A thrift bank, or thrift, is a term for a financial service organization that specializes in offering savings accounts and originating mortgage loans to consumers. Some are mutually owned--that is, owned by their depositors--while others are owned by stockholders. Thrifts have been known by a number of other names since the first such organization was founded in the U.S. nearly two centuries ago.
Origin of U.S. Thrifts
Local townspeople in Frankford, Pa., created the first U.S. thrift bank in 1831 by pooling their money. They patterned the organization, Oxford Provident Building Association, after British building societies, and similarly offered savings accounts and mortgages to members. The concept caught on, and as it spread across the country, thrifts were known as savings and loans, thrift and loans, savings banks, building associations, thrift associations and savings associations, according to the Office of Thrift Supervision (OTS), the U.S. government agency that currently oversees the industry.
Thrifts in the 20th Century
By the 1920s, about 12,000 thrifts dotted the United States. The industry took a tremendous hit during the Great Depression, with many thrifts closing, but it rebounded after World War II as the provider of about two-thirds of all U.S. home mortgages in the 1950s and '60s. The economic dislocations of the late 1970s and early '80s damaged the industry once again, and risky and sometimes fraudulent lending practices caused many thrifts to fail during the Savings and Loan Crisis in the late 1980s and early '90s.
In 1989, Congress created the OTS and made thrifts join the Federal Deposit Insurance Corp., the entity that insures deposits against the closure of financial institutions, among many other reforms to the industry. The assets of the failed '80s thrifts were sold by the Resolution Trust Corp. in the early 1990s. Yet the industry has survived into the 21st century. As of the third quarter of 2010, the OTS supervised more than 700 thrifts with assets of more than $900 billion.
What Thrifts Do for Consumers
From the perspective of ordinary consumers of financial services, there is little difference between modern thrifts and commercial banks. Though thrifts still focus on savings accounts and mortgages, they also offer other kinds of financial products, much as banks do, such as checking accounts, certificates of deposit, and loans besides mortgages, such as auto loans. Many of the remaining thrifts are still locally owned, however, and may be more akin to smaller community banks than large multinational banking companies.
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