The 2009 NMBA Annual Report

NMBA Annual Report 2009

2009 Marine Finance Market Summary

Download the 2009 annual report order form

ACKNOWLEDGMENTS

The NMBA Annual Report is compiled each year through the efforts of NMBA lending members and our independent fiduciary third party vendor. This year our new vendors, Statistical Surveys, Inc. (SSI) and Avala Marketing, Inc. (AMI) carried out
the work, directed by Aarn D. Rosen (Title) and Brian Rappaport
(Title). The SSI and AMI teams maintain the member respondent
data and its confidentiality, in addition to analyzing and
organizing the output to produce the Report.

A special thanks to our esteemed NMBA Association Manager, Bernice McArdle for overseeing the coordination, print production and distribution of the completed Report, and to those Board members who took the time to assist on this project

EXECUTIVE SUMMARY

The 2009 NMBA Annual Report remains the most comprehensive source for marine financing data in the United States. We continued with the new format created in 2008 where the Annual Report is presented in two, easy to read sections. We also added
new questions and made a few minor modifications to improve the
quality of the finished product.

Section One data provides information from banks and those lenders who hold marine loan portfolios. In this section, you will find bank data relating to retail consumer loan activities and processes, followed by floor
plan financing data. The final pages of Section One provide
interesting retail data with multiple year histories covering
such areas as loan yields, portfolio performance, duration and
more.

Section Two data is information from the marine finance service company/finance broker industry. The output in Section Two provides excellent "stand-alone" statistics for the service company segment.

Both sections contain the original survey questions for your convenience and review.

Industry Overview and Economic Highlights

The poor overall state of the economy is reflected in the marine and marine finance industries. The marine industry continued to face significant challenges throughout 2008, with sales levels across the board reaching lows that had not been
experienced in well over the last fifteen years. This impacted
the marine finance industry both directly and indirectly.

Economic indicators as well as related industry sales were hit hard in 2008 and most of the impact has spilled-over into 2009. Some of the relevant trends include:

Consumer confidence (using 1985 as a base year) decreased from 87.3 at the beginning of 2007 to 38.6 in December, an all time low since the inception of the index in 1967. Though the index continued to decline in early 2009,
reaching as low as 25.3 in February, consumer confidence is
expected by most economists to improve in 2009, but only very
modestly, not returning to levels enjoyed prior to 2008.

The unemployment rate increased steadily throughout 2008, directly impacting the base of possible boat buyers. The unemployment rate rose from 4.9% nationally on December 31, 2007 to 7.2% on December 31, 2008. This is both the
largest year over year increase and highest unemployment rate in
over 10 years. Unfortunately, 2009 has continued to experience
further increases in the unemployment rate. At the time of this
writing, we believe it will rise throughout the rest of 2009 and
well into 2010.

Auto sales are often considered a leading economic indicator, as consumers tend to hold onto their cars longer in recessionary times. They are often linked on parallel lines with new boat sales in the United States. For background,
seasonally adjusted auto sales (millions of units) hovered
between 15 and 18 from 1997 through early 2008. In 2008, auto
sales declined from a high of 15.7 in January to a low of 10.5
in December � a one year decrease of 5.2 million units. Analysts
believe the best pick-up in unit sales will occur in 2011,
pretty much bypassing the rest of 2009 and 2010.

New boat sales continued to decline in 2008, with the total market dropping 24.8% from 2007 levels. A relatively softer hit than other groups included under 18 feet aluminum outboards (down 16.7%), 18 feet and under fiberglass
outboard boats (down 11.0%), 35 to 49 feet outboard fiberglass
boats (down 7.8%) and 50 feet and larger fiberglass stern drive
boats (down 17.2%). Early 2009 boat sales and projections for
the remainder of the year will likely not show signs of
significant improvement.

The Prime Rate began to decline in the third quarter of 2007, ending the year at 7.50%. Throughout 2008 the Prime Rate continued this decline and ended the year at 4.00%. January 2009 saw an additional drop down 3.25%. The
Effective Federal Funds Rate has also experienced a
dramatic impact resulting from a generally failing economy in
2008. At the end of 2007, the Effective Federal Funds rate was
4.24. 2008 saw a steady and dramatic decline down to 0.16 at
year's end, when the Intended Federal Funds Rate was set at 0 to
0.25.

