Articles

JUNE, 2010

IN THIS ISSUE

• A Message from the President
• Financial Reform will Impact Marine Lending
• Lackluster Results for SBA Floor Plan Pilot Program
• Boating Maintains $30 Billion+ Sales in '09
• Superyacht Market Seeing "Green Shoots"
• Forecaster Predicts Rebound of 9% For New Boat Sales
• NMBA Annual Conference Heads West in 2010
• NMBA 2010 Annual Survey (2009 Data) Completed
• Highlights from AVDA's Annual Meeting
• NMBA Remembers Don Mattocks
• 2010 Marine Lending Workshop - Save the Date
• Industry Funding Effort Planned by NMBA
• NMBA Has a New Address

A MESSAGE FROM THE PRESIDENT

The NMBA has had quite a busy second quarter in 2010! We have made some physical changes, have dealt with some unfortunate circumstances, and have been involved with many changes in our industry that will affect us for years to come. Your board members attended several events in an effort to provide exposure for our association's purpose and mission, said "goodbye" to one of NMBA's founding fathers, and bid "farewell" to one of our loyal and long time association administrators.

• Our headquarters in Chicago has moved from 200 E. Randolph to 231 S. LaSalle Street, Suite 2050, Chicago, IL 60604. Many thanks to Bernice McArdle and Sheila Ray for making the transition transparent to us all.  Our phone and fax numbers remain the same. Sheila, who loyally worked for the NMBA for the past 10 years, retired at the end of May and we wish her well in her travels, and happy times ahead with her family. We welcome Dee Konstanty, our new administrative assistant. It is amazing all the work that's done for us behind the scenes.
• The Annual Conference Committee, co-chaired by Bill Otto and Jackie Forese, has been working feverishly on putting together an engaging agenda that is both relevant and timely for our marine lending challenges of today. The event will be held November 7-9, 2010 at the beautiful Rancho Bernardo Inn, San Diego; it is one you will not want to miss. We will be discussing the Gulf oil crisis and its effect on our businesses, in addition to other marine-related activities. The Regulatory Reform bill currently being reconciled in conference by Congress will also be put under a microscope and analyzed as part of our agenda, and the breakout sessions, new to our conference this year, are designed to give attendees the flexibility to choose topic selections that spike their interest.
• Several of your Board members attended the American Boating Congress (ABC) held in DC in May. Don Parkhurst, Chair of the Legislative committee along with Jim Coburn and I went to Capitol Hill to speak to senators and members of congress to petition exemption for Marine/RV dealers to the Regulatory Reform Bill. In addition, we expressed the need for the Federal preemption and discuss the effect of derivative policies on bank balance sheets. Needless to say this bill will change the way we do business like never before, and will require changes to policy and procedures in our shops. We remain committed to staying abreast of the ever-changing components of this legislation.
• In early June, the NMBA exhibited at the Consumer Bankers Association (CBA Live) conference in Hollywood, FL. Our primary goal was to establish contacts with banks to encourage their membership in the NMBA and to promote the many benefits of marine lending. We shared our recently produced "Fresh Look at Marine Lending" white paper and statistics that reflect marine loan performance (more about this valuable resource later on in our newsletter).
• Also in June the NMBA was represented at the Sail America conference to express interest in supporting the sailing community and to discuss the availability of credit and the challenges facing our industry.
• The 2010 Annual Survey Report (reflecting 2009 industry data) has been completed, and the executive summary is currently being finalized. It will be available in early summer, and you will be notified when it is ready for distribution. Thanks to all who contributed; you will receive a free report. The report will also be available for purchase via a downloadable order form on our website (www.marinebankers.org).
• Our association suffered a major loss in May with the passing of one of our founding directors, Don Mattocks. We will surely miss his expertise, wise counsel, and sound strategies for the management of the NMBA. I recall how he reminisced of the early days of our association in the early 80's, and how he went from bank to bank, door to door, to sell lenders on the many reasons why boat loans and floor plan lines could contribute positively to their bottom lines. My, how history has a way of repeating itself considering the economics of today.  His wife Linda and the rest of his family are in our continued thoughts and prayers.

Please be sure to contact me if you have any recommendations for agenda items at our upcoming conference in November 2010. We welcome your suggestions and thoughts about how we can improve our service to suit your business. Thanks so much for your support.

Karen Trostle
President

NMBA director Don Parkhurst has been following the Financial Reform Bill recently passed out of the conference committee. The bill will now be sent to the House and Senate chambers for passage. The Obama Administration hopes to have the bill wrapped up by the time Congress takes their July Fourth break.

