# Financial Institutions (GFI)

## Title 9. Savings and Loan Associations

### Subtitle 4. General Powers and Provisions

#### Section 9-401

A savings and loan association may classify its savings accounts according to the character, amount, duration, or regularity of additions to the accounts.

#### Section 9-402

In accordance with rules and regulations of the Division Director, a savings and loan association may issue a savings certificate account or any other fixed term savings account.

#### Section 9-403

(a)

  (1) As to the interest bearing account of each depositor in a savings and loan association, the savings and loan association shall generally make available to any depositor with an existing account, in addition to actually giving to the depositor, on the opening of the interest bearing account and, later, on demand of the depositor:

    (i) Written notice of:

      (1) The annual rate of simple interest currently in effect;

      (2) The dates, if any, on which the current rate of interest may be changed, and the terms and conditions under which each successive interest rate will be applied;

      (3) The date or point in time on which the deposit begins to earn interest;

      (4) The method of determining the account balance on which interest earned is calculated, including the methods for day of deposit to day of withdrawal and low periodic balance;

      (5) Whether interest is compounded and, where applicable, the period for compounding;

      (6) The annual percentage yield in 1 year based on the rate of simple interest and compounding method;

      (7) The date or point in time when interest earned is credited to the account;

      (8) The method of determining the amount of loss of accumulated earned interest if an account is closed before the date on which interest is regularly credited;

      (9) The policy on the availability of deposited funds; and

      (10) Any fees, charges, or penalties which may be applied and the conditions under which the fees, charges, or penalties may be assessed; and

    (ii) The following written notice:

    "Under Maryland law, all funds remaining in this interest bearing account become the property of this State after the account has been inactive for 5 years and notice is sent to the depositor at that depositor's last known address. This account will be considered inactive if the depositor has not: (1) increased or decreased the amount in the account; (2) presented the passbook or other similar evidence of the account for the crediting of interest; (3) written to this savings and loan association about the account; or (4) otherwise indicated an interest in the account as evidenced by a memorandum on file with this savings and loan association."

  (2) Not less than 30 days before a savings and loan association adopts any change regarding any information required under paragraph (1)(i) of this subsection, the association shall inform each depositor of the change in the association's periodic statement or by written notice.

(b) A savings and loan association shall pay at least 3 percent annual interest on each interest bearing account that is instituted for a specific purpose, including "Christmas" or "vacation" accounts, for a period of 1 year or less.

(c) A savings and loan association that fails to comply with subsection (a) or (b) of this section shall be liable to any depositor of the association who sustains any injury or loss as the result of the failure to comply for:

  (1) All foreseeable losses incurred by the depositor as a result of the association's failure to comply with those subsections; and

  (2) Reasonable attorney's fees.

#### Section 9-404

(a) Subject to this title and its bylaws, a savings and loan association may:

  (1) Pay a dividend on savings share accounts or interest on savings deposit accounts;

  (2) Agree in advance to pay an additional or different rate of dividend or interest on all savings accounts in the same classification subject to the requirement that each savings account in the same classification receive the same ratable portion of dividends or interest; and

  (3) Provide for penalties in a savings account contract, subject to approval of the Division Director.

(b) The board of directors of a savings and loan association, by resolution, shall determine as to dividends or interest on savings accounts:

  (1) The rate;

  (2) The method of calculation; and

  (3) The payment date.

(c) Dividends or interest on savings accounts may be paid only from current earnings, earned surplus, the expense fund, or as otherwise provided in this title.

#### Section 9-405

(a) Dividends or interest on a savings certificate account or other type of fixed term account shall be:

  (1) Subject to the approval of the Division Director; and

  (2) In accordance with the rules and regulations of the Division Director.

(b) Within 45 days of the request, the Division Director shall approve an association's request to pay a dividend or interest under this section if:

  (1) Earnings of the association are sufficient to pay the proposed dividend for a period of at least 1 year; and

  (2) The public interest is protected.

(c) An applicant aggrieved by the action or nonaction of the Division Director under this section may appeal to the appropriate circuit court.

#### Section 9-406

(a) Except as required by subsection (b) of this section, a savings and loan association is not required to pay any dividend or interest on special purpose accounts such as "Christmas" or "vacation" accounts.

(b) A savings and loan association shall pay at least 5 percent annual interest or dividend on savings accounts that are for:

  (1) A period of 1 year or less; and

  (2) A special purpose, such as "Christmas" or "vacation" accounts.

#### Section 9-407

(a) As to any savings account that has a withdrawal value of less than $25, a savings and loan association:

  (1) Need not pay a dividend or interest on the account; and

  (2) May not charge a penalty or service charge.

