First National Bank of Omaha, one of the credit card industry's so-called Big Six issuers, is preparing to issue about $384 million in asset-backed notes secured by receivables on a portfolio of highly seasoned, lower balance credit card accounts.
Much of the credit ratings rest on the strength of the servicer, First National Bank of Omaha, which also originated the loans, according to a Moody's Investors Service pre-sale report. The trust has no backup servicer, according to according to Moody's.
The lack of an extra safety net, so to speak, isn't necessarily a hindrance to top ratings. Fitch Ratings, for instance, noted that First National's credit card assets have turned in strong performances consistently, even throughout the pandemic.
"The trust performance has remained within Fitch's steady state assumptions through the pandemic, with observed improved performance over the past 12 months," the rating agency said.
Moody's noted that the accounts in FNB 2023-1 have lower balances compared with others among the Big Six credit card ABS trust sponsors. This makes it easier for card holders to stay current, Moody's said. Also, the FNB 2023-1 portfolio is highly seasoned. All of the trust receivables are tied to card accounts that First National Bank of Omaha originated at least five years ago, the rating agency said.
First National Master Note Trust, 2023-1, will finance receivables from about 1.4 million accounts, which have a balance of $2.3 billion, and have an average balance of $1,671—excluding the zero balance accounts. Excluding the latter, the average balance is $3,438, the rating agency said.
In terms of how the balances break down, the current ABS pool is more heavily weighted toward large balances. Accounts with balances of $10,000 or more account for 49.9% of the pool. After that, accounts with balances of less than $5,000 are 27.4% of the pool's outstanding balance, Moody's said.
Meanwhile, performance metrics supported Moody's 's view of a prime-quality pool. Gross charge-offs were 2.54% at the end of 2022, lower than the 2.94% seen at the end of 2021, and 3.68% to end 2020, the rating agency said. Only 1.16% of accounts were delinquent at 30-plus days, according to Moody's. The portfolio also has a monthly payment rate of 26.19%, according to Moody's.
Although the trust has several of these characteristics in its favor, Moody's did raise several potential concerns. Although average balances are lower, the accounts have high credit lines, which are about $20,429 on a weighted average (WA) basis. This could expose the portfolio to credit risk because cardholders under duress tend to use their credit lines to the maximum, Moody's said.
Moody's expects to assign ratings of 'Aaa' on the $300 million, class A notes, and so does Fitch. The notes have an expected maturity of April 15, 2026.
