Savings and loan companies, also known as S&Ls, thrift banks, savings banks, or savings institutions, are financial institutions that offer a range of services similar to commercial banks, including deposits, loans, mortgages, checks, and debit cards. However, S&Ls place a stronger emphasis on residential mortgages, whereas commercial banks tend to concentrate on working with large businesses and on unsecured credit services (such as credit cards).
Key Facts
- Services: Savings and loan companies offer a range of services similar to commercial banks, including deposits, loans, mortgages, checks, and debit cards.
- Emphasis on Residential Mortgages: S&Ls place a stronger emphasis on residential mortgages compared to commercial banks, which tend to focus on working with large businesses and unsecured credit services.
- Ownership: S&Ls can be owned and chartered differently than commercial banks. They can be privately owned and mutually owned by their customers or established by a consortium of shareholders with controlling stock ownership.
- Lending Practices: Historically, S&Ls had some limitations on their lending practices compared to commercial banks. However, a ruling by the Office of the Comptroller of the Currency (OCC) in 2019 provided more flexibility to the lending practices of S&Ls.
- Mutual Associations: Many savings and loan associations are mutually held, meaning that depositors and borrowers are members with voting rights and have the ability to direct the financial and managerial goals of the organization.
- Focus on Home Ownership: The original purpose of S&Ls was to enable more middle-class Americans to buy their own homes by providing more affordable mortgage options.
- Regulation: Savings and loan associations are regulated by the Office of the Comptroller of the Currency (OCC) and may be insured by the Federal Deposit Insurance Corporation (FDIC).
Services Offered by Savings and Loan Companies
Savings and loan companies provide a variety of services to their customers, including:
- Deposits: S&Ls accept deposits from individuals and businesses, offering various types of accounts, such as savings accounts, checking accounts, and money market accounts.
- Loans: S&Ls provide a range of loans, including residential mortgages, home equity loans, and personal loans.
- Mortgages: S&Ls are a significant provider of residential mortgages, offering competitive rates and terms to homebuyers.
- Checks and Debit Cards: S&Ls typically offer check-writing services and debit cards to their customers, allowing them to access their funds conveniently.
Ownership and Regulation of Savings and Loan Companies
Savings and loan companies can be owned and chartered differently than commercial banks. They can be privately owned and mutually owned by their customers or established by a consortium of shareholders with controlling stock ownership. S&Ls are regulated by the Office of the Comptroller of the Currency (OCC) and may be insured by the Federal Deposit Insurance Corporation (FDIC).
Lending Practices of Savings and Loan Companies
Historically, S&Ls had some limitations on their lending practices compared to commercial banks. However, a ruling by the Office of the Comptroller of the Currency (OCC) in 2019 provided more flexibility to the lending practices of S&Ls. This ruling allows S&Ls and thrift banks that are insured by the FDIC to elect to operate as covered savings associations, giving them the ability to operate with national bank powers without amending their original charters.
Focus on Home Ownership
The original purpose of S&Ls was to enable more middle-class Americans to buy their own homes by providing more affordable mortgage options. S&Ls continue to focus on this service, offering a variety of mortgage products and competitive rates to homebuyers.
Conclusion
Savings and loan companies play a vital role in the financial system, providing a range of services to individuals and businesses, with a particular emphasis on residential mortgages. They are regulated by the OCC and may be insured by the FDIC, ensuring the safety and soundness of their operations.
Sources:
- https://www.investopedia.com/ask/answers/041015/what-difference-between-savings-loan-company-and-bank.asp
- https://en.wikipedia.org/wiki/Savings_and_loan_association
- https://case.edu/ech/articles/s/state-savings-and-loan-co
FAQs
What are savings and loan companies?
Savings and loan companies, also known as S&Ls, thrift banks, savings banks, or savings institutions, are financial institutions that offer a range of services similar to commercial banks, including deposits, loans, mortgages, checks, and debit cards. However, S&Ls place a stronger emphasis on residential mortgages compared to commercial banks, which tend to focus on working with large businesses and on unsecured credit services.
What services do savings and loan companies offer?
Savings and loan companies offer a variety of services to their customers, including deposits, loans, mortgages, checks, and debit cards. They also typically offer competitive rates on savings accounts and certificates of deposit.
How are savings and loan companies owned and regulated?
Savings and loan companies can be owned and chartered differently than commercial banks. They can be privately owned and mutually owned by their customers or established by a consortium of shareholders with controlling stock ownership. S&Ls are regulated by the Office of the Comptroller of the Currency (OCC) and may be insured by the Federal Deposit Insurance Corporation (FDIC).
How do the lending practices of savings and loan companies differ from those of commercial banks?
Historically, S&Ls had some limitations on their lending practices compared to commercial banks. However, a ruling by the Office of the Comptroller of the Currency (OCC) in 2019 provided more flexibility to the lending practices of S&Ls. This ruling allows S&Ls and thrift banks that are insured by the FDIC to elect to operate as covered savings associations, giving them the ability to operate with national bank powers without amending their original charters.
What is the focus of savings and loan companies?
The original purpose of S&Ls was to enable more middle-class Americans to buy their own homes by providing more affordable mortgage options. S&Ls continue to focus on this service, offering a variety of mortgage products and competitive rates to homebuyers.
Are savings and loan companies safe?
Savings and loan companies are regulated by the OCC and may be insured by the FDIC. This means that deposits up to $250,000 per depositor are insured by the FDIC, providing a level of safety and security for customers.
What are the advantages of using a savings and loan company?
There are several advantages to using a savings and loan company, including:
- Competitive rates on savings accounts and certificates of deposit
- A focus on residential mortgages, making it easier to obtain a home loan
- Personalized customer service, as S&Ls are often smaller and more community-oriented than large commercial banks
What are the disadvantages of using a savings and loan company?
There are a few potential disadvantages to using a savings and loan company, including:
- Limited branch locations compared to large commercial banks
- Fewer ATMs and other banking services
- Higher fees for certain services, such as overdraft protection