Mutual Savings Bank

Oct 21, 2023 By Triston Martin

The mutual savings institution is a kind of thrift institution managed but not owned by the individuals who utilize its services. MSBs provide many similar products that you'd get from banks, such as savings accounts, checking accounts, mortgages for homes, CDs, and a credit card. Like credit unions, they're community-based organizations that focus on providing regular banking services to residents in their local area. While MSBs belong to the same people who deposit their money there, they are neither shareholders nor members. They have no input into how the bank runs its operations or uses its funds. They only receive the interest they earn on their accounts through dividends.

How a Mutual Savings Bank Works

Nowadays, mutual savings banks function as full-service institutions that provide the same kinds of services as a typical financial institution or credit union. Consider Liberty Bank, for example. It's the biggest institution of mutual savings in Connecticut that has local branches in 62 with more than $7 billion of assets under supervision. It provides almost every kind of bank product, such as business and personal accounts, as well as mortgages, digital banking, loans, insurance, and investment-related services. However, MSBs did not always look like this.


Financial Stability

In general mutual savings, banks tend to be well-capitalized and run more prudently than the average public institution. In reality, Mutual savings institutions were among the very few banks that made it through the Great Depression because of their unwillingness to take on excessive risk.

Customer Service

As a depositor signifies that you're an owner, it's normal for mutual savings institutions to take an "eager to please" approach regarding customer service. There's no doubt about it that the success of the institution is contingent on the satisfaction of its clients and the success of its customers.

Security of Depositors

These banks, also known as mutual savings institutions, are usually chartered by federal or state institutions. In the case of mutual savings, for instance, these banks are covered through the Federal Deposit Insurance Corporation (FDIC). As mentioned previously, mutual savings banks tend to be more cautious about their investments to safeguard the interest of depositors. This is why mutual savings banks can endure financial turmoil much more successfully than traditional banks.


Not Supervised By Members

Being an "owner" of an MSB is great; however, you do not have any influence over how the MSB is run or the way it uses its assets.

No Large, National Presence

A smaller, local presence can mean that it's difficult to access your funds when traveling abroad or outside of the state. It is also possible that you will have fewer customer service options than you'd get from an institution nationwide that operates all hours of the day.

MSB vs. Credit Unions

Like cooperative savings institutions, credit unions are another type of financial institution that is not the traditional commercial bank. However, credit unions and mutual savings banks generally provide identical services (e.g., taking deposits, loaning money, and selling financial products, such as debit and credit cards, CDs, or certificates of deposit). However, there are significant distinctions in structure.

These distinctions are primarily based on how these two institutions earn income. At the same time, mutual savings banks work to earn profits for shareholders of their members, while credit unions function as not-for-profit institutions created to serve their members, who are also de facto owners. Credit union members will pool their funds (i.e., purchase shares within the cooperative), enabling members to provide loans and demand deposit accounts and other financial products and services to one another.

The majority of credit unions are less sized than banks than retail. They typically serve an industry, region, or group. For instance, they serve the Navy Federal Credit Union (NFCU) with 300 branches mostly located near military bases and is the biggest credit union in terms of assets within the U.S. and is open to military personnel.

MSB vs. Commercial Bank

Commercial banks can provide small-scale businesses with loans to consumers, mortgages, consumer loans, credit cards, bank products, and checking accounts. They can also provide investments and insurance products like the mutual fund and IRAs through separate entities under the same holding company for banks under the same umbrella. Some banks also offer Trust services, estate planning, and asset management via their financial plan division. Commercial banks take the form of megabanks that have hundreds or even thousands of branches. They also include community banks focused on catering to the needs of the local community. Many banks are public-owned corporations.

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