Attached files
| file | filename |
|---|---|
| EX-99.2 - EX-99.2 - Santander Consumer USA Holdings Inc. | a2020q2earningspresentat.htm |
| 8-K - 8-K - Santander Consumer USA Holdings Inc. | a2020q2scusa8-kearning.htm |
Exhibit 99.1
Santander Consumer USA Holdings Inc. Reports Second Quarter 2020 Results
Loss of $97 Million; Approximately $8 Billion in Originations in the second quarter of 2020
Dallas, TX - July 29, 2020 - PRESS RELEASE
Santander Consumer USA Holdings Inc. (NYSE: SC) (“SC” or the “Company”) today announced net income for the second quarter ended June 30, 2020 ("Q2 2020") of $(97) million, or $(0.30) per diluted common share. The quarter included $400 million of incremental allowance for credit loss primarily driven by macroeconomic factors and COVID-19.
As previously announced, based on the interim Federal Reserve Board ("FRB") policy and SHUSA’s expected average trailing four quarters of net income, SC is prohibited from paying a dividend in the third quarter of 2020. Although SC’s standalone expected income is sufficient to declare and a pay a dividend in the third quarter, SC is consolidated into SHUSA’s capital plan and therefore is subject to the FRB’s interim policy that utilizes SHUSA’s average trailing income to determine the cap on common stock dividends. SHUSA has requested certain exceptions to the interim policy, however the timing and outcome of the request is uncertain. SC does not currently expect to declare or pay a dividend in the third quarter of 2020 pending approval of SHUSA’s exception request.
Management Quotes
"The duration of the pandemic has created significant macroeconomic uncertainty, and the speed of the economic recovery will dictate our performance over the next several months. While certain indicators are trending positive, we anticipate a delayed reversion to normal. Our results this quarter demonstrate the resiliency of our portfolio, the effectiveness of the hardship programs we instituted and the strength of our business model. Our employees, dealers and customers continue to be our priority as we endeavor to provide them the highest levels of service in these trying times. In the past weeks, we have also responded to the calls for an end to systemic racism by starting a conversation with our employees and committing to take action to make our company a place where all employees are valued, feel safe and have an opportunity to succeed. In the process, we will make sustained and material differences in the way we view race and interact with each other." said Mahesh Aditya, SC President and CEO.
Fahmi Karam, SC Chief Financial Officer, added, "This quarter's strong credit performance reflects the impact of the pandemic relief we provided to our customers and the improvement in auction recovery rates, particularly towards the end of the quarter. We continued to build reserves this quarter due to the COVID-19 uncertainty and we remain well capitalized with a 13.4% CET1 ratio, combining for an industry leading loss absorbing capacity to manage through the pandemic and position us for long-term success."
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Second Quarter of 2020 Highlights (variances compared to second quarter of 2019 (“Q2 2019”), unless otherwise noted)
•Total auto originations of $7.8 billion, down 7%
◦Core retail auto loan originations of $2.1 billion, down 12%
◦Chrysler Capital loan originations of $4.7 billion, up 36%
◦Chrysler Capital lease originations of $989 million, down 61%
◦Chrysler average quarterly penetration rate of 37%, from 36%
◦Santander Bank, N.A. program originations of $1.7 billion
•Net finance and other interest income1 of $1.1 billion, down 7%
•30-59 delinquency ratio of 4.3%, down 510 basis points
•59-plus delinquency ratio2 of 2.4%, down 230 basis points
•Retail Installment Contract (“RIC”) gross charge-off ratio of 11.1%, down 500 basis points
•Recovery rate of 46%, down from 60%
•RIC net charge-off ratio3 of 6.0%, down 40 basis points
•Troubled Debt Restructuring (“TDR”) balance of $3.9 billion, down from $4.5 billion
•Return on average assets of (0.8)%, down from 3.2%
•$1.9 billion in asset-backed securities “ABS” issued
•Expense ratio of 1.7%, down from 2.0%
•Common equity tier 1 (“CET1”) ratio of 13.4%, down from 15.7% as of June 30, 2019
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.