Whatever the outcome, there will be serious impacts on marine lending. The reform would create a new Consumer Financial Protection Bureau (CFPB) with extremely broad authority to regulate almost all "financial products," including dealer-assisted financing. Financial service companies will almost assuredly fall under provisions of the CFPB. In addition to consumer disclosure regarding fees, the bureau will have the authority to regulate how much the service companies can earn on each deal. Observers say the end result will reduce the flow of reasonably-priced credit to qualified borrowers. Major concerns remain relative to the Federal Preemption language. Questions will likely not be answered until the final regulation is written sometime in the next 9 months.

NMBA will keep members advised of changes that they may wish to comment on or encourage a contact with legislators. Until there is a more definite target to consider, Parkhurst advises careful monitoring and measured responses. From a long-term view, any new regulations and the CFPB will not go into effect until mid 2011 or early 2012. Regardless, this will cause negative influence on consumers, as it will impact availability of financing and raise costs.

LACKLUSTER RESULTS FOR SBA FLOOR PLAN PILOT PROGRAM

NMBA past president Jim Coburn reports that the new SBA 7a Dealer Floor Plan (DFP) program is still not generating significant new assistance in floor plan activity to small marine dealers. While Coburn and the NMBA did not expect dramatic impacts in new marine floor plan availability, it is a significant benefit to those dealers able to be served by the program. Banks approached for SBA floor plans are still being very cautious and perform significant due diligence on the potential borrower before they take an application or review a loan. July 1st marks the one year anniversary of the SBA 7a DFP pilot program.

SBA reports that nearly 1300 lenders in the U.S. are now participating and that funding is up (mostly traditional 7a & 504 program loans for general business purposes and fixed-asset acquisitions such as real estate). The Obama administration is currently urging Congress to pass legislation that would create a $30 billion fund to encourage banks to extend credit to small businesses. The NMBA supports this legislation and other legislation that would increase the maximum finance amount and allow for refinance lending from current floor plan holders who have exited the product.

Congress has extended the program four times since the stimulus money first ran out last November. In mid May the SBA reactivated its online Recovery Loan Queue, a waiting list for those who hope Congress will come through with another extension. Unless or until Congress acts, the loans will return to their pre-2009 terms: loans under the 7(a) program guaranteed 75 percent of the loan amount, and fees for the 504 program range from .5 percent to 3 percent depending on the loan's size and term. Members of both the House of Representatives and the Senate are trying to extend the breaks and replenish the funding supply, but the legislation is unlikely to move quickly.

Bottom line: NMBA supports SBA 7a and 504 loan programs loans for our industry (small dealers, small associates, manufacturers), but the process will remain bureaucratic and somewhat burdensome and the results (for approved and funded floor plans) will continue to be light.

BOATING MAINTAINS $30 BILLION+ SALES IN ‘09

Data shows the boating industry remains vital to U.S. economy, generating $30.8 billion in sales/services in 2009. NMMA's recently released "2009 Recreational Boating Statistical Abstract" provides a comprehensive review of the industry and its sectors with these key findings:

• An estimated $30.8 billion was generated in boating sales and services in 2009, a decrease of nine percent from 2008.
• In response to a weakened economy throughout 2009, the number of new boats sold decreased 19 percent to 572,500 units.
• New boat and motor sales totaled $8.5 billion in 2009, a 24 percent decrease from 2008.
• The traditional powerboat segment declined 24 percent in units to 153,550; retail sales were down 25 percent to $5.7 billion.
• Adult participation in boating decreased six percent to an estimated 65.9 million in 2009 from 70 million in 2008.
• Total boat and engine exports of $1.8 billion and imports of $1.2 billion resulted in a trade surplus of $574 million, down 34 percent from the previous year (which had the largest trade surplus since NMMA began collecting data in 1996).

"There's no question the declines in the U.S. and world economy in 2009 had a significant impact on new boat sales, however, our industry continues to find ways to position ourselves for future growth by adapting to the ever-changing economic landscape to help position our industry for growth in the coming years," says Thom Dammrich, NMMA president. "Despite the new boat sales decreases we saw in 2009, there was strong participation, increases in sales at businesses that serve existing boaters and solid accessory sales - all indicators that boating is alive and well and boaters will continue to take to the water to enjoy the lifestyle even in trying economic times."

"The 2009 Recreational Boating Statistical Abstract is a comprehensive summary of statistics on the U.S. recreational boating industry, providing an unparalleled resource for industry stakeholders into boating's impact on the national economy," says James Petru, NMMA director of industry statistics and research. "We expanded this year's Abstract to include a more detailed import/export section to better serve our members with enhanced product category data and trading partner profiles."

