Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Santander Consumer USA Holdings Inc. | exhibit991q32017.htm |
| 8-K - 8-K - Santander Consumer USA Holdings Inc. | scusa8-kq32017earningsfinal.htm |
10.27.2017
SANTANDER CONSUMER USA HOLDINGS INC.
Third Quarter 2017
2IMPORTANT INFORMATION
Forward-Looking Statements
This presentation 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 presentation and/or our financial performance to differ materially from that suggested
by the forward-looking statements are (a) the inherent limitations in internal controls over financial reporting; (b) our ability to remediate any material weaknesses
in internal controls over financial reporting completely and in a timely manner; (c) continually changing federal, state, and local laws and regulations could
materially adversely affect our business; (d) adverse economic conditions in the United States and worldwide may negatively impact our results; (e) our business
could suffer if our access to funding is reduced; (f) significant risks we face implementing our growth strategy, some of which are outside our control; (g)
unexpected costs and delays in connection with exiting our personal lending business; (h) our agreement with Fiat Chrysler Automobiles US LLC may not result in
currently anticipated levels of growth and is subject to certain performance conditions that could result in termination of the agreement; (i) our business could
suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (j) our financial condition, liquidity, and results of operations
depend on the credit performance of our loans; (k) loss of our key management or other personnel, or an inability to attract such management and personnel; (l)
certain regulations, including but not limited to oversight by the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the
European Central Bank, and the Federal Reserve, whose oversight and regulation may limit certain of our activities, including the timing and amount of dividends
and other limitations on our business; and (m) future changes in our relationship with 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. 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.
3
» Net income of $199 million, or $0.55 per diluted common share
» Includes sale of legacy RV/Marine portfolio resulting in a pre-tax gain on sale of $36 million, or $0.07 per
diluted common share
» Scott Powell appointed President & CEO; Juan Carlos Alvarez appointed CFO; Rich Morrin appointed to
President of Chrysler Capital & Auto Relationships and Sandra Broderick appointed EVP, Head of Operations
» Federal Reserve announced the termination of the 2014 Written Agreement with SHUSA
» Allows SHUSA and SC to operate within a normal capital cycle
» For the first time since 2014, SC has declared a cash dividend of $0.03 per share
» Gross and net loss ratios down 40 and 20 bps YoY, respectively; Auction-plus recovery rate of 49.3%, flat YoY
» Asset sales of $1.3 billion executed through the Banco Santander flow agreement
» $1.8 billion in asset-backed securities (ABS) offered and sold
» Total auto originations of $5.0 billion, down 3% YoY
» Net finance and other interest income of $1.1 billion, down 10% YoY
» Net leased vehicle income of $118 million, down 13% YoY
» Return on average assets of 2.0%, down from 2.2% in Q3 2016
» CET1 ratio of 15.0%, up 190 bps YoY
Q3 2017 HIGHLIGHTS
Driving towards long-term success by delivering value to shareholders while focusing on disciplined
underwriting, compliance and being Simple, Personal and Fair
