
~~ITEM 8.~~	~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

~~INDEX TO FINANCIAL STATEMENTS~~



INDEX TO FINANCIAL STATEMENTS			Page
~~Reports~~Report of Independent Registered Public Accounting ~~Firms~~Firm			7963
Consolidated Balance Sheets			8265
Consolidated Statements of Income and Comprehensive Income			8467
Consolidated Statements of Equity			8568
Consolidated Statements of Cash ~~Flow~~Flows			8669
Notes to Consolidated Financial Statements			8771

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Santander Consumer USA Holdings Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Santander Consumer USA Holdings Inc. and its subsidiaries (the “Company”) as of December 31, ~~2017~~2019 and ~~December 31, 2016,~~2018, and the related consolidated statements of income and comprehensive income, of equity and of cash flows for each of the ~~two~~three years in the period ended December 31, ~~2017,~~2019, including the related notes (collectively referred to as the “consolidatedfinancial statements”).We also have audited the ~~Company's~~Company’s internal control over financial reporting as of December 31, ~~2017,~~2019, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2019 and ~~December 31, 2016,~~2018, and the results of ~~their~~its operations and ~~their~~its cash flows for each of the ~~two~~three years in the period ended December 31, ~~2017~~2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company ~~did not maintain,~~maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2017,~~2019, based on criteria established in Internal Control - Integrated Framework(2013) issued by the ~~COSO because~~material weaknesses in internal control over financial reporting related to deficiencies in the Control Environment, Risk Assessment, Control Activities and Monitoring and additional material weaknesses in the Company’s Development, Approval, and Monitoring of Models Used to Estimate the Credit Loss Allowance; and Identification, Governance, and Monitoring of Models Used to Estimate Accretion existed as of that date.COSO.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the December 31, 2017 consolidated~~financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on these consolidatedfinancial statements.~~

Basis for Opinions

The ~~Company's~~Company’s management is responsible for these consolidatedfinancial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in ~~management's report referred to above.~~Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the ~~Company's~~Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~("PCAOB")~~(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Credit Loss Allowance on Retail Installment Contracts Held for Investment – Loss Given Default Model Assumption and Qualitative Adjustment to the Model

As described in Note 4 to the consolidated financial statements, as of December 31, 2019, management estimated a credit loss allowance on retail installment contracts held for investment of $3.0 billion. As disclosed by management, management assesses the adequacy of the credit loss allowance based upon a holistic assessment including both quantitative and qualitative considerations. Management’s quantitative framework is supported by a credit model that considers several credit quality indicators including, but not limited to, historical loss experience and current portfolio trends. In developing the allowance, management utilizes a loss emergence period assumption, a loss given default assumption applied to the recorded investment, and a probability of default assumption. The credit model is adjusted by management through qualitative reserves to incorporate information reflective of the current business environment that is not considered by the quantitative framework.

The principal considerations for our determination that performing procedures relating to the credit loss allowance on retail installment contracts held for investment – loss given default model assumption and qualitative adjustment to the model is a critical audit matter are (i) there was significant judgment and estimation by management when determining the loss given default model assumption and qualitative adjustment to the model, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures relating to the credit loss allowance; (ii) significant audit effort was necessary in performing procedures relating to the loss given default model assumption and qualitative adjustment to the model; (iii) significant auditor judgment was necessary to evaluate the audit evidence obtained related to the loss given default model assumption and qualitative adjustment to the model; and (iv) the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the credit loss allowance, including controls over the loss given default model assumption and qualitative adjustment to the model. These procedures also included, among others, testing management’s process for determining the credit loss allowance, including evaluation of the reasonableness of the loss given default model assumption and the qualitative adjustment and testing the completeness, accuracy, and relevance of underlying data used in the loss given default model assumption and the qualitative adjustment. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the methodology for determining the loss given default model assumption and the qualitative adjustment to the model, as well as evaluating whether the factors used to make the qualitative adjustment to the model are reasonable given current macroeconomic trends and portfolio characteristics.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas

February ~~28, 2018~~

27, 2020

We have served as the Company’s auditor since 2016.

~~Report of Independent Registered Public Accounting Firm~~

~~To the Board of Directors and Stockholders of~~

~~Santander Consumer USA Holdings Inc.~~

~~Dallas, Texas~~

We have audited the accompanying consolidated statements of income and comprehensive income, equity, and cash flows of Santander Consumer USA Holdings Inc. and subsidiaries (the "Company") for the year ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of Santander Consumer USA Holdings Inc. and subsidiaries for the year ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

~~As discussed in Note 19 to the consolidated financial statements, the accompanying 2015 consolidated financial statements have been restated to correct misstatements.~~

~~/s/ Deloitte & Touche LLP~~

~~Dallas, Texas~~

~~March 30, 2016 (October 27, 2016 as to the effects of the restatement discussed in Note 19)~~

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(~~Dollar amounts~~Dollars in thousands, except ~~per~~ share ~~data)~~amounts)


	December 31, 2019		December 31, 2018
Assets
Cash and cash equivalents - $41,785 and $101,334 held at affiliates, respectively	$	81,848	$	148,436
Finance receivables held for sale, net	1,007,105		1,068,757
Finance receivables held for investment, net	27,767,019		25,117,454
Restricted cash and cash equivalents - $27 and $341 held at affiliates, respectively	2,079,239		2,102,048
Accrued interest receivable	288,615		303,686
Leased vehicles, net	16,461,982		13,978,855
Furniture and equipment, net of accumulated depreciation of $85,347 and $72,345, respectively	59,873		61,280

Goodwill	74,056		74,056
Intangible assets, net of amortization of $52,665 and $45,324, respectively	42,772		35,195
Due from affiliates	30,841		9,654
Other assets	1,040,179		1,060,434
Total assets	$	48,933,529	$	43,959,855
Liabilities and Equity
Liabilities:
Total borrowings and other debt obligations - $5,652,325 and $3,503,293 from/to affiliates, respectively	39,194,141		34,883,037

Accounts payable and accrued expenses	499,326		472,321

Deferred tax liabilities, net	1,468,222		1,155,883

Due to affiliate	88,681		63,219
Other liabilities	364,539		367,037
Total liabilities	41,614,909		36,941,497
Commitments and contingencies (Notes 6 and 11)
Equity:
Common stock, $0.01 par value — 1,100,000,000 shares authorized;
362,798,115 and 362,028,916 shares issued and 339,201,748 and 352,302,759 shares outstanding, respectively	3,392		3,523
Additional paid-in capital	1,173,262		1,515,572
Accumulated other comprehensive income (loss), net of taxes	(26,693)		33,515
Retained earnings	6,168,659		5,465,748
Total stockholders’ equity	7,318,620		7,018,358
Total liabilities and equity	$	48,933,529	$	43,959,855

December 31,
2017 December 31,
2016
Assets
Cash and cash equivalents — $106,295 and $98,536 held at affiliates, respectively $ 527,805
$ 160,180
Finance receivables held for sale, net 2,210,421
2,123,415
Finance receivables held for investment, net 22,427,769
23,481,001
Restricted cash — $2,529 and $11,629 held at affiliates, respectively 2,553,902
2,757,299
Accrued interest receivable 326,640
373,274
Leased vehicles, net 10,160,327
8,564,628
Furniture and equipment, net of accumulated depreciation of $55,525 and $47,365, respectively 69,609
67,509
Federal, state and other income taxes receivable 95,060
87,352
Related party taxes receivable 467
1,087
Goodwill 74,056
74,056
Intangible assets, net of amortization of $36,616 and $33,652, respectively 29,734
32,623
Due from affiliates 33,270
31,270
Other assets 913,244
785,410
Total assets $ 39,422,304
$ 38,539,104
Liabilities and Equity
Liabilities:
Notes payable — credit facilities $ 4,848,316
$ 6,739,817
Notes payable — secured structured financings 22,557,895
21,608,889
Notes payable — related party 3,754,223
2,975,000
Accrued interest payable 38,529
33,346
Accounts payable and accrued expenses 429,531
379,021
Deferred tax liabilities, net 897,121
1,278,064
Due to affiliates 82,382
50,620
Other liabilities 333,806
235,728
Total liabilities 32,941,803
33,300,485
Commitments and contingencies (Notes 6 and 11)

Equity:
Common stock, $0.01 par value — 1,100,000,000 shares authorized;
360,779,465 and 359,002,145 shares issued and 360,527,463 and 358,907,550 shares outstanding, respectively 3,605
3,589
Additional paid-in capital 1,681,558
1,657,611
Accumulated other comprehensive income, net 44,262
28,259
Retained earnings 4,751,076
3,549,160
Total stockholders’ equity 6,480,501
5,238,619
Total liabilities and equity $ 39,422,304
$ 38,539,104

See notes to audited consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(~~Dollar amounts~~Dollars in thousands)

The assets of consolidated VIEs, presented based upon the legal transfer of the underlying assets in order to reflect legal ownership, that can be used only to settle obligations of the consolidated VIE and the liabilities of these entities for which creditors (or beneficial interest holders) do not have recourse to ~~our~~the Company’s general credit were as follows:


	December 31, 2019		December 31, 2018
Assets
Restricted cash and cash equivalents	$	1,629,870	$	1,582,158

Finance receivables held for investment, net	26,532,328		24,151,971
Leased vehicles, net	16,461,982		13,978,855
Various other assets	625,359		685,383
Total assets	$	45,249,539	$	40,398,367
Liabilities
Notes payable	$	34,249,851	$	31,949,839
Various other liabilities	188,093		122,010
Total liabilities	$	34,437,944	$	32,071,849

December 31,
2017 December 31,
2016
Assets
Restricted cash $ 1,995,557
$ 2,087,177
Finance receivables held for sale, net 1,106,393
1,012,277
Finance receivables held for investment, net 21,715,365
22,919,312
Leased vehicles, net 10,160,327
8,564,628
Various other assets 733,123
686,253
Total assets $ 35,710,765
$ 35,269,647
Liabilities
Notes payable $ 28,467,942
$ 31,659,203
Various other liabilities 197,969
91,234
Total liabilities $ 28,665,911
$ 31,750,437

Certain amounts shown above are greater than the amounts shown in the corresponding line items in the accompanying consolidated balance sheets due to intercompany eliminations between the VIEs and other entities consolidated by the Company. For example, for most of its securitizations, the Company retains one or more of the lowest tranches of bonds. Rather than showing investment in bonds as an asset and the associated debt as a liability, these amounts are eliminated in consolidation as required by ~~U.S.~~ GAAP.

See notes to audited consolidated financial ~~statements.~~statements

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(~~Dollar amounts~~Dollars in thousands, except per share ~~data)~~amounts)


	For the Year Ended December 31,
	2019		2018		2017
Interest on finance receivables and loans	$	5,049,966	$	4,842,564	$	4,845,623
Leased vehicle income	2,764,258		2,257,719		1,788,457
Other finance and interest income	42,234		33,235		19,885
Total finance and other interest income	7,856,458		7,133,518		6,653,965
Interest expense — Including $210,098, $166,952, and $148,345 to affiliates, respectively	1,331,804		1,111,760		947,734
Leased vehicle expense	1,862,121		1,535,756		1,298,513
Net finance and other interest income	4,662,533		4,486,002		4,407,718
Provision for credit losses	2,093,749		2,205,585		2,363,811
Net finance and other interest income after provision for credit losses	2,568,784		2,280,417		2,043,907
Profit sharing	52,731		33,137		29,568
Net finance and other interest income after provision for credit losses and profit sharing	2,516,053		2,247,280		2,014,339
Investment losses, net — Including $1,139, $(20,736), and $22,900 from affiliates, respectively	(406,687)		(401,638)		(366,439)
Servicing fee income — Including $57,630, $46,832, and $24,529 from affiliates, respectively	91,334		106,840		118,341
Fees, commissions, and other — Including $25,343, $14,213, and $900 from affiliates, respectively	364,119		333,458		349,204
Total other income	48,766		38,660		101,106
Compensation expense	510,743		482,800		581,017
Repossession expense	262,061		264,777		275,704
Other operating costs — Including $9,363, $12,926, and $5,253 to affiliates, respectively	437,747		346,095		454,715
Total operating expenses	1,210,551		1,093,672		1,311,436
Income before income taxes	1,354,268		1,192,268		804,009
Income tax expense	359,898		276,342		(368,798)
Net income	$	994,370	$	915,926	$	1,172,807

Net income	$	994,370	$	915,926	$	1,172,807
Other comprehensive income (loss):
Change in unrealized gains (losses) on cash flow hedges, net of tax of $(19,581), $(6,427), and $270, respectively	(60,970)		(16,896)		16,003
Unrealized gains (losses) on available-for-sale debt securities net of tax of $245, $0, and $0 respectively	762		—		—
Comprehensive income	$	934,162	$	899,030	$	1,188,810
Net income per common share (basic)	$	2.87	$	2.55	$	3.26
Net income per common share (diluted)	$	2.86	$	2.54	$	3.26
Dividend declared per common share	$	0.84	$	0.50	$	0.03
Weighted average common shares (basic)	346,992,162		359,861,764		359,613,714
Weighted average common shares (diluted)	347,507,507		360,672,417		360,292,330

For the Year Ended December 31,
2017 2016 2015
Interest on finance receivables and loans $ 4,755,678
$ 5,026,790
$ 5,031,829
Leased vehicle income 1,788,457
1,487,671
1,037,793
Other finance and interest income 19,885
15,135
18,162
Total finance and other interest income 6,564,020
6,529,596
6,087,784
Interest expense — Including $148,345, $119,277, and $162,353 to affiliates, respectively 947,734
807,484
628,791
Leased vehicle expense 1,298,513
995,459
726,420
Net finance and other interest income 4,317,773
4,726,653
4,732,573
Provision for credit losses 2,254,361
2,468,200
2,785,871
Net finance and other interest income after provision for credit losses 2,063,412
2,258,453
1,946,702
Profit sharing 29,568
47,816
57,484
Net finance and other interest income after provision for credit losses and profit sharing 2,033,844
2,210,637
1,889,218
Investment gains (losses), net — Including $22,900, $346, and ($5,654) from affiliates, respectively (366,439 ) (444,759 ) (95,214 )
Servicing fee income — Including $24,529, $16,733, and $16,453 from affiliates, respectively 118,341
156,134
131,113
Fees, commissions, and other — Including $900, $900, and $9,331 from affiliates, respectively 349,204
382,171
385,744
Total other income 101,106
93,546
421,643
Compensation expense 581,017
498,224
434,041
Repossession expense 275,704
293,355
241,522
Other operating costs — Including $5,253, $2,480, and $9,195 to affiliates, respectively 454,715
351,893
345,686
Total operating expenses 1,311,436
1,143,472
1,021,249
Income before income taxes 823,514
1,160,711
1,289,612
Income tax expense (benefit) (364,092 ) 394,245
465,572
Net income $ 1,187,606
$ 766,466
$ 824,040

Net income $ 1,187,606
$ 766,466
$ 824,040
Other comprehensive income (loss):
Change in unrealized gains (losses) on cash flow hedges, net of tax of $270, $15,647, and $872, respectively 16,003
26,134
(1,428 )
Comprehensive income $ 1,203,609
$ 792,600
$ 822,612
Net income per common share (basic) $ 3.30
$ 2.14
$ 2.32
Net income per common share (diluted) $ 3.30
$ 2.13
$ 2.31
Dividends paid per common share $ 0.03
$ —
$ —
Weighted average common shares (basic) 359,613,714
358,280,814
355,102,742
Weighted average common shares (diluted) 360,292,330
359,078,337
356,163,076

See notes to audited consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share amounts)


	Common Stock					Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), net		Retained Earnings			Total Stockholders’ Equity
	Shares	Amount
Balance — January 1, 2017	358,908	$	3,589	$	1,657,611	$	28,259	$	3,549,160		$	5,238,619
Cumulative-effect adjustment upon adoption of ASU 2016-09	—	—		1,439		—		25,113			26,552
Stock issued in connection with employee incentive compensation plans	1,776	18		9,086		—		—			9,104
Purchase of treasury stock	(157)	(2)		(3,768)		—		—			(3,770)
Stock based compensation expense	—	—		18,494		—		—			18,494
Dividends paid ($0.03 per share)	—	—		—		—		(10,803)			(10,803)
Tax sharing with affiliate	—	—		(1,304)		—		—			(1,304)
Net income	—	—		—		—		1,172,807			1,172,807
Other comprehensive income, net of taxes	—	—		—		16,003		—			16,003
Balance — December 31, 2017	360,527	$	3,605	$	1,681,558	$	44,262	$	4,736,277		$	6,465,702
Cumulative-effect adjustment upon adoption of ASU 2018-02	—	—		—		6,149		(6,149)			—
Stock issued in connection with employee incentive compensation plans	1,250	13		5,942		—		—			5,955
Stock repurchase/Treasury stock	(9,474)	(95)		(182,465)		—		—			(182,560)
Stock based compensation expense	—	—		7,656		—		—			7,656
Dividends paid ($0.50 per share)	—	—		—		—		(180,306)			(180,306)
Tax sharing with affiliate	—	—		2,881		—		—			2,881
Net income	—	—		—		—		915,926			915,926
Other comprehensive income (loss), net of taxes	—	—		—		(16,896)		—			(16,896)
Balance — December 31, 2018	352,303	$	3,523	$	1,515,572	$	33,515	$	5,465,748		$	7,018,358
Stock issued in connection with employee incentive compensation plans	769	8		1,322		—		—			1,330
Stock repurchase/Treasury stock	(13,870)	(139)		(337,828)		—		—			(337,967)
Stock based compensation expense	—	—		8,577		—		—			8,577
Dividends paid ($0.84 per share)	—	—		—		—		(291,459)			(291,459)
Tax sharing with affiliate	—	—		(14,381)		—		—			(14,381)
Available-for-sale securities, net of taxes	—	—		—		762		—			762
Net income	—	—		—		—		994,370			994,370
Other comprehensive income (loss), net of taxes	—	—		—		(60,970)		—			(60,970)
Balance — December 31, 2019	339,202	$	3,392	$	1,173,262	$	(26,693)	$	6,168,659		$	7,318,620

Common Stock Additional
Paid-In
Capital Accumulated
Other
Comprehensive
Income (Loss), net Retained
Earnings Total
Stockholders’
Equity
Shares Amount
Balance — January 1, 2015 348,978
$ 3,490
$ 1,560,519
$ 3,553
$ 1,958,654
$ 3,526,216
Stock issued in connection with employee incentive compensation plans 8,985
89
74,139
—
—
74,228
Purchase of treasury stock (17 ) —
(267 ) —
—
(267 )
Stock-based compensation —
—
10,686
—
—
10,686
Tax sharing with affiliate —
—
(926 ) —
—
(926 )
Net income —
—
—
—
824,040
824,040
Other comprehensive (loss), net of taxes —
—
—
(1,428 ) —
(1,428 )
Balance — December 31, 2015 357,946
$ 3,579
$ 1,644,151
$ 2,125
$ 2,782,694
$ 4,432,549
Stock issued in connection with employee incentive compensation plans 988
10
5,697
—
—
5,707
Purchase of treasury stock (26 ) —
(350 ) —
—
(350 )
Stock based compensation expense —
—
9,537
—
—
9,537
Tax sharing with affiliate —
—
(1,424 ) —
—
(1,424 )
Net income —
—
—
—
766,466
766,466
Other comprehensive income, net of taxes —
—
—
26,134
—
26,134
Balance — December 31, 2016 358,908
$ 3,589
$ 1,657,611
$ 28,259
$ 3,549,160
$ 5,238,619
Cumulative-effect adjustment upon adoption of ASU 2016-09 (Note 1)
—
—
1,439
—
25,113
26,552
Stock issued in connection with employee incentive compensation plans 1,776
18
9,086
—
—
9,104
Purchase of treasury stock (157 ) (2 ) (3,768 ) —
—
(3,770 )
Stock based compensation expense —
—
18,494
—
—
18,494
Tax sharing with affiliate —
—
(1,304 ) —
—
(1,304 )
Dividends paid —
—
—
—
(10,803 ) (10,803 )
Net income —
—
—
—
1,187,606
1,187,606
Other comprehensive income, net of taxes —
—
—
16,003
—
16,003
Balance — December 31, 2017 360,527
$ 3,605
$ 1,681,558
$ 44,262
$ 4,751,076
$ 6,480,501

See notes to audited consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~Dollar amounts~~Dollars in thousands)



	For the Year Ended December 31,
	2019		2018		2017
Cash flows from operating activities:
Net income	$	994,370	$	915,926	$	1,172,807
Adjustments to reconcile net income to net cash provided by operating activities
Derivative mark to market	12,899		(6,298)		(8,723)
Provision for credit losses	2,093,749		2,205,585		2,363,811
Depreciation and amortization	1,988,552		1,668,467		1,403,653
Accretion of discount	(70,046)		(158,477)		(246,038)
Originations and purchases of receivables held for sale	—		(1,852,628)		(3,624,718)
Proceeds from sales of and collections on receivables held for sale	127,984		3,143,462		3,099,258
Change in revolving personal loans, net	(360,923)		(371,716)		(329,167)
Investment losses, net	406,687		401,638		366,439

Stock-based compensation	8,577		7,656		18,494
Deferred tax expense	324,166		267,486		(360,495)
Changes in assets and liabilities:
Accrued interest receivable	(1,210)		23,053		9,947
Accounts receivable	(1,886)		10,094		82,578
Federal income tax and other taxes	(3,004)		(3,153)		(7,262)
Other assets	(16,957)		(44,842)		(88,537)
Accrued interest payable	(3,184)		9,927		2,767
Other liabilities	16,097		27,515		50,700
Due to/from affiliates	17,362		1,174		35,832
Net cash provided by operating activities	5,533,233		6,244,869		3,941,346
Cash flows from investing activities:
Originations and purchases of portfolios, and disbursements on finance receivables held for investment	(17,115,810)		(15,707,694)		(10,952,508)

Collections on finance receivables held for investment	12,312,080		10,683,915		10,113,377
Proceeds from sale of loans held for investment	—		—		135,577
Leased vehicles purchased	(8,573,425)		(9,819,357)		(6,007,775)
Manufacturer incentives received	801,966		1,111,421		888,532
Proceeds from sale of leased vehicles	3,426,687		3,327,649		2,274,238
Change in revolving personal loans, net	31,163		14,590		(18,761)
Purchases of available-for-sale securities	(85,098)		—		—

