Savings & Loan Companies vs. Commercial Banks: An Overview

Savings and Loans, referred to as S&Ls, provide many of the same services to customers as commercial banks, including deposits, loans, mortgages, checks, and debit cards. However, S&Ls place a stronger emphasis on residential mortgages, whereas banks tend to concentrate on working with large businesses and on unsecured credit services, such as credit cards.

Commercial Banks can be chartered at either the state or federal level. The same is true for S&Ls, also sometimes referred to as thrift banks, savings banks, or savings institutions.

The Office of the Comptroller of the Currency (OCC) is in charge of monitoring all nationally chartered commercial banks and S&Ls.

Key Takeaways

  • Savings and loan (S&Ls) and commercial deposits are protected under the FDIC.
  • S&Ls are thrift institutions aimed at making economic opportunities, like home loans, available to the middle class.
  • At the present time, many commercial banks operate exclusively online, unlike most S&L institutions.
  • Rules for lending differ between S&Ls and commercial banks.
  • Traditionally S&Ls have been private entities and mutually owned by their customers, however some are publically traded. 

Commercial Banks

Commercial banks are owned and managed by a board of directors selected by stockholders. Many commercial banks are large, multinational corporations.

There were 691 savings and loan companies insured by the FDIC as of the end of 2018.

In contrast to the S&L's narrower focus on residential mortgages, commercial banks typically provide a broader range of financial offerings, often including credit cards, wealth management, and investment banking services.

Although commercial banks provide residential mortgages, they tend to focus on loans targeting the construction and expansion needs of regional, national, and international businesses. In the electronic era, many customers utilize commercial bank services online but traditionally brick-and-mortar banks offered personalized customer service via a teller or bank manager, and offered customers amenities like ATMs and safe deposit boxes, and even personal touches like offering coffee or water to waiting customers.

Savings & Loan Companies

The original purpose of S&Ls was to enable middle-class Americans to buy their own homes with affordable mortgages. In the 21st century, these institutions continue to focus on this service, but also offer checking and savings accounts, like commercial banks. [Read more about the history of S&Ls.]

S&Ls are owned and chartered differently than commercial banks, and are generally more locally oriented in terms of customers. S&Ls can be owned in either of two ways. Under what is known as the mutual ownership model, an S&L can be owned by its depositors and borrowers. Alternatively, an S&L can be established by a consortium of shareholders controlling stock issued by a thrift's charter.

By law, S&Ls may lend up to 20% of their assets for commercial loans, and only half of that can be used for small business loans. Moreover, for Federal Home Loan Bank borrowing approvals, an S&L must be able to show that 65% of its assets are invested in residential mortgages and other consumer-related assets. Commercial banks do not have these types of limitations.