(b) This section does not apply to a negotiable or transferable order of withdrawal account.

#### Section 9-408

(a) At any time, a holder of a savings account in a savings and loan association may request to withdraw all or any part of the money in the account of the holder and, for certain classes of accounts, the request may be made by a negotiable or transferable order.

(b)

  (1) A savings and loan association may permit withdrawals from a savings account to be made by negotiable or transferable order.

  (2) As to any savings account from which withdrawal may be made by a negotiable or transferable order of withdrawal, a savings and loan association:

    (i) Need not pay any dividend or interest on the account; and

    (ii) May impose a service charge on any account in accordance with the regulations of the Division Director.

(c)

  (1) As long as a written withdrawal request remains on file, a member who is a holder of a savings account in a savings and loan association who has requested a withdrawal from the account remains a member of the association until the withdrawal request is paid.

  (2) A holder of a savings share account in a savings and loan association who has requested a withdrawal from the account is not a creditor of the association, either before or after the request to withdraw money, unless an association defaults in any payment due under this section.

(d) This section does not prevent a savings and loan association from restricting by contract a withdrawal from an account of $100,000 or over, or any account that is pledged to the association.

#### Section 9-412.1

(a) Any checks or drafts provided directly or indirectly by a savings and loan association for use in connection with a personal checking or draft account shall have the numerical month and year in which the account was opened printed on the face of the checks or drafts, except as provided in subsection (b) of this section.

(b) The provisions of subsection (a) of this section shall not apply under certain conditions:

  (1) If an individual personal checking account is closed at a particular savings and loan and a joint personal account is opened at the same savings and loan that includes one of the customers who previously had the individual personal account, then the numerical month and year printed on the face of the checks or drafts shall be the numerical month and year in which the individual personal account was established.

  (2) If a joint personal account is closed at a particular savings and loan and an individual personal account is opened at the same savings and loan by one of the customers who previously was included under the joint account, then the numerical month and year printed on the face of the checks or drafts shall be the numerical month and year in which the joint account was established.

  (3) If a customer with an individual personal account or with a joint personal account opens an additional account at the same savings and loan, then the numerical month and year printed on the face of the checks or drafts shall be the numerical month and year in which the initial account was established.

  (4) In the case of a personal checking or draft account that is closed and a new personal checking or draft account opened simultaneously on the advice of the savings and loan association, the checks or drafts for the new account shall have the numerical month and year in which the closed account was originally opened printed on the face of the checks or drafts.

  (5) If the closed account was opened prior to July 1, 1987, a date is not required to be printed on the checks or drafts.

(c) A check, draft, or order provided on the opening of a personal checking or draft account for use by the customer until printed checks or drafts have been prepared is not required to have the numerical month and year in which the account was opened printed on the face of the check, draft, or order.

(d)

  (1) The savings and loan association and the check printer may not be held liable for unintentional errors in the month and year printed on the face of the check.

  (2) The customer may not be charged for the reprinting of the checks when the checks are reprinted due to error in the month and year printed on the face of the check.

#### Section 9-416

(a) Except as provided in subsection (b) of this section, a savings and loan association is not required to recognize or take any action on any claim to a deposit or to money or property held by the association or contained in a safe deposit box if that claim is adverse to the interests of any person who, on its records, appears to be entitled to the deposit, money, or property.

(b) If, in an action to which an adverse claimant is a party, a court order or decree involving a claim to the deposit, money, or property is served on a savings and loan association, the association may, or if required by the court, shall impound the deposit, money, or property, subject to further order of the court, and without any liability for these actions.

#### Section 9-419

(a) Subject to Sec. 9-420 of this subtitle and the regulations of the Division Director, a savings and loan association may invest in any of the following types of investments:

  (1) Any mortgage on real property that is a first or second lien on property, but only if the requirements of Sec. 9-420 of this subtitle are satisfied in the case of an acquisition, development, or construction loan;

  (2) Any participation interest in a mortgage, but only if the requirements of Sec. 9-420 of this subtitle are satisfied;

  (3) Any loan that is secured by any savings accounts in the association to the extent of the withdrawal value of the respective account;

  (4) Any ground rent in this State;

  (5) Any general obligation of, or obligation guaranteed as to principal and interest by, or other instrument of:

    (i) This State or any of its political subdivisions or agencies; or

    (ii) The federal government or any of its agencies or instrumentalities;

  (6) Any general obligation of, or obligation guaranteed as to principal and interest by, any other state if:

    (i) The Division Director approves; and

    (ii) The investment is not more than 5 percent of the association's savings liability;

