A CU Charter For Mutual Savings Banks

Given the similarities between MSBs and credit unions, will any consider converting to a credit union charter when the Office of Thrift Supervision ceases to exist?


Mysteries lie dark and deep among the 1,000-plus pages of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many institutions, trade groups, and consultants have already begun the task of translating the terms of the Act, which President Obama signed into law on July 21, into actionable items. However, the bill’s far-reaching ramifications will not be fully realized for several years.

One of the larger and more immediate actions from the Act is the closure of the Office of Thrift Supervision (OTS), whose assets and responsibilities will merge into the Office of the Comptroller of the Currency (OCC). The thrift charter, however, will continue to exist in some form. According to a summary of the bill from VedderPrice, the OCC will supervise federal savings associations, the Federal Reserve will supervise savings and loan holding companies and any other non-depository subsidiary of a savings and loan holding company, and the FDIC will assume the supervision of state savings associations. These transfers will occur within 18 months; by January 2012 the OTS will no longer exist.

As of March 31, 2010, there were 506 active Mutual Savings Associations or Mutual Savings Banks in the United States, totaling $151 billion in assets. The FDIC will regulate the 53% that are state chartered; the OCC will regulate the remainder. A number of former credit unions had converted to a thrift charter and at least 10 of those now face a change in regulator. With a change in regulator, these mutuals also lose a voice in Washington.

There are 15 states with more than 10 mutual savings banks; all are in the eastern half of the United States. In two states – Massachusetts and Connecticut – mutual savings banks best credit unions in overall assets, although Maine’s 13 mutual institutions almost take the state’s 66 credit unions, which claim just $159 million more in assets.

State's Mutual Savings Banks

“MSBs were organized to help the working and lower classes by providing a safe place where the small saver, then shunned by commercial banks, could deposit money and earn interest,” says an FDIC report on Mutual Savings Banks.

Indeed, by number, size, structure, and intent, Mutual Savings Banks are more similar to credit unions than the banks the OCC or FDIC currently regulate. Notably, though, depositors technically own the assets of the institutions but they have no voting rights or say in the running of the institution. Would any consider converting to the credit union charter? Maybe. However it won't happen without encouragment. Consider your state - would activity and interest in credit unions be enhanced by any mutual bank conversions? Reach out to your mutual counterparts to discuss the possibility. Email me if you would like a list of mutual financial institutions in your state.




July 26, 2010


  • There is power in numbers. The more credit unions we have, the better for economics, fiduciary responsibility and forming strong alliances between the consumer and those we rely on for strong financial leadership.
  • Dream on - you are a captive of your own groupthink.
  • Yes. Now ESL Federal Credit Union, Eastman Savings & Loan completed its conversion to the credit union charter in 1996.
    Lydia Cole, Callahan & Associates
  • Has a Thrift ever converted to a Credit Union?