Podcasts about nonqualified

Thank you for joining us for another episode of the CU Lab. I'm Madeline Kronfeld, with America's Credit Unions and I'll be your moderator. Today I am sitting down with Liz Santos, Chief of Staff at Gallagher, and we are going to talk about the annual Gallagher Executive Compensation and Benefits Survey.  It's one of the credit union industry's premier resources for compensation data. The report provides hundreds of data points for salary, scorecards, retention plans, and more, enabling credit unions to make better decisions for their rewards strategy. We talk about who participated in the survey, the positions included in the survey, key trends that stood out in this year's survey that are noteworthy, and how credit unions can access the report and use the data.    In This Episode: [00:32] Today, I am sitting down with Liz Santos, Chief of Staff at Gallagher, and we are going to talk about the annual Gallagher Executive Compensation and Benefits Survey. [01:11] They sent invitations to all credit unions across the country to participate in the survey, so that included federal charters, state charters, and those credit unions that are privately insured.  More than 700 credit unions participated and provided information for about 2500 of their executives.  [02:03] Traditionally, the report has included the CEO as well as the next four executives in terms of salary. This year, they also added CFO-specific information.  [04:01] Over ten years, the annual raise percentage has more than doubled. In 2015, the average increase was 3%, and today it is 7%. When executive's salaries are strong and increasing that is a good reflection on the industry as a whole.  [05:53] Another trend that I think credit unions should consider is annual incentives. 70% of CEOs have some sort of annual bonus or incentive.  [06:52] Previously, the type of plan was split, but now we are starting to see more plans lean toward the formal type. This year 38% of those plans were formal as opposed to 32% informal. That is a reflection of boards wanting to pay for performance by setting strategic goals and by pushing and incentivizing their CEOs and the rest of the C-suite to achieve those.  [07:41] Another trend is the use of nonqualified benefit plans. Nonqualified benefit plans or executive benefit plans are used to retain and reward your executives, top leaders, and other top performers. With credit unions that are 100 million in assets and greater, 75% of all executives have some sort of plan.   [09:22] 23% of other leaders or managers were also receiving some sort of nonqualified benefit plan. It is showing that there is a greater need and desire to retain these up and comers and build their leadership pipeline.  [11:05] Close to a third of CEOs are aged 60 years and older. About half of all CEOs are aged 55 and older. You have a great number of CEOs who are considering retirement if not already there. It pushes that time for succession planning.  [13:27] About 40% of CEOs have been in their role for five years or less.   [14:15] The primary objective of resources like this is to educate the decision-makers on the state of executive compensation so they have up-to-date information on what is happening in the market.  [16:52] Work with a compensation consultant to make the data more actionable. The data behind the data is where you can find the actionable tasks and make sure they are aligned with your strategic goals and where you want to be.    Links and Resources: NAFCU Gallagher Liz on LinkedIn Succession Planning

In today's episode, Patti welcomes Josh Owen, Regional Vice President at Principal Financial Services, into the studio to discuss nonqualified deferred compensation plans. These are popular benefits that provide key high-earning employees with a tax-advantaged way to build retirement savings. This is a powerful tool to help CEOs recruit, retain, and reward executives. Many governmental taxation rules restrict the amount of money these highly compensated employees can contribute to tax-deferred plans, like a 401K, so these deferred compensation plans can give serious recruiting and retention advantages to CEOs. Patti and Josh's review of the advantages and disadvantages of these plans will help any business owner determine if this is a beneficial tool for retaining their top earning employees.

Welcome to the latest episode of the SK Wealth Solutions and Knowledge podcast. Join Rebecca Allen and Andrew Cayer, Certified Financial Planners at SK Wealth Management, as they explore Non-Qualified Deferred Compensation plans. They'll discuss the ins and outs of these plans, draw from real-life experiences, and provide savvy strategies to reduce your tax liabilities and enhance your retirement savings. Additionally, they'll shed light on methods to safeguard your financial future from employer bankruptcies through the use of insurance policies. If you're a high earner or seeking intelligent retirement planning, this episode is tailor-made for you. Be sure to hit that subscribe button for more pearls of wisdom from SK Wealth

Jim Crone, CLU®, CFS®, Director of Insurance Planning, and Associate Giuliana Barbagelata, CFP® join Chief Investment Officer, Troy Harmon, CFA, CVA, to provide some guidance to a C-suite executive who is considering a job that is offering a nonqualified deferred compensation plan. Jim explains how they work and the risks while Giuliana discusses their role in one's retirement planning. Read the Article: https://www.henssler.com/beyond-the-401k-exploring-nonqualified-retirement-plans   

Do you want to learn how to save money by refinancing your mortgage? In today's episode, Brendan Kolesar, a mortgage loan expert, provides us with helpful business advice on better alternative loan servicing options for purchasing properties and modifying mortgages to match your goals. Keep an eye out for further about the mortgage rate forecast!   WHAT YOU'LL LEARN FROM THIS EPISODE How does rising interest rates affect the mortgage loan industry? Alternative mortgage financing options Debt Service Coverage Ratio (DSCR) vs. conventional loan Should you pay upfront points on non-QM loans? What are the mortgage interest rates expected to be?   ABOUT BRENDAN KOLESAR   As the son of a retired Airforce Colonel and commercial airline pilot, you learn the importance of taking responsibility for both the destination and the journey. Brendan has been taking care of families' home finance needs for over fifteen years and recently welcomed his first child (a beautiful daughter) into his own family. A dedicated father, husband, and leader at The Kolesar Team, Brendan enjoys walks with his wife and daughter near their home in Carlsbad Village, but he's also been known to answer client calls from his paddle board on Mission Bay.   CONNECT WITH BRENDAN Contact number: 916-541-1808   CONNECT WITH US: If you need help with anything in real estate, please email: invest@rpcinvest.com Reach Ron: RP Capital Leave podcast reviews and topic suggestions: iTunes Subscribe and get additional info: Get Real Estate Success Facebook Group: Cash Flow Property Facebook Community

One retirement income strategy that will be virtually unscathed by President Biden's proposed tax increase is longevity insurance, more commonly known as fixed-income annuities. The post Nonqualified Fixed Income Annuities: A Timeless Tax and Retirement Income Planning Opportunity appeared first on Retirement Income Center.

On today's show, Michael dives in to the differences between non-qualified and qualified money, mainly that one may save you more money in the long run. Although this does not substitute for financial consulting, Michael provides a quick break down and general analysis on the benefits and potential dangers of building up qualified money. 

In this episode, The Annuity Man and John Lenz discuss:  Spendthrift planning.  Customizing the annuity contracts to achieve the specific goals you have in mind.  Medicaid planning using annuities.  Nonqualified stretch plans.    Key Takeaways:  There is nothing magical about the ability to manage money. It can be difficult regardless of the age of the beneficiary.  Working with an elder care attorney or an estate planning attorney can often help when deciding how to best provide for your beneficiaries.  There are many different types of annuities that you can choose from. If you work with the correct agent, there is a lot of flexibility for your specific situation.  Make sure the agent you're working with understands the business.    "Annuities provide an excellent layer of income protection. And if insurance companies stick to their knitting and remember what they're best at, it'll be a healthy environment for them." —  John Lenz    Connect with John Lenz: Website: https://www.lenzfinancial.com/      Connect with The Annuity Man:  Website: TheAnnuityMan.com  Email: Stan@TheAnnuityMan.com  Book: Owner's Manuals  YouTube: Stan The Annuity Man  Get a Quote Today! 

This episode is also available as a blog post: https://paylesstax.com/2021/05/02/nonqualified-deferred-compensation-plans/ --- Send in a voice message: https://anchor.fm/don-fitch/message

On this week's episode of Money On Tap with Seth Krussman and Ben Brayshaw, we discuss the different types of IRA's and address questions from our listeners with regards to which IRA is more effective. Money is divided into two buckets – qualified and non-qualified. Non-qualified money being money in your savings account, your checking account, and your house. Qualified money being your IRA, 401k, and Roth IRA. Today we are focusing on IRA and Roth IRA, the difference between the two, benefits of having one versus the other and ways in which you can use each one to its full potential. Today's Money in The News focused on the death of Bernie Madoff (82), the mastermind behind the Ponzi scheme. Madoff's legacy will most likely be focused on his creation of the Ponzi scheme and not around the fact that he was the one who created the NASDAQ. The effects of the Madoff scheme go as deep as changing the way the SCC investigates fraud and financial managers.