We again do not expect the economic outlook to improve greatly in 2009. Real recovery, when it may occur, will likely occur sometime after 2010. NMBA lender members are learning how to originate with less available loan with a keen eye on
maintaining and improving credit quality.

Overall retail credit availability to the marine industry, dealers, consumers, and service companies continues to be adequate. The decrease in marine lenders during 2008 nearly parallels the decline in overall marine sales and available boat
loan opportunities. Statistics in the NMBA Annual Report will
show differences in bank appetites for certain loan types. Floor
plan availability is a deep concern in the marine industry as
there are less national players offering this niche financing to
marine dealerships.

The US marine dealer base continued its consolidation throughout 2008 and is projected to continue at a similar pace in 2009.

Industry Overview and Economic Highlights

• The average size of a boat loan increased 14.3% in 2008 for service companies and 34.2% for banks. This increase may be due to several contributing factors, including larger boats being hit a little less hard by the economic
  downturns. Also, with charge-offs and delinquencies on the
  rise, lenders may have been looking for more stable buyers
  to finance, attracting them to the 50'+ boat buyers.
• The number of loans and the dollar volume were both down in 2008.
• Delinquency rates for all installment loans (marine and non-marine) were down slightly, but marine delinquency rates continued to increase. Charge-offs were up for marine and non-marine loans, though to a lesser degree for marine
  loans.
• Pre-owned boat loans as a percentage of all loans was up for 2008.
• A higher percentage of companies were supplying direct loans, while the percentage offering indirect loans was down.
• Not surprisingly, a much greater percentage of lenders saw decreases in loan volume in 2008 versus 2007.
• Lenders were not optimistic about the next year, with the majority expecting decreased business, especially for January through June 2009.
• Though banks expected an increase in variable loans in 2008, the actual percentage of variable loans fell from 36% to 25%. Meanwhile, service companies participated in a greater increase than expected, rising from 6% in 2007 to
  17% in 2008.
• Floor plan lenders increasingly used internal personnel to conduct commodity checks in 2008. The geographic scope of floorplanners shifted from less "national� to more "regional� during 2008.
• Perhaps because of a reduction in the number of loans, service companies appear to be standardizing their adjustment periods rather than offering several options available from their sources.
• The average commission paid to service company sales reps as a percentage of the loan origination fee has been decreasing over the past four years. It was down to 5.1% in 2008. The average fee or "reserve� paid to service company
  respondents declined sharply from 2007 to 2008.
• 74% of banks offered boat loan refinancing with only 7% contributing to their overall volume (in dollars) in 2008.
• The 45 to 54 year old age bracket (demographic) continues to increase, while 35 to 44 continues to decrease as a percentage of all customers. Wage earner, spouse and home owner data characteristics all decreased from 2007 to
  2008.
• Income levels of customers appear to be getting more stratified, with $50,000 to $100,000 and $250,000 or more both on the rise for service companies and $100,000 to $150,000 and $500,000 or more both on the rise for bank
  originators.

Value of Annual Report

The NMBA Annual Report is one of the most important tools for building and maintaining quality marine loan production and profitability. There is no other significant, comprehensive marine finance data available, making it truly a powerful
benefit to our industry. The Annual Report provides us with
information that we can benchmark to our own company's
performance against others in the industry.

The only way this data can be gathered is through the cooperation and participation of NMBA members. If, for some reason, you did not participate in this survey, we encourage you to examine your position and support your association and
industry by participating in the 2010 NMBA Annual Survey (for
2009 data). Making it your top priority will only help to
improve the already outstanding quality of the data. A complete
list of participating firms is included at the front of this
report.

The Annual Report is made available to all participating members as a benefit of membership. It is also available to non-participants, non-NMBA members, member prospects, financial institutions and other business associates to the marine
industry for a reasonable fee.

Now in its 31st year, the NMBA is proud to offer its members and associates the benefits of our "four pillars� which include this Report. Please log-on to our website www.marinebankers.org">
www.marinebankers.org at any time to obtain more
information.

Jim Coburn
President – National Marine Bankers Association
On behalf of the National Marine Bankers Association Board of Directors
May, 2009