Santander Consumer USA Holdings Inc. Reports Second Quarter 2020 Results

Rhea-AI Summary

Santander Consumer USA reported a net income of $(97) million for Q2 2020, reflecting challenges due to COVID-19 and a $400 million allowance for credit loss. Despite the prohibition on third-quarter dividends due to Federal Reserve policy, management noted the resilience of its portfolio and effective customer hardship programs. Total auto originations decreased by 7% to $7.8 billion, with a 12% drop in core retail auto loans. However, Chrysler Capital loan originations surged by 36%. The CET1 ratio stood strong at 13.4%, demonstrating robust capital reserves amid economic uncertainty.

Positive

• Chrysler Capital loan originations increased by 36% to $4.7 billion.
• CET1 ratio remains strong at 13.4%, indicating solid capital reserves.

Negative

• Net income of $(97) million for Q2 2020, down from positive income year-over-year.
• Total auto originations fell by 7%, with core retail loan originations down 12%.
• Prohibition on third-quarter dividends due to Federal Reserve policy.

DALLAS, July 29, 2020 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (NYSE: SC) ("SC" or the "Company") today announced net income for the second quarter ended June 30, 2020 ("Q2 2020") of $(97) million, or $(0.30) per diluted common share. The quarter included $400 million of incremental allowance for credit loss primarily driven by macroeconomic factors and COVID-19.

As previously announced, based on the interim Federal Reserve Board ("FRB") policy and SHUSA's expected average trailing four quarters of net income, SC is prohibited from paying a dividend in the third quarter of 2020. Although SC's standalone expected income is sufficient to declare and a pay a dividend in the third quarter, SC is consolidated into SHUSA's capital plan and therefore is subject to the FRB's interim policy that utilizes SHUSA's average trailing income to determine the cap on common stock dividends. SHUSA has requested certain exceptions to the interim policy, however the timing and outcome of the request is uncertain. SC does not currently expect to declare or pay a dividend in the third quarter of 2020 pending approval of SHUSA's exception request.

Management Quotes

"The duration of the pandemic has created significant macroeconomic uncertainty, and the speed of the economic recovery will dictate our performance over the next several months. While certain indicators are trending positive, we anticipate a delayed reversion to normal. Our results this quarter demonstrate the resiliency of our portfolio, the effectiveness of the hardship programs we instituted and the strength of our business model. Our employees, dealers and customers continue to be our priority as we endeavor to provide them the highest levels of service in these trying times. In the past weeks, we have also responded to the calls for an end to systemic racism by starting a conversation with our employees and committing to take action to make our company a place where all employees are valued, feel safe and have an opportunity to succeed. In the process, we will make sustained and material differences in the way we view race and interact with each other," said Mahesh Aditya, SC President and CEO.  

Fahmi Karam, SC Chief Financial Officer, added, "This quarter's strong credit performance reflects the impact of the pandemic relief we provided to our customers and the improvement in auction recovery rates, particularly towards the end of the quarter. We continued to build reserves this quarter due to the COVID-19 uncertainty and we remain well capitalized with a 13.4% CET1 ratio, combining for an industry leading loss absorbing capacity to manage through the pandemic and position us for long-term success."

Second Quarter of 2020 Highlights (variances compared to second quarter of 2019 ("Q2 2019"), unless otherwise noted)

• Total auto originations of $7.8 billion, down 7%
• Core retail auto loan originations of $2.1 billion, down 12%
• Chrysler Capital loan originations of $4.7 billion, up 36%
• Chrysler Capital lease originations of $989 million, down 61%
• Chrysler average quarterly penetration rate of 37%, from 36%
• Santander Bank, N.A. program originations of $1.7 billion
• Net finance and other interest income¹ of $1.1 billion, down 7%
• 30-59 delinquency ratio of 4.3%, down 510 basis points
• 59-plus delinquency ratio² of 2.4%, down 230 basis points
• Retail Installment Contract ("RIC") gross charge-off ratio of 11.1%, down 500 basis points
• Recovery rate of 46%, down from 60%
• RIC net charge-off ratio³ of 6.0%, down 40 basis points
• Troubled Debt Restructuring ("TDR") balance of $3.9 billion, down from $4.5 billion
• Return on average assets of (0.8)%, down from 3.2%
• $1.9 billion in asset-backed securities "ABS" issued
• Expense ratio of 1.7%, down from 2.0%
• Common equity tier 1 ("CET1") ratio of 13.4%, down from 15.7% as of June 30, 2019

¹Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.
²Delinquency 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 finance leases.
³Net Charge-Off Ratio stated on a recorded investment basis, which is unpaid principal balance adjusted for unaccreted net discounts, subvention and origination costs.