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Conference Call Information
SC will host a conference call and webcast to discuss its Q2 2020 results and other general matters at 9:00 a.m. Eastern Time on Wednesday, July 29, 2020. The conference call will be accessible by dialing 888-394-8218 (U.S. domestic), or 323-701-0225 (international), conference ID 2177889. 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 2020 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 2177889, 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 for the year ended December 31, 2019, our subsequent 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) unexpected costs and delays in connection with exiting our personal lending business; (g) 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; (h) our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (i) our financial condition, liquidity, and results of operations depend on the credit performance of our loans; (j) loss of our key management or other personnel, or an inability to attract such management and personnel; (k) 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 (l) 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.
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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 $61 billion (for the second quarter ended June 30, 2020), and is headquartered in Dallas. (www.santanderconsumerusa.com)
CONTACTS:
Investor Relations
Evan Black
800.493.8219
InvestorRelations@santanderconsumerusa.com
Media Relations
Annette Rogers
469.563.4157
Media@santanderconsumerusa.com
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Santander Consumer USA Holdings Inc.
Financial Supplement
Second Quarter 2020
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 | |||||
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Table 1: Condensed Consolidated Balance Sheets
| June 30, 2020 | December 31, 2019 | ||||||||||
| Assets | (Unaudited, Dollars in thousands) | ||||||||||
| Cash and cash equivalents | $ | 175,936 | $ | 81,848 | |||||||
| Finance receivables held for sale, net | 2,445,599 | 1,007,105 | |||||||||
| Finance receivables held for investment, at amortized cost | 30,606,438 | 30,810,487 | |||||||||
| Allowance for credit loss | (5,859,954) | (3,043,468) | |||||||||
| Finance receivables held for investment, at amortized cost, net | 24,746,484 | 27,767,019 | |||||||||
| Restricted cash | 2,057,315 | 2,079,239 | |||||||||
| Accrued interest receivable | 447,232 | 288,615 | |||||||||
| Leased vehicles, net | 16,239,622 | 16,461,982 | |||||||||
| Furniture and equipment, net | 61,653 | 59,873 | |||||||||
| Goodwill | 74,056 | 74,056 | |||||||||
| Intangible assets | 53,159 | 42,772 | |||||||||
| Other assets | 967,639 | 1,071,020 | |||||||||
| Total assets | $ | 47,268,695 | $ | 48,933,529 | |||||||
| Liabilities and Equity | |||||||||||
| Liabilities: | |||||||||||
| Borrowings and other debt obligations | $ | 40,636,769 | $ | 39,194,141 | |||||||
| Deferred tax liabilities, net | 910,448 | 1,468,222 | |||||||||
| Accounts payable and accrued expenses | 508,290 | 563,277 | |||||||||
| Other liabilities | 317,723 | 389,269 | |||||||||
| Total liabilities | $ | 42,373,230 | $ | 41,614,909 | |||||||
| Equity: | |||||||||||
| Common stock, $0.01 par value | 3,162 | 3,392 | |||||||||
| Additional paid-in capital | 624,554 | 1,173,262 | |||||||||
| Accumulated other comprehensive income, net | (63,705) | (26,693) | |||||||||
| Retained earnings | 4,331,454 | 6,168,659 | |||||||||
| Total stockholders’ equity | $ | 4,895,465 | $ | 7,318,620 | |||||||
| Total liabilities and equity | $ | 47,268,695 | $ | 48,933,529 | |||||||
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Table 2: Condensed Consolidated Statements of Income
