Unitary Thrift

A unitary thrift is a chartered holding company that controls a single thrift entity. Historically unitary thrifts could engage in a broader range of activities than bank holding companies, however they have come under increasing restrictions since the 2008 financial crisis.

Unitary thrifts, also known as savings and loan holding companies, or SLHCs, are a type of holding company that mainly holds assets in thrift investments. Thrift institutions, also known as savings and loan associations, offer a narrower range of products than other financial institutions. Their focus on customer and community service typically means they deal in traditional basic banking products such as savings and checking accounts, home loans, personal loans, automobile loans and credit cards.

Because thrifts tended to serve customer needs rather than investor desires, they initially operated under less regulatory oversight in the U.S. Prior regulatory regimes allowed unitary thrifts to open branches anywhere in the U.S. Unlike major banks, unitary thrifts could allocate up to 20 percent of their assets to commercial loans as long as they continued to hold at least 65 percent of their assets in qualified thrift investments, such as residential mortgages or mortgage-backed securities.

In the 1980s the savings and loan industry underwent a crisis after thrifts engaged in risky financial activities in an attempt to cover losses caused by depositors who moved their cash from thrifts to money market funds as interest rates boomed in the late 1970s. By 1989, much of the industry had collapsed after failed thrifts caused the insolvency of the Federal Savings and Loan Insurance Corporation, or FSLIC, which insured deposits.

The Financial Services Modernization Act of 1999, also known as the Gramm Leach Bliley Act, forbid the Office of Thrift Supervision, or OTS, from accepting any new applications for unitary thrifts. Since that time, the federal government has increased restrictions on the remaining unitary thrifts. The passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 eliminated the OTS, which suffered from implications of wrongdoing in the collapse of IndyMac and the failure of AIG during the 2008 financial crisis. Dodd-Frank passed supervision of grandfathered unitary thrifts to the Federal Reserve Board.

Unitary thrifts represent one of the two ownership models for savings and loan companies. Under a mutual ownership structure, depositors and borrowers receive part ownership of the savings and loan when they engage in business with the company. Unitary thrifts offer a smaller group of investors a way of controlling a savings and loan through purchase of stock in the holding company that owns the thrift.