Santander Consumer USA Holdings Inc. Reports Second Quarter 2019 Results and Key Leadership Appointments

DALLAS, July 24, 2019 /PRNewswire/ -- Santander Consumer USA Holdings Inc. SC ("SC" or the "Company") today announced the Boards of Directors of Santander Holdings USA, Inc. and SC have approved several senior management appointments to further strengthen Santander's US leadership teams.

• Fahmi Karam, SC's Head of Pricing and Analytics, will succeed Juan Carlos "JC" Alvarez as CFO, effective September 16, 2019. He will continue to lead the Pricing and Analytics group in addition to his new role.
• Shawn Allgood, currently EVP at Chrysler Capital, succeeds Richard Morrin as Head of Chrysler Capital and Auto Relationships, effective immediately. Morrin has resigned to assume a CEO role with a privately-held company outside of the auto finance industry.
• Juan Carlos "JC" Alvarez, will become CFO of Santander US and Santander Bank, N.A. ("SBNA"), effective September 16, 2019. Alvarez currently serves as the CFO at SC, a role he has held since 2017. Alvarez succeeds Duke Dayal in his capacity as Santander US CFO.

Management Quotes

"We are pleased with our second quarter results. We reached a mutually beneficial agreement with Fiat Chrysler, we saw strong originations driven by our FCA relationship and Santander Bank program - where we originated almost two billion dollars in loans through SBNA in the quarter, demonstrating the strength in the collaboration between our US platforms," said Scott Powell, SC President and CEO, also CEO of Santander US. "We also made important leadership appointments to further strengthen the SC and US management teams to help take the company into the future. I want to congratulate JC, Fahmi and Shawn and I want to thank Rich Morrin for his many years of service at Santander and Chrysler Capital. We wish him well."

Juan Carlos Alvarez, SC Chief Financial Officer, added, "We delivered another strong quarter with steady credit performance and disciplined expense management. We were also pleased to have announced our plan to repurchase up to $1.1 billion in common stock and the dividend increase to $0.22 from $0.20. This announcement demonstrates our progress toward a more efficient capital base, a longstanding corporate objective."

Fahmi Karam has been appointed CFO of SC in addition to his current leadership position as Head of SC's Pricing and Analytics. He joined SC in September 2015 as Executive Vice President of Strategy and Corporate Development, where he was responsible for overseeing financial planning and analysis, asset acquisitions and sales, and other strategic initiatives. Previously, Karam spent 12 years with J.P. Morgan's investment banking unit. He also held positions at Deloitte in its audit and assurance services.

Shawn Allgood assumes the role of Head of Chrysler Capital and Auto Relationships from his current position as Executive Vice President, where he led consumer underwriting. In his new role, Shawn will be focused on, and responsible for, Chrysler Capital and SC's sales and marketing activities, and its dealer and customer relationships. He joined Santander in April 2017 from Ally Financial Inc., where he held a series of leadership roles with increasing responsibility for nearly three decades, serving most recently as Executive Director for Collections.

Juan Carlos "JC" Alvarez joins Santander US from SC, where he has served as CFO since October 2017. A highly experienced finance professional, Alvarez joined Santander in 1996 and has held roles with increasing responsibility, including Corporate Treasurer for Santander US. In that role, Alvarez oversaw Santander US's liquidity risk management, asset liability management, fixed-income investor relations and treasury functions.

Q2 2019 Highlights (variances compared to the second quarter of 2018 ("Q2 2018"), unless otherwise noted):

• SC announced net income for the second quarter ended June 30, 2019 ("Q2 2019") of $368 million, or $1.05 per diluted common share.
• The Company has declared a cash dividend of $0.22 per share, to be paid on August 15, 2019, to shareholders of record as of the close of business on August 5, 2019.
• Total auto originations of $8.4 billion, up 5%
• Core retail auto loan originations of $2.4 billion, down 7%
• Chrysler Capital loan originations of $3.5 billion, up 25%
• Chrysler Capital lease originations of $2.5 billion, down 4%
• Chrysler average quarterly penetration rate of 36%, up from 32%
• Santander Bank, N.A. program originations of $1.9 billion
• Net finance and other interest income of $1.2 billion, up 5%
• 30-59 delinquency ratio of 9.4%, down 20 basis points
• 59-plus delinquency ratio of 4.7%, up 20 basis points
• Retail Installment Contract ("RIC") gross charge-off ratio of 16.1%, up 90 basis points
• Recovery rate of 60.3%, stable
• RIC net charge-off ratio of 6.4%, up 30 basis points
• Troubled Debt Restructuring ("TDR") balance of $4.5 billion, down $397 million vs. March 31, 2019
• Return on average assets of 3.2%, down from 3.3%
• $3.4 billion in loan asset-backed securities "ABS"
• Expense ratio of 2.0%, down from 2.2%
• Common equity tier 1 ("CET1") ratio of 15.7% , down from 16.9% as of June 30, 2018

