BHG Securitization Trust is returning to the capital markets with a $309 million securitization of proceeds from a pool of small business loans and unsecured consumer loans to prime, high-income professionals.
BHG or Pinnacle Bank originated the commercial loans, while Pinnacle Bank or County Bank provided the consumer loans. As far as how the collateral balance breaks down by percentage, BHG, Pinnacle Bank and County Bank accounted for 67.0%, 25.9% and 7.1%, respectively, according to Kroll Bond Rating Agency.
A group of analysts at KBRA including Maxim Berger, a director, noted that the all of the collateral—both fixed and adjustable rate—are fixed rate. The balances for both types of loans begin at $20,000, while the maximum for the commercial loans is around $500,000 and the maximum for the consumer loans is $200,000.
Credit Suisse Securities is the initial note purchaser on the deal, KBRA said, with Bankers Healthcare Group is the sponsor and servicer, as well as originator.
BHG has experienced several changes recently. Most notably, the company says that it experienced increased losses because of higher levels of income fraud in H1 2022, especially on consumer loans that were originated through its digital channel. To reduce future instances of income fraud, BHG bolstered its fraud detection efforts, most notably by putting in place a full-time fraud management team. Investigative experts, program managers and fraud strategy and analytics personnel make up the 16-member department.
KBRA analysts noted that the cumulative net loss for BHG 2022-C was 10.4%, a reduction from 10.9%.
"While the pool composition by product, term and risk grade is similar to BHG 2022-B, the removal of the prefunding feature in BHG 2022-C and the uncertainty regarding pool migration during the prefunding period has resulted in the lower expected CNL," KBRA analysts wrote.
BHG 2022-C features several other differences from the previous transaction. The transaction does not have a prefunding feature, the rating agency said. Also the average current loan balance is $87,774, compared with the $80,849 from the previous transaction. On average, the monthly payment is $1,588, compared with $1,476 on the BHG 2022-B.
As of the deal's cutoff date, borrowers had a weighted average (WA) FICO score of 734, annual income of $290,206 and WA years in industry of 18 years. Also on a WA basis, loans had an original term of 102 months, and the top 5 professions are physician/surgeon, registered nurse, engineer and financial advisor, with a larger portion of "other professionals," compared with the previous deal.
KBRA expects to assign ratings ranging from 'AAA' on the $130 million, class A notes through 'BBB-' on the $23.9 million, class E notes. Meanwhile Fitch Ratings also expects to assign 'AAA' ratings on the A notes, through 'BBB' on the $12.5 million, class D notes.
