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Santander Consumer USA Holdings Inc. Reports Fourth Quarter and Full Year 2018 Results

Santander Holdings USA Terminated 2015 Written Agreement, Company Completed $200 Million Share Repurchase Plan and Declares $0.20 Per Share Cash Dividend

DALLAS, Jan. 30, 2019 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (SC) ("SC") today announced net income for the fourth quarter ended December 31, 2018 ("Q4 2018") of $104 million, or $0.29 per diluted common share. Net income for the full year 2018 ("2018") was $916 million, or $2.54 per diluted common share.

The Company has declared a cash dividend of $0.20 per share, to be paid on February 21, 2019, to shareholders of record as of the close of business on February 11, 20191.

"Our full-year results demonstrate strength and consistency," said Scott Powell, SC President and CEO, and CEO of Santander US. "SC's earnings and originations were up during each quarter, driven by our renewed focus on dealer experience, robust pricing approach, and stable credit performance. Auto originations through Santander Bank approached $2 billion in the program's first year, demonstrating the value that Santander US' businesses bring to each other. The Federal Reserve's termination of its 2015 Written Agreement with Santander Holdings USA demonstrates the significant improvements we have made to the way our US business operates."

2018 Regulatory and Business Milestones:

  • The Federal Reserve Bank of Boston ("Federal Reserve") terminated the 2015 Written Agreement with SC's majority owner, Santander Holdings USA, Inc. ("SHUSA"). SHUSA also received its second consecutive capital stress test non-objection.
  • Achieved an average annual FCA penetration rate of 30%, up from 21% in 2017.
  • Through Santander Bank N.A., fully-launched a program in July leading to $1.9 billion in originations, and increased FCA dealer receivables ("floorplan") 43% year-over-year, to $2.8 billion.
  • Leading auto loan asset-backed securities ("ABS") issuer with $13.0 billion in ABS.
  • Completed prime auto loan portfolio conversion with a new third party increasing serviced for others balance by $1.0 billion.
  • Reached agreements with AutoFi & AutoGravity expanding SC digital partnerships in 2018.

Full Year 2018 Key Financial Highlights (variances compared to full year 2017 ("2017")):

  • Total auto originations of $28.8 billion, up 43%
  • Net finance and other interest income of $4.5 billion, up 1.8%
  • RIC net charge-off ratio of 8.5%, down 50 basis points
  • Return on average assets ("ROA") of 2.2%
  • Expense ratio of 2.1%

Fourth Quarter of 2018 Key Financial Highlights (variances compared to fourth quarter of 2017 ("Q4 2017")):

  • Total auto originations of $6.9 billion, up 59%
  • Net finance and other interest income of $1.1 billion, up 9%
  • RIC net charge-off ratio of 10.6%, up 30 basis points
  • 59+ delinquency ratio of 6.0%, down 30 basis points
  • ROA of 1.0%
  • CET1 ratio of 15.7%
  • $2.2 billion in ABS

Subsequent Events:

  • During January 2019, the Company completed its previously announced $200 million share repurchase program
  • $1.0 billion in ABS sold through DRIVE 2019-1

"During 2018 we executed on our goals and improved dealer experience, focused on risk-adjusted returns and maintained disciplined expense management. This was demonstrated by strong originations growth, steady credit performance and an improved expense ratio," said Juan Carlos Alvarez, SC CFO. "We have also completed our $200 million repurchase program and looking ahead, while we remain vigilant on the prolonged expansion, the macroeconomic environment is supportive for our business and we are optimistic about 2019."

Net finance and other interest income increased 9 percent, to $1.1 billion in Q4 2018 from $1.0 billion in Q4 2017, primarily driven by higher lease income partially offset by higher interest expenses.

Servicing fee income increased 3 percent to $27 million in Q4 2018, from $26 million in Q4 2017, driven by the SBNA originations program and higher serviced for others balances. SC's serviced for others portfolio of $9.0 billion as of Q4 2018, is up 4 percent from $8.6 billion in Q4 2017.

RIC delinquency ratio2 decreased to 6.0 percent in Q4 2018, from 6.3 percent in Q4 2017.