1 Chrysler Capital is a dba of Santander Consumer USA
4ECONOMIC INDICATORS
U.S. Auto Sales1
Units in Millions
1 Bloomberg
2 University of Michigan
3 U.S. Bureau of Labor Statistics
Consumer Confidence2
Index Q1 1966=100
U.S. GDP1
%
U.S. Unemployment Rate3
%
O
R
IG
IN
AT
IO
N
S
CR
ED
IT
Max 18.5
18.5
Min 9.0
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
95.1
Max 99.1
Min 55.3
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
2.6%
Max 3.2%
Min -4.1%
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17
Max 10.0%
Min: 4.2%
4.2%
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
5
45.1% 45.3%
49.4% 49.3%
35%
40%
45%
50%
55%
60%
65%
70%
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
SC Auction Only Recovery Rate SC Auction Plus Recovery Rate (Quarterly)
100
105
110
115
120
125
130
135
110
115
120
125
130
135
140
Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
Manheim (Left Axis) JDP Used-Vehicle Price Index (Right Axis)
110
115
2
125
130
135
40
110
115
120
125
130
135
14
Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
Manheim JDP Used-Vehicle Price Index
AUTO INDUSTRY ANALYSIS
Used Vehicle Indices1
Manheim: Seasonally Adjusted JD Power: Not Seasonally Adjusted
SC Recovery Rates2
Industry Net Loss Rates3
SE
V
ER
IT
Y
CR
ED
IT
Industry 60+ Day Delinquency Rates3
1 Manheim, Inc.; Indexed to a basis of 100 at 1995 levels; JD Power Used-Vehicle Price Index (not seasonally adjusted)
2 Auction Only - includes all auto-related recoveries including inorganic/purchased receivables from auction lanes only
2 Auction Plus – Per the financial statements includes insurance proceeds, bankruptcy/deficiency sales, and timing impacts
3 Standard & Poor’s Rating Services (ABS Auto Trust Data – two-month lag on data, as of July 31, 2017)
4.5%
Max 5.4%
Min 1.6%
Jul-07 Jul-09 Jul-11 Jul-13 Jul-15 Jul-17
Subprime
7.4%
Max 13.3%
Min 2.8%
Jul-07 Jul-09 Jul-11 Jul-13 Jul-15 Jul-17
Subprime
6
VEHICLE FINANCE
LEVERAGING TECHNOLOGY IS INTEGRAL TO THE FOUR PILLARS OF OUR FOCUSED BUSINESS MODEL
FOCUSED BUSINESS MODEL
DISCIPLINED APPROACH TO MARKET
SIMPLE, PERSONAL, FAIR APPROACH WITH
CUSTOMERS, EMPLOYEES AND ALL CONSTITUENCIES
SERVICED FOR OTHERS
FUNDING AND LIQUIDITY CULTURE OF COMPLIANCE
7DIVERSIFIED UNDERWRITING ACROSS THE CREDIT SPECTRUM
YoY auto origination decreases driven by disciplined underwriting in a competitive market
($ in Millions) Q3 2017 Q2 2017 Q3 2016 QoQ YoY
Total Core Retail Auto 1,550$ 2,253$ 1,972$ (31%) (21%)
Chrysler Capital Loans (<640)1 850 948 855 (10%) (1%)
Chrysler Capital Loans (≥640)1 928 854 1,034 9% (10%)
Total Chrysler Capital Retail 1,778$ 1,802$ 1,889$ (1%) (6%)
Total Leases2 1,668 1,428 1,303 17% 28%
Total Auto Originations 4,996$ 5,483$ 5,164$ (9%) (3%)
Total Personal Lending - 6 - N/A N/A
Total Originations 4,996$ 5,489$ 5,164$ (9%) (3%)
Asset Sales 1,482$ 566$ 794$ 162% 87%
Average Managed Assets 49,998$ 50,436$ 52,675$ (1%) (5%)
Three Months Ended Originations % Variance
1 Approximate FICOs
2 Includes nominal capital lease originations
8
2% 2% 2% 2% 2%
12% 11% 12% 12% 10%
13% 15% 18% 17% 14%
23% 24%
25% 24%
23%
14% 15%
13% 13%
13%
35% 32% 30% 33% 38%
3Q16 4Q16 1Q17 2Q17 3Q17
Originations by Credit (RIC1 only)
($ in millions)
>640
600-640
540-599
<540
No FICO
Commercial
56% 53% 47% 48% 55%
44% 47% 53% 52% 45%
3Q16 4Q16 1Q17 2Q17 3Q17
New/Used Originations
($ in millions)
Used
New
DIVERSIFIED UNDERWRITING ACROSS FULL CREDIT SPECTRUM
Originations <640 decreased by approximately $436 million YoY
Mix relatively constant on a percentage basis
