# Financial Institutions (GFI)

## Title 9. Savings and Loan Associations

### Subtitle 3. Organization and Capitalization

#### Section 9-301

(a) A member of a savings and loan association means a holder, as shown on the association's records, of:

  (1) One or more savings accounts, as to a mutual association; and

  (2) One or more shares of capital stock, as to a capital stock association.

(b)

  (1) Multiple holders of a single account or share of capital stock shall be considered a single member.

  (2) Notice to one holder of a multiple name account or share of capital stock is sufficient notice to all holders.

#### Section 9-302

(a) The business and affairs of a savings and loan association shall be managed under the direction of a board of directors.

(b) A savings and loan association shall have at least 5 directors, as its charter or bylaws provide.

(c)

  (1) Each director of a savings and loan association shall be:

    (i) A citizen of the United States; and

    (ii) A member of the association or the holder of a savings account in the association.

  (2) At least two-thirds of the directors shall be residents of this State.

  (3) Each nonresident director shall be approved by the Division Director as qualified to serve.

(d) Subsection (c)(1)(ii) of this section does not apply to any member of a board of directors who was serving on a board before July 1, 1980.

#### Section 9-303

Except as otherwise provided by the charter or bylaws, each member of:

(1) A mutual association has one vote; and

(2) A capital stock association has one vote for each share of capital stock that the member owns of record.

#### Section 9-304

(a) A savings and loan association shall notify each member of the time and place of any meeting of members at least 20 days before the meeting.

(b) The notice shall be given by mail or by publication in a newspaper of general circulation in the political subdivision where the principal business office of the association is located.

#### Section 9-305

At any meeting of the members of a savings and loan association:

(1) Except as provided in the charter or bylaws, any number of members present in person or by proxy is a quorum; and

(2) Unless otherwise specifically provided by law, the charter, or the bylaws, a majority of all votes cast at which a quorum is present determines any question.

#### Section 9-306

(a) A statement of the financial condition of a savings and loan association shall be:

  (1) Prepared quarterly;

  (2) Submitted at a meeting of the board of directors of the association that is held within 30 days after the end of the quarter; and

  (3) Submitted to the Division Director within 30 days after the end of the quarter.

(b) A savings and loan association shall:

  (1) Send or provide the quarterly statement of financial condition to any person on request; and

  (2) Within 20 days after the board of directors meeting:

    (i) Have the quarterly statement of financial condition available at each of its offices in this State; and

    (ii) Send a quarterly statement of the salaries, fees, dividends, compensation under Sec. 9-307(i) of this subtitle, expense accounts, and any loans permitted under Sec. 9-307(d) of this subtitle paid or made to each of the officers, directors, and controlling persons of the association and a current list of the names of the officers, directors, and controlling persons of the association, certified by an officer of the association, to the Division Director, who shall make them available to any member or depositor on request.

(c)

  (1) At least once each year, a savings and loan association shall:

    (i) Publish a summary of the statement of financial condition in a newspaper published in the county where the association has its principal office; and

    (ii) Submit proof of publication of the summary to the Division Director.

  (2) Each summary of a report shall be in a form that the Division Director approves.

#### Section 9-307

(a) Each director, officer, and controlling person of a savings and loan association shall:

  (1) Act in a fiduciary capacity towards the association, and the association's members, stockholders, and depositors; and

  (2) Discharge duties and their respective positions in good faith, and with the same diligence and care that an ordinarily prudent person would exercise under a similar circumstance in a like position.

(b) A director, officer, controlling person, or employee of a savings and loan association may not place himself in a position that creates a conflict of interest.

(c) Except as otherwise provided in subsection (d) of this section, a savings and loan association or a related entity may not make or renew a loan or extension of credit directly or indirectly to:

  (1) Any controlling person, director, officer, or employee of the association, or a member of any of their immediate families; or

  (2) Any corporation, association, partnership, trust or other entity in which an interest of 10 percent or more is owned by the controlling persons, directors, officers, or employees of the association, or members of any of their immediate families.

