Problems to Profit Podcast: Episode Summary Featuring Ray Owen on Business Banking, Small Business Loans & the Lending Mistakes That Cost You Big

Podcast Information:

• Title: Problems to Profit
• Host: Preston Brown
• Guest: Ray Owen, Banker at Bank of Texas, El Paso, Texas
• Episode Title: Ray Owen on Business Banking, Small Business Loans & the Lending Mistakes That Cost You Big
• Release Date: March 6, 2025

1. Introduction to Ray Owen and Bank of Texas

In this episode of the Problems to Profit podcast, Preston Brown welcomes Ray Owen, a seasoned banker and co-founder of Bank of Texas in El Paso. Ray is not your stereotypical banker; he's portrayed as humble, approachable, and deeply knowledgeable about banking and finance.

Notable Quote:

"[Ray] is a guy that'll sit down and teach you... he's quiet, he's humble, he's real."
—Preston Brown [00:03]

2. Ray Owen’s Journey and the Growth of Bank of Texas

Ray shares his humble beginnings, working from a young age on his family's farm. Despite financial limitations, he pursued higher education, earning a degree in agricultural economics from Texas Tech University. Entering the banking sector during a mini banking crisis in Texas, Ray navigated through various positions, ultimately co-founding Bank of Texas 15 years ago. Starting with $18-20 million in assets, the bank has impressively grown to over $520 million.

Notable Quotes:

"My family did not have much in the way of financial resources... my mother encouraged me to get a college degree."
—Ray Owen [01:37]

"We’ve grown our bank to now 520 to 540 million dollars."
—Ray Owen [05:23]

3. Demystifying How Banks Operate

Ray breaks down the fundamental operations of a bank, emphasizing simplicity. Banks accept deposits and extend loans, aiming to earn a margin or spread between the interest paid on deposits and earned from loans. He likens this process to "renting money," where the bank manages assets (loans) and liabilities (deposits).

Notable Quotes:

"Banking is a very simple business... we take in deposits and then we turn around and loan those funds back out and try to make a margin on it."
—Ray Owen [08:03]

"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."
—Ray Owen [12:18]

4. The Five Cs of Credit

Ray elaborates on the five essential criteria banks use to evaluate loan applications, known as the Five Cs of Credit: Character, Capacity, Capital, Collateral, and Conditions.

• Character: Integrity and determination to repay loans.
• Capacity: Ability to service debt, assessed via cash flow or debt-to-income ratios.
• Capital: Secondary repayment sources, such as equity or other income streams.
• Collateral: Assets backing the loan, though banks prefer not to seize them.
• Conditions: Economic and industry-specific factors influencing loan viability.

Notable Quotes:

"Character is the main one... it's pride that you'll do everything in your power to pay that loan back."
—Ray Owen [16:24]

"Banks don't want to own your collateral because that means things have gone haywire."
—Ray Owen [19:50]

5. The Importance of Relationship Banking

Preston shares his personal experience of how Ray's bank supported him during a challenging time, highlighting the significance of building strong, trust-based relationships with bankers. Ray emphasizes that such relationships are pivotal, especially when businesses face unforeseen issues.

Notable Quotes:

"If you had walked into 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."
—Ray Owen [22:20]

"I have a good friend... he told me this many times. He said, 'Tell the banks when you have a problem and you tell them early because banks don't like surprises.'"
—Ray Owen [38:05]

6. Selecting the Right Bank and Banker

The discussion shifts to strategies for entrepreneurs to find and connect with bankers who genuinely care about their businesses. Ray advises leveraging referrals from existing customers and emphasizes the importance of finding bankers who understand their institution's culture and can navigate its policies effectively.

Notable Quotes:

"Talk to your entrepreneur friends... what bank do you bank with? What banker do you bank with?"
—Ray Owen [28:25]

"It's all about finding the right person... someone that will listen and hear your story and try to figure out, is there a way I can make this work."
—Ray Owen [28:40]

7. Assessing Bankers’ Feedback and Information Sharing

Preston and Ray delve into how entrepreneurs can gauge the reliability and responsiveness of their bankers. They discuss the importance of timely feedback and the ability to receive market insights without compromising confidentiality. Ray encourages open communication and honesty, ensuring that bankers provide actionable and trustworthy information.