The 2009 Recreational Boating Statistical Abstract is again being offered on DVD, in lieu of printed versions. DVD copies can also be purchased for $950 for non-members. Copies can be ordered online at www.nmma.org or by contacting Chris Keil at 312/946-6209, orderdesk@nmma.org.

SUPERYACHT MARKET SEEING "GREEN SHOOTS"

A market overview in the June issue of Yacht International magazine suggests the superyacht sector appears to be slowly turning up and that the U.S. will likely lead the global return to the new normal, however that ends up being defined. Fraser Yachts reports increased brokerage activity in the piece, but points out prices are down 20 to 40 percent; the yacht charter market is estimated to be off 20 to 25 percent.

Easy loan accessibility was cited as inflating demand beyond sustainable production levels for smaller boats in the sector, especially among less affluent buyers. For the ultra high net worth buyers, financing to acquire the yachts is expected to be less of an issue than simply having an option to keep liquid assets available. Worry about conspicuous consumption at this level is also believed to be a non-issue, particularly in the U.S., where the perception of material wealth is reportedly tied to hard work leading to success.

A UK-based Barclay's Bank official in the article commented that the lender is interested in boosting activity in the superyacht and jet markets in the U.S. Barclay's is looking to serve both new and existing customers saying credit is available and they are "definitely open for business." The bank is emphasizing a focus on more conservative lending practices with more conservative buyers, however.

The link to the article is: http://viewer.zmags.com/publication/b80684ab#/b80684ab/153.

FORECASTER PREDICTS REBOUND OF 9% FOR NEW BOAT SALES

Demand for new boats and related equipment in the U.S. is expected to rebound to over $10 billion in 2014 or 9.3 percent annually from depressed 2009 levels forecasts The Freedonia Group, Inc., a Cleveland-based industry market research firm. The short-term outlook for the boating industry remains clouded; however, longer term demand will be driven by gains in consumer spending and disposable income, while the recovery in financial markets will enable more consumers to buy boats on credit.

Growth in the 55-64 age bracket will also support demand, since boat purchases become more likely just prior to retirement (although they tend to decline thereafter) and consumers in that age group have the disposable income to purchase larger, more expensive vessels. In addition, the industry's effort to market the "boating lifestyle" to women and minorities should expand the market. However, even with the rapid sales growth, the market is not expected to recover to the pre-downturn levels until the end of the decade.

Researchers suggest boats purchased on credit or by borrowing against the value of a home drove a deeper decline during the economic downturn in 2008 and 2009. For the boating industry, these factors combined to not only reduce consumer spending and the ability of individuals to secure credit for boats, but also meant that many boat dealers had trouble obtaining financing to purchase boats for their stock and boatbuilders could not borrow to pay for materials or their long-term debt.

Demand for recreational boats will benefit from the economic and credit market recoveries as well as dealer restocking and pent-up demand from consumers who delayed purchases during the downturn. Powerboats are expected to see the fastest gains in the boat category, after recording especially sharp declines in 2008 and 2009. Demand for powerboats will be supported by technological advances including newer propulsion systems and more advanced electronics. The aging of the population will also support gains, since powerboats are less strenuous to handle and maneuver than sailing vessels.

U.S. Recreational Boating Demand
($ millions)

(published 05/2010, 351 pages) is available for $4,800. Contact Corinne Gangloff, 440/684.9600, pr@freedoniagroup.com or visit

NMBA ANNUAL CONFERENCE HEADS WEST IN 2010

The NMBA's 2010 Annual Industry Conference will be held November 7-9 at the renowned Rancho Bernardo Inn in San Diego (www.ranchobernardoinn.com). The conference committee is working hard on developing an exciting, educational, and timely agenda and welcomes your input. One idea being explored is a panel discussion on the impacts of oil drilling to the recreational boating industry. Breakout sessions, new to the conference this year, are being formed with topics like "Short Sale Mechanics and Boat Financing," "Diagnosis of a Marine Fraud" and "Business Benefits of Social Networking."

The conference committee, co-chaired by Jackie Forese and Bill Otto, would love to hear from you. Please contact them at forese2@msn.com or billotto3@gmail.com.

NMBA 2010 ANNUAL SURVEY (2009 DATA) COMPLETED

This annual "must have" report, highlighting industry data for 2009, has been completed. The Executive Summary is almost ready, and the NMBA board expects a release date of early summer for the full report. Members who provided data will receive a free copy of the report as a benefit of participation, and for all others the report will be available for purchase at a price of $249 for members and $325 for non members. An order form can be downloaded from the NMBA's website (www.marinebankers.org).

