Santander Consumer USA Holdings Inc. Reports First Quarter 2015 Results

DALLAS, April 28, 2015 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (NYSE: SC) ("SCUSA") today announced net income for first quarter 2015 of $289.2 million, or $0.81 per diluted common share, up from the fourth quarter 2014 net income of $247.0 million, or $0.69 per diluted common share, and up from first quarter 2014 net income of $81.5 million, or $0.23 per diluted common share. Core net income¹ for the first quarter 2014 was $157.3 million, or $0.44 per diluted common share, which translates to a year-over-year core net income¹ growth of 84 percent.

First Quarter 2015 Key Highlights:

• Return on average equity of 31.2%, up from 29.1% in prior quarter and 11.6% in prior year first quarter. Core return on average equity¹ for prior year first quarter 2014 was 22.4%.
• Return on average assets of 3.5%, up from 3.1% in prior quarter and 1.2% in prior year first quarter. Core return on average assets¹ for the first quarter 2014 was 2.3%.
• Total originations of $7.4 billion, up from $6.1 billion in prior quarter and in line with $7.3 billion originated in prior year first quarter.
• Asset sales of $1.5 billion, up from $1.1 billion in prior quarter and down from $1.7 billion in prior year first quarter.
• Managed assets of $46.6 billion, up from $43.5 billion as of prior year-end.
• Net charge-off ratio of 6.7%, down from 8.6% in prior quarter and up from 6.4% in prior year first quarter.
• Provision for credit losses of $606 million, up from $560 million in the prior quarter and down from $699 million in prior year first quarter.
• Expense ratio of 2.2%, in line with 2.2% in prior quarter and down from 3.8% in prior year first quarter. Core expense ratio¹ for the first quarter 2014 was 2.4%.
• Efficiency ratio of 18.9%, down from 19.1% in prior quarter and 27.0% in prior year first quarter. Core efficiency ratio¹ for the first quarter 2014 was 16.9%.

"We are pleased to announce a strong start to the year with first quarter net income of $289 million and core net income¹ growth of 84 percent year over year. We are producing strong returns on an increasing capital base, and these results reflect our continued ability to achieve profitable growth and display the stability and improved performance we've seen in the market. In this quarter, we continued to optimize our retained mix of assets highlighted by the increase in both retained assets and assets sold to new and existing third-party buyers," said Tom Dundon, Chairman and Chief Executive Officer.

In the first quarter, total originations were $7.4 billion, including $2.5 billion in Chrysler retail loans, $1.1 billion in Chrysler leases originated for our own portfolio, and $404 million in Chrysler lease originations facilitated for an affiliate. Other originations, including other auto and personal loans, totaled $3.4 billion for the first quarter 2015. First quarter auto originations saw a seasonal benefit due to tax refund season, while personal lending originations saw a seasonal decline due to seasonal retail patterns.

¹ For a reconciliation from GAAP to this non-GAAP measure, see "Reconciliation of Non-GAAP Measures" on Page 14 of this release.

Finance receivables, loans and leases, net², increased 7 percent to $30.7 billion at March 31, 2015, from $28.8 billion at December 31, 2014, and increased 21 percent from $25.3 billion at March 31, 2014. SCUSA's retained average APR as of the end of the first quarter 2015 for retail installment contracts held for investment was 16.6 percent, up from 16.0 percent as of the end of the fourth quarter 2014 and up from 16.3 percent as of the end of the first quarter 2014. Portfolio trends are reflective of the mix of assets retained at the end of each quarter which can be affected by the credit quality and timing of asset sales, as well as normal seasonality of the business.

Net finance and other interest income increased 10 percent to $1.1 billion in the first quarter 2015 from $1.0 billion in the first quarter 2014, driven by growth in the average portfolio. The provision for credit losses increased to $606 million in the first quarter 2015, from $560 million in the fourth quarter 2014, and decreased from $699 million in the first quarter 2014. The quarter-over-quarter provision increase was primarily driven by higher retained asset balances and retained portfolio mix, both of which are accretive to future earnings. The allowance for loan losses increased marginally to $3.2 billion quarter-over-quarter. The allowance to loans ratio³ remained flat at 11.5 percent as of March 31, 2015 from 11.5 percent as of December 31, 2014.

"Higher asset balances and the mix of retained assets during the quarter led to a marginal provision build versus prior quarter. Given there is an interrelationship among volume, retained portfolio mix, provision and profit, we should see a benefit to future earnings from both higher average assets and the mix of those assets," said Jason Kulas, President and Chief Financial Officer.

Consistent with expected seasonal patterns, SCUSA's net charge-off ratio decreased to 6.7 percent for the first quarter 2015 from 8.6 percent for the fourth quarter 2014, and increased from 6.4 percent for the first quarter 2014, primarily due to aging of the overall portfolio and portfolio mix. Additionally, SCUSA's delinquency ratio decreased to 3.2 percent as of the end of the first quarter 2015 from 4.5 percent at the end of the fourth quarter 2014, comparable to the 3.1 percent delinquency ratio as of the end of the first quarter 2014.

