# Thrift Associations: What They Are, How They Work

## What Are Thrifts?

Even though they're not as common as they used to be, thrifts, or savings and loan associations, still play an important part in many consumers' lives. Thrifts also refer to [credit unions](https://www.investopedia.com/terms/c/creditunion.asp) and [mutual savings banks](https://www.investopedia.com/terms/m/mutual-savings-bank.asp) that provide a variety of savings and loan services. Thrifts differ from commercial banks in that they can borrow money from the [Federal Home Loan Bank System](https://www.investopedia.com/terms/f/fhlb.asp), which allows them to pay members higher interest.

## Understanding Thrifts

Thrifts, along with commercial banks and credit unions, qualify as [depository institutions](https://www.investopedia.com/terms/d/depository.asp). Most people are familiar with commercial banks and credit unions, but the line becomes fuzzy when defining a thrift. Thrifts are essentially savings and loan associations that help members' savings grow at a higher interest rate. More importantly, they are savings banks that specialize in [real estate](https://www.investopedia.com/terms/r/realestate.asp).

Originally, thrifts only offered [savings accounts](https://www.investopedia.com/terms/s/savingsaccount.asp) and [time deposits](https://www.investopedia.com/terms/t/timedeposit.asp), but over the past 20 years, the banks' scope of services has expanded to meet the needs of the average consumer. They now offer the same products as credit unions and commercial banks.

## Commercial Banks vs. Thrifts

Commercial banks, like most corporations, are in it for the profit. They have no specific mandate in terms of [asset class](https://www.investopedia.com/terms/a/assetclasses.asp). Shareholders own these organizations, and, like most corporations, the goal is to grow earnings. The range of powers given to commercial banks is mainly determined by state and federal law, as both issue bank charters.

[Corporate charters](https://www.investopedia.com/terms/c/corporatecharter.asp), and the powers granted to banks under state and federal law, determine the range of the banks' activities. Commercial banks receive deposit insurance from the Federal Deposit Insurance Corporation (FDIC) and are under the [Federal Reserve System](https://www.investopedia.com/terms/f/federalreservesystem.asp). Furthermore, what commercial banks lose in terms of member savings they gain in convenience; with thousands of branches nationwide, you won't have trouble finding a local office if you run into an emergency while traveling.

By contrast, thrifts specialize in mortgages and real estate lending. The first mandate is to the members of the thrift, not profit. Like commercial banks, thrifts may be chartered by either the [Office of the Comptroller of the Currency (OCC)](https://www.investopedia.com/terms/o/office-comptroller-currency-occ.asp) or by the state. The FDIC also insures them. Thrifts tend to retain their loan portfolio rather than securitize loans so members with atypical profiles that don't fit into agency mortgage standards may stand a better chance of securing a loan through a local thrift than a national [commercial bank](https://www.investopedia.com/terms/c/commercialbank.asp).

## Qualified Thrift Lender

Due to their charter, thrifts are mandated to focus on housing-related assets and must be members of the Federal Home Loan Bank System. Originally, thrifts were required to have at least 65% of their portfolio in housing-related assets; this threshold was referred to as the qualified thrift lender (QTL) test as it was a measure of adherence to the original charter.

One benefit to passing the QTL test is that thrifts also get to borrow from the Federal Home Loan Bank System, which translates into higher interest for depositors compared to commercial banks.