Welcome to the  Equity Compensation Guidebook and episode 3 of our mini-series. Today I will break down precisely what a non-qualified stock option— commonly referred to as an NSO— is. I won't be covering incentive stock options since 95% of stock options are non-qualified and I don't work with any clients who have ISO's. If I tried to explain the ISO I'm sure it would be a mess since I don't cater to those clients. NSOs are not super complex. The complexity with NSOs comes into play when you exercise the options and while we'll touch briefly on that, I'm going to save that minutia for another episode. You will want to hear this episode if you are interested in... What is an NSO? [1:19] Important time periods when it comes to NSOs [2:49] When to exercise and how to pay for your options [4:05] What to expect when it comes to taxes [6:16] This week's FLASHBACK [7:28]  Connect With Dan Johnson https://forwardthinkingwm.com  Subscribe on Youtube Follow on Linkedin

Hans goes over what qualifies as “qualified money”, as well as explains the advantages of this. Then he tells Robby the story of a client he had any how he used his IRA in order to leave the legacy he wanted.    Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on CardinalGuide.com for free!   You can contact Hans and Cardinal by emailing hans@cardinalguide.com or calling 919-535-8261. Learn more at CardinalGuide.com. 

Anne Meagher of the Advanced Consulting Group joins to discuss many questions around nonqualified deferred compensation plans during a financial downturn. She discusses options for both employees and businesses including what should be considered before taking money out of a qualified or nonqualified plan.

Tom Duncan joins to cover the recent IRS Private Letter Ruling on nonqualified deferred annuities.

Today we take leave the world of 401(k) plans and enter the parallel universe of nonqualified deferred compensation (NQDC) plans.  This is a new topic on the podcast and was happy to have Will Tysse and Taylor French, Partners and co-chairs of the employee benefits and executive compensation practice at the law firm McGuireWoods join me.  This is a broad topic so we started picking away at it by discussing why employers start nonqualified plans, how they are similar and different from 401(k) plans and some pitfalls to be aware of right out of the gates.  There is also some discussion of a Rabbi.   Guest Bios G. William Tysse - Will is co-chair of the McGuireWoods employee benefits and executive compensation group. He focuses his practice on employee benefits and executive compensation. He has extensive experience advising public, private and nonprofit clients on all aspects of non-qualified deferred compensation arrangements, including excess and supplemental retirement plans, cash and equity incentive plans, and employment and severance agreements. Taylor French - Taylor is co-chair of the McGuireWoods employee benefits and executive compensation group. His employee benefits practice covers a wide-range of traditional executive compensation and employee benefits matters along with a variety of inter-disciplinary practice areas and industries that are affected by executive compensation and employee benefits laws. 401(k) Fridays Podcast Overview Struggling with a fiduciary issue, looking for strategies to improve employee retirement outcomes or curious about the impact of current events on your retirement plan? We've had conversations with retirement industry leaders to address these and other relevant topics! You can easily explore over one hundred prior on-demand audio interviews here. Don't forget to subscribe as we release a new episode each Friday!  

Equity compensation can be confusing, from terminology to tax-treatment, award dates and vesting schedules, it's critically important to know what you have so you can make a plan to maximize these resources. In this episode, we cover the basics including a brief overview of RSU's and Incentive Stock Options. We will probably cover each type in-depth in future episodes. If you have questions, reach out to your stock plan administrator or plan provider.    Questions: Tweet me @15MinuteFA  

In part two of Ringler Radio‘s podcast on non-qualified structured settlements, host Larry Cohen and co-host Cindy Chanley talk with returning guest, tax attorney Robert Woodfrom Wood LLP, about the tax implications of structuring a settlement in a non-qualified case such as divorce, disability or environmental, versus taking a cash lump sum. Visit Ringler to contact a consultant in your area about structured settlements.

In part two of Ringler Radio‘s podcast on non-qualified structured settlements, host Larry Cohen and co-host Cindy Chanley talk with returning guest, tax attorney Robert Woodfrom Wood LLP, about the tax implications of structuring a settlement in a non-qualified case such as divorce, disability or environmental, versus taking a cash lump sum.Visit Ringler to contact a consultant in your area about structured settlements.

Desiree Buckner of Nationwide's Advanced Consulting Group joins to discuss the bypass trust and funding it with a nonqualified deferred annuity.

Unlike physical injury cases which receive tax-free status in a structured settlement, cases such as age and race discrimination, sexual harassment, wrongful termination and divorce do not. Yet claimants can still structure these non-qualified cases and do so with an advantageous tax outcome. On this first part of a 2-part edition of Ringler Radio, host Larry Cohen welcomes co-host Cindy Chanley and returning guest, tax attorney Robert Wood from Wood LLP, to explore the arena of non-qualified settlements and how the recent tax reform act is having an impact. Visit Ringler to contact a consultant in your area about structured settlements.

Unlike physical injury cases which receive tax-free status in a structured settlement, cases such as age and race discrimination, sexual harassment, wrongful termination and divorce do not. Yet claimants can still structure these non-qualified cases and do so with an advantageous tax outcome. On this first part of a 2-part edition of Ringler Radio, host Larry Cohen welcomes co-host Cindy Chanley and returning guest, tax attorney Robert Wood from Wood LLP, to explore the arena of non-qualified settlements and how the recent tax reform act is having an impact. Visit Ringler to contact a consultant in your area about structured settlements.

Anne Meagher and Brian Richardson or the Nationwide Business Solutions Group are back to wrap up their series on nonqualified plans. In this episode they discuss accounting considerations for nonqualified plans.

Anne Meagher and Brian Richardson of the NBSG talk about formulating a nonqualified plan and the information an advisor will want to gather when determining if it's right for their client. They also discuss other aspects of the plan and the associated tax issues.

Breaking down nonqualified deferred compensation and supplemental executive retirement plans with the ACG's Anne Meagher.

