The BOLI Advantage™ for Sub-S Banks

There are many compelling reasons for a community bank to convert to a Sub S Corporation and acquiring Bank-Owned Life Insurance (BOLI) is one of them.

BOLI is a useful tool for Sub-S banks and can serve to benefit shareholders in a number of key ways:

• BOLI Generates Additional Income on a tax-advantaged basis and, if held until death, the death benefit increases shareholder basis.
• Tax exempt securities can help increase a bank's capital growth and build retained earnings
•  BOLI Can Reduce Shareholder Tax Burden by replacing taxable income with tax-free income.
• Income is not distributable
• Distributions to offset Sub-S owners' tax liability is not needed
•  BOLI versus Municipal Bonds
• No mark-to-market for BOLI
• BOLI normally produces higher yields
• Some BOLI products offer accounts with low Risk-Based Capital Weighted Assets
• BOLI has no TEFRA disallowance
• BOLI provides death benefits
•  BOLI reduces a bank's passive income percentage because it's categorized as "Other Non-Interest Income" and is considered Active Income.

Based on these characteristics, acquiring BOLI can be a compelling strategy for a Sub-S bank to pursue. To learn more, please contact Tom Jordan at ECI/VisionLink For Banks at 512-347-9950.