DBRS Morningstar Confirms Ratings on 1st Financial Credit Card Master Note Trust III, Series 2013-II

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on four classes issued by 1st Financial Credit Card Master Note Trust III, Series 2013-II (the Trust).

The classes reviewed were as follows:

-- Series 2013-II Notes, Class A at AAA (sf)
-- Series 2013-II Notes, Class B at AA (high) (sf)
-- Series 2013-II Notes, Class C at A (high) (sf)
-- Series 2013-II Notes, Class D at BBB (high) (sf)

The ratings are based on a review by DBRS Morningstar of the following considerations:

--The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: September Update,” published on September 10, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, and have been regularly updated. The scenarios were last updated on September 10, 2020, and are reflected in DBRS Morningstar’s rating analysis.
--The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario remains predicated on a more rapid return of confidence and a steady recovery heading into 2021.
-- The performance and quality of the credit card receivables pool.
-- The form and sufficiency of available credit enhancement.
-- DBRS Morningstar has performed an operational risk review to assess the capability of 1st Financial Bank USA’s (1st Financial) origination and servicing functions in Dakota Dunes, South Dakota. DBRS Morningstar deems 1st Financial to be an acceptable originator and servicer.
-- DBRS Morningstar revised its base-case charge-off assumptions for each class DBRS Morningstar rates. Multiple factors led to this increased rate: a gradual increase in charge-offs in the Trust portfolio and an overall increase in the expected charge-off rate assumption as a result of the expected impact of the coronavirus crisis.
-- The transaction’s form and sufficiency of available credit enhancement. Overcollateralization, subordination, spread accounts, and excess spread create credit enhancement levels and liquidity that are commensurate with the ratings.
-- Transaction cash flows are sufficient to repay investors under all respective stress scenarios in accordance with the terms of each respective series’ transaction documents.
-- The legal structure and expected legal opinions that are consistent with the DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:

All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Credit Card Asset-Backed Securities (August 7, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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