Higher proportion of new vehicles originated in Q3 2017
compared to Q2 2017, in-line with prime originations
Average loan balances on originations higher QoQ, reflecting
larger percentage of new vehicles
Average loan balance in dollars $21,482 $21,488 $20,193 $20,816 $21,825
$3,328$3,861 $3,553 $4,055$3,786
2
$2,065$2,501
$3,328$3,861 $3,553 $4,055$3,786
1 RIC; Retail Installment Contract
2 Loans to commercial borrowers; no FICO score obtained
9
Banco Santander flow agreement
Rich Morrin appointed President, Chrysler Capital and Auto
Relationships to focus on Fiat Chrysler relationship
FCA has sold more than 2 million units annually since 2014
September 2017 penetration rate of 19% vs. 20% as of June 2017
Q3 2017 quarterly penetration rate of 21% vs. 20% in Q2 2017
Accomplishments and Improvements
SC is the largest finance provider for FCA
Completed national roll out of dealer VIP program in Q2 2017 with more than 2,500 dealerships participating
CHRYSLER CAPITAL
1 FCA filings; sales as reported on 10/02/2017
SC continues to work strategically and collaboratively with FCA to further strengthen the relationship and create value within the
Chrysler Capital program
1.24 1.36
1.57 1.66 1.72 1.58
1.64
1.80
2.11
2.26 2.25
2012 2013 2014 2015 2016 2017 YTD
FCA Sales1
(units in millions)
YTD Full Year
10
Flow Programs 794 477 931 566 1,347
CCART 904
Other sales 135
Recent trend in total balance related to
lower prime originations
Growth in SFO remains dependent
upon Chrysler Capital penetration and
FCA prime originations
SERVICED FOR OTHERS (SFO) PLATFORM
Composition at
9/30/2017
RIC 88%
Leases 6%
RV/Marine 6%
Total 100%
Serviced for Others Balances (End of Period)
Third Banco Santander flow transaction of
$1.3 billion
RV/Marine portfolio sale of $135 million
*Sales with retained servicing during period, also include non-Banco Santander sales.
$12,157 $11,945
$11,015
$9,881 $ 9,957
3Q16 4Q16 1Q17 2Q17 3Q17
$ in Millions
11
September 30, 2017 June 30, 2017 September 30, 2016 QoQ YoY
Interest on finance receivables and loans 1,185,059$ 1,232,252$ 1,246,386$ (4%) (5%)
Net leased vehicle income 118,351 131,040 135,771 (10%) (13%)
Other finance and interest income 6,385 5,205 3,638 23% 76%
Interest expense 250,674 233,371 207,175 7% 21%
Net finance and other interest income 1,059,121$ 1,135,126$ 1,178,620$ (7%) (10%)
Provision for credit losses 536,447 520,555 610,398 3% (12%)
Profit sharing 5,945 8,443 6,400 (30%) (7%)
Total other income 58,947 24,395 26,682 142% 121%
Total operating expenses 297,903 282,415 284,484 5% 5%
Income before tax 277,773$ 348,108$ 304,020$ (20%) (9%)
Income tax expense 78,385 83,433 90,473 (6%) (13%)
Net income 199,388$ 264,675$ 213,547$ (25%) (7%)
Diluted EPS ($) 0.55$ 0.74$ 0.59$ (26%) (7%)
Average total assets 39,496,278$ 39,216,971$ 38,473,832$ 1% 3%
Average managed assets 49,998,111$ 50,435,958$ 52,675,379$ (1%) (5%)
Three Months Ended
(Unaudited, Dollars in Thousands, except per share) % Variance
Q3 2017 FINANCIAL RESULTS
12
September 30,
2017
June 30,
2017
September 30,
2016
QoQ YoY
Interest on finance receivables and loans 1,101,584$ 1,143,383$ 1,167,675$ (4%) (6%)
Net leased vehicle income 118,351 131,040 135,771 (10%) (13%)
Other finance and interest income 6,385 5,205 3,637 23% 76%
Interest expense 238,659 221,078 196,984 8% 21%
Net finance and other interest income 987,661$ 1,058,550$ 1,110,099$ (7%) (11%)
Provision for credit losses 535,883 519,388 610,398 3% (12%)
Profit sharing 6,088 8,299 1,843 (27%) 230%
Investment Gains (losses), net 31,110 (9,880) (10,405) N/M N/M
