Two Credit Unions Sell $501 Million in Auto Securities

Oregon Community Credit Union and ENT Credit Union of Colorado sold $501 million in securities backed by auto loans last week.

OCCU of Eugene, Ore. ($3.5 billion, 268,722 members) sold $258 million Sept. 26 and ENT of Colorado Springs, Colo. ($9.9 billion, 516,642 members) sold $243 million Sept. 27.

OCCU’s sale last week was its second. In October 2022 it sold $275 million in auto loan securities.

Robert S. Smith, managing director for Stifel Investment Services of New York, said the closings last week bring the number of credit union deals to 10, all since 2019. Stifel has been involved with eight of them, including OCCU, which was oversubscribed three-fold, he said.

“This second issuance by OCCU was very well received, even in a month with tremendous volume of new ABS issuances,” Smith said. “The universe of institutional investors active on credit union securitizations has broadened nicely.”

Tight liquidity has been one reason for a recent increase in loan sales generally.

Among all credit unions, the loan-to-share ratio stood at 83.1% on June 30, up from 74.7% a year earlier.

OCCU and ENT are operating with ratios that are higher than 98% of credit unions. OCCU had a loan-to-share ratio of 116.3% on June 30, up from 112.1% a year earlier. ENT had a loan-to-share ratio of 110.7% on June 30, up from 97.4% a year earlier.

If the securitization sales had been completed June 30, both OCCU’s and ENT’s ratios would have fallen to 107%.

Besides OCCU and ENT, the six other credit unions that have sold auto loan securities were:

• GTE Credit Union of Tampa, Fla. ($2.9 billion, 231,816 members as of June 30), which sold $175 million in November 2019 and $203 million in April 2023.
• Unify Financial Federal Credit Union in Manhattan Beach, Calif. ($4.1 billion, 300,454 members), which sold $300 million in March 2021.
• PenFed Credit Union in Tysons, Va. ($35.5 billion, 2.9 million members), which sold $460.3 million in August 2022.
• Veridian Credit Union of Waterloo, Iowa ($6.9 billion, 325,785 members), which sold $300 million in May.
• Valley Strong Credit Union in Bakersfield, Calif. ($4.1 billion, 298,607 members), which sold $110.6 million in May in a private placement.
• General Electric Credit Union of Cincinnati ($5 billion, 243,001 members), which sold $300 million in August.

OCCU Auto Receivables Trust 2023-1 included $227.5 million in senior investment-grade securities with yields ranging from 5.7% to 6.4% maturing from September 2024 to September 2029. The rest was $30.5 million in subordinate debt with yields ranging from 6.6% to 8.0% maturing from September 2029 to December 2031, according to Stifel.

S&P Global’s Sept. 19 pre-sale report said OCCU’s 2023 pool has higher expected net losses than its 2022 pool despite having similar collateral characteristics. Reasons included higher losses and delinquencies in OCCU’s total auto loans, and weaker-than-expected performance of its 2022 pool, “where weaker performance of loans originated in Washington State is a contributing factor.”

Ent Auto Receivables Trust 2023-1 consists of 8,124 auto loans with borrowers having credit scores of at least 660 and a weighted-average of 733 for the pool. About 25% of the loans are for new cars, and more than 97% are to borrowers in Colorado, with a smattering in Wyoming, New Mexico and Texas.

Moody’s Investors Service’s Sept. 21 pre-sale report said key credit strengths include ENT’s long servicing history and “the strong credit quality of the collateral.” Risks include ENT’s lack of securitization history, the pool’s high proportion of longer term loans, their geographic concentration in one state, “and the risk of further decline in used car prices.”

The ENT securities included $220 million in four investment-grade classes maturing from October 2024 to November 2029 with yields ranging from 5.8% to 6.3%. It also included $23 million in three classes with junk ratings maturing from January 2030 to March 2031 with yields ranging from 6.5% to 7.8%, according to Stifel.

Both credit unions will earn a 1% annual servicing fee.

Valley Strong filed documents with the SEC in May 2023 regarding its sale of securities backed by its auto loans. The documents did not show the amount of loans sold. However, NCUA data showed that Valley Strong sold 3,974 loans that were not first mortgages worth $110.6 million in the second quarter. The average loan was $27,820. It lost $3.8 million on its total loan sales of $115.4 million in the second quarter.