Fitch Affirms First National Master Note Trust's Ratings

NEW YORK--()--Fitch Ratings has affirmed the following ratings assigned to First National Master Note Trust and has maintained the Rating Outlooks:

--2013-2 at 'AAAsf'; Outlook Stable;

--2015-1 at 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

The affirmation is based on continued positive trust performance. 60+ day delinquencies have steadily declined each month since the peak of 4.29% during the March 2010 distribution period. Currently, 60+ day delinquencies are at 0.98% for the September 2016 distribution period.

Monthly payment rate (MPR), a measure of how quickly a consumer has been paying off their credit card debt, has remained stable over the past year and is trending with the Fitch Index. Currently, MPR is at 19.53% for the September 2016 distribution period.

Gross chargeoffs have continued to decline since the last review. Currently, the 12-month average is 3.36%, down marginally from 3.38% at the September 2015 distribution period.

Fitch runs cash flow breakeven analysis by applying stress scenarios to three and 12-month average performances to test that under the stressed conditions, the transaction can withstand a level of losses commensurate with the risk associated to a rating level with the available credit enhancement. The variables that Fitch stresses are the gross yield, MPR, gross charge-off, and purchase rates.

Fitch's analysis included a comparison of observed performance trends over the past few months to Fitch's base case expectations for each outstanding rating category. As part of its ongoing surveillance efforts, Fitch will continue to monitor the performance of these trusts.

Criteria Variations

Eligible Investments: Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness, as per the Counterparty Criteria for Structured Finance and Covered Bonds, dated Sept. 1, 2016. The definition of eligible investments for this deal allows for the possibility of using investments not rated by Fitch, which represents a criteria variation. Since the only available funds to invest are monthly collections, and the funds can only be invested for a short duration of one month given the payment frequency of the notes, Fitch doesn't believe such variation currently has a measurable impact upon the ratings assigned.

Eligible Institution's: Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness, as per the Counterparty Criteria for Structured Finance and Covered Bonds, dated Sept. 1, 2016. The definition of eligible institutions for this deal allows for the possibility of using a depository institution (which may include the Indenture Trustee, Owner Trustee, Servicer, or an Affiliate of Servicer) not rated by Fitch, which does not meet the Fitch's counterparty criteria for a 'AAAsf' rated note. Since U.S. Bank, N.A., as account bank currently maintains a 'AA/F1+/Stable' rating, Fitch doesn't believe such a variation currently has a measurable impact upon the ratings assigned.

Commingling: Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness, as per Fitch's Counterparty Criteria for Structured Finance and Covered Bonds, dated Sept. 1, 2016. The deal allows for the servicer to commingle without requiring a minimum rating from Fitch, which does not meet Fitch's counterparty criteria. Fitch doesn't believe such a variation currently has a measurable impact upon the ratings assigned since U.S. Bank, N.A., as account bank currently maintains a 'AA/F1+/Stable' rating.

RATING SENSITIVITIES

Fitch models three different scenarios when evaluating the rating sensitivity compared to expected performance for credit card asset-backed securities transactions: 1) increased defaults; 2) a reduction in purchase rate, and 3) a combination stress of higher defaults and lower Monthly Payment Rate (MPR).

Increasing defaults alone has no impact on rating migration even in the most severe scenario of a 75% increase in defaults. The rating sensitivity to a reduction in purchase rate also leads to no impact in rating migration even in the most severe scenario of a 100% reduction in purchase rate. The harshest scenario assumes that an increase in defaults and reduction in monthly payment rate occur simultaneously. In this scenario, the ratings could be downgraded under the severe stress of a 75% increase in defaults and 35% reduction in MPR.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/site/re/879815

Global Credit Card ABS Rating Criteria (pub. 21 Jul 2016)

https://www.fitchratings.com/site/re/885146

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1012066

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1012066

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings, Inc.
Surveillance Analyst
Harry Kohl
Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Herman Poon
Senior Director
+1-212-908-0847
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings, Inc.
Surveillance Analyst
Harry Kohl
Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Herman Poon
Senior Director
+1-212-908-0847
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com