To hear Doug Faucette describe it, mutual banks are the neglected minority of the banking world. They’re excluded from government intervention efforts like the Small Business Jobs Act, and in the dark about how new regulations will affect them as cash-only institutions. Most ominously, their ranks are thinning year after year. And all of that is unacceptable to Faucette.

Faucette, partner with law firm Locke, Lord, Bissell & Liddell in Washington, D.C., is a major engine and mouthpiece of a new advocacy group, America’s Mutual Banks, which is meant to complement the efforts of trade groups like the American Bankers Association or the Independent Community Bankers of America.

The group will fight to make mutuals a bigger part of the national conversation, he said, but it faces significant hurdles. It is in its infancy, and is still trying to gain members and traction. The group’s current headquarters are Faucette’s law offices. And while it seems like mutual-heavy Massachusetts would welcome such a group with open arms, a number of local mutual banks had doubts.

“I worry about the attack on banking in a general sense, more than I would be about whether mutuals are well represented,” said Matthew Sosik, president and CEO of Webster-based Hometown Bank. He recalled receiving an introductory letter explaining America’s Mutual Banks, but hadn’t given the group much thought.

It’s important for the industry to present a unified voice to regulators and lawmakers, he added, instead of splintering off into factions. The credit union lobby doesn’t suffer from that problem, he said, and they’re often more effective at presenting their voice.

‘What’s A Mutual?’

Still, some major out-of-state banks have joined, including large mutuals such as Columbia Bank in New Jersey and New York-based Ridgewood Savings Bank. The organization’s interim chairman is Alton K. McCree of Fidelity Mutual Savings Bank of New Orleans.

Faucette argues that America’s Mutual Banks is intended not to fight against ABA or ICBA, but to call attention to the significant differences between mutuals and their publicly owned peers. Mutuals are private institutions and do not issue stock, which means they operate differently than public banks.

The Troubled Asset Relief Program (TARP), for example, was geared solely toward buying assets in stock banks; it was formed in the fall of 2008, but a mutual version of the plan didn’t come out until months later, Faucette said.

The same situation repeated itself with the Small Business Lending Act of 2010, which acted on the same stock-oriented mechanism. More recently, the FDIC’s new guidance explained how Dodd-Frank Act compensation rules would be applied to banks – but it spoke only of cash/stock compensation packages, and nothing about what mutual executives could expect.

“[Lawmakers] just don’t seem to have mutuality on their radar,” Faucette said.

Ray Hallock, CEO of Columbia Bank and a member of the group, said he’s encountered this confusion time and time again. When the Small Business Jobs Act came out, an employee from the U.S. Treasury called him up to inquire why his bank, a sizable mutual with $4.6 billion in assets, hadn’t shown interest in the loan programs.

Hallock told the man he couldn’t have participated if he wanted to – he was a mutual bank, and the program didn’t accommodate mutuals.

“The individual asked, ‘What’s a mutual?’” Hallock recalled.

These instances are becoming far too common, and they can pose serious logistical problems for banks, Faucette told Banker & Tradesman.

More broadly, the accumulation of all this sends a message that mutual banks are outside the mainstream, increasingly marginalized in policy discussions. America’s Mutual Banks, while it could remain silent on many issues, could step in to promote mutuals’ interests when necessary.

A Unified Front

This is important for the very survival of mutual banks: There are 577 mutual banks in the nation, according to the group’s fact sheet, and Faucette noted that a few mutuals convert to public institutions every year. And because of the rules governing de novo banking today, no one ever begins a new mutual bank.

Founding a new bank nowadays requires millions of dollars in start-up capital, and only would-be investors are interested in putting up that kind of cash, Sosik said. Mutuals used to be formed by a few depositors pooling their money and eventually starting to make loans – an impossibility in the current regulatory environment.

Faucette said he sees this as further evidence for why mutual bankers felt the need to start the group. “They realize that unless they… work together to reverse that trend, I think the results are inevitable,” he said.

The group charges members monthly membership fees, from $100 a month for institutions of less than $250 million in assets, to $2,500 a month for those of $1 billion or higher. Faucette said the money goes to the group itself, although America’s Mutual Banks has no legal designation as a business or nonprofit.

Patrick Thorpe, CEO of Bank Gloucester, hadn’t yet heard about the new group, and like Sosik, expressed hesitation. While it’s true that government actions including TARP didn’t include mutual banks like his, he wasn’t interested in participating, anyway. The key thing was to protect small banks in general as they fight to survive crippling compliance and regulation costs.

Elizabeth Jones, CEO of Everett Co-operative Bank, agreed. She was concerned about the consolidation of all types of community banks, not just mutuals. A group might not be a bad thing, Jones acknowledged, but her own institution wasn’t hurting for lack of mutual representation.

“I’m not saying it’s not needed out there, but for my bank – and I’m only speaking for Everett Cooperative – we don’t need it,” she said.