Morningstar DBRS Finalized Its Provisional Credit Ratings on Regional Management Issuance Trust 2024-1

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of notes (collectively, the Notes) issued by Regional Management Issuance Trust 2024-1 (RMIT 2024-1):

-- $128,135,000 Class A Notes at AAA (sf)
-- $15,170,000 Class B Notes at AA (low) (sf)
-- $19,105,000 Class C Notes at A (low) (sf)
-- $24,895,000 Class D Notes at BBB (low) (sf)

CREDIT RATING RATIONALE/DESCRIPTION

(1) 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 Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

(2) The Morningstar DBRS CNL assumption is 16.32%.

(3) Transaction capital structure and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, subordination, amounts held in the reserve fund, and excess spread. Credit enhancement levels are sufficient to support Morningstar DBRS's stressed projected finance yield, principal payment rate, and charge-off assumptions under various stress scenarios.

(4) 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's capabilities with regard to originations, underwriting, and servicing.
-- Morningstar DBRS has performed an operational review of Regional Management Corp. (Regional) and, as a result, 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 on an annual basis since 2007.

(5) The credit quality of the collateral and performance of Regional's consumer loan portfolio. Morningstar DBRS has 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 assets such as credit card master trusts.
-- The weighted-average (WA) remaining term of the collateral pool is approximately 38 months as of the Statistical Cutoff Date.
-- The WA coupon (WAC) of the pool is 31.15% as of the Statistical Cutoff Date and the transaction includes a reinvestment criteria event that the WAC is less than 28.50%.
-- The Morningstar DBRS base-case assumption for the finance yield is 28.50%.
-- Morningstar DBRS applied a finance yield haircut of 10.00% for Class A, 7.33% for Class B, 5.33% for Class C, and 3.33% for Class D. While these haircuts are lower than the range described in the Morningstar DBRS "Rating U.S. Credit Card Asset-Backed Securities" methodology, the fixed-rate nature of the underlying loans, lack of interchange fees, and historical yield consistency support these stressed assumptions.
-- Principal payment rates for Regional's portfolio, as estimated by Morningstar DBRS, have generally averaged between 2.5% and 5.0% since 2017.
-- The Morningstar DBRS base-case assumption for the principal payment rate is 2.83%. The RMIT 2024-1 transaction has a lower principal payment rate assumption compared with historic Morningstar DBRS-rated Regional transactions due to changes in origination patterns over the past two years. The original terms of many their lending products have shifted to longer terms; Convenience Checks in particular have seen their original term shift from 38 months over the last three months from 34 months over the last three years.
-- Morningstar DBRS applied a payment rate haircut of 35.00% for Class A, 33.33% for Class B, 28.33% for Class C, and 20.00% for Class D.
-- Charge-off rates on the Regional portfolio have generally ranged between 9.00% and 15.00% over the past several years.
-- Morningstar DBRS base-case assumption for the charge-off rate is 16.32% and is based off the RMIT 2024-1 reinvestment criteria and recent credit performance.
-- Charge-offs have increased sharply over the past two years due to inflation affordability issues with Regional's borrowers starting in mid-2022.
-- Since late 2022, Regional has taken many steps to improve portfolio performance by raising score cutoffs, reducing offer amounts, and tightening check mailing campaigns in addition to enhanced servicing strategies.
-- Additionally, in Q4 2022 and Q4 2023 Regional performed early debt charge-off sales to sell off late-stage delinquent accounts.
-- For the RMIT 2024-1 transaction, a recovery of 3.00% was assumed for the Large and Small branch products based on recovery data provided by the Company.

(6) The legal structure and presence of legal opinions that address the true sale of the assets from the Seller to the Depositor, the nonconsolidation of the special-purpose vehicle with the Seller, that the Indenture Trustee has a valid first-priority security interest in the assets, and the consistency with the Morningstar DBRS "Legal Criteria for U.S. Structured Finance".

Morningstar DBRS' credit ratings on the securities referenced herein address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated Notes are the related Monthly Interest Amount and the related Note Balance.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. The associated contractual payment obligation that is not a financial obligation for each of the rated Notes 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, or Governance factors 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) at https://dbrs.morningstar.com/research/427030.

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

The principal methodologies applicable to the credit rating are Rating U.S. Structured Finance Transactions - Appendix I: U.S. Consumer Loan ABS Transactions (April 15, 2024; https://dbrs.morningstar.com/research/431204) and 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 rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

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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New York, NY 10005 USA
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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 (April 15, 2024), https://dbrs.morningstar.com/research/431204
-- 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
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

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