USA News

Santander Consumer USA Holdings Inc. Reports First Quarter 2021 Results

DALLAS, April 28, 2021 /PRNewswire/ — Santander Consumer USA Holdings Inc. (NYSE: SC) (“SC” or the “Company”) today announced net income for the first quarter ended March 31, 2021 (“Q1 2021”) of $742 million, or $2.42 per diluted common share.

On April 27, 2021, Santander Holdings USA, Inc. received an exception to the extended interim policy (the “Interim Policy”) from the Federal Reserve. As a result, the SC Board of Directors will consider declaring a dividend during the second quarter 2021.

Management Quotes

“Our first quarter results demonstrate the strength of our business model and our people, supported by unprecedented government assistance, resilient consumers and the continued outperformance of the auto industry. All these factors led to record first quarter results, including $742 million in net income, $8.6 billion in loan and lease originations and continued improvement in key credit indicators. We remain dedicated to supporting all of our dealers, our OEM partner, Stellantis, and our customers and employees as we manage through the economic recovery,” said Mahesh Aditya, SC President and CEO.

Fahmi Karam, SC Chief Financial Officer, added, “Our first quarter earnings are a result of disciplined underwriting and risk management before and during the pandemic, strong market share across our dealers, low losses and record used car prices. The quarter was also highlighted by more than $7.0 billion of funding through a series of on and off-balance sheet transactions which will lead to a more efficient balance sheet. We sold our held for sale, unsecured personal loan portfolio, and entered into a forward flow agreement to fund future receivables. We also added approximately $2.5 billion to our serviced for others portfolio, driven by prime loan sales to third parties. Our liquidity and capital levels remain robust, and position the company to continue to manage the remaining uncertainty in the economy, while also driving shareholder value.”

Strategic Highlights & Balance Sheet Optimization

  • Termination of the Federal Reserve Written Agreement dated March 21, 2017
  • Declared and paid a $0.22 ordinary dividend and a $0.22 special dividend in March 2021
  • Sold ~$1.3 billion held for sale, personal loan portfolio as well as entered into a forward flow agreement to fund 00future obligations
  • Executed ~$2.4 billion in off-balance sheet prime loan sales, adding to the serviced for others platform
  • Issued ~$3.5 billion of asset-backed securities
  • Named Bruce Jackson as Head of Chrysler Capital & Auto Relationships

First Quarter of 2021 Highlights (variances compared to first quarter of 2020 (“Q1 2020”), unless otherwise noted)

  • Net Income of $742 million
  • Total auto originations of $8.6 billion, up 24%
    • Core retail auto loan originations of $2.8 billion, up 21%
    • Chrysler Capital loan originations of $3.7 billion, up 40%
    • Chrysler Capital lease originations of $2.2 billion, up 7%
    • Chrysler average quarterly penetration rate of 36%, down from 39%
    • Santander Bank, N.A. program originations of $2.0 billion
  • Net finance and other interest income2 of $1.4 billion, up 19%
  • 30-59 delinquency ratio of 4.4%, down 390 basis points
  • 59-plus delinquency ratio1 of 2.2%, down 240 basis points
  • Retail Installment Contract (“RIC”) gross charge-off ratio of 9.7%, down 580 basis points
  • Recovery rate of 69.1%, up from 50.1%
  • RIC net charge-off ratio3 of 3.0%, down 470 basis points
  • Allowance ratio of 18.9%, up from 18.5% as of December 31, 2020
  • Troubled Debt Restructuring (“TDR”) balance of $4.4 billion, up from $3.9 billion as of December 31, 2020
  • Return on average assets (“ROA”) of 6.1%
  • Expense ratio of 1.8%, down 10 basis points
  • Common equity tier 1 (“CET1”) ratio of 16.5%

1

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.

2

Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.

