Savings and loan associations and savings banks specialize in real estate lending, particularly loans for single-family homes and other residential properties. They can be owned by shareholders (“stock” ownership), or by their depositors and borrowers (“mutual” ownership). These institutions are referred to as “thrifts,” because they originally offered only savings accounts, or time deposits. Over the past two decades, however, they have acquired a wide range of financial powers, and now offer checking accounts (demand deposits) and make business and consumer loans as well as mortgages.
Savings institutions must hold a certain percentage of their loan portfolio in housing-related assets to maintain their special tax status and their membership in the Federal Home Loan Bank System. This is called the “qualified thrift lender” (QTL) test. Savings institutions must maintain 65% of their portfolio in housing-related assets to maintain their membership in the Federal Home Loan Bank System and 60% to qualify for special tax treatment.
Both savings and loan associations and savings banks may be chartered by the Office of Thrift Supervision (OTS) or by the state savings and loan supervisor. Generally, savings and loan associations are insured by the Savings Association Insurance Fund (SAIF), and savings banks are insured by the Bank Insurance Fund (BIF).
The number of savings institutions has declined dramatically in the past decade as differences have narrowed between these institutions and commercial banks. The savings and loan crisis of the 1980s forced many thrifts to close or merge with other institutions. Today, 1,894 savings and loans and 323 savings banks continue to operate. Together, they hold $999 billion in assets and $756.9 billion in deposits.