Kelly: My next guest worked with his brother, and was so fierce and mean in his first career that some journalists called him and his brother the “Bruise Brothers”. He wasn't in the mafia. He was an NFL safety for the Miami Dolphins. Greetings! This is Kelly Coughlin. Voiceover:     Kelly Coughlin is CEO of BankBosun, a management consulting firm helping bank C-Level Officers navigate risk and discover reward. He is the host of the syndicated audio podcast, BankBosun.com. Kelly brings over 25 years of experience with companies like PWC, Lloyds Bank, and Merrill Lynch. On the podcast, Kelly interviews key executives in the banking ecosystem to provide bank C-Suite officers, risk management, technology, and investment ideas and solutions to help them navigate risks and discover rewards. And now, your host, Kelly Coughlin. Kelly:             Hello! This is Kelly Coughlin. I am the CEO of BankBosun and program host. This is the first in a two-part interview series with a guest that I think is fascinating, interesting and frankly, he’s simply an enjoyable guy.   His name is Glenn Blackwood. And he is a Board Member and Principal of Equias Alliance, a bank-owned life insurance and nonqualified benefits consultant for regional and community banks.   What makes Glenn more fascinating and interesting than your average BOLI guy is Glenn is a former NFL athlete with the Miami Dolphins. And for all you bankers out there, who of you never reenacted the 5 seconds left, game on the line, opponent in the red zone, pass thrown your way, interception, game over, you win…   Well, this guy has been there, done that. And you all hear that not all games ended this way. You will win some and lose some, and learning to deal with that was part of being a professional athlete.   You know, in my mind, competition is the common denominator between sports and business. Certainly, professional sports are a business industry in and of themselves, but I am talking about the competition on the field of play in sports - the gridiron; and the competition on the field of play in business - the boardroom.   So what can be learned from professional sports about competing more effectively in business? And more specifically, what can our bank clients learn from professional sports and a professional athlete who knows business? That’s the purpose of this podcast.   Glenn has over 25 years of experience in the bank-owned life insurance and nonqualified benefit plans consulting and has worked with hundreds of banks in the design and construction of cost-effective solutions, to help banks compete and retain good talent. But before that, he was with the Miami Dolphins for about 10 years and I think he played middle linebacker for the Dolphins. Glenn, did I get that one right?   Glenn:            You got everything right except position. If I had played middle linebacker, I’d have gotten killed.   Kelly:             Oh that’s right, you played safety. Glenn:            Yes, I played safety.   Kelly:             All right. Great. Glenn, welcome! How are you doing?   Glenn:            Thank you. I am doing fine. Glad to be visiting with you.   Kelly:             Great! Thanks for coming on board. Glenn, I don't want to try to summarize your background, because you know yourself better than I know you. Just give us a summary of education, business background, family, where you living, how many kids?   Glenn:            My wife and I have been married for 34 years and we have 4 children and 4 grandchildren. I grew up in Texas and I grew in a football family. My dad played running back at Baylor in the late ‘40s. And then, I had two brothers and one sister.   My sister was a very good athlete as well. She played tennis and actually was one of the top tennis players in the city of San Antonio where we grew up. I’m the youngest of the four and my oldest brother Lyle played at TCU and went on and played in the NFL with a variety of teams, and actually ended up playing with me down in Miami for his last 5 years, which was really a kick.   Then I have another brother Mike, who was probably the best athlete of all of us, but he was just smaller than Lyle and I were. He was a tremendous baseball player, basketball player, golfer, football player, and he played at TCU and then primarily due to size restraint, he wasn’t able to play in the NFL.   I did really well academically in high school so back then there wasn’t as much educational counseling it’s kind of like, well, if you did really good in grades you went into med, you became a doctor.   And then I ended up going to the University of Texas out of my high school. Darrell Royal was kind enough to offer me a scholarship and there is a long story there, which I won’t bore you with. I was not his early on pick, because I was kind of small as well. And they ended up taking a chance on me and I think it worked out for them and certainly worked out for me.   I ended up starting three years there at the University of Texas. I was captain the last year of my playing there.   So I was in pre-med at the University of Texas. Actually, had completed those or was right in the process of completing, when the Dolphins drafted me. And the dean at one of the, I think it was the University of Texas Dental School, said "Look, you can come back and go to school anytime, but how many people get a chance to play in the NFL?"   So I really appreciated him having the candor because a lot of academic guys don’t really value the sports side. He was really a balanced guy and he said, “Go try the NFL. And you can always come back and go to school.”   And I was drafted by the Miami Dolphins in the 8th round and I ended up. So after 10 years in NFL, I wasn’t going to go back and try to redo that, and ended up playing 10 years for the Dolphins. And started my career there and ended my career there. I actually had nine seasons. I played in my last year but I was on injured reserve with a knee injury, which ultimately ended my career. So it was a good run.   Kelly:             Those were Don Shula years, I’m thinking, right?   Glenn:            That would be correct. That was 1979. I was drafted and I retired in April of 1989. I had all my years with coach Shula and that was a great experience from a standpoint of playing for a coach who had a grasp of the game and all phases of the game, as well as how to manage a football team. The head coach has to do a lot of stuff and Shula was probably as good at it as anybody I've ever seen.   Kelly:             And let’s see, Bob Griese would have been the quarterback in those years?   Glenn:            Actually, Griese was there the first two years I came to the Dolphins and then after that, we had a little stub period and then we drafted this kid out of Pittsburgh named Dan Marino and that was the end of that.   Kelly:             And that was the end of that. So you had, what, four years with Marino at the helm?   Glenn:            Danny came in at '83. So I actually had five years of playing with Danny.   Kelly:             Five years, yeah.   Glenn:            There is a great story there. He came up to my brother was in the locker room and my brother had been playing at that time for like 12 years, kind of the seasoned veteran. And here is the rookie Marino at his first start and Danny tells the story during his Hall of Fame speech.   My brother walked up to him and said, "Danny, look just relax. You are a great football player. You’ve got a great arm. You are going to be great in this league. Don't be nervous. Don't go out there with any anxiety. But just remember our whole season is riding on your shoulders."   Marino said, “Thanks a lot!” And he properly went out threw for a 356 yard game and so began the career of Dan Marino and probably one of the most amazing releases I’ve ever seen by a quarterback. He was so quick release. People say, “Oh, what it’s like playing with Danny?” And I’d said, “Well, you know I watched him from the sidelines so I was glad I wasn’t playing against him. But I practiced against him every day. And he made me a better football player because his release was so quick that you had to get a jump. You couldn't play around with him. You couldn’t give him any space because he could get that ball going with accuracy and velocity quicker than anybody I’ve ever seen.   Kelly:             I always have this incredible amount of respect for defensive players - safeties and cornerbacks - when they are in a situation where they know the game is on the line and then it’s the safety and the cornerback facing a really good quarterback and a really good receiver and there you are getting ready for the play. What’s that like? How do you get your mind in the game, where you’re not thinking "Oh my God! If I blow this, I’m done." Right? How do you get yourself prepared for that?   Glenn:            Well, I think part of it is that you realize that you are playing against professionals that are really good at what they do. So you’re going to get beaten some. And if you don't have a healthy understanding of that, then you’ll be a basket case in the NFL. There are those individual NFL players that are so talented…they relish that opportunity because they know they’re that good and they’re going to be able to rise to the occasion.   Most of the players in the NFL are really good athletes, but they are not of that ilk where they are just going to dominate every time. So it’s nerve racking and it is exhilarating when you rise to the occasion, and it’s a gut punch when you don’t. And I’ve been beat for touchdowns and I’ve intercepted passes as they were going in for touchdowns and I’ve stopped the play. And as they said in the Wide World of Sports, the thrill of victory and the agony of defeat. And it’s painful. But if you don't realize that that’s very much the way life is. You’re going to have some moments of exhilaration in life and you are going to have some pain parts in life as well. If you don't negotiate that well, then it can make for a tough time.   Most guys who have a difficult time with that don't last as long in the game, because they can't handle the pressure. I really felt like I prepared extremely well for a game. I had knowledge of my opponents. I knew what they liked to do. I knew what they like to do in certain downs and distances. And so I could it whittle it down.   I remember there was a play where we were playing with the Jets one time and they had a really good tight end, almost like a receiver guy a guy named Jerome Barkum, and I knew what pass route they were going to run. They ran it against me and Richard Todd threw the ball, completed it ind the end zone for touchdown. I knew exactly what they were going to run. I was just playing against a really talented receiver and a quarterback who put the ball in a place where only he could catch it.   Kelly:             Do you get in situations or have you seen players in situations where the fear factor of getting burned it almost creates a paralysis and they get so consumed by failing that they are almost slow to react cause they are so consumed by that?   Glenn:            There is no doubt you see that. You see it all the time. And that’s happened to me. Everybody has those moments where you know you say, “I don't want to be the weak link in this defense or this offense.” So absolutely, that happens. And I think some guys can live through that and come out on the back side and learn from it, and they mature and they grow through things. And then others, they never get a handle on it. And I think it hinders their career.   Look, I watched a lot of guys that were much better athletes than me, come into training camp every year and for some reason you know I was able to keep my job for you know ten years. A large part of it was because I really prepared a lot for the games and I had a good knowledge of the game, and I could coordinate our defense really well. The other part of it was that you kind of grow into that knowing that you’ve got to realize that you are going to have times where you make the play and there’s going to be times where it doesn’t work out the way you wanted to.   And that’s the game of football. You are playing with really good players on the other side of the line and that their job is to make you look bad, to beat you. They are good athletes. So sometimes you win, sometimes you lose. Fortunately, down in Miami, we won a little bit more than we lost and that was good.   Kelly:             Ever been in that situation where there is just mismatch, you are making the wrong reads and then, they are picking on you?   Glenn:            Very seldom I saw myself in that position because I was not reading things right. It usually was just physical talent. I wasn’t the biggest, fastest guy out there. You are going to get in those situations – and sometimes the quarterbacks see it and sometimes they don't.   Kelly:             So after the NFL, you decided you wanted to get in to the bank-owned life insurance business. How did you end up picking this industry?   Glenn:            You know the reason I got into the business is that – it’s a long story but I will make it very short. I ran into a former adversary of mine in the NFL, a guy named Wally Hilgenberg. And Wally played linebacker for the Minnesota Vikings…and played sixteen years in the NFL. And he and a few other gentlemen had started this business and they called the company Bank Compensation Strategies. And that company placed the first BOLI product on a bank in Bloomington, Minnesota back in 1982. And it was kind of a quid pro quo. It was an insurance policy purchase to hedge a SERP or deferred compensation expense.   And that’s the way this whole business really got started. And Wally and I ran into each other at a fishing tournament..I’ve got a name for it but I won’t say it on this…but it’s basically the old guys fishing tournament..former retired guys from the NFL we were fishing down in Louisiana and I happened to sit next to Wally on a bus going to the fishing tournament. And he and I got to talking.   And I had prepared for after football by going to a university down in Miami and studying for a couple of years. I had worked in an investment banking firm because I knew they’d kick me out of football one day. And that’s probably the one thing if I could say for most athletes, especially professional athletes is you’ve got to prepare for the day they tell you you're not good enough anymore. Because it will happen. And when it does, the severing of that cord, of that tie is swift, and it’s brutal, and it’s fast and it’s painful.   If you are not economically prepared and educationally or vocationally prepared, it’s a very tough transition. Fortunately, I had done that and Wally and I got to talking and he said we’ve got this program where he had this BOLI asset and the benefit needs. And he explained it to me and what I saw in it, was I saw there were three real focused needs of expertise.   You had to have some sense mathematically. You had to have accounting grasp. You had to have a legal grasp, because there were agreements involved. And then, you had to understand the regulatory piece of it. And I loved the multitasking and juggling all those balls. That was very similar to what I did on the football field, because I ran our defense for most of the years I was playing down there in Miami.   And so, I had to know what the line backers were doing. I didn’t play their position but I had to know what they were doing, what their challenges were, and our defensive line, our corners. And then I had to when the offense came up and showed us a different formation, I had to change our defense and put us in the right one. I love Bill Arnsparger, my defense coordinator, who was one of the greatest defense coordinators in the NFL and he sat me down on the bleachers one time and said before I was going into my first start, where I was running the defense, and he said, “Glenn. I can only guess right half of time. You have to put the right defense the other half.”   And first of all, Bill was understating his capabilities, because he didn’t guess, number 1. He was well prepared. And most of the time, he gave us the right defense. But he gave me that freedom, to move and change if I saw something I didn’t like.   And I loved that ability, the need to understand all the different pieces of how a defense works together. And it is the same way in this business. You got to understand the legal, the accounting, the regulatory. And I love being able to juggle those balls and being able to put everything together and explain to a bank and a bank board how this works, how we can put it in, how it works from an accounting perspective, and tax and balance sheet and income statement, and then what we do to take care of them to caretake for them on an ongoing basis. I looked at it and I thought this is a good fit for my skill set and Wally wanted somebody in Florida and I said I think I found the right guy for you, and that's me.   Kelly:             Did you ever have to play up in Metropolitan Stadium in the winter?   Glenn:            I played in the Met Stadium but not in the winter. And by the time I played up there in the winter, we had a dome. But I did play in the Packers in the teens and I played in New England and Chicago and New York.   Kelly:             How tough was it from Miami because half your games were down or more than half of your games were down in the southern climate, right? But how tough was that?   Glenn:            It was hard because you had to adjust to the cold weather really, it hardens everything and it makes it harder to catch the ball. One of things coach Shula used to say is don’t overdress and he’d be yelling in the locker room, don’t overdress. His point out of that was you can be warm, you can put on enough stuff to get you warm, but you can't function. You had to get that balance of layering that allowed you to maintain some form of body heat but also be able to move fluidly in your uniform, etc. I think, actually, while it was tough on us, I think it was much harder for the northern teams in November to come down to Miami and play in 80 degree weather and it’s humid. I’ve watched teams literally just melt right before us because they just couldn't handle it in the second half.   Kelly:             Really? What about the Mile High Stadium? Did you ever must have played there?   Glenn:            We did play at Mile High Stadium. That just really wasn't a lot  of problem either for me. The lack of altitude was offset by the lack of humidity…and so you didn’t sweat a lot out there. It was invigorating…I loved playing in that. The worst place I ever played from a physical standpoint of trying to be able to breathe was when we played the Rams out in Anaheim one year and they had a stage four smog alert. It was a one o'clock game; they had to turn the lights on in the stadium. There was so much smog. My lungs burned for about 2 days after that game.   Kelly:             Let's finish with the dumbest thing you have ever done or said in your situation?   Glenn:            I remember one time I was so, we had a fourth and one the Buffalo Bills were going into our endzone. They had kind of a strong set towards me and I was a strong safety and I really wasn’t that big a guy, so my adrenaline was flowing and I thought this guy was going to try and kill me. And they’re going to try to run right over me. It was kind of what you talked earlier, where there’s a little bit of fear there and I didn't want to be the weak link in the defense. So I was geared up and as soon as the ball was snapped, I took off to run into that flanker, he just turned sideways and I whiffed on him and he was a tight end flanker, it was a real tight set. They ran a play action pass and you know when I whiffed on him, I basically stumbled and the guy I was supposed to be covering ran right into the end zone and they threw him a little pass for a touchdown.   Kelly:             Well, that finishes Part 1 of my interview with Glenn Blackwood. I started the podcast saying Glenn was fascinating, interesting and simply a good guy, and I think that came out in this interview. I personally just love hearing his war stories of the NFL.   In Part 2, we will talk more about his second career in business and focusing on his expertise in the bank-owned life insurance business. And true to his form, he is competing and winning in this business just like he did with the Miami Dolphins. Thanks.   Voiceover:     We want to thank you for listening to the syndicated audio program, BankBosun.com. The audio content is produced and syndicated by Seth Greene, Market Domination, with the help of Kevin Boyle.   Video content is produced by The Guildmaster Studio, Keenan Bobson Boyle. The voice introduction is me, Karim Kronfli. The program is hosted by Kelly Coughlin.   If you like this program, please tell us. If you don’t, please tell us how we can improve it. And now, some disclaimers. Kelly is licensed with the Minnesota State Board of Accountancy as a Certified Public Accountant.  The views expressed here are solely those of Kelly Coughlin and his guests in their private capacity and do not in any other way represent the views of any other agent, principal, employer, employee, vendor or supplier.