Conference Call Information
SC will host a conference call and webcast to discuss its Q2 2020 results and other general matters at 9:00 a.m. Eastern Time on Wednesday, July 29, 2020. The conference call will be accessible by dialing 888-394-8218 (U.S. domestic), or 323-701-0225 (international), conference ID 2177889. 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 Q2 2020 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 2177889, 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 for the year ended December 31, 2019, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (collectively, our "SEC filings"). 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 adverse impact of COVID-19 on our business, financial condition, liquidity and results of operations; (b) continually changing federal, state, and local laws and regulations could materially adversely affect our business; (c) adverse economic conditions in the United States and worldwide may negatively impact our results; (d) a reduction in our access to funding a reduction in ; (e) significant risks we face implementing our growth strategy, some of which are outside our control; (f) unexpected costs and delays in connection with exiting our personal lending business; (g) 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; (h) our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (i) our financial condition, liquidity, and results of operations depend on the credit performance of our loans; (j) loss of our key management or other personnel, or an inability to attract such management and personnel; (k) 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 (l) 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 3.1 million customers across the full credit spectrum. SC, which began originating retail installment contracts in 1997, had an average managed asset portfolio of approximately $61 billion (for the second quarter ended June 30, 2020), and is headquartered in Dallas. (www.santanderconsumerusa.com)

 

CONTACTS:

Investor Relations
Evan Black
800.493.8219
InvestorRelations@santanderconsumerusa.com

Media Relations
Annette Rogers
469.563.4157
Media@santanderconsumerusa.com

 

 

Santander Consumer USA Holdings Inc.
Financial Supplement
Second Quarter 2020
Table of Contents
Table 1: Condensed Consolidated Balance Sheets	7
Table 2: Condensed Consolidated Statements of Income	8
Table 3: Other Financial Information	9
Table 4: Credit Quality	11
Table 5: Originations	13
Table 6: Asset sales	14
Table 7: Ending Portfolio	15
Table 8: Reconciliation of Non-GAAP Measures	16

 

Table 1: Condensed Consolidated Balance Sheets

	June 30, 2020				December 31, 2019
Assets	(Unaudited, Dollars in thousands)
Cash and cash equivalents	$	175,936			$	81,848
Finance receivables held for sale, net	2,445,599				1,007,105
Finance receivables held for investment, at amortized cost	30,606,438				30,810,487
Allowance for credit loss	(5,859,954)				(3,043,468)
Finance receivables held for investment, at amortized cost, net	24,746,484				27,767,019
Restricted cash	2,057,315				2,079,239
Accrued interest receivable	447,232				288,615
Leased vehicles, net	16,239,622				16,461,982
Furniture and equipment, net	61,653				59,873
Goodwill	74,056				74,056
Intangible assets	53,159				42,772
Other assets	967,639				1,071,020
Total assets	$	47,268,695			$	48,933,529
Liabilities and Equity
Liabilities:
Borrowings and other debt obligations	$	40,636,769			$	39,194,141
Deferred tax liabilities, net	910,448				1,468,222
Accounts payable and accrued expenses	508,290				563,277
Other liabilities	317,723				389,269
Total liabilities	$	42,373,230			$	41,614,909
Equity:
Common stock, $0.01 par value	3,162				3,392
Additional paid-in capital	624,554				1,173,262
Accumulated other comprehensive income, net	(63,705)				(26,693)
Retained earnings	4,331,454				6,168,659
Total stockholders' equity	$	4,895,465			$	7,318,620
Total liabilities and equity	$	47,268,695			$	48,933,529

 

