Santander Consumer USA Holdings Inc. Reports Fourth Quarter and Full Year 2017 Results
DALLAS, Jan. 31, 2018 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (NYSE: SC) ("SC" or the "Company") today announced net income for the fourth quarter of 2017 ("Q4 2017") of $580 million, or $1.61 per diluted common share. Net income for Q4 2017, excluding the impact of significant items including tax reform and other tax related items, legal reserves, and a settlement with the former CEO ("Adjusted(1)"), totaled $98 million, or $0.27 per diluted common share. Net income for the full year 2017 ("2017") was $1.2 billion, or $3.30 per diluted common share. Adjusted net income for 2017 was $627 million, or $1.74 per diluted common share. Please refer to Table 9 for a reconciliation of these significant items to GAAP.
The Company has declared a cash dividend of $0.05 per share, to be paid on February 22, 2018, to shareholders of record as of the close of business on February 12, 2018.
"2017 was a pivotal year for SC, and our full year results reflect that," said Scott Powell, SC President and CEO, and Santander US CEO. "We strengthened our management team, stabilized credit performance, and launched new efforts focusing on Fiat Chrysler and the rest of our dealers. Passing the Federal Reserve's capital stress test and our relationship with Santander Group provide us with the balance sheet flexibility to support our business objectives in 2018."
2017 Regulatory and Business Milestones:
-- The Federal Reserve Bank of Boston ("Federal Reserve") terminated the
2014 Written Agreement with SC's majority owner, Santander Holdings USA,
Inc. ("SHUSA"), following its non-objection to SHUSA's Comprehensive
Capital Analysis and Review submission. SHUSA and SC now operate within
a normal capital cycle, and SC completed its first cash dividend payment
to shareholders since 2014.
-- SHUSA and Banco Santander ("Santander") increased their total ownership
in SC to approximately 68.1%, following Santander's acquisition from
SC's former CEO of 9.6% of SC's outstanding shares, which it transferred
to SHUSA.
-- Launched flow program with Santander allowing SC to execute prime auto
loan sales of $2.6 billion, and through Santander Bank N.A., increased
FCA dealer receivables ("floorplan") 14% year-over-year, to $2.0
billion.
-- Leading auto loan asset-backed securities ("ABS") issuer with $7.9
billion in ABS offered and sold, including SC's inaugural lease
securitization, Santander Retail Auto Lease Trust ("SRT") and SC's first
public DRIVE securitization.
-- Announced key appointments and changes to its management team, including
Scott Powell as CEO, Juan Carlos Alvarez as CFO, Sandra Broderick as
EVP, Head of Operations, and Rich Morrin, as President of Chrysler
Capital and Auto Relationships.
Full Year 2017 Key Financial Highlights (variances compared to full year 2016 ("2016")):
-- Total auto originations of $20.1 billion, down 8%
-- Finance receivables, loans and leases, net(2), increased 2%, to $34.8
billion at December 31, 2017, from $34.2 billion at December 31, 2016
-- Net finance and other interest income of $4.3 billion, down 9%
-- RIC gross charge-off ratio of 17.9%, up 60 basis points, stabilizing
compared to a 230 basis point increase from 2015 to 2016
-- RIC net charge-off ratio of 8.9%, up 60 basis points, compared to a 140
basis point increase from 2015 to 2016
-- Return on average assets ("ROA") of 3.0% and Adjusted ROA of 1.6%, down
from 2.0%
-- Expense ratio of 2.6% and Adjusted expense ratio of 2.3%, up from 2.2%
Fourth Quarter of 2017 Key Financial Highlights (variances compared to fourth quarter of 2016 ("Q4 2016")):
-- Total auto originations of $4.3 billion, down 5%
-- Core retail auto originations of $1.5 billion, down 27%
-- Chrysler Capital loan originations of $1.5 billion, flat
-- Chrysler Capital lease originations of $1.3 billion, up 31%
-- Net finance and other interest income of $1.0 billion, down 11%
-- ROA of 6.0% and Adjusted ROA of 1.0%, up from 0.6%
-- CET1 ratio of 16.3%
-- $2.2 billion in ABS offered and sold
Subsequent Events:
-- Partnered with Santander InnoVentures, a Santander corporate venture
fund, during the first quarter of 2018, to become a lending choice on
AutoFi's online finance platform to streamline and simplify the car
buying process for consumers, while providing dealers a robust digital
sales channel.
