EX-99.1 2 a2018q2exhibit991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
 fasantanderconsumerusacvposr.jpg
Contacts:
Investor Relations
Evan Black 
800.493.8219
InvestorRelations@santanderconsumerusa.com
  
Media Relations
Laurie Kight
214.801.6455
Media@santanderconsumerusa.com
Santander Consumer USA Holdings Inc. Reports Second Quarter 2018 Net Income of $335 million
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, TX (July 25, 2018) – 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



1



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.

























1The 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.
2Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.
3Delinquency 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.
4Net charge-off ratio stated on a recorded investment basis, which is unpaid principal balance adjusted for unaccreted net discounts, subvention and origination costs.
5Ratio 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.
6The 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.

2



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)

3



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


4



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



5



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






6



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


7




(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)




8



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
%








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
%

1Percent of unpaid principal balance.
2Interest is accrued until 60 days past due in accordance with the Company's account policy for retail installment contracts.

10



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.



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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


12



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


13



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.


14