RIC net charge-off ratio3 increased to 10.6 percent in Q4 2018, from 10.3 percent in Q4 2017. Provision for credit loss increased to $691 million in Q4 2018, from $598 million in Q4 2017.

Allowance ratio4 decreased 30 basis points, to 11.4 percent at the end of Q4 2018, from 11.7 percent at the end of Q3 2018.

Recorded net investment losses were $146 million in Q4 2018, compared to net investment losses of $138 million in Q4 2017. The current period losses were primarily driven by held for sale accounting for SC's personal lending portfolio5.

During the quarter, SC incurred $256 million of operating expenses.

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.

2 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, excluding capital leases.

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

4 Ratio for allowance for credit losses excludes end of period balances on purchased receivables portfolio of $28 million and finance receivables held for sale of $1.1 billion.

5 The current period losses were primarily driven by $146 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, comprised of $109 million in customer default activity and $37 million increase in market discount, consistent with seasonal patterns.

Conference Call Information

SC will host a conference call and webcast to discuss the Q4 2018 results and other general matters at 10 a.m. Eastern Time on Wednesday, January 30, 2019. The conference call will be accessible by dialing 800-289-0438 (U.S. domestic), or 323-794-2423 (international), conference ID 8932754. 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 the corporate website at http://investors.santanderconsumerusa.com. Choose "Events" and select the information pertaining to the Q4 2018 Earnings Call. Additionally there will be several slides accompanying the webcast. Please allow at least 15 minutes to register, download and install any necessary software prior to the call.

For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing 844-512-2921 (U.S. domestic), or 412-317-6671 (international), conference ID 8932754, approximately two hours after the conference call for two weeks. 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 performance 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, which 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 $54 billion as of December 31, 2018, and is headquartered in Dallas. (www.santanderconsumerusa.com)

Contacts:


Investor Relations

Media Relations

Evan Black

Laurie Kight

800.493.8219

214.801.6455

InvestorRelations@santanderconsumerusa.com

Media@santanderconsumerusa.com




Santander Consumer USA Holdings Inc.

Financial Supplement

Fourth Quarter and Full Year 2018


Table of Contents

 


Table 1: Consolidated Balance Sheets

6


Table 2: Consolidated Statements of Income

7


Table 3: Other Financial Information

8


Table 4: Credit Quality

10


Table 5: Originations

12


Table 6: Asset Sales

13


Table 7: Ending Portfolio

14


Table 8: Reconciliation of Non-GAAP Measures

15


Table 9: Reconciliation of Non-GAAP Measures

16





Table 1: Consolidated Balance Sheets






December 31,
 2018


December 31, 2017
(As Revised)

Assets

(Unaudited, Dollars in thousands)

Cash and cash equivalents

$

148,436



$

527,805


Finance receivables held for sale, net

1,068,757



2,210,421


Finance receivables held for investment, net

25,117,454



22,394,286


Restricted cash

2,102,048



2,553,902


Accrued interest receivable

303,686



340,618


Leased vehicles, net

13,978,855



10,160,327


Furniture and equipment, net

61,280



69,609


Federal, state and other income taxes receivable

97,087



95,060


Related party taxes receivable

734



467


Goodwill

74,056



74,056


Intangible assets, net

35,195



29,734


Due from affiliates

8,920



33,270


Other assets

963,347



913,244


Total assets

$

43,959,855



$

39,402,799


Liabilities and Equity




Liabilities:




Notes payable — credit facilities

$

4,478,214



$

4,848,316


Notes payable — secured structured financings

26,901,530



22,557,895


Notes payable — related party

3,503,293



3,754,223


Accrued interest payable

49,370



38,529


Accounts payable and accrued expenses

422,951



429,531


Deferred tax liabilities, net

1,155,883



892,415


Due to affiliates

63,219



82,382


Other liabilities

367,037



333,806


Total liabilities

36,941,497



32,937,097






Equity:




