Santander Consumer USA Holdings Inc. Reports Second Quarter 2018 Net Income of $335 million

07/25/18
Total Auto Originations of $7.9 Billion Increased 45% YoY; Company Declares $0.20 Per Share Cash Dividend and Announces Inaugural $200 Million Share Repurchase Program; Begins Originations Program With Santander Bank

DALLAS, July 25, 2018 /PRNewswire/ — Santander Consumer USA Holdings Inc. (NYSE: SC) (“SC”) today announced net income for the second quarter ended June 30, 2018 (“Q2 2018”) of $335 million, or $0.92 per diluted common share.

The Company has declared a cash dividend of $0.20 per share, to be paid on August 8, 2018, to shareholders of record as of the close of business on August 6, 20181. In addition, the Company received authorization to repurchase $200 million of outstanding common stock through June 30, 20191.

We had a strong second quarter, with clear momentum in our business performance and continued regulatory progress,” said Scott Powell, SC President and CEO.Earnings were up 26 percent from 2Q 2017, driven by strong originations across all channels, including Chrysler, and by strong credit performance. SHUSA also received a non-objection from the Federal Reserve to our capital plan, which allows SC to pay a meaningful dividend and launch an inaugural share repurchase program.

Juan Carlos Alvarez, SC Chief Financial Officer, added, “Our ongoing efforts to optimize pricing and dealer experience led to another strong quarter, with robust originations. Our credit performance, with continued stabilization in both gross and net charge-off ratios, resulted in solid financial performance during the second quarter.

Scott Powell, who is also CEO of Santander US, added, “We are proud of our work since the beginning of the year to prepare for the launch of our program to originate SC auto loans at Santander Bank, which began on July 2, 2018. The originations program is another step forward as we continue to bring the Santander US businesses closer together, leveraging their individual strengths.

Q2 2018 Highlights (variances compared to the second quarter of 2017 (Q2 2017), unless otherwise noted):

  • Total auto originations of $7.9 billion, up 45%
    • Core retail auto loan originations of $2.6 billion, up 15%
    • Chrysler Capital loan originations of $2.7 billion, up 51%
    • Chrysler Capital lease originations of $2.6 billion, up 84%
    • Chrysler average quarterly penetration rate of 32%, up from 20% during the same quarter last year
  • Net finance and other interest income of $1.1 billion, decreased 6%
    • Net leased vehicle income of $178 million, increased 36%
  • Retail Installment Contract “RIC” gross charge-off ratio of 15.2% down 130 basis points
    • RIC net charge-off ratio of 6.0%, down 150 basis points
    • Auction-plus recovery rate of 60.6%, up 670 basis points
  • Troubled Debt Restructuring (“TDR”) balance of $6.0 billion, down $40 million vs. March 31, 2018
  • Return on average assets of 3.3%, up from 2.7%
  • Issued $3.5 billion in asset-backed securities “ABS”
  • Asset sales of $1.2 billion executed through the Santander flow agreement
    • Full roll-out of SBNA originations program in July
  • Common equity tier 1 (“CET1”) ratio of 16.7%, up from 14.3%
  • Expense ratio of 2.2%, flat

Finance receivables, loans and leases, net2 of $37.1 billion, increased compared to $34.8 billion at December 31, 2017.

Net finance and other interest income decreased 6 percent to $1.07 billion in Q2 2018 from $1.14 billion in Q2 2017, primarily driven by lower average RIC balances and an increase in benchmark rates.

Servicing fee income decreased 14 percent to $28 million in Q2 2018, from $32 million in Q2 2017, driven by lower serviced for others balances. SC’s serviced for others portfolio of $9.5 billion as of Q2 2018 decreased 4 percent from $9.9 billion the prior year quarter and increased 9 percent from $8.7 billion versus Q1 2018.

RIC delinquency ratio3 of 4.2 percent in Q2 2018 decreased compared to 5.2 percent in Q2 2017.

RIC net charge-off ratio4 decreased to 6.0 percent in Q2 2018 from 7.5 percent in Q2 2017. Provision for credit losses decreased to $353 million in Q2 2018 from $521 million the prior year quarter.