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (Unaudited, Dollars in thousands, except per share amounts) | |||||||||||||||||||||||
| Interest on finance receivables and loans | $ | 1,236,600 | $ | 1,261,098 | $ | 2,510,419 | $ | 2,514,678 | |||||||||||||||
| Leased vehicle income | 737,549 | 676,236 | 1,485,528 | 1,325,796 | |||||||||||||||||||
| Other finance and interest income | 2,657 | 11,437 | 10,208 | 21,684 | |||||||||||||||||||
| Total finance and other interest income | 1,976,806 | 1,948,771 | 4,006,155 | 3,862,158 | |||||||||||||||||||
| Interest expense | 308,982 | 330,039 | 637,816 | 664,421 | |||||||||||||||||||
| Leased vehicle expense | 610,861 | 444,442 | 1,163,773 | 888,461 | |||||||||||||||||||
| Net finance and other interest income | 1,056,963 | 1,174,290 | 2,204,566 | 2,309,276 | |||||||||||||||||||
| Credit loss expense | 861,896 | 430,676 | 1,769,783 | 981,555 | |||||||||||||||||||
| Net finance and other interest income after credit loss expense | 195,067 | 743,614 | 434,783 | 1,327,721 | |||||||||||||||||||
| Profit sharing | 11,530 | 13,345 | 25,825 | 20,313 | |||||||||||||||||||
| Net finance and other interest income after credit loss expense and profit sharing | 183,537 | 730,269 | 408,958 | 1,307,408 | |||||||||||||||||||
| Investment losses, net | (147,582) | (84,787) | (211,008) | (151,884) | |||||||||||||||||||
| Servicing fee income | 19,120 | 25,002 | 38,223 | 48,808 | |||||||||||||||||||
| Fees, commissions, and other | 82,069 | 90,196 | 177,199 | 184,572 | |||||||||||||||||||
| Total other income | (46,393) | 30,411 | 4,414 | 81,496 | |||||||||||||||||||
| Compensation and benefits | 127,643 | 122,678 | 260,969 | 250,572 | |||||||||||||||||||
| Repossession expense | 22,289 | 69,699 | 79,951 | 140,559 | |||||||||||||||||||
| Other expenses | 116,747 | 88,272 | 208,432 | 180,475 | |||||||||||||||||||
| Total other expenses | 266,679 | 280,649 | 549,352 | 571,606 | |||||||||||||||||||
| Income (loss) before income taxes | (129,535) | 480,031 | (135,980) | 817,298 | |||||||||||||||||||
| Income tax expense | (32,857) | 111,764 | (35,315) | 201,528 | |||||||||||||||||||
| Net income (loss) | $ | (96,678) | $ | 368,267 | $ | (100,665) | $ | 615,770 | |||||||||||||||
| Net income per common share (basic) | $ | (0.30) | $ | 1.05 | $ | (0.31) | $ | 1.75 | |||||||||||||||
| Net income per common share (diluted) | $ | (0.30) | $ | 1.05 | $ | (0.31) | $ | 1.75 | |||||||||||||||
| Weighted average common shares (basic) | 319,773,636 | 351,106,197 | 326,899,844 | 351,309,700 | |||||||||||||||||||
| Weighted average common shares (diluted) | $ | 319,878,145 | $ | 351,556,349 | $ | 327,137,104 | $ | 351,825,554 | |||||||||||||||
| Number of shares outstanding | 316,235,387 | 348,130,140 | 316,235,387 | 348,130,140 | |||||||||||||||||||
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Table 3: Other Financial Information
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Ratios (Unaudited, Dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Yield on retail installment contracts | 14.8 | % | 16.1 | % | 15.0 | % | 16.1 | % | |||||||||||||||
| Yield on leased vehicles | 2.9 | % | 5.8 | % | 3.7 | % | 5.6 | % | |||||||||||||||
| Yield on personal loans, held for sale (1) | 25.6 | % | 26.3 | % | 26.0 | % | 26.2 | % | |||||||||||||||
| Yield on earning assets (2) | 10.9 | % | 12.9 | % | 11.4 | % | 12.9 | % | |||||||||||||||
| Cost of debt (3) | 3.1 | % | 3.7 | % | 3.2 | % | 3.7 | % | |||||||||||||||
| Net interest margin (4) | 8.4 | % | 10.1 | % | 8.8 | % | 10.0 | % | |||||||||||||||
| Expense ratio (5) | 1.7 | % | 2.0 | % | 1.8 | % | 2.1 | % | |||||||||||||||
| Return on average assets (6) | (0.8) | % | 3.2 | % | (0.4) | % | 2.7 | % | |||||||||||||||