  (7) Real property that is:

    (i) Reasonably anticipated to be necessary or convenient to conduct its business, whether or not the property is also income producing in part. Unless the Division Director has given his prior written approval, an investment enumerated in this subparagraph may not be made by the association in real property that the association occupies for its offices and transaction of its business;

    (ii) Bought at auction sale if the association has any lien or claim on the property;

    (iii) Accepted in satisfaction of an obligation;

    (iv) Acquired by the association in an exchange for any other interest in real property owned by the association; or

    (v) Acquired in connection with salvaging the value of an investment by the association;

  (8) Furnishings and equipment necessary to conduct its business;

  (9) Any loan to members of cooperative housing projects if the loan is secured by the assignment of the member's interest in a unit of the project, notwithstanding a prior lien on the project;

  (10) Deposits, including unsecured days funds, in any financial institution insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation to the same extent and subject to the same conditions as a federal savings and loan association;

  (11) Securities, obligations, or other instruments, including participations, of:

    (i) The Federal National Mortgage Association;

    (ii) The Student Loan Marketing Association;

    (iii) The Federal Savings and Loan Insurance Corporation;

    (iv) The State of Maryland Deposit Insurance Fund Corporation;

    (v) The Federal Home Loan Bank;

    (vi) The Government National Mortgage Association;

    (vii) The Federal Home Loan Mortgage Corporation; or

    (viii) Any other agency that the Division Director approves;

  (12) Stock or obligations of a corporation if:

    (i) One or more financial institutions own all the corporation's stock; and

    (ii) The corporation's activities substantially consist of:

      (1) Originating, buying, selling, or servicing loans on real property or any participating interest in loans on real property;

      (2) Clerical functions primarily for financial institutions; or

      (3) Any other activity the Division Director approves;

  (13) Any secured or unsecured education loan;

  (14) Any secured or unsecured home improvement loans;

  (15) Any secured or unsecured consumer loan but only if the loan complies with Sec. 9-420 of this subtitle; and

  (16) Any mobile home financing loan.

(b) The Division Director may provide by regulation that specific investments permissible for a federally-chartered savings and loan association are permitted for a State-chartered savings and loan association.

(c) Savings and loan associations may make commercial loans, but only if the loans comply with Sec. 9-420 of this subtitle and regulations adopted by the Division Director.

(d) A savings and loan association may accept any additional security on any investment authorized by this section.

(e) A savings and loan association shall make investments in first and second mortgages for owner-occupied residences equal to not less than 25 percent of the assets of the association, unless the Division Director approves in writing otherwise, upon a determination that another percentage does not affect the safety and soundness of the association.

(f)

  (1) Except for investments authorized under subsection (a)(11) of this section, an association that is insured by the Maryland Deposit Insurance Fund may invest directly or indirectly under this section in real estate located in this State, the Commonwealth of Pennsylvania, the Commonwealth of Virginia, the State of Delaware, the State of West Virginia, and the District of Columbia.

  (2) An association that is insured by the Federal Savings and Loan Insurance Corporation may invest, directly or indirectly, in real estate located in this State and no more than 20 percent of their assets in real estate located in the states of Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and West Virginia, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia.

  (3) Except as to those states and jurisdictions enumerated in paragraphs (1) and (2) of this subsection, an association that is insured by the Federal Savings and Loan Insurance Corporation may invest, directly or indirectly, no more than 10 percent of their assets in real estate located in states within the United States.

(g) Nothing in this section may be construed to affect the validity of any investment made by a savings and loan association before June 1, 1986, in accordance with the provisions of this section as they existed before June 1, 1986.

#### Section 9-420

(a)

  (1) An association may not, directly or indirectly, grant loans to any one individual or business entity in a total amount in excess of 5 percent of its assets.

  (2) In computing the total amount of loans made by an association to an individual, all loans made by the association to any entity in which that individual is a controlling person shall be included.

  (3) In computing the total amount of loans made by an association to a partnership or other unincorporated association, the following loans shall be included:

    (i) All loans to the association's individual members;

    (ii) All loans made for the benefit of the partnership or other unincorporated association; and

    (iii) All loans to or for the benefit of any entity of which the partnership or unincorporated association, or any member of the partnership or unincorporated association, is a controlling person.

  (4) In computing the total amount of loans made by an association to a corporation, the following loans shall be included:

    (i) All loans made for the benefit of the corporation;

    (ii) All loans to or for the benefit of any person or entity who is a controlling person of the corporation; and

    (iii) All loans to or for the benefit of any entity of which the corporation is a controlling person.

