Major structural change planned by nation's second-biggest mutual

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Dollar Bank, a 163-year-old federal savings bank in Pittsburgh, is finally filing to form a holding company.

Having a mutual holding company will provide the nation's second-largest depositor-owned financial institution with more flexibility as it pursues acquisitions to cross the $10 billion-asset regulatory threshold. At that point, Dollar will face mandatory stress testing and caps on interchange fees.

Though the move would allow the $8.3 billion-asset bank to convert to a fully stock-owned company, there are no plans to follow that path, Jim McQuade, the bank's president and CEO, said in a Monday press release. Rather, the effort is designed to preserve Dollar's mutual status.

“Mutuality is the purest form of banking,” McQuade said. “This change will provide the growth capacity Dollar Bank needs to remain successful long-term.”

The move would allow Dollar to buy other mutuals, then operate them as separate units under the holding company. It's a model other depositor-owned companies have pursued. For instance, the $1.8 billion-asset First Federal Savings and Loan Association of Lakewood in Ohio has acquired two smaller depositor-owned thrifts since forming its holding company in 2015.

Dollar, which has no deals lined up, could also merge acquired institutions into its existing bank. It has done so twice in recent months, buying the $112 million-asset Bank @lantec in Virginia Beach and the $51.4 million-asset Progressive-Home Federal Savings and Loan Association in Pittsburgh.

Most community banks view $10 billion in assets as a potential challenge because it means reduced revenue and higher regulatory costs. As they have neared the threshold, many — seeking to add scale to offset the bottom-line hit — have chosen to leap past it with a large acquisition.

Dollar Bank is by no means the only bank facing big adjustments as it grapples with the $10 billion threshold. The $10.8 billion-asset Customers Bancorp in Wyomissing, Pa., plans to sell its digital bank largely because of the hit it would take from a cap on interchange fees.

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