Santander Consumer USA Holdings Inc. Reports Third Quarter 2021 Results

DALLAS, Oct. 27, 2021 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (NYSE: SC) ("SC" or the "Company") today announced net income for the third quarter ended September 30, 2021 ("Q3 2021") of $763 Million, or $2.49 per diluted common share. 

The Company's parent, Santander Holdings USA, Inc. ("SHUSA"), has requested regulatory approval to authorize the SC Board of Directors to consider declaring a dividend in the fourth quarter. To date, approval has not been received.

Third Quarter of 2021 Highlights (variances compared to third quarter of 2020 ("Q3 2020"), unless otherwise noted)

• Net Income of $763 million in Q3 2021, or $2.49 of diluted EPS
• Total auto originations of $7.8 billion, down 7%
• Core retail auto loan originations of $3.1 billion, up 17%
• Chrysler Capital loan originations of $2.8 billion, down 27%
• Chrysler Capital lease originations of $1.8 billion, down 2%
• Chrysler average quarterly penetration rate of 27%, down from 33%
• Santander Bank, N.A. program originations of $1.8 billion¹
• Donated $50 million to the SC Foundation
• Announced launch of new dealer and consumer digital experience through partnership with AutoFi
• Net finance and other interest income² of $1.3 billion, up 5.8%
• 30-59 delinquency ratio³ of 6.8%, up 180 basis points
• 59-plus delinquency ratio³ of 3.3%, up 90 basis points
• Retail Installment Contract ("RIC") gross charge-off ratio of 7.7%, up 90 basis points
• Recovery rate of 74.4%, down from 91.4%
• RIC net charge-off ratio⁴ of 2.0%, up 140 basis points
• Allowance ratio of 17.4%, down from 17.8% as of June 30, 2021
• Troubled Debt Restructuring ("TDR") balance of $4.0 billion, down from $4.2 billion as of June 30, 2021
• Executed ~$300 million in off-balance sheet prime loan sales
• Return on average assets ("ROA") of 6.3%
• Expense ratio of 2.2%, up 50 basis points
• Common equity tier 1 ("CET1") ratio of 19.5%

 

1Includes SBNA retail originations of $1.5 billion and lease originations of $249 million for the current period

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, categorized as either 30-59 or over 59 days, to end of period gross balance of the respective portfolio, excludes finance 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.

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, strategies, 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, seeks, believes, can, could, may, predicts, potential, should, would, will, estimates, plans, projects, continuing, ongoing, expects, intends, and similar words or phrases. Examples of forward-looking statements include, but are not limited to, all statements we make relating to revenue, earnings, margins, growth rates, and other financial results for future periods. 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 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"). 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 include the following: (a) the adverse impact of COVID-19 or any future outbreak of any contagious diseases 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 could materially impact consumer spending behavior, unemployment and demand for our products, which could negatively impact our results; (d) the effects of inflation; (e) a reduction in our access to funding; (f) significant risks we face implementing our growth strategy, some of which are outside our control; (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 regulators, including but not limited to 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; (l) there can be no assurance that the proposed acquisition of all of our outstanding common stock by Santander Holdings USA, Inc. ("SHUSA") will be approved and ultimately consummated, and the terms of any such transaction may differ materially from those originally proposed by SHUSA; (m) other future changes in our relationship with SHUSA and Banco Santander, S.A. that could adversely affect our operations; (n) our expectations regarding future litigation both known and unknown; (o) our inability to accurately forecast the amount and timing of future collections could have a material adverse effect on our results of operations; (p) our reputation is a key asset to our business, and our business may be affected by how we are perceived in the marketplace; and (q) our debt could negatively impact our business, prevent us from satisfying our debt obligations and adversely affect our financial condition. 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 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 $65 billion (for the third quarter ended September 30, 2021), and is headquartered in Dallas, Texas. (www.santanderconsumerusa.com)

 

