Adding Financial Service Products in Community Banks: An Analysis of Deposit Market Share

摘要

We examine the empirical evidence on community banks that have added financial service products, annuities and mutual funds, to their product line (financial service banks, or FSBs). In particular, we examine the effects on deposit growth and profitability of FSBs versus banks not offering such services (NFSBs). We look for evidence of disintermediation, the loss of deposits, at FSBs after adding such products. In the short run (i.e., immediately after adding financial services), FSBs appear to have a fifty-fifty chance of experiencing some loss of deposit market share. However, in the long run, we find that FSBs gain market share over time. We also note that FSBs are more profitable on average than NFSBs, though the difference in profit margins is not statistically significant.