What is a mutual bank?Mutual banks, also known as mutual institutions, first arrived in the US in 1816. They were originally organized to provide the working class with easier access to banking services. Because most commercial banks at the time primarily served businesses, the needs of consumers were often overlooked. To meet the need for more accessible banking, philanthropists started the first mutual banks. To encourage families to save money, these banks accepted deposits from all classes of consumers, famously allowing deposits as low as only a few cents. Mutual institutions operate for the benefit of their depositors, borrowers, and the surrounding communities.1

Did you know? Main Street Bank is a mutual bank with a long history, serving Massachusetts residents and businesses since 1860.

What Makes Mutual Banks Different?

While mutual institutions operate much like other banks, there are three main traits that distinguish them from the bunch:

1. Community-Based

Mutual banks are chartered to benefit their local communities. As such, their main purpose is to provide accessible banking services to local consumers and businesses in the form of deposits, loans, and other financial instruments. They also tend to invest in their communities by working with local organizations and businesses.

2. No Direct Ownership

Mutual banks are not owned by any one individual or entity. Instead, mutual banks are owned by their depositors and do not have capital stock or stockholders. And while these banks are owned by their depositors, their depositors are neither stockholders nor members, and have no vote in how the bank operates.2 Unlike credit unions, mutual institutions are for-profit and pay state and federal taxes. They provide benefits to their depositors in the form of competitive interest rates on deposits and loans, and access to amenities, such as technology and service upgrades.3

3. Prioritizing Consumer Saving & Home Ownership

The focus of mutual banks is on savings accounts and home mortgages. And while mutual banks tend to prioritize these products, today they offer many ranges of products for consumers and businesses alike, including checking accounts and business loans.

Why To Choose a Mutual Bank


There is security in smaller banks. Mutual institutions tend to be more fiscally conservative than large commercial banks, and often choose stable investments to support their depositors. Additionally, because mutual banks don’t have shareholders, they are not pressured to grow at the same rate as commercial banks. This autonomy allows them to put the financial security of their depositors over short-term profits.

Did you know? Of the approximately 350 banks that have failed since 2007, only 12 were mutual banks, according to America’s Mutual Banks.

Locality and community

Your local bank is a connection to your community. Because mutual banks tend to serve a smaller area than large commercial banks, their smaller footprint means they prioritize their communities. Being located right in town means that they have good reason to build meaningful relationships with their customers and neighbors.

Personalized Services

Mutual banks often value quality over quantity. And stellar customer service is expected, so small banks often make great efforts to grow their relationships with customers.


In summary, mutual banks were created to give local consumers and businesses easy access to banking services. They invest in their local communities and offer a range of financial products. They are owned, but not operated, by their depositors. Mutual institutions tend to pursue stable investments with a conservative approach to their assets. You can expect personalized service, reinvestment in local organizations, and the prioritization of depositors’ needs.

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