FDIC QUARTERLY 47

MUTUAL INSTITUTIONS: 

OWNED BY THE COMMUNITIES THEY SERVE

Mutual savings banks and mutual savings and loan associations (S&Ls) form a unique part 

of the banking industry, in that they are owned by their depositors rather than by shareholders.1

 An institution can be mutually owned at the level of the banking charter or at the 

level of the holding company, in structures known as mutual holding companies (MHCs). In 

the latter case, depositors own the holding company, which in turn owns a majority of the 

stock issued by a subsidiary bank.2

Unlike stock institutions that may increase equity capital by issuing new shares, mutual 

institutions generally augment their net worth through retained earnings. While reliance 

on retained earnings provides for a steady source of capital for profitable institutions, it 

also fosters conservative lending, as a mutual cannot raise equity capital externally through 

stock issuance to finance its growth or to offset larger-than-expected loan losses. Adopting a 

mutual holding company structure gives some flexibility in raising capital, as the subsidiary 

of a mutual holding company may issue some of its stock to the public.

U.S. mutual savings institutions have their origins in two main forms: mutual savings banks 

and mutual savings and loan associations. Although these institutional types began somewhat distinct from one another in the early 19th century, they became structurally and 

functionally similar in the 20th century.3 Consequently, this paper follows the convention of 

referring to both types of institutions simply as mutuals.4

Three features of mutuals distinguish them from the broader banking industry. First, 

nearly all mutuals are community banks. During each of the past 30 years, 98 percent or 

more of mutuals fit the FDIC’s research definition of a community bank.5 Second, mutuals 

are geographically concentrated in the Northeast and Mid-Atlantic states, but also retain 

a strong presence in the Midwest and a few Southern states. These geographic concentrations continued to reflect the importance of this institutional form as the economies of these 

regions were developing in the 19th and early 20th centuries. Third, the vast majority of 

mutuals—78 percent in 2015—specialize in mortgage lending.

The mutual universe has shrunk somewhat over time, both in absolute terms and as 

a percentage of the banking industry (see Charts 1 and 2). There were 398 mutuals at yearend 2015, representing 6.4 percent of the 6,182 FDIC-insured banks and thrifts. These mutuals held $142 billion in total assets, equal to 0.9 percent of industry assets. Including stock 

subsidiaries of MHCs, there were 537 mutuals, representing 8.7 percent of all banks and 

thrifts. Adding the assets of MHC subsidiaries brings the total assets of mutuals at year-end 

2015 to $251 billion, or 1.6 percent of industry assets.

Although mutuals made up a smaller portion of the banking industry in 2015 than they 

did in 1984, they continue to play an important role of providing mortgage credit in their 

communities. They use a business model that has proved to be successful over time. As this 

paper will demonstrate, the mutual business model turned out to be highly resilient to the 

hardships posed by the recent financial crisis, which was triggered in large part by credit 

problems in mortgage lending.

1 Credit unions are also mutual; however, this article focuses on mutual savings banks and S&Ls.

2 Public regulatory data can be used to identify institutions that are owned by their depositors outright going back to 1984. 

However, depositor ownership of a mutual holding company is difficult to trace through time. Thus, the analysis presented in this 

paper focuses on mutual charters.

3 See Teck (1968) on the unique origins of mutual savings banks and mutual S&Ls, and their evolution into structurally and 

functionally similar institutions.

4 When necessary to clarify historical distinctions, explicit reference will be made to savings banks or S&Ls.

5 See Chapter 1 of FDIC (2012).

Introduction
2 0 1 6  •Volume 1 0  • Number 4

48 FDIC QUARTERLY

S&Ls

Savings Banks

e Number of Mutual Charters and Total Assets Have Fallen Substantially

Number of Mutual Charters and Total Assets, Year-End 1984 to 2015

Number of Mutual Charters

Source: FDIC. 

Note: Including stock subsidiaries of mutual holding companies at year-end 2015 would add 139 charters with $108 billion in total assets.