Allowance ratio5 decreased 80 basis points, to 11.5 percent at the end of Q2 2018, from 12.3 percent at the end of Q1 2018.

Recorded net investment losses of $83 million in Q2 2018, compared to net investment losses of $100 million in Q2 2017. The current period losses were primarily driven by held for sale accounting for SC’s personal lending portfolio6. Excluding the impact of personal lending, net investment losses totaled $7 million.

During Q2 2018 SC incurred $277 million of operating expenses, down 2 percent from $282 million in Q2 2017. SC’s expense ratio of 2.2 percent for the quarter, was flat compared to 2.2 percent during the same period last year.

The timing and amount of any capital actions will depend on various factors, including the business plans and financial performance of both SC and SHUSA, as well as market conditions, and any SC capital distribution is subject to approval of the Company’s and SHUSA’s respective boards of directors.
Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.
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.
Net charge-off ratio stated on a recorded investment basis, which is unpaid principal balance adjusted for unaccreted net discounts, subvention and origination costs.
Ratio for allowance for credit losses excludes end of period balances on purchased receivables portfolio of $36 million and finance receivables and personal loans held for sale of $1.2 billion.
The current period losses were primarily driven by $76 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, comprised of $90 million in customer default activity, partially offset by a $14 million decrease in market discount, consistent with typical seasonal patterns.

Conference Call Information
SC will host a conference call and webcast to discuss its Q2 2018 results and other general matters at 9:00 a.m. Eastern Time on Wednesday, July 25, 2018. The conference call will be accessible by dialing 888-394-8218 (U.S. domestic), or 323-701-0225 (international), conference ID 5415846. 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 2018 SC Earnings Conference Call. Additionally, there will be slides accompanying the webcast. Please allow at least 15 minutes prior to the call to register, download and install any necessary software prior to the call.

For those unable to listen to the live broadcast, a replay of the call will be available on the Company’s website or by dialing 844-512-2921 (U.S. domestic), or 412-317-6671 (international), conference ID 5415846, approximately two hours after the conference call. An audio webcast of the call and investor presentation will also be archived on the Investor Relations section of SC’s corporate website at http://investors.santanderconsumerusa.com, under “Events”.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as anticipates, believes, can, could, may, predicts, potential, should, will, estimates, plans, projects, continuing, ongoing, expects, intends, and similar words or phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties that are subject to change based on various important factors, some of which are beyond our control. For additional discussion of these risks, refer to the section entitled Risk Factors and elsewhere in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q filed by us with the U.S. Securities and Exchange Commission (SEC). Among the factors that could cause the forward-looking statements in this press release and/or our financial performance to differ materially from that suggested by the forward-looking statements are (a) the inherent limitations in internal control over financial reporting; (b) our ability to remediate any material weaknesses in internal controls over financial reporting completely and in a timely manner; (c) continually changing federal, state, and local laws and regulations could materially adversely affect our business; (d) adverse economic conditions in the United States and worldwide may negatively impact our results; (e) our business could suffer if our access to funding is reduced; (f) significant risks we face implementing our growth strategy, some of which are outside our control; (g) unexpected costs and delays in connection with exiting our personal lending business; (h) our agreement with FCA US LLC may not result in currently anticipated levels of growth and is subject to certain conditions that could result in termination of the agreement; (i) our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (j) our financial condition, liquidity, and results of operations depend on the credit performance of our loans; (k) loss of our key management or other personnel, or an inability to attract such management and personnel; (l) certain regulations, including but not limited to oversight by the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the European Central Bank, and the Federal Reserve, whose oversight and regulation may limit certain of our activities, including the timing and amount of dividends and other limitations on our business; and (m) future changes in our relationship with SHUSA and Banco Santander that could adversely affect our operations. If one or more of the factors affecting our forward-looking information and statements proves incorrect, our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Therefore, we caution the reader not to place undue reliance on any forward-looking information or statements. The effect of these factors is difficult to predict. Factors other than these also could adversely affect our results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties as new factors emerge from time to time. Any forward-looking statements only speak as of the date of this document, and we undertake no obligation to update any forward-looking information or statements, whether written or oral, to reflect any change, except as required by law. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

About Santander Consumer USA Holdings Inc.

