First Community Credit Union makes its debut on the asset-backed securities market with a $255.5 million issuance supported by payments from a pool of prime-quality retail installment sale contracts on new and used motor vehicles.
The FCCU Auto Receivables Trust, 2024-1, will issue notes through seven tranches of A through D classes of notes, according to Moody's Ratings. The notes have legal final maturities that range from May 15, 2025 on the A-1 notes through July 15, 2032, Moody's said.
Although this is First Community's inaugural securitization, it does have a 70-year history of originating and servicing loans, with good results. It is a regulated, state-chartered credit union in Texas, and is classified as 'well capitalized,' the highest category of capital adequacy that its regulator assigns to credit unions, Moody's said.
Other credit enhancing strengths include the prime quality of the underlying loans, which have a weighted average (WA) FICO score of 754, with a floor of 680.
When the deal closes the classes A, B, C and D notes will benefit from total hard enhancement levels of 8.12%, 5.89%, 4.00% and 2.00%, according to Moody's. These enhancement levels will build up as the notes in the pool amortize. That enhancement includes a reserve fund representing 0.25% of the total pool balance and 1.75% in overcollateralization.
All the class A notes benefit from 8.12% in total initial hard enhancement, while the B, C and D notes have coverage of 5.89%, 4.00% and 2.00%, respectively.
Although First Community's origination and servicing track record work in its favor, its newness to the securitization market does not. The credit union also has a small platform compared to banks and captive issuers, Moody's said, amounting to $2.5 billion in total assets, with $485 million in indirectly originated contracts, the rating agency said.
Another weakness is that the collateral loans for this securitization pool were selected from First Community's Tier A managed portfolio. Although highly rated, the performance data goes back to 2016. Between then and 2021 the origination amount for quarterly vintages averaged around $10 million to $30 million, and only ramped up to $50 million-$80 million, starting in 2022. This small base resulted in more volatile cumulative net loss performance, Moody's said.
First Community originated the loan pool indirectly through dealer channels, and the vehicle types consist of automobiles, vans, sport utility vehicles and light duty trucks.
Moody's assigns P1 to the A1 notes; Aaa to the A2 through A4 notes; Aa3 to the class B; A3 to the class C and Baa3 to the class D tranche.