Common stock, $0.01 par value

3,523



3,605


Additional paid-in capital

1,515,572



1,681,558


Accumulated other comprehensive income, net

33,515



44,262


Retained earnings

5,465,748



4,736,277


Total stockholders' equity

7,018,358



6,465,702


Total liabilities and equity

$

43,959,855



$

39,402,799





Table 2: Consolidated Statements of Income






Three Months Ended
 December 31,


Year Ended December 31,


2018


2017
(As Revised)


2018


2017
(As Revised)


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

Interest on finance receivables and loans

$

1,235,889



$

1,165,091



$

4,842,564



$

4,845,623


Leased vehicle income

632,447



483,028



2,257,719



1,788,457


Other finance and interest income

9,082



4,470



33,235



19,885


Total finance and other interest income

1,877,418



1,652,589



7,133,518



6,653,965


Interest expense

311,196



236,600



1,111,760



947,734


Leased vehicle expense

427,662



370,537



1,535,756



1,298,513


Net finance and other interest income

1,138,560



1,045,452



4,486,002



4,407,718


Provision for credit losses

690,786



598,293



2,205,585



2,363,811


Net finance and other interest income after provision for credit losses

447,774



447,159



2,280,417



2,043,907


Profit sharing

14,255



7,235



33,137



29,568


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

433,519



439,924



2,247,280



2,014,339


Investment gains (losses), net

(146,164)



(137,926)



(401,638)



(366,439)


Servicing fee income

26,711



26,031



106,840



118,341


Fees, commissions, and other

86,035



74,179



333,458



349,204


Total other income (loss)

(33,418)



(37,716)



38,660



101,106


Compensation expense

122,475



182,692



482,800



581,017


Repossession expense

66,846



70,259



264,777



275,704


Other operating costs

67,147



173,089



346,095



454,715


Total operating expenses

256,468



426,040



1,093,672



1,311,436


Income before income taxes

143,633



(23,833)



1,192,268



804,009


Income tax expense

39,295



(601,283)



276,342



(368,798)


Net income

$

104,338



$

577,450



$

915,926



$

1,172,807










Net income per common share (basic)

$

0.29



$

1.60



$

2.55



$

3.26


Net income per common share (diluted)

$

0.29



$

1.60



$

2.54



$

3.26


Dividend declared per common share

0.20



0.03



0.50



0.03


Weighted average common shares (basic)

356,783,962



360,256,602



359,861,764



359,613,714


Weighted average common shares (diluted)

357,396,989



361,409,997



360,672,417



360,292,330





Table 3: Other Financial Information






Three Months Ended
 December 31,


Year Ended December 31,

Ratios (Unaudited, Dollars in thousands)

2018


2017
(As Revised)


2018


2017
(As Revised)

Yield on individually acquired retail installment contracts

16.1

%


15.9

%


16.2

%


16.0

%

Yield on purchased receivables portfolios

19.1

%


30.1

%


23.8

%


20.6

%

Yield on receivables from dealers

2.2

%


2.7

%


3.0

%


5.3

%

Yield on personal loans (1)

25.1

%


23.9

%


24.6

%


24.5

%

Yield on earning assets (2)

13.0

%


12.9

%


13.2

%


13.4

%

Cost of debt (3)

3.6

%


3.1

%


3.4

%


3.0

%

Net interest margin (4)

10.2

%


10.5

%


10.6

%


11.0

%

Expense ratio (5)

1.9

%


3.5

%


2.1

%


2.6

%

Return on average assets (6)

1.0

%


5.9

%


2.2

%


3.0

%

Return on average equity (7)

5.9

%


38.5

%


13.3

%


20.8

%

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

10.6

%


10.3

%


8.5

%


9.0

%

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

(2.0)

%


4.5

%


(4.1)

%


1.4

%

Net charge-off ratio on personal loans (8)

0.1

%


0.5

%


0.1

%


0.6

%

Net charge-off ratio (8)

10.6

%


10.3

%


8.5

%


9.0

%

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

6.0

%


6.3

%


6.0

%


6.3

%

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

11.6

%


11.5

%


11.6

%


11.5

%

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

6.0

%


6.3

%


6.0

%


6.3

%

Allowance ratio (10)

11.4

%


12.9

%


11.4

%


12.9

%

Common stock dividend payout ratio (11)