Total Assets of Mutual Charters, $ Billions

0

500

1,000

1,500

2,000

2,500

3,000

1984 1990 1996 2002 2008 2015

0

100

200

300

400

500

600

700

1984 1990 1996 2002 2008 2015 

Chart 1

Source: FDIC.

Mutual Charters and Assets as a 

Percentage of All Institutions, 1984 to 2015

e Mutual Shares of Industry Assets and Charters

Have Fallen Over Time

0

2

4

6

8

10

12

14

16

18

1984 1988 1992 1996 2000 2004 2008 2012

Assets

Charters

Assets, Including Stock 

Subsidiaries of Mutual Holding

Companies (2012–2015)

Charters, Including Stock 

Subsidiaries of Mutual Holding

Companies (2012–2015)

Mutual Share of:

Chart 2

Although mutuals eventually spread to every state, they trace their origins to the Northeastern and Mid-Atlantic parts of the country, where they are still concentrated (see Map). 

There are two reasons mutuals are concentrated in these areas. One reason is that in the 

early 19th century these regions saw the rise of an urban working class looking for a safe way 

to save. Commercial banks of the time primarily financed business activity; they did not 

offer savings accounts into which wage earners could make small, regular deposits.6 Mutuals formed, in part, to meet the demand for small-denomination savings accounts—indeed, 

mutuals were sometimes named after coins, such as the dime, signaling they would take 

deposits as small as one dime.

The second reason is that many mutuals formed to pool funds in order to finance loans for 

home purchase or construction, and the trends underlying increasing demand for home 

loans first appeared in cities located in Northeastern and Mid-Atlantic states. Demand for 

home loans was driven by rising population, and also by the rise of an urban working class. 

A growing population of wage earners willing to pool savings to finance homeownership 

6 See Welfling (1968), 3–15, and Teck (1968), 9–11 and 18–22.

Regional Concentration 

of Mutuals
FDIC QUARTERLY 49

MUTUAL INSTITUTIONS: OWNED BY THE COMMUNITIES THEY SERVE

Mutuals Are Concentrated in the Northeast and Mid-Atlantic

Source: FDIC.

1985 2015

Mutual charters as a percent of all bank and 

thri charters, year-end 1985 and 2015

> 5%

< 5% > 10%

> 20%

Map

provided an opportunity for financial intermediaries 

to serve the local community. Demand for home loans 

followed migration as people moved west, and there were 

mutuals in every state by the late 19th century.

The concentration of mutuals in the Northeast and MidAtlantic has declined since 1985, as the number of mutual 

charters in these states has declined at faster rates than 

those of other federally insured charters (see Map).

The Primacy of Home 

Financing to the Mutual 

Business Model

As mentioned above, mutuals have a long history of 

financing homeownership. In fact, early mutuals formed 

solely for this purpose were more like clubs than banks: 

Members might meet regularly at a local bar or general 

store to conduct business, and would pay regular dues 

until enough funds had been collected to disburse a loan. 

Members would then bid to receive the loan. In addition, 

the organization would review the property value and 

assess the repayment likelihood of the winning bidder. 

The first loan disbursed by the first S&L—the Oxford 

Provident Building Association—was in the amount of 

$375 to a man named Comly Rich, to buy a house in 1832. Unfortunately, he fell behind on 

the loan, forcing the institution to seize his property and auction it off.7

Given their history, it should be no surprise that 78 percent of mutuals were mortgagelending specialists at year-end 2015, as defined in Chapter 5 of the FDIC Community Banking 

Study (see Chart 3).8 For comparison, only 16 percent of all banks and thrifts were mortgagelending specialists.

7 Teck (1968), 24, and Kendall (1962), 4. The house Mr. Rich purchased still stands at 4276 Orchard Street, Philadelphia. 

Photograph by the National Park Service Historic American Buildings Survey.

8 Mortgage-lending specialists have at least one-third of their assets devoted to loans, and have more than 30 percent of their assets 

made up of loans secured by 1-to-4 family residential property. For more detail, see Chapter 5 of FDIC (2012).