(b)

  (1)

    (i) An association may make secured or unsecured loans for personal, family, or household purposes, and may invest in, sell, or hold commercial paper and corporate debt securities subject to regulations promulgated by the Division Director.

    (ii) The total of these loans and investments may not exceed 20 percent of the assets of the association.

  (2) Loans to dealers in consumer goods to finance inventory and floor planning shall be treated as commercial loans.

(c) An association may invest in, sell, purchase, participate in, or otherwise deal in loans for commercial, corporate, business, or agricultural purposes, but only if at any one time the total investment made under this section does not exceed 10 percent of the association's assets.

(d)

  (1) An association may participate in mortgages and participate with other lenders in originating and making any type of mortgage loan that the association is authorized to make under the provisions of Sec. 9-419 of this subtitle.

  (2) The amount that an association may have invested in privately placed mortgage backed securities cannot exceed 10 percent of the association's assets.

(e)

  (1) Except as provided in paragraph (2) of this subsection, a loan made for the purpose of acquiring real estate, financing the development of real estate, the construction of structures on real estate, or the rehabilitation of real estate is subject to the provisions of this section and regulations adopted by the Division Director.

  (2) This subsection does not apply to a loan made for the purchase of real estate that has or will have not more than one dwelling designed principally as a residence with accommodations for not more than 4 families.

  (3) The loans may not exceed the loan-to-value ratios provided by regulation.

  (4)

    (i) The Division Director shall adopt regulations establishing terms for the repayment of loans authorized by this subsection.

    (ii) The regulations adopted by the Division Director may not be less restrictive than those applicable to federally-chartered savings and loan associations.

    (iii) Unless otherwise provided by regulations adopted by the Division Director, the loans shall be repayable within a term that is applicable to federally-chartered savings and loan associations.

  (5) Loan documentation for development loans shall contain:

    (i) A preliminary development plan that is satisfactory to the association; and

    (ii) A projection that not less than the investment in the loan will be recovered.

  (6) The recognition of income and the amortization method used by the association originating the loans shall be in accordance with generally accepted accounting principles.

  (7)

    (i) The total amount of loans for acquisition, development, or construction cannot exceed 10 percent of the assets of the association.

    (ii) Loans to one borrower made under this subsection for any one development project may not exceed 50 percent of an association's net worth or 2 percent of its assets, whichever is less.

(f) Nothing in this section may be construed to affect the validity of any loans made before June 1, 1986, by any savings and loan association in accordance with the provisions of law relating to loans by savings and loan associations in effect before June 1, 1986.

#### Section 9-421

(a) In accordance with the regulations of the Division Director, a savings and loan association may permit borrowers to repay indebtedness on a loan by any method of repayment or plan, including a plan or repayment of indebtedness on a loan that is other than a direct monthly reduction of principal plan that has a fixed interest rate, level payments, and full amortization.

(b) If a savings and loan association offers any alternative mortgage instrument on an owner-occupied residential loan in addition to a standard direct monthly reduction of principal plan, as required by the Division Director, the association shall give each prospective borrower information on the alternative plan and the standard plan.

#### Section 9-422

A savings and loan association shall take title to all its investments in its own name, except as may be permitted by regulation or order of the Division Director to assign or grant a security interest in collateral given by a savings and loan association to any State or federal government agency or instrumentality, including the State of Maryland Deposit Insurance Fund Corporation, a federal reserve bank, or a federal home loan bank, to secure loans to the savings and loan association.

#### Section 9-423

If a savings and loan association holds an investment that was permitted under this subtitle at the time the investment was made, and the Division Director later withdraws the authorization, the association may continue to hold the investment.

#### Section 9-424

(a) A savings and loan association may require a borrower to pay all charges in connection with a loan to the borrower.

(b) At each settlement, a savings and loan association shall give the borrower a memorandum of settlement that details each charge made in connection with the settlement.

(c) This section does not modify the usury laws of this State.

#### Section 9-425

(a) A savings and loan association may:

  (1) Act as a depository of funds of:

    (i) The federal government and its agencies; and

    (ii) This State and any of its political subdivisions;

  (2) Pledge collateral to secure deposits; and

  (3) Comply with the terms required by the depositor.

(b) Depositors under this section are general creditors under Sec. 9-329 of this title ("Priority of claims").

#### Section 9-426

If the Division Director approves its application, a savings and loan association may act as a trustee or custodian under any pension or retirement act of the federal government or of any state.

#### Section 9-428

With the written approval of the Division Director, a savings and loan association may operate a business, manage or deal in property, or take any other action over any period of time as determined by the Division Director that may be reasonably necessary to avoid loss on a loan or investment made or obligation created in good faith.

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