Pub. 10 2021 Issue 1

"BOLI salesmen call on us often and we have confidence in knowing we are in good hands with EBN. They have helped us with the analysis of BOLI on a recent bank purchase and have provided great service over the years. I like dealing with a Kansas based firm with a local succession plan in place." — Mike Ewy, CEO Community State Bank FOUR WAYS BANKS VIEW BOLI CURRENT BOLI YIELDS 1. Investment Alternative BOLI is used by financial institutions to diversify their existing portfolio of loans, mortgage-backed securities and treasuries and agencies. 2. Asset-Liability Matching BOLI is commonly used by banks to “hedge” or offset either general salary and benefit costs and/or a specific benefit liability such as a non-qualified deferred compensation plan. Any gains or losses in the policy value (asset) are offset against the gains and losses in the plan’s obligation to participants (liability). 3. Loan Alternative BOLI can also be thought of as a loan to the insurance company with cash value policies as collateral. However, because of the low transaction costs and financial strength of the contract, BOLI is generally much more liquid than a loan. 4. Keyman Insurance BOLI also provides the bank with a tax-free death benefit to help with the transition costs of losing a top executive. PLAN YEAR PREMIUM CASH VALUE TOTAL INSURANCE CASH VALUE ANNUAL INCREASE CASH VALUE YIELD TAX EQUIVALENT YIELD (21% RATE) 1 1,000,000 1,030,102 3,879,916 30,102 3.01% 3.81% 2 0 1,060,221 3,853,121 30,119 2.97% 3.76% 3 0 1,091,234 3,824,124 31,013 2.95% 3.74% 4 0 1,122,113 3,803,642 30,879 2.92% 3.70% 5 0 1,154,458 3,781,002 32,345 2.91% 3.69% 6 0 1,188,352 3,755,624 33,894 2.92% 3.69% 7 0 1,223,202 3,737,886 34,850 2.92% 3.70% 8 0 1,259,188 3,716,113 35,986 2.92% 3.70% 9 0 1,297,830 3,690,047 38,642 2.94% 3.72% 10 0 1,337,373 3,672,344 39,543 2.95% 3.73% 15 0 1,550,324 3,558,279 37,167 2.97% 3.75% 20 0 1,799,878 3,446,004 38,370 2.98% 3.77% 25 0 2,080,357 3,341,511 39,097 2.97% 3.76% For a customized proposal for your bank or to speak with a BOLI consultant at Executive Benefits Network, please contact: Joe B. Jones, President jjones@ebn-design.com (785) 838-9800 www.ebn-design.com Your only Kansas-based BOLI provider. Disclosure: The opinions, estimates, charts and projections contained herein are as of the date of this publication and may be subject to change without notice. EBN endeavors to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that we believe are accurate and complete. The illustration includes insurance company illustrations that reflect dividends, interest, expense, and mortality assump- tions that are not guaranteed. EBN does not warrant the performance of any particular insurance carrier or product.