Proceeds from repayments and maturities of available-for-sale securities	6,000		—		—
Purchases of furniture and equipment	(16,358)		(10,394)		(16,556)
Sales of furniture and equipment	364		86		722
Upfront fee paid to FCA	(60,000)		—		—

Other investing activities	—		(16,004)		(7,179)
Net cash used in investing activities	(9,272,431)		(10,415,788)		(3,590,333)
Cash flows from financing activities:
Proceeds from borrowings and other debt obligations, net of debt issuance costs —$8,725,000, $500,000, and $7,065,000 from affiliates, respectively	46,381,994		45,538,130		41,369,032
Payments on borrowings and other debt obligations - $(6,575,000), $0, and $(4,885,577) to affiliates, respectively	(42,107,268)		(41,845,857)		(41,560,118)




Proceeds from stock option exercises, gross	4,501		10,289		15,104
Shares repurchased	(337,967)		(182,560)		—
Dividends paid	(291,459)		(180,306)		(10,803)

Net cash provided by (used in) financing activities	3,649,801		3,339,696		(186,785)

For the Year Ended December 31,
2017 2016 2015
Cash flows from operating activities:
Net income $ 1,187,606
$ 766,466
$ 824,040
Adjustments to reconcile net income to net cash provided by operating activities:
Derivative mark to market (8,723 ) 169
(1,650 )
Provision for credit losses 2,254,361
2,468,200
2,785,871
Depreciation and amortization 1,403,653
1,094,774
821,782
Accretion of discount (246,038 ) (355,961 ) (362,573 )
Originations and purchases of receivables held for sale (3,624,718 ) (4,019,155 ) (5,472,995 )
Proceeds from sales of and repayments on receivables originated as held for sale 3,099,258
3,905,622
4,662,778
Change in revolving unsecured consumer loans (329,167 ) (317,506 ) (107,947 )
Investment losses, net 366,439
444,759
95,214
Stock-based compensation 18,494
9,537
10,686
Deferred tax expense (benefit) (355,789 ) 379,753
427,283
Changes in assets and liabilities:
Accrued interest receivable 23,925
5,358
(93,089 )
Accounts receivable (16,196 ) 5,315
(8,587 )
Federal income tax and other taxes (7,262 ) 175,075
233,313
Other assets (88,537 ) (55,765 ) (20,628 )
Accrued interest payable 2,767
9,559
4,204
Other liabilities 50,700
(58,944 ) 59,736
Due to/from affiliates 35,832
15,861
52,268
Net cash provided by operating activities 3,766,605
4,473,117
3,909,706
Cash flows from investing activities:

Originations of and disbursements on finance receivables held for investment (10,659,617 ) (12,333,767 ) (16,910,010 )
Purchases of portfolios of finance receivables held for investment (292,891 ) (568,009 ) —
Collections on finance receivables held for investment 10,186,369
10,295,849
10,178,209
Proceeds from sale of loans originated as held for investment 135,577
823,877
2,187,328
Leased vehicles purchased (6,007,775 ) (5,596,639 ) (5,149,481 )
Manufacturer incentives received 888,532
1,210,779
979,183
Proceeds from sale of leased vehicles 2,274,238
1,548,186
1,931,957
Change in revolving personal loans (18,761 ) (93,194 ) (438,785 )
Purchases of furniture and equipment (16,556 ) (23,290 ) (18,798 )
Proceeds from sales of furniture and equipment 722
1,844
511
Change in restricted cash 309,029
(525,433 ) (466,497 )
Other investing activities (7,179 ) (8,017 ) (8,829 )
Net cash used in investing activities (3,208,312 ) (5,267,814 ) (7,715,212 )
Cash flows from financing activities:

Proceeds from notes payable related to secured structured financings — net of debt issuance costs 14,625,565
13,756,342
15,232,692
Payments on notes payable related to secured structured financings (13,700,149 ) (12,941,849 ) (11,113,459 )
Proceeds from unsecured notes payable 7,065,000
4,491,153
6,150,000
Payments on unsecured notes payable (4,885,577 ) (4,076,571 ) (7,390,631 )
Proceeds from notes payable 19,678,467
25,256,469
27,379,570
Payments on notes payable (22,978,275 ) (25,557,686 ) (26,554,425 )
Proceeds from stock option exercises, gross 15,104
8,126
87,762
Repurchase of stock - employee tax withholding —
—
(267 )
Dividends paid (10,803 ) —
—
Net cash provided by (used in) financing activities (190,668 ) 935,984
3,791,242
Net increase (decrease) in cash and cash equivalents 367,625
141,287
(14,264 )
Cash — Beginning of year 160,180
18,893
33,157
Cash — End of year $ 527,805
$ 160,180
$ 18,893

Noncash investing and financing transactions (Refer to Note 13)

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in thousands)



	For the Year Ended December 31,
	2019		2018		2017
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents	(89,397)		(831,223)		164,228
Cash and cash equivalent and restricted cash and cash equivalents— Beginning of year	2,250,484		3,081,707		2,917,479
Cash and cash equivalents and restricted cash and cash equivalents — End of year	$	2,161,087	$	2,250,484	$	3,081,707
Supplemental cash flow information:
Cash and cash equivalents	81,848		148,436		527,805
Restricted cash and cash equivalents	2,079,239		2,102,048		2,553,902
Total cash and cash equivalents and restricted cash and cash equivalents	$	2,161,087	$	2,250,484	$	3,081,707

See notes to audited consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(~~Dollar amounts~~Dollars in thousands, except per share ~~data)~~amounts)


1.	1. Description of Business, Basis of Presentation, and Significant Accounting Policies and Practices

~~Santander Consumer USA Holdings Inc., a Delaware corporation (together with its subsidiaries, SC or the Company),~~The Company is the holding company for ~~Santander Consumer USA Inc., an~~SC Illinois, ~~corporation (SC Illinois),~~ and its subsidiaries, a specialized consumer finance company focused on vehicle finance and third-party ~~servicing.~~servicing and delivering service to dealers and customers across the full credit spectrum. The Company’s primary business is the indirect origination and ~~securitization~~servicing of retail installment contracts and leases, principally, through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers.

~~In conjunction with a ten-year private label financing agreement (the Chrysler Agreement) with Fiat Chrysler Automobiles US LLC (FCA) that became effective May 1, 2013,~~ Additionally, the Company ~~offers~~sells consumer retail installment contracts through flow agreements and, when market conditions are favorable, it accesses the ABS market through securitizations of consumer retail installment contracts. SAF is our primary vehicle brand, and is available as a ~~full spectrum of auto financing products~~finance option for automotive dealers across the United States.

Since May 2013, under the Chrysler Agreement with FCA, the Company has operated as FCA’s preferred provider for consumer loans, leases and dealer loans and provides services to FCA customers and dealers under the ~~Chrysler Capital~~CCAP brand. These products and services include consumer retail installment contracts and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit. ~~Retail installment contracts and vehicle leases~~On June 28, 2019, the Company entered into ~~with FCA customers, as part of~~an Amendment to the Chrysler Agreement ~~represent a significant concentration of those portfolios and there is a risk that~~with FCA, which modified the Chrysler Agreement ~~could be~~to, among other things, adjust certain performance metrics, exclusivity commitments and payment provisions. The Amendment also terminated ~~prior to its expiration date. Termination of~~ the ~~Chrysler Agreement could result in a decrease in~~previously disclosed tolling agreement, dated July 11, 2018, between the ~~amount of new retail installment contracts~~Company and ~~vehicle leases entered into with FCA customers.~~FCA.

The Company also originates vehicle loans through a web-based direct lending program, purchases vehicle retail installment contracts from other lenders, and services automobile and recreational and marine vehicle portfolios for other lenders. Additionally, the Company has other relationships through which it provides ~~personal loans, private-label revolving lines and~~ other consumer finance products.

As of December 31, ~~2017,~~2019, the Company was owned approximately ~~68.1%~~72.4% by ~~Santander Holdings USA, Inc. (SHUSA),~~SHUSA, a subsidiary of ~~Banco~~ Santander, ~~S.A. (Santander)~~ and approximately ~~31.9%~~27.6% by other shareholders.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, including certain Trusts, which are considered ~~variable interest entities (VIEs).~~VIEs. The Company also consolidates other VIEs for which it was deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with ~~U.S.~~ GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities, as of the date of the financial statements and the amount of revenue and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. These estimates include the determination of credit loss allowance, discount accretion, impairment, fair value, ~~impairment,~~ expected end-of-term lease residual values, values of repossessed assets, and income taxes. These estimates, although based on actual historical trends and modeling, may potentially show significant variances over time.

Business Segment Information

The Company has ~~one~~1 reportable ~~segment:~~segment, Consumer Finance, which includes the Company’s vehicle financial products and services, including retail installment contracts, vehicle leases, and ~~dealer loans,~~Dealer Loans, as well as financial products and services related to ~~motorcycles,~~ recreational vehicles and marine vehicles. It also includes the Company’s personal loan and point-of-sale financing operations.

Accounting Policies

Finance Receivables

Finance receivables are comprised of retail installment contracts, ~~individually acquired,~~ purchased receivables - credit impaired, receivables from dealer, personal loans, and ~~capital~~finance lease receivables. Finance receivables are classified as either held for sale or held for investment, depending on the Company’s intent and ability to hold the underlying contract for the foreseeable

~~foreseeable~~

future or until maturity or payoff. Most of the Company’s retail installment contracts held for investment are pledged under its warehouse facilities or securitization transactions.

Retail Installment Contracts

Retail installment contracts consist largely of nonprime automobile finance receivables, which are acquired ~~individually~~ from dealers at a nonrefundable discount from the contractual principal amount. Retail installment contracts also include receivables originated through a direct lending program and loan portfolios purchased from other lenders. Retail installment contracts ~~acquired individually or originated directly~~ are primarily classified as held for investment and carried at amortized cost, net of allowance for credit losses.

The Company has elected the fair value option for certain non-performing loans acquired through the exercise of a clean-up call. Accordingly, changes in the fair value of these finance receivables, which are based upon fair value estimates (Note 15), are reported in investment gains (losses), net, in the consolidated statements of income and comprehensive income.

Interest is accrued when earned in accordance with the terms of the retail installment contract. The accrual of interest is discontinued and reversed once a retail installment contract becomes more than 60 days past due, and is resumed and reinstated if a delinquent account subsequently becomes 60 days or less past due. For loans on nonaccrual status, interest income is recognized on a cash ~~basis, however the Company continues to assess the recognition of cash received on those loans in order to identify whether certain of those loans should also be placed on a cost recovery~~ basis. For TDR loans on nonaccrual status, the accrual of interest is resumed and reinstated if a delinquent account subsequently becomes 60 days or less past due. However, for TDR loans placed on cost recovery basis, the Company returns to accrual when a sustained period of repayment performance has been achieved (typically defined as six months), which were insignificant as of December 31, 2017.

Beginning January 1, 2017, based on observed TDR performance, the Company places certain additional TDRs on nonaccrual status when the Company believes repayment under the revised terms is not reasonably assured and at the latest, when the account becomes past due more than 60 days. The Company believes repayment under the revised terms is not reasonably assured for a retail installment contract that is already on nonaccrual (i.e., more than 60 days past due) and has received a modification or deferment that qualifies for a TDR event. In addition, any TDR that subsequently receives a third deferral is placed on nonaccrual status. Further, the Company has determined that certain of these loans should also be placed on a cost recovery basis.

The Company noted some deterioration in the performance of recent originations, particularly those loans originated in 2015, and addressed those trends with the introduction of more disciplined underwriting standards in late 2016. Based on this disciplined underwriting (among other things), the servicing practices for retail installment contracts originated after January 1, 2017 changed, such that there isconsiders an increase in the minimum payment requirements. Although these changes impact the measurement of customer delinquencies, the Company does not believe they have a significant impact on the amount or timing of the recognition of credit losses and allowance for loan losses. With respectaccount delinquent when an obligor fails to ~~receivables originated by the Company through its “Chrysler Capital” channel, the required minimum payment is~~pay substantially all (defined as 90% of the scheduled payment. With respect to receivables originated by the Company or acquired by the Company from an unaffiliated third-party originator on or after January 1, 2017, the required minimum payment is 90%) of the scheduled payment ~~whereas previous~~by the due date. Payments generally are applied to ~~January 1, 2017 the required minimum payment was 50%~~interest first, then principal, then fees, regardless of ~~the scheduled payment.~~a contract’s accrual status. The payment following the partial payment must be a full payment, or the account will move into delinquency status at that time. ~~Payments generally are applied to interest first, then principal, then fees, regardless of a contract's accrual status.~~

The amortization of discounts, subvention payments from manufacturers, and other origination costs on retail installment contracts held for investment ~~acquired individually, or through a direct lending program,~~ are recognized as adjustments to the yield of the related contract using the effective interest method. The Company estimates future principal prepayments specific to pools of homogenous loans which are based on the vintage, credit quality at origination and term of the loan. Prepayments in our portfolio are sensitive to credit quality, with higher credit quality loans generally experiencing higher voluntary prepayment rates than lower credit quality loans. The impact of defaults is not considered in the prepayment rate; the prepayment rate only considers voluntary prepayments. The resulting prepayment rate specific to each pool is based on historical experience, and is used as an input in the calculation of the constant effective yield. Our estimated weighted average prepayment rates ranged from ~~6.1% to10.4%~~5.1% to 11.0% as of December 31, ~~2017,~~2019, and ~~6.0%~~5.7% to ~~10.5%~~10.8% as of December 31, ~~2016.~~2018.

Purchased Receivables Portfolios -

Receivables portfolios purchased from other lenders or pursuant to a ~~repurchased~~repurchase obligation that are purchased at amounts less than the principal amount of those receivables, resulting in a discount to par, are accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, if the discount was attributable, at least in part, to the expectation that not all contractual cash flows will be received from borrowers, which did not exist at the origination of the loans. The excess of the estimated undiscounted principal, interest, and other cash flows expected to be collected over the initial investment in the acquired loans, or accretable yield, is accreted to interest income over the expected life of the loans using the effective interest rate method.

The nonaccretable difference is the excess between the contractually required payments and the amount of cash flows, considering the impact of prepayments, expected to be collected. The nonaccretable difference is not accreted into income.

Any deterioration in the performance of the purchased portfolios results in an incremental impairment. Improvements in performance of the purchased pools that significantly increase actual or expected cash flows result in first a reversal of previously recorded impairment and then in a transfer of the excess from nonaccretable difference to accretable yield, which will be recorded as finance income over the remaining life of the receivables.

Receivable portfolios purchased from other lenders are considered non-credit impaired loans if they either do not have evidence of credit quality deterioration or it was not probable that the Company would not collect all contractually required payments, which will be evaluated using a number of factors including the loan’s delinquency status, borrower’s credit status, and roll rates. Accordingly, these loans will be accounted for in accordance with ASC 310 - 20. Under ASC 310-20, the difference between the loan’s principal balance, at the time of purchase, and the fair value is recognized as an adjustment of yield over the life of the loan. All other policies related to interest income,

calculation of allowance for loan losses, and recognizing TDRs would be similar to retail installment contracts acquired individually and originated by the Company.

Personal Loans, Net

Personal loans, net, ~~primarily consist~~consists of ~~both~~ revolving ~~and amortizing term~~ finance receivables acquired individually under terms of the Company’s agreements with certain third parties who originate and continue to service the loans. Personal loans also include private-label revolving lines of credit originated through the Company’s relationship with a point-of-sale lending technology company. Certain of the revolving receivables were acquired at a discount.

Interest is accrued when earned in accordance with the terms of the contract. The accrual of interest on amortizing term receivables is discontinued and reversed once a receivable becomes past due more than 60 days, and is resumed and reinstated if a delinquent account subsequently becomes 60 days or less past due. The accrual of interest on revolving personal loans continues until the receivable becomes 180 days past due, at which point the principal amount and interest are charged off. ~~The amortization of discounts is recognized on a straight-line basis over the estimated period over which the receivables held for investment, are expected to be outstanding.~~

Receivables from Dealers

Receivables from dealers include ~~floorplan loans~~Floorplan Loans provided to dealerships to finance new and used vehicles for their inventory. Receivables from dealers also include real estate loans and working capital revolving lines of credit. Interest on these loans is accrued when earned in accordance with the agreement with the dealer.

Finance Receivables Held for Sale, Net

Finance receivables, which may include any of the receivables described above, that the Company does not have the intent and ability to hold for the foreseeable future or until maturity or payoff, including those previously designated as held for investment and subsequently identified for sale, are classified as held for sale, at origination or at the time a decision to sell is made. Finance receivables designated as held for sale are carried at the lower of cost or market, as determined on an aggregate basis. Cost, or recorded investment, includes deferred net origination fees and costs, premium or discounts, accrued interest, manufacturer subvention (if any) and any direct write-down of the investment. When loans are transferred from held for investment, ~~if the recorded investment of a loan exceeds its market value at the time of initial designation as held for sale,~~ the Company ~~will recognize a direct write-down of the~~records charge offs as per its charge off policy. Any excess ~~of the recorded investment over market as a charge-off against the credit loss allowance.~~allowance is reversed through provision expense. Subsequent to the initial measurement of retail installment contracts and personal loans held for sale, market declines in the recorded investment, whether due to credit or market risk, are recorded through investment gains (losses), net of lower of cost or market adjustments.

Provision for Credit Losses

Provisions for credit losses are charged to operations in amounts sufficient to support the credit loss allowance in accordance with the ~~Company's~~Company’s estimate. The Company estimates an allowance on ~~individually acquired~~ retail installment contracts and personal loans held for investment not classified as TDRs at a level considered adequate to cover expected net credit losses inherent in the recorded investment of that portfolio. Probable losses are estimated based on contractual delinquency status and historical loss experience, in addition to the Company’s judgment of estimates of the value of the underlying collateral, changes in the used vehicle value index, delinquency status,

historical collection rates and other information in order to make the necessary judgments as to probable loan losses. For loans classified as TDRs, impairment is generally measured based on the present value of expected future cash flows discounted at the original effective interest rate. For loans that are considered collateral-dependent, such as certain bankruptcy modifications, impairment is measured based on the fair value of the collateral, less its estimated cost to sell. Provisions for credit losses are also charged to operations for impairment on TDRs.

Retail installment contracts ~~acquired individually~~ are charged off against the allowance in the month in which the account becomes greater than 120 days contractually delinquent if the Company has not repossessed the related vehicle. The Company charges off accounts in repossession when the automobile is repossessed and legally available for disposition. A net charge-off represents the difference between the estimated sales proceeds and the ~~Company's~~Company’s recorded investment in the related contract. Costs to sell the vehicle are presented in repossession expense. Accounts in repossession that have been charged off and are pending liquidation are removed from retail installment contracts and the related repossessed automobiles are included in other assets in the Company’s consolidated balance sheets.

~~Term and revolving personal loans are charged off against the allowance in the month in which the accounts become 120 days and 180 days contractually delinquent, respectively.~~

In addition to maintaining a general allowance based on risk ratings, receivables from dealers are evaluated individually for impairment with allowances established for receivables determined to be individually impaired. Receivables from dealers are charged off against these allowances at the time that the credit is considered uncollectable and of such little value that it does not warrant consideration as an active asset.

Troubled Debt Restructurings

A modification of finance receivable terms is considered a troubled debt restructuring (TDR) if the Company grants a concession it would not otherwise have considered to a borrower for economic or legal reasons related to the ~~debtor's~~ debtor’s

financial difficulties. The Company considers TDRs to include all ~~individually acquired~~ retail installment contracts or personal revolving loans that have been modified at least once, deferred for a period of 90 days or more, or deferred at least twice. Additionally, restructurings through bankruptcy proceedings are deemed to be TDRs. The purchased receivables portfolio - credit impaired, operating and ~~capital~~finance leases, and loans held for sale are excluded from the scope of the applicable guidance, and none of the ~~Company's personal term loans or dealer loans~~Company’s Dealer Loans have been modified or deferred.

For TDRs, impairment is generally measured based on the difference between the recorded investment of the loan and the present value of the expected future cash flows of the loan. The loan may also be measured for impairment based on the fair value of the underlying collateral less costs to sell for loans that are collateral dependent. TDRs are evaluated for impairment individually or in aggregate for those loans with similar risk characteristics.

Leased Vehicles, Net (SC as Lessor)

Most vehicles for which the Company is the lessor are classified as operating leases, as they do not meet the accounting requirements to be classified as a ~~capital~~finance lease. The net capitalized cost of each lease is recorded as an asset and depreciated on a straight-line basis over the contractual term of the lease to the expected residual value. The expected residual value and, accordingly, the monthly depreciation expense may change throughout the term of the lease. The Company estimates expected residual values using independent data sources and internal statistical models that take into consideration economic conditions, current auction results, the Company’s remarketing abilities, and manufacturer vehicle and marketing programs. Over the life of the lease, the Company evaluates the adequacy of the estimate of the residual value and may make adjustments to the depreciation rates to the extent the expected value of the vehicle at lease termination changes.

Lease payments due from customers are recorded as income until and unless a customer becomes more than 60 days delinquent, at which time the accrual of revenue is discontinued and reversed. The accrual is resumed and reinstated if a delinquent account subsequently becomes 60 days or less past due. Subvention payments from the manufacturer, down payments from the customer, and initial direct costs incurred in connection with originating the lease are treated as a reduction to the cost basis of the underlying lease asset and are amortized on a straight-line basis over the contractual term of the lease. The amortization of manufacturer subvention payments is reflected as a reduction to depreciation expense over the life of the contract.

The Company periodically evaluates its investment in operating leases for impairment if circumstances, such as a systemic and material decline in used vehicle values, indicates that an impairment may exist. These circumstances could include, for example, shocks to oil and gas prices (which may have a pronounced impact on certain models of vehicles) or pervasive manufacturer defects (which may systemically affect the value of a particular vehicle brand or

model). Impairment is determined to exist if fair value of the leased asset is less than carrying value and it is determined that the net carrying value is not recoverable. The net carrying value of a leased asset is not recoverable if it exceeds the sum of the undiscounted expected future cash flows expected to result from the lease payments and the estimated residual value upon eventual disposition. If our operating lease assets are considered to be impaired, the impairment is measured as the amount by which the carrying amount of the assets exceeds the fair value as estimated by discounted cash flows. NoNaN impairment was recognized in ~~2017, 2016,~~2019, 2018, or ~~2015.~~2017.

