What is BOLI?
Bank Owned Life Insurance (BOLI) is life insurance owned by the bank, issued on the lives of the bank employees and directors.
Earnings from BOLI are income tax-free (if held to maturity) which represents an inherent earnings advantage over bank eligible investments.
BOLI cash value increases are reported as non-interest income and cash values are reported as an Other Asset on the bank’s balance sheet.
Policies may be issued on a Guaranteed Issue basis with 10 or more insureds (i.e. limited or no medical underwriting)
BOLI cash values will not need to be marked down as yields rise per FAS 115, but rather FASB 85-4 allows for book value treatment. (link to FASB 85-4 in “Resources” tab)
The BOLI cash values can be backed by highly rated companies with a strong AAA credit rating
BOLI is immediately accretive to earnings and improves Non-Interest Income and Shareholder value
Annual time commitment for BOLI is minimal
BOLI is a long term asset and the earnings and insurance proceeds can be used to:
- Offset the costs of new and existing employee benefit plan expenses
- Offset costs of nonqualified plans for key employees and Directors
- Provide Keyperson life insurance and protect Shareholder value