The manager of a $700 million Community Reinvestment Act fund has developed a bank-owned life insurance arrangement designed for banks that want to use BOLI to meet CRA goals.
CRAFund Advisors, Ft. Lauderdale, Fla., is offering CRA-BOLI, a product that enables banks to use the cash value inside BOLI arrangements to make CRA-qualified investments.
The federal Office of the Comptroller of the Currency and other banking regulators approved the concept of a BOLI-CRA separate account in 2004, according to CRAFund Advisors, which says it has an exclusive patent on the product.
The CRA requires banks to lend to homeowners and businesses in lower-income neighborhoods.
CRAFund Advisors’ CRA-BOLI product gives banks a tax-efficient way to meet CRA investment requirements, the company says.
CRA-BOLI was developed for CRAFund Advisors by Daniel Borten, founder of Callinectes Consulting Inc., Gaithersburg, Md., a community development structured finance company.
Borten says he developed the product to help banks satisfy part of their CRA investment mandate while at the same time helping banks fund executive benefits.
Investment income from the policy would be used to finance affordable housing, small business loans and other services aimed at low- to moderate-income communities, according to CRAFund Advisors.
Because BOLI earnings are not currently taxed, CRA-BOLI may offer a more favorable return to the bank than other CRA-qualified investments, such as taxable municipal bonds, Borten says.
Companies that set up BOLI programs can use any death benefits collected to pay for executive benefits.