| Return on average equity (7) | (7.7) | % | 20.3 | % | (3.6) | % | 17.2 | % | |||||||||||||||
| Net charge-off ratio on individually acquired retail installment contracts (8) | 6.0 | % | 6.4 | % | 6.9 | % | 7.5 | % | |||||||||||||||
| Net charge-off ratio (8) | 6.0 | % | 6.4 | % | 6.9 | % | 7.5 | % | |||||||||||||||
| Delinquency ratio on individually acquired retail installment contracts held for investment, end of period (9) | 2.4 | % | 4.7 | % | 2.4 | % | 4.7 | % | |||||||||||||||
| Delinquency ratio on loans held for investment, end of period (9) | 2.4 | % | 4.7 | % | 2.4 | % | 4.7 | % | |||||||||||||||
| Allowance ratio (10) | 19.2 | % | 10.8 | % | 19.2 | % | 10.8 | % | |||||||||||||||
| Common stock dividend payout ratio (11) | * | 19.1 | % | * | 22.8 | % | |||||||||||||||||
| Common Equity Tier 1 capital ratio (12) | 13.4 | % | 15.7 | % | 13.4 | % | 15.7 | % | |||||||||||||||
| Charge-offs, net of recoveries, on individually acquired retail installment contracts | $ | 461,014 | $ | 462,427 | $ | 1,054,060 | $ | 1,077,631 | |||||||||||||||
| Total charge-offs, net of recoveries | 461,925 | 464,277 | $ | 1,055,524 | $ | 1,079,892 | |||||||||||||||||
| End of period delinquent amortized cost over 59 days, retail installment contracts held for investment | 743,693 | 1,367,310 | 743,693 | 1,367,310 | |||||||||||||||||||
| End of period personal loans delinquent principal over 59 days, held for sale | 127,504 | 167,033 | 127,504 | 167,033 | |||||||||||||||||||
| End of period delinquent amortized cost over 59 days, loans held for investment | 744,170 | 1,368,427 | 744,170 | 1,368,427 | |||||||||||||||||||
| End of period assets covered by allowance for credit losses | 30,522,963 | 29,007,585 | 30,522,963 | 29,007,585 | |||||||||||||||||||
| End of period gross retail installment contracts held for investment | 30,492,634 | 28,971,311 | 30,492,634 | 28,971,311 | |||||||||||||||||||
| End of period gross retail installment contracts held for sale | 1,718,244 | 321,503 | 1,718,244 | 321,503 | |||||||||||||||||||
| End of period gross personal loans held for sale | 1,283,183 | 1,364,956 | 1,283,183 | 1,364,956 | |||||||||||||||||||
| End of period gross finance receivables and loans held for investment | 30,496,308 | 29,009,846 | 30,496,308 | 29,009,846 | |||||||||||||||||||
| End of period gross finance receivables, loans, and leases held for investment | 47,729,637 | 45,557,709 | 47,729,637 | 45,557,709 | |||||||||||||||||||
| Average gross retail installment contracts held for investment | 30,493,604 | 29,017,122 | 30,586,535 | 28,816,732 | |||||||||||||||||||
| Average gross retail installment contracts held for sale | 1,363,876 | 321,503 | 1,363,876 | 321,503 | |||||||||||||||||||
| Average gross retail installment contracts held for investment and held for sale | 31,193,215 | 29,070,738 | 31,017,842 | 28,834,640 | |||||||||||||||||||
| Average gross personal loans held for sale | 1,307,609 | 1,375,306 | 1,363,023 | 1,424,717 | |||||||||||||||||||
| Average gross finance receivables and loans | 32,554,978 | 30,507,780 | 32,438,109 | 30,321,739 | |||||||||||||||||||
| Average gross operating leases | 17,492,255 | 16,043,654 | 17,584,849 | 15,752,705 | |||||||||||||||||||
| Average gross finance receivables, loans, and leases | 50,047,233 | 46,551,434 | 50,022,958 | 46,074,444 | |||||||||||||||||||
| Average managed assets | 61,001,767 | 55,545,503 | 60,652,091 | 55,043,583 | |||||||||||||||||||
| Average total assets | 46,876,726 | 45,700,887 | 47,308,997 | 45,101,873 | |||||||||||||||||||
| Average debt | 40,113,885 | 36,152,602 | 39,858,355 | 35,715,392 | |||||||||||||||||||
| Average total equity | 5,033,773 | 7,273,470 | 5,573,544 | 7,163,738 | |||||||||||||||||||
(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.
