It was my pleasure to attend the recent Lancaster Chamber of Commerce and Industry presentation of the “Changing Nature of Banking in Central PA.”  The presenters were Brian Bisignani of Post & Schell and Dave Hornberger and Andria Linn of Orrstown Bank.  They spoke about topics ranging from the effect of the recent bank acquisitions in central Pennsylvania, to the growth of community banks in Lancaster County, the challenges of marketing to millennials, the decline in retail sales, and cyber security and phishing attacks.

One of the things that struck me was that over thirty percent of all of the cash deposits in Lancaster County were affected by the recent bank acquisitions, or “roll ups” to use the term that Dave frequently called them.  In a very short amount of time there have been huge changes in local banking, affecting both banks and their customers.

Dave did a great job of summing up the concerns I have heard from many bankers over the past few months.  He noted that very big banks can be competitive because of their rates and lending base.  Smaller community banks gain customers by emphasizing their flexibility, with a faster speed to market and more personal customer service.  While these are all necessary, especially the personal level of service, they are not everything that our customers need.  Continue Reading Trends in the Banking Industry

It was announced on Wednesday that one of the more popular craft breweries in the country, Wicked Weed Brewing out of Ashville, North Carolina, was acquired by Anheuser-Busch, the world’s largest producer of beer.  Interestingly (but not surprising if you follow the craft beer industry) the announcement was met with significant backlash from the craft beer community.  The acquisition garnered significant criticism on Twitter, with many accusing Wicked Weed of “selling out.” The deal even generated a statement from the North Carolina’s Craft Brewers Guild, saying that they were “disheartened” by the announcement.  In another example, when Elysian Brewing Company out of Seattle announced its sale to Anheuser-Busch in 2015, the owner reported that customers were buying beers and dumping them onto the floor in protest of the sale!

Why are craft brewers treated so differently in the business world than other startups?  Why are they accused of “selling out” when in other industries, startup companies are celebrated and their founders turned into celebrities when they successfully sell off their company for millions (or hundreds of millions) of dollars?

The answer is not so simple and there seems to be reasonable arguments that can be made on both sides of the issue (beyond just pouring out a perfectly good beer).  Customers and craft beer enthusiasts often express concern that the takeover by a large, international corporate giant is going to impact the quality of the beer.  In some cases, this seems to be a justifiable concern.  The article from Thrillist cites a number of examples including Goose Island and Ballast Point where, after the acquisition, the original ownership left, recipes were changed, and in one case, a coveted batch of beer had to be recalled because of a non-toxic bacteria that infected the beer required its recall.  These issues were all blamed on the takeover and many people swore off drinking these beers as a result. Continue Reading Double (IPA) Standard for Craft Breweries?

I regularly work with both lenders and commercial borrowers.  In the last 12 months, I have noticed that interest rate swaps are becoming a part of more and more financing arrangements.  While I am not an economist, there are a handful of reasons why including swaps or derivatives in a financing arrangement should be part of more conversations between banks and commercial borrowers.

In this post, I am considering a “plain vanilla” interest rate swap.  A simple example of this would be a bank offering a 10 year fixed interest rate loan to a borrower.  The bank then swaps this fixed interest payment with someone (maybe another lending institution, swap bank, or even back to the borrower) in exchange for a variable rate payment – usually tied to LIBOR plus some amount of basis points.  At the end of the swap period, the difference in interest payments between the fixed and the variable interest rate is paid out to the appropriate party.

Increasing Competition Among Lenders

Many of my commercial clients complain that banks only want to lend money to people who don’t need it.  This is not entirely the decision of lenders.  Today’s regulatory environment has forced banks to tighten their risk tolerances.  The net result of this is that it seems there are more loan demand than there is loan supply.

I think of it as Venn Diagram.  One circle is borrowers who need financing.  The other circle is businesses with acceptable risk.  Where those two circles intersect, banks and borrowers are doing business.  If your project falls into that middle part of the diagram, congratulations! You will have lots of banks competing over your business.

