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Santander Consumer USA Holdings Inc. Reports Third Quarter 2018 Net Income of $232 million

Total Auto Originations of $7.6 Billion Increased 52% YoY; Santander Holdings USA Terminated 2015 Written Agreement, Company Executes On Previously Announced Share Repurchase Plan and Declares $0.20 Per Share Cash Dividend

DALLAS, Oct. 31, 2018 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (SC) ("SC") today announced net income for the third quarter ended September 30, 2018 ("Q3 2018") of $232 million, or $0.64 per diluted common share.

The Company has declared a cash dividend of $0.20 per share, to be paid on November 15, 2018, to shareholders of record as of the close of business on November 10, 20181.

Management Quotes

"Our performance in the third quarter demonstrates the continued strength in our business," said Scott Powell, SC President and CEO, who is also CEO of Santander US. "Earnings increased 17 percent versus the third quarter of 2017, with significant originations growth. We fully launched our program to originate SC auto loans at Santander Bank, creating value for both entities and for Fiat Chrysler. Santander Holdings USA terminated its 2015 Written Agreement with the Federal Reserve, which is among the most significant milestones we've reached in resolving our legacy regulatory challenges."

Juan Carlos Alvarez, SC Chief Financial Officer, added, "As seasonal pressures increase in the second half of the year, our credit performance remains stable and originations are solid. During the third quarter we began to execute on our previously announced inaugural share repurchase plan, targeting a more efficient capital base, and remaining focused on expense management and more efficient funding."

Q3 2018 Highlights (variances compared to the third quarter of 2017 ("Q3 2017"), unless otherwise noted):

  • Total auto originations of $7.6 billion, up 52%
  • Full roll-out of Santander Bank, N.A. program in July leading to $685 million in originations
  • Net finance and other interest income of $1.1 billion, up 5%
  • Retail Installment Contract "RIC" gross charge-off ratio of 17.6% down 60 basis points
  • 59-plus Delinquency ratio of 5.5%, down 30 basis points
  • Troubled Debt Restructuring ("TDR") balance of $5.8 billion, down $339 million vs. June 30, 2018
  • Return on average assets of 2.2%, up from 2.0%
  • Issued $4.5 billion in asset-backed securities "ABS"
  • Expense ratio of 2.1%, down from 2.4%
  • Common equity tier 1 ("CET1") ratio of 16.4% down from 16.9% vs. June 30, 2018

Net finance and other interest income increased 5 percent to $1.14 billion in Q3 2018 from $1.09 billion in Q3 2017, primarily driven by higher lease income partially offset by higher interest expenses.

Servicing fee income decreased 8 percent to $26 million in Q3 2018, from $29 million in Q3 2017, driven by lower serviced for others balances. SC's serviced for others portfolio of $9.2 billion as of Q3 2018 decreased 8 percent from $10.0 billion the prior year quarter.

RIC delinquency ratio3 of 5.5 percent in Q3 2018 decreased compared to 5.8 percent in Q3 2017.

RIC net charge-off ratio4 decreased to 8.8 percent in Q3 2018 from 9.3 percent in Q3 2017. Provision for credit losses of $598 million in Q3 2018 were up from $571 million the prior year quarter.

Allowance ratio5 decreased 40 basis points, to 11.7 percent at the end of Q3 2018, from 12.1 percent at the end of Q2 2018.

Recorded net investment losses of $87 million in Q3 2018, compared to net investment losses of $53 million in Q3 2017, which during Q3 2017 included a pretax gain of $36 million from the sale of the majority of the Company's legacy RV/Marine portfolio. The current period losses were primarily driven by held for sale accounting for SC's personal lending portfolio6.

During Q3 2018 SC incurred $272 million of operating expenses, down 9 percent from $298 million in Q3 2017. SC's expense ratio of 2.1 percent for the quarter, was down compared to 2.4 percent during the same period last year.