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(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 and six months ended June 30, 2020 has not been disclosed since the earnings per share for the three and six months ended June 30, 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)
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Table 4: Credit Quality
The activity in the credit loss allowance for retail installment contracts for the three and six months ended June 30, 2020 and 2019 was as follows (Unaudited, Dollar amounts in thousands):
| Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | ||||||||||||||||||||||
| Retail Installment Contracts | Retail Installment Contracts | ||||||||||||||||||||||
| Allowance for Credit Loss | Non-TDR | TDR | Non-TDR | TDR | |||||||||||||||||||
| Balance — beginning of period | $ | 4,482,663 | $ | 973,236 | $ | 1,891,351 | $ | 1,280,649 | |||||||||||||||
| Credit loss expense (a) | 744,511 | 116,419 | 348,817 | 59,806 | |||||||||||||||||||
| Charge-offs (b) | (721,218) | (127,617) | (795,901) | (369,523) | |||||||||||||||||||
| Recoveries | 312,231 | 75,590 | 517,626 | 185,371 | |||||||||||||||||||
| Balance — end of period | $ | 4,818,187 | $ | 1,037,628 | $ | 1,961,893 | $ | 1,156,303 | |||||||||||||||
| Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | ||||||||||||||||||||||
| Retail Installment Contracts | Retail Installment Contracts | ||||||||||||||||||||||
| Allowance for Credit Loss | Non-TDR | TDR | Non-TDR | TDR | |||||||||||||||||||
| Balance — beginning of period | $ | 2,123,878 | $ | 914,718 | $ | 1,819,360 | $ | 1,416,743 | |||||||||||||||
| Day 1 - Adjustment to allowance for adoption of CECL standard | 2,030,473 | 71,833 | — | — | |||||||||||||||||||
| Credit loss expense (a) | 1,501,704 | 267,268 | 795,305 | 164,419 | |||||||||||||||||||
| Charge-offs (b) | (1,620,768) | (417,184) | (1,723,358) | (836,160) | |||||||||||||||||||
| Recoveries | 782,900 | 200,993 | 1,070,586 | 411,301 | |||||||||||||||||||
| Balance — end of period | $ | 4,818,187 | $ | 1,037,628 | $ | 1,961,893 | $ | 1,156,303 | |||||||||||||||
(a) Excluded from the credit loss expense is $39 million related to retail installment contracts sold in an off balance sheet securitization during the three and six months ended June 30, 2020. In addition, credit loss expense excludes $12 million related to retail installment contracts transferred to held for sale during the three and six months ended June 30, 2020. Furthermore, credit loss expense includes $20 million related to retail installment contracts transferred to held for sale during the three and six months ended June 30, 2019.
(b) 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 June 30, 2020 and December 31, 2019 is as follows (Unaudited, Dollar amounts in thousands):
| Delinquent Balance | June 30, 2020 | |||||||||||||
| Amount | Percent | |||||||||||||
| Amortized cost, 30-59 days past due | 1,308,305 | 4.3 | % | |||||||||||
| Delinquent amortized cost over 59 days | 743,693 | 2.4 | % | |||||||||||
| Total delinquent balance at amortized cost | $ | 2,051,998 | 6.7 | % | ||||||||||
| Delinquent Balance | December 31, 2019 | |||||||||||||
| Amount | Percent | |||||||||||||
| Principal 30-59 days past due | $ | 2,972,495 | 9.7 | % | ||||||||||
| Delinquent principal over 59 days | 1,578,452 | 5.1 | % | |||||||||||
| Total delinquent principal (a) | $ | 4,550,947 | 14.8 | % | ||||||||||
(a) The table includes balances based on UPB. Difference between amortized cost and UPB was not material.
