This past year has seen many changes in the community banking industry. Some of these issues we expected and some had more of an impact than maybe we would have thought. As we reflect and look forward to 2016, we asked several of our colleagues to weigh in regarding what we saw, what we expect and how to best prepare for the coming new year.
 
Timothy R. Moore, Spilman Thomas & Battle, Member and Co-Chair of the Community Banking Practice Group
Tim’s practice focuses on advising financial institutions as to certain regulatory matters. His practice also includes real estate, mergers and acquisitions, corporate governance and general corporate law.
 
“Albeit bank consolidation will not just continue but do so at a faster rate, I expect to see the nascent beginnings of a few new local financial institutions sprouting up. This will begin in communities where either local banks have been lost to consolidation or the local community leaders believe that the larger super community or regional banks that are then in market are not sufficiently attentive to the people and the needs of those communities. As you all know, locally headquartered financial institutions bring a lot of positives to their home communities – beyond just employment and financial services – but pride and civic involvement. Initially, these new institutions will take more of the form of credit unions (due to regulatory issues), but I expect to see a de novo bank announcement in the mix too for 2016.”
 
 
Dustin Davies, Spilman Thomas & Battle, Chief Technology Officer and Director of Next Technology
Dustin serves in dual roles as CTO and with Next Consulting, Spilman’s wholly owned subsidiary intended to help organizations identify and reach the next chapters in their evolution.
 
“Not surprisingly, the data breach drum beat continued in 2015, and will continue into 2016. Increasingly, we will see industries maturing together. Banking and legal are adopting standards and information sharing groups and a collective framework is emerging – this will continue into 2016.
 
In 2016, I expect that we’ll see maturation in platform service providers (Amazon EC2, Microsoft Azure and others) and as a result we’ll see lower prices and increased pressure to move production environments into shared services. This will result in collective improvements to security and a shift (net reduction) of availability of the “quasi-technician” (business people with a high degree of tech-capability). More than ever, attracting and keeping talent will be critical.”
 
 
Hugh B. Wellons, Spilman Thomas & Battle, Member and Co-Chair of the Community Banking Practice Group
Hugh’s primary areas of practice are corporate law, banking and finance law, securities, and biotechnology law.
 
“Looking back at 2015, I along with many others expected a lot more merger activity. We saw some, but the large number of “mergers of equals” (“MOE”) among community bankers did not materialize. There are economies of scale; but a larger bank, with more shareholders, may find it difficult to avoid periodic reporting requirements under the Securities Exchange Act. Joining another bank that, due to the combination of shareholder lists, requires periodic reporting to the federal securities regulator (SEC, Fed, or FDIC) eliminates possible economies of scale. Credit unions, of course, avoid this risk. But, that possible reporting obligation may be why we are not yet seeing more MOEs. I still think we will start seeing more MOE activity in 2016. 
 
I believe that cybersecurity will be the big banking story of 2016. We’ve already seen large data breaches in this industry. In other industries, the breaches started at the larger companies and then trickled down. That will also happen to banks and credit unions.
 
The bank regulators’ reaction, of course, is to increase regulation and formalize the examination for this. This will add to the regulatory burden and expand the scope of examinations. Banks and credit unions are already  gearing up for this, but until the exact expectations are understood, it is difficult to predict precisely what this will cost or how effective it will be.” 
 
 
Rayford K. “Trip” Adams III, Spilman Thomas & Battle, Counsel 
Trip’s primary practice areas are bankruptcy, creditors’ rights, and commercial disputes and workouts. He has more than 30 years of experience in all aspects of bankruptcy matters and has represented creditors, lessors, committees, debtors, guarantors, and trustees in a broad range of matters.
 
“In a relatively quiet year of activity and developments, two items stood out in 2015: litigation against guarantors in North Carolina and new bankruptcy forms. In September, the North Carolina Supreme Court decided the Highmark Properties case, clarifying that guarantors of bank loans can use North Carolina’s anti-deficiency statute as a defensive tool, regardless of whether the primary borrower is a party to the litigation. Because the anti-deficiency statute allows a guarantor-defendant to contest the amount of a deficiency following the foreclosure of the borrower’s property (on the grounds that the sale did not bring “fair value” for the property), it is likely that the statute will be invoked by more guarantors, resulting in higher settlement amounts and higher costs. Community bankers looking to the deep pockets of their guarantors to pay deficiencies will need to think more carefully about the bids they make at their foreclosure sales.
 
On a less momentous front, completely revamped official bankruptcy forms became effective on December 1, 2015. Most existing forms were changed substantially, and new forms were created. The official proof of claim form was also reworked. Bankers will have to learn their way around the new forms in order to determine where the relevant information is now listed, but the forms should also provide more information in a more logical manner. In particular, petitions and schedules are now customized in different forms for consumer and business debtors.”