Santander Consumer USA Holdings Inc. (NYSE: SC) (“SC”) is a full-service consumer finance company focused on vehicle finance, third-party servicing and delivering superior service to our more than 2.7 million customers across the full credit spectrum. The company, which began originating retail installment contracts in 1997, has an average managed asset portfolio of approximately $50 billion (as of June 30, 2018), and is headquartered in Dallas. (www.santanderconsumerusa.com)

Santander Consumer USA Holdings Inc.

Financial Supplement

Second Quarter 2018

Table of Contents

Table 1: Condensed Consolidated Balance Sheets

5

Table 2: Condensed Consolidated Statements of Income

6

Table 3: Other Financial Information

7

Table 4: Credit Quality

9

Table 5: Originations

11

Table 6: Asset Sales

12

Table 7: Ending Portfolio

13

Table 8: Reconciliation of Non-GAAP Measures

14

 

Table 1: Condensed Consolidated Balance Sheets

June 30,

 2018

December 31,

2017

Assets

(Unaudited, Dollars in thousands)

Cash and cash equivalents

$

319,688

$

527,805

Finance receivables held for sale, net

1,246,732

2,210,421

Finance receivables held for investment, net

24,096,770

22,427,769

Restricted cash

2,125,410

2,553,902

Accrued interest receivable

286,164

326,640

Leased vehicles, net

11,729,482

10,160,327

Furniture and equipment, net

64,599

69,609

Federal, state and other income taxes receivable

100,517

95,060

Related party taxes receivable

467

467

Goodwill

74,056

74,056

Intangible assets

31,613

29,734

Due from affiliates

35,398

33,270

Other assets

1,062,240

913,244

Total assets

$

41,173,136

$

39,422,304

Liabilities and Equity

Liabilities:

Notes payable — credit facilities

$

4,502,823

$

4,848,316

Notes payable — secured structured financings

24,300,820

22,557,895

Notes payable —  related party

3,125,963

3,754,223

Accrued interest payable

43,882

38,529

Accounts payable and accrued expenses

470,439

429,531

Deferred tax liabilities, net

1,079,557

897,121

Due to affiliates

154,192

82,382

Other liabilities

449,726

333,806

Total liabilities

$

34,127,402

$

32,941,803

Equity:

Common stock, $0.01 par value

3,614

3,605

Additional paid-in capital

1,693,896

1,681,558

Accumulated other comprehensive income, net

62,449

44,262

Retained earnings

5,285,775

4,751,076

Total stockholders’ equity

$

7,045,734

$

6,480,501

Total liabilities and equity

$

41,173,136

$

39,422,304

 

Table 2: Condensed Consolidated Statements of Income

Three Months Ended

 June 30,

Six Months Ended

 June 30,

2018

2017

2018

2017

(Unaudited, Dollars in thousands, except per share amounts)

Interest on finance receivables and loans

$

1,156,536

$

1,232,252

$

2,270,673

$

2,441,438

Leased vehicle income

537,897

429,264

1,042,175

847,497

Other finance and interest income

8,494

5,205

15,631

9,030

Total finance and other interest income

1,702,927

1,666,721

3,328,479

3,297,965

Interest expense

273,953

233,371

514,981

460,460

Leased vehicle expense

360,335

298,224

719,018

588,395

Net finance and other interest income

1,068,639

1,135,126

2,094,480

2,249,110

Provision for credit losses

352,575

520,555

811,570

1,155,568

Net finance and other interest income after provision for credit losses

716,064

614,571

1,282,910

1,093,542

Profit sharing

12,853

8,443

17,230

16,388

Net finance and other interest income after provision for credit losses and profit sharing

703,211

606,128

1,265,680

1,077,154

Investment losses, net

(82,634)

(99,522)

(169,154)

(175,921)