~~Capital~~Finance Lease Receivables, net (SC as Lessor)

Leases classified as ~~capital~~finance leases are accounted for as direct financing leases. Minimum lease payments plus the estimated residual value of the leased vehicle are recorded as the gross investment. The difference between the gross investment and the cost of the leased vehicle is recorded as unearned income. Direct financing leases are reported at the aggregate of gross investments, net of unearned income and allowance for lease losses. Income for direct financing leases is recognized using the effective interest method, which provides a constant periodic rate of return on the outstanding investment on the lease.

Fees, commissions, and other

Fees, commissions, and other primarily include late fees, miscellaneous, and other income, and are generally recorded when there is no doubt as to the collectability of the related receivable.

Repossessed Vehicles and Repossession Expense

Repossessed vehicles represent vehicles the Company has repossessed due to the borrowers’ default on the payment terms of the retail installment contracts, loans or leases. The Company generally begins repossession activity once a customer has reached 60 days past due. The customer has an opportunity to redeem the repossessed vehicle by paying

all outstanding balances, including finance charges and fees. Any vehicles not redeemed are sold at auction. The Company records the vehicles currently in its inventory at the lower of cost or estimated fair value, net of estimated costs to sell (See Notes 9 and 15).

Repossession expense includes the costs to repossess and sell vehicles obtained due to borrower default. These costs include transportation, storage, rekeying, condition reports, legal fees, the fees paid to repossession agents and auction fees.

Sales of Finance Receivables and Leases

The Company transfers retail installment contracts into newly formed Trusts, which then issue one or more classes of notes payable backed by the retail installment contracts.

The Company’s continuing involvement with the credit facilities and Trusts are in the form of servicing loans held by the special purpose entities (SPEs) and, generally, through holding a residual interest in the SPE. These transactions are structured without recourse. The Trusts are considered VIEs under ~~U.S.~~ GAAP and are consolidated when the Company has: (a) power over the significant activities of the entity and (b) an obligation to absorb losses or the right to receive benefits from the VIE which are potentially significant to the VIE.

The Company has power over the significant activities of those Trusts as servicer of the financial assets held in the Trust. Servicing fees are not considered significant variable interests in the Trusts; however, when the Company also retains a residual interest in the Trust, either in the form of a debt security or equity interest, the Company has an obligation to absorb losses or the right to receive benefits that are potentially significant to the SPE. ~~Accordingly,~~For all VIEs in which the Company is involved, the Company assesses whether it is the primary beneficiary of the VIE on an ongoing basis. In circumstances where the Company have both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive benefits of the VIE that could be significant, the Company would conclude that it is the primary beneficiary of the VIE, and accordingly, these Trusts are consolidated within the consolidated financial statements, and the associated retail installment contracts, borrowings under credit facilities and securitization notes payable remain on the consolidated balance sheets. ~~Securitizations involving Trusts in which~~

In situations where the Company is not deemed to be the primary beneficiary of the VIE, the Company does not ~~retain a residual interest or any other debt or equity~~consolidate the VIE and only recognizes its interests in the VIE. These securitizations involving Trusts are treated as sales of the associated retail installment contracts.

While these Trusts are included in the consolidated financial statements, these Trusts are separate legal entities; thus, the finance receivables and other assets sold to these Trusts are legally owned by these Trusts, are available only to satisfy the notes payable related to the securitized retail installment contracts, and are not available to the ~~Company's~~Company’s creditors or other subsidiaries.

The Company also sells retail installment contracts and leases to VIEs or directly to third parties, which the Company may determine meet sale accounting treatment in accordance with the applicable guidance. Due to the nature, purpose,

and activity of these transactions, the Company either does not hold potentially significant variable interests or is not the primary beneficiary as a result of the ~~Company's~~Company’s limited further involvement with the financial assets. The transferred financial assets are removed from the ~~Company's~~Company’s consolidated balance sheets at the time the sale is completed. The Company generally remains the servicer of the financial assets and receives servicing fees. The Company also recognizes a gain or loss for the difference between the fair value, as measured based on sales proceeds plus (or minus) the value of any servicing asset (or liability) retained and carrying value of the assets sold.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company has maintained balances in various operating and money market accounts in excess of federally insured limits.

Restricted Cash

Cash deposited to support securitization transactions, lockbox collections, and the related required reserve accounts is recorded in the Company’s consolidated balance sheet as restricted cash. Excess cash flows generated by the securitization trusts are added to the restricted cash reserve account, creating additional over-collateralization until the contractual securitization requirement has been reached. Once the targeted reserve requirement is satisfied, additional

excess cash flows generated by the Trusts are released to the Company as distributions from the Trusts. Lockbox collections are added to restricted cash and released when transferred to the appropriate warehouse facility or Trust.

The Company has several limited guarantees with Santander that provide explicit performance guarantees on certain servicer obligations related to the Company’s warehouse facilities and certain securitizations. As a result of those guarantees, the Company was permitted to commingle funds received on contracts that have been included in the securitizations and certain warehouse facilities, and retain and remit cash to the respective collection accounts once a month prior to the distribution dates.

Income Taxes

Income tax expense consists of income taxes currently payable and deferred income taxes computed using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The deferred tax asset is subject to reduction by a valuation allowance in certain circumstances. This valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax asset will not be realized based on a review of available evidence. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company records the benefit of uncertain tax positions in the consolidated financial statements when such positions (1) meet a more-likely-than-not threshold, (2) are settled through negotiation or litigation, or (3) the statute of limitations for the taxing authority to examine the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more-likely-than-not recognition threshold is no longer satisfied.

Furniture and Equipment

Furniture and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the improvements. Depreciation and amortization on furniture and equipment for the years ended December 31, 2019, 2018 and 2017 ~~2016,~~totaled $17,050, $18,785, and ~~2015 totaled~~ $17,682, ~~$16,357, and $16,111,~~ respectively. Expenditures for major renewals and betterments are capitalized. Repairs and maintenance expenditures are charged to operations as incurred.

Operating Leases (SC as Lessee)

Operating lease ROU assets and liabilities are recognized based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate for a collateralized borrowing based on the duration of the lease term in determining the present value of lease payments. The lease term includes options to extend or terminate a lease when the Company considers it reasonably certain that such options will be exercised. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Lease expense for operating lease is recognized on a straight-line basis over the lease term.

Goodwill and Intangibles

Goodwill represents the excess of consideration paid over fair value of net assets acquired in business combinations. Intangibles represent intangible assets purchased or acquired through business combinations, including trade names and software development costs. Intangibles are amortized over their estimated useful lives. The Company tests goodwill for impairment annually in accordance with the provisions of ASC 350, Intangibles-Goodwill and Other.

Derivative Financial Instruments

Derivative financial instruments are recognized as either assets or liabilities in the consolidated balance sheets at fair value. The accounting for changes in the fair value of each derivative financial instrument depends on whether it has been designated and qualifies as a hedge for accounting purposes, as well as the type of hedging relationship identified. The Company does not use derivative instruments for trading or speculative purposes.

Interest Rate Swap Agreements — The Company uses interest rate swaps to hedge the variability of cash flows on securities issued by securitization Trusts and borrowings under the Company’s warehouse facilities. Certain interest rate swap agreements are designated and qualify as cash flow hedges, and are highly effective in reducing exposure to interest rate risk from both an accounting and an economic perspective.

At hedge inception and at least quarterly, the interest rate swap agreements designated as accounting hedges are assessed to determine their effectiveness in offsetting changes in the cash flows of the hedged items and whether those interest rate swap agreements may be expected to remain highly effective in future periods.

The Company uses the hypothetical derivative method to assess hedge effectiveness of cash flow hedges on a prospective and retrospective basis. At December 31, ~~2017,~~2019, all of the Company’s interest rate swap agreements designated as cash flow hedges are deemed to be effective hedges for accounting purposes. The Company uses the hypothetical derivative method to measure the amount of ineffectiveness and a net earnings impact occurs when the cumulative change in the value of a derivative, as adjusted, differs from the cumulative change in value of the perfect hypothetical derivative. The excess change in value (the ineffectiveness) is recognized in interest expense on the consolidated statements of income and comprehensive income.

The ~~effective portion of the~~ changes in the fair value of the interest rate swaps qualifying as cash flow hedges isare included as a component of other comprehensive ~~loss,~~income(loss), net of estimated income taxes, as an unrealized gain or loss on cash flow hedges. These unrealized gains or losses are recognized as adjustments to income over the same period in which cash flows from the related hedged item affect earnings. The Company discontinues hedge accounting prospectively when it is determined that an interest rate swap agreement has ceased to be effective as an accounting hedge or if the underlying hedged cash flow is no longer probable of occurring.

The Company has also entered into interest rate swap agreements related to its securitization trusts and warehouse facilities that are not designated as hedges. These agreements are intended to reduce the risk of interest rate fluctuations. For the interest rate swap agreements not designated as hedges, any gains or losses are included in the Company’s earnings as a component of ~~operating~~interest expense.

Interest Rate Cap Agreements — The Company purchases interest rate cap agreements to limit floating rate exposures on securities issued in credit facilities. As part of the interest rate risk management strategy, and when economically feasible, the Company may simultaneously sell a corresponding written option to offset the premium paid to purchase the interest rate cap agreement and thus retain the interest rate risk. Because these instruments entered into directly by the Company or through SPEs are not designated for hedge accounting, changes in the fair value of interest rate cap agreements purchased by the SPEs and written option sold by the Company are recorded in ~~operating~~interest expenses on the consolidated statements of income and comprehensive income.

~~Warrants —~~ The Company is the holder of a warrant that gives it the right, if certain vesting conditions are satisfied, to purchase additional shares in a company in which it has a cost method investment. This warrant would allow the Company to increase its ownership to approximately 22% in the investee company.

Stock-Based Compensation

The Company measures the compensation cost of stock-based awards using the estimated fair value of those awards on the grant date, and recognizes the cost as expense over the vesting period of the awards (see Note 16).

Earnings per Share

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and restricted stock grants. Because the Company has issued participating securities in the form of unvested restricted stock that has dividend rights, the Company applies the two-class method when computing earnings per share.

Recently Adopted Accounting Standards

~~The~~Since January 1, 2019, the Company adopted the following ~~Financial Accounting Standards Board (FASB) Accounting Standards Updates (ASUs):~~FASB ASUs:

•In February 2016, the FASB issued ASU ~~2016-09,~~ ~~Compensation - Stock Compensation (Topic 718)~~2016-02, Leases. ~~This new~~The primary effect of the ASU is to replace the existing accounting requirements for operating leases for lessees. Lessee accounting requirements for finance leases and lessor accounting requirements for operating leases and sales type and direct financing leases (sales-type and direct financing leases were both previously referred to as capital leases) are largely unchanged. The Company adopted this standard using the modified retrospective method and utilized the optional transition method under which we continue to apply the legacy guidance simplifies certain aspects related to income taxes, the Statement of Cash Flows (SCF), and forfeitures when accounting for share-based payment transactions. ASU 2016-09 eliminates the requirement to recognize excess tax benefits in ~~APIC pools, and instead requires companies to record all excess tax benefits and deficiencies at settlement, vesting or expiration~~ASC 840, Leases, including its disclosure requirements, in the ~~income statement as provision for income taxes. At~~comparative period presented.

For all our operating leases (primarily our office space/facility leases), where the Company is a lessee, adoption of ~~ASU 2016-09~~the new standard resulted in recognizing on ~~January 1, 2017,~~our balance sheet, a right-of-use (“ROU”) asset of $67,300, a reduction of accounts payable and accrued expenses of $24,100 relating to straight-line rent accruals and unamortized tenant improvement allowances, and a lease liability of $91,400. The right-of-use-asset and lease liability will be derecognized in a manner that effectively yields a straight-line lease expense over the cumulative-effect for previously unrecognized excess tax benefits totaled $26,552 net of tax, and was recognized, as an increase, through an adjustment in beginning retained earnings. The Company recorded excess tax deficiency, net of tax of $796 in the provision for income taxes rather than as a decrease to additional paid-in capital for the year ended December 31, 2017, on a prospective basis. All excess tax benefits along with other income tax cash flows are now being classified as operating activities rather than financing activities in the SCF on a prospective basis.

lease term. In addition, the Company ~~changed its accounting policy~~will no longer capitalize certain initial direct costs in connection with lease originations where it is the lessor.

Further, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. We elected not to (a) use the hindsight practical expedient to determine the lease term for existing leases; and (b) recognize a lease liability and associated ROU asset for short term leases if such lease meet the definition

under ASC 842. We chose not to elect the practical expedient to not separate non-lease components from lease components. The standard did not have a material impact on ~~forfeitures from previously recognizing forfeitures based on estimating~~our consolidated statement of income or consolidated statement of cash flows.

•In August 2018, the ~~number of awards expected to be forfeited to electing to recognize forfeiture of awards as they occur to simplify the accounting~~FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for ~~forfeitures. This resulted~~Implementation Costs Incurred in a ~~cumulative adjustment, as~~Cloud Computing Arrangement That Is a ~~decrease~~Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to ~~beginning retained earnings of $1,439.~~

~~ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. This new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. The guidance provides that a goodwill impairment is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance remains largely unchanged. The same one-step impairment test will be applied to goodwill at all reporting units.develop or obtain internal-use software. The Company ~~early~~ adopted this ~~ASU as of October~~standard effective January 1, ~~2017. The adoption of this ASU~~2019 and it did not have a material impact on the Company’s business, financial position or results of ~~operations or cash flows.~~operations.

The adoption of the following ASUs did not have ~~material impact on the Company's financial position, results of operations or cash flows.~~

~~ASU 2016-05,~~ ~~Derivatives and Hedging (Topic 815)~~: ~~Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.~~

~~ASU 2016-06,~~ ~~Derivatives and Hedging (Topic 815)~~: ~~Contingent Put and Call Options in Debt Instruments.~~

~~ASU 2016-07,~~ ~~Investments-Equity Method and Joint Ventures (Topic 323)~~.

~~ASU 2016-17,~~ ~~Consolidation (Topic 810), Interest Held Through Related Parties That Are Under Common Control~~.

~~Recent Accounting Pronouncements~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~. This ASU, as amended, requires an entity to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment includes a five-step process to assist an entity in achieving the main principle(s) of revenue recognition under ASC 606. The amended standard is effective for the Company for the annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. It should be applied retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.

~~Because the ASU does not apply to revenue associated with leases and financial instruments (including loans and securities), this ASU will not have~~ a material impact on the elements of its Consolidated Statements of Income most closely associated with leases and financial instruments (such as interest income, interest expense and investment gain and losses) as well as other revenue streams that are not material in nature. The Company will adopt this ASU in the first quarter of 2018 using a modified retrospective approach with a cumulative-effect adjustment to opening retained earnings. The Company does not anticipate having any adjustments to the opening retained earnings as of January 1, 2018. The Company is also in the process of developing additional quantitative and qualitative disclosures that are required for 2018 SEC filings.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases,~~ which will, among other impacts, change the criteria under which leases are identified and accounted for as on- or off-balance sheet. The guidance will be effective for the fiscal year beginning after December 15, 2018, including interim periods within that year. Once effective, the new guidance must be applied for all periods presented. The Company is in the process of reviewing its existing property and equipment lease contracts as well as service contracts that may include embedded lease. Upon adoption, the Company will gross up its balance sheet by the present value of future minimum lease payments for these operating leases. The Company does not intend to early adopt this ASU.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments-Credit Losses~~, which changes the criteria under which credit losses are measured. The amendment introduces a new credit reserving model known as the Current Expected Credit Loss (CECL) model, which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to establish credit loss estimates. The guidance will be effective for the fiscal year beginning after December 15, 2019, including interim periods within that year. The Company does not intend to adopt the new standard early and is currently evaluating the impact the new guidance will have on its financial position, results of operations and cash flows; however, it is expected that the new CECL model will alter the assumptions used in calculating the Company's credit losses, given the change to estimated losses for the estimated life of the financial asset, and will likely result in material changes to the Company’s ~~credit and capital reserves.~~

~~In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash~~ ~~(A consensus of the FASB Emerging Issues Task Force)~~, which requires that the statement of cash flows include restricted cash in the beginning and end-of-period total amounts shown on the statement of cash flows and that the statement of cash flows explain changes in restricted cash during the period. The guidance will be effective for the Company for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, however, adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments will not impact financial results, but will result in a change in the presentation of restricted cash and restricted cash equivalents within the statement of cash flows. The Company currently plans to adopt these amendments on January 1, 2018, and expect to use the retrospective approach as required.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~. The new guidance amends the hedge accounting model to enable entities to more accurately reflect their risk management activities in the financial statements. The amendments expand an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line in which the earnings effect of the hedged item is reported. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The Company plans to early adopt this standard in 2018 and does not expect to have a material impact on opening balance of retained earnings for cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness.

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.~~ The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The Company has $6,100 stranded income tax benefits as of December 31, 2017. The Company has decided to not early adopt this ASU in 2017.

~~In addition to those described in detail above, the Company is also in the process of evaluating the following ASUs and does not expect them to have a material impact on the Company's~~ business, financial position or results of ~~operations or disclosures:~~operations.

~~ASU 2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.~~

~~ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments.~~

~~ASU 2016-16,~~ ~~Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory.~~

~~ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business.~~

~~ASU 2017-05,~~ Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets

~~ASU 2017-06,~~ Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force)

~~ASU 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~

•ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities

~~ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.~~

•ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope ~~Exception.~~Exception

•ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

•ASU 2018-16, Derivatives and Hedging (Topic 815), Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes.

•ASU 2018-09, Codification Improvements

Recently Issued Accounting Pronouncements

•In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This guidance significantly changes how entities will measure credit losses for most financial assets and certain other instruments that measured at amortized cost. The amendment introduces a new credit reserving framework known as "Current Expected Credit Loss" (“CECL”), which replaces the incurred loss impairment framework in current GAAP with one that reflects expected credit losses over the full expected life of financial assets and commitments, and requires consideration of a broader range of reasonable and supportable information, including estimation of future expected changes in macroeconomic conditions. Additionally, the standard changes the accounting framework for purchased credit deteriorated HTM debt securities and loans, and dictates measurement of AFS debt securities using an allowance instead of reducing the carrying amount as it is under the current OTTI framework. The Company adopted the new guidance on January 1, 2020.

The Company established a cross-functional working group for implementation of this standard. Generally our implementation process included data sourcing and validation, development and validation of loss forecasting methodologies and models, including determining the length of the reasonable and supportable forecast period and selecting macroeconomic forecasting methodologies to comply with the new guidance, updating the design of our established governance, financial reporting, and internal control over financial reporting frameworks, and updating accounting policies and procedures. The status of our implementation was periodically presented to the Audit Committee and the Risk Committee. The Company completed multiple parallel model runs to test and refine its current expected credit loss models to satisfy the requirements of the new standard.

The adoption of this standard resulted in the increase in the allowance for credit losses ("ACL") for loans of approximately $2 billion and a decrease to opening retained earnings, net of income taxes, at January 1, 2020. The estimated increase is based on forecasts of expected future economic conditions and is primarily driven by the fact that the allowance will cover expected credit losses over the full expected life of the loan portfolios. The standard did not have a material impact on the Company's other financial instruments.

•In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted the new guidance effective January 1, 2020 and it did not have a material impact on the Company’s business, financial position or results of operations.


2.	~~Finance Receivables~~

In addition to those described in detail above, the Company evaluated the ASU 2018-17, Consolidation (Topic 10): Targeted Improvements to Related Party Guidance for Variable Interest Entities, and it did not have a material impact on the Company’s business, financial position, results of operations or disclosures.

2. Finance Receivables

Held For Investment

Finance receivables held for investment, net is comprised of the following at December 31, ~~2017~~2019 and ~~2016:~~2018:

December 31, 2017 December 31, 2016
Retail installment contracts acquired individually (a) $ 22,362,509
$ 23,219,724
Purchased receivables 27,839
158,264
Receivables from dealers 15,623
68,707
Personal loans 4,459
12,272
Capital lease receivables (Note 3) 17,339
22,034
Finance receivables held for investment, net

$ 22,427,769
$ 23,481,001


	December 31, 2019		December 31, 2018
Retail installment contracts (a)	$	27,719,221	$	25,065,511
Purchased receivables - credit impaired	12,177		19,235
Receivables from dealers	12,536		14,557
Personal loans (b)	—		2,014
Finance lease receivables (Note 3)	23,085		16,137
Finance receivables held for investment, net	$	27,767,019	$	25,117,454

(a) The Company has elected the fair value option for certain retail installment contracts reported in finance receivables held for investment, net. As of December 31, ~~2017~~2019 and ~~December 31, 2016, $22,124~~2018, $22,353 and ~~$24,495~~$13,509 of loans were recorded at fair value, respectively (Note 15).

(b) The remaining balance of personal loans, held for investment, was charged off during the quarter ended June 30, 2019.

