Bank Board Letter November 2014 : Page 2

The bank also boasts an efficiency ratio of 57.21 percent. Prior to nCino, closers used to close 40 loans each year. Now, they are able to close 60 loans on average per year. These results are due to a lending strategy the bank does not compromise, and a belief in technology to carry out its execution. Live Oak looks differently at how information moves across the organization. In such a distributed environment, paper does not work, driving Live Oak’s movement to paperless. Today, 100 percent of its regulatory and compliance policies, accounting books, loan documents and more are electronic, online files. Working in tandem with the financial institution’s core, nCino’s cloud-based Bank Operating System is built around the Salesforce platform to provide bankers with a centralized means to manage loan production and performance. With nCino, Live Oak employees no longer need to rekey information multiple times; it needs to be entered just once to make it securely avail-able to multiple stakeholders and from any device with secure Internet access. Live Oak has the flexibility to configure custom document templates and workflow patterns, keeping all forms righted in the proper routing and approval procedure through-out origination. Everyone involved can see loans and communi-cate with each other on those loans, creating an intense degree of consistency to Live Oak’s loan approval process. Live Oak believes in a decentralized management structure where people interoperate and make decisions in the field. Not every bank employee is concentrated in the greater Wilmington area, or even in the state of North Carolina. However, that does not stop them from collaborating on the same deals ev-ery day. They can equally understand the business so it can move a lot faster. They are spotting more qualified deals more quickly and are equipped to process borrowers, who basically span every state, better too. The bank has improved loan turn times and experienced a more than 50 percent reduction in document exceptions. While a boost to loan activity, such visibility has boosted job performance Ð also measured on a real-time basis. Employees thrive in an environment where they are held accountable while also being able to make decisions. The culture for Live Oak Bank employees is to expose information for making decisions. Every division at Live Oak runs on a dashboard that is shared with the entire company each Monday. Marketing leads, conversions, loan operation performance Ð all shown with the names and pictures of top performers, plus those on the low end, revealed. The goal is to look for anomalies and find opportunities, always strive to see more in the data they have. The view that Live Oak has into borrower data helps the bank forecast more accurately and cross-sell to grow wallet share. Banks can sometimes fall behind on keeping up with when loans are up for renewal, but the nCino Bank Operating System ensures 90, 60, 30 days out that its loan officers are reminded. Employees are on top of the portfolio. There are no disparate spreadsheets, but instead rigorous accountability as to the status of each loan relationship. The portfolio can be segmented by characteristics such as collateral type, debt ser-vice arrangement or borrower geography. Each loan’s financial results are available real time. Live Oak overall has created an environment of awareness, which has directly played into its risk management and compli-ance objectives. Over the course of time, the bank has signifi-cantly reduced exam downgrades, most times receiving none, and has a better watch list process in play, too. Live Oak has found a solution that takes into account the needs of each end user, helping make that employee more ef-fective, so that essentially the top level is being rewarded at the same time as the bank’s bottom line. Neil Underwood is president and chief operating officer of Live Oak Bank in Wilmington, N.C. Go to www.liveoakbank.com for more information. The Perks of serPs: benefiTs To aTTracT execuTives By Todd CarpenTer G overnment limits and restrictions on the amount that employ-ees and employers may contribute toward qualified retirement plans, such as an IRA, 401(k) or 403(b), leave many highly compensated executives Ð usually key executives Ð without enough retirement income to sustain their current standard of living. A supplemental executive retirement plan is a great way to solve both the issue of governmental limits and the ability to at-tract, retain and reward key talent. SERPs are typically designed Next moNth: Software enhances Directors’ Performance meeting millenials’ Banking Needs to make up for the retirement income shortfall caused by limits and restrictions in qualified retirement plans. I say typically because there are more ways to use SERPs than just for retirement income. The executive benefit planning indus-try has long focused solely on retirement income because that is how most consultants were trained and introduced to SERPs. Executives at most companies tend to be in their late 40s and 50s, which is where the focus on retirement income originated. When consultants design SERPs solely for retirement income because the decision makers are concerned about retirement, they often make the mistake of designing a plan that fails its primary goal Ð a ttracting, retaining and rewarding key talent. Consider the following: Executive A is 57. He is married with adult children that live on their own. He is maxing out his deferrals into the company 401(k) plan but still has not saved enough for retirement. His employer wants to reward him for his 15 years of service and keep him around another 10 years

THE PERKS OF SERPS: BENEFITS TO ATTRACT EXECUTIVES

Todd Carpenter


Government limits and restrictions on the amount that employees and employers may contribute toward qualified retirement plans, such as an IRA, 401(k) or 403(b), leave many highly compensated executives Ð usually key executives Ð without enough retirement income to sustain their current standard of living.

