Several states are doing their part to nudge thrift charters into obsolescence.
Pennsylvania lawmakers abolished the state's savings-and-loan association charter last month, following the lead of Connecticut and Maine. The moves come as the number of thrifts nationwide continues to decline and the "savings & loan" name loses its former appeal.
"It is a bit sad to think that the most famous savings and loan in the world would have to switch charters if it was in existence today," says Jeffrey Werthan, a lawyer at Katten Muchin Rosenman, referring to Bailey Building & Loan Association from the classic Jimmy Stewart film "It's a Wonderful Life."
The Pennsylvania Department of Banking and Securities wanted to ditch the S&L association because only four institutions still have the charter, making it costly to maintain separate regulatory operations. While the move continues a trend of reducing thrifts' options, it helps state regulators become more efficient, says Doug Faucette, a lawyer at Locke Lord.
"It makes sense for regulators to eliminate the variety of charters, which in most cases are anachronistic or very similar to another charter option," adds Richard Schaberg, a lawyer at Hogan Lovells.
One of the four remaining state S&L's in Pennsylvania ESSA Bancorp in Stroudsburg does not expect the new law to change its operations.
"To be honest, we've been waiting on these changes to come for about 15 years," says Gary Olson, $1.4 billion-asset thrift company's president and chief executive. "They finally got around to it."
Pennsylvania was once a haven for savings and loan associations, with about 1,000 in the state. (Pennsylvania still has several dozen state- and federally chartered savings banks.)
The number of state-chartered savings-and-loan associations plummeted after the S&L crisis of the late 1980s, and now only about 50 remain nationwide, Faucette says.
State regulators discussed the proposed law with Pennsylvania's four S&Ls and they all accepted the change, says Tim Arthun, director of government relations at the Pennsylvania Association of Community Bankers. The state is waiving all fees that it would normally charge for a charter switch, he says.
Pennsylvania would prefer to keep its four S&L's in the state's oversight. "My hope is that all four S&L's will elect to become state-chartered savings banks, which will give them the same tax treatment and expanded lending powers," Glenn Moyer, the state's secretary of banking and securities, said in a statement. He did not return calls seeking further comment.
ESSA has not yet made a final decision on its charter change, which could also include converting to a national charter or merging with another institution, says Allan Muto, the company's chief financial officer.
In addition to ESSA, Pennsylvania's other state S&Ls consist of the $87 million-asset Armstrong County Building & Loan Association in Ford City; the $109 million-asset Fidelity Savings & Loan Association of Bucks County in Bristol; and the $301 million-asset Slovenian Savings & Loan Association of Canonsburg in Strabane. Calls to those institutions were not returned.
Faucette agrees that it makes sense for Pennsylvania to "rationalize" a system with too many labels, though he says it continues an ongoing trend of confusing consumers.
Savings and loans used to be known for an emphasis on residential mortgages, but that distinction has become blurred, Faucette says. "There is a tendency towards homogenization, that a bank is a bank is a bank, even though that's not true," he says.
A number of financial institutions, especially thrifts, have scrapped national charters based on a belief that federal regulators are preoccupied with larger institutions, says Mark Kaufman, commissioner of the Maryland Office of Financial Regulation.
"It's hard for an agency that focuses on the largest institutions to also focus on the smallest thrifts," Kaufman says. State-chartered banks in Maryland choose their charter format because "every institution we regulate is under $5 billion in assets and they all do the same thing," he says.