"Fourth quarter results demonstrate continued stabilization in credit performance following Hurricanes Harvey and Irma," said Juan Carlos Alvarez, SC CFO. "As we head into 2018 our goal is to leverage our network and improve our dealer experience, including with Fiat Chrysler, while remaining focused on risk-adjusted returns and disciplined expense management."
Net finance and other interest income decreased 11 percent, to $1.0 billion in Q4 2017 from $1.1 billion in Q4 2016, primarily driven by lower average RIC balances and an increase in benchmark rates.
Servicing fee income decreased 19 percent to $26 million in Q4 2017, from $32 million in Q4 2016, driven by lower prime originations and lower prime asset sales. SC's serviced for others portfolio of $8.6 billion as of Q4 2017, is down 28 percent from $11.9 billion in Q4 2016.
RIC delinquency ratio(3) increased to 5.4 percent in Q4 2017, from 5.1 percent in Q4 2016, primarily due to a lower portfolio balance.
RIC net charge-off ratio(4) increased to 10.3 percent in Q4 2017, from 9.9 percent in Q4 2016. Provision for credit loss decreased to $562 million in Q4 2017, from $686 million in Q4 2016.
Allowance ratio(5) decreased 20 basis points, to 12.6 percent at the end of Q4 2017, from 12.8 percent at the end of Q3 2017.
Recorded net investment losses were $138 million in Q4 2017, compared to net investment losses of $168 million in Q4 2016. The current period losses were primarily driven by held for sale accounting for SC's personal lending portfolio(6).
During the quarter, SC incurred $426 million of operating expenses, up 44 percent from $296 million in Q4 2016. Adjusted operating expenses were $269 million, down 9 percent from $296 million in Q4 2016.
(1 )Please refer to Table 9 for a reconciliation of these significant items to GAAP. Amounts excluding significant items are non-GAAP financial measures that management believes will assist users of SC's financial information by excluding items that management does not believe reflect SC's fundamental business performance or results of operations.
(2) Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.
(3 )Delinquency ratio is defined as the ratio of end of period delinquent principal over 60 days to end of period gross balance of the respective portfolio, excluding capital leases.
(4 )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.
(5) 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 $2.2 billion.
(6) The current period losses were primarily driven by $136 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, comprised of $114 million in customer default activity and $23 million increase in market discount, consistent with typical seasonal patterns.
Conference Call Information
SC will host a conference call and webcast to discuss the Q4 2017 results and other general matters at 9 a.m. Eastern Time on Wednesday, January 31, 2018. The conference call will be accessible by dialing 800-281-7973 (U.S. domestic), or 323-794-2093 (international), conference ID 4639683. 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 2017 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 4639683, 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 Fiat Chrysler Automobiles 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.
Contacts: Media Relations
Investor Relations Laurie Kight
Evan Black 214.801.6455
800.493.8219 Media@santanderconsumerusa.com
InvestorRelations@santanderconsumerusa.com
------------------------------------------
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 2.6 million customers across the full credit spectrum. The Company, which began originating retail installment contracts in 1997, has a managed asset portfolio of approximately $49 billion as of December 31, 2017, and is headquartered in Dallas. (www.santanderconsumerusa.com)
Santander Consumer USA Holdings Inc.