(d)

  (1) Subject to the provisions of paragraphs (3) and (4) of this subsection, a loan by a savings and loan association or a related entity is not prohibited to any controlling person, director, officer, or employee of an association or a member of any of their immediate families if the loan is:

    (i) Secured by the borrower's principal residence, including a principal residence under construction; or

    (ii) Secured by the borrower's savings account in the association, subject to the requirement that the loan secured by a savings account does not exceed the withdrawal value of the account.

  (2) Subject to the provisions of paragraph (4) of this subsection, a consumer loan by a savings and loan association or related entity is not prohibited to any employee of an association or a member of the employee's immediate family.

  (3) With respect to loans permitted under paragraph (1)(i) of this subsection, the loan or loans in the aggregate:

    (i) May not exceed 80 percent of the appraised value of the borrower's principal residence; or

    (ii) May exceed 80 percent of the appraised value if:

      (1) The difference between that percentage and the total amount of the loan or loans does not exceed 15 percent; and

      (2) The difference is insured by an agency of the federal government or a private mortgage insurance company.

  (4) Any loan permitted by paragraphs (1) and (2) of this subsection shall comply with the following requirements:

    (i) The loans shall be in the ordinary course of business of the association or subsidiary, may not involve more than the normal risk of collectibility or present other unfavorable features, and may not exceed the loan amount that would be available to members of the general public of similar credit status applying for loans;

    (ii) The loans shall be approved in advance by a resolution duly adopted after full disclosure by at least a majority of the entire board of directors of the association, but not including any director who has an interest in the loan transaction;

    (iii) The disclosure of the loan transactions shall include whether the loan is made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans to members of the general public;

    (iv) The interest rate on the loans shall be at least 100 basis points above the current cost of funds of the association, and the resolution required by subparagraph (ii) of this paragraph shall set forth the association's current cost of funds, including the elements of its computation; and

    (v) In the case of a loan secured by a savings account, the interest rate shall be at least 100 basis points above the rate of return on the savings account, and the borrower may not withdraw funds from the account below the level of the amount of the outstanding balance of the loan.

(e)

  (1) A controlling person, director, officer, employee, or agent of a savings and loan association, or a member of any of their immediate families, directly, or indirectly may not assent to receive, or receive any money or other property of value as a fee, commission, gift, or remuneration of any type from any person or business entity, for procuring, endeavoring to procure, or performing any service, in connection with any loan from, investment by, or deposit in the association.

  (2) This subsection does not prohibit an employee or agent of an association who is not a controlling person, director, or officer or a member of their immediate family from receiving fees in the nature of loan origination commissions from the association.

(f)

  (1) Except as provided in paragraph (2) of this subsection, a controlling person, director, officer, employee or attorney of a savings and loan association, or member of that individual's immediate family, directly or indirectly, may not purchase from, sell to, or lease from or to the association.

  (2) The prohibition contained in paragraph (1) of this subsection does not apply if the Division Director makes a prior written determination that the purchase, sale, or lease to or from the association would be economically advantageous to, fair to, and in the best interest of the association.

  (3) Nothing in this subsection may be construed to affect any bona fide lease, purchase order, or other contractual obligation entered into before June 1, 1986, between an association and a controlling person, director, officer, employee, or attorney of an association or a member of that individual's immediate family.

(g)

  (1) Except as provided in paragraph (2) of this subsection, an association may not honor an overdraft to a controlling person, director, officer, or employee of the association or a member of any of their immediate families on any account or accounts at the association.

  (2) If an employee has overdraft protection on an account with the association, an association may honor an overdraft to an employee or a member of the employee's immediate family to the extent of the maximum amount of the overdraft protection on the account.

(h)

  (1) A director, officer, or controlling person may not take advantage of a business opportunity for the director's, officer's, or controlling person's personal profit or the benefit or the personal profit or benefit of a member of the immediate family when the opportunity is:

    (i) Within the corporate powers of the association or its service corporations; and

    (ii) Of present or potential advantage to the association.