Table 2: Condensed Consolidated Statements of Income

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
	(Unaudited, Dollars in thousands, except per share amounts)
Interest on finance receivables and loans	$	1,236,600			$	1,261,098			$	2,510,419			$	2,514,678
Leased vehicle income	737,549				676,236				1,485,528				1,325,796
Other finance and interest income	2,657				11,437				10,208				21,684
Total finance and other interest income	1,976,806				1,948,771				4,006,155				3,862,158
Interest expense	308,982				330,039				637,816				664,421
Leased vehicle expense	610,861				444,442				1,163,773				888,461
Net finance and other interest income	1,056,963				1,174,290				2,204,566				2,309,276
Credit loss expense	861,896				430,676				1,769,783				981,555
Net finance and other interest income after credit loss expense	195,067				743,614				434,783				1,327,721
Profit sharing	11,530				13,345				25,825				20,313
Net finance and other interest income after credit loss expense and profit sharing	183,537				730,269				408,958				1,307,408
Investment losses, net	(147,582)				(84,787)				(211,008)				(151,884)
Servicing fee income	19,120				25,002				38,223				48,808
Fees, commissions, and other	82,069				90,196				177,199				184,572
Total other income	(46,393)				30,411				4,414				81,496
Compensation and benefits	127,643				122,678				260,969				250,572
Repossession expense	22,289				69,699				79,951				140,559
Other expenses	116,747				88,272				208,432				180,475
Total other expenses	266,679				280,649				549,352				571,606
Income (loss) before income taxes	(129,535)				480,031				(135,980)				817,298
Income tax expense	(32,857)				111,764				(35,315)				201,528
Net income (loss)	$	(96,678)			$	368,267			$	(100,665)			$	615,770
Net income per common share (basic)	$	(0.30)			$	1.05			$	(0.31)			$	1.75
Net income per common share (diluted)	$	(0.30)			$	1.05			$	(0.31)			$	1.75
Weighted average common shares (basic)	319,773,636				351,106,197				326,899,844				351,309,700
Weighted average common shares (diluted)	$	319,878,145			$	351,556,349			$	327,137,104			$	351,825,554
Number of shares outstanding	316,235,387				348,130,140				316,235,387				348,130,140

 

Table 3: Other Financial Information

	Three Months Ended June 30,								Six Months Ended June 30,
Ratios (Unaudited, Dollars in thousands)	2020				2019				2020				2019
Yield on retail installment contracts	14.8		%		16.1		%		15.0		%		16.1		%
Yield on leased vehicles	2.9		%		5.8		%		3.7		%		5.6		%
Yield on personal loans, held for sale (1)	25.6		%		26.3		%		26.0		%		26.2		%
Yield on earning assets (2)	10.9		%		12.9		%		11.4		%		12.9		%
Cost of debt (3)	3.1		%		3.7		%		3.2		%		3.7		%
Net interest margin (4)	8.4		%		10.1		%		8.8		%		10.0		%
Expense ratio (5)	1.7		%		2.0		%		1.8		%		2.1		%
Return on average assets (6)	(0.8)		%		3.2		%		(0.4)		%		2.7		%
Return on average equity (7)	(7.7)		%		20.3		%		(3.6)		%		17.2		%
Net charge-off ratio on individually acquired retail installment contracts (8)	6.0		%		6.4		%		6.9		%		7.5		%
Net charge-off ratio (8)	6.0		%		6.4		%		6.9		%		7.5		%
Delinquency ratio on individually acquired retail installment contracts held for investment, end of period (9)	2.4		%		4.7		%		2.4		%		4.7		%
Delinquency ratio on loans held for investment, end of period (9)	2.4		%		4.7		%		2.4		%		4.7		%
Allowance ratio (10)	19.2		%		10.8		%		19.2		%		10.8		%
Common stock dividend payout ratio (11)	*				19.1		%		*				22.8		%
Common Equity Tier 1 capital ratio (12)	13.4		%		15.7		%		13.4		%		15.7		%
Charge-offs, net of recoveries, on individually acquired retail installment contracts	$	461,014			$	462,427			$	1,054,060			$	1,077,631
Total charge-offs, net of recoveries	461,925				464,277				$	1,055,524			$	1,079,892
End of period delinquent amortized cost over 59 days, retail installment contracts held for investment	743,693				1,367,310				743,693				1,367,310
End of period personal loans delinquent principal over 59 days, held for sale	127,504				167,033				127,504				167,033
End of period delinquent amortized cost over 59 days, loans held for investment	744,170				1,368,427				744,170				1,368,427
End of period assets covered by allowance for credit losses	30,522,963				29,007,585				30,522,963				29,007,585
End of period gross retail installment contracts held for investment	30,492,634				28,971,311				30,492,634				28,971,311
End of period gross retail installment contracts held for sale	1,718,244				321,503				1,718,244				321,503
End of period gross personal loans held for sale	1,283,183				1,364,956				1,283,183				1,364,956
End of period gross finance receivables and loans held for investment	30,496,308				29,009,846				30,496,308				29,009,846
End of period gross finance receivables, loans, and leases held for investment	47,729,637				45,557,709				47,729,637				45,557,709
Average gross retail installment contracts held for investment	30,493,604				29,017,122				30,586,535				28,816,732
Average gross retail installment contracts held for sale	1,363,876				321,503				1,363,876				321,503
Average gross retail installment contracts held for investment and held for sale	31,193,215				29,070,738				31,017,842				28,834,640
Average gross personal loans held for sale	1,307,609				1,375,306				1,363,023				1,424,717
Average gross finance receivables and loans	32,554,978				30,507,780				32,438,109				30,321,739
Average gross operating leases	17,492,255				16,043,654				17,584,849				15,752,705
Average gross finance receivables, loans, and leases	50,047,233				46,551,434				50,022,958				46,074,444
Average managed assets	61,001,767				55,545,503				60,652,091				55,043,583
Average total assets	46,876,726				45,700,887				47,308,997				45,101,873
Average debt	40,113,885				36,152,602				39,858,355				35,715,392
Average total equity	5,033,773				7,273,470				5,573,544				7,163,738