Desiree Buckner of the Advanced Consulting Group joins Chad Queen to discuss the nonqualified annuity stretch concept and how it is used.

Introduction: Kelly Coughlin is CEO of BankBosun, a management consulting firm helping bank C-Level Officers navigate risk and discover reward. He is the host of the syndicated audio podcast, BankBosun.com. Kelly brings over 25 years of experience with companies like PWC, Lloyds Bank, and Merrill Lynch. On the podcast Kelly interviews key executives in the banking ecosystem to provide bank C-Suite officers, risk management, technology, and investment ideas and solutions to help them navigate risks and discover rewards.   And now your host, Kelly Coughlin. Kelly Coughlin: Greetings, this is Kelly Coughlin. I'm the program host of the syndicated, biweekly podcast, 'BankBosun.com: Helping Community Banks' C-Suite Officers Navigate Risk and Discover Reward.' As most of you know, we like to focus on three primary categories here, the three 'R's, Risk, Regulation, and Revenue Creation. I think just about all the critical things a bank does can be captured in one or more of these three categories, Risk, Regulation, Revenue Creation. Nowhere else does the results of how a bank does with these three categories, than in the valuation of that bank.     I think Jack Welch, in the eighties, first made popular the notion of shareholder value. He didn't create this concept, but he sure popularized it. I think, since then, we've kind of expanded it to include more than just shareholders, but stakeholders, and stakeholders might include all range of people and enterprises, ranging from suppliers to entire community ecosystems. At its core, we still get back the valuation, the equity value of the enterprise. With that in mind, I'm going to introduce George Thompson, a forty-year, seasoned vet in the bank deal business. George is managing director of The Capital Corporation. George, are you there?   George Thompson: Good morning, Kelly. How are you?   Kelly Coughlin: I'm fine, thanks for joining us today. George, rather than me kind of get into summarizing your background, education, etc, can you give us a minute on who George Thompson is, and why you're the seasoned vet in the banking valuation deal business?   George Thompson: I would be pleased to do so. Kelly, I graduated from the University of Missouri in Columbia, in 1976. Accountancy was my major. I went to work for one of the large accounting firms in Kansas City right out of college, and three years later, joined an individual out of Arthur Anderson, that was wanting to build a CPA practice specifically for community banks in the Midwest. I joined him in 1979, and we built that firm for the next twenty years, ended up selling it when H&R Block and RSM McGladrey were doing their accounting from roll-ups. In about the year 2000, we sold that accounting firm and it merged into RSM McGladrey here in the Midwest.     Since that time, I've been in banking and investment banking, right now, managing director, as you said, with The Capital Corporation. About 85-90 percent of our business is sell-side work. In other words, we work with the sellers of financial institutions, although we do work a little bit with buyers, and will contract with banks to go find them a bank to acquire. Appreciate the invitation to talk about the things that kind of drive value in banking.   Kelly Coughlin: George, how many deals have you been in the middle of?   George Thompson: Our firm, all we work with is banks. We do not do investment banking for small businesses. We do only banks. We have been involved, either whole-bank or branch transactions, over the past fifteen years, with approximately 125 to 140 whole-banks to branch transactions. Probably about seven and a half billion in assets changed hands during those transactions.   Kelly Coughlin: Right. I want to go immediately to net interest income versus other income, non-interest income.   George Thompson: Okay.   Kelly Coughlin: You know, the goal here is to come away with some ideas on, how can, if I'm a CEO or a board member, how can I increase the value of my bank? Now, the obvious things are, well, increase revenues and profits and free cash flow. But I need something better than those things. So I want to go to net interest income and Other Income. Because net interest income, other than getting more quantity, more assets, and more loans, there's a price. You're kind of stuck with the yields that are in the market, right? Other income gives more variability, I should say. My question to you is, in terms of valuation can a bank fetch a higher multiple in valuation, whether that be based on assets or revenues or free cash flow or earnings through an increase in non-interest income versus net interest income. Is there any difference in that?   George Thompson: The answer is yes. I can talk about a couple of specifics. We are working with a bank right now, that has built a program that they refer to as a contract services division, but it is a community bank that has built ties to the servicing, not making credit card loans, but has ties to the credit card industry. And as they service the debt that's on the outside, they are the servicer, they are the administrator. They do not hold the debt, so they do not have the credit risk, but they have built substantial contracts, for revenues. It is recurring revenue, and it has substantially increased what our asking price, and what we expect to get in the marketplace, when we ultimately can get a transaction done.     We have seen other banks that have built substantial mortgage generation machines and divisions, that, it's harder to sell and get a full value for a mortgage division, from the standpoint of, buyers look at those mortgage divisions as more transactional-based, not quite as recurring. Now, if you do it year after year after year, there is value there, but it's not the value that, perhaps, someone would pay for a truly recurring revenue.   Kelly Coughlin: Right, so it's this other income, this non-interest income, is it fair to say that the quality of earnings, I don't know if you use quality, in earnings, is higher in other income? I guess it depends on the permanence, and how long it's been on the books, et cetera, but     George Thompson:   It’s the recurring nature and, you know, can a buyer look at that potential selling bank, and are they willing to pay a multiple of that because they believe it will be recurring for year after year after year? Or is it transactional-based, to where, you know, if there's a downturn in the economy or change in interest rates, I think right now, everybody's waiting, as far as, I mentioned mortgage producing machines are revenue generators, if interest rates go back up, which is kind of anticipated now for a few years, some of that mortgage revenue is going to drop, and buyers anticipate that, so they will pay less of a premium with that.   Kelly Coughlin: Yeah, I guess, part of, in full disclosure, part of my reason to get right to that, is that, I was at one of these, you know, bank conferences, and there was, I'm not going to mention who it was, but this broker who's in the business of kind of promoting municipal bonds, made the argument that bankers might have to extend duration a little bit to get the yield they need to fetch here.     I asked him, offline, I said, "Well," in full disclosure, I'm in the, I work through independent consulting work with Equias Alliance, and we are in the bank-owned life insurance business, and I said, "Well, wouldn't the recurring nature of bank-owned life insurance, more predictable, recurring, et cetera, other non-interest income, wouldn't that be better for the bank's valuation?" He said, "No, I prefer that interest income." When I go back to my Cooper's days of doing some bank valuation work, I thought that other income would increase the value, but ...   George Thompson: It does. There's no doubt that it does. Now, we do not see BOLI being, in any way, a detriment to get a deal done. At the same time, we do not see BOLI being anything that will drive a transaction price higher. I'm involved in a transaction right now that will be announced within the next couple of weeks, whereas the seller, I believe, probably has six to ten million of BOLI already on their books. The buyer is not worried about that, is not concerned about that, welcomes that earning asset as we move forward. In that case, the BOLI certainly, I wouldn't say it helped driving price, but they like the, the buyer likes the earnings off that BOLI, that's for sure.   Kelly Coughlin: Now, this wasn't mean to be a shameless plug for BOLI, but it's one of those things that did come into my mind, and as I'm looking at banks that hold muni bonds versus BOLI, and I just wanted to kind of get that clarified with you. Let's go to another question I have. When you see a deal, what do acquirers like to see, or not see, in terms of locking up staff, how they're dealing with high-producing staff or low-producing staff, I mean, what are you seeing out there in terms of staff like that?   George Thompson: Our buyers, especially in, size matters in this relationship, but as the buyers get larger, as the sellers get larger, normally, you have a group of people, or a handful of people, that are really helping drive earnings and drive the revenue of the seller, which is what the buyer's interested in acquiring. They'll want those revenue streams and customer contacts to continue. We often see that that definitely comes into play with a buyer and a seller, where they want to try to lock up that staff, whether it be with some type of employment agreements. We have seen transactions where the buyer has pretty much made it a demand, as a part of the contract, that one, two, three, four people, sign employment agreements before they're willing to put their name on a contract to pay a real high price. They want to make sure those people are locked up.     Now, it's very difficult to get a pure non-compete. You can certainly get a non-solicitation. We've seen agreements like that, for sure. A lot of our transactions are community banks based, here in Midwestern states, and oftentimes, the primary seller, one of the largest shareholders, if not the single shareholder family, is the president and CEO. Many times, the buyers will, whether they hire them full-time, and we are seeing that more, where some of the bankers are looking ahead, asking themselves, "Who is my buyer? Where are the buyers? Perhaps I should sell this bank now, I'm sixty years old. I would have waited til sixty-five or sixty-eight, but if I sell it now and work three to five more years for the new buyer, one, I get my price, two, I get to keep working, and kind of lock in the liquidity, and not have to worry about it. I can kind of turn that over to a new buyer.     We are seeing that a little bit more often, where the president, CEO, primary seller, does get locked into employment agreements, non-compete agreements, non-solicitation agreements. The buyers want those people locked down.   Kelly Coughlin: Yeah. That goes, probably, in terms of the food chain, it goes down to the producing professionals, the credit guys, and the guys that are doing deals.   George Thompson: Once in a while, you'll see a COO or CFO that falls into that fold, but many times, it is the chief lending officer, the major loan producers, that are bringing the revenue to the table.   Kelly Coughlin: Right, right. How does the cyber security risk, it's one of those big, contingent risks, and potential contingent liabilities out there, any trends, anything that you're seeing going on there, on how they deal with the cyber security risk?   