Santander Consumer USA Holdings Inc.
Financial Supplement
Third Quarter 2021
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	8
Table 5: Originations	10
Table 6: Asset sales	11
Table 7: Ending Portfolio	12
Table 8: Reconciliation of Non-GAAP Measures	13

 

Table 1: Condensed Consolidated Balance Sheets
	September 30, 2021				December 31, 2020
Assets	(Unaudited, Dollars in thousands)
Cash and cash equivalents	$	2,106,405			$	109,053
Finance receivables held for sale, net	359,561				1,567,527
Finance receivables held for investment, at amortized cost	33,183,439				33,114,638
Allowance for credit loss	(5,699,698)				(6,110,633)
Finance receivables held for investment, at amortized cost, net	27,483,741				27,004,005
Restricted cash	2,248,667				2,221,094
Accrued interest receivable	323,469				415,765
Leased vehicles, net	15,529,610				16,391,107
Furniture and equipment, net	62,168				62,032
Goodwill	74,056				74,056
Intangible assets	75,176				70,128
Other assets	811,597				972,726
Total assets	$	49,074,450			$	48,887,493
Liabilities and Equity
Liabilities:
Borrowings and other debt obligations	$	38,431,858			$	41,138,674
Deferred tax liabilities, net	1,855,859				1,263,796
Accounts payable and accrued expenses	554,581				531,369
Other liabilities	299,422				331,693
Total liabilities	$	41,141,720			$	43,265,532
Equity:
Common stock, $0.01 par value	3,061				3,061
Additional paid-in capital	391,343				393,800
Accumulated other comprehensive income, net	(31,194)				(50,566)
Retained earnings	7,569,520				5,275,666
Total stockholders' equity	$	7,932,730			$	5,621,961
Total liabilities and equity	$	49,074,450			$	48,887,493

 

Table 2: Condensed Consolidated Statements of Income
	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	(Unaudited, Dollars in thousands, except per share amounts)
Interest on finance receivables and loans	$	1,215,121			$	1,300,694			$	3,749,264			$	3,811,113
Leased vehicle income	670,334				725,156				2,115,134				2,210,684
Other finance and interest income	1,631				2,146				6,125				12,354
Total finance and other interest income	1,887,086				2,027,996				5,870,523				6,034,151
Interest expense	218,747				292,118				709,479				929,934
Leased vehicle expense	325,259				467,172				1,043,774				1,630,945
Net finance and other interest income	1,343,080				1,268,706				4,117,270				3,473,272
Credit loss expense (benefit)	42,058				340,548				(85,484)				2,110,331
Net finance and other interest income after credit loss expense	1,301,022				928,158				4,202,754				1,362,941
Profit sharing	41,009				30,414				158,888				56,239
Net finance and other interest income after credit loss expense and profit sharing	1,260,013				897,744				4,043,866				1,306,702
Investment gains (losses), net	5,241				(68,989)				(7,057)				(279,997)
Servicing fee income	19,975				18,574				61,481				56,797
Fees, commissions, and other	48,867				78,924				200,242				256,123
Total other income	74,083				28,509				254,666				32,923
Compensation and benefits	149,669				127,991				460,014				388,960
Repossession expense	33,349				35,910				117,540				115,861
Other expenses	179,147				99,761				382,313				308,193
Total operating expenses	362,165				263,662				959,867				813,014
Income (loss) before income taxes	971,931				662,591				3,338,665				526,611
Income tax expense	208,607				172,476				775,484				137,161
Net income (loss)	$	763,324			$	490,115			$	2,563,181			$	389,450
Net income per common share (basic)	$	2.49			$	1.58			$	8.37			$	1.21
Net income per common share (diluted)	$	2.49			$	1.58			$	8.37			$	1.21
Weighted average common shares (basic)	306,093,379				310,150,293				306,086,399				321,275,907
Weighted average common shares (diluted)	306,378,733				310,307,265				306,354,463				321,492,331
Number of shares outstanding	306,111,379				306,070,972				306,111,379				306,070,972

 

