Office of Thrift Supervision 

Program Summary by Budget Activity 

(Dollars in thousands) 

Budget Activity FY 2009 FY 2010 FY 2011 

Actual Estimated Estimated $ Change % Change

 Supervision of the Thrift Industry $233,571 $251,145 $244,867 ($6,278) (2.5%) 

Total Cost of Operations $233,571 $251,145 $244,867 ($6,278) (2.5%) 

Explanation of Budget Estimate 

The Office of Thrift Supervision (OTS) budget 

supports it’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 2010, OTS estimates that its revenues 

will total $226,018,000 and its expenditures 

will be $251,145,000. 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. 

Information regarding the Administration’s 

comprehensive regulatory reform proposals is 

provided in a separate budget chapter. 

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 

($251,145,000 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, increased 

supervisory action, including additional field 

visits, accelerating the normal 12-18 month 

exam cycle, and/or enforcement action is 

taken. 

Department of the Treasury - Budget in Brief FY 2011 Page 109
The FY 2010 projected assessment revenue is 

lower than FY 2009 due to the impact of 

ongoing industry consolidation and recent 

thrift failures. 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 the FY 2010 shortfall. In 

addition, OTS is limiting permanent new hires 

and increasing term appointments to fill the 

need for increased supervision. Additionally, 

OTS is prudently managing other expenses. 

With efficient operations and demonstrated 

OTS Performance by Budget Activity 

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. 

Capital Investments Summary 

OTS has no major IT investments planned for 

FY 2010. 

Budget Activity Performance Measure 

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 

Actual Actual Target Actual Target 

Met? Target Target 

Percent of safety and soundness exams 

started as scheduled (%) 

95 94 90 94 Yes 90 90 

Percent of thrifts that are well capitalized 

(%) 

99 98.4 95 97 Yes 95 95 

Percent of thrifts with a compliance 

examination rating of 1 or 2 (%) 

97 95.8 90 95 Yes 90 90 

Percent of thrifts with composite CAMELS 

ratings of 1 or 2 (%) 

93 90 90 84 No 80 80 

Supervision of the 

Thrift Industry 

Supervision of the 

Thrift Industry 

Supervision of the 

Thrift Industry 

Supervision of the 

Thrift Industry 

Description of Performance 

OTS will have met all goals relating to (1) 

Percent of safety and soundness exams started 

as scheduled (2) A Well-capitalized thrift 

industry, and (3) Percent of thrifts with 

COMPLIANCE exam ratings of “1” or “2.” 

The targets for these measures will remain the 

same for FY 2010. 

The fourth goal, Percent of thrifts with 

COMPOSITE ratings of “1” or “2” will be 

short approximately 6% of goal for FY 2009 – 

84% compared to the performance goal of 

90%. The target will not be met due to the 

challenging economic environment, a housing 

market downturn, rising unemployment, and 

lower real estate values. As a result, the banks 

are reporting an increase in troubled assets, 

delinquencies, charge-offs, and reserves which 

have adversely impacting earnings and return 

on equity. As long as economic challenges 

continue in FY 2010, it will continue to impact 

our institution's performance. 

OTS plans to maintain its current high level of 

achievement for its performance measures. 

The following is a brief description of each 

performance measure: 

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 OTS identifies safety and 

soundness or compliance issues during its riskfocused examinations, it 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 

Department of the Treasury - Budget in Brief FY 2011 Page 110
Examination to discuss findings and 

recommendations. 

Capital absorbs losses, promotes public 

confidence and provides protection to 

depositors and the FDIC insurance fund. 

Capital 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. 

The FFIEC first approved a uniform, 

interagency compliance rating system in 1980. 

The rating system reflects, 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. 

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 

composite rating. The CAMELS rating is 

based upon a scale of 1 through 5 in increasing 

order of supervisory concern. 

Beginning in FY 2006, OTS included an 

annual 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 less than $250 

million and are generally community-based 

organizations that provide retail financial 

services in their local markets. The measure 

does not include the assets of the holding 

company enterprises regulated by OTS. 

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