Oregon Community CU sells $275 million in auto loan securities

Source: Shutterstock.

The Oregon Community Credit Union has completed the sale of $275 million in auto loan-backed securities it issued, an adviser on the deal said Wednesday.

ALM First, a Dallas-based financial advisory service, said it served as a consultant for the Eugene, Oregon-based OCCU ($3.5 billion in assets, 256,807 members as of Sept. 30) in connection with the securitization which closed on October 20.

Travis Goodman, director of ALM First, said it was the credit union’s first asset-backed securities issue and only the fourth such securitization to be made. made across the industry since the NCUA’s June 2017 opinion letter arguing that credit unions can conduct securitizations. With OCCU sales, total sales now stand at $1.2 billion since 2019.

Travis Goodman Travis Goodman

“We’ve helped OCCU access a broader investor market and cost-effectively access liquidity,” Goodman said. “In our role as a trusted advisor, we help credit unions strategically navigate the securitization process, provide insight into pricing new loans for sale, and execute hedging strategies to secure profits given the uncertain rate environment.”

The OCCU will receive an annual fee of 1% for servicing the loans.

“This securitization benefits members by strengthening the financial strength of OCCU,” said OCCU President and CEO Ron Neumann. “This strength allows us to serve more members and supports our ability to offer member benefits such as reduced or eliminated fees, additional branches and service centers, and improved technology such as digital banking and ATMs. “

Ron Neumann Ron Neumann

Moody’s Investors Service and Standard & Poor’s have assigned the securities investment grade ratings.

The sale included $244.2 million of senior notes that mature Oct. 15, 2023 through Nov. 15, 2029 and had S&P ratings of AAA and above. The $30.8 million in subordinated notes mature from 2029 to 2031 and carry S&P ratings of AA to BBB, the lowest investment grade rating.

Factors in S&P’s rating included the credit quality of the underlying pool, which consists of prime direct and indirect auto loans that had a weighted average credit score of 730 and a minimum credit score of 620.

Risks noted by S&P included:

  • Geographical concentration: Oregon and Washington each represent approximately 46% of originations in the pool.
  • A high concentration of long-term loans: Loans over 72 months represent 71% of the pool. About 11% of the pool is made up of loans with an initial term of 73-75 months, and a further 60% have terms of 76-87 months, the majority of which are 84-month loans.
  • High loan-to-value ratios: the pool had a weighted average LTV ratio of 110%, which is at the high end of the securitization pools of its peers.

S&P’s pre-sale report showed the average loan in the OCCU pool had an average remaining balance of $29,442, with an original term of 77 months at 5.65% APR.

OCCU’s net charge rate was 0.11% in the first half of this year, compared to 0.12% in the first half of 2021. For the years 2016 to 2021, charges peaked at 0.55% in 2017, then decreased to 0.47% in 2017. 2019. With the pandemic, expenses dipped to 0.35% in 2020 and 0.16% in 2021.

Its over 30-day delinquencies for auto loans rose to 1.15% as of June 30 from 0.63% a year earlier, “showing a normalization of delinquency rates compared to those before 2020”, says the S&P report.

NCUA data shows that the OCCU’s 60+ day auto delinquency rate for all auto loans fell from 0.51% at the end of September 2021 to 0.58% to 0.78% on September 30.

The OCCU was the 127th-largest credit union in the nation based on assets as of June 30, up from 138th a year earlier, according to NCUA data.

Its total auto loan balance as of June 30 was $1.5 billion, making it the 44th-largest credit union auto lender in the nation. Auto loans made up 52% ​​of its total loan portfolio, compared to 32% for all credit unions.

As of September 30, it held $1.7 billion in auto loans. Its new auto loan balance was $599.6 million, up 65% from a year earlier, while used loans were $1.1 billion, up 62%.

Previous credit union ABS sales were:

  • GTE Financial Federal Credit Union of Tampa, Fla. ($2.9 billion in assets, 231,425 members) sold $175 million in November 2019.
  • Unify Financial Federal Credit Union of Torrance, Calif. ($4.1 billion in assets, 292,992 members) sold $300 million in March 2021. ALM First also acted as advisor on this transaction.
  • PenFed Credit UnionTysons, Virginia ($35.9 billion, 2.8 million members) sold for $460.3 million in August. PenFed held $5.3 billion in auto loans as of September 30, down from $6 billion as of June 30.