Table 3: Other Financial Information
	Three Months Ended September 30,								Nine Months Ended September 30,
Ratios (Unaudited, Dollars in thousands)	2021				2020				2021				2020
Yield on retail installment contracts	14.6		%		14.9		%		14.8		%		15.0		%
Yield on leased vehicles	8.4		%		6.0		%		8.4		%		4.4		%
Yield on personal loans, held for sale (1)	—		%		25.6		%		29.0		%		25.9		%
Yield on earning assets (2)	12.6		%		12.2		%		12.8		%		11.6		%
Cost of debt (3)	2.3		%		2.8		%		2.4		%		3.1		%
Net interest margin (4)	10.8		%		9.9		%		10.9		%		9.2		%
Expense ratio (5)	2.2		%		1.7		%		2.0		%		1.8		%
Return on average assets (6)	6.3		%		4.1		%		7.1		%		1.1		%
Return on average equity (7)	40.3		%		38.9		%		50.8		%		9.6		%
Net charge-off ratio on individually acquired retail installment contracts (8)	2.0		%		0.6		%		1.3		%		4.7		%
Net charge-off ratio (8)	2.0		%		0.6		%		1.3		%		4.7		%
Delinquency ratio on individually acquired retail installment contracts held for investment, end of period (9)	3.4		%		2.4		%		3.4		%		2.4		%
Allowance ratio (10)	17.4		%		18.4		%		17.4		%		18.4		%
Common stock dividend payout ratio (11)	8.8		%		13.9		%		10.5		%		54.4		%
Common Equity Tier 1 capital ratio (12)	19.5		%		13.7		%		19.5		%		13.7		%
Charge-offs, net of recoveries, on individually acquired retail installment contracts	$	161,943			$	46,078			$	326,795			$	1,100,138
End of period delinquent amortized cost over 59 days, retail installment contracts held for investment	1,106,673				817,577				1,106,673				817,577
End of period personal loans delinquent principal over 59 days, held for sale	—				93,296				—				93,296
End of period delinquent amortized cost over 59 days, loans held for investment	1,107,073				817,911				1,107,073				817,911
End of period assets covered by allowance for credit losses	32,767,052				33,515,634				32,767,052				33,515,634
End of period gross retail installment contracts held for investment	32,742,544				33,485,342				32,742,544				33,485,342
End of period gross personal loans held for sale	—				1,211,575				—				1,211,575
End of period gross finance receivables and loans held for investment	32,742,544				33,489,017				32,742,544				33,489,017
End of period gross finance receivables, loans, and leases	48,879,467				50,617,356				48,879,467				50,617,356
Average gross retail installment contracts held for investment	32,762,939				31,462,524				32,576,199				30,946,321
Average gross retail installment contracts held for investment and held for sale	33,186,854				32,847,716				32,906,959				31,632,276
Average gross finance receivables, loans and finance leases	33,222,223				34,135,256				33,351,219				33,008,338
Average gross operating leases	16,465,976				17,146,166				16,935,680				17,447,194
Average gross finance receivables, loans, and leases	49,688,199				51,281,422				50,286,899				50,455,532
Average managed assets	64,640,255				62,662,686				64,316,796				61,325,546
Average total assets	48,594,272				47,979,008				48,291,222				47,581,031
Average debt	38,296,862				41,064,441				39,029,273				40,262,948
Average total equity	7,578,893				5,044,976				6,731,687				5,429,924

(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.
(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.
(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). CET1 Ratio is provided as a preliminary calculation.

