Bedminster, New Jersey-based Peapack Gladstone Financial Corporation has high hopes for its life insurance premium finance division, which it launched earlier this month.
Greg Smith, president of commercial banking at Peapack-Gladstone, which has $6.2 billion in assets, expects the fledgling unit to emerge as one of the company’s top business lines within four to six years, and the impact on its balance sheet. said he believes that will begin to emerge. 2023.
Life insurance premium finance means lending money and using that money to pay for life insurance. This is most common among business owners and wealthy individuals who have large insurance policies and prefer to take advantage of higher premiums than pay out of pocket.
Anthony Roscalzo, senior managing director and chief operating officer of the new unit, expects minimum loan amounts to range from $100,000 to $200,000, with averages ranging from $500,000 to $800,000.
LoScalzo and Raymond Kim lead the division as Senior Managing Director and President, with multi-million dollar financing at Wintrust Financial in Rosemont, Illinois. Industry leader Wintrust reported on Sept. 30 that he had $8 billion in life insurance premium financing loans.
How big will Peapack-Gladstone’s venture get? Primis Financial Corporation of McLean, Virginia announced its entry into life insurance premium finance in October 2021. Nearly a year later, Primis, with $3.3 billion in assets, built her $129 million portfolio at the end of the third quarter on Sept. 30. Life insurance premium financial loan. Peapack-Gladstone plans to produce at a similar or larger scale, Smith said.
“We’re going to do a slow walk in the fourth quarter. [but] It will definitely grow exponentially next year,” Smith said of the life insurance premium finance sector.
Once operational, Peapack-Gladstone’s life insurance premium finance division will operate nationwide.” [management] We have a back-office infrastructure built in to support this effort,” writes David Bishop, head of Peapack-Gladstone at Hovde, in a research note.
Currently, there are not many banks involved in this space, but it is becoming more crowded as institutions realize the potential benefits, Kim said.
Truthist BankDirect Capital Finance Sept. 6 dealsIt is the premium finance arm of Texas Capital Bancshares in Dallas.
For Peapack-Gladstone, the appeal of life insurance premium financing lies in the relatively high interest rates, currently around 6% according to Smith, and the low associated risks.
“I don’t mean to say ‘almost nothing’ because I jinx myself, but I think we have eight basis points of reserves,” Smith said. is protected by cash value surrender life insurance and some form of equity marketable securities.We are effectively almost 100% protected.”
On a strategic level, booking a large volume of life insurance premium loans, as Peapack plans to launch next year, will go a long way to diluting the company’s long-standing concentration of commercial real estate loans. Mr Smith added. As of June 30, multifamily and CRE loans accounted for 49% of his $5.15 billion asset-loan portfolio at the company.
Premium financing seems like a good fit for Peapack-Gladstone’s existing business model. Under CEO Douglas Kennedy, the company has earned its reputation as a high-touch, high-performance boutique specializing in small business lending and wealth management. Peapack-Gladstone said on June 30 he had $9.5 billion in assets under management.
This is “a business line with natural synergies and cross-selling opportunities for bank wealth management, high net worth and CRE customer bases,” Hovde’s Bishop wrote in a research note.
Mr Smith said life insurance premium financing is a “natural cross-sell” because PeaPak Gladstone property owners have substantial assets but relatively low liquidity. “This is also a great property planning tool for our subsidiary PeaPak Private Wealth Management.
A product aimed almost exclusively at senior executives and wealthy entrepreneurs, premium finance requires the kind of sophisticated service that Peapack-Gladstone is known to offer, Kim said. says.
“These are ultra-high net worth individuals,” Kim said. “They are highly sophisticated clients who deserve the high-touch service that Peapack-Gladstone is famous for.”
Of life insurance premium financing, LoScalzo said, “It’s a very relationship-based business. …You have to be able to hold hands a little. No. That’s something I always felt very strongly about.I believed it.”