Servicing fee income

27,538

31,953

53,720

63,637

Fees, commissions, and other

77,480

91,964

162,871

192,159

Total other income

22,384

24,395

47,437

79,875

Compensation expense

118,598

127,894

240,603

264,156

Repossession expense

63,660

67,269

135,741

138,568

Other operating costs

94,692

87,252

188,518

184,769

Total operating expenses

276,950

282,415

564,862

587,493

Income before income taxes

448,645

348,108

748,255

569,536

Income tax expense

114,004

83,433

171,315

161,434

Net income

$

334,641

$

264,675

$

576,940

$

408,102

Net income per common share (basic)

$

0.93

$

0.74

$

1.60

$

1.14

Net income per common share (diluted)

$

0.92

$

0.74

$

1.59

$

1.13

Dividend paid per common share

$

0.05

$

$

0.10

$

Weighted average common shares (basic)

361,268,112

359,461,407

360,987,233

359,284,213

Weighted average common shares (diluted)

362,057,614

359,828,690

361,829,283

359,928,003

Table 3: Other Financial Information

Three Months Ended

 June 30,

Six Months Ended

 June 30,

2018

2017

2018

2017

Ratios

(Unaudited, Dollars in thousands)

Yield on individually acquired retail installment contracts

15.5

%

16.1

%

15.4

%

15.8

%

Yield on purchased receivables portfolios

24.1

%

20.4

%

25.9

%

20.3

%

Yield on receivables from dealers

3.4

%

5.6

%

3.2

%

5.4

%

Yield on personal loans (1)

24.6

%

25.3

%

24.5

%

25.0

%

Yield on earning assets (2)

13.0

%

13.7

%

12.9

%

13.5

%

Cost of debt (3)

3.4

%

3.0

%

3.3

%

2.9

%

Net interest margin (4)

10.4

%

11.3

%

10.3

%

11.2

%

Expense ratio (5)

2.2

%

2.2

%

2.3

%

2.3

%

Return on average assets (6)

3.3

%

2.7

%

2.9

%

2.1

%

Return on average equity (7)

19.4

%

19.1

%

17.1

%

15.0

%

Net charge-off ratio on individually acquired retail installment contracts (8)

6.0

%

7.5

%

7.1

%

8.2

%

Net charge-off ratio on purchased receivables portfolios (8)

(6.1)

%

0.8

%

(5.1)

%

0.7

%

Net charge-off ratio on personal loans (8)

45.2

%

39.0

%

47.7

%

61.3

%

Net charge-off ratio (8)

6.0

%

7.5

%

7.1

%

8.2

%

Delinquency ratio on individually acquired retail installment contracts held for investment, end of period (9)

4.2

%

5.2

%

4.2

%

5.2

%

Delinquency ratio on personal loans, end of period (9)

12.0

%

12.7

%

12.0

%

12.7

%

Delinquency ratio on loans held for investment, end of period (9)

4.2

%

5.2

%

4.2

%

5.2

%

Allowance ratio (10)

11.5

%

12.6

%

11.5

%

12.6

%

Common stock dividend payout ratio (11)

5.4

%

6.3

%

Common Equity Tier 1 capital ratio (12)

16.7

%

14.3

%

16.7

%

14.3

%

Other Financial Information

Charge-offs, net of recoveries, on individually acquired retail installment contracts

$

398,658

$

512,621

$

936,450

$

1,111,554

Charge-offs, net of recoveries, on purchased receivables portfolios

(565)

419

(993)

772

Charge-offs, net of recoveries, on personal loans

515

1,321

1,264

4,779

Charge-offs, net of recoveries, on capital leases

406

1,278

712

2,592

Total charge-offs, net of recoveries

$

399,014

$

515,639

$

937,433

$

1,119,697

End of period delinquent principal over 59 days, individually acquired retail installment contracts held for investment

1,149,429

1,412,377

1,149,429

1,412,377

End of period delinquent principal over 59 days, personal loans

164,458

177,615

164,458

177,615

End of period delinquent principal over 59 days, loans held for investment

1,151,410

1,417,461

1,151,410

1,417,461

End of period assets covered by allowance for credit losses

27,412,597

27,342,511

27,412,597

27,342,511

End of period gross individually acquired retail installment contracts held for investment