Servicing fee income 28,673 31,953 36,446 (10%) (21%)
Fees, commissions and other 35,486 32,412 46,425 9% (24%)
Total other income 95,269$ 54,469$ 72,467$ 75% 31%
Average gross individually acquired RICs 28,144,133$ 28,202,716$ 28,970,039$ 0% (3%)
Average gross operating leases 10,710,941$ 10,380,491$ 9,347,620$ 3% 15%
Average Serviced for Others 9,579,089$ 10,342,125$ 12,622,328$ (7%) (24%)
Three Months Ended
(Unaudited, Dollars in Thousands) % Variance
Q3 2017 EXCLUDING PERSONAL LENDING
*Additional details can be found in Appendix
13TOTAL OTHER INCOME
SC’s strategy is to price loans sold under flow agreements close to par, with minimal investment gains (losses), to generate further growth
in the serviced for others platform and drive increased fee income
Beginning in Q4 2015, net investment gains (losses) include the impact of personal lending assets
Customer defaults, as part of LOCM adjustments on the personal lending portfolio designated as held for sale, are recognized through
net investment gains (losses)
Seasonal balances will impact magnitude of LOCM adjustments; this quarter included lower LOCM adjustments driven by seasonal
decreases in the personal lending portfolio
1 Other represents gains, losses and impairments
2 Normalized Investment Gains (Losses), Net and Normalized Total Other Income; Non-GAAP measures
3 Fees, commissions and Other includes fee income from the personal lending and auto portfolios
30-Sep-16 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17
Reported Total Other Income (Loss) 26,682$ (47,996)$ 55,480$ 24,395$ 58,947$
Reported Investment (Losses), Net (106,050)$ (168,344)$ (76,399)$ (99,522)$ (52,592)$
Add back:
Personal Lending LOCM Adjustments 95,646 150,083 64,639 89,642 83,699
Other1 6,639 8,130 878 7,701 (1,133)
Normalized Investment Gains (Losses), Net2 (3,765)$ (10,131)$ (10,882)$ (2,179)$ 29,974$
Servicing Fee Income 36,447 32,205 31,684 31,953 28,673
Fees, Commissions, and Other3 96,285 88,143 100,195 91,964 82,866
Normalized Total Other Income2 128,967$ 110,217$ 120,997$ 121,738$ 141,513$
Customer Default Activity 114,477 116,113 111,199 103,703 107,611
Fair Value Discount (18,831) 33,970 (46,560) (14,061) (23,912)
Denotes quarters with CCART sales
Three Months Ended
(Unaudited, Dollars in Thousands)
Includes RV/Marine pretax
gain on sale of $36 million
14CREDIT QUALITY: VINTAGE LOSS PERFORMANCE
2016 vintage continues to outperform the 2015 vintage on a gross and net loss basis
*Retained originations only
1 Vintage Performance describes January through December originations performance through the end of the following September (for each respective year), up to 21 months of performance to
illustrate similar aging points for each vintage
2 SC’s financial statements reflect auction fees in repossession expense, whereas these fees are included in the net loss figures as shown above; Non-GAAP measure
12.2%
13.8%
12.4%
9.5%
10.5%
11.5%
12.5%
13.5%
14.5%
2014 2015 2016
Vintage Performance1, Gross Losses
6.4%
7.5%
6.8%
4.0%
5.0%
6.0%
7.0%
8.0%
2014 2015 2016
Vintage Performance1, Net Losses2
15
18.4% 19.0% 18.1%
16.4%
18.0%
9.3% 9.9% 8.8%
7.5%
9.1%
49%
48%
51%
54%
49%
44%
45%
46%
47%
48%
49%
50%
51%
52%
53%
54%
55%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Credit: Individually Acquired Retail Installment Contracts,
Held for Investment
Gross Charge-
off Ratio
Net Charge-off
Ratio
Recovery Rate
(as % of
recorded
investment)
9.2%
10.0%
7.3%
9.3% 9.2%
4.6%
5.1%
3.8%
4.7% 5.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Delinquency: Individually Acquired Retail Installment Contracts,