Comly Rich House, Philadelphia (1977)
2 0 1 6  •Volume 1 0  • Number 4

50 FDIC QUARTERLY

Not only are mutuals strongly devoted to mortgage lending today, they were the backbone 

of U.S. mortgage finance throughout much of the 20th century. In their heyday, mutuals 

financed roughly half of all single-family mortgages and, in many years, were the largest 

single source of financing in the mortgage market (see Chart 4). Among the reasons for the 

long-term prevalence of mutuals in the U.S. mortgage market was the preferential tax treatment that mutuals enjoyed compared to other mortgage lenders, such as commercial banks.9

However, the importance of mutuals to the broader mortgage market declined precipitously 

after 1980, even as the vast majority of mutuals remained mortgage-lending specialists. 

Mutuals held less than 1 percent of total U.S. mortgage debt outstanding as of year-end 2015.

As the importance of mutuals to the mortgage market declined, their numbers and total 

assets fell (see Chart 1). Moreover, the share of mutuals among all institutions in terms of 

assets fell drastically in the 1980s and early 1990s (see Chart 2). About 16 percent of banking industry assets were at mutual institutions at year-end 1984, compared with just under 

4 percent at year-end 1994. Assets at mutuals fell from $581 billion to $181 billion, and the 

number of mutual charters fell from more than 2,400 to 1,076 over the same time period. 

9 FDIC (1997), 219–220. The value of this preferential tax treatment declined over time, and the preference was ended in 1996. 

However, an additional incentive for mutuals to hold residential mortgages is provided by the Qualified Thrift Lender test, 

introduced in 1987. Institutions that meet the test—generally, by holding a certain percentage of their assets in single-family 

mortgages and related investments—are exempt from certain restrictions on activities, branching, and dividend payments. 

0

10

20

30

40

50

60

70

80

90

100

Mutuals Specialize in Mortgage Lending

Percent of Mutual Charters

by Lending Specialty, 1984 to 2015

Source: FDIC.

1984 1989 1994 1999 2004 2009 2014

Other

No Specialty

Multi-Specialty

Mortgage

Chart 3

Percent

Sources: FDIC and Federal Reserve, Flow of Funds.

Note: Mortgage debt among S&Ls prior to 1984 is assumed to be distributed between mutual and stock associations according to the share of total S&L assets held by each type.

*GSEs stands for government-sponsored enterprises, and includes GSE and Agency-sponsored mortgage pools. ABS stands for asset-backed securities. "Other" includes primarily credit unions and 

mortgage nance companies, among other holders. 

0

20

40

60

80

100

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Mutuals

Other S&Ls and Savings Banks

GSEs*

Private-Label ABS Issuers* Other*

Commercial Banks

e GSEs Now Dominate the Mortgage Market, Which Was Previously Dominated by Mutuals

Holders of Single-Family Mortgage Debt Outstanding, 1955 to 2015

Chart 4
FDIC QUARTERLY 51

MUTUAL INSTITUTIONS: OWNED BY THE COMMUNITIES THEY SERVE

This decline represented a fall from 13 percent of all banking charters to 9 percent. Two 

factors played large roles in the fall in the number and total assets of mutuals, and in their 

declining importance in the mortgage market: the S&L and mutual savings bank crises, and 

the rise of securitization.

The business of home mortgage lending was fairly stable from the introduction of federal 

deposit insurance and supervision in the 1930s, through the early 1970s. The conservative 

underwriting practices that prevailed at that time helped to limit the credit risk borne by 

mutual mortgage lenders. However, the maturity mismatch between the long-term mortgages they carried and the shorter-term deposits used to fund them exposed most mutuals 

to interest-rate risk. Moreover, the income that mutuals received from payments on fixedrate mortgages declined in real terms as inflation rose in the late 1970s. Annual inflation 

increased from 4.9 percent in 1976 to 14.8 percent in 1980.10 In October 1979, the Federal 

Reserve changed its monetary policy to arrest inflation, which led to large and immediate 

increases in short-term interest rates. The three-month T-bill rate rose from 4.34 percent in 

1976 to 14.24 percent in 1980.

