Marine financing poised for 2013 gains

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In case you missed it, there’s good news from the National Marine Bankers Association. It recently reported increased loan activity for 2012 through the third quarter, with 92 percent of those reporting expecting the final quarter will prove the same or better than a year ago.

“I expect to see a continued increase in boat loans in 2013,” says former NMBA president and director emeritus Bill Otto of Lake Effect Financial Services. “Money is definitely available for qualified buyers. There is absolutely no shortage of available funds; rather we have had a shortage of available buyers. Clearly more retail boat sales would fire up the lending market, draw in more players and create more competition.”

The NMBA does quarterly and annual studies of boat-lending activity. Here are some interesting recent sidelights:

  • Loan service companies that originate loans for banks reported the majority of their customers were 45-54 years old with household incomes of $50,000 to $99,000.
  • Similarly, banks responding to the study found the average age 45-54, but with a higher household income range of up to $150,000.
  • Boat loans continue to have a lower delinquency rate than other types of consumer instalment loans. Average delinquency in 2011 performed better than that of all installment loans by 44 basis points. That trend is expected to continue. Moreover, charge-offs have dropped below all loans tracked after two years of being above them.
  • For the first time in several years, down payments on new and used boats are trending down.
  • Turnover in loans is holding steady. The NMBA’s last report had the mean at 43 months and 42 months, direct and indirect boat loans respectively.
  • Lenders overwhelmingly reported consumer credit quality to be the same or better than the previous quarter, so borrowers with strong credit profiles are leveraging it for a boat purchase. Moreover, only 15 percent of the survey respondents indicated credit criteria were more stringent in the third quarter of 2012 than the previous period.
  • Dollar volume of loans booked during the third quarter 2012 was up over the same period in 2011, reported 69 percent of the responding lenders, with an additional 15 percent of lenders reporting volume to be about the same.
  • Finally, while conventional thinking has been that used-boat sales are accounting for more than 80 percent of all boat sales, new boat sales might finally be gaining a bigger piece. In the study, 92 percent of the respondents cited new boats as accounting for 26-50 percent of loans, at least by dollar volume.

Jim Coburn of Coburn & Associates, the NMBA director and also a former president, is on point when he says: “I find that bankers are interested in booking good, clean assets. This bodes well for marine retail, but the growth may be at a slower rate than the industry would like. Margins will still be a central focus with consumer lenders — along with credit quality. And rates are still at historic lows.”

Speaking of margins, in the last quarterly NMBA survey, 77 percent of the retail marine lenders responding said their average margin on boat loans was the same or better than that of the prior year. In contrast, a little-publicized fact is that banks have generally been experiencing margin compression in their overall lending as older loans mature and are repriced at lower rates. Throw in some marketplace competition and there’s more pressure on rates. Marine portfolios, on the other hand, have historically produced solid yields and, therefore, it seems logical that boat loans will become more attractive going forward. Coburn somewhat backs up that thinking when he tells me: “We are aware of a few more banks planning new marine retail programs for 2013. All good news.”

With increasing interest in marine lending, this year’s NMBA Recreational Marine Lender’s Workshop is expected to see increased attendance. It’s slated for March 3-5 in Fort Lauderdale. Those involved in or looking to get in any level of marine finance (underwriters, sales managers, collectors, funders, remarketing services, surveyors, maritime attorneys, service companies, dealer F&I personnel) are encouraged to attend. It’s the premier marine lending workshop held anywhere in the country.

Full workshop details can be found at www.marinebankers.org.

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