Small banks have been uniquely hurt in the era of near-zero interest rates as low rates mean that banks are limited in the interest rates they can charge on loans. Furthermore, small banks have also been hit by tighter regulations in the post financial crisis-era that may not fully apply to their lines of business. Yet, according to Ted Peters, a former board member of the Philly Fed and current Chairman and CEO of Bluestone Financial Institutional Fund, small banks may be poised to do outperform their larger peers such as JPMorgan Chase and Bank of America. Among the reasons for their their projected success, Peters says small banks will be able to reprice their loans quickly to adjust for higher rates while adjustments to the rates they pay on deposits are likely to lag.
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