Industry News, Articles and Events Blog

A Special Message from CEO/Founder

3/18/2020

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By Scott Richardson, JD, CLU, ChFC

IZALE Financial Group is well-prepared to respond to the rapidly-changing environment triggered by COVID-19.

We have mostly been a remote workforce, with just the national administrative office staffed. Employees there have worked remotely from time-to-time to balance family life, so moving to more frequent remote work is fairly simple. We will still staff the administrative office since it is our main source of mail, however, we will do so on a staggered basis so that employees minimize contact with each other.

Protecting information security is critical. We have a robust Written Information Security Protocol or WISP plan in place. In addition to other practices, we use MFA for accessing systems and a VPN for working remotely. This applies to employees as well as independent representatives.

We have asked all of our representatives to stop having face-to-face meetings. Going from one client or prospective client to another is not in accordance with current guidance from public health experts. We greatly enjoy the personal interactions we have with you and look forward to getting back to normal, but in the meantime we can serve clients via phone calls, emails, and even video calls.

While we expect no disruption to monthly reporting for BOLI or quarterly reporting for Split-Dollar Loan plans, we rely solely on the carriers to provide us with policy values. We have been in contact with them and while they have plans in place to continue timely reporting, that could be disrupted by further outbreaks affecting their workforce or limits imposed by authorities. We will clearly communicate any change in our reporting commitment.

We understand that many of you had plans for buying or adding BOLI or executive benefits and those plans may be put on hold in the short-term. We understand there are other priorities on which your institution and communities need to focus. IZALE is well-positioned to weather this delay. We will continue to send our newsletter and add relevant information to our online blog. We will work to update and expand the content of our online library and encourage you to visit it to learn more about how we help our clients and your peers.

We are grateful for the opportunity to serve our clients, and wish you the best as you implement your own plans. We’ll get through these challenging times together!

R. Scott Richardson, JD, CLU, ChFC
President & CEO
IZALE Financial Group
2400 Big Timber Road, Suite 103A
Elgin IL 60124

Contact Scott by Phone Mobile or by Email

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COMMUNITY BANKS & ESOPs

3/16/2020

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by Mike Mathioudakis, Genesis ESOP Advisors, LLC

Community banks are the very lifeblood of many communities. They serve the banking interests of the businesses and individuals in their respective communities, still offering a personal level of service that the big banks just can’t match.

Community banks have fought long and hard over the years to maintain their independence. However, this has become an increasingly difficult challenge as the big banks just keep getting bigger. The “costs” and the “risks” to keep up continue to rise. Technology has changed the banking industry (and most others) in ways no one could have imagined.

Community Banks plan for independence.

While some customers still like to visit their local bank on a regular business to handle their banking needs, more and more people are moving towards doing most, if not all, of their banking using their smart phones. This technological revolution brings with it a massive risk – cyber security.

However, there is another major risk that community banks face that is a very real threat to their very existence. That risk is ownership succession.

Studies have shown as baby boomers move into retirement, those who own family businesses are finding that their children are not following in their footsteps and entering the family business like they have in decades past. There are multiple reasons for this, which are beyond the scope of this article. However, the net result of this trend is not. The result is that a far greater percentage of these boomer-owned businesses are being sold to non-family members. This same phenomenon faces many community banks.

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The Butterfly Effect

3/10/2020

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The market is waking up to not just the viral contagion of coronavirus, but also to financial, economic, and geopolitical contagion.

by Scott Minerd, Guggenheim Partners

The market is finally waking up to the prospects of not just viral contagion from coronavirus, but also to financial and geopolitical contagion. Now the contagion is spreading rapidly into the credit markets where not only energy bonds are plunging but other sectors like airlines, lodging, and retail are sure to follow suit. Then there is the knock-on effect to corporate earnings and cash flows across a broad swath of industries once the world enters a global recession which now appears to be inevitable. We

arrive at this moment with the overleveraged corporate sector about to face the prospect that new-issue bond markets may seize up, as they did last week, and that even seemingly sound companies will find credit expensive or difficult to obtain. Credit spreads have a long way to expand. BBB bonds could easily reach a spread of 400 basis points over Treasurys while high yield would follow suit with BB bonds at 750 basis points over and single B bonds at 1,100 basis points over. The risk is that it could be worse. As for stocks, technical analysis suggests that there should be support around 2,600 on the S&P 500, but in a recession scenario a level closer to 2,000 could be the ultimate outcome.

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Coronavirus Shakes the World Markets - BOLI Provides Stable, Predictable Earnings

3/4/2020

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by R. Scott Richardson, JD, CLU, ChFC Founder & CEO IZALE Financial Group

As world economies are shaken by the Coronavirus,

The Federal Reserve March 3, 2020 announced an emergency rate cut of 50bps. Are there more to come? Less earnings on Fed Funds.
Today, the 10-year UST fell BELOW 1%. Well-below its all-time low.
The 5-year UST is below that at about 0.75%.
Our clients are sharing that their corporate bond yields have fallen to below 2.25%.

The only silver lining is that you should have some gains in the bond portfolio. But now what? Unless you have a robust loan pipeline, where do you go with maturing bonds or to invest the cash from loan payments?

Bank-Owned Life Insurance or BOLI is used by over 4,000 financial institutions with over $180 BILLION of capital invested in it. What makes BOLI so attractive?

Guaranteed minimum crediting rates of 1% - 4%. You are reading that correctly.
Current yields (after cost of insurance) of 2.75% - 3.5%, depending on purchase size and insured demographics. Tax-effect that, and it compares with some new loan rates.
No mark-to-market risk. With general account or hybrid account BOLI, a change in market rates has zero impact on the balance sheet value.
There are even products with an “index” crediting rate that could deliver far more yield than traditional BOLI.

Call or email us today. Let’s talk about the vital role that BOLI can play on your balance sheet and let us help you with the next BOLI purchase.

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Blog

A Special Message from CEO/Founder

COMMUNITY BANKS & ESOPs

by Mike Mathioudakis, Genesis ESOP Advisors, LLC

The Butterfly Effect

Coronavirus Shakes the World Markets - BOLI Provides Stable, Predictable Earnings

IZALE Financial Group

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