Will recreational lending grow past the pandemic?

President and CEO Joanne Rau of Chelsea State Bank poses with customer Jerry Bridges, his dog, and the community bank’s Mark Burmis, and Steve Saules

President and CEO Joanne Rau of Chelsea State Bank (center-right) poses with customer Jerry Bridges (center-left), his dog and the community bank’s Mark Burmis (far left) and Steve Saules (far right).

Many community banks and their dealership customers saw rising demand for recreational loans as consumers, including many first-time buyers, looked to boats, RVs and other vehicles for an escape during the pandemic. Experts say this sector will remain strong this year and beyond.

By Beth Mattson-Teig


When the executive team at Chelsea State Bank sat down for its 2021 strategic planning meeting, they discussed further focus on recreational lending. Like many community banks, loans for boats, RVs, ATVs and other sport vehicles have typically represented a relatively small percentage of consumer lending at the Chelsea, Mich.-based bank. However, the pandemic spurred a surge in sales in recreational vehicles and equipment that hasn’t gone unnoticed by bankers.

Quick stat

$27.5 billion

The annual revenue of U.S. recreational vehicle dealerships in 2020

Source: 2020 IBISWorld report

Chelsea State Bank now views recreational loans as an opportunity to retain and attract customers and further diversify its loan portfolio. The $395 million-asset community bank plans to step up marketing efforts to customers and also rely on existing relationships with local dealerships to increase its recreational loan volume.

“Marketing is a big part of the strategy for all of our loan products, because we’re more limited in being able to meet with people face to face,” says Mark Burmis, senior vice president and retail lending manager.

Chelsea State Bank is fortunate to have a local RV dealer that has been a customer for decades. The dealership sold 613 RVs and campers in 2020, a 16% increase from 2019. The majority of those sales came from first-time buyers. “Because we’re still in the pandemic, people are going to be hesitant to get on planes, trains and cruise ships,” Burmis says. “I think this is a market that is going to be in demand going forward.”

A positive lending outlook

Winter Haven, Fla.-based SouthState Bank is an active recreational lender, offering loans for the purchase of boats, RVs and other power sports equipment such as Jet Skis and dirt bikes. Those loans typically represent about 10% of the $37 billion-asset community bank’s annual consumer loan production, which is sizable given that it generated a record high of nearly $1 billion in consumer loans in 2020.

“I think the trend of increased demand and increased sales volume will continue in 2021,” says Jeff Fulp, director of consumer banking at SouthState Bank. He adds that the changes in consumer behavior that fueled demand in 2020 are not going to disappear overnight.

“Even beyond COVID, the trends indicate that people really want to get outdoors and create lasting memories. So, I think the outlook for 2021 and beyond is very bright.”
—Jeff Fulp, SouthState Bank

The low interest rates and improving economy could very well give people more confidence in making a major purchase, and dealers have been busy replenishing what had become depleted showrooms and inventories. At the end of last year, SouthState Bank had prequalified a number of borrowers for orders placed that will get fulfilled in 2021.

“Even beyond COVID, the trends indicate that people really want to get outdoors and create lasting memories,” Fulp says. “So, I think the outlook for 2021 and beyond is very bright.”

Recreational lending is a unique market. Unlike the auto lending market, which is dominated by the lending arms of automakers like Toyota, Honda and GM, the recreational vehicle market doesn’t have the same base of captive lenders. Instead, buyers have a variety of options. Community banks have started to express more interest in recreational lending over the past 24 months, particularly as they have seen these loans slip away to other lenders, says Chet Heughan, senior director of indirect lending solutions at software firm AppOne in St. Cloud, Minn.

Banks also like the profitability this type of loan can deliver. Recreational loans tend to be priced at a higher rate than auto loans because captive lenders offer aggressively low rates to sell cars. In addition, Heughan says, lenders often find that they are dealing with customers with good credit who are often willing to put a down payment to secure the loan.

An opportunity to deepen relationships

In Conway, S.C., $1.1 billion-asset Anderson Brothers Bank offers recreational loans to its customers and has cultivated relationships with a variety of dealers. One of the things that came out of the pandemic is that people had more free time and were looking for ways to get out of their homes and do things outdoors. “I wouldn’t say we saw a spike, but we did see an increase in those types of recreational vehicle loans,” says Jeff Williamson, the community bank’s Horry County consumer loan sales leader.

Anderson Brothers Bank looks at recreational loans with the same consumer focus as its other products. “We are not just looking at the customer as an opportunity but as a client that we’re trying to serve,” Williamson says. “We try to protect the consumer as best as we possibly can so they are not getting into a massive negative equity situation.”

Leveraging dealer relationships

So, how can community banks grow their recreational loan volume? One way to expand that business is by forming relationships with recreational vehicle dealers.

“Leveraging relationships with dealerships in your community is probably the best way to enter the [recreational lending] market.”
—Chet Heughan, AppOne

“This is really how this industry has grown,” Heughan says. “The dealership is the front line.” For example, almost every customer who wants to buy a new or used RV goes into a dealership, and that dealer will direct the customer to a financial institution. “So, leveraging relationships with dealerships in your community is probably the best way to enter the market,” Heughan says.

AppOne provides a software platform that creates a bridge between dealers and lenders by allowing dealers to submit credit applications from buyers direct to lenders. Those documents also are tailored to requirements for individual lenders, products and states where a dealer operates, which creates some added efficiencies for banks.

SouthState Bank has two channels for its marine lending. One is a direct-to-customer model, where its bankers work with in-branch customers or online loan applicants. The other is its marine division, which has relationships with dealers in the six states it serves. Those dealers market loans directly to their customers, which creates a steady pipeline of new business.

SouthState Bank uses direct mail and email marketing for all of its recreational loans, as well as more targeted digital marketing based on what consumers are searching for online. The community bank also recently redeveloped its website to make its loan offerings more prominent. “We want to make sure [potential customers] know that we make these types of loans,” Fulp says, “and that we’re here to help them when they have a need.”


Recreational lending: What the data says

COVID-19 has accelerated a number of different trends, and growing consumer interest in outdoor recreation is one of them. That begs the question whether this shift is a flash in the pan or if it represents a sustainable financing opportunity.

“Some sales were pulled forward from 2020, but I don’t think it is as much as people think,” says Chet Heughan, senior director of indirect lending solutions at AppOne, a software firm in St. Cloud, Minn.

Recreational purchases also had been growing for several years before the pandemic. According to a report from the research firm IBISWorld, recreational vehicle dealers in the U.S. generated $27.5 billion in revenues in 2020. Between 2015 and 2020, the annual growth rate was 2.1%. That is forecast to rise to 3.2% over the next five years.

The report cited baby boomers’ continued spending power and buyers’ increased access to credit as two contributing factors to that growth. Industry associations are providing more education and resources to dealerships, which Heughan says is helping to drive sales. There have also been efforts to make national and state parks more accessible to boats and RVs, which is creating opportunities for vehicle owners.

So, even though it appears that boat and recreational vehicle purchases surged in 2020, demand has been developing steadily for the past decade, Heughan adds.

It’s also notable that industry growth has come despite last year’s economic slowdown, which is usually detrimental to large purchases. During the Great Recession, 35% of its all-boat dealers went out of business. However, boating has provided an escape for families when other activities were limited or unsafe.

“By all indications, 2020 was a record year for the boating market,” says Matt Gruhn, president of the Marine Retailers Association of the Americas, adding that dealers are seeing a significant number of first-time boat buyers.

“We’re seeing all kinds of families and kids getting involved in boating, and that will have a lasting impact on our industry.”


Beth Mattson-Teig is a writer in Minnesota.

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