OCC, ABA File Briefs in Appeal of Missouri Mutual M&A Case

The OCC, the American Bankers Association and the Missouri Bankers Association have filed friend-of-the-court briefs in the appeal of a Missouri case in which two mutual thrift depositors claim that they were entitled to a distribution of their thrift’s capital at the time the bank merged into another institution. The plaintiffs have appealed the district court’s dismissal of their claim.

The OCC — which rarely intervenes in court cases involving banks — argued that the plaintiffs misstated the law applicable to federal mutual banks, explaining that under judicial authorities and OCC interpretations, mutual bank depositors have no individualized equity interest in the bank’s retained earnings and that the depositors were not entitled to a vote as a condition of the merger.

In their brief, ABA and MBA emphasized the uniqueness of the mutual ownership model as distinct from stock organizations. Because mutuals raise capital through retained earnings, granting depositors a right to compel a capital distribution could harm a bank’s safety and soundness and create risks to the Deposit Insurance Fund.

The case arose when Inter-State Federal Savings and Loan Association in Kansas City, Mo., merged with First Federal Bank of Kansas City — also a mutual thrift. Two Inter-State depositors filed a class action suit seeking more than $5 million in damages, arguing that their “ownership interest” was “significantly diluted” by the merger. For more information, contact ABA’s Dawn Causey or Andrew Doersam.