Malissa Schultz, president of AVDA, provided the following details (which have been condensed for this newsletter) of the association's April annual meeting.

The meeting began with a presentation provided by NVDC to answer previously submitted AVDA member questions and an overview of how AVDA members can assist in facilitating transactions and inquiries in a timely and efficient manner. Tom Willis presented excellent information and answered questions regarding the latest details on the Title Law Legislation Proposal. Both presentations can be found at http://www.americanvessel.com/membernews/, along with revisions provided by Mike Schwenk of SunTrust Bank to lending practices surrounding LLC ownership and financing repossessed vessels.

Mary Bacon led an informal discussion on risk and exposure issues, warning members to be careful about word choice in both written and verbal communications. Tom Russell, counsel, suggested members refer to themselves as "facilitator" instead of "agent" and avoid rendering a legal opinion on any matter. It was suggested that when providing a client with an Abstract of Title that it be forwarded without a written opinion. A verbal explanation of the entries on the Abstract can be given, stressing that the Abstract is not conclusive proof of ownership. If the client wants conclusive proof, a Certificate of Ownership should be obtained.

No means for removing a Notice of Claim of Lien from an Abstract of Title exists other than a Satisfaction or Release of Lien is filed. The lien does not expire, though the filing expires three years from the date of the claim. The Notice of Claim of Lien will remain on the Abstract of Title even after the filing has expired. Clients should be advised to seek counsel for further guidance. The only liens that take precedence over a First Preferred Ship's Mortgage are ones that arise from crew's wages, tort claims, or salvage. Just because a lien has not been recorded does not mean it does not exist.

AVDA members were reminded to surrender any title back to the state that issued it. State titles should not be sent to the US Coast Guard as they have no means to effectively notify the state. When completing the CG-1258 section K the box should be checked for "is titled" ONLY if the boat is currently titled in the applicant's name. Also if USCG paperwork is not filed immediately upon receipt, members could be subject to failure of due diligence.

When a vessel is deleted from USCG documentation it is not noted on the Abstract of Title. If proof of deletion is required, a certified copy of the Certificate of Documentation should be ordered. Unless a member has written permission from the vessel owner, a member can not renew a Certificate of Documentation.

NMBA REMEMBERS DON MATTOCKS

Don Wynne Mattocks, the founding President of the National Marine Bankers Association, died May 23 after a six-month battle with leukemia. He was 68.

Mattocks became the first President of NMBA in 1980 at a time when lending for small recreational pleasure boats was in its earliest stages. He took his success story of making profitable small boat loans at a major Atlanta bank and told it to other lenders across the U.S. in dozens of seminars and conferences. At boat builder meetings he'd educate dealers how to get their banks into boating. The research paper he wrote at the University of Virginia banking school became the "Marine Lender's Handbook," used by banks, savings and loan institutions and credit unions to establish boat loan departments.

Boat lending became a financial commodity as a direct result of the efforts and lenders and the boating industry profited extensively from his pioneering work. In the decade Mattocks crusaded for boat loans, the industry expanded in annual revenues from $7 billion to $17 billion while the boat lending business is estimated to have grown from $1 billion to $5 billion annually. Making recreational boating affordable through installment loans helped middle-class families access a lifestyle that benefitted thousands of Americans.

Mattocks served as Senior Vice President of retail finance for Citizens and Southern National Bank until the mid-1990s then moved to Primus Automotive Financial Services, a division of Ford Motor Credit Company, where he also served as Senior Vice President based in Nashville. He retired to New Bern, NC in 2005, but continued his involvement in the NMBA as Director Emeritus until he died.

Throughout his life Mattocks enjoyed history, politics and travel. He will be remembered for his gracious hospitality and his love of good food and wine. He never met a stranger and lived life to the fullest with a ready smile for everyone. During retirement he also served his church as a Council member and greeter, was a volunteer for The Tryon Palace Academy, Board Member of the United Way of Craven County, and co-chair with his wife of the New Bern 300^th Celebration Ball.

Surviving are his wife Linda, a son and daughter, grandchildren and brother and sister. Memorial contributions can be made in the name of Don W. Mattocks to Centenary United Methodist Church, P.O. Box 1388, New Bern, NC 28563.