The retail installment contracts held for investment that were placed on nonaccrual status, as of June 30, 2020 and December 31, 2019 (Unaudited, Dollar amounts in thousands):
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| Nonaccrual Balance | June 30, 2020 | ||||||||||
| Amount | Percent | ||||||||||
| Non-TDR | 622,126 | 2.0 | % | ||||||||
| TDR | 242,037 | 0.8 | % | ||||||||
| Total non-accrual loans (a) | $ | 864,163 | 2.8 | % | |||||||
(a) The table includes balances based on amortized cost.
| Nonaccrual Balance | December 31, 2019 | |||||||||||||
| Amount | Percent | |||||||||||||
| Non-TDR | $ | 1,099,462 | 3.6 | % | ||||||||||
| TDR | 516,119 | 1.7 | % | |||||||||||
| Total nonaccrual principal (a) | $ | 1,615,581 | 5.3 | % | ||||||||||
(a) The table includes balances based on UPB. Difference between amortized cost and UPB was not material.
The table below presents the Company’s allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of June 30, 2020 and December 31, 2019 (Unaudited, Dollar amounts in thousands):
| Allowance Ratios | June 30, 2020 | December 31, 2019 | |||||||||
| TDR - Unpaid principal balance | $ | 3,946,808 | $ | 3,859,040 | |||||||
| TDR - Impairment | 1,037,628 | 914,718 | |||||||||
| TDR - Allowance ratio | 26.3 | % | 23.7 | % | |||||||
| Non-TDR - Unpaid principal balance | $ | 26,527,943 | $ | 26,895,551 | |||||||
| Non-TDR - Allowance | 4,818,187 | 2,123,878 | |||||||||
| Non-TDR Allowance ratio | 18.2 | % | 7.9 | % | |||||||
| Total - Unpaid principal balance | $ | 30,474,751 | $ | 30,754,591 | |||||||
| Total - Allowance | 5,855,815 | 3,038,596 | |||||||||
| Total - Allowance ratio | 19.2 | % | 9.9 | % | |||||||
The Company’s allowance for credit losses increased $0.4 billion and $2.8 billion for the three and six months ended June 30, 2020. For the three months ended June 30, 2020, the increase was primarily due to a reserve build associated with a weaker economic outlook related to COVID-19, partially offset by declines in balances. For the six months ended June 30, 2020, the primary drivers were $2.1 billion increase at CECL adoption on January 1, 2020, driven mainly by the addition of lifetime expected credit losses for non-TDR loans, and additional reserves specific to COVID-19 risk, partially offset by decline in balances.
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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 | Six Months Ended | Three Months Ended | |||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | March 31, 2020 | |||||||||||||||||||||||||
| Retained Originations | (Unaudited, Dollar amounts in thousands) | ||||||||||||||||||||||||||||
| Retail installment contracts | $ | 5,098,496 | $ | 3,949,648 | $ | 8,832,741 | $ | 7,975,975 | $ | 3,846,226 | |||||||||||||||||||
| Average APR | 11.7 | % | 16.2 | % | 13.3 % | 16.7 | % | 15.3 | % | ||||||||||||||||||||
| Average FICO® (a) | 657 | 601 | 635 | 597 | 607 | ||||||||||||||||||||||||
| Discount | (0.9) | % | (0.5) | % | (0.8) | % | (0.3) | % | (0.8) | % | |||||||||||||||||||
| Personal loans (b) | 347,238 | 343,214 | 618,073 | 631,770 | $ | 270,835 | |||||||||||||||||||||||
| Average APR | 29.6 | % | 29.7 | % | 29.5 | % | 29.8 | % | 29.8 | % | |||||||||||||||||||
| Leased vehicles | 986,617 | 2,520,130 | 3,007,338 | 4,483,710 | $ | 2,020,721 | |||||||||||||||||||||||
| Finance lease | 1,927 | 4,822 | 4,929 | $ | 8,129 | $ | 3,002 | ||||||||||||||||||||||
| Total originations retained | $ | 6,434,278 | $ | 6,817,814 | $ | 12,463,081 | $ | 13,099,584 | $ | 6,140,784 | |||||||||||||||||||
| Sold Originations | |||||||||||||||||||||||||||||
| Retail installment contracts | $ | — | $ | — | $ | 111,981 | $ | — | $ | — | |||||||||||||||||||
| Average APR | — | % | — | % | 4.4 % | — | % | — | % | ||||||||||||||||||||
| Average FICO® (c) | — | — | 722 | — | — | ||||||||||||||||||||||||
| Total originations sold | $ | — | $ | — | $ | 111,981 | $ | — | $ | — | |||||||||||||||||||
| Total originations (excluding SBNA Originations Program) | $ | 6,434,278 | $ | 6,817,814 | $ | 12,575,062 | $ | 13,099,584 | $ | 6,140,784 | |||||||||||||||||||
(a)Unpaid principal balance excluded from the weighted average FICO score is $586 million, $448 million, $1.0 billion, $941 million and $432 million for the three months ended June 30, 2020 and 2019, the six months ended June 30, 2020 and 2019, and for the three months ended March 31, 2020, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $102 million, $141 million, $241 million, $247 million and $139 million, respectively, were commercial loans.
