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Looking Back
Seven years ago I authored a Cyber-Graham entitled R*E*S*P*E*C*T. That article focused on the tension that existed between banks and regulators. Since that time, a more symbiotic balance has returned, reflecting a stronger economy and healthier credit portfolios.

The Current Environment
As we celebrate the life of the iconic Aretha Franklin, who gave new meaning to the word RESPECT, it struck me that now is the perfect time to assess where we are as a banking industry and where we might be headed. Low interest rates, pristine credit quality, a bubbling stock market, and general economic optimism would seem to make the current climate the best of times. However, as we all have learned, nothing lasts forever.

The Future of Banking
Strong bank stock prices have continued to fuel a healthy appetite for mergers. Buyers are using rich currency to incent sellers to partner up, and sellers see this as a potentially closing window of opportunity to achieve significant returns for their shareholders—a match made in banker heaven. As long as stock prices remain strong, we should expect the continued consolidation of our industry to 5,000 banks and below.

Technology at Work
Concurrent with all of this is the increasing influence of technology as more and more banking is handled remotely. Much like the metamorphosis retail continues to experience, banks should expect to see the same: less “in store” business and more online transactions. This likely will impact the size, if not the number, of branches. Keeping up with the Joneses in technology is now a given for survival.

The Credit Union Variable
One could see how credit unions will continue to become more viable players in the market. Will they eventually convert to banks over time? Will they be tempted to morph into stock associations through a multi-step process? These are unanswered, but highly possible, results. With the increasing depth and breadth of credit unions, it is not difficult to foresee their enhanced role in the banking industry.

I think that in the best of times it is easy to show respect. Maintaining respect through the challenging times is the real test. As our economy inevitably softens a bit, the regulators start tightening down again, and all the numbers aren’t so rosy, I hope that we all show mutual respect and understanding for each other—whether it be our regulators, competitors, Fintech, credit unions, or whomever. That will provide the proper RESPECT that Ms. Franklin’s words and spirit deserve.