3

Net 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 Q1 2021 results and other general matters at 9:00 a.m. Eastern Time on Wednesday, April 28, 2021. The conference call will be accessible by dialing 1-866-548-4713 (U.S. domestic), or 1-323-794-2093 (international), conference ID 1344654. 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 Q1 2021 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 1-844-512-2921 (U.S. domestic), or 1-412-317-6671 (international), conference ID 1344654, 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 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) 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; (g) our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (h) our financial condition, liquidity, and results of operations depend on the credit performance of our loans; (i) loss of our key management or other personnel, or an inability to attract such management and personnel; (j) 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 (k) 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 $64 billion (for the first quarter ended March 31, 2021), and is headquartered in Dallas, Texas. (www.santanderconsumerusa.com)

Santander Consumer USA Holdings Inc.
Financial Supplement
First Quarter 2021


Table of Contents


Table 1: Condensed Consolidated Balance Sheets

Table 2: Condensed Consolidated Statements of Income

Table 3: Other Financial Information

Table 4: Credit Quality

Table 5: Originations

Table 6: Asset sales

Table 7: Ending Portfolio

Table 8: Reconciliation of Non-GAAP Measures

Table 1: Condensed Consolidated Balance Sheets



March 31, 2021


December 31, 2020

Assets

(Unaudited, Dollars in thousands)

Cash and cash equivalents

$

415,969



$

109,053


Finance receivables held for sale, net



1,567,527


       Finance receivables held for investment, at amortized cost

32,090,201



33,114,638


       Allowance for credit loss

(6,005,115)



(6,110,633)


Finance receivables held for investment, at amortized cost, net

26,085,086



27,004,005


Restricted cash

2,623,565



2,221,094


Accrued interest receivable

345,769



415,765


Leased vehicles, net

16,478,224



16,391,107


Furniture and equipment, net

58,081



62,032


Goodwill

74,056



74,056


Intangible assets

73,833



70,128


Other assets

1,079,419



972,726


Total assets

$

47,234,002



$

48,887,493


Liabilities and Equity




Liabilities:




Borrowings and other debt obligations

$

38,541,624



$

41,138,674


Deferred tax liabilities, net

1,497,829



1,263,796


Accounts payable and accrued expenses

567,474



531,369


Other liabilities

395,222



331,693


Total liabilities

$

41,002,149



$

43,265,532






Equity:




Common stock, $0.01 par value

3,060



3,061


Additional paid-in capital

387,946



393,800


Accumulated other comprehensive income, net

(41,818)



(50,566)


Retained earnings

5,882,665



5,275,666


Total stockholders’ equity

$

6,231,853



$

5,621,961


Total liabilities and equity

$

47,234,002



$

48,887,493


Table 2: Condensed Consolidated Statements of Income



Three Months Ended March 31,


2021


2020


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

Interest on finance receivables and loans

$

1,304,651



$

1,273,819


Leased vehicle income

740,884



747,979


Other finance and interest income

1,426



7,551


Total finance and other interest income

2,046,961



2,029,349


Interest expense

253,537



328,834


Leased vehicle expense

423,795



552,912


Net finance and other interest income

1,369,629



1,147,603


Credit loss expense

136,209



907,887


Net finance and other interest income after credit loss expense

1,233,420



239,716


Profit sharing

67,326



14,295


Net finance and other interest income after credit loss expense and profit sharing

1,166,094



225,421


Investment losses, net

(14,712)



(63,426)


Servicing fee income

18,694



19,103


Fees, commissions, and other

100,528



95,130


Total other income

104,510



50,807


Compensation and benefits

153,895



133,326


Repossession expense

45,346



57,662


Other expenses

95,251



91,685


Total operating expenses

294,492



282,673


Income (loss) before income taxes

976,112



(6,445)


Income tax expense

234,457



(2,458)


Net income (loss)

$

741,655



$

(3,987)






Net income per common share (basic)

$

2.42



$

(0.01)


Net income per common share (diluted)

$

2.42



$

(0.01)


Weighted average common shares (basic)

306,108,987



334,026,052


Weighted average common shares (diluted)

306,325,155



334,346,122


Number of shares outstanding

306,033,735



321,117,187


Table 3: Other Financial Information



Three Months Ended March 31,

Ratios (Unaudited, Dollars in thousands)

2021


2020

Yield on retail installment contracts

14.8

%


15.3

%

Yield on leased vehicles

7.3

%


4.4

%

Yield on personal loans, held for sale (1)

