Pentagon Federal Credit Union in McLean, Virginia, recently sold $460.3 million in securities backed by prime auto loans, its first auto loan securitization ever completed.
The $36.7 billion-asset PenFed said the private placement offering of asset-backed notes was done in four senior and three subordinate tranches that were rated by S&P and Fitch.
"Entering the securitization market will reduce interest rate risk, increase liquidity and strengthen net worth," James Schenck, PenFed's president and CEO, said in a press release.
PenFed, the nation's third-largest credit union by assets, had nearly $6 billion outstanding in auto loans at June 30 plus an additional $1.2 billion in indirect auto loans, according to call report data from the National Credit Union Administration.
The credit union said it has the second-largest consumer loan portfolio among all credit unions across auto, personal, student, consumer loans and credit cards. PenFed also has one of the largest auto loan portfolios among federal credit unions, with originations across all 50 states and Puerto Rico.
"PenFed is pleased that the auto loan securitization offering was very well received by the market," Jill Streit, the credit union's chief financial officer, said in the press release. "We plan to leverage securitization as a tool to further diversify liquidity and funding options, adding additional protections for PenFed members."
J.P. Morgan Securities acted as the structuring lead manager of the transaction, and Wells Fargo Securities acted as joint lead manager.
PenFed earned $170.4 million in the first six months of 2022, a 28% increase from a year earlier, according to call report data from the NCUA.
