Why BOLI? Why Newcleus?: A Client Testimonial
Bank of Clarke County CEO Brandon Lorey was introduced to bank-owned life insurance (BOLI) when, as a bank executive, he was insured by a BOLI policy. That was over two decades ago and he’s now using BOLI to insure his own executive team.
“It was good to have had the experience when I rolled it out to my team at Clarke,” Lorey said, noting that it was helpful that he knew how it was going to feel up front. “It can be off-putting. It’s a sensitive topic, but when we sat down with our employees one-on-one and explained the yields it would bring to our investment portfolio, it was a very easy conversation,” he said. “We also added an additional death benefit to the family as a part of the investment, which can be very beneficial.”
Why BOLI? Lorey describes it as this: “At the highest level, I’m buying an annuity product, placing an insurance death benefit on an employee that I am going to get an annuity paid at a tax-effective yield over a period of time.” The hesitation, he said, is often the unfamiliarity of how BOLI can benefit a bank. The reality is that BOLI is one of the better-performing assets on the bank’s books.
Lorey met Newcleus Bank Advisors Brad Dyksen and Cole Svenson when he was executive vice president, head of consumer banking at United Bank in Hartford, Connecticut. “I got to know Brad and Cole. They are great people in general, their relationship with the bank was really strong and BOLI was a part of how we were managing the business.”
Dyksen and Svenson value their roles at Newcleus because of the focus placed on customer service and client relationships. “We love what we do. We feel we have the best products and solutions to help the bank grow. It’s easy for us to be open and honest with our approach,” said Dyksen and Svenson. “Our goal is to educate the executives and the board on the asset and the options available to them. We want their expectations to be reasonable. The thrill in the success for us is the success and growth of the bank.”
Newcleus advisors, Lorey said, provide a major source of confidence when he discusses BOLI as part of the bank’s investment portfolio. “In the community bank space, it’s the relationship that is much more important,” he said. Because of that relationship, Newcleus Bank Advisors were included in a group of advisory firms interviewed by the bank’s board.
“For the board, it was the sincerity that came across, open and honest. It was hugely helpful,” Lorey said. “What was wonderful was when my chairman came to me and said Brad and Cole are the ones we want to use.” During their board presentation, Dyksen and Svenson backed up their analysis with information and data demonstrating how other comparable organizations already hold BOLI. “It was helpful to show we were the only bank in the area that doesn’t do this,” Lorey said.
Educating boards on BOLI can be an uphill battle. Some banks have had bad experiences, such as when a carrier no longer actively sells and supports their BOLI products or is downgraded by the rating agencies. Newcleus Bank Advisors’ relationship-focused approach is transparent, honest and consistent and addresses the risks along with the advantages. An annual face-to-face analysis identifies underperforming BOLI, checks on breakpoints and over-diversification and reviews new carriers and products.
Lorey was impressed by Newcleus’ proprietary technology, MINTS, a customizable platform with the ability to store and retain all of the information necessary for their BOLI plan. “The reporting and the data analytics that came back to us from Newcleus on a quarterly basis made it a clean process when we were going to our examiners and our auditors,” Lorey said. “The ease at which we were able to take the reports and use them for whatever really made it a one-stop-shop versus having our accounting doing all of the heavy lifting.”
This platform eases the administrative burden of BOLI portfolios, providing audited reporting and BOLI data personalized to the bank.
The use of BOLI is increasing. Over the past 10 years, since 2011, 15% more banks have BOLI policies, and there is a 46% increase in BOLI total cash value. As of the third quarter of 2021, about 66% of banks own BOLI and 71% of banks with $100 million to $10 billion in assets have BOLI.
The future of BOLI is promising, with over 80% of the top 100 banks owning BOLI in Q3 2021. BOLI can be a source of funding for executive compensation packages once the concept is accepted by bank leadership.
“The compensation from the BOLI earnings is critical, more so now than ever, with the fierce competition to get folks hired,” said Lorey, “and we’ll expand the use of the income from BOLI to offset some executive compensation. It’s more about the dollars now, not about what they will be getting.”
When reflecting on the work they have done with Lorey, Dyksen and Svenson recalled, “In an industry where our products and solutions are somewhat a commodity, we strive to form strong relationships with our clients who eventually become close friends.” At Newcleus, we invest in people, technology and community to generate a superior return for our clients.
We focus on ways to leverage tools like BOLI to make your bank’s investments work by supporting the executive compensation packages that inspire growth, ensure retention and pave the way forward to a bright future.
Read on at the link to learn more about BOLI from Brian McCracken, VP and Account Executive Director at Newcleus. Or if you are interested in speaking to a professional, contact our team at Newcleus today.
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