Smaller banks are slowly adopting bank-owned life insurance as a way to counter shrinking loan margins and diminished returns on other investments.
Community banks have traditionally been reluctant to buy life insurance on key employees, a common practice among big banks. But since the recession, higher capital requirements and other factors have made bank-owned life insurance, or BOLI, increasingly attractive. The insurance offers tax breaks and counts as Tier 1 capital, while producing higher yields than most Tier 1 investments.
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