The ~~Company's~~Company’s held for investment portfolio of retail installment contracts, ~~acquired individually,~~ receivables from dealers, and personal loans is comprised of the following at December 31, ~~2017~~2019 and ~~2016:~~2018:


	December 31, 2019
	Retail Installment Contracts									Receivables from Dealers
	Non-TDR			TDR
Unpaid principal balance	$	26,895,551		$	3,859,040		$	12,668
Credit loss allowance - specific	—			(914,718)			—
Credit loss allowance - collective	(2,123,878)			—			(132)
Discount	(67,484)			(17,167)			—
Capitalized origination costs and fees	84,961			2,916			—
Net carrying balance	$	24,789,150		$	2,930,071		$	12,536
Allowance as a percentage of unpaid principal balance	7.9		%	23.7		%	1.0		%
Allowance and discount as a percentage of unpaid principal balance	8.1		%	24.1		%	1.0		%


	December 31, 2017														December 31, 2018
	Retail Installment Contracts Acquired Individually							Receivables from Dealers			Personal Loans				Retail Installment Contracts									Receivables from Dealers			Personal Loans
	Non- TDR			TDR											Non-TDR			TDR
Unpaid principal balance	$	19,681,394		$	6,261,894			$	15,787		$	6,887		Unpaid principal balance	$	23,054,157		$	5,378,603		$	14,710		$	2,637
Credit loss allowance - specific	—			(1,731,320		)		—			(2,565		)	Credit loss allowance - specific	—			(1,416,743)			—			—
Credit loss allowance - collective	(1,529,815		)	—				(164		)	—			Credit loss allowance - collective	(1,819,360)			—			(153)			$	(761)
Discount	(309,191		)	(74,832		)		—			(1		)	Discount	(172,659)			(40,333)			—			—
Capitalized origination costs and fees	58,638			5,741			6	—			138			Capitalized origination costs and fees	77,398			4,448			—			138
Net carrying balance	$	17,901,026		$	4,461,483			$	15,623		$	4,459		Net carrying balance	$	21,139,536		$	3,925,975		$	14,557		$	2,014
Allowance as a percentage of unpaid principal balance														Allowance as a percentage of unpaid principal balance	7.9		%	26.3		%	1.0		%	28.9		%
Allowance and discount as a percentage of unpaid principal balance														Allowance and discount as a percentage of unpaid principal balance	8.6		%	27.1		%	1.0		%	28.9		%

December 31, 2016
Retail Installment Contracts Acquired Individually Receivables from
Dealers Personal Loans (a)
Non-TDR TDR
Unpaid principal balance $ 21,528,406
$ 5,599,567
$ 69,431
$ 19,361
Credit loss allowance - specific —
(1,611,295 ) —
—
Credit loss allowance - collective (1,799,760 ) —
(724 ) —
Discount (467,757 ) (91,359 ) —
(7,721 )
Capitalized origination costs and fees 56,704
5,218
—
632
Net carrying balance $ 19,317,593
$ 3,902,131
$ 68,707
$ 12,272

~~(a) As of December 31, 2016, there were lower of cost or market adjustments of $7,521 included in the discount on personal loans.~~

Retail installment contracts

Retail installment contracts are collateralized by vehicle titles, and the Company has the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract. Most of the Company’s retail installment contracts held for investment are pledged against warehouse ~~facilities~~lines or securitization bonds (Note 6). Most of the borrowers on the Company’s retail installment contracts held for investment are retail consumers; however, ~~$641,003~~$741,592 and ~~$848,918~~$537,922 of the unpaid principal balance represented fleet contracts with commercial borrowers as of December 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

During the years ended December 31, ~~2017~~2019 and ~~2016,~~2018, the Company originated ~~$6,713,239~~(including the SBNA originations program) $12,762,677 and ~~$8,050,653,~~$7,927,597, respectively, in ~~Chrysler Capital~~CCAP loans which represented ~~47%~~56% and ~~49%~~46%, respectively, of the ~~Company's~~ total retail installment contract ~~originations. Additionally, during~~originations (including the years ended December 31, 2017 and 2016, the Company originated $5,987,648 and $5,584,149, respectively, in Chrysler Capital leases. As of December 31, 2017 and 2016, the Company's auto retail installment contract portfolio consisted of $8,234,653 and $7,365,444, respectively, of Chrysler loans which represents 37% and 32%, respectively, of the Company's auto retail installment contract portfolio. Retail installment contracts and vehicle leases entered into with FCA customers, as part of the Chrysler Agreement, represent a significant concentration of those portfolios and there is a risk that the Chrysler Agreement could be terminated prior to its expiration date. Termination of the Chrysler Agreement could result in a decrease in the amount of new retail installment contracts and vehicle leases entered into with FCA customers.SBNA originations program).

As of December 31, ~~2017,~~2019, borrowers on the Company’s retail installment contracts held for investment are located in Texas ~~(16%~~(17%), Florida ~~(12%~~(11%), California (9%), Georgia (6%) and other states each individually representing less than 5% of the Company’s ~~total.~~total portfolio.

Purchased receivables

A.Purchased receivables portfolios - credit impaired, accounted under ASC 310-30

Purchased receivables portfolios - credit impaired, which were acquired with deteriorated credit quality, is comprised of the following at December 31, ~~2017~~2019 and ~~2016:~~2018:

December 31, 2017 December 31, 2016
Outstanding balance $ 43,474
$ 231,360
Outstanding recorded investment, net of impairment 28,069
159,451

During the year ended December 31, 2017, the Company sold receivables previously acquired with deteriorated credit quality to SBNA (Note 12). Carrying value of the receivables at the date of sale was $99,301. No such sales occurred during the years ended December 31, 2016 and 2015.


	December 31, 2019		December 31, 2018
Outstanding balance	$	21,542	$	30,631
Outstanding recorded investment, net of impairment	12,272		19,390

Changes in accretable yield on the Company’s purchased receivables portfolios - credit impaired for the periods indicated iswere as follows:


											For the Year Ended December 31,
	For the Year Ended December 31,
	2017			2016			2015				2019		2018		2017
Balance — beginning of year	$	107,041		$	178,582		$	268,927		Balance — beginning of year	$	18,145	$	19,464	$	107,041
Accretion of accretable yield	(30,129		)	(69,701		)	(91,157		)	Accretion of accretable yield	(4,007)		(8,569)		(30,129)
Disposals/transfers	(62,183		)	—			—			Disposals/transfers	—		—		(62,183)
Reclassifications from (to) nonaccretable difference (a)	4,735			(1,840		)	812			Reclassifications from (to) nonaccretable difference (a)	11		7,250		4,735
Balance — end of year	$	19,464		$	107,041		$	178,582		Balance — end of year	$	14,149	$	18,145	$	19,464

(a) Reclassifications from (to) nonaccretable difference represents the increases (decreases) in accretable yield resulting from higher (lower) estimated undiscounted cash flows.

B.Purchased receivables portfolios, accounted under ASC 310-20 and/or Fair Value Option

During the year ended December 31, 2019, 2018 and 2017, the company purchased financial receivables from third party lenders for $1.09 billion, $67,249 and 0, respectively. The unpaid principal balance of these loans as of the acquisition date was $1.12 billion, $74,086 and 0, respectively.

For the year ended 2019, the Company determined that majority of the acquired loans were non-credit impaired loans because they either did not have evidence of credit quality deterioration or it was not probable that the Company would not collect all contractually required payments, which was evaluated using a number of factors including the loan’s delinquency status, borrower’s credit status, and roll rates. The company elected the fair value option for $22 million of purchased loans deemed to be credit-impaired since it was determined that not all contractually required payments would be collected. Refer to Note 15 - "Fair Value of Financial Instruments" to these accompanying consolidated financial statements for additional details. Accordingly, the majority of these loans are accounted for in accordance with ASC 310-20. Under ASC 310-20, the difference between the loan's principal balance, at the time of purchase, and the fair value is recognized as an adjustment of yield over the life of the loan. All other policies related to interest income, calculation of allowance for loan losses, and recognizing TDRs would be similar to retail installment contracts and are originated by the Company.

During the years ended December 31, ~~2017, 2016,~~2018 and ~~2015,~~2017, the Company did not acquire any vehicle loan portfolios for which it was probable at acquisition that not all contractually required payments would be collected. ~~However,~~

In addition, during the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015, and~~2017 the Company recognized certain retail installment ~~loans~~contracts with an unpaid principal balance of $74,718, $213,973 and $290,613 ~~and $466,050, and $95,596,~~ respectively, ~~which were previously~~ held by non-consolidated securitization Trusts, under optional clean-up calls (Note 7). Following the initial recognition of these loans at fair value, the performing loans in the portfolio ~~will be~~are carried at amortized cost, net of allowance for credit losses. The Company elected the fair value option for all non-performing loans acquired (more than 60 days delinquent as of the re-recognition date), for which it was probable that not all contractually required payments would be collected (Note 15).

Receivable from Dealers

The receivables from dealers held for investment are all ~~arose from the~~ Chrysler ~~Agreement.~~Agreement-related. As of December 31, ~~2017,~~2019, borrowers on these dealer receivables are located in Virginia ~~(62%~~(70%), and New York ~~(27%), Missouri (10%) and Wisconsin (1.0%~~(30%). The Company previously held a term loan with a third-party vehicle dealer and lender that operates in multiple states. The loan allowed committed borrowings of $50,000 at December 31, 2016. During the year ended December 31, 2017, the unpaid principal balance of the facility of $50,000 along with accrued interest was repaid.

~~Personal Loans~~

At September 30, 2016, the Company determined that its intent to sell certain personal revolving loans had changed and now expects to hold these loans through their maturity. The Company recorded a lower of cost or market adjustment through investment gains (losses), net, immediately prior to transferring the loans to finance receivables held for investment at their new recorded investment. The carrying value of these loans was $4,459 and $11,733 at December 31, 2017 and 2016, respectively.

Held For Sale

The carrying value of the ~~Company's~~Company’s finance receivables held for sale, ~~was~~net is comprised of the following at December 31, ~~2017~~2019 and ~~2016:~~2018:

December 31, 2017 December 31, 2016
Retail installment contracts acquired individually $ 1,148,332
$ 1,045,815
Personal loans 1,062,089
1,077,600
Total assets held for sale $ 2,210,421
$ 2,123,415


	December 31, 2019		December 31, 2018


Personal loans	$	1,007,105	$	1,068,757

Sales of retail installment contracts ~~to third parties~~ and proceeds from sales of charged-off assets for the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015~~2017 were as follows:


	For the Year Ended December 31,

	2019		2018		2017
Sales of retail installment contracts to third parties	$	—	$	—	$	260,568
Sales of retail installment contracts to affiliates	—		2,905,922		2,583,341
Proceeds from sales of charged-off assets to third parties	55,220		55,902		93,619

For the Year Ended December 31,
2017 2016 2015
Sales of retail installment contracts to third parties $ 260,568
$ 3,694,019
$ 7,862,520
Proceeds from sales of charged-off assets 93,619
64,847
122,436

3. Leases (SC as Lessor)

The Company ~~retains servicing of retail installment contracts sold to third parties. Total contracts sold to unrelated third parties and serviced as of December 31, 2017 and 2016 were as follows:~~

December 31, 2017 December 31, 2016
Serviced balance of retail installment contracts and leases sold to third parties $ 5,771,085
$ 10,116,788

~~3. Leases~~

~~The Company has both~~originates operating and ~~capital~~finance leases, which are separately accounted for and recorded on the ~~Company's~~Company’s consolidated balance sheets. Operating leases are reported as leased vehicles, net, while ~~capital~~finance leases are included in finance receivables held for investment, net.

Operating Leases

Leased vehicles, net, which is comprised of leases originated under the Chrysler Agreement, consisted of the following as of December 31, ~~2017~~2019 and ~~2016:~~2018:


	December 31, 2019		December 31, 2018
Leased vehicles	$	21,722,726	$	18,737,338
Less: accumulated depreciation	(4,159,944)		(3,518,025)
Depreciated net capitalized cost	17,562,782		15,219,313
Manufacturer subvention payments, net of accretion	(1,177,342)		(1,307,424)
Origination fees and other costs	76,542		66,966
Net book value	$	16,461,982	$	13,978,855

December 31,
2017 December 31,
2016
Leased vehicles $ 14,285,769
$ 11,939,295
Less: accumulated depreciation (3,110,167 ) (2,326,342 )
Depreciated net capitalized cost 11,175,602
9,612,953
Manufacturer subvention payments, net of accretion (1,042,477 ) (1,066,531 )
Origination fees and other costs 27,202
18,206
Net book value $ 10,160,327
$ 8,564,628

Historically, the Company executed bulk sales of Chrysler Capital leases to a third party. The Company has retained servicing on the sold leases. During the years ended December 31, 2016 and 2017, the Company did not execute any bulk sales of leases originated under the Chrysler Capital program.

The following summarizes the ~~future minimum rental~~maturity analysis of lease payments due to the Company as lessor under operating leases as of December 31, ~~2017:~~2019:




2020	$	2,702,377
2021	1,700,849
2022	568,921
2023	52,910
Thereafter	—
Total	$	5,025,057

2018 $ 1,650,271
2019 1,034,470
2020 374,598
2021 12,317
Thereafter —
Total $ 3,071,656

~~Capital~~Finance Leases

Certain leases originated by the Company are accounted for as ~~capital~~direct financing leases, as the contractual residual values are nominal amounts. ~~Capital~~Finance lease receivables, net consisted of the following as of December 31, ~~2017~~2019 and ~~2016:~~2018:


	December 31, 2019		December 31, 2018
Gross investment in finance leases	$	34,443	$	23,809
Origination fees and other	241		152
Less: unearned income	(6,859)		(4,465)
Net investment in finance leases before allowance	27,825		19,496
Less: allowance for lease losses	(4,740)		(3,359)
Net investment in finance leases	$	23,085	$	16,137

December 31,
2017 December 31,
2016
Gross investment in capital leases $ 27,234
$ 39,417
Origination fees and other 124
150
Less unearned income (4,377 ) (7,545 )
Net investment in capital leases before allowance 22,981
32,022
Less: allowance for lease losses (5,642 ) (9,988 )
Net investment in capital leases $ 17,339
$ 22,034

The following summarizes the ~~future minimum~~maturity analysis of lease payments due to the Company as lessor under ~~capital~~finance leases as of December 31, ~~2017:~~2019:




2020	$	10,064
2021	9,059
2022	7,594
2023	5,269
Thereafter	2,457
Total	$	34,443

2018 $ 11,050
2019 6,809
2020 4,417
2021 2,960
Thereafter 1,998
Total $ 27,234

4. Credit Loss Allowance and Credit Quality

Credit Loss Allowance

The Company estimates the allowance for credit losses on ~~individually acquired~~ retail installment contracts (including loans acquired from third party lenders that are considered to have no credit deterioration at acquisition) and personal loans held for investment, not classified as TDRs, based on delinquency status, historical loss experience, estimated values of

underlying collateral, when applicable, and various economic factors. In developing the allowance, the Company utilizes a loss emergence period assumption, a loss given default assumption applied to the recorded investment, and a probability of default ~~assumption based on a loss forecasting model.~~assumption. The loss emergence period assumption represents the average length of time between when a loss event is first estimated to have occurred and when the account is ~~charged off.~~charged-off. The recorded investment represents unpaid principal balance adjusted for unaccreted net discounts, subvention from manufacturers, and origination costs. Under this approach, the resulting allowance represents the expected net losses of recorded investment inherent in the portfolio.

The Company uses a transition based Markov model for estimating the allowance for credit losses on ~~individually acquired~~ retail installment contracts. This model utilizes the recently observed loan transition rates from various loan statuses, including delinquency and accounting statuses from performing to charge off, to forecast future losses.

For loans classified as TDRs, impairment is generally measured based on the present value of expected future cash flows discounted at the original effective interest rate. For loans that are considered collateral-dependent, such as certain bankruptcy modifications, impairment is measured based on the fair value of the collateral, less its estimated cost to sell. The amount of the allowance is equal to the difference between the loan’s impaired value and the recorded investment.

The Company maintains a general credit loss allowance for receivables from dealers based on risk ratings and individually evaluates loans for specific impairment as necessary. As of December 31, ~~2017~~2019 and ~~2016,~~2018, the credit loss allowance for receivables from dealers is comprised entirely of general ~~allowances~~allowance as none of these receivables have been determined to be individually impaired.

The activity in the credit loss allowance for ~~individually acquired loans~~retail installment contracts and Dealer Loans for the years ended December 31, ~~2017, 2016,~~2019 and ~~2015 were~~2018 was as follows:


											Year Ended December 31, 2019

											Retail Installment Contracts								Receivables from Dealers				Personal Loans
	Year Ended December 31, 2017										Non-TDR		TDR
	Retail Installment Contracts Acquired Individually			Receivables from Dealers			Personal Loans								Receivables from Dealers									Personal Loans
Balance — beginning of year	$	3,411,055		$	724		$	—		Balance — beginning of year							$	1,819,360			$	1,416,743			$	153	$	761
Provision for credit losses	2,244,182			(560		)	10,691			Provision for credit losses	1,774,000		317,305				(21)				1,096
Charge-offs (a)	(4,796,216		)	—			(8,945		)	Charge-offs (a)	(3,636,924)		(1,559,318)		—				(2,107)
Recoveries	2,402,114			—			819			Recoveries	2,167,442		739,988		—				250

Balance — end of year	$	3,261,135		$	164		$	2,565		Balance — end of year	$	2,123,878	$	914,718	$	132			$	—

Agreement or Legal Matter Commitment or Contingency December 31, 2017 December 31, 2016
Chrysler Agreement Revenue-sharing and gain-sharing payments $ 6,580
$ 10,134
Agreement with Bank of America Servicer performance fee 8,072
9,797
Agreement with CBP Loss-sharing payments 5,625
4,563
Other Contingencies Consumer arrangements 6,326
—
Legal and regulatory proceedings Aggregate legal and regulatory liabilities 108,800
39,200

Following is a description of the agreements and legal matters pursuant to which the liabilities in the preceding table were recorded.

Chrysler Agreement

Underterms of the Chrysler Agreement, the Company must make revenue sharing payments to FCA and also must ~~make gain-sharing payments to~~share with FCA when residual ~~gains~~gains/(losses) on leased vehicles exceed a specified threshold. The Company had accrued ~~$6,580~~$12,132 and ~~$10,134~~$7,001 at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively, related to these obligations.

The Chrysler Agreement requires, among other things, that SC bears the risk of loss on loans originated pursuant to the agreement, but also that FCA shares in any residual gains and losses from consumer leases. The agreement also requires that ~~SC maintains~~the Company maintain at least $5.0 billion in funding available for ~~dealer inventory financing~~Floorplan Loans and $4.5 billion of financing dedicated to FCA retail financing. In turn, FCA must provide designated minimum threshold percentages of its subvention business to the Company. The Chrysler Agreement is subject to early termination in certain circumstances, including the failure by either party to comply with certain of their ongoing obligations under the Chrysler Agreement. These obligations include the Company's meeting specified escalating penetration rates for the first five years of the agreement. The Company has not met these penetration rates at December 31, 2017. If the Chrysler Agreement were to terminate, there could be a materially adverse impact to the Company's financial condition and results of operations.

Agreement with Bank of America

Until January ~~31,~~ 2017, the Company had a flow agreement with Bank of America whereby the Company was committed to ~~sell~~selling up to ~~a specified amount~~$300,000 of eligible loans to the bank each month. On July 27, 2016, the Company and Bank of America amended the flow agreement to reduce the maximum commitment to sell eligible loans each month to $300,000. On October 27, 2016, Bank of America notified the Company that it was terminating the flow agreement effective January 31, 2017, and accordingly, the flow agreement is terminated. The Company retains servicing on all sold loans and may receive or pay a servicer performance payment based on an agreed-upon formula if performance on the sold loans is better or worse, respectively, than expected performance at time of sale. Servicer performance payments are due six years from the cut-off date of each loan sale. The Company had accrued ~~$8,072~~$2,503 and ~~$9,797~~$6,353 at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively, related to this obligation.

Agreement with CBP

Until May 1, 2017, the Company sold loans to CBP under terms of a flow agreement and predecessor sale agreements. ~~Under the flow agreement, as amended, CBP's committed purchases of Chrysler Capital prime loans were a maximum of $200,000 and a minimum of $50,000 per quarter.~~ The Company retained servicing on the sold loans and ~~will owe~~owes CBP a loss-sharing payment capped at 0.5% of the original pool balance if losses exceed a specified threshold, established on a pool-by-pool basis. Loss-sharing payments are due the month in which net losses exceed the established threshold of each loan sale. The Company had accrued ~~$5,625~~$1,429 and ~~$4,563~~$3,708 at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively, related to the loss-sharing obligation.

Other Contingencies

The Company is or may be subject to potential liability under various other contingent exposures. The Company had accrued ~~$6,326~~$1,991 and ~~zero~~$2,138 at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively, for other miscellaneous contingencies.

Legal and regulatory proceedings

Periodically, the Company is party to, or otherwise involved in, various lawsuits and other legal proceedings that arise in the ordinary course of business. In view of the inherent difficulty of predicting the outcome of any such lawsuit, regulatory matter and legal proceeding, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict the eventual outcome of the pending matters, the timing of the ultimate resolution of the matters, or the eventual loss, fines or penalties related to the matter. Further, it is reasonably possible that actual outcomes or losses may differ materially from the ~~Company's~~Company’s current assessments and estimates and any adverse resolution of any of these matters against it could materially and adversely affect the ~~Company's~~Company’s business, financial condition and results of operation.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation, regulatory matters and other legal proceedings when those matters present material loss contingencies that are both

probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation, regulatory matter or other legal proceeding develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether the matter presents a material loss contingency that is probable and estimable. If a determination is made during a given quarter that a material loss contingency is probable and estimable, an accrued liability is established during such quarter with respect to such loss contingency. The Company continues to monitor the matter for further developments that could affect the amount of the accrued liability previously established.

As of December 31, ~~2017,~~2019, the Company has accrued aggregate legal and regulatory liabilities of ~~$108,800.~~$137 million. Further, the Company believes that the estimate of the aggregate range of reasonably possible losses, in excess of reserves

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established, for legal and regulatory proceedings is up to ~~$207,000~~$11.5 million as of December 31, ~~2017.~~2019. Set forth below are descriptions of the material lawsuits, regulatory matters and other legal proceedings to which the Company is subject.

Securities Class Action and Shareholder Derivative Lawsuits

•Deka Lawsuit: ~~We are~~The Company is a defendant in a purported securities class action lawsuit (the ~~Deka Lawsuit)~~"Deka Lawsuit") in the United States District Court, Northern District of Texas, captioned Deka Investment GmbH et al. v. Santander Consumer USA Holdings Inc. et ~~al.~~al., No. 3:15-cv-2129-K. The Deka Lawsuit, which was filed in August 26, 2014, was brought against the Company, certain of its current and former directors and executive officers and certain institutions that served as underwriters in the Company’s IPO on behalf of a class consisting of those who purchased or otherwise acquired our securities between January 23, 2014 and June 12, 2014. The complaint alleges, among other things, that our IPO registration statement and prospectus and certain subsequent public disclosures violated federal securities laws by containing misleading statements concerning the Company’s ability to pay dividends and the adequacy of the Company’s compliance systems and oversight. OnIn December ~~18,~~ 2015, the Company and the individual defendants moved to dismiss the lawsuit, which was denied. OnIn December 2, 2016, the plaintiffs moved to certify the proposed classes. OnIn July ~~11,~~ 2017, the court entered an order staying the Deka Lawsuit pending the resolution of the appeal of a class certification order in In re Cobalt Int’l Energy, Inc. Sec. Litig., No. H-14-3428, 2017 U.S. Dist. LEXIS 91938 (S.D. Tex. June 15, 2017). In October 2018, the court vacated the order staying the Deka Lawsuit and ordered that merits discovery in the Deka Lawsuit be stayed until the court ruled on the issue of class certification.

