Is George Bailey Dead?

As consolidation, deregulation, and technological advances transform the financial services industry, it is generally believed that community banks provide relationship-based banking services for small businesses, family farmers, and depositors of low to moderate wealth. Using data from actual loan applications to a rural community bank (not too dissimilar to It's A Wonderful Life's ‘Bailey Building and Loan Company’ in Bedford Falls), the role of relationship lending in the market for home mortgages is examined for a financial institution with a long-perceived tradition of character lending. No evidence is found that prior account holders are given any advantage in the approval process for a home loan. Nearly all of the loan decisions are based on objective criteria such as personal wealth, debt obligations, and credit score. This has obvious implications for historically underserved consumers who are often rationed out of a credit market that allocates loan funds based solely on credit scoring techniques.