Florida Banking December 2025/January 2026

makes BOLI particularly attractive in environments where liquidity is tight, loan demand is high, and when market interest rates are volatile. Despite its liquidity constraints, regulators recognize BOLI as a prudent financing tool, provided it is backed by sound risk management and does not exceed 25% of Tier 1 capital as a reference. This guidance is outlined in the Interagency Statement on the Purchase and Risk Management of Life Insurance (OCC Bulletin 2004-56), which emphasizes the need for board oversight, pre purchase analysis and ongoing monitoring. Strategic Alignment Is Key As banks navigate the balance between lending and liquidity, executive benefit plans must evolve in tandem. By aligning compensation

strategy with financial metrics and leveraging BOLI to finance long-term obligations, community banks can retain top talent while preserving financial flexibility. In a world where every basis point matters, executive benefits are no longer just a reward — they’re a reflection of strategic discipline. Insurance services provided through NFP Executive Benefits, LLC. (NFP EB), a subsidiary of NFP Corp. (NFP). Doing business in California as NFP Executive Benefits & Insurance Agency, LLC. (License #OH86767). Securities offered through Kestra Investment Services, LLC, member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with NFP or NFP EB. Investor Disclosures: www. kestrafinancial.com/disclosures

future benefit payments without setting aside dedicated assets. This structure allows the bank to selectively reward key individuals, such as a chosen successor, without triggering nondiscrimination rules or immediate funding requirements. From a succession planning perspective, this is a powerful tool. By offering a deferred benefit, the bank can retain a future leader who is prepared to step in when their predecessor retires. It ensures continuity and readiness at the executive level. However, because the plan is unfunded, the participant remains an unsecured general creditor of the bank. If the bank fails, the benefit may be lost, even while receiving benefit payments during retirement. This underscores the importance of leaving the bank in capable hands — someone who is not only ready to lead but also motivated to protect the institution’s long-term stability. Enter Bank-Owned Life Insurance (BOLI), a time-tested asset banks use to informally finance executive benefit liabilities and provide key person death benefit protection. While BOLI is technically illiquid, its tax-deferred growth and non-taxable death proceeds make it a powerful offset and cost-recovery to the rising cost of employee benefits. BOLI is carried at book value and earns interest that is recorded as non interest income. When structured properly, it can generate tax equivalent yields significantly higher than traditional investments, without being marked-to-market. This Financing Executive Benefits with BOLI

Commercial Loan Portfolio Consulting

Commercial Loan Reviews Portfolio Stress Testing Consulting

ENGAGED. PROVEN. TRUSTED. CEIS Review evaluates and assesses commercial loan portfolios to assist senior management and the board in assessing the credit risk quality and administration of their Institution’s portfolio. CEIS’ experienced credit professionals consult with clients to advise on credit matters, industry best practices, and pertinent regulatory guidelines.

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