George Thompson: The buyer certainly comes in and looks at what kind of auditing processes, what programs, what compliance, you know, what does the seller have in place that has been protecting cyber security? What programs do they have that's monitoring it, you know, every second, every minute of every day, to protect the customer data and protect the bank from an intrusion? That certainly is a piece of the puzzle when a buyer is doing its due diligence.   Kelly Coughlin: Yeah. Are you finding, on the deals that you're working on, do they typically hire an outside consulting firm to help on that? That isn't the kind of expertise that you'd normally get on an accounting due diligence team.   George Thompson: The inside people for the buyer, you know, the operations people, will get out the audits, get out the contracts, get out the intrusion tests, and really review that hard. They may pursue it, if they see something, you know, "Why didn't you do this, this, this, and this?" We have not seen them go hire, at this point, outside technology companies to come in, during due diligence, and do intrusion testing, or testing of those. They're pretty much relying on what the bank has been doing to satisfy the regulatory agencies.   Kelly Coughlin: Okay. Good. Have you seen any deals collapse because of cyber security?   George Thompson: We have not, in our practice.   Kelly Coughlin: Okay. What are the top five things a bank can do to increase enterprise value for a sale? Looking forward a year. They meet with their board, they say, "Okay, we're going to position this for sale a year from now. Or, two years from now." Other than the obvious, increase revenues, profits, and cash flow, what could a bank do?   George Thompson: Yeah, and let's be honest, Kelly, there are many times that banks are sold and they didn't look out one, two, or three years in advance. I'll touch on a couple of things where the pricing could have been helped. My first comment to anybody that contacts me about selling their bank is asset quality. It seems common sense, but oftentimes, bankers that are wanting to sell, they may be trying to put the smallest amount possible, and we're not, we don't want them to put excess bad debt reserves, or allowance for loan lease losses in their financial statements, but make sure that bad debt reserve is adequate, that you've taken the marks on any problem loans you have, that you've taken the marks on your other real estate owned, or OREO. Just, fewer items to be argued by a potential buyer, with respect to asset quality, will help pricing, will help things go much smoother.     Tied to that is loan file documentation. We've actually seen a couple of transactions within the last year, where the buyers got into the loan review, and had some significant issues, and one of them was one-rated bank. Some significant issues with the loan file documentation, and the lack, in their mind, that the regulators had kind of, let that seller kind of glide along, just because they'd had very few loan losses, had kept giving them one ratings. Their loan file documentation was very poor, so I suggest sellers, or potential sellers, to clean up loan files, and make sure that all the docs are there.   Kelly Coughlin: Low-cost activity, too.   George Thompson: It is. It's something that, you know, you probably have the personnel to go through loan files, dig through them, "We don't have this tax return, we don't have this credit report," you know. "We don't have this debt service coverage calculations." Seems like common sense, but there's, oftentimes, a lot of that loan file documentation just, it doesn't get done, or loan file memos.     Vendor contracts, Kelly. We have seen vendor contracts come up and bite sellers. You know, maybe they didn't think about that contract, that seven-year contract they signed three years ago, and now they're ready to sell their bank. "Oh, by the way, you have a four-year penalty to pay off the core processor, or the ATM company, or the debit card company." Sometimes, those penalties can be substantial. As some of these groups are aging, the stockholder groups, the ownership groups, the management groups, if selling your bank is something that you're thinking about doing, frankly, any time in the next three to five years, you need to be thinking about that when you sign any of these vendor contracts, because these penalties can have a significant bite on the amount of premium you get.     Branch networking. We are seeing people worry more about the viability of some Midwestern towns, Midwestern communities. At the same time, we're seeing people that love to be in the, in county seat towns, and will continue to pay good premiums for locations that are in county seats, that are stable, growing, but there are some real communities that, you know, are losing population, may not be in a county seat, and it really is impacting the premiums that are paid by buyers in some of the communities that really aren't showing future viability. I guess ...   Kelly Coughlin: Are you saying they should be looking at closing those down, in an advance anticipation of the sale?   George Thompson: The answer is, that question should be asked, you know. If you're, let's say you're in a small town, and over the last decade, that small branch has just steadily dropped in deposits and loans. You know, maybe you're down managing it now, with two or three people, and you don't want to close it, you don't want to let people go as far as their jobs, but if a potential buyer walks in and looks at that, and says, "Well, they're just leaving it for me to close," it will cost you, when you go to sell the institution, if the buyer has to be the one that has to be the bad guy, that maybe is taking a banking service away from a community, or from other people. They're going to take that into account when they're calculating what they're willing to pay you.   Kelly Coughlin: Yeah, I guess they take the political hit, don't they, if they have to do it?   George Thompson: That's exactly right. Probably the last thing we touched on, is employment issues, a little bit, but, you know, it goes without saying that a buyer certainly wants key management to stay, they don't want to be the bad guy, firing poor performers. Many times, if there are some poor performers, the buyer will ask the seller to take care of those people before closing, so that the buyer isn't perceived as completely the bad guy.     Tied to the employment issues, unless a buyer has some long-term contracts or long-term deferred compensation contracts, if the seller has those and the buyer doesn't, many times the buyer will ask the seller to get those paid off, and pay off those employees, those long-term, let's say, deferred compensation arrangements. Because it's pretty tough for a buyer to bring home, and say, "Well, we've got three or four people, in the bank we just bought, that have long-term deferred compensation arrangements, but we don't have it here, and we're not going to give them to you, our current set of employees." Sometimes, not always, but sometimes, those deferred compensation arrangements can come into play between buyers and sellers.   Kelly Coughlin: This would be, like, non-qualified benefit plans, you're saying?   George Thompson: It would be. It would be.   Kelly Coughlin: You're saying, those can be considered somewhat negative, depending upon the culture of the acquiring bank.   George Thompson: If the buyer has them, and the seller has them, it can be okay. If the buyer doesn't have them, and the seller does, normally the buyer is not going to take in those long-term deferred compensation arrangements, and have things, employee benefits for new people, that they're not even giving to their current people.   Kelly Coughlin: Right. I know, we at Equias, we like those things, because they help, the non-qualified deferred plans, because they help the bank compete and retain good talent, and, of course, we use the bank-owned life insurance as a way to, kind of, fund those things. It doesn't have a significant impact on their cash flow, but ...   George Thompson: Well, and, you know, a bank has to, you're trying to protect somebody, and you may have had that in place for somebody for ten or fifteen years. It probably did what it was set up to do at the time, which was help you keep that person. Now, if you're in the position, after that ten or fifteen year period, you've protected the people, you provided for them, now they're going to get, maybe, an early payout, then it's up to the buyer to make arrangements to keep that person if they're making the seller cash out that deferred compensation arrangement. I'm like you, Kelly, I've seen it used very positively, many times, in a lot of banks, whether it's deferred director's fees, deferred compensation arrangements with key lending and financial officers. Don't take my comments that they're bad, complication in a deal.   Kelly Coughlin: They're a complication. Right. Got it. Okay. All right. Anything else you wanted to add? That covers most of my questions on this kind of high-level overview of valuations. One of the things I ask you to do is, be prepared to tell me, give me either your favorite quote, or, what I prefer is, George, tell us one of the stupidest things you either said or did in your business career.   George Thompson: You know, I try to never be too stupid, but, you know, going back, a saying I had, and it goes back to high school, and if you found my 1972 yearbook from my high school graduation, what it stated under my name was, "Lead, follow, or get out of the way." I've tried to live that as I've, kind of, been in my professional career. Now, what I gave them, back in 1972, to put in my yearbook, was, "Lead, follow, or get the hell out the way." In rural America, in a little religious farm town, they wouldn't put the H-word in the high school annual, but they wouldn't use the H-word in the high school annual in 1972.   Kelly Coughlin: That's good. You didn't need that on your record, anyway. But now it will be on your record, so there it goes.   George Thompson: Yeah, it's out there now, isn't it?   Kelly Coughlin: It's out there now. All right, George, I appreciate it. Thanks for your time, and we'll get this posted, and published, and syndicated on iTunes and Google Play Store, and there you have it.   George Thompson: Kelly, thanks so much for allowing me to be part of the podcast today.   Kelly Coughlin: Okay. Thanks, George.       We want to thank you for listening to the syndicated audio program, BankBosun.com The audio content is produced by Kelly Coughlin, Chief Executive Officer of BankBosun, LLC;  and syndicated by Seth Greene, Market Domination LLC, with the help of Kevin Boyle. Video content is produced by The Guildmaster Studio, Keenan Bobson Boyle. The voice introduction is me, Karim Kronfli. The program is hosted by Kelly Coughlin. If you like this program, please tell us. If you don’t, please tell us how we can improve it. Now, some disclaimers. Kelly is licensed with the Minnesota State Board of Accountancy as a Certified Public Accountant.   Kelly provides bank owned life insurance portfolio and nonqualified benefit services to banks across the United States.  The views expressed here are solely those of Kelly Coughlin and his guests in their private capacity and do not in any other way represent the views of any other agent, principal, employer, employee, vendor or supplier of Kelly Coughlin.  

