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31.01.2018 12:20:00
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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 ("Adjusted1"), 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, net2, 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 ratio3 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 ratio4 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 ratio5 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 portfolio6.
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: Investor Relations Evan Black 800.493.8219 InvestorRelations@santanderconsumerusa.com | Media Relations Laurie Kight 214.801.6455 Media@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
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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, | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
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, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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 ratio1 | 10.3 | % | 9.9 | % | 8.9 | % | 8.3 | % | |||||||
December 31, 20172 | December 31, 20162 | ||||||||||||
Principal 30-59 days past due | $ | 2,823,118 | 10.9 | % | $ | 2,911,800 | 10.7 | % | |||||
Delinquent principal over 59 days3 | 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 |
2Percent of unpaid principal balance. |
3Interest 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 | |||||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | September 30, | |||||||||||||||||||||
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® (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® (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 | |||||||||||||||||
December 31, | December 31, | December 31, | December 31, | September 30, | |||||||||||||||
(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® | — | 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 | ||||||
(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. |
View original content:http://www.prnewswire.com/news-releases/santander-consumer-usa-holdings-inc-reports-fourth-quarter-and-full-year-2017-results-300590846.html
SOURCE Santander Consumer USA Holdings Inc.
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