Correction of Immaterial Errors In Prior Period Financial Statements

In connection with preparing its financial statements for the quarter ended September 30, 2018, the Company identified and corrected two immaterial errors. To correct the errors, the Company prepared its consolidated financial statements as of and for the period ended September 30, 2018, on a consolidated basis and revised its consolidated financial statements as of and for the period ended September 30, 2017. The matters giving rise to the corrections are summarized below:

  • For core retail auto loans originated after January 1, 2017, as previously disclosed, the Company had determined past due status using a 90% required minimum payment threshold, while continuing to use a 50% threshold to report past due status on core retail auto loans originated prior to that date. In Q3 2018, the Company determined that historically a 90% required minimum payment threshold should be used for all loans and our prior reporting was in error. Therefore, the consolidated financial statements and related delinquency disclosures have been corrected to be on that basis.
  • On January 1, 2017, as previously disclosed, the Company prospectively began classifying as nonaccrual loans (1) any loans designated as TDRs and 60+ days past due at the time of a TDR and (2) any loans less than 60 days past due at the time of TDR event that had a third instance of deferral. These TDR loans were also placed on a cost recovery basis from that time forward and not returned to accrual status until there was sustained evidence of collectability. In Q3 2018, the Company determined the changes in both nonaccrual designation and cost recovery basis were in error and, in turn, has corrected the error by reversing the impacts of the change going back to January 1, 2017.

A Financial Supplement aggregating all revised financials is available in the Investor Relations section of the Company's website at http://investors.santanderconsumerusa.com. Choose "Events" and select the information pertaining to the "Q3 2018 SC Earnings Conference Call."

*Prior periods have been revised according to the 8-K filed on October 31, 2018. See Financial Supplement on the SC Investor Relations website for further details.

1The timing and amount of any capital actions will depend on various factors, including the business plans and financial performance of both SC and SHUSA, as well as market conditions, and any SC capital distribution is subject to approval of the Company's and SHUSA's respective boards of directors.

2Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.

3Delinquency ratio is defined as the ratio of end of period delinquent principal over 59 days to end of period gross balance of the respective portfolio, excludes capital leases.

4Net charge-off ratio stated on a recorded investment basis, which is unpaid principal balance adjusted for unaccreted net discounts, subvention and origination costs.

5Ratio for allowance for credit losses excludes end of period balances on purchased receivables portfolio of $33 million and finance receivables and personal loans held for sale of $0.9 billion.

6The current period losses were primarily driven by $87 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, comprised of $100 million in customer default activity, partially offset by a $13 million increase in market discount, consistent with typical seasonal patterns.

Conference Call Information

SC will host a conference call and webcast to discuss its Q3 2018 results and other general matters at 9:00 a.m. Eastern Time on Wednesday, October 31, 2018. The conference call will be accessible by dialing 866-548-4713 (U.S. domestic), or 323-794-2093 (international), conference ID 9871011. Please join 10 minutes prior to the start of the call. The conference call will also be accessible via live audio webcast through the Investor Relations section of SC's corporate website at http://investors.santanderconsumerusa.com. Choose "Events" and select the information pertaining to the Q3 2018 SC Earnings Conference Call. Additionally, there will be slides accompanying the webcast. Please allow at least 15 minutes prior to the call to register, download and install any necessary software prior to the call.

For those unable to listen to the live broadcast, a replay of the call will be available on the Company's website or by dialing 844-512-2921 (U.S. domestic), or 412-317-6671 (international), conference ID 9871011, approximately two hours after the conference call. An audio webcast of the call and investor presentation will also be archived on the Investor Relations section of SC's corporate website at http://investors.santanderconsumerusa.com, under "Events".

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as anticipates, believes, can, could, may, predicts, potential, should, will, estimates, plans, projects, continuing, ongoing, expects, intends, and similar words or phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties that are subject to change based on various important factors, some of which are beyond our control. For additional discussion of these risks, refer to the section entitled Risk Factors and elsewhere in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q filed by us with the U.S. Securities and Exchange Commission (SEC). Among the factors that could cause the forward-looking statements in this press release and/or our financial performance to differ materially from that suggested by the forward-looking statements are (a) the inherent limitations in internal control over financial reporting; (b) our ability to remediate any material weaknesses in internal controls over financial reporting completely and in a timely manner; (c) continually changing federal, state, and local laws and regulations could materially adversely affect our business; (d) adverse economic conditions in the United States and worldwide may negatively impact our results; (e) our business could suffer if our access to funding is reduced; (f) significant risks we face implementing our growth strategy, some of which are outside our control; (g) unexpected costs and delays in connection with exiting our personal lending business; (h) our agreement with FCA US LLC may not result in currently anticipated levels of growth and is subject to certain conditions that could result in termination of the agreement; (i) our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (j) our financial condition, liquidity, and results of operations depend on the credit performance of our loans; (k) loss of our key management or other personnel, or an inability to attract such management and personnel; (l) certain regulations, including but not limited to oversight by the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the European Central Bank, and the Federal Reserve, whose oversight and regulation may limit certain of our activities, including the timing and amount of dividends and other limitations on our business; and (m) future changes in our relationship with SHUSA and Banco Santander that could adversely affect our operations. If one or more of the factors affecting our forward-looking information and statements proves incorrect, our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Therefore, we caution the reader not to place undue reliance on any forward-looking information or statements. The effect of these factors is difficult to predict. Factors other than these also could adversely affect our results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties as new factors emerge from time to time. Any forward-looking statements only speak as of the date of this document, and we undertake no obligation to update any forward-looking information or statements, whether written or oral, to reflect any change, except as required by law. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