  (2) Nothing in this subsection may be construed to affect any contractual obligations entered into before January 15, 1986 by a director, officer, or controlling person.

(i) An association, its holding company, subsidiaries, or affiliates may employ its officers, directors, and controlling persons in a capacity other than as officer or director only if the employment:

  (1) Does not create a conflict of interest;

  (2) Is for reasonable compensation; and

  (3) Is in a capacity in which the officers, directors, and controlling persons are qualified.

(j) An association may not make a loan to, or transact business with, any person or entity for the purpose of frustrating or avoiding any prohibition in this section or any regulations adopted under this section.

(k) Any controlling person, director, officer, employee, or attorney who knowingly violates or causes a violation of this section on conviction is subject to imprisonment in the penitentiary for a period not more than 10 years, or a fine of not more than $100,000, or both.

#### Section 9-308

(a) A savings and loan association shall provide a fidelity bond, in the amount that the Division Director requires, to cover each director, officer, employee, or agent of the association who has control over or access to cash or securities of the association.

(b) If a person fails to qualify for the bond required by subsection (a) of this section, the association shall remove the person from the position held by the person with the association.

#### Section 9-309

(a) A savings and loan association may not establish or relocate any branch office or relocate a principal office unless the Division Director approves its application to do so.

(b) An application for the establishment or relocation of a branch office or relocation of a principal office shall include:

  (1) An application fee of $500 unless the application is for relocation within a one-half mile radius of the existing site; and

  (2) A statement of:

    (i) The need for the establishment or relocation;

    (ii) The address of the proposed location;

    (iii) The services to be provided;

    (iv) The estimated annual expense; and

    (v) The source of payment for the annual expense.

(c)

  (1) The Division Director shall publish notice of the filing of an application under this section.

  (2) The notice shall state:

    (i) The scheduled date, place, and time of a public hearing at least 30 days and not more than 90 days after the filing;

    (ii) That written protests to the application may be made by any savings and loan association located in the area where a savings and loan office is proposed, and that protests shall be received by the Division Director no later than 10 days before the scheduled hearing; and

    (iii) That the hearing may be canceled if no written protest is received within the time provided in the notice.

  (3) The notice shall be published:

    (i) At least once each week for 2 successive weeks at the expense of the applicant in a newspaper of general circulation in the political subdivision where the proposed office is to be located;

    (ii) In the Maryland Register, as provided in the State Documents Law; and

    (iii) As the Division Director considers otherwise desirable.

(d) As provided in this section:

  (1) Any savings and loan association located in the area where a proposed branch office of a savings and loan association is to be located or a principal office is proposed to be relocated may protest the requested approval of the Division Director; and

  (2) The Division Director shall give any savings and loan association that protests under paragraph (1) of this subsection an opportunity to be heard.

(e) Not later than 30 days after the conclusion of the hearing or, if a hearing is not held, after the scheduled hearing date, the Division Director shall approve an application under this section if the Director finds that:

  (1) The public interest will be promoted; and

  (2) The office will be operated efficiently and in accordance with this title.

(f) The Division Director may not approve a new office or location for any savings and loan association that is not in compliance with Title 8 of this article and this title or any other law or regulation of this State relating to savings and loan associations.

(g) Any applicant may appeal any action or nonaction of the Division Director to the Circuit Court for Baltimore City.

#### Section 9-310

(a)

  (1) In this section, "electronic terminal" means an automated electronic information processing device that:

    (i) Stores information about a customer's account with a savings and loan association and transmits that information to an office of the association; and

    (ii) Is activated by a machine-readable instrument issued to a customer.

  (2) An electronic terminal is not a branch office of a savings and loan association.

(b) If the Division Director approves the application of a savings and loan association under this section, an association may establish and maintain an electronic terminal at a location that may be other than its principal or any branch office.

(c)

  (1) The savings and loan association shall:

    (i) File with the Division Director an application for general authority to establish one or more electronic terminals; and

    (ii) Pay to the Division of Savings and Loan Associations a $100 filing fee.