During the quarter, SCUSA incurred $245 million of operating expenses, up 6 percent from $230 million in the fourth quarter 2014, and down 23 percent from $318 million in the first quarter 2014. First quarter 2015 operating expenses were up 24 percent from core operating expenses⁴ in the first quarter 2014 of $199 million, primarily due to SCUSA's strong managed asset growth over the previous year, leading to higher headcount. SCUSA produced a 2.2 percent expense ratio for the quarter, down from 3.8 percent expense ratio and 2.4 percent core expense ratio¹ in the same period last year despite an increase in regulatory and compliance costs.

During Q1 2015, SCUSA executed two securitizations totaling $2.0 billion⁵ and advanced $1.1 billion on private term amortizing facilities. During the quarter, SCUSA continued to show funding diversification by relaunching the DRIVE securitization platform and executing the first DRIVE transaction since 2006 to meet investor demand.

Additionally, SCUSA continued to focus on its forward flow relationships to leverage its servicing platform and increase servicing fee income. During the quarter, SCUSA grew its relationships and completed a $561 million⁶ lease sale as well as a bankruptcy sale of charged off assets for $38 million in proceeds. In addition, SCUSA sold $919 million of assets through monthly loan sale programs to existing flow partners. Servicing fee income totaled $24.8 million in the first quarter 2015, up from $10.4 million in the first quarter 2014 primarily due to the increase in the portfolio of loans and leases serviced for others to $11.2 billion as of March 31, 2015, up from $6.2 billion as of March 31, 2014. For the first quarter 2015, net investment gains, which primarily consist of gains on sale, totaled $21.2 million, flat with $21.3 million in the fourth quarter 2014 and down from $35.8 million in the first quarter 2014, driven mostly by the timing of asset sales⁷.

² Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.
³ Excludes purchased receivables portfolio and finance receivables held for sale.
⁴ For a reconciliation from GAAP to this non-GAAP measure, see "Reconciliation of Non-GAAP Measures" on Page 14 of this release.
⁵ Net bonds sold of $1.96 billion of total $2.03 billion offered.
⁶ Depreciated net cap cost.
⁷ The absence of a CCART transaction in the first quarter 2015 compared to the first quarter 2014 explains the reduction in net investment gains year-over-year. SCUSA executed a CCART transaction at the beginning of the second quarter 2015.

Conference Call Information

SCUSA management will host a conference call and webcast to discuss the first quarter results and other general matters at 10:30 a.m. EDT on Tuesday, April 28, 2015. The conference call will be accessible by dialing 844-856-2691 (U.S. domestic), or 815-926-1990 (international), conference ID 24853184. Please dial in 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 Q1 2015 Earnings Call. Additionally there will be several slides accompanying the webcast. Please allow at least 15 minutes prior to the call to register, download, and install any necessary software.

For those unable to listen to the live broadcast, a replay will be available on the company's website or by dialing 855-859-2056 (U.S. domestic), or 404-537-3406 (international), conference ID 24853184, approximately two hours after the event. The dial-in replay will be available for two weeks after the conference call, and the webcast replay will be available through April 28, 2016. An investor presentation will also be available by visiting the Investor Relations page of SCUSA's website at http://investors.santanderconsumerusa.com.

Non-GAAP Disclosure

This press release includes certain non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). SCUSA believes that this non-GAAP financial measure provides both management and investors a more complete understanding of the underlying operational results and trends and SCUSA's marketplace performance. This additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other financial institutions.

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 which 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 SEC. Among the factors that could cause our financial performance to differ materially from that suggested by the forward-looking statements are: (a) we operate in a highly regulated industry and continually changing federal, state, and local laws and regulations could materially adversely affect our business; (b) adverse economic conditions in the United States and worldwide may negatively impact our results; (c) our business could suffer if our access to funding is reduced; (d) we face significant risks implementing our growth strategy, some of which are outside our control; (e) our agreement with Chrysler may not result in currently anticipated levels of growth and is subject to certain performance conditions that could result in termination of the agreement; (f) our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (g) our financial condition, liquidity, and results of operations depend on the credit performance of our loans; (h) loss of our key management or other personnel, or an inability to attract such management and personnel, could negatively impact our business; (i) we are subject to certain regulations, including oversight by the Office of the Comptroller of the Currency, the CFPB, the Bank of Spain, and the Federal Reserve, which oversight and regulation may limit certain of our activities, including the timing and amount of dividends and other limitations on our business; and (j) future changes in our relationship with Santander 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 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. New factors emerge from time to time, and management cannot assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. 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. (NYSE: SC) ("SCUSA") is a full-service, technology-driven consumer finance company focused on vehicle finance and personal lending products. The company, which began originating retail installment contracts in 1997, has a managed assets portfolio of more than $46 billion (as of March 31, 2015), has more than two million customers across all credit grades, and is headquartered in Dallas. (www.santanderconsumerusa.com)

SOURCE Santander Consumer USA Holdings Inc.

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