About Santander Consumer USA Holdings Inc.

Santander Consumer USA Holdings Inc. (SC) ("SC") is a full-service consumer finance company focused on vehicle finance, third-party servicing and delivering superior service to our more than 2.7 million customers across the full credit spectrum. The company, which began originating retail installment contracts in 1997, has an average managed asset portfolio of approximately $52 billion (as of September 30, 2018), and is headquartered in Dallas. (www.santanderconsumerusa.com)

Contacts:

Investor Relations

Evan Black

800.493.8219

InvestorRelations@santanderconsumerusa.com


Media Relations

Laurie Kight

214.801.6455

Media@santanderconsumerusa.com



Santander Consumer USA Holdings Inc.

Financial Supplement

Third Quarter 2018



Table of Contents




Table 1: Condensed Consolidated Balance Sheets

5


Table 2: Condensed Consolidated Statements of Income

6


Table 3: Other Financial Information

7


Table 4: Credit Quality

9


Table 5: Originations

11


Table 6: Asset Sales

12


Table 7: Ending Portfolio

13


Table 8: Reconciliation of Non-GAAP Measures

14





Table 1: Condensed Consolidated Balance Sheets



September 30,
2018


December 31,

2017 (As Revised)

Assets

(Unaudited, Dollars in thousands)

Cash and cash equivalents

$

81,435



$

527,805


Finance receivables held for sale, net

933,380



2,210,421


Finance receivables held for investment, net

24,839,583



22,394,286


Restricted cash

2,130,130



2,553,902


Accrued interest receivable

304,538



340,618


Leased vehicles, net

13,183,793



10,160,327


Furniture and equipment, net

62,852



69,609


Federal, state and other income taxes receivable

99,308



95,060


Related party taxes receivable

467



467


Goodwill

74,056



74,056


Intangible assets

32,177



29,734


Due from affiliates

9,814



33,270


Other assets

1,055,422



913,244


Total assets

$

42,806,955



$

39,402,799


Liabilities and Equity




Liabilities:




Notes payable — credit facilities

$

5,632,053



$

4,848,316


Notes payable — secured structured financings

24,867,297



22,557,895


Notes payable —  related party

3,003,529



3,754,223


Accrued interest payable

44,555



38,529


Accounts payable and accrued expenses

453,834



429,531


Deferred tax liabilities, net

1,138,088



892,415


Due to affiliates

69,804



82,382


Other liabilities

456,580



333,806


Total liabilities

$

35,665,740



$

32,937,097






Equity:




Common stock, $0.01 par value

3,593



3,605


Additional paid-in capital

1,647,738



1,681,558


Accumulated other comprehensive income, net

56,601



44,262


Retained earnings

5,433,283



4,736,277


Total stockholders' equity

$

7,141,215



$

6,465,702


Total liabilities and equity

$

42,806,955



$

39,402,799





Table 2: Condensed Consolidated Statements of Income



Three Months Ended
September 30,


Nine Months Ended
September 30,


2018


2017 (As Revised)


2018


2017 (As Revised)


(Unaudited, Dollars in thousands, except per share amounts)

Interest on finance receivables and loans

$

1,227,129



$

1,218,299



$

3,606,675



$

3,680,533


Leased vehicle income

583,097



457,932



1,625,272



1,305,429


Other finance and interest income

8,522



6,385



24,153



15,415


Total finance and other interest income

1,818,748



1,682,616



5,256,100



5,001,377


Interest expense

285,583



250,674



800,564



711,134


Leased vehicle expense

389,076



339,581



1,108,094



927,976


Net finance and other interest income

1,144,089



1,092,361



3,347,442



3,362,267


Provision for credit losses

597,914



571,012



1,514,799



1,765,518


Net finance and other interest income after provision for credit losses

546,175



521,349



1,832,643



1,596,749


Profit sharing

1,652



5,945



18,882



22,333


Net finance and other interest income after provision for credit losses and profit sharing