Introduction: Kelly Coughlin is CEO of BankBosun, a management consulting firm helping bank C-Level Officers navigate risk and discover reward. He is the host of the syndicated audio podcast, BankBosun.com. Kelly brings over 25 years of experience with companies like PWC, Lloyds Bank, and Merrill Lynch. On the podcast Kelly interviews key executives in the banking ecosystem to provide bank C-Suite officers, risk management, technology, and investment ideas and solutions to help them navigate risks and discover rewards.   And now your host, Kelly Coughlin.   Kelly: Good morning. This is Kelly Coughlin. I've got David Shoemaker on the line. We’re going to do a podcast with David. He's the President of Equias Alliance.   David: Good morning.   Kelly: Good morning David. How you doing?   David: I am well.   Kelly: Just to kind of lay the foundation here I thought we’d talk very briefly about my relationship with David and Equias. As David knows, I'm a CPA. I've been in the investment and banking ecosystem for many years and as part of a consulting gig about a year and a half ago I came across the BOLI industry, the bank owned life insurance industry, and then Equias Alliance. I decided at that time, after looking at this asset class, that this is a space I wanted to get into. And I looked at the competitors, once I decided I liked the product, and decided who are the competitors, Equias, in my mind, rose above everybody else out there.     It wasn’t just me that thought that. I believe American Bankers Association selected Equias as their endorsed vendor. I think another dozen or state banking associations also selected them. Is that a fair statement?   David: Ten of them.   Kelly: Ten, clearly they emerged in my mind and in other’s mind as the key player out there. I met with David and I found him to be a key player in the industry, so I thought I'd do a podcast disclosing that I have an independent consultant relationship with David’s company, Equias. I thought we’d do a podcast and talk about first of all just give us a brief background on who you are, how you got into this space, some background and then we’ll talk about the product generally and how you got into this space and what your take is on that. You want to kick it off with some brief bio on who you are?   David: I graduated from the University of Tennessee, Knoxville with a Bachelor of Science in Business Administration, with a major in accounting, then worked for Deloitte Touche for nine years and an investment banking firm for three years. Then, while I was in investment banking, one of my clients was looking at an insurance product and asked me to help evaluate it knowing that I was a CPA technical type.     I liked what I saw, but what I didn’t like was that, it had a four percent front-end load charge. I thought it was a good asset class, but if we could get rid of the load charge we could make it very viable for banks to want to use as an asset class. I've been in bank owned life insurance and nonqualified differed comp for the last twenty-seven years now. I've worked with hundreds of banks over that period of time. I live in Memphis. I have a wife and six children. There’s a lot to do on a daily basis just keeping up with the family.   Kelly: All right, taking from your statement that you saw what was going in the market, the four percent front-end load. Let's elaborate on that because my understanding based on discussion with others including yourself is that you were one of the early pioneers of crafting the product offering as it is right now. What was the need in the market at that time? Give us a general year when that was. Then, where was the gap in products available and the products needed by the bank? What did you see at that time?   David: The year was 1989. There were several products available in the market, but they all had loads of between two and four percent. That means if you purchased a million dollars of BOLI asset and you had even a two percent load that was a $20,000 initial reduction of your cash value. You’d have to reduce your earnings and capital by $20,000 per million. I saw that as a hindrance to banks wanting to buy that asset.     So my partner at the time, who was an attorney, and I decided we could go to insurance carriers and see if they could provide a product that had no-loads which would be more viable for a bank. During that process we found that there's more to it than we’d initially understood. The carriers have to pay a premium tax to the state which generally averages about two percent. Then the federal government has a tax called the DAC or Deferred Acquisition Cost tax that effectively costs around a point and a quarter.     Carriers at time were not comfortable with essentially front ending that asset to give a hundred percent credit after they paid the taxes because they would potentially lose the money if the policy didn’t remain on the books. It took a fair amount of discussion and a fair amount of time, but my partner and I were able to convince four carriers to do no-load contracts.     At that time, I guess there were two other firms that we knew of in the business. They were Bank Compensation Strategies who pioneered the business and then there was Benmark. They were the primary players in, it wasn’t called BOLI then, the bank owned life insurance market. The need for it was to find a product that was viable to banks that didn’t have these loads charges and the idea behind it, back in that day, was primarily to fund nonqualified, deferred compensation plans for management and Boards of banks.   Kelly: That was the primary need for the product, not as an investment per se, but to help fund the nonqualified benefit portion.   David: Yes, to maybe take it a step further. There were not really any regs back until 1991 that were clear as to what a bank could purchase and couldn’t purchase. They could not buy life insurance as an investment asset. They could buy it to fund specific needs. A nonqualified, deferred comp plan was widely considered to be one of those specific items that could be funded with life insurance. It was not clear at the time that you could buy life insurance to informally fund health care and 401K and other retirement benefits and group life benefits and so forth.     Even in the first regs that were issued in 1991, bank reg; I think it’s called BC249, essentially said that you can’t buy life insurance as an investment. You can buy it to offset the cost of certain benefit plans. Even then it wasn’t clear whether that covered health care and 401Ks and things like that, so the initial design of bank owned life insurance was primarily for the purpose of nonqualified deferred compensation plans.   Kelly: The regs specifically prohibited it as an alternative investment asset class. Is that mainly because of that front-end charge and regulators didn’t want to see the hit to capital?   David: That was not the reason. They just viewed life insurance as not a normal asset for a bank from an investment standpoint. It was for specific purposes, but not considered to be an investment in the same terms as Treasury’s and agencies and municipal bonds.   Kelly: Now, that has changed since those early years correct that regulatory perspective?   David: Technically no, in 1996 there was a guidance issued under OCC96-51 which specifically gave authority for a bank to buy life insurance to informally fund retirement benefits and health care. So even today you can't buy life insurance purely as an investment. You have to purchase it from a regulatory standpoint to offset and/or recover the cost of employee benefit plans.     For instance, if a bank had no employee benefit plans; if they weren’t providing health care or 401K’s or retirement plans or nonqualified plans, they really could not buy life insurance and hold onto it until the death of the insured because they would not have a valid reason under the regs to buy that life insurance.   Kelly: They could only buy like Key Man life insurance.   David: They could buy the Key Man, but when that Key Man would leave the bank they’d have to surrender the policy because there was no need for it once that key man left.   Kelly: A bank does not have to have a nonqualified benefit plan. It could just have any sort of benefit plan. It could be health insurance. It could be 401K, any sort of benefit, correct?   David: That's correct, as long as they're providing employee benefits. From experience, if a bank provides health care coverage typically the cost of health care in today’s market is so high that health care alone is enough to justify buying bank owned life insurance generally up to twenty-five percent of capital.   Kelly: Right, so do you see BOLI as primarily an alternative asset class or an insurance product with investment benefits or does it kind of depend on what the needs of the bank are?   David: I would say it depends on the needs of the bank. I'd say it probably leans more toward the alternative asset class in that you look at the features of bank owned life insurance as a tool to produce earnings that would help the bottom line and help recover employee benefit expenses. BOLI has features that are attractive from that standpoint.   Kelly: As an alternative asset class, and I know you and I've had this discussion offline a couple times, if you consider the investment features as an alternative asset class what asset class does BOLI compete against best or worst I suppose? Where do you think, if you were a bank and they liked the features and benefits of BOLI and they need as a replacement. What asset do you think it replaces best MUNI’s, agencies, loans? As I see it, it could be a loan to an insurance company. Where do you see it?   David: It's hard to say that BOLI replaces any particular investment because the features are different than all the other asset classes that are traditional for a bank. If you go down that path and talk about, for instance, BOLI versus MUNI’s there is some common characteristics in that they both have income that's not taxable that helps produce generally higher returns than most taxable asset classes.     There are a lot of differences in those two asset classes, for instance, MUNI’s generally have a fixed rate interest rate, whereas BOLI is an adjustable interest rate. The credit quality of both are high. The BOLI carriers tend to be large, very well-known, highly rated carriers, so very strong credit quality. BOLI has no mark to market in the asset, that in reporting periods whereas municipal bonds generally have to do a mark to market of capital through the OTTI adjustment. BOLI essentially doesn’t have a diminution of value when rates rise whereas municipal bonds could.     Now, from the value of municipal bonds relative to BOLI is that it's always tax-free rather than tax deferred. BOLI’s tax deferred technically, but if held until death its tax free. If you surrender a BOLI contract before maturity, before the person dies, you have a tax liability for the gain plus an extra ten percent for the it’s called a modified endowment contract penalty. BOLI effectively has minimal liquidity from the standpoint of once you buy it you intend to hold it until death, because you don’t want to incur the tax liability.     Whereas a municipal bond if you decided to sell that you would still retain all the income that you've earned to that point tax free. Sometimes banks put municipal bonds in the hold to maturity buckets so they can't really sell the bond; it becomes an illiquid asset for them as well. There's some pros and cons to each, but BOLI does hold up well generally considering the pros and cons of it to any of the asset classes.   Kelly: But, especially MUNI’s.   David: Yes, I think from that standpoint rather than one versus the other it might be some combination of the two for diversification.   Kelly: From my perspective, I see MUNI yields to get higher yield you have to extend duration, so you look at the risk of extending duration versus investing some assets in bank owned life insurance. I've only been doing this for a year now. It’s seems that like half the banks have BOLI on the balance sheet and half don’t.     From my perspective, it's kind of a CPA, risk manager, investment person I don’t really see why a bank wouldn’t max out their twenty-five percent of net capital. Now, that sounds pretty self-serving I know, but in your experience what's the single biggest reason for a bank to not include BOLI in its assets class, because there certainly is a reasonable amount of bias and hesitancy for Boards and CFO’s to get BOLI. What's the single biggest reason that you see for a bank to not include it in their asset class?   David: The stats on BOLI are that sixty percent of the banks across the country have BOLI and forty percent don’t. For banks over a hundred million it's about two-thirds that have BOLI and one-third that don’t. It’s fairly common for banks above one hundred million to have an investment in bank owned life insurance. For those that don’t, it generally falls into one of two to three reasons.     