How it Works (Continued)

General regulatory guidelines [differ by state]

• Insurance may be purchased with employee compensation and benefit plans.

• The bank can invest up to 25% of Tier 1 capital in BOLI and up to 15% with any single carrier.

• The bank can insure up to 35% of active employees and 100% of active directors (waiting periods may apply).

• All insured employees must give written consent to be insured, and they must be informed the policy may be held by the bank until their death.

How the Bank Can Profit

The bank can recover the cost of employee benefit plans
and improve earnings per share.

How Employees Can Benefit

Co-sharing may reduce benefit plan expenses, so em-
ployees retain more of their take-home income. They may also realize enhanced benefit packages.

Product

An investment portfolio to finance employee benefits using Bank-Owned Life Insurance (BOLI)

Objective

Help recover existing employee benefit expenses and offset new benefit plan expenses

How it Works

A bank can insure up to 35% of its most highly-compensated employees and use BOLI income to recover expenses related
to its benefit plans. These benefit plans may include group
healthcare, group life insurance, qualified retirement plans,
and SERP plans.

Summary

• The bank may insure the lives of directors and/or select
executives.

• The bank owns all the cash values—listed as “other
assets,” with the gains booked as “other income” and not subject to taxes (if policies are held until death).

• The life insurance benefits are received tax-free upon death
of the insured.

• Products are single premium and do not have surrender charges (with possible 1035 exchange restrictions).