•Feldman Lawsuit: OnIn October ~~15,~~ 2015, a shareholder derivative complaint was filed in the Court of Chancery of the State of Delaware, captioned Feldman v. Jason A. Kulas, et ~~al.~~al., C.A. No. 11614 (the ~~Feldman Lawsuit)~~"Feldman Lawsuit"). The Feldman Lawsuit names as defendants, certain of its current and former members of the Board, and names the Company as a nominal defendant. The complaint alleges, among other things, that the current and former director defendants breached their fiduciary duties in connection with overseeing the Company’s nonprime vehicle lending practices, resulting in harm to the Company. The complaint seeks unspecified damages and equitable relief. OnIn December ~~29,~~ 2015, the Feldman Lawsuit was stayed pending the resolution of the Deka Lawsuit.

•~~Parmelee Lawsuit:~~ We are a defendant in two purported securities class actions lawsuits that were filed in March and April 2016 in the United States District Court, Northern District of Texas. The lawsuits were consolidated and are now captioned Parmelee v. Santander Consumer USA Holdings Inc. et al., No. 3:16-cv-783. The lawsuits were filed against the Company and certain of its current and former directors and executive officers on behalf of a class consisting of all those who purchased or otherwise acquired our securities between February 3, 2015 and March 15, 2016. The complaint alleges that the Company violated federal securities laws by making false or misleading statements, as well as failing to disclose material adverse facts, in its periodic reports filed under the Exchange Act and certain other public disclosures, in connection with, among other things, the Company’s change in its methodology for estimating its allowance for credit losses and correction of such allowance for prior periods. On March 14, 2017, the Company filed a motion to dismiss the lawsuit. On January 3, 2018, the court granted the Company’s motion as to defendant Ismail Dawood (the Company’s former Chief Financial Officer) and denied the motion as to all other defendants.

•Jackie888 Lawsuit: OnIn September ~~27,~~ 2016, a shareholder derivative complaint was filed in the Court of Chancery of the State of Delaware, captioned Jackie888, Inc. v. Jason Kulas, et ~~al.~~al., C.A. # 12775 (the ~~Jackie888 Lawsuit)~~"Jackie888 Lawsuit"). The Jackie888 Lawsuit names as defendants current and former members of the Board, and names the Company as a nominal defendant. The complaint alleges, among other things, that the defendants breached their fiduciary duties in connection with the Company’s accounting practices and controls. The complaint seeks unspecified damages and equitable relief. OnIn April ~~13,~~ 2017, the Jackie888 Lawsuit was stayed pending the resolution of the Deka Lawsuit.

On March 23, 2018, the Feldman Lawsuit and Jackie888 Lawsuit were consolidated under the caption In Re Santander Consumer USA Holdings, Inc. Derivative Litigation, Del. Ch., Consol. C.A. No. 11614-VCG. On January 21, 2020, the Company executed a Stipulation and Agreement of Settlement, Compromise and Release with the plaintiffs in the consolidated action that fully resolves all of the plaintiffs’ claims om the Feldman Lawsuit and the Jackie888 Lawsuit. The Stipulation provides for the settlement of the consolidated action in return for defendants causing the Company to enact and implement certain corporate governance reforms and enhancements. The settlement is subject to approval by the Court.

Consumer Lending Cases

The Company is also party to various lawsuits pending in federal and state courts alleging violations of state and federal consumer lending laws, including, without limitation, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, Fair Credit Reporting Act, Section 5 of the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Truth in Lending Act, wrongful repossession laws, usury laws and laws related to unfair and deceptive acts or practices. In general, these cases seek damages and equitable and/or other relief.

Regulatory Investigations and Proceedings

The Company is party to, or is periodically otherwise involved in, reviews, investigations, examinations and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the FRBB, the CFPB, the DOJ, the SEC, the FTC and various state regulatory and enforcement agencies.

104

Currently, such matters include, but are not limited to, the following:

We•The Company received a civil subpoena from the DOJ, under FIRREA, ~~requesting the production of documents and communications that, among other things, relate to the underwriting and securitization of nonprime vehicle loans, and also from the SEC~~ requesting the production of documents and communications that, among other things, relate to the underwriting and securitization of nonprime vehicle loans. The Company has responded to these requests within the deadlines specified in the ~~subpoenas~~subpoena and has otherwise cooperated with the DOJ ~~and SEC~~ with respect to ~~these matters.~~this matter.

•In October 2014, May 2015, July 2015 and February 2017, the Company received subpoenas and/or Civil Investigative Demands (CIDs) from the Attorneys General of California, Illinois, Oregon, New Jersey, Maryland and Washington under the authority of each ~~state's~~state’s consumer protection statutes. The Company has been informed that these states ~~will~~ serve as an executive committee on behalf of a group of 3033 state Attorneys ~~General.~~General (and the District of Columbia). The subpoenas and/or CIDs from the executive committee states contain broad requests for information and the production of documents related to the Company’s underwriting, securitization, servicing and collection of nonprime vehicle loans. The Company has responded to these requests within the deadlines specified in the CIDs and has otherwise cooperated with the Attorneys General with respect to this matter.

In July 2015, the CFPB notified the Company that it had referred to the DOJ certain alleged violations by the Company of the ECOA regarding statistical disparities in markups charged by vehicle dealers to protected groups on loans originated by those dealers and purchased by the Company and the treatment of certain types of income in the Company’s underwriting process. In September 2015, the DOJ notified the Company that it has initiated, based on the referral from the CFPB, an investigation under the ECOA of the Company’s pricing of vehicle loans. The Company has resolved the investigation pursuant to a confidential agreement with the CFPB.

In February 2016, the CFPB issued a supervisory letter relating to its investigation of the Company’s compliance systems, Board and senior management oversight, consumer complaint handling, marketing of GAP coverage and loan deferral disclosure practices. The Company subsequently received a series of CIDs from the CFPB requesting information and testimony regarding the Company’s marketing of GAP coverage and loan deferral disclosure practices. The Company has responded to these requests within the deadlines specified in the CIDs and has otherwise cooperated with the CFPB with respect to this matter.

•In August 2017, wethe Company received a CID from the CFPB. The stated purpose of the CID is to determine whether the Company has complied with the Fair Credit Reporting Act and related regulations. The Company has responded to these requests within the deadlines specified in the CIDs and has otherwise cooperated with the CFPB with respect to this matter.

These matters are ongoing and could in the future result in the imposition of damages, fines or other penalties. No assurance can be given that the ultimate outcome of these matters or any resulting proceedings would not materially and adversely affect the Company’s business, financial condition and results of operations.

•2017 Written Agreement with the Federal ~~Reserve~~

OnReserve: In March ~~21,~~ 2017, the Company and SHUSA entered into a written agreement ~~(the 2017 Written Agreement)~~ with the FRBB. Under the terms of the ~~2017 Written Agreement,~~agreement, the Company is required to enhance its compliance risk management program, ~~board~~Board oversight of risk management and senior management oversight of risk management, and SHUSA is required to enhance its oversight of ~~SC’s~~the Company’s management and operations.

•Mississippi Attorney General ~~Lawsuit~~

OnLawsuit: In January ~~10,~~ 2017, the Attorney General of Mississippi filed a lawsuit against the Company in the Chancery Court of the First Judicial District of Hinds County, Mississippi, captioned State of Mississippi ex rel. Jim Hood, Attorney General of the State of Mississippi v. Santander Consumer USA Inc., C.A. # G-2017-28. The complaint alleges that the Company engaged in unfair and deceptive business practices to induce Mississippi consumers to apply for loans that they could not afford. The complaint asserts claims under the Mississippi Consumer Protection Act (the MCPA) and seeks unspecified civil penalties, equitable relief and other relief. OnIn March ~~31,~~ 2017, the Company filed motions to dismiss the lawsuit and ~~subsequently filed a motion to stay~~ the lawsuit pending the resolution of an interlocutory appeal relating to the MCPA before the Mississippi Supreme Court in Purdue Pharma, L.P., et al. v. State, No. 2017-IA- 00300-SCT. On September 25, 2017, the court granted the motion to stay and ordered a stay of all proceedings, excluding discovery and final briefing on motions to dismiss.parties are proceeding with discovery.

•SCRA Consent ~~Order~~

Order: In February 2015, the Company entered into a consent order with the DOJ, approved by the United States District Court for the Northern District of Texas, that resolves the DOJ’s claims against the Company that certain of its repossession and collection activities during the period of time between January 2008 and February 2013 violated the ~~SCRA. The~~Servicemembers Civil Relief Act (SCRA). The consent order requires the Company to pay a civil fine in the amount of $55, as well as at least $9,360 to affected servicemembers consisting of $10 per servicemember plus compensation for any lost equity (with interest) for each repossession by the Company, and $5 per servicemember for each instance where the Company sought to collect repossession-related fees on accounts where a repossession was conducted by a prior account holder. The consent order also provides for monitoring by the DOJ for the Company’s SCRA compliance for a period of five years and requires the Company to undertake certain additional remedial measures.

Agreements

•Bluestem

The Company is party to agreements with Bluestem whereby the Company is committed to purchase certain new advances on personal revolving financings receivables, along with existing balances on accounts with new advances, originated by Bluestem for an initial term ending in April 2020 and renewable through April 2022 at ~~Bluestem's~~Bluestem’s option. As of December 31, ~~2017,~~2019 and 2018, the total unused credit available to customers was ~~$3.9 billion.~~$3.0 billion and $3.1

105

billion, respectively. In ~~2017,~~2019, the Company purchased $1.2 billion of receivables, out of the ~~$4.0~~$3.1 billion unused credit available to customers as of December 31, ~~2016.~~2018. In 2018, the Company purchased $1.2 billion of receivables, out of the $3.9 billion unused credit available to customers as of December 31, 2017. In addition, the Company purchased ~~$263,831~~$270,424 and $304,550 of receivables related to newly opened customer accounts in ~~2017.~~ 2019 and 2018 respectively.

Each customer account generated under the agreements generally is approved with a credit limit higher than the amount of the initial purchase, with each subsequent purchase automatically approved as long as it does not cause the account to exceed its limit and the customer is in good standing. As of December 31, ~~2017~~2019 and ~~2016,~~2018, the Company was obligated to purchase ~~$11,539~~$10,628 and ~~$12,634,~~$15,356, respectively, in receivables that had been originated by Bluestem but not yet purchased by the Company. The Company also is required to make a profit-sharing payment to Bluestem each month if performance exceeds a specified return threshold. ~~During the year ended December 31, 2015, the Company and Bluestem executed an amendment that,~~The agreement, among other provisions, ~~increased the profit-sharing percentage retained by the Company,~~ gives ~~the retailer~~Bluestem the right to repurchase up to 9.99% of the existing portfolio at any time during the term of the agreement, and, ~~provided~~provides that if the repurchase right is exercised, ~~gives~~ Bluestem has the right to retain up to 20% of new accounts subsequently originated.

•Others

Under terms of an application transfer agreement with Nissan, the Company has the first opportunity to review for its own portfolio any credit applications turned down by the ~~Nissan's~~Nissan’s captive finance company. The agreement does not require the Company to originate any loans, but for each loan originated the Company will pay ~~the~~ Nissan a referral ~~fee.~~fee.

The Company also has agreements with SBNA to service recreational and marine vehicle portfolios. These agreements call for a periodic retroactive adjustment, based on cumulative return performance, of the servicing fee rate to

~~inception of the contract. Adjustments for the years ended December 31, 2017 and 2016 totaled a net adjustment of zero and net upward adjustment of $836, respectively.~~

In connection with the sale of retail installment contracts through securitizations and other sales, the Company has made standard representations and warranties customary to the consumer finance industry. Violations of these representations and warranties may require the Company to repurchase loans previously sold to on- or off-balance sheet Trusts or other third parties. As of December 31, ~~2017,~~2019, there were no0 loans that were the subject of a demand to repurchase or replace for breach of representations and warranties for the ~~Company's~~Company’s asset-backed securities or other sales. In the opinion of management, the potential exposure of other recourse obligations related to the Company’s retail installment contract sales agreements is not expected to have a material adverse effect on the Company’s business, financial position, results of operations, or cash flows.

Santander has provided guarantees on the covenants, agreements, and obligations of the Company under the governing documents of its warehouse lines and privately issued amortizing notes. These guarantees are limited to the obligations of the Company as servicer.

The Company provided SBNA with the first right to review and approve consumer vehicle lease applications, subject to volume constraints, under terms of a flow agreement that was terminated on May 9, 2015. The Company has indemnified SBNA for potential credit and residual losses on $48,226 of leases that had been originated by SBNA under this program but were subsequently determined not to meet SBNA’s underwriting requirements. This indemnification agreement is supported by an equal amount of cash collateral posted by the Company in an SBNA bank account. The collateral account balance is included in restricted cash in the Company's consolidated balance sheets. As of December 31, 2017, the balance in the collateral account is $18.

In January 2015, the Company additionally agreed to indemnify SBNA for residual losses, up to a cap, on certain leases originated under the flow agreement between September 24, 2014 and May 9, 2015 for which SBNA and the Company had differing residual value expectations at lease inception. As of December 31, 2017 and 2016, the Company had a recorded liability of $2,206 and $2,691, respectively, related to the residual losses covered under the agreement.

~~On March 31,~~November 2015, the Company executed a forward flow asset sale agreement with a third party under terms of which the Company committed to sell $350,000 in charged off loan receivables in bankruptcy status on a quarterly basis until sales total at least $200,000 in proceeds. On June 29, 2015, the Company and the third party executed an amendment to the forward flow asset sale agreement, which increased the committed sales of charged off loan receivables in bankruptcy status to $275,000. On September 30, 2015, the Company and the third party executed a second amendment to the forward flow asset sale agreement, which required sales to occur quarterly. On November 13, 2015, the Company and the third party executed a third amendment to the forward flow asset sale agreement, which increased the committed sales of charged off loan receivables in bankruptcy status to $350,000.basis. However, any sale more than $275,000 is subject to a market price check. AsThe remaining aggregate commitment as of December 31, ~~2017~~2019 and ~~2016, the remaining aggregate commitment~~2018, not subject to market price check was ~~$98,858~~$39,787 and ~~$166,167,~~$63,975, respectively.

~~Leases~~

The Company has entered into various operating leases, primarily for office space and computer equipment. Lease expense incurred totaled $10,901, $11,328 and $8,965 for the years ended December 31, 2017, 2016, and 2015, respectively. The remaining obligations under lease commitments at December 31, 2017 are as follows:

2018 $ 12,642
2019 12,771
2020 13,032
2021 12,907
2022 12,282
Thereafter 44,663
Total $ 108,297

12. Related-Party Transactions

Related-party transactions not otherwise disclosed in these footnotes to the consolidated financial statements include the following:

Credit Facilities

Interest expense, including unused fees, for affiliate ~~debt facilities~~lines of credit for the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015~~2017 was as follows:


	For the Year Ended December 31,

	2019		2018		2017
Lines of credit agreement with Santander - New York Branch (a)	$	—	$	11,620	$	51,735
Debt facilities with SHUSA (Note 6)	209,399		151,238		90,988

For the Year Ended December 31,
2017 2016 2015
Line of credit agreement with Santander - New York Branch (Note 6) $ 51,735
$ 69,877
$ 96,753
Debt facilities with SHUSA (Note 6) 90,988
24,050
5,299
(a) Through its New York branch, Santander provided the Company with revolving credit facilities. During the year ended December 31, 2018 these facilities were terminated.

Accrued interest for affiliate ~~debt facilities~~lines of credit at December 31, ~~2017~~2019 and ~~2016, were comprised~~2018, was as follows:

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December 31, 2017 December 31, 2016
Line of credit agreement with Santander - New York Branch (Note 6) $ 1,435
$ 6,297
Debt facilities with SHUSA (Note 6) 18,670
1,737


	December 31, 2019		December 31, 2018

Debt facilities with SHUSA (Note 6)	$	29,326	$	19,928

In ~~August~~ 2015, under ~~a new~~an agreement with Santander, the Company agreed to begin incurring a fee of 12.5 basis points (per annum) on certain warehouse ~~facilities,~~lines, as they renew, for which Santander provides a guarantee of the ~~Company's~~Company’s servicing obligations. The Company recognized guarantee fee expense of ~~$5,979~~$384, $5,024, and ~~$6,402~~$5,979 for the years ended December 31, ~~2017~~2019, 2018, and ~~2016,~~2017, respectively. As of December 31, ~~2017~~2019 and ~~2016,~~2018, the Company had ~~$7,598~~$0 and ~~$1,620~~$1,922 of related fees payable to Santander, ~~under this arrangement.~~respectively.

Derivatives

The Company has derivative financial instruments with Santander and affiliates with outstanding notional amounts of ~~$3,734,400~~

$1,874,100 and ~~$7,259,400 at~~0 as of December 31, ~~2017~~2019 and ~~2016,~~2018, respectively (Note 8). The Company had a collateral overage on derivative liabilities with Santander and affiliates of ~~$1,622~~$2,220 and ~~$15,092 at~~0 as of December 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

Interest and mark-to-market adjustments on these ~~agreements includes amounts totaling~~derivative financial instruments totaled $315, $930 and $1,333 ~~$16,078, and $58,019~~ for the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015,~~2017, respectively.

~~Originations~~

Lease origination and servicing agreement

Servicing fee income recognized on leases serviced for SBNA totaled $9, $1,425 and $4,894 for the years ended December 31, 2019, 2018 and 2017, respectively.

Retail Installment Contracts and RV Marine

The Company also has agreements with SBNA to service auto retail installment contracts and recreational and marine vehicle portfolios.

Servicing fee income recognized under these agreements totaled $1,776, $3,690 and $3,381 for the years ended December 31, 2019, 2018 and 2017, respectively. Other information on the serviced auto loan and retail installment contract portfolios for SBNA as of December 31, 2019 and 2018 is as follows:


	December 31, 2019		December 31, 2018
Total serviced portfolio	$	277,669	$	383,246
Cash collections due to owner	14,908		14,920
Servicing fees receivable	738		601

Dealer Lending

Under the Company’s agreement with SBNA, the Company is required to permit SBNA a first right to review and assess ~~Chrysler Capital~~CCAP dealer lending opportunities, and SBNA is required to pay the Company ~~a relationship management fee based upon the performance and yields of Chrysler Capital dealer loans held by SBNA. On April 15, 2016, the relationship management fee was replaced with~~ an origination fee and an annual renewal fee for each ~~loan.~~loan originated under the agreement. The Company recognized zero, $419 and $6,976 of relationship management fee income for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017 and 2016, the Company had relationship management fees receivable from SBNA of zero. The Company recognized $1,660 and $3,314 of origination fee income for the years ended December 31, 2017 and 2016, respectively, and $1,476 and $610 of renewal fee income for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, the Company had origination and renewal fees receivable from SBNA of $369 and $552. These agreementsagreement also transferred the servicing of all ~~Chrysler Capital~~CCAP receivables from dealers, including receivables held by SBNA and by ~~SC, from SC to SBNA. Servicing fee expense under this new agreement totaled $97, $110 and $253 for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017 and 2016,~~ the Company, ~~had $9 and $21, respectively, of servicing fees payable~~from the Company to SBNA. The Company may provide advance funding for dealer loans originated by SBNA, which is reimbursed to the Company by SBNA. The Company had no0 outstanding receivable from SBNA as of December 31, ~~2017~~2019 or ~~2016~~2018 for such advances.

Other information related to the above transactions with SBNA is as follows:


	For the Year Ended December 31,

	2019		2018		2017
Origination and renewal fee income from SBNA (a)	$	5,682	$	4,226	$	3,136
Servicing fees expenses charged by SBNA (b)	295		78		97

(a) As of December 31, 2019 and 2018, the Company had origination and renewal fees receivable from SBNA of $479 and $385, respectively.

(b) As of December 31, 2019 and 2018, the Company had $5 and $19 of servicing fees payable to SBNA, respectively.

Under the agreement with SBNA, the Company may originate retail consumer loans in connection with sales of vehicles that are collateral held against floorplan loans by SBNA. Upon origination, the Company remits payment to

107

SBNA, who settles the transaction with the dealer. The Company owed SBNA ~~$4,481~~$5,384 and ~~$2,761~~$5,908 related to such originations as of December 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

The Company received a $9,000 referral fee in connection with ~~the original~~sourcing and servicing arrangement and ~~was~~is amortizing the fee into income over the ~~ten-year~~ten-year term of the ~~agreement. The remaining balance of the referral fee SBNA paid to the Company in connection with the original sourcing and servicing~~ agreement ~~is considered a referral fee in connection with the new agreements and will continue to be amortized into income~~ through ~~the~~ July 1, 2022, the termination date of

the ~~new agreements.~~agreement. As of December 31, ~~2017~~2019 and ~~2016,~~2018, the unamortized fee balance was ~~$4,950~~$3,150 and ~~$5,850,~~$4,050, respectively. The Company recognized $900, $900 and $900 of income related to the referral fee for the years ended December 31, 2019, 2018 and 2017, ~~2016, and 2015,~~ respectively.

The Company also has agreements with SBNA to service auto retail installment contracts and recreational and marine vehicle portfolios. Servicing fee income recognized under these agreements totaled $3,381, $5,154, and $2,500 for the years ended December 31, 2017, 2016, and 2015, respectively. Other information on the serviced auto loan and retail installment contract portfolios for SBNA as of December 31, 2017 and 2016 is as follows:Origination Support Services

December 31,
2017 December 31,
2016
Total serviced portfolio $ 400,788
$ 531,117
Cash collections due to owner 11,870
21,427
Servicing fees receivable 839
1,123

During the year ended December 31, 2017, the Company sold certain receivables previously acquired with deteriorated credit quality to SBNA. These loans were sold with a gain of $35,927 recognized in investment losses, net in the consolidated statements of income. The Company will continue to perform the servicing of these assets and has recorded $548 of servicing fee income from SBNA during the period ended December 31, 2017. There were no such sales of receivables previously acquired with deteriorated credit quality to SBNA during 2016 and 2015.

