Office of Thrift Supervision 

Program Summary by Budget Activity 

(Dollars in thousands) 

FY 2008 FY 2009 FY 2010 Budget Activity Obligated Estimated Estimated $ Change % Change

 Supervision of the Thrift Industry $245,699 $246,706 $181,000 ($65,706) (26.6%)

Total Cost of Operations $245,699 $246,706 $181,000 ($65,706) (26.6%)

Explanation of Budget Estimate 

 

The Office of Thrift Supervision (OTS) budget 

supports OTS’s strategic and performance 

goals that provide for the proactive supervision 

of the industry, reduced regulatory burden, and 

improved credit availability. The budget 

enables OTS to continue tailoring supervisory 

examinations to the risk profile of the 

institutions, while effectively allocating 

resources to oversee and assess the safety and 

soundness and consumer compliance record of 

the thrift industry. OTS works closely with 

the industry to maintain the profitability, 

integrity, and viability of the thrift charter. 

For FY 2009, OTS estimates that its revenues 

will total $248,850,000 and its expenditures 

will be $246,706,000. OTS receives no 

appropriated funds from Congress. The 

income of the bureau is derived principally 

from assessments on savings associations and 

savings and loan holding companies. Other 

sources of income include fees, rents, and 

interest on investments. 

Purpose of Program 

 

OTS was established by Congress as a bureau 

of the Department of the Treasury on 

August 9, 1989. The bureau’s mission is to 

supervise savings associations and their 

holding companies in order to maintain their 

safety and soundness and compliance with 

consumer laws and to encourage a competitive 

industry that meets America’s financial 

services needs. OTS’s vision is to perform, 

and to be recognized, as the premier regulator 

of financial institutions and holding 

companies. 

OTS charters, examines, supervises, and 

regulates federal savings associations insured 

by the Federal Deposit Insurance Corporation 

(FDIC). OTS also examines, supervises, and 

regulates state-chartered savings associations 

insured by the FDIC and provides for the 

registration, examination, and regulation of 

savings and loan holding companies (SLHCs) 

and other affiliates. 

Explanation of Budget Activities 

 

Supervision of the Thrift Industry 

($181,000,000 from reimbursable 

programs) OTS examines savings 

associations every 12 – 18 months for safety 

and soundness and compliance with consumer 

protection laws and regulations. During these 

exams, the association’s ability to identify, 

measure, monitor, and control risk is 

evaluated, including the risk posed by other 

entities within the corporate structure. When 

weaknesses are identified, supervisory action 

is taken. 

OTS receives no appropriated funds from 

Congress; its revenue is derived principally 

from assessments on savings associations and 

savings and loan holding companies. While 

the FY 2009 projected assessment revenue is 

consistent with FY 2008 levels, OTS continues 

Department of the Treasury - Budget in Brief FY 2010 Page 91
to monitor the impact of recent thrift failures 

and ongoing industry consolidation, driven in 

part by the current financial crisis. The bureau 

has experienced surpluses in recent years 

which led to an increase in the agency’s cash 

reserves in excess of $200 million. Existing 

reserves will be sufficient to cover any FY 

2009 shortfall. In addition, OTS is limiting 

new hires and prudently managing other 

expenses to adjust to any revenue reductions. 

With efficient operations and demonstrated 

prudent use of funds, OTS will be able to 

continue supervising savings associations and 

holding companies while maintaining the 

safety and soundness of the thrift industry for 

years to come. 

Legislative Proposals 

 

OTS currently has no legislative proposals. 

Capital Investments Summary 

 

OTS has no major IT investments planned for 

FY 2009. 

OTS Performance by Budget Activity 

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Budget Activity Performance Measure Actual Actual Actual Target 

Met? Target Target

Supervision of the Percent of safety and soundness 

Thrift Industry exams started as scheduled (%) (Oe) 

94.00 95.00 94.00 Yes 90.00 90.00 

Supervision of the Percent of thrifts that are well 

Thrift Industry capitalized (%) (Oe) 

99.90 99.00 98.40 Yes 95.00 95.00 

Supervision of the Percent of thrifts with a compliance 

Thrift Industry examination rating of 1 or 2 (%) (Oe) 

93.00 97.00 95.80 Yes 90.00 90.00 

Supervision of the Percent of thrifts with composite 

Thrift Industry CAMELS ratings of 1 or 2 (%) (Oe) 

93.00 93.00 90.00 Yes 90.00 90.00 

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. Satisfaction 

Description of Performance 

 

OTS met all of its performance measure 

targets for FY 2008 except for “Total OTS 

Cost per $100,000 in Savings Association 

Assets Regulated,” which missed by only 

one-tenth of one percent (.1%). OTS is 

presently repositioning its resources to meet 

the requirements of supervising a smaller 

asset base. The FY 2009 Performance 

Budget describes the goals, strategies, and 

priorities that will guide OTS’s operations. 