34.7

%


26.5

%

Yield on earning assets (2)

12.7

%


11.8

%

Cost of debt (3)

2.5

%


3.3

%

Net interest margin (4)

10.7

%


9.2

%

Expense ratio (5)

1.8

%


1.9

%

Return on average assets (6)

6.1

%


(0.03)

%

Return on average equity (7)

50.1

%


(0.3)

%

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

3.0

%


7.7

%

Net charge-off ratio (8)

3.0

%


7.7

%

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

2.2

%


4.6

%

Allowance ratio (10)

18.9

%


17.7

%

Common stock dividend payout ratio (11)

18.2

%


*

Common Equity Tier 1 capital ratio (12)

16.5

%


13.8

%

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

$

244,075



$

593,046


End of period delinquent amortized cost over 59 days, retail installment contracts held for investment

698,620



1,418,857


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



161,639


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

699,005



1,419,865


End of period assets covered by allowance for credit losses

31,840,959



30,781,350


End of period gross retail installment contracts held for investment

31,813,760



30,741,144


End of period gross personal loans held for sale



1,341,361


End of period gross finance receivables and loans held for investment

31,813,760



30,753,640


End of period gross finance receivables, loans, and leases

49,114,776



48,598,983


Average gross retail installment contracts held for investment

32,569,618



30,718,119


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

32,853,151



30,768,423


Average gross finance receivables, loans and finance leases

33,909,419



32,242,390


Average gross operating leases

17,281,874



17,735,640


Average gross finance receivables, loans, and leases

51,191,293



49,978,030


Average managed assets

63,779,438



60,207,338


Average total assets

48,262,590



47,690,751


Average debt

40,070,243



39,692,456


Average total equity

5,922,904



6,006,455












(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 months ended March 31, 2020 has not been disclosed since the earnings per share for the three months ended March 31, 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 month ended March 31, 2021 and 2020 was as follows
(Unaudited, Dollar amounts in thousands):



Three Months Ended March 31, 2021


Three Months Ended March 31, 2020


Retail Installment Contracts


Retail Installment Contracts

Allowance for Credit Loss

Non-TDR


TDR


Non-TDR


TDR

Balance — beginning of period

$

4,792,464



$

1,314,170



$

2,123,878



$

914,718


Day 1 – Adjustment to allowance for adoption of CECL standard





2,030,473



71,833


Credit loss expense

40,059



98,722



757,193



150,850


Charge-offs (a)

(586,793)



(202,461)



(899,550)



(289,567)


Recoveries

416,903



128,277



470,669



125,402


Balance — end of period

$

4,662,633



$

1,338,708



$

4,482,663



$

973,236




(a)

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 March 31, 2021 and December 31, 2020 is as follows (Unaudited, Dollar amounts in thousands):


Delinquent Balance


March 31, 2021



Amount


Percent

Amortized cost, 30-59 days past due


$

1,409,974



4.4

%

Delinquent amortized cost over 59 days


698,620



2.2

%

Total delinquent balance at amortized cost


$

2,108,594



6.6

%






Delinquent Balance


December 31, 2020



Amount


Percent

Principal 30-59 days past due


$

1,971,766



6.0

%

Delinquent principal over 59 days


1,038,869



3.1

%

Total delinquent principal (a)


$

3,010,635



9.1

%

The retail installment contracts held for investment that were placed on nonaccrual status, as of March 31, 2021 and December 31, 2020 (Unaudited, Dollar amounts in thousands):


Nonaccrual Balance

March 31, 2021


Amount


Percent

Non-TDR

$

544,228



1.7

%

TDR

260,408



0.8

%

Total non-accrual loans (a)

$

804,636



2.5

%


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


Nonaccrual Balance

December 31, 2020


Amount


Percent

Non-TDR

$

748,026



2.3

%

TDR

385,021



1.2

%

Total nonaccrual principal (a)

$

1,133,047



3.5

%

The table below presents the Company’s allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of March 31, 2021 and December 31, 2020 (Unaudited, Dollar amounts in thousands):