~~Other information on the serviced receivables for SBNA as of December 31, 2017 is as follows:~~

December 31,
2017
Total serviced portfolio $ 121,431
Cash collections due to owner 436
Servicing fees receivable 104

Beginning in 2016, the Company agreed to pay SBNA a market rate-based fee expense for payments made at SBNA retail branch locations for accounts originated/serviced by the Company and the costs associated with modifying the Advanced Teller platform to the payments. The Company incurred $225 and $473 for these services during the years ended December 31, 2017 and 2016, respectively.

Beginning in 2018, the Company ~~has~~ agreed to provide SBNA with origination support services in connection with the processing, underwriting and purchase of retail loans, primarily from ~~Chrysler~~FCA dealers. In addition, the Company ~~has~~ agreed to perform the servicing for any loans originated on SBNA’s behalf.

~~Flow Agreements~~

~~Until May 9, 2015,~~ For the years ended December 31, 2019 and 2018, the Company ~~was party to a flow agreement with SBNA whereby SBNA had~~facilitated the ~~first right to review~~purchase of $7.0 billion and ~~approve Chrysler Capital consumer vehicle lease applications.~~$1.9 billion of retail installment contacts, respectively. The Company ~~could review any applications declined by SBNA for the Company’s own portfolio. The Company received an origination~~recognized origination/referral fee ~~on all leases originated under this agreement~~ and ~~continues to service these vehicles leases. Pursuant to the Chrysler Agreement, the Company pays FCA on behalf of SBNA for residual gains and losses on the flowed leases. Origination~~servicing fee income ~~recognized under the agreement totaled zero, zero~~of $58,148 and ~~$8,431~~$15,489 for the years ended December 31, ~~2017, 2016~~2019 and ~~2015, respectively. Servicing fee income recognized on leases serviced for SBNA totaled $4,894, $7,707~~2018, of which $2,068 is payable and ~~$6,977 for the years ended December 31, 2017, 2016 and 2015, respectively.~~

~~Other information on the consumer vehicle lease portfolio serviced for SBNA~~$4,875 is receivable as of December 31, ~~2017~~2019 and ~~2016 is as follows:~~

December 31,
2017 December 31,
2016
Total serviced portfolio $ 321,629
$ 1,297,317
Cash collections due to owner —
78
Origination and servicing fees receivable 2,067
926
Revenue share reimbursement receivable 1,548
612

On June 30, 2014, the Company entered into an indemnification agreement with SBNA whereby the Company indemnifies SBNA for any credit or residual losses on a pool of $48,226 in leases originated under the flow agreement. The covered leases are non-conforming units because they did not meet SBNA’s credit criteria at origination. At the time of the agreement, the Company established a $48,226 collateral account with SBNA in restricted cash that will be released over time to SBNA, in the case of losses, and the Company, in the case of payments and sale proceeds. As of December 31, 2017 and 2016, the balance in the collateral account was $18 and $11,329,2018, respectively. ~~For the years ended December 31, 2017, 2016, and 2015, the Company recognized indemnification expense of $272, zero, and 3,142, respectively.~~

Also, in January 2015, the Company agreed to indemnify SBNA for residual losses, up to a cap, on certain leases originated under the Company's prior flow agreement with SBNA between September 24, 2014 and May 9, 2015 for which SBNA and the Company had differing residual value expectations at lease inception. At the time of the agreement, the Company established a collateral account held by SBNA to cover the expected losses, as of December 31, 2017 and 2016, the balance in the collateral account was $2,210 and $2,706, respectively. As of December 31, 2017 and 2016, the Company had a recorded liability of $2,206 and $2,691 respectively, related to the residual losses covered under the agreement.

On September 16, 2014, the Company sold $18,227 of receivables from dealers to SBNA, resulting in a gain of $347. The Company was entitled to additional proceeds on this sale totaling $694 if certain conditions, including continued existence and performance of the sold loans, are met at the first and second anniversaries of the sale. At the first and second anniversary dates of the sale, which occurred during the years ended December 31, 2015 and 2016, respectively, the Company received $347 and $347, respectively, in additional proceeds related to the sale due to the satisfaction of conditions specified at the time of the sale.

Securitizations

~~On March 29, 2017, the~~The Company ~~entered into~~had a Master Securities Purchase Agreement (MSPA) with Santander, whereby the Company ~~has~~had the option to sell a contractually determined amount of eligible prime loans to Santander, through the SPAIN securitization platform, for a term ~~ending~~that ended in December 2018. The Company ~~will provide~~provides servicing on all loans originated under this arrangement.

Other information relating to SPAIN securitization platform for the ~~MSPA. As~~years ended December 31, 2019 and 2018 is as follows:



	December 31, 2019		December 31, 2018
Servicing fee income	$	29,831	$	35,058
Loss (Gain) on sale, excluding lower of cost or market adjustments (if any)	—		20,736

Servicing fee receivable as of December 31, 2017, the Company sold $1,236,331 of loans at fair value under this MSPA. Under a separate securities purchase agreement, the Company sold $1,347,010 of prime loans at fair value to Santander during the year ended December 31, 2017. A total loss of $13,0262019 and 2018 was recognized for the year ended December 31, 2017, which is included in investment losses, net in the consolidated statements of income. Servicing fee income recognized totaled $12,346 for the year ended December 31, 2017.$1,869 and $2,983, respectively. The Company had ~~$12,961~~$8,180 and $15,968 of collections due to Santander as of December 31, ~~2017.~~2019 and 2018, respectively.

~~Employment~~

Santander Investment Securities Inc. (SIS), an affiliated entity, serves as joint bookrunner and co-manager on certain of the Company’s securitizations. Amounts paid to SIS as co-manager for the years ended December 31, 2019, 2018 and 2017, totaled $3,688, $2,647 and $1,359, respectively, and are included in debt issuance costs in the accompanying consolidated financial statements.

Separation and Settlement Agreements

~~On July 2,~~In 2015, the Company announced the departure of Thomas G. Dundon from his roles as Chairman of the Board and CEO of the ~~Company, effective as of the close of business on July 2, 2015.~~Company. In connection with his departure, ~~and subject to the terms and conditions of his Employment Agreement, including Mr. Dundon's execution of a release of claims against the Company,~~ Mr. Dundon ~~became entitled to receive certain payments and benefits under his Employment Agreement.~~

~~Mr. Dundon also~~ entered into a ~~separation~~separate agreement (the Separation Agreement) with the Company providing Mr. Dundon with certain ~~other~~ payments and benefits. Mr. Dundon, the Company, DDFS LLC (an affiliate of Mr. Dundon), SHUSA and Santander also entered into a Second Amendment to the Shareholders Agreement (the Second Amendment). Pursuant to the Second Amendment, the parties agreed that the price per share to be paid in the event that a call or put option was exercised under the Shareholders Agreement with respect to the shares of Company Common Stock owned by DDFS LLC would be $26.83.

Pursuant to the Separation Agreement, SHUSA was deemed to have delivered as of July 3, 2015 an irrevocable notice to exercise a call option under the Shareholders Agreement with respect to all 34,598,506 shares of the Company's Common Stock owned by DDFS LLC, subject to the receipt of required bank regulatory approvals and any other approvals required by law (the Call Transaction). The parties to the Separation Agreement agreed that interest would accrue on the call price, commencing after October 15, 2015 (the Call End Date). In addition, pursuant to the Separation Agreement, DDFS LLC and Santander entered into an amendment to the Amended and Restated Loan Agreement, dated as of July 16, 2014, between DDFS LLC and Santander (the Loan Agreement). The Loan Agreement provided for a $300,000 revolving loan which, as of the maturity date, had a $290,000 unpaid principal balance.

In the amendment to the Loan Agreement, among other things, the parties agreed that the outstanding balance under the Loan Agreement would become due and payable upon the consummation of the Call Transaction and that the amount otherwise payable to DDFS LLC pursuant the Call Transaction would be reduced by the amount outstanding under the Loan Agreement, including principal, interest and fees, and further that any net cash proceeds received by DDFS LLC on account of sales of Company Common Stock after the Call End Date would be applied to the outstanding balance under the Loan Agreement.

On August 31, 2016, Mr. Dundon, DDFS LLC, the Company, Santander and SHUSA entered into a Second Amendment to the Separation Agreement, and Mr. Dundon, DDFS LLC, Santander and SHUSA entered into a Third Amendment to the Shareholders Agreement, whereby the price per share to be paid to DDFS LLC in connection with the Call Transaction was reduced from $26.83 to $26.17.

~~On November 15,~~ 2017, Mr. Dundon entered into a Settlement Agreement with Santander, SHUSA, SC, SC Illinois, and DDFS LLC (the Settlement Agreement) pursuant to which Mr. Dundon received cash payments from the Company totaling $66,115, of which $52,799 was paid in satisfaction of Mr. Dundon’s previous exercise of certain stock options that was the subject of the Separation ~~Agreement (see Note 16).~~Agreement. The $66,115 cash payment iswas recorded as compensation expense in the Company’s consolidated statement of income and comprehensive income. The Settlement Agreement also ~~modifies~~modified the terms of certain equity-based awards previously granted to Mr. Dundon. In addition, pursuant to the Settlement Agreement, the parties agreed to consummate the Call Transaction. The Call Transaction was consummated ~~on November 15,~~in 2017, pursuant to which Santander purchased the 34,598,506 shares of the ~~Company's~~Company’s Common Stock owned by DDFS LLC for an aggregate price of $941,945, representing the aggregate of the previously agreed price per share of the ~~Company's~~Company’s Common Stock of $26.17, as set forth in the Third Amendment, interest ~~accruing~~accrued after the Call End Date. The net proceeds to DDFS LLC from the Call Transaction were reduced by all amounts

108

outstanding and/or accrued under the Loan Agreement, including principal, interest (including default interest), and fees, through the closing of the Call Transaction, which totaled $294,501.

Former CEO and other employee compensation

~~On August 28, 2017, the Board of Directors~~In December 2019, Scott Powell resigned as president and CEO of the ~~Company announced that Scott Powell would succeed Jason Kulas as President and CEO, effective immediately.~~Company. During the ~~year 2017,~~years ended December 31, 2019 and 2018, the Company ~~paid $795 to Mr. Powell~~accrued $3,095 and $4,033 as its share of compensation expense based on time allocation between his services to the Company and SHUSA.

In addition, certain employees of the Company and SHUSA, provide services to each other. For the years ended December 31, 2019 and 2018, the Company owed SHUSA approximately $16,064 and $2,595, and SHUSA owed the Company approximately $5,234 and $1,222 for such services, respectively.

Other related-party transactions

•As of December 31, ~~2017, Mr.~~2019, Jason A. Kulas and Mr. Dundon, both being former members of the Board and CEOs of the Company, ~~along with a Santander employee who was a member of the SC Board until the second quarter of 2015,~~ each had a minority equity investment in a property in which the Company leases approximately 373,000 square feet as its corporate headquarters. During the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015,~~2017, the Company recorded ~~$4,970, $4,945~~$5,305, $4,775 and ~~$4,612,~~$4,970, respectively, in lease expenses on this property. The Company subleases approximately 13,000 square feet of its corporate office space to SBNA. For the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015,~~2017, the Company recorded $176, $163 ~~$161~~ and ~~$204,~~$163, respectively, in sublease revenue on this property. Future minimum lease payments over the remainder of the ~~9-year~~seven-year term of the lease, which extends through 2026, ~~total $62,381.~~totaled $48,478.

•The ~~Company's~~Company’s wholly-owned subsidiary, Santander Consumer International Puerto Rico, LLC (SCI), ~~opened~~has deposit accounts with Banco Santander Puerto Rico, an affiliated entity. As of December 31, ~~2017~~2019 and ~~2016,~~2018, SCI had cash (including restricted cash) of ~~$106,596~~$8,102 and ~~$98,836,~~$8,862, respectively, on deposit with Banco Santander Puerto Rico.

~~During 2015, Santander Investment Securities Inc. (SIS),~~

•The Company has certain deposit and checking accounts with SBNA, an affiliated ~~entity, purchased a portion of the Class B notes of SDART 2013-3, a consolidated securitization Trust, with a principal balance of $725.~~entity. As of December 31, ~~2017~~2019 and ~~2016,~~2018, the ~~unpaid note~~Company had a balance of ~~the Class B notes owned by SIS was zero~~$33,683 and ~~zero, respectively. In addition, SIS purchased an investment of $2,000~~$92,774, respectively, in the Class A3 notes of CCART 2013-A, a securitization Trust formed by the Company in 2013. Although CCART 2013-A is not a consolidated entity of the Company, the Company continues to service the assets of the associated trust. SIS also serves as co-manager on certain of the Company’s securitizations. Amounts paid to SIS as co-manager for the years ended December 31, 2017, 2016, and 2015 totaled $1,359, $1,149, and $550, respectively, and are included in debt issuance costs in the accompanying consolidated financial statements.these accounts.

Produban Servicios Informaticos Generales S.L., a Santander affiliate, is under contract with the Company to provide professional services, telecommunications, and internal and/or external applications. Expenses incurred, which are

included as a component of other operating costs in the accompanying consolidated statements of income, totaled zero, $93, and $161 for the years ended December 31, 2017, 2016, and 2015, respectively.

The Company is party to a Master Service Agreement (MSA) with a company in which it has a cost method investment and holds a warrant to increase its ownership if certain vesting conditions are satisfied. The MSA enables SC to review point-of-sale credit applications of retail store customers. Under terms of the MSA, the Company originated personal revolving loans of zero, zero, and $23,504 during the years ended December 31, 2017, 2016, and 2015, respectively. During the year ended December 31, 2015, the Company fully impaired its cost method investment in this entity and recorded a loss of $6,000 in investment gains (losses), net in the accompanying consolidated statement of income and comprehensive income. Effective August 17, 2016, the Company ceased funding new originations from all of the retailers for which it reviews credit applications under this MSA.

•Beginning in 2017, the Company and SBNA entered into a Credit Card Agreement (Card Agreement) whereby SBNA will provide credit card services for travel and related business expenses ~~and~~ for vendor payments. This service is at zero cost but ~~generate~~generates rebates based on purchases made. As atof December 31, ~~2017,~~2019, the activities associated with the program were insignificant.

•Beginning in 2016, the Company agreed to pay SBNA a market rate-based fee expense for payments made at SBNA retail branch locations for accounts originated or serviced by the Company and the costs associated with modifying the Advanced Teller platform to the payments. The Company incurred expenses of $230, $258 and 225 for the years ended December 31, 2019, 2018 and 2017, respectively.

•Effective ~~April 1,~~ 2017, the Company contracted Aquanima, a Santander affiliate, to provide procurement services. Expenses incurred totaled $2,035, $1,515 and $637 for the ~~year~~years ended December 31, ~~2017.~~2019, 2018 and 2017, respectively.

•Santander Global Tech (formerly known as Produban Servicios Informaticos Generales S.L.), a Santander affiliate, is under contract with the Company to provide professional services, telecommunications, and internal and/or external applications. Expenses incurred, which are included as a component of other operating costs in the accompanying consolidated statements of income, totaled $334, 0 and 0 for the years ended December 31, 2019, 2018 and 2017, respectively.

•The Company partners with SHUSA to place Cyber Liability Insurance in which participating national entities share $150 million aggregate limits. The Company repays SHUSA for the Company’s equitably allocated portion of insurance premiums and fees. Expenses incurred totaled ~~$312~~$432, $369 and ~~$294~~$312 for the ~~year~~years ended December 31, 2019, 2018 and 2017, respectively. In addition the Company partners with SHUSA for various other insurance products. Expenses incurred totaled $754 and $708 and $607 for the years ended December 31, ~~2016,~~2019, 2018 and 2017, respectively.

109


~~13.~~	~~Supplemental Cash Flow Information~~

13. Supplemental Cash Flow Information

Supplemental cash flow information for the ~~year~~years ended December 31, ~~2017~~2019, 2018 and ~~December 31, 2016,~~2017 was as follows:


	For the Year Ended December 31,
	2019		2018		2017
Cash paid (received) during the year for:
Interest	$	1,334,988	$	1,104,982	$	942,551
Income taxes	13,080		9,865		1,856
Noncash investing and financing transactions:


Transfer of revolving credit facilities to secured structured financings	—		—		495,991
Adoption of lease accounting standard:
Right-of-use assets	67,300		—		—
Accrued expenses and payables	91,400		—		—

14. Computation of Basic and Diluted Earnings per Common Share

For the Year Ended December 31,

2017 2016 2015
Cash paid (received) during the year for:

Interest $ 942,551
$ 796,682
$ 635,558
Income taxes 1,856
(180,323 ) (190,663 )
Noncash investing and financing transactions:

Transfer of revolving credit facilities to secured structured financings 495,991
146,864
193,180
Transfer of personal loans to held for sale —
—
1,883,251

During the year ended December 31, 2015, the Company deconsolidated certain Trusts from the consolidated balance sheet following the sale of its retained interests in the respective Trusts (Note 7). Upon deconsolidation, the Company derecognized $1,919,171 in assets, including $170,144 in restricted cash, and $1,183,792 in notes payable and other liabilities of the Trusts.


~~14.~~	~~Computation of Basic and Diluted Earnings per Common Share~~

Earnings per common share ~~(EPS)~~(“EPS”) is computed using the two-class method required for participating securities. Restricted stock awards are considered to be participating securities because holders of such shares have non-forfeitable dividend rights in the event of a declaration of a dividend on the Company’s common shares.

The calculation of ~~earnings per share~~diluted EPS excludes ~~367,880, 1,387,656, and 926,242 employee~~the effect of exercise or settlement of the following securities that would be anti-dilutive:

(a) Employee stock options of $24,507, $168,728 and ~~626,551, 1,106,187, and zero RSUs~~$367,880 for the years ended December 31, 2019, 2018 and 2017, ~~2016,~~respectively; and ~~2015, respectively, as~~

(b) RSUs of 0 for the ~~effect of those securities would be anti-dilutive.~~ years ended December 31, 2019 and 2018, and $626,551 for the year ended 2017.

The following table represents EPS numbers for the years ended December 31, ~~2017, 2016~~2019, 2018 and ~~2015:~~2017.



	For the Year Ended December 31,
	2019		2018		2017
Earnings per common share
Net income	$	994,370	$	915,926	$	1,172,807
Weighted average number of common shares outstanding before restricted participating shares (in thousands)	346,992		359,862		359,614

Weighted average number of common shares outstanding (in thousands)	346,992		359,862		359,614
Earnings per common share	$	2.87	$	2.55	$	3.26
Earnings per common share - assuming dilution
Net income	$	994,370	$	915,926	$	1,172,807
Weighted average number of common shares outstanding (in thousands)	346,992		359,862		359,614
Effect of employee stock-based awards (in thousands)	516		810		678
Weighted average number of common shares outstanding - assuming dilution (in thousands)	347,508		360,672		360,292
Earnings per common share - assuming dilution	$	2.86	$	2.54	$	3.26

For the Year Ended December 31,
2017 2016 2015
Earnings per common share
Net income attributable to Santander Consumer USA Holdings Inc. shareholders $ 1,187,606
$ 766,466
$ 824,040
Weighted average number of common shares outstanding before restricted participating shares (in thousands) 359,614
358,032
354,636
Weighted average number of participating restricted common shares outstanding (in thousands) —
249
467
Weighted average number of common shares outstanding (in thousands) 359,614
358,281
355,103
Earnings per common share $ 3.30
$ 2.14
$ 2.32

Earnings per common share - assuming dilution
Net income attributable to Santander Consumer USA Holdings Inc. shareholders $ 1,187,606
$ 766,466
$ 824,040
Weighted average number of common shares outstanding (in thousands) 359,614
358,281
355,103
Effect of employee stock-based awards (in thousands) 678
797
1,060
Weighted average number of common shares outstanding - assuming dilution (in thousands) 360,292
359,078
356,163
Earnings per common share - assuming dilution $ 3.30
$ 2.13
$ 2.31

15. Fair Value of Financial Instruments

Fair value measurement requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs and also establishes a fair value hierarchy that categorizes ~~into three levels~~ the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that can be accessed as of the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

110

Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 inputs are those that are unobservable for the asset or liability and are used to measure fair value to the extent relevant observable inputs are not available.

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following tables present the carrying value and estimated fair value of the Company’s financial assets and liabilities disclosed, but not carried, at fair value at December 31, ~~2017~~2019 and ~~December 31, 2016,~~2018, and the level within the fair value hierarchy:


	December 31, 2019
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents (a)	$	81,848	$	81,848	$	81,848	$	—	$	—

Finance receivables held for investment, net (b)	27,544,162		28,133,427		—		1,009,358		27,124,069
Restricted cash and cash equivalents (a)	2,079,239		2,079,239		2,079,239		—		—
Total	$	29,705,249	$	30,294,514	$	2,161,087	$	1,009,358	$	27,124,069
Liabilities:
Notes payable — facilities with third parties (c)	$	5,399,931	$	5,399,931	$	—	$	—	$	5,399,931
Notes payable — secured structured financings (d)	28,141,885		28,360,948		—		18,646,326		9,714,622
Notes payable — facilities with Santander and related subsidiaries (e)	5,652,325		5,724,675		—		—		5,724,675
Total	$	39,194,141	$	39,485,554	$	—	$	18,646,326	$	20,839,228

December 31, 2017
Carrying
Value Estimated
Fair Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents (a) $ 527,805
$ 527,805
$ 527,805
$ —
$ —
Finance receivables held for investment, net (b) 22,284,068
24,340,739
—
—
24,340,739
Restricted cash (a) 2,553,902
2,553,902
2,553,902
—
—
Total $ 25,365,775
$ 27,422,446
$ 3,081,707
$ —
$ 24,340,739
Liabilities:
Notes payable — credit facilities (c) $ 4,848,316
$ 4,848,316
$ —
$ —
$ 4,848,316
Notes payable — secured structured financings (d) 22,557,895
22,688,381
—
12,275,408
10,412,973
Notes payable — related party (e) 3,754,223
3,754,223
—
—
3,754,223
Total $ 31,160,434
$ 31,290,920
$ —
$ 12,275,408
$ 19,015,512


	December 31, 2018
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents (a)	$	148,436	$	148,436	$	148,436	$	—	$	—

Finance receivables held for investment, net (b)	24,914,833		26,037,559		—		—		26,037,559
Restricted cash and cash equivalents (a)	2,102,048		2,102,048		2,102,048		—		—
Total	$	27,165,317	$	28,288,043	$	2,250,484	$	—	$	26,037,559
Liabilities:
Notes payable — facilities with third parties (c)	$	4,478,214	$	4,478,214	$	—	$	—	$	4,478,214
Notes payable — secured structured financings (d)	26,901,530		26,994,912		—		17,924,867		9,070,045
Notes payable — facilities with Santander and related subsidiaries (e)	3,503,293		3,438,543		—		—		3,438,543
Total	$	34,883,037	$	34,911,669	$	—	$	17,924,867	$	16,986,802

(a)Cash and cash equivalents and restricted cash and cash equivalents — The carrying amount of cash and cash equivalents, including restricted cash and cash equivalents, is at an approximated fair value as the instruments mature within 90 days or less and bear interest at market rates.