As short-term interest rates rose, mutuals experienced disintermediation amid competition from nonbank financial institutions that were not bound by the interest-rate ceilings 

imposed by Regulation Q.11 Depositors withdrew their money from mutuals and placed it in 

newly emergent money market mutual funds, or in other accounts offering higher returns.12

Net worth built over decades of prudent lending and deposit gathering quickly eroded. On a 

market-value basis, many mutuals were soon insolvent. Insolvency led to mergers, failures, 

and conversions of mutuals to stock form. Moreover, insolvent mutuals—driven by the need 

to recapitalize—were more likely than solvent institutions to convert to stock form.13

The events mentioned above marked the beginnings of what would become the S&L crisis 

of the 1980s and 1990s. There was also a smaller crisis among mutual savings banks.14 A 

combination of factors served to greatly magnify the damage to S&Ls, and more than 1,000 

S&Ls, with total assets of $519 billion, failed between 1986 and 1995.15 By comparison, 58 

FDIC-insured savings banks, with total assets of $61 billion, failed between 1986 and 1994.16

At the time, the S&L crisis was the greatest U.S. financial crisis since the Great Depression.

Another factor that served to diminish the role of mutuals in housing finance was the 

increasing importance of securitization, backed by the rise of government-sponsored enterprises (GSEs), which supplanted mutuals as the primary source of home mortgage credit 

(see Chart 4).17 Financial institutions used the GSEs to securitize the mortgages that they 

originated, thereby enhancing the liquidity of their portfolio and reducing their interest-rate 

risk.18 In addition, mortgage-backed securities had lower regulatory capital charges than 

residential mortgages held on the balance sheet, which further encouraged financial institutions to securitize their mortgages.19

10 Inflation as measured by the Consumer Price Index.

11 The Banking Act of 1933 (the Glass-Steagall Act) authorized the Federal Reserve to set interest-rate ceilings on savings deposits 

at commercial banks, which it created in Regulation Q: Title 12, part 217 of the U.S. Code of Federal Regulations. These ceilings 

were extended to S&Ls and savings banks in 1966.

12 FDIC (2005), 4–6, and FDIC (1997), 220–222.

13 Kroszner and Strahan (1996), 1294–1295.

14 For detailed accounts of the S&L and mutual savings bank crises, see White (1991), and Chapters 4 and 6 of FDIC (1997). For a 

summary of factors that contributed to the S&L crisis, see Curry and Shibut (2000), 27, and works cited therein.

15 Curry and Shibut (2000), 27.

16 FDIC (1997), 234.

17 Barth, et al. (2009), 350, Table A.12.

18 FDIC (2010).

19 Ibid.

Securitization Rises in 

Importance

Mutuals Rocked by Crises
2 0 1 6  •Volume 1 0  • Number 4

52 FDIC QUARTERLY

Most mortgage securitization was initially carried out by the GSEs, particularly the Federal 

National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).20 By the mid-1990s, most residential mortgage debt was financed 

by the GSEs.21 Private issuers of mortgage-backed securities then took substantial market 

share away from the GSEs. Private issuers grew from less than $50 billion in volume in 1995, 

15 percent of the total, to more than $1 trillion annually in 2005 and 2006, greater than 

55 percent of the total each year. But with the unprecedented losses on these securities during 

the financial crisis of 2007 to 2009, private-label securitization precipitously declined.22

As the S&L crisis crested and then subsided, and as securitization became more important to 

housing finance, the mutuals that stayed in operation kept their focus on their core business 

of portfolio mortgage lending. Following the S&L crisis, earnings, asset quality, and capital 

ratios improved. The fundamentals of the mutual industry were strong, and mutuals earned 

steady, if not spectacular, returns on assets (ROA) from careful lending.

Over the long term, mutuals tend to earn lower pretax ROA and lower noninterest income 

than stock institutions. They also typically report lower net interest margins, which are 

offset to an extent by lower expenses for loan-loss provisions and overhead (see Chart 5). 