544,523



515,404



1,813,761



1,574,416


Investment losses, net

(86,320)



(52,592)



(255,474)



(228,513)


Servicing fee income

26,409



28,673



80,129



92,310


Fees, commissions, and other

84,552



82,866



247,423



275,025


Total other income

24,641



58,947



72,078



138,822


Compensation expense

119,722



134,169



360,325



398,325


Repossession expense

62,189



66,877



197,930



205,445


Other operating costs

90,431



96,857



278,949



281,626


Total operating expenses

272,342



297,903



837,204



885,396


Income before income taxes

296,822



276,448



1,048,635



827,842


Income tax expense

64,874



77,879



237,047



232,484


Net income

$

231,948



$

198,569



$

811,588



$

595,358










Net income per common share (basic)

$

0.64



$

0.55



$

2.25



$

1.66


Net income per common share (diluted)

$

0.64



$

0.55



$

2.24



$

1.65


Dividend declared per common share

$

0.20



$



$

0.30



$


Weighted average common shares (basic)

360,725,330



359,619,083



360,898,973



359,397,063


Weighted average common shares (diluted)

361,445,223



360,460,353



361,714,123



360,069,449








Table 3: Other Financial Information






Three Months Ended
September 30,

Nine Months Ended
September 30,


Ratios (Unaudited, Dollars in thousands)

2018


2017
(As Revised)

2018


2017
(As Revised)


Yield on individually acquired retail installment contracts

16.3

%


16.0

%

16.1

%


16.0

%


Yield on purchased receivables portfolios

23.2

%


17.4

%

25.1

%


20.1

%


Yield on receivables from dealers

3.4

%


6.0

%

3.3

%


5.7

%


Yield on personal loans (1)

24.9

%


24.4

%

24.6

%


24.9

%


Yield on earning assets (2)

13.3

%


13.3

%

13.3

%


13.5

%


Cost of debt (3)

3.5

%


3.2

%

3.3

%


3.0

%


Net interest margin (4)

10.6

%


10.8

%

10.7

%


11.2

%


Expense ratio (5)

2.1

%


2.4

%

2.2

%


2.3

%


Return on average assets (6)

2.2

%


2.0

%

2.6

%


2.0

%


Return on average equity (7)

13.1

%


13.8

%

15.8

%


14.4

%


Net charge-off ratio on individually acquired retail installment contracts (8)

8.8

%


9.3

%

7.7

%


8.6

%


Net charge-off ratio on purchased receivables portfolios (8)

(3.9)

%


2.6

%

(4.7)

%


1.2

%


Net charge-off ratio on personal loans (8)

9.3

%


67.2

%

37.8

%


62.7

%


Net charge-off ratio (8)

8.8

%


9.3

%

7.7

%


8.6

%


Delinquency ratio on individually acquired retail installment contracts held for investment, end of period (9)

5.5

%


5.8

%

5.5

%


5.8

%


Delinquency ratio on personal loans, end of period (9)

13.3

%


13.8

%

13.3

%


13.8

%


Delinquency ratio on loans held for investment, end of period (9)

5.5

%


5.8

%

5.5

%


5.8

%


Allowance ratio (10)

11.7

%


13.0

%

11.7

%


13.0

%


Common stock dividend payout ratio (11)

31.3

%



13.3

%




Common Equity Tier 1 capital ratio (12)

16.4

%


15.1

%

16.4

%


15.1

%

Other Financial Information








Charge-offs, net of recoveries, on individually acquired retail installment contracts

$

613,210



$

623,631


$

1,560,144



$

1,745,287



Charge-offs, net of recoveries, on purchased receivables portfolios

(331)



769


(1,324)



1,541



Charge-offs, net of recoveries, on personal loans

84



1,771


1,348



6,550



Charge-offs, net of recoveries, on capital leases

227



1,193


939



3,785



Total charge-offs, net of recoveries

$

613,190



$

627,364


$

1,561,107



$

1,757,163



End of period delinquent principal over 59 days, individually acquired retail installment contracts held for investment

