Commerce Bank sees off-road vehicle financing as a potential new market venture as it continues to expand motorcycle loan volume, said Indirect Lending Manager Rob Griffin. However, adding off-road vehicles into its portfolio is not included in the bank’s three-year plan, he told Powersports Finance.
“Since we already have powersport ties, it would be a good opportunity for us,” he said. However, there are “different performance levels as you expand into powersports, and it depends on where key risk measures fall in line with how we can expect those products to perform.”
Commerce Bank finances new and pre-owned automobiles, marine, RVs, and on-road motorcycles. “That crossover into off-road vehicles is where you get into another niche, another growth opportunity, if we decide to go that route,” he said.
At certain times of the year, the powersports business provides a “little extra protection” when auto loan volume declines, Griffin said. “It’s been a nice market for us, but we are very strict or limited in the products we finance.” The bank might look into financing off-road vehicles, but it’s not in the near future, Griffin said.
Around 2013, the bank started putting “more emphasis” on the powersports portfolio, Griffin said, meaning Commerce ramped up its sales calls to recruit new dealer partners. “Before, we had a few dealers and worked with those, but we weren’t actively pursuing others,” he added.
Additionally, Commerce Bank started working with Texas dealers in 2015, which expanded the powersports portfolio “quite a bit with just the volume of motorcycle sales there,” he said. The bank currently works with more than 75 franchise dealers.
The portfolio has grown progressively since, he said. “As we tracked the performance of the powersports loans, we just really like the business,” Griffin added. “We like the slightly better margins, although the balance is a little bit lower. The portfolio performs very well.”
Commerce Bank’s consumer loans — which consist of auto, motorcycle, marine, tractor/trailer, recreational vehicles, fixed-rate home equity, and other consumer loans — totaled $1.9 billion at yearend 2015, according to the bank’s annual report. Total consumer loans increased by $219.2 million in 2015. Approximately 58% of the consumer portfolio consists of loans secured by passenger vehicles, which includes motorcycles.