In the holiday classic "It's a Wonderful Life", George Bailey's Building & Loan is contrasted with the dealings of Mr. Potter, who, after taking over the town bank, uses that business for his own personal enrichment. The Bailey Building & Loan on the other hand, takes in deposits and lends out money for mortgages, making the dream of home ownership possible for the ordinary citizens of Bedford Falls.
With the current mortgage crisis, that of course has all changed. Banks need to find a way to attract relatively low-cost deposits, prudently fund mortgages, and, gasp, maybe even portfolio these loans. But rather than being a problem to be overcome, this new dynamic represents a tremendous opportunity for our business.
Although the business structure of the Building & Loan doesn't exactly exist today, the story still reverberates in light of recent events in the industry. With the relentless ascent of mortgage-backed securities, the whole concept of acquiring funds through deposits and lending them out prudently seemed as quaint as the fictionalized image of Bedford Falls.
That's because our activities are brought back into harmony with the benefit of all involved. For community banks in particular, it can play perfectly into their position of being institutions that serve the interests of the community.
Of course, it also means that banks have to be more effective and efficient in acquiring deposits and originating loans. For ideas and tips that can help community banks (and any bank) thrive in today's environment, subscribe to my free e-newsletter. Simply email me at firstname.lastname@example.org, and put subscribe in the subject line.