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

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

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating confirmations are based on a review by Morningstar DBRS of the following considerations:

-- Amendments regarding the extension of the maturity date and increasing the maximum invested amount.

-- The form and sufficiency of available credit enhancement. Credit enhancement is in the form of overcollateralization, subordination, spread accounts, and excess spread. Credit enhancement levels are sufficient to cover Morningstar DBRS-expected losses at their current respective credit rating levels.

-- The performance and quality of the credit card receivables pool.

-- The ability of the transaction to perform within Morningstar DBRS’ base case assumptions. 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 transaction parties’ capabilities regarding origination, underwriting, and servicing.

-- Morningstar DBRS has performed an operational risk review to assess the capability of 1st Financial Bank USA’s origination and servicing functions in Dakota Dunes, South Dakota. Morningstar DBRS deems 1st Financial to be an acceptable originator and servicer.

-- The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, "Baseline Macroeconomic Scenarios for Rated Sovereigns: March 2024 Update," published on March 27, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

-- The legal structure and expected legal opinions that are consistent with Morningstar DBRS’ “Legal Criteria for U.S. Structured Finance.”

Morningstar DBRS’ credit ratings on the Class A, Class B, Class C, and Class D notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. For the securities listed in the table above, the associated financial obligations are the related Monthly Interest Amount and Note Principal Balance.

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations that are not financial obligations. For the securities listed in the table above, the associated contractual payment obligation that is not a financial obligation is the related interest on any unpaid Monthly Interest Amount.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) https://dbrs.morningstar.com/research/427030.

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

The principal methodology applicable to the credit rating is Rating U.S. Credit Card Asset-Backed Securities (July 24, 2023) https://dbrs.morningstar.com/research/417562.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

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

DBRS, Inc.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating U.S. Structured Finance Transactions (February 22, 2024), https://dbrs.morningstar.com/research/428503
-- Operational Risk Assessment for U.S. ABS Servicers (March 21, 2024), https://dbrs.morningstar.com/research/430003
-- Operational Risk Assessment for U.S. ABS Originators (March 21, 2024), https://dbrs.morningstar.com/research/430004
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- Legal Criteria for U.S. Structured Finance (December 7, 2023), https://dbrs.morningstar.com/research/425081

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.