1,560,736



1,537,373


1,560,736



1,537,373



End of period delinquent principal over 59 days, personal loans

177,916



183,919


177,916



183,919



End of period delinquent principal over 59 days, loans held for investment

1,562,486



1,541,123


1,562,486



1,541,123



End of period assets covered by allowance for credit losses

28,281,165



26,389,583


28,281,165



26,389,583



End of period gross individually acquired retail installment contracts held for investment

28,243,007



26,342,678


28,243,007



26,342,678



End of period gross personal loans

1,336,664



1,337,114


1,336,664



1,337,114



End of period gross finance receivables and loans held for investment

28,293,857



26,416,774


28,293,857



26,416,774



End of period gross finance receivables, loans, and leases held for investment

42,700,297



37,439,821


42,700,297



37,439,821



Average gross individually acquired retail installment contracts held for investment

27,919,080



26,784,161


26,928,172



26,998,499



Average gross personal loans held for investment

3,623



10,549


4,761



13,935



Average gross individually acquired retail installment contracts held for investment and held for sale

$

28,060,492



$

28,165,822


$

27,615,084



$

28,204,075



Average gross purchased receivables portfolios

34,059



120,245


37,545



176,792



Average gross receivables from dealers

15,070



53,715


15,363



63,401



Average gross personal loans

1,350,852



1,367,445


1,398,555



1,419,223



Average gross capital leases

20,034



22,544


21,183



26,415



Average gross finance receivables and loans

$

29,480,507



$

29,729,771


$

29,087,730



$

29,889,906



Average gross operating leases

13,607,010



10,710,941


12,458,508



10,257,752



Average gross finance receivables, loans, and leases

43,087,517



40,440,712


41,546,238



40,147,658



Average managed assets

52,472,270



50,019,800


50,594,560



50,576,757



Average total assets

41,985,751



39,476,811


40,900,603



39,172,967



Average debt

32,706,778



31,554,026


32,002,094



31,538,355



Average total equity

7,105,340



5,751,987


6,845,767



5,530,123




(1)

Includes Finance and other interest income; excludes fees



(2)

"Yield on earning assets" is defined as the ratio of annualized Total finance and other interest income, net of Leased vehicle expense, to Average gross finance receivables, loans and leases



(3)

"Cost of debt" is defined as the ratio of annualized Interest expense to Average debt



(4)

"Net interest margin" is defined as the ratio of annualized Net finance and other interest income to Average gross finance receivables, loans and leases



(5)

"Expense ratio" is defined as the ratio of annualized Operating expenses to Average managed assets



(6)

"Return on average assets" is defined as the ratio of annualized Net income to Average total assets



(7)

"Return on average equity" is defined as the ratio of annualized Net income to Average total equity



(8)

"Net charge-off ratio" is defined as the ratio of annualized Charge-offs, on a recorded investment basis, net of recoveries, to average unpaid principal balance of the respective held-for-investment portfolio. Effective as of September 30, 2016, the Company records the charge-off activity for certain personal loans within the provision for credit losses due to the reclassification of these loans from held for sale to held for investment.



(9)

"Delinquency ratio" is defined as the ratio of End of period Delinquent principal over 59 days to End of period gross balance of the respective portfolio, excludes capital leases



(10)

"Allowance ratio" is defined as the ratio of Allowance for credit losses, which excludes impairment on purchased receivables portfolios, to End of period assets covered by allowance for credit losses



(11)

"Common stock dividend payout ratio" is defined as the ratio of Dividends declared per share of common stock to Earnings per share attributable to the Company's shareholders.



(12)

"Common Equity Tier 1 Capital ratio" is a non-GAAP ratio defined as the ratio of Total common equity tier 1 capital to Total risk-weighted assets (for a reconciliation from GAAP to this non-GAAP measure, see "Reconciliation of Non-GAAP Measures" in Table 8 of this release)




Table 4: Credit Quality


The activity in the credit loss allowance for individually acquired retail installment contracts for the three and nine months ended September 30, 2018 and 2017 was as follows (Unaudited, Dollar amounts in thousands):



Three Months Ended September 30, 2018


Three Months Ended September 30, 2017
(As Revised)



