An Overview of Thrift Institutions

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There are three major types of depository institutions in the United States: commercial banks, thrifts (which include savings and loan associations and savings banks), and credit unions. Financial deregulation has blurred most of the functional and philosophical distinctions, but they still differ in specialization and emphasis, and in their regulatory and supervisory structures. 

Commercial banks are the department stores of the financial services world. Thrift institutions and credit unions are more like specialty shops that, over time, have expanded their lines of business to better compete for market share. 

While credit unions are sometimes considered thrift institutions, there is one important distinction: depository insurance. Thrifts and commercial banks are covered by FDIC, credit unions are covered by NCUA, though both are covered to the same limit per financial institution. 

Thrift Institutions

A thrift institution is a financial institution formed primarily to accept consumer deposits and make home mortgages. Thrifts are generally smaller, local institutions and don't have the reach or resources of a large national bank. The primary types of thrift institutions are mutual banks and savings and loan associations.

Thrift institutions often pay out more in dividends (interest) than do traditional financial institutions and have access to lower-cost funds from organizations like Federal Home Loan Banks. Thrift institutions are more community-focused than other types of financial institutions and tend to focus more on consumers than businesses. By law, thrifts must have 65% of their lending portfolio tied up in consumer loans. Since financial services have become increasingly deregulated, thrift institutions have been able to offer more services to businesses, however.

Thrifts offer customers many of the same deposit products you can get at a bank, such as checking accounts, savings accounts, and certificates of deposit, as well as credit products such as home and auto loans and credit cards. 


Thrift institutions first opened amid the economic change and social upheaval of the Industrial Revolution. Profit was not their primary concern. Their main goal was to give working people a secure place to set aside some money for “a rainy day.” Most were founded and managed by public-spirited citizens of means who understood the ways of finance and were eager to help working-class people.

Millions of Americans in the postwar era bought homes with loans from thrifts; at one point in the postwar period, they were making the majority of mortgages in the U.S. That changed with the deregulation of the financial services industry, followed by a wave of failures in the 1980s.


From a consumer perspective, thrifts do have a big advantage over banks: higher interest on customers' savings.


These days, the lines between thrifts and conventional banks have blurred. Savings and loan associations are moving more into commercial lending and construction, and an increasing number are converting to conventional banks.

Also, many of the advantages thrifts used to get, including less stringent regulation, have been eliminated over the years, most recently by the Dodd-Frank financial reform law. It is a rapidly consolidating industry overall. Thrifts may be harder to find in the future.

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