Q&A with National Marine Bankers Association president Michael BryantPosted on Written by Reagan Haynes
Michael Bryant, the president of the National Marine Bankers Association, laughs when asked about his background. The good thing about writing my bio is that I think Ive only worked in four jobs in the last 40 years, and all of them have been in the marine lending business.
Bryant began his lending career in the 1970s. In 1978, he joined Wells Fargo Bank as its marine and aircraft manager. He then started the marine lending program at Ganis Credit, which is now owned by General Electric. Next he established several offices for the Western Region of First New England Financial, which was later sold to John Deere.
In 1996 he was one of the founding members of Trident Funding Corp. as vice president and regional general manager, with marketing and information technology responsibilities for the entire company. Today he is vice president and principal of the Shelton, Conn.-based yacht and boat loan provider.
Bryant previously served three terms as an NMBA director and held the positions of chairman of membership and co-chairman of the golf tournament and annual conference.
Q: Can you tell us about Trident Funding and give an idea about the lending model it uses?
A: A few lenders and I started Trident Funding in 1996, and it has eight locations in coastal communities around the United States. Despite the recession, weve been hanging in there. Weve had as many as 20 lenders at any given time. The big consolidation thats taken place in magazines banking has done pretty much the same thing. We have fewer now so the consumer has fewer choices. Theres also less competition, so banks dont necessarily have to compete for the business. If there was more competition, that would help rates and help consumers. We have consistently been the largest producer of marine loans for banks using marine loans. A lot of times were called service companies, but we sometimes call ourselves loan originators. We originate the loans and fund the loans ourselves initially, but basically our premise is to sell the loans off to lenders. Were actually operating as an agent. There used to be lenders big enough that they could originate loans, keep a portfolio and sell off blocks. There arent many out there who have this type of model anymore. The benefit of it is theres very little gap time for the consumer. Our turnaround time is quick. There can be a down side to that for us, and that is that we pay interest in the time that we hold the loan. When interest rates are high, that can be tough.
There are essentially three types of service company models. There are those like us companies that originate and fund the loan, and then take on the responsibility of finding a new lender; there are some who go directly to banks for loan approval, at which point they wait for the bank to close and fund the loan; and there is the third type, which is more unique. In it, the dealer has a relationship with the bank, and the company in between is a liaison who splits the fee. The liaison is looking at credit, making sure the loan is something the bank will buy; the bank funds the dealer, who then shares the fee with the company who did the work for him.
Q: When did you become president of the National Marine Bankers Association?
A: I became the new NMBA president in December 2012. There was a gap where I wasnt on the board for a short period of time. Then I came back on the board with the idea to work toward becoming president. Karen Trostle had been president for the last three years, which is longer than people usually hold the post. But we had circumstances develop that resulted in her serving in that role longer. I cant think of a time when its been rougher [for an NMBA president]. Weve seen membership dwindle like a slow bleed, [through] no fault of her own.
Bank consolidation has been the biggest factor. Weve seen some get out of the marine business altogether. There are some service providers like ourselves who have gotten out. By the same token, weve seen a lot of new associate members whove joined for whatever reason. As the boat business cycles and the economy cycles, with more repossessions, and with unemployment as high as it was and still is, you have a lot of companies who want to help banks deal with that. So there is growth there, but at the same time you have lenders falling off. Now were working our way in the other direction again. Were seeing banks come back into the business and less of the remarketers growing.
Q: In the last year or two Ive been hearing about the emergence or return of subprime consumer lending. Can you tell me about that?
A: As far as I know, there are two banks doing subprime lending; the two predominant ones are Merit Bank and Medallion. The point of it is that theyre choosing people who, under normal circumstances, are pretty good customers, but something happened they lost a job or had a divorce or illness or something that caused them credit problems that they hadnt otherwise had and theyre customers who appreciate the person who helped them get out from under that. Theyre limited in dollar size, one is $50,000 and one is $60,000, so it is limited in a sense. If youre a first-time boat buyer, or maybe a second-time boat buyer and youve got some credit issues, that works fine, but youre not going to walk in and buy a Hatteras.
Q: Is this a new phenomenon in just the last couple of years? I didnt think anyone was doing this in 2009, 2010.
A: I have a feeling they were doing it prior to the 2008 collapse, but I think you have lower dollar amounts on loans now, and more money required down. And several banks have gotten out of marine lending altogether. Because you had so many lenders doing stated income, it took care of a lot of problems you would encounter in subprime lending now, as long as you kept the loan under a certain amount. Bank of America allowed a quarter-million dollars of stated income.
In my opinion, what happened after that was a lot of lenders went away, but the lenders who were still making boat loans were still making loans the same way they used to, except for a couple of things. One, stated income went away. Two, they were looking at collateral value much differently than they used to, and three, the customers really had to prove all of the things the bank had been taking kind of for granted. The lender that was probably most liberal at the time was Key, and they got out of the marketplace. Im sure they probably had more boats to deal with than anybody else.