Probably the most prevalent is a bank that has high loan demand. The bank wants to make loans to its local market because that helps build franchise value. If they have high loan demands, say their loan to deposit ratio is over a hundred percent, they may not have the liquidity to hold BOLI at the current time. All their attention and all their liquidity is going into making loans. While BOLI competes with loans well on the yield side, the tax equivalent yield side, banks tend to want to have loans for building the franchise value versus owning bank owned life insurance. If they have the option, they're going it put it into loans rather than BOLI assuming they feel comfortable with the credit quality of those loans. That's probably the biggest reason.     Number two is that some banks don’t fully understand the asset, haven’t taken the time to fully understand it. The pros and cons and features of BOLI is not traditional with a lot of banks. There's this uncertainty about something that's not traditional. They may think “We haven’t done that before and I don’t want to take the time to learn pros and cons.” Maybe they’ve had a presentation and it wasn’t presented in a way that made it clear what the pros and cons are. They maybe saw it as too much of a sales push instead of laying out all the pros and all the cons kind of thing.     Keep in mind that for BOLI to be approved by a bank it generally requires a hundred percent agreement, meaning you must have the CFO of the bank, the CEO of the bank and usually everybody on the Board to be in unison that they want to buy BOLI. You can have one person dissent out of ten, for instance, and that could keep it from happening.   Kelly: Why is unanimity required?   David: It’s not required. It's just generally the way it is. First off, if you don’t have the CEO and CFO on board it probably won't go to the Board. You need both of them. The Board, they normally just don’t want BOLI to be something that causes dissention among the Board members. That's not always the case, but typically they need all Board members or at least eighty to ninety percent approval before they would invest in the asset. I haven’t really run into it, but I don’t think you’ll see BOLI being approved on a five to four vote.   Kelly: Yeah, but that would be true with just about any asset class. Let's say the bank wanted to, the CFO proposed extending duration. Don’t you think that unanimity would be expected or the same standard would be expected for that decision to extend municipal bond duration versus like in a BOLI decision?   David: Yes, I would think so. On investments they have their investment policy that's been approved by the Board and that decision would have to be made within the investment policy about extending duration. Yes, I would think you would need a very high approval rate of the Board members before you would change the investment the policy to do something that effectively increases the risk.   Kelly: Do you see BOLI as being subject to…say within the scope of the banks investment policy in your experience?   David: No, BOLI has its own policy. One of the requirements under the regs is that you have to have a BOLI policy before you can purchase it. You would establish a bank owned life insurance policy; in a sense it's an investment policy for BOLI all to its own. It explains within the policy the bank’s view of BOLI; the percentage of capital that the bank would be willing to purchase; the percent to any one carrier; the due diligence that would be done before purchase; carrier selection; vendor selection. How would they go about deciding which carriers, which vendors and so forth? That all has to be documented in a policy before the bank can even go about purchasing a BOLI product.   Kelly: The bank either includes that as a chapter within the investment policy or they have it as its own separate investment policy.   David: I have pretty much only seen it as its own separate policy. If they include it within the investment policy it would be its own chapter. It's fairly lengthy. It's usually ten - fifteen pages of policy all to itself.   Kelly: How has the industry changed since the early years?   David: In the early years, I guess from a salesperson’s standpoint the hard part was to get a bank to talk to you about BOLI because it just wasn’t common and owning life insurance as an asset was not normal. It was outside the box and a lot of bankers didn’t want to discuss doing something that was outside the box. The biggest hurdle was getting the audience.     Today, most banks know about BOLI so they've heard about it and they have had many, many sales calls about it. Other banks they know have purchased it, so they understand at least the term and what it is. Now, there are just a whole lot of sales calls from insurance sales folks asking about BOLI. They're aware of it. It's just very, very competitive and maybe difficult for the bankers to understand the difference in firm A versus firm B.     The other way that's changed, when I started doing this the only products available were what's called general account products where the carrier provides a universal life insurance product or some whole life products that have an interest rate or dividend rate. Then the main risk to the bank was a carrier’s credit whether the carrier would be able to pay the claim later. Today, you have not only general account which are still very popular, but since then there's been a lot of purchases of what is called hybrid separate account products and also variable separate account products.     Variable separate account products are where the assets are segregated from creditors somewhat like a mutual fund. The bank can choose to invest the money within a particular investment bucket; although, for a bank it as to be eligible investments unless it's used as a hedge against a deferred comp plan. Those have some higher risk features, a little bit more moving parts. They have a stable value wrap sold by a registered product or private placement memorandum and so they're more complicated. Most community banks shy away from those because of the complications and the mark to market within the portfolio.     Then, there's a hybrid separate account product that has features very much like a general account. It has an added credit enhancement that if the carrier were to ever become insolvent the assets within the separate account by legal definitions are segregated from creditors of the insurance carrier so that those assets would only be available to the policy holders. These new asset classes have been pretty popular and have essentially enhanced the options for banks to buy bank owned life insurance.   Kelly: The first generation of BOLI was the general account, no-load product and then the second generation would be some of these the hybrid accounts and some of these more sophisticated product structures. But the core concept was the same, right?   David: That's correct, basically similar structure from a standpoint of no loads, no surrender charges, single premium, just a difference in the chassis if you will.   Kelly: Right, the risk sharing to a certain extent, right, because was the separate account available back then in the early years?   David: You could buy a separate account that was called variable universal life. It was a shelf product, but banks really didn’t buy it then because you had mark to market. Say it was all in a bond fund but the interest rates went up and the value of the bond fund went down five percent you’d have to take an immediate mark to market on your balance sheet and income statement. That was not very attractive to a buyer. If you're a bank you don’t want that kind of volatility on your income statement.   Kelly: Even though that's the nature of a municipal bond portfolio, they have to mark those.   David: A municipal bond portfolio they mark to market, but not through the income statement. They mark to market through the capital account.   Kelly: Right.   David: It doesn’t flow through income.   Kelly: Right.   David: Whereas if you were to do the same thing in a variable universal life insurance contract and have that mark to market risk you’d have to mark that through your income statement because the cash value is changing.   Kelly: One of the things that I noticed about Equias, again this sounds somewhat self-serving, but I’ll say it anyway. This relates to the industry changes. When I see Equias, it just seems to be a highly professional organization. I think eighteen consultants and thirty some support personnel and I believe seven CPAs and a bunch of attorneys, MBA’s that kind of thing. It just seems that one of the things that appears to have happened with Equias having emerged as the key player is the element of professional consulting capabilities versus I would suspect in the early years, and currently, many of potentially our competitors, it's mainly a bunch of insurance guys, right, trying to sell product?  I would think in the early years that's what it was all about, insurance guys trying to sell insurance to a new market…banks.   David: Yes, there was a lot of that. The business model that Equias developed was this is not an area that banks have a lot of expertise in and that they need support services so that they can spend a minimal amount of their time dealing with the technical stuff and don’t have to pay a lot to CPA firms and law firms to help them through the process.     We set up the firm with the idea that we could provide those services at costs that are competitive with anybody in the marketplace. Through volume we could provide more services and all the technical services that a bank would need, but do it in a very cost effective way. That’s where we actually have eight CPAs and two attorneys and a former OCC regulator, former bankers, bank directors, and a former head of the BOLI area for one of the major insurance carriers.     We've staffed our firm with very, very experienced, competent, technical people including the consultants are all very experienced, so that we could be a real asset to the banks. It'd be hard for our competitors to match our knowledge and experience and to duplicate what we can do.   Kelly: One of the things that got my attention was I think you're one of the few that has a SOC 1, Type 2 audit. Not many insurance “agencies” have that kind of thing going on. That was a good plus in my mind with you guys.   David: Yeah, it covers our implementation process, as well as our administration process, and covers not only the BOLI side of it, but covers the nonqualified benefits side. We’ve set up internal controls when we established the company and we followed those controls. We've been able to go through the audit process very efficiently and effectively.   Kelly: I’ll probably be criticized for this being an infomercial for Equias, but what the heck. That's what we can do. All right let's finish with one final thing. I’ll give you the choice. This is a question I ask every guest either your favorite quote or, what I like the best, is tell us what one of the stupidest things you’ve said or done in your business career.   David: One of the early days in my career I remember having gone to this bank to explain BOLI and the nonqualified plans probably for the seventh or eighth time. Some of the Board members were wearing out with me coming back almost it seemed like every month. One of the Board members, who was an attorney, when I came back this time she just looked and “Oh no, not you again.” I said, “Yeah.” She said, “Look, if I vote for this, does that mean you won't come back and you'll leave us alone?” I said, ‘You’ve got my word on that.” I guess in that case persistence paid off.   Kelly: It's good, yeah.   David: It wasn’t one of those real positive “I'm glad to see you” kind of moments.   Kelly: That's right; you got the deal done though.   David: Yeah, I was able to get it done through persistence, not through the sales process really.   Kelly: Yeah, that's good. All right, David, thanks for your time. I appreciate it.   We want to thank you for listening to the syndicated audio program, BankBosun.com The audio content is produced by Kelly Coughlin, Chief Executive Officer of BankBosun, LLC;  and syndicated by Seth Greene, Market Domination LLC, with the help of Kevin Boyle. Video content is produced by The Guildmaster Studio, Keenan Bobson Boyle. The voice introduction is me, Karim Kronfli. The program is hosted by Kelly Coughlin. If you like this program, please tell us. If you don’t, please tell us how we can improve it. Now, some disclaimers. Kelly is licensed with the Minnesota State Board of Accountancy as a Certified Public Accountant.   Kelly provides bank owned life insurance portfolio and nonqualified benefit services to banks across the United States.  The views expressed here are solely those of Kelly Coughlin and his guests in their private capacity and do not in any other way represent the views of any other agent, principal, employer, employee, vendor or supplier of Kelly Coughlin.  