The FY 2009 budget enables OTS to 

continue tailoring supervisory examinations 

to the risk profile of the institutions, while 

effectively allocating resources to oversee 

and assess the safety and soundness and 

consumer compliance record of the thrift 

industry. The following is a brief 

description of each performance measure: 

Percent of thrifts with composite CAMELS 

ratings of 1 or 2 On December 9, 1996, the 

Federal Financial Institutions Examination 

Council (FFIEC) adopted the CAMELS 

rating system (Capital adequacy, Asset 

quality, Management, Earnings, Liquidity 

and Sensitivity to market risk) as the internal 

rating system to be used by the federal and 

state regulators for assessing the safety and 

soundness of financial institutions on a 

uniform basis. The CAMELS rating system 

puts increased emphasis on the quality of 

risk management practices. OTS assigns a 

composite CAMELS rating to savings 

associations at each examination. OTS 

adjusts the level of supervisory resources 

devoted to an association based on the 

Department of the Treasury - Budget in Brief FY 2010 Page 92
composite rating. The CAMELS rating is 

based upon a scale of 1 through 5 in 

increasing order of supervisory concern. 

Percent of thrifts with compliance 

examination ratings of 1 or 2 A uniform, 

interagency compliance rating system was 

first approved by the FFIEC in 1980. The 

FFIEC rating system was designed to 

reflect, in a comprehensive and uniform 

fashion, the nature and extent of a savings 

association’s compliance with consumer 

protection statutes, regulations, and 

requirements. The Compliance Rating 

System is based upon a scale of 1 through 5 

in increasing order of supervisory concern. 

OTS elected to combine safety and 

soundness and compliance examinations in 

2002 to attain exam efficiencies and to 

improve risk assessment. Using 

comprehensive exam procedures, 

compliance with consumer protection laws 

is reviewed at more frequent intervals, 

which has improved the quality of the 

examination process. 

Percent of thrifts that are well capitalized - 

Capital absorbs losses, promotes public 

confidence, and provides protection to 

depositors and the FDIC insurance fund. It 

provides a financial cushion that can allow a 

savings association to continue operating 

during periods of loss or other adverse 

conditions. The Federal Deposit Insurance 

Act established a system of prompt 

corrective action (PCA) that classifies 

insured depository institutions into five 

categories (well-capitalized; adequately 

capitalized; undercapitalized, significantly 

undercapitalized; and critically 

undercapitalized) based on their relative 

capital levels. The purpose of PCA is to 

resolve the problems of insured depository 

institutions at the least possible long-term 

cost to the deposit insurance fund. 

Percent of safety and soundness exams 

started as scheduled OTS examines savings 

associations every 12-18 months for safety 

and soundness, compliance and consumer 

protection laws. OTS performs safety and 

soundness examinations of its regulated 

savings associations consistent with 

statutory authority. When safety and 

soundness or compliance issues are 

identified during its risk-focused 

examinations, OTS acts promptly to ensure 

association management and directors 

institute corrective actions to address 

supervisory concerns. OTS staff often 

meets with the savings association’s board 

of directors after delivery of the Report of 

Examination to discuss findings and 

recommendations. 

Total OTS Costs Relative to Every 

$100,000 in Savings Association Assets 

Regulated Beginning in FY 2006, OTS 

included a performance measure that reflects 

the efficiency of its operations while 

meeting the increasing supervisory demands 

of a growing and more complex thrift 

industry. This measure supports OTS’s 

ongoing efforts to efficiently use agency 

resources. The efficiency measure is 

impacted by the relative size of the savings 

associations regulated. Approximately 60 

percent of all savings associations have total 

assets of less than $250 million and are 

generally community-based organizations 

that provide retail financial services in their 

local markets. The measure does not 

include over $8.5 trillion in assets of holding 

company enterprises regulated by OTS. 

Department of the Treasury - Budget in Brief FY 2010 Page 93