Despite moves initiated two years ago to tighten underwriting, Brookline Bank continues to see deterioration in its auto loan portfolio.
The Massachusetts bank reduced originations and targeted higher credit quality borrowers, yet delinquencies continue to climb.
Here are the stats:
• As of Sept. 30, Brookline Bank’s portfolio totaled $566.9 million, with an average credit score of 760. The year prior, the portfolio totaled $604.5 million, and the average credit score was four points lower — 756.
• Only 2.6% of the loans originated in the first nine months of this year were to borrowers with credit scores below 660, down from 5.7% in the first nine months of 2008.
• Even so, 1.84% of the portfolio was at least 30 days delinquent in 3Q09 — up from 1.72% in 3Q08 — and the allowance for auto loan losses increased to 1.49% of the portfolio from 1.19%.
The upshot is that there is only so much that auto lenders can do to improve portfolio performance. At some point, economic factors just have to run their course.
This appears to be a direct result of frozen or limited originations resulting in natural portfolio attrition. The fact that the porfolio was reduced by 6.5% and they held their delinquency to 1.84% is a testament to a very good portfolio, underwriting team, and collection team. They did a great job of holding their $$ delinquency at bay with limited increase in the allowance for loan losses. Hat’s off to whoever is running that shop.
I am not sure what to make of the 30 basis points of additional allowances for credit losses on a portfolio with an average credit score of 760 — a higher average credit score than the year previous.