did they put it? Largely they went to the big banks because in their mind, well, they're too big to fail. The government won't let them fail. So because of that perception that they're too big to fail, in my humble opinion, the big banks have a competitive advantage over us from that standpoint. In our bank, our customers all know us largely. They banked with us for years. Going back, multiple banks that me and my partner have worked at to a degree, a lot of them know what kind of financial strength we have, et cetera, et cetera. But some banks don't have that. And so it became a problem back then because there was a lot of fear in the market. Banking is all about confidence. If you're depositing money somewhere, you want to be confident that that bank is solid and you're not going to lose your money, right? And so back in that time, there was a lot of concern and people were losing confidence in the banking system. And the winners Were frankly the big banks because they were considered to be too big to fail. I consider that a competitive disadvantage for me and other small banks.
- [68:29]
Preston Brown
Interesting. Now what's happening is those big banks have gotten so much and they've gotten so entitled and they are so too big to fail that they've been able to be less flexible, offer less programs, create more barriers to, to kind of that, that feedback I was talking about earlier. And I'm at least starting to see, at least in a small way here in El Paso, the local banks are dramatically favored by the entrepreneur class to the big banks. You know, I want to end on this because you're a bank, you're in El Paso, you're in Lubbock, you're around Texas, especially for our Texas entrepreneurs. How can they get ahold of you? How can they reach out to bank of Texas and learn about how they could do business with you or maybe be referred by you to somebody that might fit them?
- [69:19]
Ray Owen
Sure. Absolutely. I mean, they can reach out to me. My, my office number is 9153-1367-2091-5313-6720. That's my direct line. My email address is Rowan bank of Texas Online.com Rowan bank of Texas Online.com and they can reach out to me there. Preston will tell you I answer my calls, I return my calls, I return my emails. So absolutely, if, if you have any questions, whether you want to consider banking with us or not, that's, that's a different story. But if I can answer any question for you, shoot me an email. Shoot me a. Shoot me a call.
- [70:05]
Preston Brown
Ray, this has been a wealth of information, and I know you're going to help a lot of entrepreneurs. It is an absolute privilege to have you on the show. What I'll say is, cheers, sir.
- [70:14]
Ray Owen
Cheers.
- [70:14]
Preston Brown
Cheers to you. Cheers to the bank of Texas.
- [70:16]
Ray Owen
Thanks.