Space Coast Sells $422 Million in Auto Loan Securities

One of the credit union movement’s largest producers of indirect auto loans sold $422.25 million in securities backed by some of those loans last week.

The Dec. 15 sale of auto loan-backed securities was the first by Space Coast Credit Union of Melbourne, Fla., and the 11th sale by a credit union. Since the first sale in 2019, the nine credit unions involved have now sold more than $3 billion in auto loan-backed securities, including $1.8 billion in seven deals this year.

According to ALM First, a Dallas, Texas-based advisory firm that served as a consultant for Space Coast, the credit union’s deal, which originally totaled $331.7 million, was upsized to $422.5 million and its average spread tightened in to 112.6 basis points.

A pre-sale report by Moody’s Investor Service, which assigned investment grade ratings to the securities, said the asset pool consists of 9,726 auto loans, 54% of them for used cars. Average weighted measures include: 770 credit score, 96% loan-to-value, 7.41% APR and 73-month original term.

All of the loans were originated indirectly through auto dealers.

NCUA data showed Space Coast of Melbourne, Fla., was the nation’s 29th largest credit union as of Sept. 30 with $9 billion in assets and 633,462 members. However, its balances ranked ninth for total auto loans and fourth for indirect auto loans.

Of Space Coast’s $4.6 billion in total auto loans at the end of September, 89% were indirect.

While new car loans have been stagnant this year among all credit unions, NCUA data showed they were $2.1 billion at Space Coast as of Sept. 30, up 27% from a year earlier. Used car loans rose 22% to $2.5 billion.

Its indirect auto loans rose 34% to $4.1 billion, while direct auto loans fell 23% to $501 million.

Moody’s said the deal’s main credit strengths included the credit union’s 50-plus years of experience servicing auto loans and the strong credit quality of the loans. More than 79% of the loan holders have credit scores greater than 660. Also, the deal included a nondeclining reserve that will also grow as a percentage of the remaining assets as the pool amortizes.

The main credit challenges included Space Coast’s lack of experience in securitizations, the risk of falling used car prices and a high proportion of longer-term loans. Just over half of the loans carry original terms of 73 to 84 months.

Moody’s also singled out the geographic concentration risk with all the loans being to Floridians.

“This concentration in a single state is significantly higher than the concentrations in typical auto loan transactions and exposes the transaction to worsening performance stemming from regional economic trends or idiosyncratic risk,” Moody’s said.

“Idiosyncratic risk”: Think hurricanes.

The securities were sold in seven classes based on their final maturity dates. The first two classes consist of $170.5 million that mature by June 15, 2027. The last class of $5.8 million matures by Nov. 17, 2031.

As servicer, Space Coast will receive a servicing fee of 1% per year.

Citigroup Global Markets and J.P.Morgan Securities were the lead underwriters on the securitization.