27,373,181

27,240,542

27,373,181

27,240,542

End of period gross personal loans

1,370,888

1,400,369

1,370,888

1,400,369

End of period gross finance receivables and loans held for investment

27,427,980

27,512,362

27,427,980

27,512,362

End of period gross finance receivables, loans, and leases held for investment

40,283,898

37,916,523

40,283,898

37,916,523

Average gross individually acquired retail installment contracts held for investment

26,633,832

27,168,965

26,280,006

27,136,965

Average gross personal loans held for investment

4,562

13,566

5,304

15,587

Average gross individually acquired retail installment contracts held for investment and held for sale

$

27,534,479

$

28,202,716

$

27,221,983

$

28,235,651

Average gross purchased receivables portfolios

37,284

202,097

39,257

211,494

Average gross receivables from dealers

15,361

68,810

15,507

69,361

Average gross personal loans

1,375,877

1,402,416

1,421,861

1,450,002

Average gross capital leases

20,937

25,752

21,699

28,235

Average gross finance receivables and loans

$

28,983,938

$

29,901,791

$

28,720,307

$

29,994,743

Average gross operating leases

12,219,612

10,191,380

11,856,109

10,016,322

Average gross finance receivables, loans, and leases

41,203,550

40,093,171

40,576,416

40,011,065

Average managed assets

50,306,666

50,435,958

49,494,154

50,844,426

Average total assets

40,901,810

39,216,971

40,334,031

39,063,816

Average debt

31,898,900

31,519,486

31,589,063

31,545,144

Average total equity

6,891,934

5,540,371

6,737,055

5,434,973

(1)

Includes Finance and other interest income; excludes fees

(2)

“Yield on earning assets” is defined as the ratio of annualized Total finance and other interest income, net of Leased vehicle expense, to Average gross finance receivables, loans and leases

(3)

“Cost of debt” is defined as the ratio of annualized Interest expense to Average debt

(4)

“Net interest margin” is defined as the ratio of annualized Net finance and other interest income to Average gross finance receivables, loans and leases

(5)

“Expense ratio” is defined as the ratio of annualized Operating expenses to Average managed assets

(6)

“Return on average assets” is defined as the ratio of annualized Net income to Average total assets

(7)

“Return on average equity” is defined as the ratio of annualized Net income to Average total equity

(8)

“Net charge-off ratio” is defined as the ratio of annualized Charge-offs, on a recorded investment basis, net of recoveries, to average unpaid principal balance of the respective held-for-investment portfolio. Effective as of September 30, 2016, the Company records the charge-off activity for certain personal loans within the provision for credit losses due to the reclassification of these loans from held for sale to held for investment.

(9)

“Delinquency ratio” is defined as the ratio of End of period Delinquent principal over 59 days to End of period gross balance of the respective portfolio, excludes capital leases

(10)

“Allowance ratio” is defined as the ratio of Allowance for credit losses, which excludes impairment on purchased receivables portfolios, to End of period assets covered by allowance for credit losses

(11)

“Common stock dividend payout ratio” is defined as the ratio of Dividends declared per share of common stock to Earnings per share attributable to the Company’s shareholders.

(12)

“Common Equity Tier 1 Capital ratio” is a non-GAAP ratio defined as the ratio of Total common equity tier 1 capital to Total risk-weighted assets (for a reconciliation from GAAP to this non-GAAP measure, see “Reconciliation of Non-GAAP Measures” in Table 8 of this release)

 

Table 4: Credit Quality

The activity in the credit loss allowance for individually acquired retail installment contracts for the three and six months ended June 30, 2018 and 2017 was as follows (Unaudited, Dollar amounts in thousands):

Three Months Ended June 30, 2018

Three Months Ended June 30, 2017

Retail Installment Contracts Acquired Individually

Retail Installment Contracts Acquired Individually

Allowance for Credit Loss

Non-TDR

TDR

Non-TDR

TDR

Balance —  beginning of period

$

1,586,557

$

1,595,465

$

1,836,730

$

1,604,489

Provision for credit losses

242,286

112,144

172,990

345,380

Charge-offs

(584,296)

