As the Federal Reserve Bank of Cleveland noted in a study published Monday (May 4), CSAs are a relatively new kind of depository institution created by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.
This law permitted federal savings associations (FSA) — savings banks or savings and loans with a federal charter — with less than $20 billion in assets to choose to become a CSA and retain that status even if they topped that asset threshold.
CSAs are treated almost like national banks, but are not subject to lending restrictions that require FSAs to focus their business on residential mortgage lending.
“Yet, unlike a national bank, a CSA retains a few traditional FSA powers, most notably, regarding governance,” the study said. “For FSAs looking to diversify their loan portfolio, the CSA election may be an attractive option.”
By electing CSA status, these banks can diversify into commercial and industrial lending without the previous asset concentration limits.
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According to the report, 40 institutions — representing $78 billion in combined assets — had made this election as of the second quarter of 2025.
For many mutual thrifts (institutions owned by their depositors), the CSA election offers a unique advantage: the ability to operate like a commercial bank for the first time since the 1860s without being forced to reorganize as a stock corporation.
This path has been particularly popular among larger mutuals; 11 of the 20 largest mutual FSAs have made the election. Meanwhile, the number of FSAs has seen a dramatic decline in the last few decades, from 2,000 in 1980 to just 233 as of last year.
Researchers found since 2019, about 20% of FSAs have chosen to become CSAs, often not waiting for the official paperwork to start their transformation. Data suggests these banks began reducing their residential lending concentrations about two years before making the formal election.
This indicates that for many, the CSA status is an “intermediate step” in a long-term strategic shift toward a broader commercial banking business model. The report added that it is easier to become a CSA than a national bank.
The former process involves simply submitting a notice to the federal banking regulators, while the latter requires an FSA to submit an application and wait for the Office of the Comptroller of the Currency to take action on it.