What happens in these cases, I think, unfortunately history repeats itself. No one totally ever learns. It just takes a longer time for it to happen, but it happens. The difference is it usually happens in the marketplace where people have higher interest rates. That model had been viable until banks wanted to be more competitive and lowered rates. You cant do that. Banks have to match their rates to the kind of paper theyre buying. If they can stay within that field of vision and not get distracted to whats happening on the sidelines, they can remain viable. A lot of them stayed the course, and theyre still here today. The more liberal lenders with the lowest rates are not in the market anymore. Even in a normal economy, thats true, let alone what happened in 2008, which up to that point was an abstract. Theres only one other economic calamity that happened of that magnitude, but it happened before my time.
Q: How do service companies fit into that scheme?
A: The bank agreement is structured as a dealer agreement. Companies like Marine One Acceptance kind of work in between the bank and the dealer as an F&I adjunct. Theyre filing all the paperwork for the dealers, and all of them have relationships with various banks. A fee gets paid to the dealer, who reimburses the service company for handling all of that. I think the advantage of a Priority One or Marine One Acceptance is [that] usually in dealerships the F&I people arent people who stick around a long time. At the service companies youve got someone whos well-trained, where at a dealership you often have to train someone over and over again.
When youre a dealer trying to sell boats, you might not have time to repeat that process, so that gets solved if they use a service company. Then its their problem to make sure theyve got quality people. They get a fee, but at the same time dealers arent paying the salary of an in-house person.
For subprime buyers, dealers are never going to have that many subprime clients. Subprime customers get handled differently at service companies because they dont make as much money on them. So they sometimes dedicate a team of people to handle those contracts, and they get paid differently since they wont make as much on them. The benefit is, a customer whos been turned down in other dealerships for loans will be loyal to a dealer who can help him get into that boat.
Q: What are some of your plans for NMBA?
A: Obviously were trying to attract more lenders to get into the organization and looking at ways of expanding our membership to include members who havent been before. We havent gone after companies like the Priority Ones, or that model of service company, and we think we could provide them lot of good information, especially when theyre expanding and hiring. NMBA could be a great resource to them. We think there are a lot of companies like that doing business with dealers.
At the same time, as some banks come back into the fold they may want to introduce dealers to banks to expand their programs, too. We feel that a lot of these smaller companies do business with more regional lenders of different varieties. That also gives us the ability to talk to them and see if we can bring them into the organization, as well. We do feel like we need to expand the association from what its typically been in the past, from banks and service companies like ourselves who do lending directly.
Over the past few years we had expanded our organization to include ancillary parts, remarketing firms, attorneys, software companies, other companies that fit the marine business. That had grown rapidly prior to 2008, but what dropped off the most were the actual lenders because of consolidation and banks got out of it altogether. We didnt see quite the shrinkage in the associate membership category that we have. That part has been fairly consistent with the number we have coming on. Were continuing to see fairly good growth in the associate membership category, which are ancillary parts like documentation companies and attorneys.
Q: That must be an area of growth, considering some of the compliance enforcement the industry has seen lately.
A: Yes, and that is another thing where the NMBA is going to play a really big role because we have for many years had a committee that follows all the government regulations. Weve been working very closely with the National Marine Manufacturers Association, as well, when it comes to working with Congress in understanding how important the boating industry is. I know how tempting it is for people to look at the wealthy yacht owner, but you have to look at who is putting that boat together. There are thousands of people who put these boats together.
California charges you on every boat that you buy. You pay full sales tax on the full amount unless you keep it out of the state for a year. In the case of Southern California, Mexico is 80 miles away and these marinas were built overnight when those tax laws changed. So the state of Washington began charging a small fee and no sales tax to people traveling up there, and now they have people traveling up there. They now have those fees, the slip rents, restaurants and shops, all earning money off those buyers.
Youd think someone in the California legislature would scratch their heads and say, What are we doing to ourselves?
I think the area of the maritime attorney has seen growth in business because of the fact that there are a lot of lenders, whether marine or other types, that have been touched by the fact that theyve had visits by the Consumer [Financial] Protection Bureau. In cases of marine, theyre specializing in that area of law and going to help out lenders as a result of that. So we would expect to see some additional growth in our membership as a result of the Dodd-Frank Act and other legislation.
When theres little going on in the world of legislation, lenders are sure what they can and cant do. But now lenders are very unsure of what they can and cant do under this legislation. Its all under the auspices of making it fairer for the consumer. In trying to do that they ultimately make it so theres less competition. And less competition is never a good thing for the consumer.
Theyre trying to come up with various ways of leveling the playing field. That becomes problematic in the way theyre trying to do that. I dont think it works out on behalf of the customer because now lets say you have a lender who has a rate and offers this rate to a certain group of customers, and someone like us comes with a customer slightly outside of that box.
Before, the bank could say, Thats slightly outside of our parameters, so I dont want to make him a loan. But if that lender says, Well take those customers outside that box, but put them into this bigger box and charge them a slightly higher rate, my understanding is that is viewed as a tiered rate structure.
They would prefer that you blend the rate and raise it for everyone to accommodate for the other category, or just not offer loans to that category. And I can see their thinking there because, for example, a customer going to buy a car might not get the most competitive rate. I think the government would like to see if they can protect that guy. Its just very difficult to do because it makes fewer products available to fewer people.
This article originally appeared in the May 2013 issue.