Financial Supplement
Fourth Quarter and Full Year 2016
Table of Contents
Table 1: Consolidated Balance Sheets 5
Table 2: Consolidated Statements of
Income 6
Table 3: Other Financial Information 7
Table 4: Credit Quality 9
Table 5: Originations 10
Table 6: Asset Sales 11
Table 7: Ending Portfolio 12
Table 8 & 9: Reconciliation of Non-
GAAP Measures 13
Table 1: Consolidated Balance Sheets
December 31, December 31,
2017 2016
---- ----
Assets (Unaudited, Dollars in thousands)
Cash and cash equivalents $527,805 $160,180
Finance receivables held for
sale, net 2,210,421 2,123,415
Finance receivables held for
investment, net 22,427,769 23,481,001
Restricted cash 2,553,902 2,757,299
Accrued interest receivable 326,640 373,274
Leased vehicles, net 10,160,327 8,564,628
Furniture and equipment, net 69,609 67,509
Federal, state and other
income taxes receivable 95,060 87,352
Related party taxes receivable 467 1,087
Goodwill 74,056 74,056
Intangible assets, net 29,734 32,623
Due from affiliates 33,270 31,270
Other assets 913,244 785,410
------- -------
Total assets $39,422,304 $38,539,104
=========== ===========
Liabilities and Equity
Liabilities:
Notes payable -credit
facilities $4,848,316 $6,739,817
Notes payable -secured
structured financings 22,557,895 21,608,889
Notes payable - related party 3,754,223 2,975,000
Accrued interest payable 38,529 33,346
Accounts payable and accrued
expenses 429,531 379,021
Deferred tax liabilities, net 897,121 1,278,064
Due to affiliates 82,382 50,620
Other liabilities 333,806 235,728
------- -------
Total liabilities 32,941,803 33,300,485
---------- ----------
Equity:
Common stock, $0.01 par value 3,605 3,589
Additional paid-in capital 1,681,558 1,657,611
Accumulated other
comprehensive income, net 44,262 28,259
Retained earnings 4,751,076 3,549,160
--------- ---------
Total stockholders' equity 6,480,501 5,238,619
Total liabilities and equity $39,422,304 $38,539,104
=========== ===========
Table 2: Consolidated Statements of Income
Three Months Ended Year Ended December 31
December 31,
2017 2016 2017 2016
---- ---- ---- ----
(Unaudited, Dollars in thousands, except per share amounts)
Interest on finance
receivables and loans $1,129,181 $1,222,468 $4,755,678 $5,026,790
Leased vehicle income 483,028 401,020 1,788,457 1,487,671
Other finance and
interest income 4,470 3,695 19,885 15,135
Total finance and
other interest income 1,616,679 1,627,183 6,564,020 6,529,596
Interest expense 236,600 216,980 947,734 807,484
Leased vehicle expense 370,537 278,229 1,298,513 995,459
Net finance and other
interest income 1,009,542 1,131,974 4,317,773 4,726,653
Provision for credit
losses 562,346 685,711 2,254,361 2,468,200
------- ------- --------- ---------
Net finance and other
interest income after
provision for credit
losses 447,196 446,263 2,063,412 2,258,453
Profit sharing 7,235 12,176 29,568 47,816
----- ------ ------ ------
Net finance and other
interest income after
provision for credit
losses and profit
sharing 439,961 434,087 2,033,844 2,210,637
Investment gains
(losses), net (137,926) (168,344) (366,439) (444,759)
Servicing fee income 26,031 32,205 118,341 156,134
Fees, commissions, and
other 74,179 88,143 349,204 382,171
------ ------ ------- -------
Total other income
(loss) (37,716) (47,996) 101,106 93,546
Compensation expense 182,692 126,982 581,017 498,224
Repossession expense 70,259 75,539 275,704 293,355
Other operating costs 173,089 93,384 454,715 351,893
Total operating
expenses 426,040 295,905 1,311,436 1,143,472
------- ------- --------- ---------
Income before income
taxes (23,795) 90,186 823,514 1,160,711
Income tax expense (603,911) 28,911 (364,092) 394,245
Net income $580,116 $61,275 $1,187,606 $766,466
======== ======= ========== ========
Net income per common
share (basic) $1.61 $0.17 $3.30 $2.14
===== ===== ===== =====
Net income per common
share (diluted) $1.61 $0.17 $3.30 $2.13
===== ===== ===== =====
Dividends paid per
common share $0.03 - $0.03 -
===== === ===== ===
Weighted average
common shares (basic) 360,256,602 358,582,203 359,613,714 358,280,814
=========== =========== =========== ===========
Weighted average
common shares
(diluted) 361,409,997 360,323,179 360,292,330 359,078,337
=========== =========== =========== ===========
Table 3: Other Financial Information