Held for Investment
31-60
61+
DELINQUENCY AND LOSS
YoY delinquency increased for each delinquency bucket
primarily driven by a lower portfolio balance
YoY gross charge-off ratio decreased 40 basis points
YoY net charge-off ratio decreased 20 basis points
16
$631
$611
$18 ( $20 )
( $16 )
( $2 )
Q3 2016 Recoveries Portfolio Aging and
Mix Shift
Debt Sales Other Q3 2017
Q3 2016 to Q3 2017 Net Charge-Off Walk
($ in millions)
CREDIT QUALITY: LOSS DETAIL
17
$610
$686 $635
$521 $536
12.4%
12.6%
12.7%
12.6%
12.8%
12.2%
12.3%
12.4%
12.5%
12.6%
12.7%
12.8%
12.9%
$0
$100
$200
$300
$400
$500
$600
$700
$800
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Provision Expense and Allowance Ratio
($ in millions)
Provision for credit losses Allowance Ratio
PROVISION AND RESERVES
Allowance to loans ratio increased 20 bps to 12.8% QoQ
Provision for credit losses decreased $74 million YoY
1 TDR migration – the allowance for assets classified as TDRs or “troubled debt restructuring” takes into consideration expected lifetime losses, typically requiring additional coverage
2 Explanation of quarter over quarter variance are estimates
TBU – Grace M.
$3,458
$3,381
$138
$130
($41)
($304)
$3,200
$3,300
$3,400
$3,500
$3,600
$3,700
$3,800
Q2 2017 New
Volume
TDR
Migration
Performance
Adjustment
Liquidations
& Other
Q3 2017
Q2 2017 to Q3 2017 ALLL Reserve Walk2
($ in millions)
QoQ allowance decreased $77 million
New volume and TDR migration1 were offset by
liquidations and other
18
$52,675 $52,039 $51,230 $50,436 $49,998
$284 $296
$305
$282
$298
2.2% 2.3%
2.4%
2.2%
2.4%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
$2
$10,002
$20,002
$30,002
$40,002
$50,002
$60,002
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Average Managed Assets
($ millions)
Total Expenses
($ millions)
Expense Ratio
EXPENSE MANAGEMENT
Operating expenses totaled $298 million, an increase of 5% versus the same quarter last year, primarily driven by losses recorded for certain
contingencies and severance expenses related to management changes
19
4.9 4.3
5.0 5.3
Q2 2017 Q3 2017
Unused Used
2.3 2.4
5.4 5.5
Q2 2017 Q3 2017
Unused
Used
$17.9 billion in commitments from 14 lenders
55% unused capacity on revolving lines at Q3 2017
FUNDING AND LIQUIDITY
Total committed liquidity of $42.3 billion at the end Q3 2017, up 1% from $42.0 billion at the end of Q2 2017
Asset-Backed Securities
($ Billions)
Private Financings
($ Billions)
Banco Santander & Subsidiaries
($ Billions)
Asset Sales
($ Billions)
Offered and sold $1.8 billion in asset-backed securities (ABS)
$7.8 billion in total commitments
70% unused capacity at Q3 2017
Executed $1.3 billion Banco Santander flow transaction in Q3 2017
Executed $135 million RV/Marine sale
Amortizing Revolving
9.9 9.6
7.97.7
15.3 15.0
Q2 2017 Q3 2017
8.5 8.3
Q2 2017 Q3 2017
0.6
1.5
Q2 2017 Q3 2017
20
13.1% 13.4%
13.8%
14.3%
15.0%
13.0% 13.4%
13.6%
14.1%
14.9%
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
CET1 TCE/TA
CONSISTENT CAPITAL GENERATION
1 Common Equity Tier 1 (CET1) Capital Ratio begins with stockholders’ equity and then adjusts for AOCI, goodwill/intangibles, DTAs, cash flow hedges and other regulatory exclusions over risk-
weighted assets; Non-GAAP measure
2Tangible common equity to tangible assets is defined as the ratio of Total equity, excluding Goodwill and intangible assets, to Total assets, excluding Goodwill and intangible assets; Non-GAAP
measure, reconciliation in Appendix
1 2
SC has exhibited a strong ability to generate earnings and capital, while growing assets.
