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. (NYSE: 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%
- Core retail auto loan originations of $2.3 billion, up 49%
- Chrysler Capital loan originations of $2.4 billion, up 34%
- Chrysler Capital lease originations of $2.9 billion, up 73%
- Chrysler average quarterly penetration rate of 31%, up from 21% during the same quarter last year
- 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
- RIC net charge-off ratio of 8.8%, down 50 basis points
- Auction-plus recovery rate of 50.0%, up 120 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. (NYSE: 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 |
Media Relations Laurie Kight 214.801.6455 |
Santander Consumer USA Holdings Inc. |
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Financial Supplement |
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Third Quarter 2018 |
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Table of Contents |
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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, |
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 |
Nine Months Ended |
||||||||||||||
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 |
Nine Months Ended |
||||||||||||||
Ratios (Unaudited, Dollars in thousands) |
2018 |
2017 |
2018 |
2017 |
|||||||||||
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 |
|||||||||||||||
Retail Installment Contracts Acquired |
Retail Installment Contracts Acquired |
|||||||||||||||
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 |
|||||||||||||||
Retail Installment Contracts Acquired |
Retail Installment Contracts Acquired |
|||||||||||||||
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, |
December 31, |
|||||
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 |
|||||||||||||||||
September 30, |
September 30, |
September 30, |
September 30, |
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. |
SOURCE Santander Consumer USA Holdings Inc.
Related Links
http://www.santanderconsumerusa.com
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