Santander Consumer USA Holdings Inc. Reports Third Quarter 2017 Net Income of $199 million

DALLAS, Oct. 27, 2017 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (NYSE: SC) ("SC") today announced net income for the third quarter ended September 30, 2017 ("Q3 2017") of $199 million, or $0.55 per diluted common share. This includes a pretax gain of $36 million, or $0.07 per diluted common share from the sale of the majority of the Company's legacy RV/Marine portfolio.

These results build on numerous Q3 2017 milestones:

• SC announced a new President and CEO, Scott Powell
• The Federal Reserve Bank of Boston announced the termination of the 2014 Written Agreement with SC's majority owner, Santander Holdings USA, Inc. ("SHUSA"), enabling SHUSA and SC to operate within a normal capital cycle
• 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
• SC's retail installment contract ("RIC") gross and net loss ratios improved, with YoY decreases of 40 and 20 basis points, respectively

"Our results this quarter demonstrate the continued strength of our business," said Scott Powell, SC President and CEO, also SHUSA CEO. "We have been focused on strengthening our financial and operational performance, delivering returns for all our shareholders and improving risk management. Our credit performance in the third quarter was strong and positively impacted our financial results. The Federal Reserve's termination of its 2014 Written Agreement with SHUSA gives SC the ability to make distributions within a normal capital cycle. We still have work to do to resolve our outstanding regulatory issues, but it is a major turning point for our business."

Other recently announced key leadership changes include:

• Juan Carlos ("JC") Alvarez was appointed CFO. JC joined SC from SHUSA, where he served as Corporate Treasurer
• Sandra ("Sandy") Broderick was appointed EVP, Head of Operations. Sandy joined SC from US Bank, which she joined in 2017 from JPMorgan Chase & Co., where she served as Managing Director, Operations Executive from 2002 to March 2017, and as Head of Operations for the automotive finance business from 2012
• Rich Morrin, former SC COO, was appointed President, Chrysler Capital and Auto Relationships

Mr. Powell continued, "I'm pleased to have a strong leadership team in place including JC, Sandy and Rich.  JC was instrumental in the work that led to the termination of SHUSA's 2014 Written Agreement with the Federal Reserve, Sandy has significant operations expertise in auto finance, and Rich's new role will allow SC to devote more attention to building our relationship with Fiat Chrysler."

Juan Carlos Alvarez, Chief Financial Officer, added, "We are pleased to report solid financial performance this quarter. We are providing temporary financial relief to our customers affected by the recent hurricanes, primarily in the form of loan extensions. While we expect additional delinquencies and losses associated with this relief effort in subsequent quarters, both gross and net loss ratios decreased versus the prior year quarter, demonstrating improved credit performance in our portfolio."

Q3 2017 Highlights (variances compared to Q3 2016, unless otherwise noted):

• Retail Installment Contract ("RIC") gross and net loss ratios decreased 40 and 20 basis points, respectively
• Auction-plus recovery rate of 49.3% remained relatively flat
• 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%
• Core retail auto loan originations of $1.5 billion, down 21%
• Chrysler Capital nonprime loan originations of $850 million, down 1%
• Chrysler Capital prime loan originations of $928 million, down 10%
• Net finance and other interest income of $1.1 billion, down 10%
• Net leased vehicle income of $118 million, down 13%
• Return on average assets of 2.0%, down from 2.2%
• Common equity tier 1 ("CET1") ratio of 15.0%, up 190 bps

Finance receivables, loans and leases, net¹ of $34.4 billion as of September 30, 2017 increased 1 percent versus December 31, 2016. Net finance and other interest income decreased 10 percent to $1.1 billion in Q3 2017 from $1.2 billion in Q3 2016, driven by lower average RIC balances and an increase in benchmark rates.

Net leased vehicle income decreased 13 percent to $118 million in Q3 2017, from $136 million in Q3 2016, due to an increase in leased vehicle depreciation, primarily driven by revised Automotive Leasing Guide ("ALG") residual value forecasts as of Q2 2017. SC depreciates its lease portfolio to forecasted residual values.

Servicing fee income decreased 21 percent to $29 million in Q3 2017, from $36 million in Q3 2016. SC's serviced for others portfolio of $10.0 billion as of Q3 2017, is down 18 percent from $12.2 billion in Q3 2016. The serviced for others portfolio increased versus the prior quarter driven by asset sales of $1.5 billion during Q3 2017, $1.3 billion of which was generated through SC's flow agreement with Banco Santander.

SC's RIC delinquency ratio² increased to 5.1 percent in Q3 2017 from 4.6 percent in Q3 2016, primarily due to a lower portfolio balance.

SC's RIC net charge-off ratio³ and provision for credit losses decreased to 9.1 percent and $536 million in Q3 2017, respectively, from 9.3 percent and $610 million in Q3 2016, respectively, attributable to a combination of improving credit performance and stabilizing recovery rates. The decrease in provision for credit losses was partially offset by additional reserves for customers affected by Hurricanes Harvey and Irma.

SC's allowance ratio⁴ increased 20 basis points, to 12.8 percent at the end of Q3 2017, from 12.6 percent at the end of Q2 2017.

SC recorded net investment losses of $53 million in Q3 2017, compared to net investment losses of $106 million in Q3 2016. The current period losses were primarily driven by held for sale accounting for SC's personal lending portfolio⁵. Excluding the impact of personal lending, net investment gains totaled $30 million, which includes the $36 million pretax RV/Marine portfolio gain on sale.

During Q3 2017 SC incurred $298 million of operating expenses, up 5 percent from $284 million in Q3 2016, primarily driven by losses recorded for certain contingencies and severance expenses related to management changes. SC's expense ratio for the quarter increased to 2.4 percent, up from 2.2 percent during the same period last year.

¹ Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.

² 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.

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.

⁴ Ratio for allowance for credit losses excludes end of period balances on purchased receivables portfolio of $49 million and finance receivables held for sale of $1.8 billion.

⁵ The current period losses were primarily driven by $84 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, comprised of $108 million in customer default activity, offset by a $24 million decrease in market discount, consistent with typical seasonal patterns.

Conference Call Information

SC management will host a conference call and webcast to discuss its Q3 2017 results and other general matters at 9:00 a.m. Eastern Time on Friday, October 27, 2017. The conference call will be accessible by dialing 877-419-6593 (U.S. domestic), or 719-325-4933 (international), conference ID 7075755. Please dial in 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 Q3 2017 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.

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 7075755, approximately two hours after the event. The dial-in replay will be available for two weeks 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 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 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, technology-driven 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 September 30, 2017), and is headquartered in Dallas. (www.santanderconsumerusa.com)

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SOURCE Santander Consumer USA Holdings Inc.