WASHINGTON — Federally chartered lenders are increasingly opting to become covered savings associations, a relatively new charter created under a 2018 banking law, according to a study released by the Federal Reserve Bank of Cleveland.
The Cleveland Fed said in its report published Monday (May 4) that covered savings associations, or CSAs, were established under the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. The law allows federal savings associations with less than $20 billion in assets to elect CSA status and retain it even if they grow beyond that threshold.
CSAs are treated similarly to national banks but are not subject to certain lending restrictions that require traditional federal savings associations to concentrate on residential mortgage lending, the Federal Reserve Bank of Cleveland said.
“Yet, unlike a national bank, a CSA retains a few traditional FSA powers, most notably, regarding governance,” the report said, adding that the designation can be attractive for institutions seeking to diversify their loan portfolios.
By electing CSA status, institutions can expand into commercial and industrial lending without prior asset concentration limits, according to the Federal Reserve Bank of Cleveland.
What the Data Show
As of the second quarter of 2025, 40 institutions with a combined $78 billion in assets had made the transition, the report found.
The study noted that the option has been particularly appealing for mutual thrifts, which are owned by their depositors. For those institutions, the CSA framework allows them to operate more like commercial banks without converting to stock ownership, a shift not widely available since the 19th century.
Among larger mutual institutions, adoption has been notable, with 11 of the 20 largest mutual federal savings associations electing CSA status, the Federal Reserve Bank of Cleveland reported.
The broader population of federal savings associations has declined significantly over time, from about 2,000 in 1980 to 233 as of last year.
20% Have Become CSAs
Since 2019, roughly 20% of federal savings associations have become CSAs, often beginning to reduce their reliance on residential lending before formally completing the transition, according to the report.
That trend suggests many institutions view the move as an intermediate step toward a more diversified, commercial banking model, the Federal Reserve Bank of Cleveland said.
The report also noted that converting to a CSA is a simpler process than becoming a national bank, as it requires only a notice to federal regulators rather than a formal application and approval process.