Tangible Assets $38,665 $38,432 $38,956 $39,401 $38,660
Tangible Common Equity $5,011 $5,132 $5,313 $5,572 $5,780
$ in millions
The Company has declared a cash dividend of $0.03 per share, to be paid November 17, 2017 to shareholders of record as of the close of
business on November 7, 2017
APPENDIX
22SANTANDER CONSUMER USA HOLDINGS INC.
• Santander Consumer USA Holdings Inc. (NYSE:SC) (“SC”) is approximately 58.7%1 owned by Santander Holdings USA, Inc.
(“SHUSA”), a wholly-owned subsidiary of Banco Santander, S.A. (NYSE:SAN)
• On July 3, 2015, SHUSA elected to exercise its right to purchase all of the shares of SC common stock owned by DDFS LLC2,
subject to regulatory approval and applicable law
▪ SC is a full-service consumer finance company focused on vehicle finance, third-party servicing and providing superior customer
service
• Historically focused on nonprime markets; established presence in prime and lease
▪ Approximately 5,000 full-time, 50 part-time and 1,600 vendor-based employees across multiple locations in the U.S. and the
Caribbean
▪ Our strategy is to leverage our efficient, scalable technology and risk infrastructure and data to underwrite, originate and service
profitable assets while treating employees, customers and all stakeholders in a simple, personal and fair manner
▪ Unparalleled compliance and responsible practices focus
▪ Continuously optimizing the mix of assets retained vs. assets sold and serviced for others
▪ Efficient funding through key third-party relationships, secondary markets and Santander
▪ Solid capital base
Overview
Strategy
1 As of September 30, 2017
2 DDFS LLC is an entity owned by SC’s former Chairman and Chief Executive Officer, Tom Dundon. This purchase would result in SHUSA owning approximately 68.4% of SC.
23
~31.6% Ownership
COMPANY ORGANIZATION
Other Subsidiaries
100% Ownership
Santander Holdings USA, Inc.
(“SHUSA’)
~58.7% Ownership
Santander Consumer USA Holdings Inc.
(“SC”)
Santander Bank, N.A.
Other Subsidiaries
~9.7% Ownership
DDFS LLC1
and Tom Dundon
Public
Shareholders
Banco Santander, S.A. Spain
*Ownership percentages are approximates as of September 30 2017
1 On July 3, 2015, SHUSA elected to exercise the right to purchase shares of SC common stock owned by DDFS LLC, an entity owned by former Chairman and Chief Executive
Officer, Thomas Dundon, subject to regulatory approval and applicable law. This purchase would result in SHUSA owning approximately 68.4% of SC.