December 31, 2016
Carrying
Value Estimated
Fair Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents (a) $ 160,180
$ 160,180
$ 160,180
$ —
$ —
Finance receivables held for investment, net (b) 23,456,506
24,630,599

24,630,599
Restricted cash (a) 2,757,299
2,757,299
2,757,299
—
—
Total $ 26,373,985
$ 27,548,078
$ 2,917,479
$ —
$ 24,630,599
Liabilities:
Notes payable — credit facilities (c) $ 6,739,817
$ 6,739,817
$ —
$ —
$ 6,739,817
Notes payable — secured structured financings (d) 21,608,889
21,712,691
—
13,530,045
8,182,646
Notes payable — related party (e) 2,975,000
2,975,000
—
—
2,975,000
Total $ 31,323,706
$ 31,427,508
$ —
$ 13,530,045
$ 17,897,463
(b)Finance receivables held for investment, net — Finance receivables held for investment, net are carried at amortized cost, net of an allowance. These receivables exclude retail installment contracts that are measured at fair value on a recurring and nonrecurring basis. The estimated fair value for the underlying financial instruments are determined as follows:


~~(a)~~	~~Cash and cash equivalents and restricted cash~~ ~~— The carrying amount of cash and cash equivalents, including restricted cash, is at an approximated fair value as the instruments mature within 90 days or less and bear interest at market rates.~~


~~(b)~~	~~Finance receivables held for investment, net~~ ~~— Finance receivables held for investment, net are carried at amortized cost, net of an allowance. The estimated fair value for the underlying financial instruments are determined as follows:~~

•Retail installment contracts held for investment ~~net~~and purchased receivables - credit impaired — The estimated fair value for certain finance receivables at December 31, 2019 is based on the most recent purchase price and hence has classified these amounts as Level 2. The estimated fair value for the remaining finance receivables is calculated based on a DCF in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect prepayment rates, expected recovery rates, discount rates reflective of the cost of funding, and credit loss ~~expectations.~~

111

~~Receivables from dealers~~expectations.Accordingly, these remaining retail installment contracts held for investment ~~and Capital~~are classified as Level 3.

•Finance lease receivables ~~net~~ — ~~Receivables from dealers held for investment and capital~~Finance lease receivables are carried at ~~amortized cost, net of credit loss allowance and~~ gross investments, net of unearned income and allowance for lease ~~losses, respectively.~~losses. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements.

•Receivables from dealers and personal loans held for investment — Receivables from dealers and personal loans held for investment are carried at amortized cost, net of credit loss allowance. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements.

~~(c)~~

~~Notes payable — credit facilities~~ — The carrying amount of notes payable related to revolving credit facilities is estimated to approximate fair value. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements as the facilities are subject to short-term floating interest rates that approximate rates available to the Company.

(c)Notes payable — facilities with third parties — The carrying amount of notes payable related to revolving credit facilities is estimated to approximate fair value. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements as the facilities are subject to short-term floating interest rates that approximate rates available to the Company.

(d)Notes payable — secured structured financings — The estimated fair value of notes payable related to secured structured financings is calculated based on market observable prices and spreads for the Company’s publicly traded debt and market observed prices of similar notes issued by the Company, or recent market transactions involving similar debt with similar credit risks, which are considered level 2 inputs. The estimated fair value of notes payable related to privately issued amortizing notes is calculated based on a combination of credit enhancement review, discounted cash flow analysis and review of market observable spreads for similar liabilities. In conducting this analysis, the Company uses significant unobservable inputs on key assumptions, including historical default rates, prepayment rates, discount rates reflective of the cost of funding, and credit loss expectations, which are considered level 3 inputs.

(e)Notes payable — facilities with Santander and related subsidiaries — The carrying amount of floating rate notes payable to a related party is estimated to approximate fair value as the facilities are subject to short-term floating interest rates that approximate rates available to the Company. The fair value premium/discount of the fixed rate promissory notes are derived from changes in the Company’s unsecured cost of funds since the time of issuance and weighted average life of these notes.

~~(d)~~

~~Notes payable — secured structured financings~~ — The estimated fair value of notes payable related to public securitizations is calculated based on market observable prices and spreads for the Company’s publicly traded debt and market observed prices of similar notes issued by the Company, or recent market transactions involving similar debt with similar credit risks, which are considered level 2 inputs. The estimated fair value of notes payable related to privately issued amortizing notes is calculated based on a combination of discounted cash flow analysis and market observable spreads for similar liabilities in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect prepayment rates, discount rates reflective of the cost of funding, and credit loss expectations, which are considered level 3 inputs.


~~(e)~~	~~Notes payable — related party~~ — The carrying amount of notes payable to a related party is estimated to approximate fair value as the facilities are subject to short-term floating interest rates that approximate rates available to the Company.

Financial Instruments Measured At Fair Value On A Recurring Basis

The following ~~table presents~~tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, ~~2017~~2019 and ~~2016,~~2018, and ~~are categorized using~~the level within the fair value hierarchy:


	Fair Value Measurements at December 31, 2019
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets — trading interest rate caps (a)	$	37,222	$	—	$	37,222	$	—
Due from affiliates — trading interest rate caps (a)	25,330		—		25,330		—
Other assets — cash flow hedging interest rate swaps (a)	2,807		—		2,807		—
Other assets — trading interest rate swaps (a)	—		—		—		—
Other assets — available-for-sale-debt securities (b)	92,246		—		92,246		—
Other liabilities — trading options for interest rate caps (a)	37,222		—		37,222		—
Other liabilities — cash flow hedging interest rate swaps (a)	39,128		—		39,128		—
Due to affiliates — trading options for interest rate caps (a)	25,330		—		25,330		—
Other liabilities — trading interest rate swaps (a)	10,267		—		10,267		—
Retail installment contracts (c)(d)	22,353		—		17,634		4,719

112

Fair Value Measurements at December 31, 2017
Total Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Other assets — trading interest rate caps (a) $ 129,718
$ —
$ 129,718
$ —
Due from affiliates — trading interest rate caps (a) 6,112
—
6,112
—
Other assets — cash flow hedging interest rate swaps (a) 39,036
—
39,036
—
Due from affiliates — cash flow hedging interest rate swaps (a) 6,950
—
6,950
—
Other assets — trading interest rate swaps (a) 7,925
—
7,925
—
Due from affiliates — trading interest rate swaps (a) 1,671
—
1,671
—
Other assets — trading options for interest rate caps (a)

20,075
—
20,075
—
Due from affiliates — trading options for interest rate caps (a)
12,090
—
12,090
—
Other liabilities — trading options for interest rate caps (a) 129,712
—
129,712
—
Due to affiliates — trading options for interest rate caps (a) 6,112
—
6,112
—
Other liabilities — trading interest rate caps (a) 20,019
—
20,019
—
Due to affiliates — trading interest rate caps (a) 12,090
—
12,090
—
Retail installment contracts acquired individually (c) 22,124
—
—
22,124


	Fair Value Measurements at December 31, 2018
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets — trading interest rate caps (a)	$	128,377	$	—	$	128,377	$	—

Other assets — cash flow hedging interest rate swaps (a)	43,967		—		43,967		—

Other assets — trading interest rate swaps (a)	11,553		—		11,553		—




Other liabilities — trading options for interest rate caps (a)	128,377		—		128,377		—

Other liabilities — cash flow hedging interest rate swaps (a)	7,478		—		7,478		—
Other liabilities — trading interest rate swaps (a)	2,130		—		2,130		—
Retail installment contracts (c)(d)	13,509		—		—		13,509

(a)The valuation is determined using widely accepted valuation techniques including a DCF on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurement of its derivatives. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings and guarantees. The Company utilizes the exception in ASC 820-10-35-18D (commonly referred to as the “portfolio exception”) with respect to measuring counterparty credit risk for instruments (Note 8).

Fair Value Measurements at December 31, 2016
Total Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Other assets — trading interest rate caps (a) $ 68,676
$ —
$ 68,676
$ —
Due from affiliates — trading interest rate caps (a) 7,593
—
7,593
—
Other assets — cash flow hedging interest rate swaps (a) 41,471
—
41,471
—
Due from affiliates — cash flow hedging interest rate swaps (a) 4,080
—
4,080
—
Other assets — trading interest rate swaps (a) 783
—
783
—
Due from affiliates — trading interest rate swaps (a) 1,292
—
1,292
—
Other liabilities — trading options for interest rate caps (a) 68,688
—
68,688
—
Due to affiliates — trading options for interest rate caps (a) 7,593
—
7,593
—
Other liabilities — cash flow hedging interest rate swaps (a) 482
—
482
—
Due to affiliates — cash flow hedging interest rate swaps (a) 451
—
451
—
Other liabilities — trading interest rate swaps (a) 42
—
42
—
Due to affiliates — trading interest rate swaps (a) 95
—
95
—
Other liabilities — total return settlement (a,b) 30,618
—
—
30,618
Retail installment contracts acquired individually (c) 24,495
—
—
24,495
(b)The Company's available-for-sale debt securities includes U.S. Treasury securities that are valued utilizing observable market quotes. The Company obtains vendor trading platform data (actual prices) from a number of live data sources, including active market makers and interdealer brokers and therefore, classified as Level 2.

~~(a)~~

The valuation is determined using widely accepted valuation techniques including a DCF on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurement of its derivatives. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings and guarantees. The Company utilizes the exception in ASC 820-10-35-18D (commonly referred to as the “portfolio exception”) with respect to measuring counterparty credit risk for instruments (Note 8).


~~(b)~~	The significant unobservable inputs for total return settlement derivative contracts used in the fair value measurement of the Company's liabilities are discount percentages, which are based on comparable financial instruments.

~~(c)~~

(c)For certain retail installment contracts reported in finance receivables held for investment, net, the Company has elected the fair value option. For a majority of these loans, the Company has used the most recent purchase price as the fair value and hence has classified these amounts as Level 2. The fair values of the remaining retail installment contracts are estimated using a DCF model. When estimating the fair value using this model, the Company uses significant unobservable inputs on key assumptions, which includes historical default rates and adjustments to reflect prepayment rates based on available data from a comparable market securitization of similar assets, discount rates reflective of the cost of funding of debt issuance and recent historical equity yields, and recovery rates based on the average severity utilizing reported severity rates and loss severity utilizing available market data from a comparable securitized pool. Accordingly, these remaining retail installment contracts reported in finance receivables held for investment, net, the Company has elected the fair value option. The fair values of the retail installment contracts are estimated using a DCF model. When estimating the fair value using this model, the Company uses significant unobservable inputs on key assumptions, which includes historical default rates and adjustments to reflect prepayment rates based on available data from a comparable market securitization of similar assets, discount rates reflective of the cost of funding of debt issuance and recent historical equity yields, and recovery rates based on the average severity utilizing reported severity rates and loss severity utilizing available market data from a comparable securitized pool. Accordingly, retail installment

contracts held for investment are classified as Level 3. Changes in the fair value are recorded in investment gains (losses), net in the consolidated statement of income.

(d)The aggregate fair value of retail installment contracts in non-accrual status as of December 31, 2019 and 2018 is $9,511 and $5,126, respectively.

The following table presents the changes in retail installment contracts held for investment balances classified as Level 3 balances for the years ended December 31, ~~2017, 2016~~2019, 2018 and ~~2015:~~

2017:


										Year Ended
	Year Ended
	December 31, 2017			December 31, 2016			December 31, 2015			2019		2018		2017
Fair value, beginning of year	$	24,495		$	6,770		$	—
Balance — beginning of year									Balance — beginning of year	$	13,509	$	22,124	$	24,495
Additions / issuances	21,672			36,623			6,770		Additions / issuances	2,079		6,631		21,672
Net collection activities	(28,598		)	(18,850		)	—		Net collection activities	(11,766)		(16,755)		(28,598)
Loans sold	—			(48		)	—
Gains recognized in earnings	4,555			—			—		Gains recognized in earnings	897		1,509		4,555
Fair value, end of year	$	22,124		$	24,495		$	6,770
Balance — end of year									Balance — end of year	$	4,719	$	13,509	$	22,124

~~The following table presents the changes in the total return settlement balance, which is classified as Level 3, for the years ended December 31, 2017, 2016, and 2015:~~

Year Ended
December 31, 2017 December 31, 2016 December 31, 2015
Fair value, beginning of year $ 30,618
$ 53,432
$ 48,893
Losses recognized in earnings 505
4,365
10,973
Settlements (31,123 ) (27,179 ) (6,434 )
Fair value, end of year $ —
$ 30,618
$ 53,432

The Company ~~did~~did not have any transfers between Levels 1 and 2 during the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015.~~2017. There were no amounts transferred into or out of Level 3 during the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015.~~2017.

Financial Instruments Measured At Fair Value On A Nonrecurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a nonrecurring basis at December 31, ~~2017~~2019 and ~~2016,~~2018, and are categorized using the fair value hierarchy:

Fair Value Measurements at December 31, 2017
Total Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Lower of cost or fair value expense for the year ended December 31, 2017
Other assets — vehicles (a) $ 293,546
$ —
$ 293,546
$ —
$ —
Personal loans held for sale (b) 1,062,089
—
—
1,062,089
374,374
Retail installment contracts held for sale (c) 1,148,332
—
—
1,148,332

11,686
Auto loans impaired due to bankruptcy (d) 121,578
—
121,578
—
75,194

113


	Fair Value Measurements at December 31, 2016											Fair Value Measurements at December 31, 2019
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Lower of cost or fair value expense for the year ended December 31, 2016			Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Lower of cost or fair value expense for the year ended December 31, 2019
Other assets — vehicles (a)	$	257,382	$	—	$	257,382	$	—	$	—	Other assets — vehicles (a)	$	341,465	$	—	$	341,465	$	—	$	—
Personal loans held for sale (b)	1,077,600		—		—		1,077,600		414,703		Personal loans held for sale (b)	1,007,105		—		—		1,007,105		408,700
Retail installment contracts held for sale (c)	1,045,815		—		—		1,045,815		8,913

Auto loans impaired due to bankruptcy (c)											Auto loans impaired due to bankruptcy (c)	200,504		—		200,504		—		9,106


	Fair Value Measurements at December 31, 2018
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Lower of cost or fair value expense for the year ended December 31, 2018
Other assets — vehicles (a)	$	342,097	$	—	$	342,097	$	—	$	—
Personal loans held for sale (b)	1,068,757		—		—		1,068,757		367,219
Retail installment contracts held for sale	—		—		—		—		15,098
Auto loans impaired due to bankruptcy (c)	189,114		—		189,114		—		18,083

(a) The Company estimates the fair value of its vehicles, which are obtained either through repossession or lease termination, using historical auction rates and current market levels of used car prices.

(b) ~~Represents the portion of the portfolio specifically impaired as of period-end.~~ The estimated fair value for personal loans held for sale is calculated based on the lower of market participant view and a DCF analysis in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect prepayment rates (principal and interest), discount rates reflective of the cost of funding, and credit loss expectations. The lower of cost or fair value adjustment for personal loans held for sale includes customer default activity and adjustments related to the net change in the portfolio balance during the reporting period.

(c) The estimated fair value is calculated based on a DCF analysis in which the Company uses significant unobservable inputs on key assumptions, including expected default rates, prepayment rates, recovery rates, and discount rates reflective of the cost of funds and appropriate rate of returns.

~~(d)~~ For loans that are considered collateral-dependent, such as certain bankruptcy loans, impairment is measured based on the fair value of the collateral, less its estimated cost to sell. For the underlying collateral, the estimated fair value is obtained using historical auction rates and current market levels of used car prices.

Quantitative Information about Level 3 Fair Value Measurements

The following table presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, ~~2017:~~

2019 and 2018:

Financial Instruments

Fair Value at December 31, 2019

Valuation Technique

Unobservable Inputs

Range

Financial Assets:

Retail installment contracts held for investment

4,719

Discounted Cash Flow

Discount Rate

8%-10%

Default Rate

15%-20%

Prepayment Rate

6%-8%

Loss Severity Rate

50%-60%

Personal loans held for sale

1,007,105

Lower of Market or Income Approach

Market Approach

Market Participant View

70%-80%

Income Approach

Discount Rate

15%-25%

Default Rate

30%-40%

Net Principal & Interest Payment Rate

70%-85%

Loss Severity Rate

90%-95%

114

Financial Instruments

Fair Value at December 31, 2018

Valuation Technique

Unobservable Inputs

Range

Financial Assets:

Retail installment contracts held for investment

13,509

Discounted Cash Flow

Discount Rate

8%-10%

Default Rate

15%-20%

Prepayment Rate

6%-8%

Loss Severity Rate

50%-60%

Personal loans held for sale

1,068,757

Lower of Market or Income Approach

Market Approach

Market Participant View

70%-80%

Income Approach

Discount Rate

15%-25%

Default Rate

30%-40%

Net Principal & Interest Payment Rate

70%-85%

Loss Severity Rate

90%-95%

~~Financial Instruments~~

~~Fair Value at December 31, 2017~~

~~Valuation Technique~~

~~Unobservable Inputs~~

~~Range~~

~~Financial Assets:~~

~~Retail installment contracts held for investment~~

~~$22,124~~

~~Discounted Cash Flow~~

~~Discount Rate~~

~~8% - 10%~~

~~Default Rate~~

~~15% - 20%~~

~~Prepayment Rate~~

~~6% - 8%~~

~~Loss Severity Rate~~

~~50% - 60%~~

~~Personal loans held for sale~~

~~$1,062,089~~

~~Lower of Market or Income Approach~~

~~Market Approach~~

~~Market Participant View~~

~~70% - 80%~~

~~Income Approach~~

~~Discount Rate~~

~~15% - 20%~~

~~Default Rate~~

~~30% - 40%~~

~~Net Principal Payment Rate~~

~~50% - 70%~~

~~Loss Severity Rate~~

~~90% - 95%~~

~~Retail installment contracts held for sale~~

~~$1,148,332~~

~~Discounted Cash Flow~~

~~Discount Rate~~

~~3% - 6%~~

~~Default Rate~~

~~3% - 4%~~

~~Prepayment Rate~~

~~15% - 20%~~

~~Loss Severity Rate~~

~~50% - 60%~~

Financial Instruments Fair Value at December 31, 2016 Valuation Technique Unobservable Inputs Range
Financial Assets:
Retail installment contracts held for investment $24,495 Discounted Cash Flow Discount Rate 8% - 10%
Default Rate 15% - 20%
Prepayment Rate 6% - 8%
Loss Severity Rate 50% - 60%
Personal loans held for sale

$1,077,600
Lower of Market or Income Approach

Market Approach

Market Participant View

70% - 80%

Income Approach
Discount Rate 15% - 20%

Default Rate

30% - 40%

Net Principal Payment Rate

50% - 70%

Loss Severity Rate

90% - 95%
Retail installment contracts held for sale $1,045,815 Discounted Cash Flow Discount Rate 3% - 6%
Default Rate 3% - 4%
Prepayment Rate 15% - 20%
Loss Severity Rate 50% - 60%
Total return settlement $30,618 Discounted Cash Flow Discount Rate 6.4%

16. Employee Benefit Plans

SC Compensation Plans — ~~Prior to its expiration on January 31, 2015, the~~ The Company granted stock options to certain executives, other employees, and independent directors under the Company’s 2011 Management Equity Plan (the MEP)~~. It~~, which enabled the Company to make stock awards up to a total of approximately 29 million common ~~shares. No~~shares (net of shares canceled and forfeited). The MEP expired in January 2015 and the Company will not grant any further awards ~~will be made~~ under ~~this plan. In December 2013,~~ the ~~Board established~~MEP. The Company has granted stock options, restricted stock awards and restricted stock units (RSUs) under the Omnibus Incentive Plan (the ~~Omnibus~~ Plan), which was ~~amended~~established in 2013 and ~~restated as of June 2016. The Omnibus Plan~~ enables the Company to grant awards of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, ~~restricted stock units (RSUs),~~RSUs, and other awards that may be settled in or based upon the value of the ~~Company's~~Company’s common stock up to a total of 5,192,641 common shares. The Plan was amended and restated as of June 16, 2016.

Stock options granted under the MEP and the Plan have an exercise price based on the estimated fair market value of the Company’s common stock on the grant date. The stock options expire ~~after~~ ten years after grant date and include both time vesting options and performance vesting options. The fair value of the stock options is amortized into income over the vesting period as time and performance vesting conditions are met. Under the Management Shareholders Agreement entered into by certain employees, no shares obtained through exercise of stock options under the MEP could be transferred until the later of December 31, 2016, and the Company’s execution of an IPO (the later date of which is referred to as the Lapse Date). Until the Lapse Date, if an employee were to leave the Company, the Company would have the right to repurchase any or all of the stock obtained by the employee through option exercise. If the employee were terminated for cause (as defined in the MEP) or voluntarily left the Company without good reason (as defined in the Plan), in each case, prior to the Lapse Date the repurchase price would be the lower of the strike price or fair market value at the date of repurchase. If the employee were terminated without cause or voluntarily left the Company with good reason, in each case, prior to the Lapse Date the repurchase price is the fair market value at the date of repurchase. Management believes the Company’s repurchase right caused the IPO event to constitute an implicit vesting condition and therefore did not record any stock compensation expense until the date of the IPO.

~~On December 28,~~In 2013, the Board approved certain changes to the MEP and the Management Shareholders Agreement, including acceleration of vesting for certain employees, removal of transfer restrictions for shares underlying a portion of the options outstanding under the Plan, and addition of transfer restrictions for shares underlying another portion of the outstanding options. All of the changes were contingent on, and effective upon, the Company’s execution of an IPO and, as such, became effective upon pricing of the IPO on January 22, 2014. ~~Also, on December 28, 2013, the Company granted~~

Compensation expense related to 583,890 shares of restricted stock that the Company has issued to certain executives ~~under terms of the Omnibus Plan. Compensation expense related to this restricted stock~~ is recognized over a ~~five-year~~five-year vesting period, ~~with~~with 0, 0, and $5,457 ~~$725, and $8,851~~ recorded for the years ended December 31, 2019, 2018 and 2017, ~~2016,~~respectively. The Company recognized $8,577, $7,656 and ~~2015,~~$13,037 related to stock options and restricted stock units within the compensation expense for the years ended December 31, 2019, 2018 and 2017, respectively. In addition, the Company recognizes forfeitures of awards as they occur.