Net finance and other interest income¹ increased 5 percent to $1.17 billion in Q2 2019 from $1.12 billion in Q2 2018, driven by increased loan and lease balances.

SC's serviced for others portfolio decreased 3 percent to $9.3 billion as of Q2 2019 versus the prior year quarter. Servicing fee income decreased 9 percent to $25 million in Q2 2019, from $28 million in Q2 2018, driven by the change in the composition of those balances. Fees, commissions and other increased to $90 million in Q2 2019, from $77 million in Q2 2018, driven by origination fees from the SBNA program.

RIC delinquency ratio² of 4.7 percent in Q2 2019 increased 20 basis points compared to 4.5 percent in Q2 2018.

RIC net charge-off ratio³ increased to 6.4 percent in Q2 2019, from 6.1 percent in Q2 2018. Provision for credit losses of $431 million in Q2 2019 were up from $407 million the prior year quarter.

Allowance ratio⁴ decreased 20 basis points, to 10.8 percent at the end of Q2 2019, from 11.0 percent at the end of Q1 2019.

Recorded net investment losses of $85 million in Q2 2019, compared to net investment losses of $83 million in Q2 2018. The current period losses were primarily driven by held for sale accounting for SC's personal lending portfolio.⁵

During Q2 2019 SC incurred $281 million of operating expenses, up 1 percent from $277 million in Q2 2018. SC's expense ratio decreased to 2.0 percent during the quarter, compared to 2.2 percent during the same period last year.

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

²Delinquency 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.

³Net charge-off ratio stated on a recorded investment basis, which is unpaid principal balance adjusted for unaccreted net discounts, subvention and origination costs.

⁴Ratio for allowance for credit losses excludes end of period balances on purchased receivables portfolio of $26 million and finance receivables and personal loans held for sale of $1.2 billion.

⁵The current period losses were primarily driven by $85 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, comprised of $97 million in customer default activity, partially offset by a $12 million decrease in market discount, consistent with typical seasonal patterns.

Conference Call Information

SC will host a conference call and webcast to discuss its Q2 2019 results and other general matters at 9:00 a.m. Eastern Time on Wednesday, July 24, 2019. The conference call will be accessible by dialing 800-263-0877 (U.S. domestic), or 646-828-8143 (international), conference ID 8209516. 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 2019 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 8209516, 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. 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, had an average managed asset portfolio of approximately $56 billion (as of June 30, 2019), and is headquartered in Dallas. (www.santanderconsumerusa.com)

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, 2019 and 2018 was as follows (Unaudited, Dollar amounts in thousands):

A summary of delinquencies of our individually acquired retail installment contracts as of June 30, 2019 and December 31, 2018 is as follows (Unaudited, Dollar amounts in thousands):

Within the total delinquent principal above, retail installment contracts acquired individually held for investment that were placed on nonaccrual status, as of June 30, 2019 and December 31, 2018 (Unaudited, Dollar amounts in thousands):

The table below presents the Company's allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of June 30, 2019 and December 31, 2018 (Unaudited, Dollar amounts in thousands):

Table 5: Originations

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

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 $1.9 billion and $2.95 billion of retail installment contacts during the three and six months ended June 30, 2019, respectively.

There were no asset sales during 2019, since it has been replaced with SBNA originations program.

Table 7: Ending Portfolio

Ending outstanding balance, average APR and remaining unaccreted dealer discount of our held for investment portfolio as of June 30, 2019, and December 31, 2018, are as follows:

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SOURCE Santander Consumer USA Holdings Inc.