Between 1984 and 2015, federally insured mutuals earned an average annual pretax ROA 

20 Inside Mortgage Finance (2006), 11.

21 Federal Reserve Board (2015), Table L, 218.

22 Inside Mortgage Finance (2013), 4.

Comparative Financial 

Performance of Mutuals

Percent

Mutuals Report Lower Protability and Lower Loan Losses 
an Stock Community Banks

Annual Income or Expense Item as a Percentage of Average Assets

Percent

Percent Percent

Source: FDIC.

Pretax ROA, Year-End 1984 to 2015

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

1984 1990 1996 2002 2008 2014

Mutuals Stock Community Banks Stock Noncommunity Banks

0.0

1.0

2.0

3.0

4.0

5.0

1984 1990 1996 2002 2008 2014

Net Interest Margin, Year-End 1984 to 2015

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1984 1990 1996 2002 2008 2014

Noninterest Income, Year-End 1984 to 2015

0.0

0.5

1.0

1.5

2.0

2.5

1987 1993 1999 2005 2011

Provision Expenses, Year-End 1987 to 2015

Chart 5
FDIC QUARTERLY 53

MUTUAL INSTITUTIONS: OWNED BY THE COMMUNITIES THEY SERVE

of 0.89 percent, compared with 1.09 percent at stock community banks and 1.32 percent at 

stock noncommunity banks. As the upper-left quadrant in Chart 5 shows, all three types of 

institutions performed poorly in the 1980s but recovered in the 1990s. But even as the 1990s 

and most of the 2000s turned out to generally be a period of strong ROA, the performance of 

mutuals started to fall behind the other institutional types in the early 2000s.

Although mutuals do not generally report an ROA as high as that of other institutions, they 

consistently report lower provision expenses, reflecting a different risk-return trade-off. 

Mutuals had average annual provision expenses of 0.20 percent between 1987 and 2015, 

which was nearly one-half the average at stock community banks and less than one-third the 

average at stock noncommunity banks.

Performance differences between mutuals and other institutions can be explained in large 

part by three factors: their geographic concentration, which largely ties them to the economic 

fortunes of a particular region (see Map); their more conservative business model, reflecting a 

choice to forgo high returns in purchase of greater stability; and their focus on mortgage lending.

When we compare mutual mortgage-lending specialists with stock community bank 

mortgage-lending specialists, we find they report generally similar financial results, 

with a few differences. Mutual mortgage-lending specialists report lower overhead costs, 

slightly lower provision expenses, and only slightly lower pretax ROA (primarily because 

of lower margins and lower noninterest income, as shown in Chart 6). When we compare 

Percent

Mutual Mortgage Specialists Report Financial Performance Measures Broadly Similar to Stock Community Banks

Annual Income or Expense Item as a Percentage of Average Assets, Mortgage-Lending Specialists Only

Percent

Percent Percent

Source: FDIC.

Pretax ROA, Year-End 1984 to 2015

0.0

0.5

1.0

1.5

2.0

1984 1990 1996 2002 2008 2014

Mutuals Stock Community Banks

0.0

1.0

2.0

3.0

4.0

1984 1990 1996 2002 2008 2014

Net Interest Margin, Year-End 1984 to 2015

0.0

0.5

1.0

1.5

2.0

1984 1990 1996 2002 2008 2014

Noninterest Income, Year-End 1984 to 2015

0.0

0.5

1.0

1.5

2.0

1987 1993 1999 2005 2011

Provision Expenses, Year-End 1987 to 2015

Chart 6
2 0 1 6  •Volume 1 0  • Number 4

54 FDIC QUARTERLY

Stock institutions owned by mutual holding companies 

(MHCs) make up another segment of the mutual industry. 