This competition is a problem for lenders.  I have seen banks offer extreme terms just to “win” some of these “good loans.” Many banks just cannot compete with lenders who are willing to cut deep into their profits just to secure a deal.  This is not good for banks, and when banks struggle or consolidate, it ultimately harms borrowers, too. Continue Reading A Perfect Storm: Why are Rate-Swaps or Commercial Loan Hedging Arrangements on the Rise?

This week is officially Small Business Week. The attorneys at Russell, Krafft & Gruber work with many small businesses every day.  Personally, I love to work with family–owned businesses, and get to know the family and what makes them and their business special.  In honor of the well-deserved recognition small business owners are receiving this week, I wanted to offer some advice and encouragement to the many small businesses in our community. I didn’t want to do the typical “here is a problem and here is how to fix it” post about the problems that small businesses face – taxes, employees, contracts, security, technology, and all of that stuff.  This post is a thank you to small businesses.

Many small businesses start because of a personal interest or expertise.  So rather than bore with you legalese  I thought I’d share , a link between my interests and small business that might not come to mind.

My son is a huge professional wrestling fan.  Because of him, I am also a professional wrestling fan.  It is a special bond that we share.  He started watching when he was probably 7 years old.  Now he’s almost 16, taller than me, with a handful of hairs sticking off of his chin. But we share wrestling.  When something happens on a Monday night show, it is the first thing he wants to talk about on Tuesday morning.  He and I have traveled to Giants Stadium to see Wrestlemania with 90,000 fans.  We have also been in the Palmer Center in Easton with 300 people in the stands, or the American Legion in Hellertown with maybe 75 people. We have watched the biggest movie star in the world – Dwayne “The Rock” Johnson — and we have seen someone wrestle dressed up as a Space Monkey.

What does this have to do with small business?  The head of the Small Business Administration is Linda McMahon.  She is the wife of Vince McMahon, the head of World Wrestling Entertainment.  She has been part of storylines and has appeared in the ring.  Linda McMahon has suffered a nervous breakdown, been committed to a “sanitarium” and lapsed into a coma.  She drank beer with “Stone Cold” Steve Austin.  She took a stunner from Austin, been slapped by her daughter numerous times, and ended a bunch of fights with well-placed kicks. (Don’t worry about me — I know it is not real. But for the sake of this post, go with me for a bit.)

It strikes me that every small business can take away some lessons from Linda McMahon. Continue Reading How Your Small Business is Like Professional Wrestling

While “made-up holidays” and “National _____ Weeks” have been on the rise, since 1963, the United States Small Business Administration has celebrated National Small Business Week, which recognizes the critical contributions of America’s entrepreneurs and small business owners. That basically makes National Small Business Week an OG of the made-up holiday scene.

Though National Small Business Week is a nationwide event, Lancaster County is home to a thriving small business community with great resources available to entrepreneurs to help start and grow their businesses.

Here are just a few resources available to entrepreneurs in Lancaster County:

Continue Reading Think Lancaster During National Small Business Week

I have written a number of times on this blog about providing reasonable accommodations for “service animals” and “emotional support animals.”  This legal battle continues to affect condominium and homeowner association communities.  A recent case shows a new way that a condominium association could get in trouble for refusing to provide a reasonable accommodation: because of a neighbor’s blog post.

Estate of Walters v. Cowpet Bay West Condominium Association, begins with the “usual” issue.  Two condominium unit owners sought to keep “emotional support dogs” in the condominium.  The condominium’s rules absolutely banned pets.  In this case, the Court determined that the unit owners were disabled, and that the support animals were necessary to allow them the use and enjoyment of the condominium unit.  Because of this, the condominium association was required to make a reasonable accommodation under the Fair Housing Act.

The concerning part of this case arises from the blog of some disgruntled neighbors.  The opinion from the United States Court of Appeals, Third Circuit, quoted a number of blog posts from residents of the community that opposed the emotional support dogs.  One neighbor replied on a blog post “isolate them [the unit owners] completely to their little “dog patch” on the beach and ignore them at every venue or occasion!” Continue Reading Could a Condominium Face Legal Trouble Because of Residents’ Blog Against Emotional Support Animals

For entrepreneurs in states that permit state equity crowdfunding, effective today, a change in federal rules will allow those states to allow entrepreneurs to use social media to solicit out of state residents to raise money for their business ventures. This article posted on LancasterOnline describes the impact of the law change on businesses raising money pursuant to state crowdfunding laws: Law change could boost little-used state crowdfunding laws.

