Organizational Form and Thrift Risk During the US Housing Boom and Bust

We compare the performance of community-bank-sized mutual and stock thrifts during the housing boom of 2001-06 and the housing bust of 2007-13. During the housing bust, mutuals failed at a much lower rate than stock thrifts. To investigate this difference, we first estimate a probit model of thrift failure over the housing bust and show that this difference holds even when controlling for local economic shocks and differences in thrift characteristics. Furthermore, we find that a concentration in construction and land development loans is the only type of loan concentration that is predictive of failure. Second, we calculate several measures of risk during the housing boom period and find that mutual thrifts increased their risk less than stock thrifts. We compare our results with earlier studies that examined thrifts during the savings and loan crisis. In our sample, thrifts supervised by the Office of Thrift Supervision failed at a higher rate than other thrifts. However, once we account for other thrift characteristics, they did not fail at a higher rate during the housing bust nor did they take more risk during the housing boom. Finally, we also describe a class of hybrid thrifts that are mutually organized but can raise external capital and analyze their performance during the housing bust.