ITA Quarterly News - Feb. 2018

ITA President's Message

Welcome to 2018! Thank you for your membership in the Iowa Trust Association. Many of you know this already, but it is a great organization that can help us within all of our departments no matter the size.

I have found that one of those areas of help is the new survey that was conducted of members. This survey can be a valuable piece in each of your departments and can help you understand how others in the state handle their departments. These ideas can be invaluable to us.

I want to thank those that participated and provided the information in the survey. I feel strongly it will be a piece that I go back to regularly as a trust department manager. 

Let’s make 2018 even better than 2017!

Jonathan Holthe, CFP
CBI Bank & Trust and President of the Iowa Trust Association


IBA invites all bankers to Feb. 7 Legislative Reception
The Iowa Bankers Association (IBA) will host a legislative reception at 4:30 p.m. on Feb. 7, at the Embassy Suites in Des Moines that is free and open to all bankers to attend. Attendees will have the opportunity to network with legislators to discuss issues that are important to them and their banks. With the Iowa Legislature planning to take a serious look at tax reform, it is important for the banking industry to have a strong showing at this year's reception, which provides a great opportunity to discuss the uneven playing field that the credit union tax exemptions creates. Register for the reception.


Prince’s Estate Sells His Music Vault, How Will That Affect His Legacy?

Michael Brohawn, CFP, CLU, ITM  TwentyFirst
In 2004, Prince took part in a ceremony honoring George Harrison at the Rock and Roll Hall of Fame.  Sharing the stage with such rock luminaries as Steve Winwood, Tom Petty, and Jeff Lynne, Prince joined the group in a rendition of “While My Guitar Gently Weeps” by providing firepower on the song’s guitar solo, and he did not disappoint.  About halfway through the song, Dhani Harrison, George’s son, smiles at Prince, knowing what is to come. Prince launches into a three-minute performance in which he doesn’t just play notes, but makes the guitar an extension of his body.  Great guitarists make it look easy - it just flows, and that night it did for Prince. By the time the last note rang out, with Prince tossing his vintage Fender Telecaster into the audience, the members of the audience - all musical stars themselves - understood what a singular talent he was.

Most people don’t think of Prince as a great guitarist, they remember him for his songs, and not just the songs he made famous like “Purple Rain,” and “1999,” but also songs he wrote for others.  “Nothing Compares 2 U” made Sinead O’Connor a star – briefly.  He gave the Bangles their biggest hit with “Just Another Manic Monday.”

Prince did not have a home studio, he had a 60,000-square foot entertainment complex as his home -  he literally lived in the studio.  He put out 39 albums and contributed to many more, but the vault he left behind included much more than that. He battled throughout his career to manage the creation and the delivery of his music on his terms – passing up millions to ensure that he alone controlled his art.

He was a prolific songwriter and like anyone prolific in his or her craft, among the many gems there will be clunkers. Which is why it was upsetting to read that his estate had signed a $30M deal giving Universal Music Group access to the vault.

Many articles have been written about the estate planning mistakes Prince made.  He did little right in that area. His assets, estimated at more than $150 million, may not have gone to the right people or causes, but I imagine it is the possible tarnishing of his musical legacy that would be most disturbing to him.  I suspect we will soon hear songs Prince never intended to see the light of day - at least not without his special polish.

In the end, that is his estate planning failure - someone who spent his life attempting to control the most important thing in his life, his music, lost control in death.

Estate planning focuses on lowering taxes and maximizing assets for the next generation, but for many the most important asset left behind is legacy. It reminds us to take the time to talk to our clients about their personal legacy – what do they really want to leave behind, to be remembered for?  


A Recap of 2017 Land Trends and What’s Ahead in 2018

Brad Hayes (Appraiser), Peoples Company, Clive

As we commence the 2018 year, it appears that prices have stabilized following a recent uptrend in land values. The inventory of farms that are available for purchase continues to be historically low. Across the State of Iowa, there are currently 5.26 farms per county that are being marketed for sale and of those, 1.58 farms per county are highly tillable tracts. There continues to be strong demand by operators who are looking to expand their operations as well as by investors who continue to participate at public sales. Overall, operators are still the primary buyers of farmland but investors are participating and setting a floor on land values. Farmers appeared to be more optimistic at the end of 2017 when compared to the end of 2016. That said, lenders located across the state indicate that there is some stress in the market and that there are numerous operators who are struggling to weather this agricultural downturn and low profitability. We continue to monitor these scenarios and are predicting that there will be a few more distressed land sales in 2018 than what was seen in 2017. The yield production continues to assist operators in managing their operation with continued lower commodity prices.

As we review and summarize the 2017 data accumulated by the Peoples Company Appraisal Team, we have identified the following statistics. There were 2,179+ tracts of land that were available and publicly exposed to the market place throughout the State of Iowa. Of these tracts, 790 were sold via the public auction method. Of the 790 tracts, 738 tracts were sold and 52 did not meet the reserve price and therefore were not successfully sold. The gross acres of all 790 tracts combined for all tracts that were marketed for auction was 86,008 +/- acres.

As illustrated in the chart below, it appears the most recent decline in land values occurred between the fourth quarter of 2015 and the first quarter of 2016. Since the first quarter of 2016, land values have increased through the second quarter of 2017 and stabilized through the last nine months of 2017. The chart references the average dollar ($) per CSR2 point on tillable acres. The fourth quarter of 2017 reflected $122/CSR2 point. These figures are based on a dataset that includes farms that sold at public auction and have 85% tillable acres or greater.


Land value trends for pasture land and recreational land were stable throughout 2017. The livestock markets have rebounded and with new processing plants being constructed in Iowa, there is high demand for the construction of new livestock facilities throughout the state. Swine confinement units currently have the highest demand for the construction of new facilities. The overall economy is strong which has reflected stable demand for recreational tracts of land.

In addition to the land value trends, the other main topics of interest are cash rents and interest rates. Per discussions with farm managers across the state, cash rents have remained stable over the previous two years and cash rents in the 2018 crop year will be relatively equal to cash rents in the 2017 crop year. Interest rates have begun to increase which could bear additional stress on operators who are restructuring debt. Alternatively, there are numerous operators and land owners in the market place who are not leveraging financing when making land purchases. Therefore, we look forward to monitoring the correlation between land values and interest rates through 2018 and the years ahead.


Legislative Tool Helps you Connect with Legislators

 The Iowa Bankers Association's Legislative Action Center allows bankers to easily contact legislators electronically. Letters on key pending legislation and regulations are posted on the site and can be easily edited and/or personalized for bankers to send to their respective elected officials and regulators at the state and federal level. The Legislative Action Center is available online at www.iowabankers.com.


Contribute to the Iowa Trust Association

As a reminder, the Iowa Trust Association (ITA) welcomes contributors to their quarterly newsletter. If you would like to comment on recent activities in the industry or let us know about an upcoming event that would be of interest to our readers, please feel free to contact Darcy Burnett, at (800) 800-2353 or dburnett@iowabankers.com. Thank you for your interest in our publication and we look forward to hearing from you!


ITA Newsletter Subscription

If this message was forwarded to you and you would like to receive the ITA Newsletter, e-mail Darcy Burnett to subscribe.


Published by the Iowa Trust Association
8800 NW 62nd Avenue | PO Box 6200 | Johnston, Iowa | 50131-6200

(800) 800-2353 • FAX (515) 280-4140 • www.iatrust.com
Send comments to dburnett@iowabankers.com
To remove yourself from this mailing list, click here.