(427,079)

(654,613)

(457,102)

Recoveries

396,667

216,050

405,702

193,392

Balance — end of period

$

1,641,214

$

1,496,580

$

1,760,809

$

1,686,159

Six Months Ended June 30, 2018

Six Months Ended June 30, 2017

Retail Installment Contracts Acquired Individually

Retail Installment Contracts Acquired Individually

Allowance for Credit Loss

Non-TDR

TDR

Non-TDR

TDR

Balance — beginning of period

$

1,529,815

$

1,731,320

$

1,799,760

$

1,611,295

Provision for credit losses

553,007

260,102

515,082

632,385

Charge-offs

(1,263,735)

(946,661)

(1,388,767)

(947,645)

Recoveries

822,127

451,819

834,734

390,124

Balance — end of period

$

1,641,214

$

1,496,580

$

1,760,809

$

1,686,159

 

A summary of delinquencies of our individually acquired retail installment contracts as of June 30, 2018 and December 31, 2017 is as follows (Unaudited, Dollar amounts in thousands):

Delinquent Principal

June 30, 20181

December 31, 20171

Principal 30-59 days past due

$

2,532,058

9.3

%

$

2,822,686

10.9

%

Delinquent principal over 59 days2

1,149,429

4.2

%

1,541,728

5.9

%

Total delinquent contracts

$

3,681,487

13.5

%

$

4,364,414

16.9

%

Within the total delinquent principal above, retail installment contracts acquired individually held for investment that were placed on nonaccrual status, as of June 30, 2018 and December 31, 2017 (Unaudited, Dollar amounts in thousands):

Nonaccrual Principal

June 30, 20181

December 31, 20172

Non-TDR

$

505,399

1.8

%

$

666,926

2.6

%

TDR

1,554,860

5.7

%

1,390,373

5.4

%

Total nonaccrual principal

$

2,060,259

7.5

%

$

2,057,299

7.9

%

 

The table below presents the Company’s allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of June 30, 2018 and December 31, 2017 (Unaudited, Dollar amounts in thousands):

Allowance Ratios

June 30,

 2018

December 31,

 2017

TDR – Unpaid principal balance

$

5,958,564

$

6,261,894

TDR – Impairment

1,496,580

1,731,320

TDR – Allowance ratio

25.1

%

27.6

%

Non-TDR – Unpaid principal balance

$

21,414,617

$

19,681,394

Non-TDR – Allowance

1,641,214

1,529,815

Non-TDR Allowance ratio

7.7

%

7.8

%

Total – Unpaid principal balance

$

27,373,181

$

25,943,288

Total – Allowance

3,137,794

3,261,135

Total – Allowance ratio

11.5

%

12.6

%

Percent of unpaid principal balance.

Interest is accrued until 60 days past due in accordance with the Company’s account policy for retail installment contracts.

 

Table 5: Originations

The Company’s originations of individually acquired loans and leases, including revolving loans, average APR, and discount were as follows:

Three Months Ended

Six Months Ended

Three Months Ended

June 30, 2018

June 30, 2017

June 30, 2018

June 30, 2017

March 31, 2018

Retained Originations

(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

4,630,704

$

3,750,752

$

8,014,110

$

6,669,307

$

3,866,494

Average APR

16.8

%

15.6

%

17.0

%

16.7

%

16.1

%

Average FICO® (a)

602

612

599

598

611

Discount

0.004

%

0.3

%

0.2

%

0.4

%

0.3

%

Personal loans (b)

340,088

351,068

613,416

638,764

273,328

Average APR

27.1

%

25.7

%

28.3

%

25.7

%

26.0

%

Leased vehicles

2,632,052

1,426,957

4,725,657

3,027,616

2,093,604

Capital lease

2,058

1,001

4,456

$

2,178

$

2,398

Total originations retained

$

7,604,902

$

5,529,778

$

13,357,639

$

10,337,865

$

6,235,824

Sold Originations (c)

