Longtime Bank CEO: Big Banks Are Evil and Founding a Company at 65 is No Sweat
Ted Peters knows that many people have a fundamental mistrust of the banking industry in the wake of the Great Recession. After spending 14 years at the helm of Bryn Mawr Trust, Peters wants you to know that smaller, so-called community banks were not the culprits. He blames the Too Big to Fail types. In fact, he’s outspoken about the “bad guys” running the nation’s largest 10 or 12 banks and applauds the government’s increased regulations on them. But community banks are also facing much stiffer regulations — some of which he calls “silly.”
Peters made a bold career move last year — retiring from Bryn Mawr to start Bluestone Financial Institutions Fund which invests selectively in small, publicly traded community banks. A career change at 65 years old? Nothing to it.
BizPhilly: In the wake of the Great Recession, what do you want people to know about community banks compared to the largest institutions?
Peters: Bank of America, Citi – these are bad guys. There are very bad people who run these banks and they’re corrupt and don’t care about ethics. They started to do lots of crazy financial moves like credit default swaps. They packaged all the bad mortgages and sold them to pension funds and to little old ladies. Their thinking was: “Can we make money at it and get it by our legal department?”
BizPhilly: Now the government has stepped up regulations on banks, but you argue that community banks are being adversely affected. But aren’t increased regulations needed to protect consumers?
Peters: The nation’s largest 10 to 12 banks should get a huge amount of regulations, but that’s filtering down to community banks which are not nearly as systemically important. If they go out of business, it’s not going to shake the financial structure of the country. The largest banks are bad people who caused the financial collapse in 2008 and 2009. Dodd Frank was meant to punish the big banks, but regulators are now applying those policies to community banks. The things they’re making small banks do as silly.
It’s hard to be a $500 million to $600 million bank. Regulators are forcing people to hire more finance people and we think a lot of those banks are going to sell. It’s even hard to be a $1 billion dollar bank right now.
BizPhilly: Let’s talk career. You were CEO of a profitable bank that made it through the recession in good shape. Why make a career change to start Bluestone Financial Institutions Fund?
Peters: I’d been in banking 38 years and the last 28 were as chairman and CEO of three separate banks. I was 65 and ready for a change.
BizPhilly: You had quite a bit of success. Why not just retire at 65 to play golf and relax?
I couldn’t do that. Mentally, I think you need to continue being challenged, and this is a great challenge. I started up two banks, so for me to start something from scratch wasn’t unusual. I’d done it twice before.
BizPhilly: Bluestone has invested in local banks like Sun National Bank and National Penn Bancshares. Why are you so bullish on investing in the community banking space?
There’s a lot of opportunity in the space. First of all, the space is undergoing a lot of consolidation. There are now 6,700 banks in country. In six years there will probably be 4,500. The consolidation of the industry and rising interest rates are the two primary drivers. We own 15 or 16 bank stocks at any one time.
Most community banks are healthy. In general, profits are up and people are making money. Loan quality has improved. There are only about three to four banks in the Philadelphia area that might go down.
BizPhilly: You’ve said that you don’t plan on being an activist investor and won’t seek influence on the banks you invest in. So what is the model?
It’s no different than just buying stock in the open market. Because we’re dealing with micro- and small-cap bank stocks, management is very agreeable to meet with people like us that buy their stocks. We would never own more than 1 or 2 percent of any bank, and no stock will ever make up more than 10 percent of our portfolio. We’re a passive investor, but we get to know management of the banks we buy. We think that people make the difference.
BizPhilly: How well capitalized is Bluestone?
I can’t give exact amounts but we’re hoping to be at $20 million to $25 million by end of year. Hopefully in the following year we can double that.