(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 amortized cost basis, net of recoveries, to average unpaid principal balance of the respective held-for-investment portfolio.
(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 finance 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. The Common stock dividend payout ratio for the three and six months ended June 30, 2020 has not been disclosed since the earnings per share for the three and six months ended June 30, 2020 was a negative number
(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 retail installment contracts for the three and six months ended June 30, 2020 and 2019 was as follows (Unaudited, Dollar amounts in thousands):

	Three Months Ended June 30, 2020								Three Months Ended June 30, 2019
	Retail Installment Contracts								Retail Installment Contracts
Allowance for Credit Loss	Non-TDR				TDR				Non-TDR				TDR
Balance — beginning of period	$	4,482,663			$	973,236			$	1,891,351			$	1,280,649
Credit loss expense (a)	744,511				116,419				348,817				59,806
Charge-offs (b)	(721,218)				(127,617)				(795,901)				(369,523)
Recoveries	312,231				75,590				517,626				185,371
Balance — end of period	$	4,818,187			$	1,037,628			$	1,961,893			$	1,156,303
	Six Months Ended June 30, 2020								Six Months Ended June 30, 2019
	Retail Installment Contracts								Retail Installment Contracts
Allowance for Credit Loss	Non-TDR				TDR				Non-TDR				TDR
Balance — beginning of period	$	2,123,878			$	914,718			$	1,819,360			$	1,416,743
Day 1 - Adjustment to allowance for adoption of CECL standard	2,030,473				71,833				—				—
Credit loss expense (a)	1,501,704				267,268				795,305				164,419
Charge-offs (b)	(1,620,768)				(417,184)				(1,723,358)				(836,160)
Recoveries	782,900				200,993				1,070,586				411,301
Balance — end of period	$	4,818,187			$	1,037,628			$	1,961,893			$	1,156,303

(a)

Excluded from the credit loss expense is $39 million related to retail installment contracts sold in an off balance sheet securitization during the three and six months ended June 30, 2020. In addition, credit loss expense excludes $12 million related to retail installment contracts transferred to held for sale during the three and six months ended June 30, 2020. Furthermore, credit loss expense includes $20 million related to retail installment contracts transferred to held for sale during the three and six months ended June 30, 2019.

(b)

Charge-offs for retail installment contracts includes partial write-down of loans to the collateral value less estimated costs to sell, for which a bankruptcy notice was received. There is no additional ACL on these loans.

