Carthage Savings and Loan now open for municipal business at all branches

·4 min read

Jul. 13—CARTHAGE — Carthage Federal Savings and Loan received approval from the Federal Reserve Bank to change its charter and, therefore, its name. The financial institution is now officially Carthage Savings and Loan, National Association.

The charter change allows the bank to do business with municipalities, which is significant, according to the institution's CEO Thomas H. Piche.

He said that for years, towns, villages, fire departments and school districts have approached the banking institution to do business, but they had to refuse.

"It bothered me," Mr. Piche said. "I felt like the poor stepsister or something, but we had all of the same things as the banks that were allowed to accept their business."

A 1950s-era state municipal law says municipalities can only do business at a "bank or trust company," which Mr. Piche said "the commercial banking industry has taken that letter to the law and basically said you can't go to a credit union, you can't go to what we call a thrift — a savings and loan — or a savings bank."

Although there are ways around this problem, they have all been expensive, cumbersome and time consuming until this decision by the Federal Reserve.

"Watertown Savings Bank opened their own municipal bank, so they have the Watertown Savings Bank and the Watertown Savings Municipal Bank," Mr. Piche said. "So they have to run two completely different sets of books. We could have done that — you have to run two sets of books, two sets of audits. It's just a lot of extra work and extra expense to have municipalities have the ability to bank with you."

Mr. Piche, who has been in banking for 30 years and will retire later this year, said he has been fighting this "crazy" requirement to essentially open a separate company so that municipalities can do business with a local savings and loan institution.

His organization used the other main workaround by being designated a "banking development district" when it opened a new branch in Croghan to fill the void left there by Key Bank. But, he said, it was a lot of work and it has to be renewed every year, which takes more resources.

The charter change had expenses but now that it is done, there won't be any others.

"We are the first 'mutual' national bank in the country," Mr. Piche said. "This was actually groundbreaking."

That means that instead of becoming a typical "commercial bank" to gain a national charter, Carthage Savings remains a "customer-owned" bank — which is where the term "mutual" comes into play. Although there are shares in the bank, they are held by the board members who return those shares to the bank when they depart from the board. The shares are never traded.

Mr. Piche said any customer can express their views to the board or apply to become a board member.

Mr. Piche said the change is "groundbreaking" because it opens the door for other savings and loan banks to bring the municipalities where all of their relationships are formed into their client base.

"Like with the village of Carthage and the town of Wilna, we are the only financial institution in those municipalities. By technical rules, they weren't allowed to deposit with us even though we all have the same regulators and we're a highly rated institution. It's ridiculous," Mr. Piche said.

That's also part of the past. Those municipalities can now do their banking with Carthage Savings and Loan.

The chief executive said they had engaged a lawyer in Washington D.C. three years ago to get the same approval from the Federal Reserve but the effort was unsuccessful.

This year, because another savings and loan bank had been given the approval but never went ahead with the charter change, the same lawyer contacted Mr. Piche and said the time was right.

There will be no changes in the way the bank conducts its business due to the new designation, Mr. Piche said. The bank's customers were sent a large postcard by mail two weeks ago notifying them of the change and assuring them their community-based bank continues to "exist for you."