24Q3 2017 EXCLUDING PERSONAL LENDING DETAIL
Total
Personal
Lending
Excluding
Personal
Lending
Total
Personal
Lending
Excluding
Personal
Lending
Total
Personal
Lending
Excluding
Personal Lending
Interest on finance receivables and loans $ 1,185,059 $ 83,475 $ 1,101,584 $ 1,232,252 $ 88,869 $ 1,143,383 $ 1,246,386 $ 78,711 $ 1,167,675
Net leased vehicle income 118,351 - 118,351 131,040 - 131,040 135,771 - 135,771
Other finance and interest income 6,385 - 6,385 5,205 - 5,205 3,637 - 3,637
Interest expense 250,674 12,015 238,659 233,372 12,293 221,078 207,175 10,191 196,984
Net finance and other interest income $ 1,059,121 $ 71,460 $ 987,661 $ 1,135,126 $ 76,576 $ 1,058,550 $ 1,178,619 $ 68,520 $ 1,110,099
Provision for credit losses 536,447 564 535,883 520,555 1,167 519,388 610,398 - 610,398
Profit sharing 5,945 (143) 6,088 8,443 143 8,299 6,400 4,557 1,843
Investment Gains (losses), net (52,590) (83,700) 31,110 (99,522) (89,642) (9,880) (106,051) (95,646) (10,405)
Servicing fee income 28,673 - 28,673 31,953 - 31,953 36,446 - 36,446
Fees, commissions and other 82,866 47,380 35,486 91,964 59,552 32,412 96,284 49,859 46,425
Total other income $ 58,949 $ (36,320) $ 95,269 $ 24,394 $ (30,075) $ 54,469 $ 26,680 $ (45,787) $ 72,467
Average gross individually acquired retail
installment contracts
$ 28,144,133 - $ 28,202,716 - $ 28,970,039 -
Average gross personal loans - $ 1,367,445 - $ 1,402,416 - $ 1,343,099
Average gross operating leases $ 10,710,941 - $ 10,380,491 - $ 9,347,620 -
Average Serviced for Others $ 9,579,089 - $ 10,342,125 - $ 12,622,328 -
As of and for the Three Months Ended
(Unaudited, Dollars in Thousands)
September 30, 2017 June 30, 2017 September 30, 2016
25HELD FOR INVESTMENT CREDIT TRENDS
Retail Installment Contracts1
1Held for investment at end of period; excludes assets held for sale
3.
3%
12
.4
%
22
.2
%
31
.1
%
17
.2
%
13
.8
%
3.
1%
12
.2
%
22
.1
%
31
.4
%
17
.4
%
13
.8
%
2.
8%
12
.0
%
22
.3
%
31
.7
%
17
.4
%
13
.8
%
2.
5%
11
.9
%
22
.4
%
31
.9
%
17
.3
%
14
.0
%
2.
4%
11
.6
%
22
.4
%
32
.4
%
17
.5
%
13
.7
%
Commercial Unknown <540 540-599 600-639 >=640
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
26CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands) September 30, 2017 December 31, 2016
Assets
Cash and cash equivalents $ 397,311 $ 160,180
Finance receivables held for sale, net 1,775,459 2,123,415
Finance receivables held for investment, net 22,667,203 23,481,001
Restricted cash 2,559,246 2,757,299
Accrued interest receivable 330,554 373,274
Leased vehicles, net 9,931,283 8,564,628
Furniture and equipment, net 72,519 67,509
Federal, state and other income taxes receivable 112,794 87,352
Related party taxes receivable 467 1,087
Goodwill 74,056 74,056
Intangible assets, net 31,534 32,623
Due from affiliates 26,871 31,270
Other assets 786,260 785,410
Total assets $ 38,765,557 $ 38,539,104
Liabilities and Equity
Liabilities:
Notes payable — credit facilities $ 4,965,888 $ 6,739,817
Notes payable — secured structured financings 23,258,363 21,608,889
Notes payable — related party 2,369,850 2,975,000
Accrued interest payable 38,012 33,346
Accounts payable and accrued expenses 336,390 379,021
Deferred tax liabilities, net 1,515,932 1,278,064
Due to affiliates 67,059 50,620