A non-qualified assignment involves the transfer of a future periodic payment obligation arising from the settlement of a dispute from the defendant or its carrier to a third-party assignee.  In this podcast, Ringler Radio host Larry Cohen and co-host, Duke Wolpert join Tom Donahue, Vice President of Structured Settlements Marketing at Liberty Life Assurance Company of Boston, to discuss Liberty Life’s structured settlement program, the benefits of non-qualified assignments, and ways to effectively use them.

A non-qualified assignment involves the transfer of a future periodic payment obligation arising from the settlement of a dispute from the defendant or its carrier to a third-party assignee.  In this podcast, Ringler Radio host Larry Cohen and co-host, Duke Wolpert join Tom Donahue, Vice President of Structured Settlements Marketing at Liberty Life Assurance Company of Boston, to discuss Liberty Life's structured settlement program, the benefits of non-qualified assignments, and ways to effectively use them.

We're continuing our Q&A series this week and today I handle these two questions: 00:01 Melissa heard about an idea of using a HELOC to pay off your primary mortgage as a method of paying off the loan faster and saving interest costs. This was referenced in the book "Master Your Debt" and the website TruthInEquity.com. 38:13 Robert asks about the safety of the deferred comp plan that he and his wife participate in at her Fortune 500 Public Utitlity company. Enjoy the show! Joshua