 

A summary of delinquencies of our retail installment contracts as of June 30, 2020 and December 31, 2019 is as follows (Unaudited, Dollar amounts in thousands):

Delinquent Balance		June 30, 2020
		Amount				Percent
Amortized cost, 30-59 days past due		1,308,305				4.3	%
Delinquent amortized cost over 59 days		743,693				2.4	%
Total delinquent balance at amortized cost		$	2,051,998			6.7	%
Delinquent Balance		December 31, 2019
		Amount				Percent
Principal 30-59 days past due		$	2,972,495			9.7	%
Delinquent principal over 59 days		1,578,452				5.1	%
Total delinquent principal (a)		$	4,550,947			14.8	%

(a)	The table includes balances based on UPB. Difference between amortized cost and UPB was not material.

 

The retail installment contracts held for investment that were placed on nonaccrual status, as of June 30, 2020 and December 31, 2019 (Unaudited, Dollar amounts in thousands):

Nonaccrual Balance	June 30, 2020
	Amount				Percent
Non-TDR	622,126				2.0	%
TDR	242,037				0.8	%
Total non-accrual loans (a)	$	864,163			2.8	%

(a)	The table includes balances based on amortized cost.

Nonaccrual Balance		December 31, 2019
		Amount				Percent
Non-TDR		$	1,099,462			3.6	%
TDR		516,119				1.7	%
Total nonaccrual principal (a)		$	1,615,581			5.3	%

(a)	The table includes balances based on UPB. Difference between amortized cost and UPB was not material.

 

The table below presents the Company's allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of June 30, 2020 and December 31, 2019 (Unaudited, Dollar amounts in thousands):

Allowance Ratios	June 30, 2020				December 31, 2019
TDR - Unpaid principal balance	$	3,946,808			$	3,859,040
TDR - Impairment	1,037,628				914,718
TDR - Allowance ratio	26.3		%		23.7		%
Non-TDR - Unpaid principal balance	$	26,527,943			$	26,895,551
Non-TDR - Allowance	4,818,187				2,123,878
Non-TDR Allowance ratio	18.2		%		7.9		%
Total - Unpaid principal balance	$	30,474,751			$	30,754,591
Total - Allowance	5,855,815				3,038,596
Total - Allowance ratio	19.2		%		9.9		%

The Company's allowance for credit losses increased $0.4 billion and $2.8 billion for the three and six months ended June 30, 2020. For the three months ended June 30, 2020, the increase was primarily due to a reserve build associated with a weaker economic outlook related to COVID-19, partially offset by declines in balances. For the six months ended June 30, 2020, the primary drivers were $2.1 billion increase at CECL adoption on January 1, 2020, driven mainly by the addition of lifetime expected credit losses for non-TDR loans, and additional reserves specific to COVID-19 risk, partially offset by decline in balances.

 

Table 5: Originations

The Company's originations of loans and leases, including revolving loans, average APR, and dealer discount (net of dealer participation) were as follows:

	Three Months Ended								Six Months Ended								Three Months Ended
	June 30, 2020				June 30, 2019				June 30, 2020				June 30, 2019				March 31, 2020
Retained Originations	(Unaudited, Dollar amounts in thousands)
Retail installment contracts	$	5,098,496			$	3,949,648			$	8,832,741			$	7,975,975			$	3,846,226
Average APR	11.7		%		16.2		%		13.3 %				16.7		%		15.3		%
Average FICO® (a)	657				601				635				597				607
Discount	(0.9)		%		(0.5)		%		(0.8)		%		(0.3)		%		(0.8)		%
Personal loans (b)	347,238				343,214				618,073				631,770				$	270,835
Average APR	29.6		%		29.7		%		29.5		%		29.8		%		29.8		%
Leased vehicles	986,617				2,520,130				3,007,338				4,483,710				$	2,020,721
Finance lease	1,927				4,822				4,929				$	8,129			$	3,002
Total originations retained	$	6,434,278			$	6,817,814			$	12,463,081			$	13,099,584			$	6,140,784
Sold Originations
Retail installment contracts	$	—			$	—			$	111,981			$	—			$	—
Average APR	—		%		—		%		4.4 %				—		%		—		%
Average FICO® (c)	—				—				722				—				—
Total originations sold	$	—			$	—			$	111,981			$	—			$	—
Total originations (excluding SBNA Originations Program)	$	6,434,278			$	6,817,814			$	12,575,062			$	13,099,584			$	6,140,784