(b)Included in the total origination volume is $58 million, $51 million, $79 million, $76 million and $21 million for the three months ended June 30, 2020 and 2019, the six months ended June 30, 2020 and 2019, and for the three months ended March 31, 2020, respectively, related to newly opened accounts.
(c)Unpaid principal balance excluded from the weighted average FICO score is $9 million for the six months ended June 30, 2020, as the borrowers on these loans did not have FICO scores at origination.
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 $1.7 billion and $2.8 billion of retail installment contacts during the three and six months ended June 30, 2020, respectively.
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Table 6: Asset Sales
| Three Months Ended | Six Months Ended | Three Months Ended | |||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | March 31, 2020 | |||||||||||||||||||||||||
| Assets Sold | (Unaudited, Dollar amounts in thousands) | ||||||||||||||||||||||||||||
| Retail installment contracts | $ | 512,286 | $ | — | $ | 512,286 | $ | — | $ | — | |||||||||||||||||||
| Average APR | 6.4 | % | — | % | 6.4 | % | — | % | — | % | |||||||||||||||||||
| Average FICO® | $ | 691 | — | 691 | — | — | |||||||||||||||||||||||
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Table 7: Ending Portfolio
Ending outstanding balance, average APR and remaining unaccreted net discount of our held for investment portfolio as of June 30, 2020 and December 31, 2019, are as follows:
| June 30, 2020 | December 31, 2019 | ||||||||||
(Unaudited, Dollar amounts in thousands) | |||||||||||
| Retail installment contracts | $ | 30,492,634 | $ | 30,776,038 | |||||||
| Average APR | 15.4 | % | 16.1 | % | |||||||
| Discount | 0.03 | % | 0.3 | % | |||||||
| Receivables from dealers | $ | 3,675 | $ | 12,668 | |||||||
| Average APR | 3.9 | % | 4.0 | % | |||||||
| Leased vehicles | $ | 17,206,674 | $ | 17,562,782 | |||||||
| Finance leases | $ | 26,655 | $ | 27,584 | |||||||
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Table 8: Reconciliation of Non-GAAP Measures
| June 30, 2020 | June 30, 2019 | ||||||||||
(Unaudited, Dollar amounts in thousands) | |||||||||||
| Total equity | $ | 4,895,465 | $ | 7,337,261 | |||||||
| Add: Adjustment due to CECL capital relief (c) | 1,769,430 | — | |||||||||
| Deduct: Goodwill, intangibles, and other assets, net of deferred tax liabilities | 154,943 | 152,264 | |||||||||
| Deduct: Accumulated other comprehensive income (loss), net | (63,705) | (21,568) | |||||||||
| Tier 1 common capital | $ | 6,573,657 | $ | 7,206,565 | |||||||
| Risk weighted assets (a)(c) | 48,997,902 | 45,849,574 | |||||||||
| Common Equity Tier 1 capital ratio (b)(c) | 13.4 | % | 15.7 | % | |||||||
(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 2019 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 is electing this alternative option instead of the one described in the December 2018 rule.
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