In 1987, Congress passed the Competitive Equality Banking Act, which gave mutuals flexibility to raise capital and 

keep their mutuality by forming an MHC.a The MHC 

is owned by depositors, and in turn owns the majority 

of the capital stock outstanding of its subsidiary stock 

institution.b

Identifying a particular MHC, along with its relationships 

to other holding companies and underlying charters, is 

a complex process that cannot be extended far back in 

time. Thus, we identified stock subsidiaries of MHCs only 

between 2012 and 2015. We found that MHC subsidiaries have more in common with mutual charters than with 

other charter types.

For example, both mutual charters and MHC subsidiaries 

are more likely to be community banks than are all other 

financial institutions. Both are concentrated in the Northeast and Mid-Atlantic states. Both are predominantly mortgage lenders, and their financial performance is similar.

There are three key differences between mutual charters 

and subsidiaries of MHCs. First, MHC subsidiaries are 

typically much larger than mutual charters, and, second, 

they devote more of their assets to loans—in particular, 

commercial real estate loans (see Table A2). Third, MHC 

subsidiaries have somewhat greater noninterest income and 

expenses than mutual charters.

In summary, MHCs are a different way of expressing mutuality in a savings bank or S&L, and the ability to distinguish MHC subsidiaries adds to our understanding of the 

mutual industry. At least since 2012, and along several 

important dimensions—location, business line, likelihood 

of being a community bank, and financial performance—

MHC subsidiaries bear a closer resemblance to mutual 

charters than to other stock institutions. See Tables A1 and 

A2, and Chart A1, in the Appendix for greater detail.

Mutual Holding Company Subsidiaries

a Competitive Equality Banking Act of 1987, Pub. L. No. 100–86, 101 Stat. 552 (1987), https://www.gpo.gov/fdsys/pkg/STATUTE-101/pdf/STATUTE-101-Pg552.pdf.

b Some insurance companies are mutual because they are owned by their policyholders. For this study, banking subsidiaries owned by mutual insurance companies are not 

grouped with other MHC subsidiaries.

the performance of mortgage-lending specialists headquartered in a Northeastern or 

Mid-Atlantic state, we find that mutuals report results similar to stock community bank 

mortgage-lending specialists. Average annual pretax ROA at mutual mortgage-lending 

specialists headquartered in a Northeastern or Mid-Atlantic state was 1.01 percent between 

1984 and 2015, while it was 1.02 percent for stock community banks headquartered in the 

same region and in the same business line.

That mutuals report lower profitability, and lower loan-loss provisions, suggests that mutuals have chosen a more conservative business model. This choice would prove beneficial 

in the mid-2000s as the banking industry approached its worst crisis period since the 

Great Depression.

The global financial crisis of 2007 to 2009 had its origins in subprime and other nontraditional 

mortgage loans that were funded by issuers of private-label asset-backed securities, some large 

financial firms, and, to a lesser extent, the GSEs.23 By comparison, mutuals originated loans 

and kept them in their own portfolios, maintaining the focus on making high-quality loans in 

their communities. Thus, mutuals as a whole and mutuals that were mortgage-lending specialists failed far less often than did other institutions during the crisis (see Chart 7).

Mutuals did not seem to join in risky mortgage lending that occurred in the run-up to the 

housing bust. The returns of mutuals fell in the years before the financial crisis, and the 

amount of their 1-to-4 family mortgage loans outstanding stayed relatively flat. Between 

year-end 2003 and year-end 2007, mortgage loans outstanding at mutuals expanded 

3.6 percent. In the same period, however, total U.S. mortgage debt outstanding grew by 

54.9 percent. Among mortgage-lending specialists, pretax ROA for both stock community 

banks and mutuals declined markedly during the housing bubble years. This disparity in 

23 Financial Crisis Inquiry Commission (2011), 102–125.

How Mutuals Fared 

During the Global 

Financial Crisis
FDIC QUARTERLY 55

MUTUAL INSTITUTIONS: OWNED BY THE COMMUNITIES THEY SERVE

growth rates between mutuals and other mortgage lenders reflected, in part, a more conservative approach to underwriting on the part of mutual institutions.

