December 02, 2020

Greetings [FIRST]:

ITA President's Message

Craig Schrader, Vice President Trust, West Bank and President of the Iowa Trust Association

The Iowa Trust Association just completed a series of webinars. We had more than 160 people participate in the webinars and 50 people sign on to the peer group meeting. Although it was disappointing we were not able to hold our annual conference in person I believe the webinar series was a great success. I’d like to thank Darcy Burnett for all her work on the 2020 ITA Fall Webinar Series and Annual Meeting.

All of the presentations at series were well received and generated positive feedback from the attendees. The webinars included developments in trust law and estate planning, a macro-economic presentation, and a strong presentation from a motivational speaker (even I enjoyed his presentation, and I don’t generally like motivational speakers).

Two presentations that I felt were particularly timely and relevant for our membership were on the new Iowa “directed trust” statute and recent developments in estate planning. The “directed trust” statute amended the Iowa Trust Code and took effect July 1, 2020. These presentations discussed directed trusts, the process of “decanting” existing trusts, fiduciary liability issues, and silent trusts. Also discussed was recent Federal tax legislation, which included the CARES Act and the SECURE Act.

The Peer Group session covered a broad range of topics and was, as usual, quite informative.  A special “thank you” to Gina Sitzmann for sharing her department’s Bank Security Act risk rating system with the group.

There is still time to register your department staff members for the two day online Trust Operations Seminar presented by Cannon Financial on Nov. 4-5. This webinar is designed cover beginning and intermediate level operations and administration functions for trust departments. This cost of this webinar is subsidized by ITA and represents an excellent value for your membership. If you were to register directly with Cannon, the cost of the webinar would be around $1,500. The ITA offers it to its members for $495. And due to the pandemic there will be no lodging or travel expenses (How’s that for looking for the silver lining).

Thank you for the opportunity to serve as Association president and for your membership in the ITA.

While there was no ITA Fall Conference this year, members of the association were still able to learn from one another and from industry experts at the ITA Fall Webinar Series. Held over a week in October, there were sessions on directed trusts, recent estate planning developments, economic outlook, and even a motivational session about the mindset of a champion. If you want to check out any of these sessions, you can at the ITA website.
A special thanks to event sponsors for helping to make this event possible.

BTC Capital Management
Capital Group
Christopher’s Fine Jewelry and Rare Coins
Infovisa
Peoples Company
ProxyTrust
T. Rowe Price

Insight Extra: Election Angst

Jon Augustine, CFA, Chief Investment Officer, BTC Capital Management

With less than a month to go, the anxiety surrounding the presidential election is reaching fever pitch. Reflective of the highly polarized political environment we currently find ourselves in, proponents of the two major parties are working overtime to convince voters the other side will have a draconian effect on the U.S. economy and equity markets for years to come.

The first question to address regarding this matter is whether the party affiliation of the president definitively impacts the performance of the economy or equity markets. In terms of the stock market, since World War II, only two presidents have had their term marked by a negative annualized return as measured by the Standard & Poor’s 500 Index. Interestingly, these two presidents were both Republicans, Richard Nixon, and George W. Bush. The highest return during a president’s term during this time was the 19% annualized rate that occurred during the administration of Bill Clinton, a Democrat. In terms of annualized GDP growth, the strongest period of growth occurred during the administration of Harry S. Truman, and the weakest occurred during George W. Bush’s term in office. As you will recall President Bush’s tenure coincided with the bursting of the “tech bubble” in his first term and the onset of the Great Financial Crisis in his second term. In summary, as evidenced by the data shared above, presidential elections and presidential party affiliations have not historically been the primary drivers of equity market performance.

Marching in tandem with this year’s presidential election is the ongoing situation related to the coronavirus pandemic. The impact of the virus on the U.S. and global economies was extremely harsh in the second quarter and although the recovery process is underway, the prospect of further negative impact remains on the horizon. Given the severity of the pandemic, the progress in overcoming it likely will have more impact on the economy and financial markets than the outcome of the election. We have already seen extensive responses to the pandemic in the form of significant easing of monetary policy along with massive fiscal stimulus.

Given this backdrop, what should investors do to position themselves properly? Our view is that investors should continue to maintain asset allocation positioning that is in alignment with their long-term goals and objectives. Monetary policy officials have shared their commitment to take whatever measures are necessary to support economic growth and promote policies committed to reducing unemployment. In addition, another round of fiscal stimulus is currently being discussed and could be prospectively implemented within the next several weeks. Also, numerous pharmaceutical companies are working feverishly to develop a vaccine that will move the world closer to an effective cure for the coronavirus.

As we progress through the final weeks prior to the election, volatility may very well increase as markets react to news flow related to presidential campaigns and the ongoing battle against the coronavirus. One of the tenets of our investment philosophy is to focus on the long term. We think that is the appropriate approach to take at this moment in time.

Source: BTC Capital Management, Bloomberg LP, Ibbotson Associates, FactSet.
The information provided has been obtained from sources deemed reliable, but BTC Capital

Matt Adams, Peoples Company
Farming has always been considered a high-risk business. It is essential for a farming business to navigate a multitude of decisions with a high level of business acumen to be profitable year-over-year. However, most of the risk associated with farming relates to events that are out of the operations control such as weather events and the direction of the commodity markets. The year 2020 gave us a reminder of those uncertainties as much of the crops in West Central Iowa suffered through a severe drought and a derecho windstorm that blew across the corn belt beginning in Nebraska and ending in Indiana. The windstorm affected approximately 750 miles of corn and soybean acres and the damage amount has varied among different sources, but the Risk Management Agency (RMA) estimates the total derecho crop damage to have cost over $6 Billion. Most farmland operators and owners quickly contacted their crop insurance agent or dug out their crop insurance file to check their policy and coverage levels purchased prior to the crop being planted. The reports of the derecho storm and drought damage began to dominate most conversations with the discussion including the nature of how crop insurance payments would affect the profitability of the farm sector. A high percentage of farmers and farm operators will have a crop insurance claim for the 2020 farm year and this article explores how the surge in crop insurance payments could offer support to balance sheets and subsequently boost cash rents and land prices into 2021.

The intent of crop insurance is to serve as a risk management tool available to farmers and ranchers to help protect against declines in crop yields and revenue by creating a safety net of farm income. Federal crop insurance was first authorized by Congress in the 1930s to assist the agricultural sector in recovering from the Great Depression and the Dust Bowl. In 1980, legislation was passed to encourage participation in the Federal Crop Insurance Program and to subsidize the products so they could be more affordable to producers. This marked the introduction of a public-private partnership between the U.S. government and private insurance companies where the government would contribute financially to assist in lowering the overall cost of crop insurance. Crop insurance has become a staple to most all operations and in 2019, more than 90% of the nation’s insurable farmland, or roughly 370 million acres, were enrolled in the Federal Crop Insurance Program. There are several different crop insurance products that are available at various coverage levels with options for additional endorsements. The level or type of crop insurance purchased is usually a reflection of the risk profile of the operator or the revenue protection required by a lending institution to cover or service a loan payment. The two primary crop insurance types are hail insurance and multi-peril insurance. Multi-peril insurance provides coverage options to farmers that combine yield protection and price protection against potential loss in revenue due to low yields or changes in the market commodity price.
Continued on Peoples Company website

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 at the IBA website.