A supplemental executive retirement plan is a great way to solve both the issue of governmental limits and the ability to attract, retain and reward key talent. SERPs are typically designed to make up for the retirement income shortfall caused by limits and restrictions in qualified retirement plans.

I say typically because there are more ways to use SERPs than just for retirement income. The executive benefit planning industry has long focused solely on retirement income because that is how most consultants were trained and introduced to SERPs. Executives at most companies tend to be in their late 40s and 50s, which is where the focus on retirement income originated.

When consultants design SERPs solely for retirement income because the decision makers are concerned about retirement, they often make the mistake of designing a plan that fails its primary goal Ð a ttracting, retaining and rewarding key talent.

Consider the following: Executive A is 57. He is married with adult children that live on their own. He is maxing out his deferrals into the company 401(k) plan but still has not saved enough for retirement. His employer wants to reward him for his 15 years of service and keep him around another 10 years until he plans on retiring. Putting a SERP in place that promises to pay him 40 percent of his final pay for life will accomplish the employer’s goal, because 10 years and retirement is first and foremost on the executive’s mind.

Now let’s take a look at his successor in training. Executive B is 40. He is married with three children ages 4, 6 and 8. His wife stays at home to care for the children and does not have formal employment. He is contributing to his 401(k) but is nowhere near maxing out contributions. His employer wants to retain him long term to succeed Executive A. The employer offers him the same SERP that will pay him 40 percent of final pay at retirement. Three years go by, and Executive B leaves the company for a higher-paying job. The plan did not achieve the employer’s goal. Why did it fail?

To most 40-year-olds in his situation, short-term incentives are king. To promise a benefit 27 years down the road does little to retain an executive, as retirement is not on the radar.

That is where many consultants and employers make mistakes in the design process of plans. They don’t put themselves in the shoes of their executives and ask themselves if they were in a similar stage in life what would matter most to them. They fail to ask each executive being considered if the plan would be valuable to them. Many employers may feel awkward asking their executives, and some executives may be reluctant to answer honestly. That’s where a consultant can be invaluable during the planning process. Ask questions about what stage in life they are at, their family dynamics and short- and long-term goals.

Once a consultant and employer have a good understanding of what is important to their top talent, a plan can be designed to accomplish the goals. SERPs can be designed to pay out benefits at certain pre-set dates or life events while still employed. Benefits can be paid to accomplish goals other than retirement. Here are a few examples:

• Lump sum in five years for mission work.
• Four annual payments starting in 10 years to pay for a child’s college tuition.
• At age 50 to buy a boat.

Consider the following alternative benefit design for Executive B and its value to him. Would this plan have been better for retaining him in both the short and long term?

Executive B is 40. Again, he is married with three children ages 4, 6 and 8. After being interviewed, paying for college is a concern of his. His employer wants to retain him long term to succeed Executive A. The employer offers him the same SERP that will pay him 40 percent of pay. However, this plan allows for half of that amount (20 percent of pay) to be paid out over a six-year period, starting in 10 years. This will be beneficial as a source of additional income to help pay for his children’s college tuition. He vests in that benefit over a 10-year period. The remaining 20 percent of pay will be paid out at age 67 when he plans on retiring. Will this accomplish the employer’s goal? It definitely has a better chance. There is now a benefit that serves to retain him short-to mid-term. Once he receives those payments and his children are out of the house, retirement becomes a real concern, and is only nine years away.

Over the past several years, we have seen an increase in older executives retiring as the baby boomers age. Younger executives taking over have different needs than their predecessors.

Taking an alternative approach to the traditional design of simply focusing on retirement is needed now more than ever. This approach has been well received by our clients over the past several years, and nontraditional designs are becoming more common.

Employer goals of retaining, recruiting and rewarding executives be accomplished utilizing a SERP as long as we remember that “one size does not always fit all.

Todd Carpenter is senior vice president of business development for NFP Executive Benefits, Nashville. He can be contacted at 615- 376-0213 or tcarpenter@nfp.com.

Read the full article at http://omagdigital.com/article/THE+PERKS+OF+SERPS%3A+BENEFITS+TO+ATTRACT+EXECUTIVES/1862919/234560/article.html.

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