Supervision & Ratings
Thrift Institution
Also known as Thrift, Savings Association, Savings and Loan
A thrift institution, or thrift, is a savings association or savings bank: a depository institution chartered mainly to take savings deposits and make residential mortgage loans. Thrifts are FDIC-insured and file the same quarterly call report as commercial banks.
How is Thrift calculated?
The qualified thrift lender (QTL) test in the Home Owners' Loan Act requires a savings association to hold at least 65% of its portfolio assets in qualified thrift investments, mainly residential mortgage loans, mortgage-backed securities and other housing and consumer loans, in at least 9 of every 12 months. A thrift can instead qualify as a domestic building and loan association under the Internal Revenue Code. Portfolio assets are total assets less goodwill and other intangibles, the value of property used to conduct business, and liquid assets up to 20% of total assets.
Why does Thrift matter?
The charter decides who supervises the institution. Since the Dodd-Frank Act abolished the Office of Thrift Supervision in 2011, the OCC supervises federal savings associations, the FDIC supervises state savings associations, and the Federal Reserve supervises savings and loan holding companies. A thrift that fails the QTL test faces restrictions on its activities and its holding company's, which is why the test shapes a thrift's balance sheet.
How do you interpret Thrift?
Expect a thrift's loan book to lean toward residential mortgages and its funding toward retail deposits, which makes interest rate risk the central exposure: long-dated fixed-rate mortgages funded by deposits that reprice faster. When comparing a thrift with commercial banks, read residential real estate concentration and rate sensitivity first. Thrifts have filed the FFIEC call report since March 31, 2012, so their data is comparable line by line with banks.
What is a good Thrift?
| Range | Label | Interpretation |
|---|---|---|
| ≥ 65% QTI | Meets QTL | Qualified thrift investments at or above 65% of portfolio assets in 9 of 12 months. |
| < 65% QTI | Fails QTL | Activity restrictions apply until the institution requalifies or converts its charter. |
Worked example
Frequently asked
What is the difference between a thrift and a bank?
A thrift is chartered under savings association law with a mission centered on housing finance, and it must meet the qualified thrift lender test. A commercial bank has no such asset test. Both take insured deposits, both are FDIC-insured and both file the FFIEC call report.
Who regulates thrifts today?
The OCC supervises federal savings associations, the FDIC supervises state-chartered savings associations, and the Federal Reserve supervises savings and loan holding companies. The Office of Thrift Supervision held those roles until the Dodd-Frank Act transferred them in July 2011.
Can a thrift operate like a national bank?
Yes, if it elects to. A federal savings association with $20 billion or less in total assets as of December 31, 2017 can elect to become a covered savings association under 12 CFR Part 101, which gives it the rights and duties of a national bank without converting its charter or meeting the QTL test.
Sources
- 12 USC §1467a(m): Qualified thrift lender test (Home Owners' Loan Act)
- 12 CFR Part 101: Covered savings associations (OCC)
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