First Citizens Loan Trust 2026-SBA1 secures final Morningstar DBRS ratings on $336.5 million notes

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Highlights

Morningstar DBRS finalized ratings on First Citizens Loan Trust 2026-SBA1's $336.5 million notes, assigning AAA (sf) to $259.77 million of Class A Notes.
Credit enhancement features such as subordination, reserve account cash, and excess spread support stressed cumulative net loss hurdles up to 19.40% for AAA-rated notes.
Morningstar DBRS rates First-Citizens Bank & Trust Company as an acceptable originator and servicer, deeming ESG factors non-material to this transaction's credit analysis.

Ratings structure and credit support

As reported by Morningstar DBRS, DBRS, Inc. finalizes its provisional credit ratings on notes issued by First Citizens Loan Trust 2026-SBA1, with $259.77 million of Class A Notes rated AAA (sf), $19.67 million of Class M-1 Notes rated AA (sf), $17.35 million of Class M-2 Notes rated A (sf), $12.29 million of Class M-3 Notes rated BBB (sf), $15.96 million of Class M-4 Notes rated BB (sf), and $11.48 million of Class M-5 Notes rated B (sf).

The rating agency says its analysis is based on the transaction’s capital structure and available credit enhancement, including note subordination, cash in the reserve account, available excess spread, and other structural provisions. Those features are considered sufficient to support stressed cumulative net loss hurdle rate assumptions of 19.40% for AAA, 14.85% for AA, 10.83% for A, 7.10% for BBB, 4.00% for BB, and 1.87% for B.

Morningstar DBRS says its ratings address the credit risk tied to the financial obligations defined in the transaction documents, specifically the note amount, interest payment amount, and interest carryforward amount for each rated class. It adds that its long-term credit ratings express an opinion on default risk, meaning the risk that an issuer fails to meet those obligations under the terms of issuance.

Bank servicing review and market relevance

Morningstar DBRS says it also reviews the capabilities of the transaction parties in originating, underwriting, and servicing first-lien, SBA 504, and conventional commercial real estate loans. The agency says it performs an operational review of First-Citizens Bank & Trust Company and finds the bank to be an acceptable originator and servicer for the collateral.

The agency describes the bank as an investment grade sponsor, originator, and servicer, and notes that the parent holding company and bank subsidiary are regulated by the Federal Reserve, the North Carolina Office of the Commissioner of Banks, and the FDIC. For investors in U.S. structured finance and SBA-linked commercial loan exposure, the finalized ratings provide an updated benchmark on the transaction’s loss protection and servicing oversight.

Morningstar DBRS says no environmental, social, or governance factors have a significant or relevant effect on its credit analysis for the transaction.

Our earlier report on Dallas Area Rapid Transit’s AA credit rating affirmation outlined how a diversified funding mix—anchored by sales taxes and federal sources—helped support a stable outlook. We also noted that positive ridership trends, cost controls, and capital planning were key factors underpinning expectations for fiscal 2025 without undermining operating stability.

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