A pre-sale report from Moody’s Investors Service said the loans in this year’s issue had slightly higher credit ratings.

All the loans in the issue that closed May 29 were indirect and 55% were for used cars. All went to borrowers with credit scores of at least 680 and the pool had a weighted average score of 767. Loans in last year’s pool had an average score of 754.

“The (weighted average) FICO is at the higher end compared to the other credit union deals we rated, but lower than the captive- and bank-sponsored deals we recently rated,” Moody’s said.

This year’s pool consisted of 55% used cars, compared with 61% in last year’s pool. The average remaining balance at the time of the issue was $41,387 in this year’s pool, compared with $39,557 in the 2024 pool.

The average percentage rate on this year’s loans was 7.5%, compared with 8% on last year’s.

Moody’s said risks in this year’s deal include:

• All the loans were to borrowers in Texas, the same as in the 2024 issue.
• The loans have relatively long terms. The average original term was 78 months, with 73 months remaining at the time of the issue. About 70% of the loans have an original term of 73 to 84 months. “Longer term loans carry risks stemming from their slower amortization schedules that may lead to negative equity for the borrower, and a prolonged period during which the loan is exposed to negative credit events and macroeconomic factors,” Moody’s said.
• Used car prices might fall. “Used car prices have somewhat stabilized in recent months after coming down from historical highs. This is mainly due to tight wholesale supply. However, used car prices are still prone to volatility should demand subside as a result of a slowdown of economic activity. Falling used car prices expose the transaction to lower recovery rates, higher loss severity and consequently higher net losses.”

FCCU earned $11.8 million in 2024, or 0.47% of its average assets, down from 0.50% ROA in 2023.

FCCU’s loan-to-asset ratio stood at 105.8% on March 31, the 84th highest among all credit unions. If the loans had been sold on that date, its loan-to-asset ratio would have been 93%. The average loan-to-savings ratio for all credit unions was 81.8%, according to NCUA data pulled from Callahan’s Peer Suite.

The situation is similar to a year ago. Its loan-to-savings ratio fell from 100.1% in March 2024 to 90.4% in June 2024 after the first sale of asset-backed securities.

Contact Jim DuPlessis at [email protected].