SIC 6036 Savings Institutions, Not Federally Chartered

SIC 6036

This category includes savings and loan associations operating under state charters and savings banks operating under state charters. Both savings and loan associations and savings banks fall under the general term "thrifts." Thrifts are financial institutions that exist primarily to hold retail deposits and make residential mortgage loans. The thrift industry is the second largest type of financial institution, after commercial banks. Thrifts can be either federally chartered and regulated by the Treasury Department's Office of Thrift Supervision or state-chartered and subject to regulation varying by state. This article discusses state-chartered thrifts and is intended as a supplement to SIC 6035: Savings Institutions, Federally Chartered. Much information pertinent to both federally and state chartered institutions is included in that article.

NAICS CODE(S)

522120

Savings Institutions

INDUSTRY SNAPSHOT

As of December 31, 2004, there were 105 state-chartered thrift institutions in the United States, compared to over 1,000 in 1989 and almost 2,500 in 1965. These 105 thrifts held more than $23.7 billion in assets, down from $286 billion in 1989, and operated some 5,208 branches. In 2004, state-chartered thrifts accounted for about 12 percent of all thrifts regulated by the Office of Thrift Supervision (OTS) and held just 1.4 percent of all thrift assets.

The declining number of thrifts reflects regulatory changes that have prompted some thrifts to become commercial banks. In 2004, fourteen state-chartered thrifts converted to community banks, and seven converted to state-chartered commercial banks. This trend is also the result of a wave of mergers and acquisitions that began in the late 1990s that transformed the nation's entire financial services world. In 2004, sixteen state-chartered thrifts were acquired by commercial banks and five were acquired by state-chartered commercial banks; twelve merged with other thrifts and three dissolved operations. Most U.S. thrifts are insured by the Savings Association Insurance Fund (SAIF); those not insured by the SAIF are insured by the Bank Insurance Fund (BIF).

One to four family mortgages accounted for 57 percent, or $729.4 billion, of the overall industry's $1.31 trillion in total assets at the end of 2004. This reflected a marked decrease from the 76 percent these small mortgages accounted for in the early 1990s. The drop was due to the growing diversification of the financial services industry. Securities accounted for some $213.6 billion in assets; consumer loans, $78.2; multifamily residential properties, $61.1 billion; and commercial real estate loans, $40.7 billion. Despite the waning number of thrift institutions, the industry's level of assets, deposits, and profits exploded in the early 2000s, mainly because falling interest rates sparked record levels of mortgage origination and refinancing loans.

ORGANIZATION AND STRUCTURE

Thrifts can be classified in three ways: by type of ownership (stock or mutual), by type of institution (savings and loan association or savings bank), and by type of charter (state or federal). The type of ownership and institution is specified in each thrift's charter, and distinctions between the different types of ownership and institutions are discussed in SIC 6035: Savings Institutions, Federally Chartered. The distinctions between the organization and structure of state-chartered versus federal-chartered thrifts are discussed below.

Depository Insurance

All thrifts, both federal and state, have federal depository insurance. Savings and loan associations are insured by the Savings Association Insurance Fund (SAIF), and savings banks are insured by the Bank Insurance Fund (BIF). Both of these funds are administered by the Federal Deposit Insurance Corporation (FDIC), an independent federal agency, which originally was formed to provide depository insurance for commercial banks, but assumed the role of insurance provider for thrifts with the passage of the 1989 bailout law. Savings banks have always been insured by the FDIC; savings and loans were insured by the now defunct Federal Savings and Loan Insurance Corporation (FSLIC) until 1989. The two funds were kept separate to justify higher insurance premiums at the SAIF. A more thorough discussion of depository insurance is found in article SIC 6035: Savings Institutions, Federally Chartered.

In all states, federal deposit insurance coverage is a necessary condition to obtain and keep a state charter. Those state institutions that opt for federal insurance must comply with any rules of the particular insurance fund, but are not subject to most federal regulatory rules in general, with some important exceptions as explained below. That all state-chartered thrifts had federal insurance, a situation that has existed since the 1980s, did not occur by law. Rather, by the 1980s, most individual...