69.0

%


1.9

%


19.6

%


0.9

%

Common Equity Tier 1 capital ratio (12)

15.7

%


16.4

%


15.7

%


16.4

%

Other Financial Information








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

$

754,625



$

674,953



$

2,314,769



$

2,420,241


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

(159)



514



(1,483)



2,055


Charge-offs, net of recoveries, on personal loans

268



1,576



1,616



8,126


Charge-offs, net of recoveries, on capital leases

703



609



1,642



4,394


Total charge-offs, net of recoveries

$

755,437



$

677,652



$

2,316,544



$

2,434,816


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

$

1,712,243



$

1,642,934



$

1,712,243



$

1,642,934


End of period personal loans delinquent principal over 59 days

$

177,369



$

175,660



177,369



175,660


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

$

1,713,775



$

1,645,789



$

1,713,775



$

1,645,789


End of period assets covered by allowance for credit losses

$

28,469,451



$

26,038,648



$

28,469,451



$

26,038,648


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

$

28,432,760



$

25,993,117



$

28,432,760



$

25,993,117


End of period gross personal loans

$

1,529,433



$

1,524,158



$

1,529,433



$

1,524,158


End of period gross finance receivables and loans held for investment

$

28,480,583



$

26,059,035



$

28,480,583



$

26,059,035


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

$

43,719,240



$

37,257,495



$

43,719,240



$

37,257,495


Average gross individually acquired retail installment contracts held for investment

$

28,395,046



$

26,141,086



$

27,227,705



$

26,804,609


Average gross personal loans held for investment

$

2,934



$

7,997



$

4,314



$

12,476


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

$

28,395,046



$

27,148,805



$

27,756,099



$

27,976,058


Average gross purchased receivables portfolios

31,543



45,907



36,075



146,362


Average Gross receivables from dealers

14,822



15,927



15,229



52,435


Average Gross personal loans

1,401,626



1,392,528



1,404,261



1,419,418


Average Gross capital leases

19,422



22,232



20,736



25,495


Average Gross finance receivables and loans

$

29,862,459



$

28,625,399



$

29,232,400



$

29,619,768


Average Gross finance receivables, loans, and leases

$

44,720,094



$

39,713,760



$

42,280,796



$

40,075,889


Average managed assets

$

53,804,349



$

49,021,506



$

51,328,934



$

50,160,595


Average total assets

$

43,458,471



$

38,973,432



$

41,541,102



$

39,144,382


Average debt

$

34,223,818



$

30,804,384



$

32,570,257



$

31,385,153


Average total equity

$

7,114,411



$

6,007,145



$

6,905,796



$

5,648,670



(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 twelve months ended December 31, 2018 and 2017, is as follows (Unaudited, Dollar amounts in thousands):




Three Months Ended December 31, 2018


Three Months Ended December 31, 2017
(As Revised)

Allowance for Credit Loss

Non-TDR


TDR


Non-TDR


TDR


Balance — beginning of period

$

1,740,862



$

1,559,808



$

1,599,651



$

1,822,514


Provision for credit losses

503,382



186,676



206,300



390,935


Charge-offs

(888,142)



(544,843)



(652,188)



(605,093)


Recoveries

463,258



215,102



386,552



195,776


Balance — end of period

$

1,819,360



$

1,416,743



$

1,540,315



$

1,804,132















Twelve Months Ended December 31, 2018


Twelve Months Ended December 31, 2017
(As Revised)

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

1,433,977



772,448



877,771



1,475,861


Charge-offs

(2,850,361)



(2,029,325)



(2,758,023)



(2,064,331)


Recoveries

1,695,429



869,488



1,620,807



781,307


Balance — end of period

$

1,819,360



$

1,416,743



$

1,540,315



$

1,804,132














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






December 31, 20181


December 31, 2017 (As Revised)1

Principal 30-59 days past due

$

3,118,869



11.0

%


$

2,953,203



11.4

%

Delinquent principal over 59 days2

1,712,243



6.0

%


1,642,934



6.3

%

Total delinquent contracts

$

4,831,112



17.0

%


$

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 December 31, 2018 and 2017 (Unaudited, Dollar amounts in thousands):


