DBRS Finalizes Its Provisional Ratings on Regional Management Issuance Trust 2018-1

DBRS, Inc. (DBRS) finalized its provisional ratings on the following asset-backed notes issued by Regional Management Issuance Trust 2018-1:

-- $129,770,000 Class A Asset-Backed Notes, rated AA (sf)
-- $9,270,000 Class B Asset-Backed Notes, rated A (sf)
-- $10,960,000 Class C Asset-Backed Notes, rated BBB (sf)

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

-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and principal by the legal final maturity date.
-- Regional Management Corp. (Regional) capabilities with regard to originations, underwriting and servicing.
-- DBRS has performed an operational review of Regional and considers the entity to be an acceptable originator and servicer of unsecured personal loans with an acceptable backup servicer.
--Regional’s senior management team has considerable experience and a successful track record within the consumer loan industry.
--Regional has remained consistently profitable since 2007.
-- In February 2018, Regional completed a system migration to the Nortridge Loan Management System, allowing for the implementation of centralized underwriting for all branches, which led to the ability to implement a hybrid servicing model.
-- The credit quality of the collateral and performance of Regional’s consumer loan portfolio. DBRS used a hybrid approach in analyzing the Regional portfolio that incorporates elements of static pool analysis, employed for assets such as consumer loans, and revolving asset analysis, employed for such assets as credit card master trusts.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the issuer, the non-consolidation of the special-purpose vehicle with Regional and that the trust has a valid first-priority security interest in the assets and is consistent with the DBRS methodology “Legal Criteria for U.S. Structured Finance.”

The 2018-1 transaction represents the first term securitization of a portfolio of non-prime and subprime personal loans originated through Regional’s branch network.

Credit enhancement in the transaction consists of overcollateralization, subordination, excess spread and a reserve account. The rating on the Class A Notes reflects the 24.00% of initial hard credit enhancement provided by the subordinated notes in the pool, the reserve account (1.00%) and overcollateralization (11.00%). The ratings on the Class B Notes and the Class C Notes reflect 18.50% and 12.00% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

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

The principal methodologies are Rating U.S. Structured Finance Transactions – Appendix I: U.S. Consumer Loan ABS Transactions and Rating U.S. Credit Card Asset-Backed Securities, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS 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@dbrs.com.