Retail Installment Contracts Acquired
Individually


Retail Installment Contracts Acquired
Individually


Allowance for Credit Loss

Non-TDR


TDR


Non-TDR


TDR




Balance — beginning of period

$

1,651,714



$

1,664,222



$

1,771,309



$

1,704,496



Provision for credit losses

380,496



217,447



140,315



429,677



Charge-offs

(701,393)



(524,429)



(711,495)



(507,066)



Recoveries

410,044



202,568



399,522



195,407



Balance — end of period

$

1,740,861



$

1,559,808



$

1,599,651



$

1,822,514











Nine Months Ended September 30, 2018


Nine Months Ended September 30, 2017
(As Revised)



Retail Installment Contracts Acquired
Individually


Retail Installment Contracts Acquired
Individually


Allowance for Credit Loss

Non-TDR


TDR


Non-TDR


TDR




Balance — beginning of period

$

1,540,315



$

1,804,132



$

1,799,760



$

1,611,295



Provision for credit losses

930,595



585,771



671,471



1,084,926



Charge-offs

(1,962,220)



(1,484,482)



(2,105,835)



(1,459,239)



Recoveries

1,232,171



654,387



1,234,255



585,532



Balance — end of period

$

1,740,861



$

1,559,808



$

1,599,651



$

1,822,514





A summary of delinquencies of our individually acquired retail installment contracts as of September 30, 2018 and December 31, 2017 is as follows (Unaudited, Dollar amounts in thousands):


Delinquent Principal

September 30, 20181


December 31, 2017(As Revised)1

Principal 30-59 days past due

$

2,975,844



10.5

%


$

2,953,203



11.4

%

Delinquent principal over 59 days2

1,560,736



5.5

%


1,642,934



6.3

%

Total delinquent contracts

$

4,536,580



16.0

%


$

4,596,137



17.8

%



Within the total delinquent principal above, retail installment contracts acquired individually held for investment that were placed on nonaccrual status, as of September 30, 2018 and December 31, 2017 (Unaudited, Dollar amounts in thousands):


Nonaccrual Principal

September 30, 20181


December 31, 2017(As Revised)1

Non-TDR

$

701,017



2.5

%


$

691,256



2.7

%

TDR

725,202



2.6

%


806,938



3.1

%

Total nonaccrual principal

$

1,426,219



5.0

%


$

1,498,194



5.8

%



The table below presents the Company's allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of September 30, 2018 and December 31, 2017 (Unaudited, Dollar amounts in thousands):


Allowance Ratios

September 30,
2018


December 31,
2017 (As Revised)

TDR - Unpaid principal balance

$

5,759,094



$

6,314,035


TDR - Impairment

1,559,808



1,804,132


TDR - Allowance ratio

27.1

%


28.6

%





Non-TDR - Unpaid principal balance

$

22,483,913



$

19,679,082


Non-TDR - Allowance

1,740,862



1,540,315


Non-TDR Allowance ratio

7.7

%


7.8

%





Total - Unpaid principal balance

$

28,243,007



$

25,993,117


Total - Allowance

3,300,670



3,344,447


Total - Allowance ratio

11.7

%


12.9

%


1Percent of unpaid principal balance.


2Interest is accrued until 60 days past due in accordance with the Company's account policy for retail installment contracts.




Table 5: Originations


The Company's originations of individually acquired loans and leases, including revolving loans, average APR, and discount were as follows:





Three Months Ended


Nine Months Ended


Three Months
Ended


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017


June 30, 2018

Retained Originations

(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

4,014,963



$

2,570,228



$

11,756,642



$

8,619,961



$

4,630,704


Average APR

17.3

%


16.1

%


17.4

%


17.2

%


16.8

%

Average FICO® (a)

596



605



595



591



602


Discount

0.3

%


1.2

%


0.3

%


0.8

%


0.004

%











Personal loans (b)

325,120



309,779



938,536



948,544



340,088


Average APR

28.8

%


25.7

%


29.4

%


25.7

%


27.1

%











Leased vehicles

2,890,841



1,665,776



7,616,498



4,693,392



2,632,052












Capital lease

2,633



2,477



7,088



$

4,655



$

2,058


Total originations retained

$

7,233,557



$

4,548,260



$

20,318,764



$

14,266,552



$

7,604,902












Sold Originations (c)










Retail installment contracts

$



$

757,720



$

1,826,411



$

2,550,065



$

683,935


Average APR

%


6.0

%


7.3

%


6.2

%


7.6

%

Average FICO® (d)



729



727



727



726


Total originations sold

$



$

757,720



$

1,826,411



$

2,550,065



$

683,935












Total originations (e)

$

7,233,557



$

5,305,980



$

22,145,175



$

16,816,617



$

8,288,837




(a)

Unpaid principal balance excluded from the weighted average FICO score is $744 million, $311 million, $1.5 billion, $1.2 billion, and $594 million for the three months ended September 30, 2018 and 2017, the nine months ended September 30, 2018 and 2017, and the three months ended June 30, 2018, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $80 million, $37 million, $147 million, $95 million, and $77 million, respectively, were commercial loans.