Previously, social media solicitation was prohibited. The revised rules are 17 CFR Sections 230.147 and 230.147A and can be found at the Securities and Exchange Commission’s website.

Pennsylvania does not currently have a state crowdfunding law, but Pennsylvania residents and businesses could be impacted by this change if they are solicited by out of state companies raising capital for their ventures. Since May 2016, Pennsylvania businesses may utilize federal crowdfunding laws to offer equity in their companies. Continue Reading Federal Rule Changes Impacting Equity Crowdfunding and Social Media Use Go Into Effect Today

One of the highlights of the Lancaster tech community’s big year in 2016 was the opening of preregistration for LanCity Connect, a high speed, fiber optic internet service for Lancaster City residents and businesses. LanCity Connect is a public-private partnership between the City of Lancaster and MAW Communications, located in Reading.

As outlined in this LancasterOnline article, my favorite coworking space, The Candy Factory, has enjoyed increased speed and reliability after being an early adopter of the service. Since its installation in January, I’ve noticed a significant increase in speed. For example, when I log in remotely to my office computer, there is almost no noticeable lag in the connection.

If you haven’t checked out the LanCity Connect website lately, it has been updated with a residential deployment schedule, with scheduling for installation available beginning this month. There are four primary tiers of service available, with base costs from $34.99 to $89.99 and speeds from 50 Mbps to 1,000 Mbps. By way of comparison, Comcast’s maximum advertised speed is up to 200 Mbps. There is also a low income tier available to qualifying residents.

This project is just one more example of the local government’s commitment to assist the growing technology industry in Lancaster County. It’s an exciting time to live and work in Lancaster County.

Matt Landis is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University School of Law and advises clients on issues of Business Law, Intellectual Property Law and Information Technology & Internet Law.

crayonsToday’s National Crayon Day. While it should be a happy day, full of nostalgic memories of simpler times, I’m feeling bittersweet since Crayola has announced that it will retire dandelion from its standard 24 pack of crayons. With change comes new opportunity – a brand new color will be announced today to replace dandelion, albeit with some big shoes to fill. The name of the crayon will likely be determined by a contest.

As a business lawyer, I’ve grown fond of the familiar entity formation laws that I’ve grown up with. The Pennsylvania Limited Liability Company Law of 1994 has gone largely unchanged since my graduation from law school, and it was my dandelion. I knew that when I opened up my box of crayons (Westlaw), the LLCL was there in all of its glory, just as I remembered it. But as of tomorrow, the provisions of Act 170 will be the law of the land for all Pennsylvania LLCs and will be known as the Pennsylvania Uniform Limited Liability Company Act of 2016. Unfortunately, the naming contest is already over and our legislature missed an opportunity to consult the Internet, which has significant expertise in creative naming.

Act 170 makes some significant revisions to the unincorporated entity laws in Pennsylvania. Unincorporated entities include partnerships, limited partnerships, limited liability companies (LLCs) and now limited liability limited partnerships. While the law was effective on February 21, 2017 for newly created entities, as of April 1, 2017, the changes in Act 170 apply retroactively to all existing LLCs and limited partnerships. Continue Reading Significant Changes Effective April 1 for Pennsylvania’s LLC and Partnership Laws

We trust our computers to handle our to-do lists and calendars because they never forget, right? While computers are good at remembering what we tell them (and a big thank you to Google for remembering my kids’ birthdays), one of the current weaknesses of artificial intelligence (AI) is that it cannot apply what it learns in a different scenario. For example, an AI that learns to play chess does not have a leg up when learning to play checkers. Essentially, computers have a “catastrophic forgetting” problem that forces them to relearn what they already knew just because they are presented with a new project.

Researchers are now making breakthroughs to overcome this ‘forgetfulness’ problem. Working in connection with neuroscientists, researchers are attempting to have AI learn more like humans so they can apply what they have learned in one context to another related context without starting over. In other words, teach computers to learn more like humans do so they stop forgetting what they already learned. Continue Reading Teaching Computers Not to Forget Could Cut the Costs of Litigation