A small, but growing, body of research suggests that the financial services provided by large banks are less-than-perfect substitutes for those provided by community banks. 4 Consistent with this view, one study finds that the increase in competition from large, geographically diversified banking organizations has not affected the profitability of community banks in urban areas.
There is some evidence of a profitability effect in rural areas, but it is actually more likely to be positive than negative. 5 Thus, for most community bankers, the increased presence in their local markets of large, geographically diversified banking organizations appears not to adversely affect profitability.