Community banks and deposit market share growth

Purpose – The purpose of this paper is to examine whether community banks have gained market share at the expense of larger, regional banks in small metropolitan statistical areas (MSAs). The authors also seek to examine market share gains of community banks relative to each other. Design/methodology/approach – The empirical research is conducted using deposit and market share data for community and regional banks between 2001 and 2008. The authors employ regression analysis. Findings – It is found that community banks have gained market share. When regional banks are excluded and the market share gains of community banks relative to each other examined it is found that community banks with lower market shares gain relative to banks with a larger initial share of the deposit market. Research limitations/implications – Research is conducted using eight metropolitan statistical areas (MSAs) in Wisconsin, Minnesota, and Iowa. Thus, conclusions drawn are based on analysis conducted in one region of the United States. Practical implications – The paper's findings are in contrast to traditional thinking about size and market share and suggest that community bank managers should focus on each other as well as regional and megabank competitors. Originality/value – The paper uses market share as a proxy for bank size as a means of explaining the competitive landscape that exists within community banking.