 

Table 4: Credit Quality
The activity in the credit loss allowance for retail installment contracts for the three and nine month ended September 30, 2021 and 2020 was as follows (Unaudited, Dollar amounts in thousands):
	Three Months Ended September 30, 2021								Three Months Ended September 30, 2020
	Retail Installment Contracts								Retail Installment Contracts
Allowance for Credit Loss	Non-TDR				TDR				Non-TDR				TDR
Balance — beginning of period	$	4,299,670			$	1,514,994			$	4,818,187			$	1,037,628
Credit loss expense (benefit)	188,195				(144,772)				24,841				314,075
Charge-offs (a)	(427,659)				(206,111)				(334,938)				(200,352)
Recoveries	338,097				133,730				392,042				97,171
Balance — end of period	$	4,398,303			$	1,297,841			$	4,900,132			$	1,248,522
	Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2020
	Retail Installment Contracts								Retail Installment Contracts
Allowance for Credit Loss	Non-TDR				TDR				Non-TDR				TDR
Balance — beginning of period	$	4,792,464			$	1,314,170			$	2,123,878			$	914,718
Day 1 - Adjustment to allowance for adoption of CECL standard	—				—				2,030,473				71,833
Credit loss expense (benefit)	(252,963)				169,268				1,526,545				581,344
Charge-offs (a)	(1,356,482)				(599,083)				(1,955,706)				(617,536)
Recoveries	1,215,284				413,486				1,174,942				298,163
Balance — end of period	$	4,398,303			$	1,297,841			$	4,900,132			$	1,248,522

(a)	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 September 30, 2021 and December 31, 2020 is as follows (Unaudited, Dollar amounts in thousands):
Delinquent Balance		September 30, 2021
		Amount				Percent
Amortized cost, 30-59 days past due		$	2,253,907			6.8	%
Delinquent amortized cost over 59 days		1,106,673				3.3	%
Total delinquent balance at amortized cost		$	3,360,580			10.1	%
Delinquent Balance		December 31, 2020
		Amount				Percent
Principal 30-59 days past due		$	1,971,766			6.0	%
Delinquent principal over 59 days		1,038,869				3.1	%
Total delinquent principal (a)		$	3,010,635			9.1	%

 

The retail installment contracts held for investment that were placed on nonaccrual status, as of September 30, 2021 and December 31, 2020 (Unaudited, Dollar amounts in thousands):
Nonaccrual Balance	September 30, 2021
	Amount				Percent
Non-TDR	$	818,292			2.5	%
TDR	391,834				1.2	%
Total non-accrual loans (a)	$	1,210,126			3.7	%
(a)     The table includes balances based on amortized cost.
Nonaccrual Balance		December 31, 2020
		Amount			Percent
Non-TDR	$	748,026			2.3	%
TDR		385,021			1.2	%
Total nonaccrual principal (a)	$	1,133,047			3.5	%

 

The table below presents the Company's allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of September 30, 2021 and December 31, 2020 (Unaudited, Dollar amounts in thousands):
Allowance Ratios	September 30, 2021				December 31, 2020
TDR - Unpaid principal balance	$	3,952,344			$	3,945,040
TDR - Impairment	1,297,841				1,314,170
TDR - Allowance ratio	32.8%				33.3%
Non-TDR - Unpaid principal balance	$	28,779,433			$	28,977,299
Non-TDR - Allowance	4,398,303				4,792,464
Non-TDR Allowance ratio	15.3%				16.5%
Total - Unpaid principal balance	$	32,731,777			$	32,922,339
Total - Allowance	5,696,144				6,106,634
Total - Allowance ratio	17.4%				18.5%

The Company's ACL decreased $0.1 billion and $0.4 billion for the three and nine months ended September 30, 2021. The decrease was primarily due to an improved macroeconomic outlook as well as credit quality and performance.