2010 MARINE LENDING WORKSHOP - SAVE THE DATE

The NMBA's Annual Marine Lending Workshop will be held December 5-7 at the Embassy Suites in Fort Lauderdale. This comprehensive two-day program provides a complete course on the various elements of pleasure boat financing. Sessions include:

• Industry Overview
• Market Planning and Development: Elements of a Successful Marketing Strategy
• Marine Insurance: Protecting the Collateral Investment
• Collateral Evaluation: Assessing Accurate and Reliable Values
• Credit Analysis: Perspective and Technique
• Registration and Lien Perfection: State and Federal Regulations
• Collection and Repossession: Successful Management of Problem Accounts
• Collateral Remarketing and Liquidation: How to Minimize Losses Through Effective Marketing

Instructors are expert marine lenders, collectors, asset managers, attorneys, insurance specialists and others collectively offering decades of significant experience.

A registration form will be posted on the NMBA's website shortly - stay tuned.

INDUSTRY FUNDING EFFORT PLANNED BY NMBA
New resource on marine finance targets current, prospective lenders

A new review of marine lending makes a realistic assessment of the impact of the 2007 – 2009 recession on the boating and finance markets but points out that a significant percentage of Americans continue to embrace the lifestyle and a toughened industry remains in place to serve them. Titled "A Fresh Look at Marine Lending," the 16-page document provides a high-line perspective focused on the need to replace funding by lenders who remain in the market as well as others looking for opportunity to attract upscale borrowers and support surviving marine businesses.

"We are starting to see a slight opening in the availability of consumer credit and want to position marine lending as a primary place for funds to flow," says National Marine Bankers Association (NMBA) President Karen Trostle of Sterling Acceptance Corp. of Annapolis, MD. "This new review is designed for lenders to take upstairs to boardrooms to help get boating consumer and inventory loans in the strategic plan. It can also be shared with community and other bankers to remind them of the opportunity to attract high-quality borrowers and assist local small businesses."

NMBA is delivering the updated information to current and prospective lenders and asking the industry to help spread the word. One goal is to set up roundtables to bring together local or regional lenders with marine business representatives to underscore industry needs and how lenders can address and profit from them. Marine trade associations and major manufacturers are being encouraged to host events where NMBA will produce the program to have lender-to-lender dialogue. For information on hosting a roundtable, contact Trostle at Karen@sterlingacceptance.com.

Guided by the NMBA Marketing Committee headed by Peggy Bodenreider of Maritime Capital Group of Ft. Lauderdale, FL, the industry update was written by marine F&I consultant and columnist Greg Proteau. "Our first distribution was during the American Boating Congress in Washington in May, and NMBA board members used the document to underscore the lending needs of the industry to lawmakers and finance agency personnel," Bodenreider points out. "From there, it was made available to lenders who attended the Consumer Banker Association's Retail Credit Convention in Ft. Lauderdale." It is available to all in the industry as a download or link from the homepage of www.marinebankers.org.

Information presented highlights the historical NMBA data that boat lending offers portfolio performance superior to most consumer loans and a solid customer base to build upon. Profiles of boating participants and borrowers illustrate their higher credit capability, charts compare marine portfolios favorably in comparison to other loans, and copy and illustrations provide hand-holds showing marine lending partners are eager and willing to assist in the underwriting and service requirements. A wide view of the industry is provided noting loans are needed to finance small craft on inland lakes to bluewater cruisers taking on oceans – and the companies that build and sell them.

The new NMBA resource joins two others produced in 2009 for industry principals to sharpen their knowledge on securing funding: an "Executive Summary" of the market that focuses on a discussion specific to commercial floor plan lending and a webinar program titled "Finding Funding, Building Lending Relationships" for marine manufacturers and retailers. Both are posted on the NMBA website and available to download.

Membership in the NMBA includes financial institutions such as commercial banks, private financing firms, savings and loan companies, and credit unions. Associate members are those which provide services to the marine lending community. Members extend or originate credit to consumers, retailers/dealers and manufacturers of recreational boats and equipment. The organization produces two major educational initiatives annually: an annual Lending Conference held in November and Marine Lending Workshop in December. For details, visit www.marinebankers.org or call 312/946-6260.

NMBA HAS A NEW ADDRESS

On May 20th NMBA relocated to their new offices.

231 South LaSalle Street - Suite 2050
Chicago, IL 60604

NOTE: Telephone, fax, email and web addresses stay the same.

New items which are germane to the marine financing field will be considered for inclusion in the newsletter. Send information to the address below.

Address changes and subscription requests should also be directed to the address below:

Information contained herein may not be reproduced in any format without proper credit to the National Marine Bankers Association and any other named source within the text in question.

National Marine Bankers Association
231 South LaSalle Street, Suite 2050
Chicago, Illinois 60604
Telephone: 312-946-6260/6280/6248
Fax: 312/946-0388
www.marinebankers.org

The National Marine Bankers Association welcomes contributed editorial to its newsletter and claims no responsibility for the views, opinions and statements of fact expressed by the authors of the articles.