Santander Consumer USA Holdings Inc. Reports Second Quarter 2020 Results

Loss of $97 Million; Approximately $8 Billion in Originations in the second quarter of 2020

News provided by

Santander Consumer USA Holdings Inc.

Jul 29, 2020, 06:15 ET

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
[email protected]

Media Relations
Annette Rogers
469.563.4157
[email protected]

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.

SOURCE Santander Consumer USA Holdings Inc.

Related Links

http://www.santanderconsumerusa.com

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