(b)

Effective as of three months ended December 31, 2017, the Company revised its approach to define origination volumes for Personal Loans to include new originations, gross of paydowns and charge-offs, related to customers who took additional advances on existing accounts (including capitalized late fees, interest and other charges), and newly opened accounts. In the prior periods, the Company reported net balance increases on personal loans as origination volume. Included in the total origination volume is $71 million , $61 million, $155 million, $132 million, and $58 million for the three months ended September 30, 2018 and 2017, the nine months ended September 30, 2018 and 2017, and the three months ended June 30, 2018, respectively, related to newly opened accounts.



(c)

Only includes assets both originated and sold in the period. Total asset sales for the period are shown in Table 6.



(d)

Unpaid principal balance excluded from the weighted average FICO score is zero, $93 million, $144 million, $319 million, and $54 million for the three months ended September 30, 2018 and 2017, the nine months ended September 30, 2018 and 2017, and the three months ended June 30, 2018, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, zero, $26 million, $76 million, $102 million, and $67 million, respectively, were commercial loans.



(e)

Total originations excludes finance receivables (UPB) of $74,086 purchased from a third party lender during the three months ended September 30, 2018

SBNA Originations Program

Beginning in 2018, the Company agreed to provide SBNA with origination support services in connection with the           processing, underwriting and purchase of retail loans, primarily from Chrysler dealers. In addition, the Company agreed to perform the servicing for any loans originated on SBNA's behalf. During the three and nine months ended September 30, 2018, the Company facilitated the purchase of $685 million and $738 million of retail installment contacts, respectively.



Table 6: Asset Sales


Asset sales may include assets originated in prior periods.



Three Months Ended


Nine Months Ended


September 30, 2018


September 30, 2017


September 30, 2018


September 30, 2017


(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

274,609



$

1,482,134



$

2,905,922



$

2,979,033


Average APR

7.5

%


6.2

%


7.2

%


6.2

%

Average FICO®

727



716



726



721










Total asset sales

$

274,609



$

1,482,134



$

2,905,922



$

2,979,033





Table 7: Ending Portfolio


Ending outstanding balance, average APR and remaining unaccreted dealer discount of our held for investment portfolio as of September 30, 2018, and December 31, 2017, are as follows:



September 30, 2018


December 31, 2017


(Unaudited, Dollar amounts in thousands)

Retail installment contracts (a)

$

28,275,649



$

26,036,361


Average APR

16.8

%


16.5

%

Discount

0.9

%


1.5

%





Personal loans

$

3,266



$

6,887


Average APR

31.7

%


31.8

%





Receivables from dealers

$

14,942



$

15,787


Average APR

4.1

%


4.2

%





Leased vehicles

$

14,386,490



$

11,175,602






Capital leases

$

19,950



$

22,857



(a) Revised for December 31, 2017




Table 8: Reconciliation of Non-GAAP Measures



September 30, 2018


September 30,

2017 (As Revised)


(Unaudited, Dollar amounts in thousands)

Total equity

$

7,141,215



$

5,873,102


  Deduct: Goodwill, intangibles, and other assets, net of deferred tax liabilities

162,643



172,502


  Deduct: Accumulated other comprehensive income (loss), net

56,601



27,481


Tier 1 common capital

$

6,921,971



$

5,673,119


Risk weighted assets (a)

$

42,256,218



$

37,609,878


Common Equity Tier 1 capital ratio (b)

16.4

%


15.1

%



(a)

Under the banking agencies' risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together with the measure for market risk, resulting in the Company's total Risk weighted assets.



(b)

CET1 is calculated under Basel III regulations required as of January 1, 2015. The fully phased-in capital ratios are non-GAAP financial measures.

 

 

Cision

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