News

 BOLI Ownership Popular Among Quality Financial Institutions

FOR IMMEDIATE RELEASE

Contact:  Paul Steidler
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                paul@effectivecomm.org

 

BOLI Ownership Popular Among Quality
Community Financial Institutions

The Todd Organization Study Documents Ownership Prevalence
and BOLI’s Role in Strengthening Executive Benefits Programs

 

Greensboro, NC/May 10, 2006 – Quality community institutions are highly likely to use bank-owned life insurance (BOLI) as part of their asset mix and to address executive benefit financing challenges.  These are among the central findings in a study by The Todd Organization of 77 quality financial institutions with assets of $100 million to $2 billion.

The Todd study selected the two most profitable financial institutions in each state with assets between $100 million and $2 billion.  The study excluded institutions which did not have a return on average assets that exceeded a minimum threshold of 0.75 percent.  In many cases, states did not have two financial institutions which met these criteria.

            Of particular note, the study found:

  • 64 percent of the study universe owned some BOLI.  At 20 percent of all the banks studied, BOLI ownership exceeds 20 percent of Tier I capital.
  • non-qualified retirement plans are popular at the 77 banks studied.  56 percent offer a non-qualified supplemental executive retirement plan (SERP) and 25 percent offer a non-qualified deferred compensation program. 
  • Banks use BOLI to both offset specific benefit obligations as well as to recover the costs of broader-based employee benefit costs.  BOLI death benefits are used as remuneration for key employees by 30% of the companies in the Study Universe.
  • Larger community institutions are somewhat more likely to own BOLI.  Among institutions which have assets of between $1 billion to $2 billion, 71 percent own BOLI, compared with 60 percent of those with assets of $100 million-$500 million.

“It is clear bank-owned life insurance is an important component of many quality financial institutions’ asset-liability management strategies.  When properly evaluated and implemented, BOLI can help institutions to meet executive benefits and other obligations, while helping to strengthen shareholder value,” said Craig Main, President of Main Data Group, which prepared the study as well as a related analysis and which is also a member office of The Todd Organization.

Founded in 1957, The Todd Organization (www.toddorg.com) is a nationwide leader in the executive benefits field.  The firm provides executive benefit consulting services, benefit financing solutions, and administration for over 700 plans for major corporations and financial institutions. 

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