  (2) The application shall include as to proposed electronic terminals:

    (i) The location of each;

    (ii) The physical size and other characteristics;

    (iii) The capital investment;

    (iv) The security devices to be installed;

    (v) The systems and safeguards to be used to insure confidentiality and privacy of the account information of customers; and

    (vi) Evidence of sufficient fidelity, forgery, and other appropriate insurance to protect the interests of the association.

  (3) The Division Director shall publish a notice of the filing in the Maryland Register as provided in the State Documents Law.

(d) Within 60 days after the application is filed, the Division Director shall approve an application only if the Division Director finds that the proposed terminal will:

  (1) Promote the public interest; and

  (2) Be operated efficiently and in accordance with this title.

(e) A savings and loan association may use an electronic terminal to enable a customer of the association to:

  (1) Deposit money into an account of the customer of the association;

  (2) Transfer money from any account of the customer to any other account;

  (3) Withdraw money from an account or under an authorized line of credit of a customer;

  (4) Make payments on loans; and

  (5) Execute any other transaction that the Division Director approves.

(f) A savings and loan association may verify by direct wire transmission or otherwise any transaction that is made by means of an electronic terminal.

(g) A savings and loan association may participate with any other financial institution doing business in this State in establishing and maintaining an electronic terminal.

(h) Any applicant aggrieved by any action or nonaction of the Division Director under this section may appeal to the circuit court for the county where the association has its principal business office in this State.

#### Section 9-311

(a)

  (1) A savings and loan association shall have a president, a secretary, and a treasurer and other officers as it may authorize.

  (2) Except for the president, who may not hold any other office than that of chairman of the board, the bylaws of an association may provide that the same individual may hold 2 offices.

  (3) The president shall be a member of the board of directors.

(b)

  (1) Except as otherwise provided in the bylaws, the board of directors shall elect the officers, and fill all vacancies.

  (2) By a vote of the majority of the board at any time, the board may remove any officer elected or appointed.

(c) The officers shall have the authority and perform the duties as are provided in the bylaws, or, in the absence of a provision in the bylaws, as are provided by the board.

#### Section 9-312

(a)

  (1) Except as otherwise provided in the bylaws, the board of directors of an association or subsidiary has the responsibility for determining the compensation of officers of the association or subsidiary.

  (2) Compensation determined under this section must be reasonable and commensurate with the duties and responsibilities of the officers.

(b) In making the determination concerning officers, the board of directors shall consider the following factors:

  (1) The qualifications and experience of the person concerned;

  (2) The compensation paid to other persons employed by the association or subsidiary;

  (3) The compensation paid to persons having similar duties and responsibilities in other associations or subsidiaries;

  (4) The size of the association or subsidiary, and the complexity of its operations;

  (5) The financial condition, including income, of the association or subsidiary and the individual's contribution to the financial condition;

  (6) Any amounts received, either directly or indirectly, by an officer whose principal occupation is with the association or subsidiary for other services performed for the association or subsidiary; and

  (7) The value of personal fringe benefits provided to the officer.

(c) With respect to fees of outside accountants, appraisers, attorneys, or other professionals, the board of directors is responsible for a determination of whether those fees are reasonable and commensurate with the services being performed. This duty may be discharged by the establishment of standards for or ranges of reasonable fees with provision for periodic review by the board and the ability of the board to alter excessive fees.

(d)

  (1) In establishing fees to be paid to members of the board, the board of directors shall establish policies that protect the assets of the association.

  (2) The board of directors shall use the same factors in setting its fees as it does in setting the officer's compensation.

(e) The minutes of the board of directors shall include the record of deliberations concerning compensation for officers and fees for accountants, attorneys, appraisers, other professionals, and directors.

#### Section 9-313

(a) If its charter or bylaws provide, a savings and loan association that is not a deposit association may issue savings share accounts.

(b) Notwithstanding any provision in its charter or bylaws before July 1, 1980 on the number of savings share accounts, a savings and loan association that is not a deposit association may accept subscriptions and payment for an unlimited number of savings share accounts without other corporate action.

