Auto Securities Near New Record for Credit Unions

Credit unions have nearly matched last year’s record sales of securities backed by their auto loans, and another deal is around the corner from American Heritage Federal Credit Union of Philadelphia.

American Heritage ($4.9 billion in assets, 312,782 members as of June 30) filed a 15G form Oct. 18 with the U.S. Securities & Exchange Commission saying the credit union planned to issue securities backed by some of its auto loans. The expected amount and closing dates were not stated. Stifel, Nicolaus & Company and BofA Securities were assisting the deal.

The credit union has not yet commented on the deal.

Meanwhile, the credit union is expected to be paying LINKBANK more than $130 million by year’s end when it closes on the purchase of three of the bank’s branches in southern New Jersey.

American Heritage’s costs include the $123 million in face value of loans acquired and a $7.3 million premium on $105 million in deposits assumed from LINKBANK. The credit union also agreed to pay the book value of the fixed assets and real estate for the branches in Moorestown, Marlton and Cherry Hill, according to the agreement filed with SEC.

So far this year, credit unions have sold $2.10 billion in securities backed by auto loans, compared with $2.14 billion sold in 2023. Since the first deal in 2019, credit unions have closed on nearly $5.4 billion in auto-backed securities.

This year’s total included $447.4 million sold Aug. 29 by PenFed Credit Union of McLean, Va., just outside Washington, D.C. ($33.5 billion in assets, 2.9 million members).

The notes, offered in four senior and three subordinate tranches, received investment-grade ratings from Standard & Poor’s and Fitch. The notes were backed by loans from borrowers with prime credit scores: A weighted average of 760 for the pool.

It is PenFed’s second auto loan securitization deal. The first was for $460.3 million in August 2022. PenFed receives a 1% annual servicing fee on both issues.

Fitch noted the 2024 loan pool was similar to other prime auto ABS transactions, but weaker than PenFed’s 2022 issue.

FICO scores 800 and above were 25% of PenFed’s pool this year, down from 33% in 2022. Used cars and light truck loans were 75% of the 2024 pool, up from 56% in 2022. Original loan terms greater than 60 months were 79% of the 2024 pool, up from 53% in 2022.

Other deals this year were:

• GreenState Credit Union of North Liberty, Iowa ($10.8 billion in assets, 450,119 members) closed on $400 million March 14.
• Valley Strong Credit Union of Bakersfield, Calif. ($3.9 billion in assets, 336,162 members) closed on $331.7 million March 26.
• First Community Credit Union of Houston ($2.4 billion in assets, 163,434 members) closed on $256 million May 30.
• Space Coast Credit Union of Melbourne, Fla. ($9.1 billion in assets, 657,412 members) closed on $485 million July 24.