Three Months Ended Year Ended December 31,
December 31,
2017 2016 2017 2016
---- ---- ---- ----
Ratios (Unaudited, Dollars in thousands)
Yield on individually acquired
retail installment contracts 15.4% 15.8% 15.7% 16.1%
Yield on purchased receivables
portfolios 30.1% 18.1% 20.6% 24.3%
Yield on receivables from dealers 2.7% 5.1% 5.3% 5.2%
Yield on personal loans (1) 23.9% 22.9% 24.5% 23.9%
Yield on earning assets (2) 12.6% 13.5% 13.2% 14.1%
Cost of debt (3) 3.1% 2.8% 3.0% 2.6%
Net interest margin (4) 10.2% 11.3% 10.8% 12.0%
Expense ratio (5) 3.5% 2.3% 2.6% 2.2%
Return on average assets (6) 6.0% 0.6% 3.0% 2.0%
Return on average equity (7) 38.5% 4.7% 21.0% 15.8%
Net charge-off ratio on
individually acquired retail
installment contracts (8) 10.3% 9.9% 8.9% 8.3%
Net charge-off ratio on purchased
receivables portfolios (8) 4.5% 1.3% 1.4% - %
Net charge-off ratio on
receivables from dealers (8) - % 1.5% - % 0.5%
Net charge-off ratio on personal
loans (8) 0.5% - % 0.6% - %
Net charge-off ratio (8) 10.3% 9.8% 8.9% 8.2%
Delinquency ratio on individually
acquired retail installment
contracts held for investment, end
of period (9) 5.4% 5.1% 5.4% 5.1%
Delinquency ratio on personal
loans, end of period (9) 11.5% 11.3% 11.5% 11.3%
Delinquency ratio on loans held for
investment, end of period (9) 5.4% 5.1% 5.4% 5.1%
Allowance ratio (10) 12.6% 12.6% 12.6% 12.6%
Common stock dividend payout ratio
(11) 1.9% - % 0.9% - %
Common Equity Tier 1 capital ratio
(12) 16.3% 13.4% 16.3% 13.4%
Other Financial Information
Charge-offs, net of recoveries, on
individually acquired retail
installment contracts $671,418 $674,442 $2,394,102 $2,257,849
Charge-offs, net of recoveries, on
purchased receivables portfolios 514 790 2,055 (17)
Charge-offs, net of recoveries, on
receivables from dealers - 258 - 393
Charge-offs, net of recoveries, on
personal loans 1,576 - 8,126 -
Charge-offs, net of recoveries, on
capital leases 525 2,219 4,310 9,384
---
Total charge-offs, net of
recoveries $674,033 $677,709 $2,408,593 $2,267,609
End of period delinquent principal
over 60 days, individually
acquired retail installment
contracts held for investment $1,404,620 $1,386,218 $1,404,620 $1,386,218
End of period personal loans
delinquent principal over 60 days $175,660 $176,873 $175,660 176,873
End of period delinquent principal
over 60 days, loans held for
investment $1,407,456 $1,392,789 $1,407,456 $1,392.789
End of period assets covered by
allowance for credit losses $25,988,819 $27,229,276 $25,988,819 $27,229,276
End of period gross individually
acquired retail installment
contracts held for investment $25,943,288 $27,127,973 $25,943,288 $27,127,973
End of period gross personal loans $1,524,158 $1,558,790 $1,524,158 $1,558,790
End of period gross finance
receivables and loans held for
investment $26,009,206 $27,427,578 $26,009,206 $27,427,578
End of period gross finance
receivables, loans, and leases
held for investment $37,207,665 $37,040,531 $37,207,665 $37,040,531
Average gross individually acquired
retail installment contracts held
for investment $26,091,257 $27,225,198 $26,754,780 $27,253,756
Average gross personal loans held
for investment $7,997 $21,047 $12,476 $9,995
Average gross individually acquired
retail installment contracts $27,098,976 $28,604,117 $27,926,229 $28,652,897
Average gross purchased receivables
portfolios 45,907 241,404 146,362 286,354
Average Gross receivables from
dealers 15,927 69,745 52,435 71,997
Average Gross personal loans 1,392,528 1,405,187 1,419,417 1,413,440
Average Gross capital leases 22,232 34,584 25,495 45,949
------
Average Gross finance receivables
and loans $28,575,570 $30,355,037 $29,569,938 $30,470,637
Average Gross finance receivables,
loans, and leases $39,663,931 $39,941,127 $40,026,059 $39,289,341
Average managed assets $48,971,677 $52,038,692 $50,110,765 $52,731,119
Three Months Ended Year Ended December 31,
December 31,
2017 2016 2017 2016
---- ---- ---- ----
(Unaudited, Dollars in thousands)
Average total assets $38,992,937 $38,513,454 $39,163,887 $37,944,529
Average debt $30,804,384 $31,416,694 $31,385,153 $31,330,686
Average total equity $6,021,944 $5,185,840 $5,663,469 $4,850,653
(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 60 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
