GTE Federal Credit Union (GTE Financial) has prepped its first-ever securitization backed by $184.8 million in prime auto loan receivables, according to a presale report by S&P Global Ratings. The deal is expected to close Nov. 26.
The securitization pool has a “high concentration” of longer-term loans, with 62% of the pool consisting of loans with terms greater than 72 months. Yet, the transaction’s weighted average FICO score of 727 is a notable strength that keeps expected cumulative net losses low at 2.90%-3.10%, according to S&P.
GTE Financial’s origination growth and characteristics have shown an “improving credit quality trend,” which mitigates the risk of lengthening loan terms, S&P noted. The Tampa, Fla.-based lender’s originations increased 8.1% year over year to $200.3 million as of June 30. Meanwhile, net charge-offs were down 16 basis points at 0.62% of the managed portfolio, and 30-plus-day delinquencies were down 19 basis points at 0.97% of the managed portfolio.
S&P noted additional risks for the transaction, including an “extremely high geographic concentration,” as 98% of the loans were originated in and around the Tampa, Fla., region.
“GTE provided overall managed portfolio performance dating back to 2005 that showed, in our view, higher than average volatility in losses compared with other geographically diversified originators’ performance during the Great Recession,” S&P noted. “During this time, the Tampa region also experienced a more severe economic decline compared with other regions in the U.S.”