Allowance Ratios

March 31, 2021


December 31, 2020

TDR – Unpaid principal balance

$

4,357,438


$

3,945,040

TDR – Impairment

1,338,708


1,314,170

TDR – Allowance ratio

30.7%


33.3%





Non-TDR – Unpaid principal balance

$

27,442,853


$

28,977,299

Non-TDR – Allowance

4,662,633


4,792,464

Non-TDR Allowance ratio

17.0%


16.5%





Total – Unpaid principal balance

$

31,800,291


$

32,922,339

Total – Allowance

6,001,341


6,106,634

Total – Allowance ratio

18.9%


18.5%

The Company’s ACL decreased $0.1 billion for the three months ended March 31, 2021. For the three months ended March 31, 2021, the decrease was primarily due to balance and improved macroeconomic outlook.

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


Three Months Ended


March 31, 2021


March 31, 2020


December 31, 2020

Retained Originations

(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

4,383,146


$

3,846,226


$

3,954,958

Average APR

15.0 %


15.3 %


15.1 %

Average FICO® (a)

606


607


609

Discount/(premium)

(1.6) %


(0.8) %


(1.4) %







Personal loans (b)


270,835


$

526,541

Average APR

— %


29.8 %


29.5 %







Leased vehicles

2,154,506


2,020,721


$

1,956,559







Finance lease

2,796


3,002


$

3,026

Total originations retained

$

6,540,448


$

6,140,784


$

6,441,084







Sold Originations






Retail installment contracts

$

95,738


$


$

Average APR

9.5 %


— %


— %

Average FICO® (c)

688









Personal Loans (d)

$

292,709


$


$

Average APR

29.7 %


— %


— %







Total originations sold

$

388,447


$


$







Total originations (excluding SBNA Originations Program)

$

6,928,895


$

6,140,784


$

6,441,084















(a)   

Unpaid principal balance excluded from the weighted average FICO score is $450 million, $432 million, and $392 million for the three months ended March 31, 2021 and 2020, and for the three months ended December 31, 2020, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $154 million, $139 million, and $153 million, respectively, were commercial loans.



(b)   

Included in the total origination volume is $21 million, and $143 million for the three months ended March 31, 2020 and December 31, 2020, 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. Unpaid principal balance excluded from the weighted average FICO score is $2 million, zero, and zero for the three months ended March 31, 2021 and 2020, and for the three months ended December 31, 2020, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, the commercial loans were zero.



(d)  

Included in the total origination volume is $25 million for the three months ended March 31, 2021 related to newly opened accounts.

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 $2.0 billion of retail installment contacts during the three months ended March 31, 2021.

Table 6: Asset Sales



Three Months Ended


Three Months Ended


March 31, 2021


March 31, 2020


December 31, 2020

Assets Sold

(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

2,380,785


$


$

Average APR

4.0%


— %


— %

Average FICO®

$

740









Personal loans

$

1,253,476



$

Average APR

29.7%


— %


— %







Total asset sales

$

3,634,261


$


$













Table 7: Ending Portfolio
Ending outstanding balance, average APR and remaining unaccreted net discount of our held for investment portfolio as of March 31, 2021 and December 31, 2020, are as follows:



March 31, 2021


December 31, 2020


(Unaudited, Dollar amounts in thousands)

Retail installment contracts

$

31,813,760


$

32,937,036

Average APR

15.9%


15.2%

Discount/(premium)

(0.48)%


(0.15)%





Leased vehicles

$

17,273,817


$

17,259,468





Finance leases

$

27,199


$

26,150


Table 8: Reconciliation of Non-GAAP Measures



March 31, 2021


March 31, 2020


(Unaudited, Dollar amounts in thousands)

Total equity

$

6,231,853


$

5,146,103

Add: Adjustment due to CECL capital relief (c)

1,805,720


1,669,466

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

163,359


153,712

Deduct: Accumulated other comprehensive income (loss), net

(41,818)


(63,655)

Tier 1 common capital

$

7,916,032


$

6,725,512

Risk weighted assets (a)(c)

47,995,845


48,829,941

Common Equity Tier 1 capital ratio (b)(c)

16.5%


13.8%











(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 2020 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 elected 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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