Other liabilities 328,829 235,728
Total liabilities $ 32,880,323 $ 33,300,485
Equity:
Common stock, $0.01 par value 3,598 3,589
Additional paid-in capital 1,672,392 1,657,611
Accumulated other comprehensive income (loss), net 27,481 28,259
Retained earnings 4,181,763 3,549,160
Total stockholders’ equity $ 5,885,234 $ 5,238,619
Total liabilities and equity $ 38,765,557 $ 38,539,104
For the Three Months Ended
27CONDENSED CONSOLIDATED INCOME STATEMENTS
September 30, September 30,
2017 2016
Interest on finance receivables and loans $ 1,185,059 $ 1,246,386
Leased vehicle income 457,932 388,501
Other finance and interest income 6,385 3,638
Total finance and other interest income $ 1,649,376 $ 1,638,525
Interest expense 250,674 207,175
Leased vehicle expense 339,581 252,730
Net finance and other interest income $ 1,059,121 $ 1,178,620
Provision for credit losses 536,447 610,398
Net finance and other interest income after provision for credit losses $ 522,674 $ 568,222
Profit sharing 5,945 6,400
Net finance and other interest income after provision for credit losses and profit sharing $ 516,729 $ 561,822
Investment (losses), net (52,592) (106,050)
Servicing fee income 28,673 36,447
Fees, commissions, and other 82,866 96,285
Total other income $ 58,947 $ 26,682
Compensation expense 134,169 128,056
Repossession expense 66,877 75,920
Other operating costs 96,857 80,508
Total operating expenses $ 297,903 $ 284,484
Income before income taxes 277,773 304,020
Income tax expense 78,385 90,473
Net income $ 199,388 $ 213,547
Net income per common share (basic) $ 0.55 $ 0.60
Net income per common share (diluted) $ 0.55 $ 0.59
Weighted average common shares (basic) 359,619,083 358,343,781
Weighted average common shares (diluted) 360,460,353 360,087,749
For the Three Months Ended
(Unaudited, dollars in thousands, except per share amounts)
28RECONCILIATION OF NON-GAAP MEASURES
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Total equity $ 5,885,234 $ 5,678,733 $ 5,418,998 $ 5,238,619 $ 5,117,657
Deduct: Goodwill and intangibles 105,590 106,298 106,331 106,679 107,084
Tangible common equity $ 5,779,644 $ 5,572,435 $ 5,312,667 $ 5,131,940 $ 5,010,573
Total assets $ 38,765,557 $ 39,507,482 $ 39,061,940 $ 38,539,104 $ 38,771,636
Deduct: Goodwill and intangibles 105,590 106,298 106,331 106,679 107,084
Tangible assets $ 38,659,967 $ 39,401,184 $ 38,955,609 $ 38,432,425 $ 38,664,552
Equity to assets ratio 15.2% 14.4% 13.9% 13.6% 13.2%
Tangible common equity to tangible assets 14.9% 14.1% 13.6% 13.4% 13.0%
Total equity 5,885,234$ 5,678,733$ 5,418,998$ 5,238,619$ 5,117,657$
Deduct: Goodwill and other intangible assets, net of deferred tax liabilities 172,502 177,619 182,156 186,930 191,850
Deduct: Accumulated other comprehensive income, net 27,481 27,860 35,504 28,259 (26,598)
Tier 1 common capital 5,685,251$ 5,473,254$ 5,201,338$ 5,023,430$ 4,952,405$
Risk weighted assets (a) 37,826,261$ 38,368,928$ 37,799,513$ 37,432,700$ 37,828,982$
Common Equity Tier 1 capital ratio (b) 15.0% 14.3% 13.8% 13.4% 13.1%
(Unaudited, dollars in thousands)
(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 and the Bank's total Risk weighted assets
(b) CET1 is calculated under Basel III regulations required as of January 1, 2015.