After home prices fell and the economy entered recession, it was clear that mutuals had made 

higher-quality loans. Mutuals failed far less often than other institutions and reported better 

asset quality throughout the crisis. One way to express the relative prevalence of failures 

among mutuals is by constructing a failure index for mutuals, based on the number of mutuals at year-end 2007 and the number that failed between 2008 and 2014. A failure index for 

mutuals is calculated by dividing the share of mutual failures occurring between 2008 and 

2014 by their share among all institutions at year-end 2007. Failure index values lower than 

1 indicate that mutuals failed less often relative to other institutions. The failure index for 

all mutuals was 0.52, and the failure index for mutual mortgage-lending specialists was 0.32, 

indicating that they failed at far lower rates than other institutions between 2008 and 2014 

(see Chart 7).24 Mutuals were an unexpected source of stability within the banking system, 

considering the global financial crisis began, in part, with credit problems in the U.S. mortgage market.

One reason that mutuals fared comparatively well was that they had built up their capital 

by retaining more of their earnings. Going into the crisis, they were much better capitalized 

than other institutions. Mutuals did not receive assistance from the U.S. Treasury’s Troubled 

Asset Relief Program (TARP)—although they were eligible—and only one mutual institution 

received capital from the Small Business Lending Fund that came after TARP.25

Today, mutuals make up a small fraction of FDIC-insured institutions and hold a thin 

slice of total banking industry assets. However, they stay focused on their core business 

of single-family mortgage lending. At year-end 2015, mutuals devoted 44 percent of their 

assets to mortgage loans, compared with 19 percent of assets at stock community banks and 

14 percent of assets at stock noncommunity banks. Amid a housing market weakened by 

defaults and foreclosures, mutuals stand strong: They fail rarely, they continue a tradition as 

24 A failure index measures the frequency of failures in a group of institutions relative to that group’s prevalence among all 

institutions. The failure index is expressed as:

Failures in group

All failures

Banks in group

All banks

Failure Index =

25 Some mutuals participated in the FDIC’s Temporary Liquidity Guarantee Program.

The Relevance of Mutuals 

Today

Source: FDIC.

*e failure index for each group is calculated as failures within that group as a ratio to all failures, divided by institutions in that group as a ratio to all institutions. 

An index value over 1 indicates a failure rate above the overall industry, while an index value less than 1 indicates a failure rate below the industry.

Failure Index*

Between 2008 and 2014, Mutuals Failed at Much Lower Rates an Other Institutions

Institutions Reporting at Year-End 2007, and Failures at Occurred From 2008 to 2014

0.52

0.99

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Mutual Charters Stock Community Banks

0.32

0.43

Mutual Mortgage

Specialists

Other Mortgage

Specialists

Chart 7
2 0 1 6  •Volume 1 0  • Number 4

56 FDIC QUARTERLY

mortgage-lending specialists, and they have higher-quality assets. Mutuals have chosen to 

assume less risk, in return for enhanced stability and lower returns.

However, mutuals continue to decline in number, and their share of the mortgage market is 

small. These trends are unlikely to change, for two reasons. First, nonbanks play an increasingly important role in the origination of mortgages.26 Among the top 50 mortgage lenders, 

nonbanks accounted for more than half of originations in third quarter 2016, the first time 

that threshold has been crossed.27 Second, the mortgage business has become one of scale: 

in 1989, the top five mortgage originators made 10.3 percent of all new mortgage loans by 

volume. However, in 2015, the top five originators made up 29.4 percent of the market.28

Surely, a desire to promote thrift and homeownership is still alive in our communities. One 

traditional attraction of mutuals is that they return profits to their customers and communities that would otherwise be returned to shareholders. Mutuals today continue the tradition 

of operating for the benefit of their depositors, borrowers, and surrounding communities. 

Although many commercial institutions—particularly those under the community bank 

umbrella—also support their communities, organizing as a mutual is a powerful business 

model for serving local customers. Lending to borrowers about whom the lenders knew 

very little was one factor in the recent financial crisis. The mutual business model, based on 

prudent mortgage lending to members of the community, proved to be more durable.