Retail installment contracts

$

683,935

$

304,748

$

1,553,979

$

1,172,771

$

386,956

Average APR

7.6

%

6.6

%

7.3

%

6.2

%

6.8

%

Average FICO® (d)

726

725

726

727

732

Total originations sold

$

683,935

$

304,748

$

1,553,979

$

1,172,771

$

386,956

Total originations

$

8,288,837

$

5,834,526

$

14,911,618

$

11,510,636

$

6,622,780

(a)

Unpaid principal balance excluded from the weighted average FICO score is $594 million, $503 million, $1 billion, $1.0 billion, and $461 million for the three months ended June 30, 2018 and 2017, the six months ended June 30, 2018 and 2017, and the three months ended March 31, 2018, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $44 million, $49 million, $77 million, $77 million, and $54 million, respectively, were commercial loans.

(b)

Effective as of three months ended December 31, 2017, the Company revised its approach to define origination volumes for Personal Loans to include new originations, gross of paydowns and charge-offs, related to customers who took additional advances on existing accounts (including capitalized late fees, interest and other charges), and newly opened accounts. In the prior periods, the Company reported net balance increases on personal loans as origination volume. Included in the total origination volume is $58 million , $48 million, $84 million, $71 million, and $17 million for the three months ended June 30, 2018 and 2017, the six months ended June 30, 2018 and 2017, and the three months ended March 31, 2018, respectively, related to newly opened accounts.

(c)

Only includes assets both originated and sold in the period. Total asset sales for the period are shown in Table 6.

(d)

Unpaid principal balance excluded from the weighted average FICO score is $54 million, $39 million, $121 million, $156 million, and $32 million for the three months ended June 30, 2018 and 2017, the six months ended June 30, 2018 and 2017, and the three months ended March 31, 2018, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $26 million, $14 million, $67 million, $58 million, and $20 million, respectively, were commercial loans.

SBNA Originations Program
Beginning in 2018, the Company agreed to provide SBNA with origination support services in connection with the processing, underwriting and purchase of retail loans, primarily from Chrysler dealers. In addition, the Company agreed to perform the servicing for any loans originated on SBNA’s behalf. During the three and six months ended June 30, 2018, the Company facilitated the purchase of $29 million and $53 million of retail installment contacts, respectively.

Table 6: Asset Sales

Asset sales may include assets originated in prior periods.

Three Months Ended

Six Months Ended

June 30, 2018

June 30, 2017

June 30, 2018

June 30, 2017

(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

1,156,060

$

566,309

$

2,631,313

$

1,496,899

Average APR

7.5

%

6.6

%

7.0

%

6.2

%

Average FICO®

724

725

726

726

Total asset sales

$

1,156,060

$

566,309

$

2,631,313

$

1,496,899

 

Table 7: Ending Portfolio

Ending outstanding balance, average APR and remaining unaccreted dealer discount of our held for investment portfolio as of June 30, 2018, and December 31, 2017, are as follows:

June 30, 2018

December 31, 2017

(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

27,408,764

$

25,986,532

Average APR

16.6

%

16.5

%

Discount

1.0

%

1.5

%

Personal loans

$

4,016

$

6,887

Average APR

31.8

%

31.8

%

Receivables from dealers

$

15,200

$

15,787

Average APR

4.2

%

4.2

%

Leased vehicles

$

12,835,718

$

11,175,602

Capital leases

$

20,200

$

22,857

 

Table 8: Reconciliation of Non-GAAP Measures

June 30, 2018

June 30, 2017

(Unaudited, Dollar amounts in thousands)

Total equity

$

7,045,734

$

5,678,733

  Deduct: Goodwill, intangibles, and other assets, net of deferred tax liabilities

166,241

177,619

  Deduct: Accumulated other comprehensive income (loss), net

62,449

27,860

Tier 1 common capital

$

6,817,044

$

5,473,254

Risk weighted assets (a)

$

40,744,526

$

38,368,928

Common Equity Tier 1 capital ratio (b)

16.7

%

14.3

%

(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.

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