What is a Mutual Bank?

A mutual bank is often called as mutual saving bank.

It is a state-charted saving bank which is owned by its depositors and managed by a fiduciary board of trustees.

A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc., are paid.

Profits after deductions are shared among the members. The institution is intended to provide a safe place for individual members to save and to invest those savings in mortgages, loans, stocks, bonds and other securities and to share in any profits or losses that result. The members own the business.  - From Wikipedia.

What's the difference between general bank and mutual bank?

The term “mutual” reflects the fact that members have ownership of the credit unions and building societies they belong to, and “bank” refers to the banking services they provide.

So a mutual bank, also known as a customer-owned bank, is a credit union or building society that has gone through the process needed to use the word “bank” in its trading name.

This process starts with a democratic vote by members and ends with an official application to the banking regulator to prove the institution meets the capital requirements of a bank. A retail bank, on the other hand, such as one of the Big 4 or their many subsidiaries is generally listed on the stock exchange and owned by shareholders, who are not necessarily customers of the bank.

The difference between the two bank types is important to many Australians or Americans, some of who prefer directing their business towards a more personal and often community-based financial institution.

As a result, the mutual bank customers are tend to be happier, markets are more diversified and regulations are stronger. How mutual bank came into stage? Initiated in 1816, the first mutual savings banks (MSBs) were the Philadelphia Saving Society and Boston's Provident Institution for Saving. Most MSBs had primary locations in the Mid-Atlantic and industrial Northeast regions of the United States. By 1910, there were 637 of these institutions. - From Investopedia.

MSBs were generally very successful until the 1970s. During the 1980s, regulations governing what MSBs could invest in, along with what rate of interest they could pay to customers, combined with rising interest rates, caused MSBs massive losses. Consequently, many MSBs failed in the 1980s; others merged, became commercial banks, or converted to stock form.

MSBs traditionally invested in mortgages. Individuals and businesses will use mortgages to make large real estate purchases without paying the entire value of the up front. Fixed-rate mortgages (also called a “traditional" mortgage) adjustable-rate mortgages (ARM) exist. Although a mortgage is usually a contract between a borrower and lender, mortgages can be pooled together and become available for investment by outside parties. What are the main advantages of mutual banks? Customer service.

Bank employees know you’re one of the bank owners and are more eager to please. In effect, your success is the bank’s success, so employees do their best to ensure your success. Long-term perspective. Since Mercer Savings is not a traditional bank that has to make profits for shareholders every year, we develop a long-term perspective. This permits us to build beneficial relationships within the community and offer more flexibility for our customer owners. Financial stability.

Mutual banks were among the few banks that survived the Great Depression, because they don’t make risky investments.

Customer safety. Mutual banks are chartered by state or federal governments. Mercer Savings deposits, for example, are insured by the FDIC.

Mutual banks also make cautious investments to safeguard the investments of their owners—you. Mutual banks can weather market volatility much better than traditional banks. Profits are reinvested in the community.

The profits from loans are usually returned to owners in the form of lower rates on loans and higher rates on deposits. Banks usually donate to community events. Mercer Savings has a long history of donating to local school, cultural, and community events. Employees invest in the community.

Not only do employees buy homes, cars and other products from community businesses, they frequently volunteer. For example, Mercer Savings’ Helping Hand program donates 1,650 volunteer hours to the community each year. Advice. Community members can walk in at almost any time and receive advice from financial professionals who live in the community.

We also write informative articles about financial issues of interest to our community members.

Firstly created and edited by AI Analytics; Source: Wikipedia, Investopedia and mercer's saving etc;