Notable Quotes:

"A good banker will be honest and tell you... a good banker wants you to be successful, and information is a big part of being successful."
—Ray Owen [50:59]

"If the banker can't provide timely and credible feedback, it might be time to consider other options."
—Preston Brown [44:31]

8. Navigating Threats to the Banking Industry

Ray outlines the primary threats facing the banking sector, despite its overall stability. These include industry-wide downturns in sectors like commercial real estate, housing, oil, and gas. Additionally, regulatory pressures, particularly from consumer-focused bodies like the Consumer Financial Protection Bureau (CFPB), pose challenges, especially for larger banks.

Notable Quotes:

"Regulatory issues can be a thing. A lot of the regulatory pressure... affects the big banks."
—Ray Owen [53:40]

"The banking industry is in pretty good shape today... except for a few pockets like Silicon Valley Bank and First Republic."
—Ray Owen [54:00]

9. Competition Between Banks and Credit Unions

The conversation shifts to the competitive dynamics between traditional banks and credit unions. Preston argues that credit unions' tax advantages drive them to offer more sophisticated and flexible services to entrepreneurs. Ray acknowledges this advantage but emphasizes that good bankers, regardless of institution type, can provide exceptional service.

Notable Quotes:

"Credit unions have a competitive advantage because of this taxation deal."
—Ray Owen [59:51]

"Even though credit unions have an advantage, you can find a good banker in a credit union just as well as in a bank."
—Ray Owen [60:23]

10. Lessons from Recent Banking Crises

Ray analyzes the failures of institutions like Silicon Valley Bank and First Republic, attributing their downfall to poor interest rate risk management. He explains how these banks made substantial long-term investments at low-interest rates, leading to significant losses when rates rose. Ray underscores the importance of prudent financial management and avoiding overexposure to volatile sectors.

Notable Quotes:

"They went and bought long-term bonds at low interest rates... when rates go up, you can't sell those securities without taking a monstrous loss."
—Ray Owen [62:33]

"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."
—Ray Owen [68:28]

11. Conclusion and Contact Information

As the episode wraps up, Ray provides ways for listeners to connect with him and Bank of Texas for further inquiries or to explore banking opportunities.

Notable Quotes:

"They can reach out to me. My office number is [redacted for privacy]. My email address is Rowan@bankoftexasonline.com."
—Ray Owen [69:19]

"Ray, this has been a wealth of information... Cheers to you. Cheers to the Bank of Texas."
—Preston Brown [70:13]

Key Takeaways:

• Relationship Matters: Building a strong, trust-based relationship with your banker can significantly impact your business's financial health and access to tailored loan programs.

• Understanding Bank Operations: Entrepreneurs benefit from understanding how banks operate, including the importance of deposits, loans, and managing interest rate risks.

• Five Cs of Credit: Grasping the Five Cs—Character, Capacity, Capital, Collateral, and Conditions—can enhance your loan application’s success.

• Choose the Right Bank: Align the size and culture of the bank with your business needs. Smaller, local banks often provide more personalized service compared to larger institutions.

• Stay Informed on Industry Threats: Awareness of industry-wide risks and regulatory changes can help businesses navigate banking relationships more effectively.

• Credit Unions vs. Banks: While credit unions have tax advantages that can benefit entrepreneurs, exceptional service is achievable in both credit unions and traditional banks.

• Lessons from Failures: Proper financial management and risk assessment are crucial to avoiding pitfalls that led to recent banking crises.

For Entrepreneurs Seeking Banking Solutions: If you’re an entrepreneur in Texas looking to build a meaningful banking relationship, consider reaching out to Ray Owen at Bank of Texas. His hands-on approach and deep understanding of both banking and entrepreneurial challenges can help transform your business problems into profitable solutions.

Contact Information:

• Email: Rowan@bankoftexasonline.com
• Phone: [Redacted for Privacy]

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