Nonaccrual Principal

December 31, 20181


December 31, 2017 (As Revised)1

Non-TDR

$

834,921



2.9

%


$

691,256



2.7

%

TDR

733,218



2.6

%


806,938



3.1

%

Total nonaccrual principal

$

1,568,139



5.5

%


$

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 December 31, 2018 and 2017 (Unaudited, Dollar amounts in thousands):


Allowance Ratios

December 31,
 2018


December 31,

2017 (As Revised)

TDR - Unpaid principal balance

$

5,378,603



$

6,314,035


TDR - Impairment

1,416,743



1,804,132


TDR - Allowance ratio

26.3

%


28.6

%





Non-TDR - Unpaid principal balance

$

23,054,157



$

19,679,082


Non-TDR - Allowance

1,819,360



1,540,315


Non-TDR Allowance ratio

7.9

%


7.8

%





Total - Unpaid principal balance

$

28,432,760



$

25,993,117


Total - Allowance

3,236,103



3,344,447


Total - Allowance ratio

11.4

%


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


Twelve Months Ended


Three Months
Ended


December 31,
2018


December 31,
2017


December 31,
2018


December 31,
2017


September 30,
2018

Retained Originations

(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

3,616,810



$

3,014,433



$

15,379,778



$

11,634,395



$

4,014,963


Average APR

17.1

%


14.0

%


17.3

%


16.4

%


17.3

%

Average FICO® (a)

593



631



595



602



596


Discount

0.5

%


0.2

%


0.2

%


0.7

%


0.3

%











Personal loans (b)

$

544,134



$

528,705



$

1,482,670



$

1,477,249



325,120


Average APR

29.5

%


25.7

%


29.6

%


25.7

%


28.8

%











Leased vehicles

$

2,125,925



$

1,294,256



$

9,742,423



$

5,987,648



2,890,841












Capital leases

$

2,706



$

4,640



$

9,794



$

9,295



2,633


Total originations retained

$

6,289,575



$

4,842,034



$

26,614,665



$

19,108,587



$

7,233,557












Sold Originations (c)










Retail installment contracts

$



$



$

1,820,085



$

2,550,065



$


Average APR





7.3

%


6.2

%



Average FICO® (c)

$



$



727



727




Total originations sold

$



$



$

1,820,085



$

2,550,065



$












Total SC originations

$

6,289,575



$

4,842,034



$

28,434,750



$

21,658,652



$

7,233,557












Total originations (d)

$

6,289,575



$

4,842,034



$

28,434,750



$

21,658,652



$

7,233,557




(a) 

Unpaid principal balance excluded from the weighted average FICO score is $408 million, $372 million, $1.9 billion, $1.5 billion, and $744 million for the three months ended December 31, 2018 and 2017, the twelve months ended December 31, 2018 and 2017, and the three months ended September 30, 2018, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $100 million, $68 million, $76 million, $164 million, and $80 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.



(c) 

Only includes assets both originated and sold in the period. Total asset sales for the period are shown in Table 6. Unpaid principal balance excluded from the weighted average FICO score is zero, zero, $143 million, $317 million, and zero for the three months ended December 31, 2018 and 2017, the twelve months ended December 31, 2018 and 2017, and the three months ended September 30, 2018, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, zero, zero, $76 million, $102 million, and zero, respectively, were commercial loans.



(d) 

Total originations excludes finance receivables (UPB) of $74,086 purchased from a third party lender during the year ended December 31, 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 twelve months ended December 31, 2018, the Company facilitated the purchase of $1.1 billion and $1.9 billion of retail installment contacts, respectively.

Table 6: Asset Sales


Asset sales may include assets originated in prior periods.



Twelve Months Ended


Three Months
Ended


December 31, 2018


December 31, 2017


September 30,
2018


(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

2,905,922



$

2,979,033



$

274,609


Average APR

7.2

%


6.2

%


7.5

%

Average FICO®

726



721



727








Total asset sales

$

2,905,922



$

2,979,033



$

274,609



There were no asset sales for the three months ended December 31, 2018 and 2017.