#### Section 9-314

(a) Only a deposit association may issue savings deposit accounts.

(b) A savings and loan association may become a deposit association if:

  (1) Its charter or bylaws provide; and

  (2) The Division Director approves.

#### Section 9-315

(a) The holder of a savings deposit account in a savings and loan association has the same claim priority in any distribution of assets on liquidation as a general creditor of the deposit association to the extent of the deposit account's withdrawal value.

(b) In addition to subsection (a) of this section, the holder of a savings deposit account has the same rights as the owner of a savings share account, including any membership or voting rights and the right to share in any distribution of remaining assets on liquidation.

#### Section 9-316

If a savings and loan association becomes a deposit association:

(1) It may accept only savings deposit accounts;

(2) Existing savings share accounts in the association become savings deposit accounts;

(3) The conversion, for the purpose of computing interest on its savings accounts, shall be considered to have taken place on the immediately preceding regular distribution date if the effective date of the conversion to a deposit association is made on a date other than the date on which an association regularly distributes dividends; and

(4) The holder of any outstanding right to receive from the association a savings share account shall receive instead a savings deposit account.

#### Section 9-319

If its charter provides, a savings and loan association may issue capital stock.

#### Section 9-320

A capital stock association:

(1) Shall obtain the prior written approval of the Division Director for each prospectus, offering circular, or advertisement offering capital stock for sale or subscription;

(2) Shall include in each prospectus offering capital stock a statement that shares of capital stock are not insured by the State of Maryland Deposit Insurance Fund Corporation or the Federal Savings and Loan Insurance Corporation;

(3) Except for stock issued under a plan of consolidation, merger, or reorganization approved under Sec. 9-627 of this title, shall require that the consideration for its capital stock be paid in cash and in an amount not less than the par value of the stock;

(4) May issue stock options under a stock option plan approved by the Division Director;

(5) May not grant any loan which is secured in whole or in part by shares of its capital stock; and

(6) Unless the Division Director has given prior written approval, may not repurchase shares of capital stock for its own account.

#### Section 9-321

(a) If the Division Director approves a plan of issuance under subsection (b) of this section, a capital stock association may issue capital stock that is additional to that of its initial offering.

(b) The Division Director shall approve a plan submitted under subsection (a) of this section if the plan:

  (1) Is fair; and

  (2) Conforms to this part of this subtitle.

(c) A dividend in the form of a savings and loan association's capital stock does not require approval of the Division Director.

(d) A split of the number of issued shares of capital stock of a savings and loan association into a greater or lesser number of shares without increasing the stated capital of the association requires the approval of the Division Director.

(e) Any applicant that is aggrieved by the action or nonaction of the Director may appeal to the Circuit Court for Baltimore City.

#### Section 9-322

Capital stock shall:

(1) Have a par value of $1 a share, or any greater amount that the charter may provide;

(2) Be nonassessable, notwithstanding any provision in the charter or bylaws, or on the capital stock certificate;

(3) Be nonredeemable until each claim against and each liability of the capital stock association is satisfied fully, and each savings account is paid to its holder at its withdrawal value;

(4) Be entitled to payment of dividends but only after dividends or interest are paid on each savings account as provided in Subtitle 4 of this title;

(5) Be designated "capital stock" notwithstanding any charter or bylaw provision; and

(6) On each certificate that evidences capital stock, state that the shares are "capital stock" and are not insured by the State of Maryland Deposit Insurance Fund Corporation or the Federal Savings and Loan Insurance Corporation.

#### Section 9-323

(a) Every stock association shall at all times keep an up-to-date list of the names of all its stockholders and those of its holding companies.

(b) Each year, or whenever requested by the Division Director, the association shall file with the Division Director a correct list of all its stockholders and those of its holding companies, the resident address of each, and the number of shares of each class of stock held by each stockholder.

(c) Except as provided in Sec. 9-306(b)(2)(ii) of this subtitle, the Division Director shall keep confidential the list of stockholders.

