By Daniel Brown and Alex Ryan
ABA DataBank
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Today’s mortgage market is highly competitive. Banks, credit unions and nonbank mortgage companies all directly compete for borrowers. Mutual banks comprise one segment of the banking industry that continues to excel in the mortgage origination business. This ABA DataBank examines mutual banks, their contribution to the housing market, and the factors behind their continued success despite growing competition from nonbank lenders.
What are mutual banks?
Mutual banks have a unique ownership structure that incentivizes a longer-term approach to bank operations. As noted in a 2016 FDIC report, mutual banks are owned by their depositors rather than outside shareholders. This structure creates an important capital-raising distinction: unlike publicly owned banks, which can issue additional stock, mutual bank capital is primarily sourced from locally held deposits. (A much-anticipated, ABA-backed proposal by the Federal Reserve would modernize the rules governing how mutual institutions raise capital by creating a clearer, more standardized framework for issuing mutual capital instruments — while preserving their mutual ownership structure.)
Under current rules, capital certificate offerings are often bespoke and costly, limiting their usefulness as a practical source of capital. In recent years, mutual capital certificates and similar instruments have received renewed interest because they allow mutual banks to raise capital like stock institutions do while preserving their mutual ownership structure. The Federal Reserve proposal seeks to alleviate current constraints by providing a template for a standardized approach that could be adopted across mutual bank regulators while maintaining the core features of mutual ownership.
Even with improved capital-raising tools, mutual banks’ depositor-owned structure would continue to support a lending approach focused on steady growth, local relationships and a longer-term outlook. Mutuals historically operated across the United States and maintained a significant market share in the mortgage lending market. While these institutions originated roughly 40% of all mortgages in 1950, consolidation in the banking industry, the growing importance of securitization and the secondary market, and competition from nonbanks reduced mutual bank presence in many states. However, Figure 1 illustrates how mutuals still account for a large share of depository institutions in Northeast and mid-Atlantic states.
Mutual banks’ balance sheets remain geared for housing
While many mortgage companies quickly originate and then sell off mortgages to the secondary market, mutual banks are more likely to retain the mortgages they originate and hold other housing-related assets. Figure 2 shows that 55% of lending by mutuals is dedicated to housing-related activities. Within their lending portfolio, 41% of mutuals’ outstanding loans are closed-end mortgages, reaffirming mutuals’ preference to hold onto the mortgages they originate. Beyond the lending shown in Figure 2, mutuals also held $75 billion in mortgage-backed securities (69% of all mutuals’ securities) in 2025Q4, further emphasizing their commitment to homeownership in the communities they serve. As portfolio lenders, mutual banks can also provide borrowers with added confidence that the institution will continue servicing their loan. The importance of locally serviced mortgages was reaffirmed in a recent speech by Federal Reserve Vice Chair Michelle Bowman, who noted that “servicing creates customer loyalty when done well but can create significant frustration when done poorly.”
While a bank with highly specialized lending has greater concentration risk, robust capital levels at mutual banks help address this concern. Figure 3 compares tier 1 capital for mutual banks with the Office of the Comptroller of the Currency’s tier 1 capital recommendations. As the figure illustrates, mutuals hold significantly higher capital levels (22.62%) than the OCC’s recommendation to be considered well capitalized (8%) and adequately capitalized (6%).
Mutuals in the mortgage market
Compared to non-mutual mortgage lenders (which includes banks, credit unions and nonbank financial institutions), slightly higher shares of originations by mutual banks (49% versus 47%) are home purchase mortgages, and these institutions specialize in conforming loans (Figure 4). Like other lenders, most mortgages originated by mutuals are conventional loans; however, mutual banks originate a higher share of loans backed by the U.S. Department of Veterans Affairs (8%, compared to 3% for other lenders).
As previously mentioned, mutual banks and S&Ls historically were the predominant class of mortgage lender in the United States. Figure 5 reveals that while the nationwide mortgage share for mutuals has remained relatively low since 2018, their regional market share in New England has remained elevated and has even grown by 12 percentage points during the period.
Consistent with Figure 1, the geographical distribution of mortgage market share for mutuals is highly skewed toward New England (Figure 6), with market share reaching as high as 70% in some communities across Massachusetts, New Hampshire and Maine (Figure 7). Despite a modest market share nationally, the resilience of mutual banks within New England during a period of expansion by nonbanks further suggests that mutuals have a competitive advantage in their communities.
Using branches to propel mortgage lending
Another competitive advantage for mutuals is their outsized branch presence in the communities they serve. As of May 2026, mutual banks in New England maintain a significant bank branch-to-population ratio, with four times as many branches per capita than the national average (Figure 8). By maintaining relationships with depositors and borrowers, mutual bank loan officers and managers can provide personalized support that surpasses traditional loan servicing responsibilities.
Mutual banks have consistently invested in maintaining a strong branch presence in the communities they serve. Many of the active mutual bank branches have been operational for decades, with over 60% of current branches established before 2000. This is particularly true in the Northeast, where almost 32% of the active branches already were opened by 1900 and over 50% by 1950 (FDIC’s Summary of Deposits and FDIC’s Location and History application programming interface). These branches do not just provide services for members of their communities — they draw on decades (and sometimes centuries) of accumulated knowledge and relationships to meet the needs of their customers.
Because mutual banks continue to outperform in the mortgage space and maintain a strong bank presence, it is important to understand whether there is a connection between these two strengths of mutuals. Figure 9 shows that many of the counties in which mutual banks originate mortgages maintain active branches, and as of 2025 almost 80% of mortgages were originated in counties where they had branches. Mutual banks rely on physical presence and a strong understanding of their communities to sustain a competitive mortgage lending business.
Conclusion
With deep historical expertise in mortgage lending and an ownership structure that prioritizes a long-term outlook, mutual banks excel in the markets they serve. Despite the growing reliance of lenders and consumers on technology in the mortgage market, mutuals show that a relationship-based model remains valued by many Americans and continues to position these institutions as pillars of their local communities. Policy proposals to make it easier for mutuals to raise capital would further assist these institutions’ ability to originate mortgages in the markets they serve.
Editor’s note: For additional research and analysis from the ABA’s Office of the Chief Economist, please visit the OCE website.
Daniel Brown is an economist and senior director in ABA’s Office of Economics and Research. Alex Ryan is a Ph.D. candidate in applied economics at Ohio State University.
