14. State of Maryland Deposit Insurance Fund Corporation:

During 1985, several State-chartered savings and loan associations, whose deposits were insured by the
Maryland Savings-Share Insurance Corporation (MSSIC), experienced unusually heavy withdrawals of funds
by depositors which caused a substantial decline in their liquid assets. As a result, MSSIC was appointed by
the Circuit Court of Baltimore City to act as conservator for two of the associations. On May 17, 1985, the
Maryland General Assembly enacted legislation creating the State of Maryland Deposit Insurance Fund
Corporation (MDIFC), an agency of the State of Maryland Department of Licensing and Regulation and the
successor by statutory merger to MSSIC. On May 18, 1985, all savings and loan associations that were
members of MSSIC automatically became members of MDIFC. MDIFC insures members' savings deposits
deposited prior to that date up to $100,000 per account and amounts deposited after that date up to the
amount insured by the Federal Savings and Loan Insurance Corporation (FSLIC). The savings accounts of all
associations operating in the State must be insured by either MDIFC or FSLIC.

Emergency legislation also gave authority to the Maryland Board of Public Works to issue, at its
discretion, general obligation bonds of the State not to exceed the aggregate principal amount of
$100,000,000. Bond proceeds may be provided to MDIFC or to the Savings and Loan Association Capital
Stabilization Fund (the "Fund"), a special non-lapsing fund established by the legislation. The Fund may be
applied at the discretion of the Governor to purchase net worth certificates of any Maryland chartered savings
and loan association if, in the opinion of the Secretary of Licensing and Regulation, by so doing the
association will qualify for insurance of its deposits and accounts by FSLIC. Net worth certificates are special
capital instruments which MDIFC-insured associations are authorized to issue for the purpose of increasing
their capital. The Board of Public Works may authorize the purchase of such certificates in exchange for
money, bond anticipation notes, or other obligations of the State in consideration for the net worth
certificates. The net worth certificates give the State the right to exercise significant operational control over
the association and may be convertible into stock of a capital stock association. As of October 30,1987 none of
the authorized $100,000,000 general obligations bonds had been issued, however, net worth certificates
totalling $11,906,000 had been purchased from seven associations in exchange for a like principal amount of
bond anticipation notes of the State. Each of the bond anticipation notes mature three years after its date of
issuance, subject to prior redemption at par at any time at the option of the State, and bear interest, payable
annually, at rates of 8.1% to 9.3%. The net worth certificates bear interest at 1.5% above the bond
anticipation notes. The State does not intend to redeem the net worth certificates nor to issue general
obligation bonds in connection with these transactions and, accordingly, the net worth certificates and bond
anticipation notes have not been recorded in the State's financial statements. Interest received on net worth
certificates and interest paid on bond anticipation notes during fiscal year 1987 are recorded in the general
obligation debt service fund. Each of the seven associations have presented plans acceptable to the State to
redeem their net worth certificates within three years.

The emergency legislation also gave the Governor and others certain emergency powers. As of October
30, 1987, four savings and loan associations are in receivership. The deposits at these associations have been
frozen and earn no interest pending liquidation of the associations' assets. Also, as of this date, two other
savings and loan associations are under conservatorship. By order of the Circuit Court, the savings deposits
held by these associations under conservatorship have been frozen and are to earn interest at the contract rate
for unmatured certificates of deposit and at 5.25% per annum for all other accounts. In addition, under a 1985
executive order, withdrawals from two other associations not insured by FSLIC are still limited to $1,000 per
month per account.

On May 13, 1986, a bank acquired the insured depositor accounts and certain assets of a member
association in receivership. At the end of three years, certain assets acquired by the bank will be appraised
and the receivership will share in any gains or losses over adjusted book value. The receivership may also be
required to repurchase certain other assets at the end of three years for their adjusted book value. If the
receivership fails to make any required payment to the bank , then MDIFC will make the required payment
and become subrogated to the bank's claim against the receivership. MDIFC has secured its obligation to
make payments to the bank by pledging $46,700,000 of bond anticipation notes of the State issued to MDIFC.
Since the bond anticipation notes were issued only as collateral for the aforementioned guarantee and the
State does not intend to issue general obligation bonds in connection with the bond anticipation notes, such
notes have not been recorded in the financial statements of the State as of June 30, 1987.

52