26 Nonbanks typically sell the mortgages they originate. Since the crisis, the share of all mortgages outstanding held at federally 

insured banks and thrifts has held steady, while the share held by nonbanks has substantially decreased.

27 Inside Mortgage Finance Publications, Inside Mortgage Finance 2016, no. 41 (October 27, 2016), 1.

28 Inside Mortgage Finance (1997), 72, and (2016), 9.

Authors:

Eric C. Breitenstein

Economic Analyst

Division of Insurance and Research

Clayton W. Boyce

Senior Technical Writer-Editor

Division of Insurance and Research
FDIC QUARTERLY 57

MUTUAL INSTITUTIONS: OWNED BY THE COMMUNITIES THEY SERVE

Mutual Charters Report Lower Noninterest Income and Expenses Compared With Stock Subsidiaries of 

Mutual Holding Companies (MHC)

Measure Charter

Percentage of Average Assets, by Year

2012 2013 2014 2015

Pretax ROA Mutual Charter 0.71 0.72 0.70 0.75

Subsidiary of MHC 0.70 0.82 0.77 0.82

Net Interest Margin

Mutual Charter 3.16 3.02 3.04 3.03

Subsidiary of MHC 3.17 3.08 3.05 3.07

Noninterest Income

Mutual Charter 0.64 0.50 0.47 0.52

Subsidiary of MHC 0.70 0.73 0.74 0.75

Noninterest Expenses

Mutual Charter 2.69 2.58 2.59 2.60

Subsidiary of MHC 2.66 2.67 2.75 2.78

Provision Expenses

Mutual Charter 0.23 0.10 0.08 0.06

Subsidiary of MHC 0.35 0.18 0.10 0.05

Source: FDIC.

Table A1

Stock Subsidiaries of Mutual Holding Companies Devote a Greater Share of Assets to Commercial 

Real Estate Loans Than Mutual Charters

Loan or Asset Category

Mutual Charters

Subsidiaries of Mutual Holding 

Companies

$ Billions

Percentage 

of Assets $ Billions

Percentage 

of Assets

Mortgage Loansa 63 44 47 44

Consumer Loans 3 2 2 2

Commercial Real Estate Loansb 25 18 25 23

Construction and Development Loans 4 3 3 3

Commercial and Industrial Loans 4 3 6 5

Agricultural Loansc 1 0.4 0 0.4

Other Loans and Leases 0 0.3 1 1

Less: Loan Loss Reserve and Unearned Income 1 0.6 1 1

Net Loans and Leases 95 67 82 75

Securities 31 22 16 15

Other Assets 17 12 11 10

Total Assets 142 100 108 100

Source: FDIC. 

Notes: All figures are as of December 31, 2015. Amounts and percentages may not total due to rounding.

a Mortgage loans include home equity lines of credit, junior liens, and other loans secured by residential real estate.

b Commercial real estate loans include construction and development loans, loans secured by multifamily properties, and loans secured by nonfarm 

nonresidential real estate.

c Agricultural loans include production loans and loans secured by farm real estate. 

Table A2

Appendix
2 0 1 6  •Volume 1 0  • Number 4

58 FDIC QUARTERLY

Percent

e Recent Financial Performance of Mutual Charters Has Closely Resembled at of Stock Subsidiaries of Mutual Holding Companies

Annual Income or Expense Item as a Percentage of Average Assets, Year-End 2012 to 2015

Percent

Percent Percent

Source: FDIC.

Pretax ROA

0.0

0.5

1.0

1.5

Mutual Charter Subsidiary of MHC Other Stock Community Bank

0.0

1.0

2.0

3.0

4.0

Net Interest Margin

0.0

0.5

1.0

1.5

Noninterest Income

0.0

0.5

1.0

1.5

Provision Expenses

2012 2013 2014 2015 2012 2013 2014 2015

2012 2013 2014 2015 2012 2013 2014 2015

Chart A1
FDIC QUARTERLY 59

MUTUAL INSTITUTIONS: OWNED BY THE COMMUNITIES THEY SERVE

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