#### Section 9-324

(a)

  (1) For the purposes of this section, "net worth" includes:

    (i) Capital stock;

    (ii) Paid-in capital or paid-in surplus;

    (iii) Retained income, retained earnings, earned surplus, and undivided profits;

    (iv) Subordinated debt as defined by the Division Director;

    (v) Preferred stock as defined by the Division Director; and

    (vi) Other items or amounts as defined and deemed appropriate by the Director to achieve regulatory objectives.

  (2) In this section, qualifying amounts shall be determined in accordance with generally accepted accounting principles or accounting practices determined by the Division Director to be appropriate to achieve regulatory objectives and to assure that the interests of depositors, members, stockholders, and the public are protected.

(b)

  (1) The minimum net worth requirement shall be:

    (i) An amount equal to at least 5 percent of liabilities as defined under generally accepted accounting principles, or accounting practices determined by the Division Director to be appropriate to achieve regulatory objectives, excluding that portion of subordinated debt included in net worth under subsection (a) of this section, plus

    (ii) Any additional amounts deemed necessary by the Division Director to assure that the interests of depositors, members, stockholders, and the public are protected.

  (2) Beginning on June 1, 1986, for those associations that do not meet the requirements of paragraph (1) of this subsection and, on May 31, 1986, were otherwise in compliance with the applicable general reserve requirement of 3 percent of savings and loan liabilities, as defined under laws and regulations in effect on May 31, 1986, regulatory net worth must be increased so that the requirements of paragraph (1) of this subsection are satisfied by July 1, 1989.

(c) Dividends on capital stock may not be declared or paid if the association, after the payment of the dividends, would not be in compliance with subsection (b)(1) of this section.

(d) In the event that an association is not in compliance with the requirements of this section, the Division Director may take any action necessary, as authorized under this title and Title 8 of this article to assure that the interests of depositors, members, stockholders, and the public are protected.

#### Section 9-328

(a) Subject to regulation of the Division Director, the board of directors of each savings and loan association shall allocate the profits of the association, at least annually, at the times the bylaws provide.

(b) The board of directors of each savings and loan association shall:

  (1) In accordance with generally accepted accounting principles, determine gross income for the association; and

  (2) Exclude from gross income:

    (i) Income received or accrued during the period of default for any asset upon which a default exists; and

    (ii) Discounts that are amortized on securities upon which a default exists.

(c) To determine the amount of net profits, the board of directors shall deduct items from gross income in accordance with generally accepted accounting principles.

(d) By regulation the Division Director may permit or deny other items to be included in, or deducted from, gross income.

#### Section 9-329

(a) In any distribution of assets on liquidation of a savings and loan association, the priority of claims is as follows:

  (1) In a mutual association:

    (i) General creditors and holders of savings deposit accounts;

    (ii) Holders of savings share accounts; and

    (iii) Contributors to the initial general reserve fund before June 1, 1986 and to the expense fund under Subtitle 2 of this title; and

  (2) In a capital stock association:

    (i) General creditors (other than those who are capital stockholders) and holders of savings deposit accounts;

    (ii) Holders of savings share accounts;

    (iii) Contributors to the initial general reserve fund before June 1, 1986 and to the expense fund under Subtitle 2 of this title unless the funds were provided by paid-in surplus; and

    (iv) Capital stockholders.

(b) Notwithstanding any other provision of law, in the case of the liquidation of a savings and loan association for which a receiver has been appointed under Sec. 9-708 of this title:

  (1) The determination of whether the association's savings accounts constitute savings deposit accounts or savings share accounts for purposes of subsection (a) of this section shall be made as of the date that the receiver is appointed by the court administering the receivership; and

  (2) If, as of that date, the savings and loan association in receivership constitutes a deposit association under Sec. 9-314 of this subtitle, then all of its savings accounts shall constitute savings deposit accounts for purposes of subsection (a) of this section.

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Md. Code Ann., Fin. Inst. (as displayed at mgaleg.maryland.gov, October 16, 2026)