Amounts related to our individually acquired retail installment contracts as of and for the three and twelve months December 31, 2017 and 2016, are as follows:
(Unaudited, Dollars in thousands)
Three Months Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016
---- ---- ---- ----
Credit loss
allowance -
beginning of
period $3,371,265 $3,401,285 $3,411,055 $3,197,414
Provision for
credit losses 561,288 684,213 2,244,182 2,471,490
Charge-offs (1,253,745) (1,293,744) (4,796,216) (4,723,649)
Recoveries 582,327 619,301 2,402,114 2,465,800
Credit loss
allowance -end
of period $3,261,135 $3,411,055 $3,261,135 $3,411,055
========== ========== ========== ==========
Net charge-offs $671,418 $674,442 $2,394,102 $2,257,848
Average unpaid
principal
balance (UPB)
held for
investment 26,091,257 27,225,198 26,754,780 27,253,756
Charge-off
ratio(1) 10.3% 9.9% 8.9% 8.3%
December 31, 2017(2) December 31, 2016(2)
Principal
30-59 days
past due $2,823,118 10.9% $2,911,800 10.7%
Delinquent
principal
over 59
days(3) 1,507,345 5.8% 1,520,105 5.6%
---------
Total
delinquent
contracts $4,330,463 16.7% $4,121,795 16.3%
========== ==== ========== ====
December 31, September 30,
-------------
2017 2016 2017 2016
---- ---- ---- ----
TDR -Unpaid
principal
balance $6,261,894 $5,599,567 $6,276,659 $5,332,767
Non-TDR -
Unpaid
principal
balance $19,681,394 $21,528,406 $20,044,330 $22,038,228
Total -
Unpaid
principal
balance $25,943,288 $27,127,973 $26,320,989 $27,370,995
Total -
Allowance $3,261,135 $3,411,055 $3,371,265 $3,401,285
Total
allowance
ratio 12.6% 12.6% 12.8% 12.4%
(1)"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
(2)Percent of unpaid principal
balance.
(3)Interest is accrued until
60 days past due in
accordance with the Company's
account policy for retail
installment contracts.
Table 5: Originations
Three Months Ended Twelve Months Ended Three Months
Ended
-----
December 31, December 31, December 31, December 31, September 30,
2017 2016 2017 2016 2017
---- ---- ---- ---- ----
Retained
Originations (Unaudited, Dollar amounts in thousands)
-------------
Retail installment
contracts $3,014,433 $3,068,154 $11,634,395 $12,726,912 $2,570,228
Average APR 14.0% 15.4% 16.4% 15.7% 16.1%
Average FICO(R) (a) 631 604 602 598 605
Discount 0.2% 0.3% 0.7% 0.5% 1.2%
Personal loans (b) $528,705 $570,632 $1,477,249 $1,555,783 $309,779
Average APR 25.7% 25.2% 25.7% 25.1% 25.7%
Discount - - - - -
Leased vehicles $1,294,256 $971,865 $5,987,648 $5,584,149 $1,665,776
Capital leases $4,640 $1,424 $9,295 $7,401 $2,477
------ ------ ------
Total originations
retained $4,842,034 $4,612,075 $19,108,587 $19,874,245 $4,548,260
Sold Originations
-----------------
Retail installment
contracts $ - $484,916 $2,550,065 $3,573,658 $757,720
Average APR - % 4.4% 6.2% 4.3% 6.0%
Average FICO(R) (c) - 746 727 745 729
--- --- --- ---
Total originations
sold $ - $484,916 $2,550,065 $3,573,658 $757,720
Total SC
originations $4,842,034 $5,096,991 $21,658,652 $23,447,903 $5,305,980
Total originations $4,842,034 $5,096,991 $21,658,652 $23,447,903 $5,305,980
---------- ---------- ----------- ----------- ----------
(a) Unpaid principal balance excluded
from the weighted average FICO
score is $372 million, $426
million, $1.5 billion, and $2.1
billion and $311 million for the
three months ended December 31,
2017 and 2016, the twelve months
ended December 31, 2017 and 2016,
and the three months ended
September 30, 2017, respectively,
as the borrowers on these loans did
not have FICO scores at
origination. Of these amounts, $68
million, $71 million, $164 million,
$364 million, and $37 million,
respectively, were commercial
loans.
(b) Effective 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) Unpaid principal balance excluded
from the weighted average FICO
score is zero, $50 million, $317
million, $451 million and $93
million for the three months ended
December 31, 2017 and 2016, the
twelve months ended December 31,
2017 and 2016, and the three months
ended September 30, 2017,
respectively, as the borrowers on
these loans did not have FICO
scores at origination. Of these
amounts, zero, $8 million, $102
million, $86 million, and $26
million, respectively, were
commercial loans.
Table 6: Asset Sales
Asset sales may include assets originated in prior periods.