Table 7: Ending Portfolio


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



December 31, 2018


December 31, 2017
(As Revised)


(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

28,463,236



$

26,036,361


Average APR

16.7

%


16.5

%

Discount

0.8

%


1.5

%





Personal loans

$

2,637



$

6,887


Average APR

31.7

%


31.8

%





Receivables from dealers

$

14,710



$

15,787


Average APR

4.1

%


4.2

%





Leased vehicles

$

15,219,313



$

11,175,602






Capital leases

$

19,344



$

22,857





Table 8: Reconciliation of Non-GAAP Measures



December 31, 2018


December 31, 2017
(As Revised)


(Unaudited, Dollar amounts in thousands)

Total equity

$

7,018,358



$

6,465,702


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

161,516



172,664


  Deduct: Accumulated other comprehensive income (loss), net

33,515



44,262


Tier 1 common capital

$

6,823,327



$

6,248,776


Risk weighted assets (a)

$

43,547,594



$

38,174,087


Common Equity Tier 1 capital ratio (b)

15.7

%


16.4

%



(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.




Table 9: Reconciliation of Non-GAAP Measures



Three Months Ended
December 31, 2017 
(As Revised)


Twelve Months Ended
December 31, 2017
(As Revised)


(Unaudited, Dollar amounts in thousands)





GAAP Operating Expenses

$

426,040



$

1,311,436


     Deduct: Legal Reserves

91,000



91,000


     Deduct: Settlement with former CEO

66,115



66,115


Adjusted Operating Expenses, excluding significant items

$

268,925



$

1,154,321






GAAP Pre-Tax (Loss)/Income

$

(23,833)



$

804,009


     Add: Legal Reserves

91,000



91,000


     Add: Settlement with former CEO

66,115



66,115


     Deduct: Gain on RV/Marine Portfolio



35,927


Adjusted Pre-Tax Income, excluding significant items

$

133,282



$

925,197






GAAP Net Income

$

577,450



$

1,172,807


Adjustments for significant items:

 




     Deduct: Tax Reform and other tax related items (a)

596,705



652,366


     Deduct:  Gain on RV/Marine Portfolio (after tax)



23,353


     Add: Legal reserves (after tax)

72,100



72,100


     Add: Settlement with former CEO (after tax)

42,975



42,975


Adjusted Net Income, excluding significant items

$

95,820



$

612,163






GAAP Diluted Earnings per common share (b)

$

1.60



$

3.26


Adjusted Diluted Earnings per common share, excluding significant items  (b)

$

0.27



$

1.70






Adjusted Selected Ratios




GAAP Return on Average Assets (b)

6.0

%


3.0

%

Adjusted Return on Average Assets, excluding significant items (b)

1.0

%


1.6

%

Average Assets

$

38,973,432



$

39,144,382






GAAP Return on Average Equity (b)

38.5

%


20.1

%

Adjusted Return on Average Equity, excluding significant items  (b)

6.5

%


10.9

%

Average adjusted Equity excluding significant items

$

5,886,737



$

5,614,107






GAAP Expense Ratio (c)

3.5

%


2.6

%

Adjusted Expense Ratio, excluding significant items (c)

2.2

%


2.3

%

Average Managed Assets

$

49,021,506



$

50,160,595




(a) 

In addition to the tax adjustments noted under footnote c under Table 8, during the three months ended December 31, 2017, the Company changed the classification of earnings from its subsidiary, Santander Consumer International Puerto Rico, LLC, and no longer intends to permanently reinvest the earnings outside of the United States. As a result of this change, the Company recognized $55.7 million of additional income tax expense during the three months ended December 31, 2017 to record the applicable U.S. deferred income tax liability.



(b) 

These ratios correspond with the GAAP Net Income and Adjusted Net Income (excluding significant items) shown above, divided by Average Assets, Average Equity or Weighted average number of common shares outstanding, as applicable.



(c) 

These ratios correspond with the GAAP Operating Expenses and Adjusted Operating Expenses (excluding significant items) shown above, divided by Average Managed Assets.

 

 

Cision

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