(a)	Unpaid principal balance excluded from the weighted average FICO score is $586 million, $448 million, $1.0 billion, $941 million and $432 million for the three months ended June 30, 2020 and 2019, the six months ended June 30, 2020 and 2019, and for the three months ended March 31, 2020,  as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $102 million, $141 million, $241 million, $247 million and $139 million, respectively, were commercial loans.
(b)	Included in the total origination volume is $58 million, $51 million, $79 million, $76 million and $21 million for the three months ended June 30, 2020 and 2019, the six months ended June 30, 2020 and 2019, and for the three months ended March 31, 2020, respectively, related to newly opened accounts.
(c)	Unpaid principal balance excluded from the weighted average FICO score is $9 million for the six months ended June 30, 2020, as the borrowers on these loans did not have FICO scores at origination.

 

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. The Company facilitated the purchase of $1.7 billion and $2.8 billion of retail installment contacts during the three and six months ended June 30, 2020, respectively.

Table 6: Asset Sales

	Three Months Ended								Six Months Ended								Three Months Ended
	June 30, 2020				June 30, 2019				June 30, 2020				June 30, 2019				March 31, 2020
Assets Sold	(Unaudited, Dollar amounts in thousands)
Retail installment contracts	$	512,286			$	—			$	512,286			$	—			$	—
Average APR	6.4		%		—		%		6.4		%		—		%		—		%
Average FICO®	$	691			—				691				—				—

 

Table 7: Ending Portfolio

Ending outstanding balance, average APR and remaining unaccreted net discount of our held for investment portfolio as of June 30, 2020 and December 31, 2019, are as follows:

	June 30, 2020				December 31, 2019
	(Unaudited, Dollar amounts in thousands)
Retail installment contracts	$	30,492,634			$	30,776,038
Average APR	15.4		%		16.1		%
Discount	0.03		%		0.3		%
Receivables from dealers	$	3,675			$	12,668
Average APR	3.9		%		4.0		%
Leased vehicles	$	17,206,674			$	17,562,782
Finance leases	$	26,655			$	27,584

 

Table 8: Reconciliation of Non-GAAP Measures

	June 30, 2020				June 30, 2019
	(Unaudited, Dollar amounts in thousands)
Total equity	$	4,895,465			$	7,337,261
Add: Adjustment due to CECL capital relief (c)	1,769,430				—
Deduct: Goodwill, intangibles, and other assets, net of deferred tax liabilities	154,943				152,264
Deduct: Accumulated other comprehensive income (loss), net	(63,705)				(21,568)
Tier 1 common capital	$	6,573,657			$	7,206,565
Risk weighted assets (a)(c)	48,997,902				45,849,574
Common Equity Tier 1 capital ratio (b)(c)	13.4		%		15.7		%

(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)	As described in our 2019 annual report on Form 10-K, on January 1, 2020, we adopted ASU 2016-13, Financial Instruments -Credit Losses ("CECL"), which upon adoption resulted in a reduction to our opening retained earnings balance, net of income tax, and increase to the allowance for credit losses of approximately $2 billion. As also described in our 2019 10-K, the U.S. banking agencies in December 2018 had approved a final rule to address the impact of CECL on regulatory capital by allowing banking organizations, including the Company, the option to phase in the day-one impact of CECL until the first quarter of 2023. In March 2020, the U.S. banking agencies issued an interim final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL's effect on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period. The Company is electing this alternative option instead of the one described in the December 2018 rule.

 

 

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SOURCE Santander Consumer USA Holdings Inc.

FAQ

What were Santander Consumer USA's Q2 2020 earnings results?

Santander Consumer USA reported a net income of $(97) million for Q2 2020.

How did COVID-19 impact Santander Consumer USA's financials?

The company increased its allowance for credit loss by $400 million due to macroeconomic factors related to COVID-19.

Is Santander Consumer USA paying a dividend in Q3 2020?

No, SC is prohibited from paying a dividend in Q3 2020 due to Federal Reserve policy.

What was the total auto originations for Santander Consumer USA in Q2 2020?

Total auto originations were $7.8 billion in Q2 2020, a 7% decrease from the previous year.

What is Santander Consumer USA's CET1 ratio?

The CET1 ratio for Santander Consumer USA was 13.4% as of June 30, 2020.