Three Months Ended Twelve Months Ended Three Months
Ended
-----
December 31, December 31, December 31, December 31, September 30,
2017 2016 2017 2016 2017
---- ---- ---- ---- ----
(Unaudited, Dollar amounts in thousands)
Retail
installment
contracts $ - $1,381,036 $2,979,033 $3,694,019 $1,482,134
Average APR - % 6.3% 6.2% 4.2% 6.2%
Average
FICO(R) - 721 721 746 716
Personal
loans $ - $ - $ - $869,349 $ -
Average APR - % - % - % 17.9% - %
Total asset
sales $ - $1,381,036 $2,979,033 $4,563,368 $1,482,134
=== === ========== ========== ========== ==========
Table 7: Ending Portfolio
Ending outstanding balance, average APR and remaining unaccreted discount of our held for investment portfolio as of
December 31, 2017, and December 31, 2016, are as follows:
December 31, 2017 December 31, 2016
----------------- -----------------
(Unaudited, Dollar amounts in thousands)
Retail
installment
contracts $25,986,532 $27,358,147
Average APR 16.5% 16.4%
Discount 1.5% 2.3%
Personal loans $6,887 $19,361
Average APR 31.8% 31.5%
Receivables from
dealers $15,787 $69,431
Average APR 4.2% 4.9%
Leased vehicles $11,175,602 $9,612,953
Capital leases $22,857 $31,872
Table 8: Reconciliation of Non-GAAP Measures
December 31, 2017 December 31, 2016
(Unaudited, Dollar amounts in thousands)
Total equity $6,480,501 $5,238,619
Deduct: Goodwill,
intangibles, and
other assets, net of
deferred tax
liabilities 172,664 186,930
Deduct: Accumulated
other comprehensive
income (loss), net 44,262 28,259
------ ------
Tier 1 common capital $6,263,575 $5,023,430
Risk weighted assets
(a) $38,473,339 $37,432,700
Common Equity Tier 1
capital ratio (b) 16.3% 13.4%
Tier 1 common capital $6,263,575 $5,023,430
Adjustments for
significant items:
Deduct: Tax Reform (c) 652,366 -
Deduct: Gain on RV/
Marine Portfolio
(after tax) (d) 23,353 -
Add: Legal reserves
(after tax) (e) 72,100 -
Add: Settlement with
former CEO (after
tax) (f) 42,975 -
------ ---
Adjusted Tier 1 common
capital $5,702,931 $5,023,430
Risk weighted assets
(a) $38,473,339 $37,432,700
Adjusted Common Equity
Tier 1 capital ratio 14.8% 13.4%
(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.
(c) Net tax benefit due to re-
measurement of all deferred tax
assets (DTAs) and deferred tax
liabilities (DTLs) at a federal
tax rate of 21% (as compared to
35%).
(d) During the three months ended
September 30, 2017, SC sold
certain receivables previously
acquired with deteriorated credit
quality at a gain.
(e) During the three months ended
December 31, 2017, the Company
recorded accrual for legal
reserves related to certain
lawsuits, regulatory matters and
other legal proceedings, based on
availability of additional
information and ability to
reliably estimate the potential
liability.
(f) On November 15, 2017, the Company
entered into a Settlement
Agreement with Thomas G. Dundon
(former CEO) that, among other
things, altered certain portions
of the economic arrangements set
forth in the Separation Agreement.
Table 9: Reconciliation of Non-GAAP Measures
Three Months Ended For the Year Ended
December 31, 2017 December 31, 2017
(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 $(23,795) $823,514
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 $133,320 $944,702
GAAP Net Income $580,116 $1,187,606
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 $98,486 $626,962
GAAP Diluted
Earnings per common
share (b) $1.61 $3.30
===== =====
Adjusted Diluted
Earnings per common
share, excluding
significant items
(b) $0.27 $1.74
===== =====
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 $38,992,937 $39,163,887
GAAP Return on
Average Equity (b) 38.5% 21.0%
Adjusted Return on
Average Equity,
excluding
significant items
(b) 6.7% 11.1%
Average adjusted
Equity excluding
significant items $5,901,536 $5,628,906
GAAP Expense Ratio
(c) 3.5% 2.6%
Adjusted Expense
Ratio, excluding
significant items
(c) 2.2% 2.3%
Average Managed
Assets $48,971,677 $50,110,765
(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.
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SOURCE Santander Consumer USA Holdings Inc.