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								Nine Months Ended								Three Months Ended
	September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020				June 30, 2021
Retained Originations	(Unaudited, Dollar amounts in thousands)
Retail installment contracts	$	4,432,175			$	5,344,755			$	14,298,345			$	13,608,298			$	5,871,823
Average APR	14.8%				13.7 %				15.0%				13.8 %				14.4 %
Average FICO® (a)	606				637				603				631				608
Premium	(2.4)%				(1.3)%				(2.1)%				(1.0)%				(2.3)%
Personal loans (b)	—				305,039				—				923,112				$	—
Average APR	—%				29.4 %				—%				29.4 %				—%
Leased vehicles	1,577,539				1,856,166				5,799,786				4,863,504				$	2,067,741
Finance lease	2,816				4,087				8,147				$	9,016			$	2,534
Total originations retained	$	6,012,530			$	7,510,047			$	20,106,278			$	19,403,930			$	7,942,098
Sold Originations
Retail installment contracts	$	39,325			$	80,144			$	523,862			$	761,323			$	—
Average APR	4.9%				5.2 %				5.3%				4.8 %				—%
Average FICO® (c)	730				738				720				734				—
Personal Loans (d)	$	—			$	—			$	292,709			$	—			$	—
Average APR	—%				—%				29.7%				$	—			—%
Total originations sold	$	39,325			$	80,144			$	816,571			$	761,323			$	—
Total originations (excluding SBNA Originations Program)	$	6,051,855			$	7,590,191			$	20,922,849			$	20,165,253			$	7,942,098

(a)	Unpaid principal balance excluded from the weighted average FICO score is $386 million, $571 million, $1.4 billion, $1.5 billion and $559 million for the three months ended September 30, 2021 and 2020, nine months ended September 30, 2021 and 2020, and for the three months ended June 30, 2021, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $129 million, $145 million, $469 million, $386 million and $187 million, respectively, were commercial loans.
(b)	Included in the total origination volume is $72 million and $151 million for the three and nine months ended September 30, 2020, 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. Unpaid principal balance excluded from the weighted average FICO score is $3 million, $28 million, $11 million, $80 million and $0 million for the three and nine months ended September 30, 2021 and 2020, and for the three months ended June 30, 2021, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, the commercial loans were zero.
(d)	Included in the total origination volume is $25 million for the three months ended March 31, 2021 related to newly opened accounts.

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 $1.5 billion and $6.1 billion of retail installment contacts during the three and nine months ended September 30, 2021, respectively.

Table 6: Asset Sales
	Three Months Ended								Nine Months Ended								Three Months Ended
	September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020				June 30, 2021
Assets Sold	(Unaudited, Dollar amounts in thousands)
Retail installment contracts	$	277,898			$	636,301			$	2,968,467			$	1,148,587			$	309,784
Average APR	3.4%				4.9 %				4.2%				5.6 %				5.9 %
Average FICO®	$	737			735				737				715				716
Personal loans	$	—			—				1,253,476				—				$	—
Average APR	— %				— %				29.7%				— %				— %
Discount	—				—				—				—				—
Total asset sales	$	277,898			$	636,301			$	4,221,943			$	1,148,587			$	309,784

 

Table 7: Ending Portfolio
Ending outstanding balance, average APR and remaining unaccreted net discount of our held for investment portfolio as of September 30, 2021 and December 31, 2020, are as follows:
	September 30, 2021				December 31, 2020
	(Unaudited, Dollar amounts in thousands)
Retail installment contracts	$	32,742,544			$	32,937,036
Average APR	15.2%				15.2%
Premium	(0.96)%				(0.15)%
Leased vehicles	$	16,112,416			$	17,259,468
Finance leases	$	24,508			$	26,150

 

Table 8: Reconciliation of Non-GAAP Measures
	September 30, 2021				September 30, 2020
	(Unaudited, Dollar amounts in thousands)
Total equity	$	7,932,730			$	5,094,812
Add: Adjustment due to CECL capital relief (c)	1,729,366				1,842,536
Deduct: Goodwill, intangibles, and other assets, net of deferred tax liabilities	156,942				159,907
Deduct: Accumulated other comprehensive income (loss), net	(31,194)				(56,882)
Tier 1 common capital	$	9,536,348			$	6,834,323
Risk weighted assets (a)(c)	48,830,527				49,882,540
Common Equity Tier 1 capital ratio (b)(c)	19.5%				13.7%

(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 2020 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 elected this alternative option instead of the one described in the December 2018 rule.

 

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SOURCE Santander Consumer USA Holdings Inc.