Also, in connection with the IPO, the Company granted additional stock options under the MEP to certain executives, other employees, and an independent director with an estimated compensation cost of $10,216, which is being recognized over the ~~awards'~~awards’ vesting period of five years for the employees and three years for the director. Additional stock option grants have been made to employees under the ~~Omnibus~~ Plan during the year ended December 31, 2016. The estimated compensation cost associated with these additional grants was $727 and will be recognized over the vesting periods of the awards.

A summary of the Company’s stock options and related activity as of and for the year ended December 31, ~~2017~~2019 is as follows:

115

Shares
Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value
Options outstanding at January 1, 2017 4,295,830
$ 12.70
5.6 $ 12,982
Exercised (1,435,606 ) 9.51

8,047
Expired (470,276 ) 20.28

Forfeited (694,940 ) 14.94

Options outstanding at December 31, 2017 1,695,008
$ 12.39
4.7 $ 12,058
Options exercisable at December 31, 2017 1,455,170
$ 10.91
4.3 $ 11,851
Options expected to vest at December 31, 2017 239,838
$ 21.35
6.7


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2019	645,376	$	13.15	4.0	$	3,682
Granted	—	—		—	—
Exercised	(356,183)	12.72		—	4,266
Expired	(1,480)	9.21		—	—
Forfeited	(15,456)	24.36		—	—
Others (a)	1,480	9.21		—	—
Options outstanding at December 31, 2019	273,737	13.09		3.1	$	2,867
Options exercisable at December 31, 2019	243,786	12.57		2.8	$	2,674
Options expected to vest at December 31, 2019	29,951	17.26		5.8	193

A summary of the ~~RSUs vested immediately upon grant,~~status and ~~a portion will vest annually over the first three anniversaries~~changes of the ~~grant date. In June 2015,~~Company’s nonvested stock options as ~~part~~ of a separate grant under the Omnibus Incentive Plan, the Company granted certain officers RSUs that vest over a three-year period, with vesting dependent on Santander performance over that time. After vesting, stock obtained by employees and ~~officers through RSUs must be held~~ for one year. In October 2015, the Company granted, under the Omnibus Plan, certain directors RSUs that vest upon the earlier of the first anniversary of the grant date or the first annual meeting following the grant date. In December 2015, the Company granted a new officer RSUs that will vest in equal portions on each of the first three anniversaries of the grant date.

In February, June and November 2016, the Company granted certain new employees RSUs that will vest annually over a three-year period. In March, April and November 2016, RSUs that vest annually over a three-year period were granted to certain officers and employees as retention awards. The RSUs granted as retention awards to officers and employees whose variable compensation is subject to the provisions of CRD IV must be held for one year after vesting. In accordance with the provisions of CRD IV, in April 2016, the Company granted RSUs to certain officers and employees, a portion of which vested immediately upon grant and a portion that vest annually over a three-year period, and all of which must be held for one year after vesting. In November 2016, the Company granted certain officers RSUs that vest over a three-year period, with vesting dependent on Santander performance over that time and which must be held for one year after vesting. In November and December 2016, the Company granted certain directors RSUs that vest upon the earlier of the first anniversary of the grant date or the first annual meeting following the grant date. All RSU grants during the year ended December 31, ~~2016~~2019, is presented below:


	Shares	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2019	87,821	$	6.55
Granted	—	—
Vested	(42,414)	7.08
Forfeited	(15,456)	8.09
Non-vested at December 31, 2019	29,951	$	5.01

At December 31, 2019, total unrecognized compensation expense for nonvested stock options was $72, which is expected to be recognized over a weighted average period of 0.8 years.

There were ~~made under the Omnibus Plan.~~

~~In March, May, August, and October 2017, the Company~~no stock options granted to ~~certain employees subject to CRD IV, RSUs that vest annually over three-year periods. In March 2017, the company granted RSUs to certain officers and~~ employees in connection with the 2016 annual bonus. For the RSUs granted to officers and employees subject to CRD IV, except for the CEO, 60% of the RSUs vested immediately upon grant and 40% of the RSUs will vest ratably over three-year periods, all of which must be held for one year after vesting. For the RSUs granted to the CEO, half of the RSUs vested immediately upon grant and half of the RSUs will vest ratably over a five-year period, subject to the achievement of certain performance conditions. For employees not subject to the CRD IV, the RSUs will vest annually over three-year periods. In June 2017, the Company granted certain directors RSUs that vest upon the earlier of the first anniversary of the grant date2019 or ~~the first annual meeting following the grant date. All RSU grants during the year ended December 31, 2017 were made under the Omnibus Plan.~~2018.

On November 15, 2017, Mr. Dundon (former Chairman of the Board and CEO of the Company), the Company, SC Illinois, SHUSA, Santander and DDFS LLC (an affiliate of Mr. Dundon), entered into the Settlement Agreement that,

among other things, amended the terms of a prior settlement agreement entered into between the parties in connection with Mr. Dundon’s departure from the Company. Pursuant to the Settlement Agreement, among other things, Mr. Dundon received payments from the Company totaling $66,115, of which $52,799 was paid in satisfaction of Mr. Dundon’s previous exercise of certain stock options that was the subject of the Separation Agreement entered into by Mr. Dundon in connection with his departure from the Company. The Settlement Agreement also ~~modifies~~modified the terms of certain equity-based awards previously granted to Mr. Dundon.

In connection with compensation restrictions imposed on certain executive officers and other employees by the European Central Bank under the Capital Requirements Directive IV (CRD IV) prudential rules, which require a portion of such officers’ and employees’ variable compensation to be paid in the form of equity and deferred, the Company periodically grants RSUs. Under the Plan, a portion of these RSUs vest immediately upon grant, and a portion will vest annually over the following three or five years subject to the achievement of certain performance conditions as and where applicable. After the shares subject to the RSUs vest and are settled, they are subject to transfer and sale restrictions for one year. The Company also has granted certain directors RSUs that vest upon the earlier of the first anniversary of grant date or the first stockholder meeting following the grant date. In addition, the Company grants RSUs to certain officers and employees as part of variable compensation and vesting terms can vary depending on grant reason. Any awards granted that are not pursuant to CRD IV compliance are not subject to the one year no sale/transfer restriction.RSUs are valued based upon the fair market value on the date of the grant.

A summary of the ~~status~~Company’s Restricted Stock Units and ~~changes of the Company's nonvested~~performance stock ~~options~~units and related activity as of and for the year ended December 31, ~~2017,~~2019 is ~~presented below:~~as follows:

116

Shares Weighted Average Grant Date Fair Value
Non-vested at January 1, 2017 1,151,067
$ 7.02
Granted —
—
Vested (216,289 ) 7.66
Forfeited or expired (694,940 ) 6.73
Non-vested at December 31, 2017 239,838
$ 7.29


	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2019	698,799	$	14.53	1.1	$	12,292
Granted	473,325	20.46		—	—
Vested	(563,427)	16.69		—	11,882
Forfeited/canceled	(110,398)	16.34		—	—
Non-vested at December 31, 2019	498,299	$	17.41	0.9	$	11,645

~~At December 31, 2017, total unrecognized compensation expense for nonvested stock options was $1,198, which is expected to be recognized over a weighted average period of 2.2 years.~~

There were no stock options granted to employees in 2017. The following summarizes the assumptions used for estimating the fair value of stock options granted to employees for the years ended December 31, 2016, and 2015.

For the Year Ended December 31,
2016 2015
Assumption
Risk-free interest rate 1.79% 1.64% - 1.97%
Expected life (in years) 6.5 6.0 - 6.5
Expected volatility 33% 32% - 48%
Dividend yield 3.69% 1.6% - 2.7%
Weighted average grant date fair value $3.14 $6.92 - $9.67

Defined Contribution Plan— The Company sponsors a defined contribution plan offered to qualifying employees. Employees participating in the plan may contribute up to 75% of their ~~base salary,~~eligible compensation, subject to federal limitations on absolute amounts contributed. The Company will match up to 6% of their ~~base salary,~~eligible compensation, with matching contributions of up to 100% of employee contributions. The total amount contributed by the Company in 2019, 2018 and 2017, ~~2016,~~was $14,039, $13,952, and ~~2015, was~~ $12,370, ~~$11,805, and $9,498,~~ respectively.

17. ~~Shareholders'~~Shareholders’ Equity

Share Repurchases and Treasury Stock

In June 2018, the Board announced purchases by the Company of up to $200 million, excluding commissions, of its outstanding common stock through June 2019.

In May 2019, the Board announced purchases by the Company of up to $400 million, excluding commissions, of its outstanding common stock through the end of the second quarter of 2019.

In June 2019, the Board announced purchases by the Company of up to $1.1 billion, excluding commissions, of its outstanding common stock effective from the third quarter of 2019 through the end of the second quarter of 2020.

On January 30, 2020, the Company commenced a modified Dutch Auction tender offer to purchase up to $1 billion of shares of its common stock, at a range of between $23 and $26 per share, or such lesser number of shares of its common stock as are properly tendered and not properly withdrawn by the seller, in cash. The tender offer expires on February 27, 2020.

The following table presents information regarding repurchases of the Company’s common stock as part of publicly announced plans or programs during the year ended December 31, 2019:


$200 Million Share Repurchase Program - January 2019(a)
Total cost (including commissions paid) of shares repurchased	$	17,780
Average price per share	$	18.40
Number of shares repurchased	965,430

$400 Million Share Repurchase Program - May 2019 through June 2019
Total cost (including commissions paid) of shares repurchased	$	86,864
Average price per share	$	23.16
Number of shares repurchased	3,749,692

$1.1 Billion Share Repurchase Program - July 2019 through June 2020
Total cost (including commissions paid) of shares repurchased	$	233,350
Average price per share	$	25.47
Number of shares repurchased	9,155,288

(a) During the year ended December 31, 2018, the Company purchased 9,473,955 shares of its common stock under its share repurchase program at a cost of approximately $182 million  During the year ended December 31, 2019, the Company purchased 13,870,410 shares of it's common stock under its share repurchase program at a cost of approximately $338 million, excluding commissions.

117

Refer to Part II Item 5 - "Market for the registrant's common equity, related stockholder matters and issuer purchases of equity securities," Repurchase of Common Stock section for additional details on share repurchases.

The Company had ~~252,002~~23,596,367 and ~~94,595~~9,725,957 shares of treasury stock outstanding, with a cost of ~~$5,370~~$525,897 and ~~$1,600~~$187,930 as of December 31, ~~2017~~2019 and ~~2016,~~2018, respectively. ~~Prior to the IPO, the Company repurchased 3,154 shares as a result of an employee leaving the company. Additionally, as of December 31, 2017 and 2016, 248,848 and 91,441~~NaN shares were withheld to cover income taxes related to stock issued in connection with employee incentive compensation plans ~~respectively, including 157,407 and 25,590 shares withheld during~~for the ~~years~~year ended December 31, ~~2017 and 2016, respectively.~~2019. The value of the treasury stock is ~~immaterial and~~ included within the additional paid-in-capital.

Accumulated Other Comprehensive Income (Loss)

A summary of changes in accumulated other comprehensive income (loss), net of tax, for the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015~~2017 is as follows:


	For the Year Ended December 31,

	2019		2018		2017

Beginning balance, unrealized gains (losses)	$	33,515	$	44,262	$	28,259
Other comprehensive income (loss) before reclassifications (gross)	(32,150)		17,802		21,962
Amounts (gross) reclassified out of accumulated other comprehensive income (loss)	(28,058)		(28,549)		(5,959)
Ending balance, unrealized gains (losses)	$	(26,693)	$	33,515	$	44,262

Unrealized gains (losses) on cash flow hedges
Balance - January 1, 2015 $ 3,553
Other comprehensive income (loss) before reclassifications (gross) (34,182 )
Amounts (gross) reclassified out of accumulated other comprehensive income 32,754
Balance - December 31, 2015 2,125
Other comprehensive income (loss) before reclassifications (gross) (1,324 )
Amounts (gross) reclassified out of accumulated other comprehensive income 27,458
Balance - December 31, 2016 28,259
Other comprehensive income (loss) before reclassifications (gross) 21,962
Amounts (gross) reclassified out of accumulated other comprehensive income (5,959 )
Balance - December 31, 2017 $ 44,262

Amounts (gross) reclassified out of accumulated other comprehensive income (loss) during the years ended December 31, 2019, 2018 and 2017 consist of the following:


		For the Year Ended December 31,
Reclassification	Income statement line item	2019		2018		2017
Cash flow hedges	Interest expense	$	(37,079)	$	(37,710)	$	(6,060)

Tax benefit		9,021		9,161		101
Net of tax		$	(28,058)	$	(28,549)	$	(5,959)

Year Ended December 31, 2017 Year Ended December 31, 2016 Year Ended December 31, 2015
Reclassification Amount reclassified Income statement line item Amount reclassified Income statement line item Amount reclassified Income statement line item

Cash flow hedges $ (6,060 ) Interest Expense $ 43,898
Interest Expense $ 50,860
Interest Expense
Tax expense (benefit) 101
(16,440 ) (18,106 )
Net of tax $ (5,959 ) $ 27,458
$ 32,754

Dividends

~~The~~During January 2020, the Company ~~made~~declared a cash dividend ~~payment in 2017 and in~~of $0.22 per share, which was paid on February ~~2018 and, subject~~20, 2020, to ~~Board approval, plan to pay a dividend in~~shareholders of record as of the ~~second quarter~~close of ~~2018.~~business on February 10, 2020.

118

18. Investment ~~Gains (Losses),~~Losses, Net

When the Company sells retail installment contracts, ~~acquired individually,~~ personal loans or leases to unrelated third parties or to VIEs and determines that such sale meets the applicable criteria for sale accounting, the Company recognizes a gain or loss for the difference between the cash proceeds and carrying value of the assets sold. The gain or loss is recorded in investment gains (losses), net. Lower of cost or market adjustments on the recorded investment of finance receivables held for sale are also recorded in investment gains (losses), net.

Investment gains (losses), net was comprised of the following for the ~~years~~year ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015:~~

2017:


											For the Year Ended December 31,
	For the Year Ended December 31,										2019		2018		2017
	2017			2016			2015
Gain (loss) on sale of loans and leases	$	17,554		$	(11,549	)	$	155,408		Gain (loss) on sale of loans and leases	$	—	$	(22,250)	$	17,554
Lower of cost or market adjustments	(386,060		)	(423,616		)	(236,396		)	Lower of cost or market adjustments	(408,700)		(382,317)		(386,060)
Other gains / (losses and impairments)	2,067			(9,594		)	(14,226		)
Other gains, (losses and impairments), net										Other gains, (losses and impairments), net	2,013		2,929		2,067
	$	(366,439	)	$	(444,759	)	$	(95,214	)		$	(406,687)	$	(401,638)	$	(366,439)

The lower of cost or market adjustments for the year ended December 31, 2019, 2018 and 2017 included $418,771, $404,651 and $451,672, in customer default activity, respectively, and net favorable adjustments of $10,071, $22,334 and $65,612, respectively, primarily related to net changes in the unpaid principal balance on the personal lending portfolio, ~~most~~all of which ~~has been~~is classified as held for sale since September 30, 2015. The lower of cost or market adjustments for the year ended December 31, 2016 included $429,106 in customer default activity and net favorable adjustments of $14,403 related to net changes in the unpaid principal balance on the personal lending portfolio, most of which has been classified as held for sale since September 30, 2015. The key driver to continued write-downs due to customer default activity, is the lower of cost or market adjustment recorded for each new originated loan, based on forecasted lifetime loss.sale.


~~19.~~	~~Correction of Errors~~

On October 27, 2016, the Company filed an amended Annual Report on Form 10-K/A for the year ended December 31, 2015 in which the Company restated its audited financial statements for the year ended December 31, 2015 to correct certain errors which are reflected herein, the most significant of which were as follows:

119

The methodology for estimating the credit loss allowance for individually acquired retail installment contracts held for investment and the identification of the population of loans that should be classified and disclosed as TDRs.

~~The effective rate used to discount expected cash flows to determine TDR impairment.~~

~~The classification of subvention payments within the income statement related to leased vehicles.~~

The application of the retrospective effective interest method for accreting discounts, subvention payments from manufacturers, and other origination costs (collectively "discount") on individually acquired retail installment contracts held for investment.

~~The consideration of net unaccreted discounts when estimating the allowance for credit losses for the non-TDR portfolio of individually acquired retail installment loans held for investment.~~

~~The recognition of and disclosure of severance and stock compensation expenses, a deferred tax asset, and a liability for certain benefits payable to the former CEO.~~

~~20.~~19. Quarterly Financial Data (unaudited)

The following is a summary of quarterly financial results:


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Year Ended December 31, 2019
Total finance and other interest income	$	1,913,387	$	1,948,771	$	1,989,250	$	2,005,050
Net finance and other interest income	1,134,986		1,174,290		1,197,845		1,155,412
Provision for credit losses	550,879		430,676		566,849		545,345
Income (loss) before income taxes	337,267		480,031		314,694		222,276
Net income (loss)	247,503		368,267		232,538		146,062
Net income (loss) per common share (basic)	$	0.70	$	1.05	$	0.67	$	0.43
Net income (loss) per common share (diluted)	$	0.70	$	1.05	$	0.67	$	0.43

Allowance for credit losses	$	3,176,250	$	3,122,259	$	3,116,680	$	3,043,469
Finance receivables held for investment, net	25,598,716		25,838,749		26,500,359		27,767,019
Total assets	45,045,906		46,416,093		47,279,015		48,933,529
Total equity	7,158,530		7,337,261		7,345,202		7,318,620

Year Ended December 31, 2018
Total finance and other interest income	$	1,679,955	$	1,757,397	$	1,818,748	$	1,877,418
Net finance and other interest income	1,080,244		1,123,109		1,144,089		1,138,560
Provision for credit losses	510,341		406,544		597,914		690,786
Income before income taxes	302,667		449,146		296,822		143,633
Net income	244,614		335,026		231,948		104,338
Net income per common share (basic)	$	0.68	$	0.93	$	0.64	$	0.29
Net income per common share (diluted)	$	0.68	$	0.93	$	0.64	$	0.29

Allowance for credit losses	$	3,320,821	$	3,320,792	$	3,305,186	$	3,240,376
Finance receivables held for investment, net	22,551,646		24,057,164		24,839,583		25,117,454
Total assets	40,028,740		41,157,189		42,806,955		43,959,855
Total equity	6,713,532		7,033,636		7,141,215		7,018,358

120

First Quarter Second Quarter Third Quarter Fourth Quarter
Year Ended December 31, 2017
Total finance and other interest income $ 1,631,244
$ 1,666,721
$ 1,649,376
$ 1,616,679
Net finance and other interest income 1,113,984
1,135,126
1,059,121
1,009,542
Provision for credit losses 635,013
520,555
536,447
562,346
Income (loss) before income taxes 221,428
348,108
277,773
(23,795 )
Net income (loss) 143,427
264,675
199,388
580,116
Net income (loss) per common share (basic) $ 0.40
$ 0.74
$ 0.55
$ 1.61
Net income (loss) per common share (diluted) $ 0.40
$ 0.74
$ 0.55
$ 1.61

Allowance for credit losses $ 3,453,075
$ 3,458,410
$ 3,380,763
$ 3,269,506
Finance receivables held for investment, net 23,444,625
23,634,914
22,667,203
22,427,769
Total assets 39,061,940
39,507,482
38,765,557
39,422,304
Total equity 5,418,998
5,678,733
5,885,234
6,480,501

Year Ended December 31, 2016
Total finance and other interest income $ 1,619,899
$ 1,643,989
$ 1,638,525
$ 1,627,183
Net finance and other interest income 1,213,804
1,202,255
1,178,620
1,131,974
Provision for credit losses 660,170
511,921
610,398
685,711
Income before income taxes 328,942
437,563
304,020
90,186
Net income 208,299
283,345
213,547
�� 61,275
Net income per common share (basic) $ 0.58
$ 0.79
$ 0.60
$ 0.17
Net income per common share (diluted) $ 0.58
$ 0.79
$ 0.59
$ 0.17

Allowance for credit losses $ 3,337,490
$ 3,436,325
$ 3,412,977
$ 3,421,767
Finance receivables held for investment, net 23,961,903
23,477,426
23,686,391
23,481,001
Total assets 37,768,959
38,490,611
38,771,636
38,539,104
Total equity 4,604,739
4,876,712
5,117,657
5,238,619

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


~~ITEM 9.~~	~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

None.


~~ITEM 9A.~~	~~CONTROLS AND PROCEDURES~~

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our ~~Chief Executive Officer (CEO)~~CEO and ~~Chief Financial Officer (CFO),~~CFO, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a- 15(e) and 15d- 15(e) under the ~~Securities~~ Exchange Act ~~of 1934, as amended (the “Exchange Act”),~~ as of ~~the end of the period covered by this Annual Report on Form 10-K.~~ December 31, 2019 (the “Evaluation Date”).Based on ~~such~~that evaluation, our CEO and CFO have concluded that as of ~~December 31, 2017, we did not maintain effective~~the Evaluation Date, our disclosure controls and procedures ~~because of~~were effective at the material weaknesses in internal control over financial reporting described below. In light of these material weaknesses, management completed additional procedures and analysis to validate the accuracy and completeness of the financial results impacted by the control deficiencies including the validation of data underlying key financial models and the addition of substantive logic inspection, fluctuation analysis and testing procedures. In addition, management engaged the Audit Committee directly, in detail, to discuss the procedures and analysis performed to ensure the reliability of the Company's financial reporting. Notwithstanding these material weaknesses, based on additional analyses and other procedures performed, management concluded that the financial statements included in this report fairly present in all material respects our financial position, results of operations, capital position, and cash flows for the periods presented, in conformity with U.S. GAAP.reasonable assurance level.

~~Management's~~Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed under the supervision of the ~~Company's~~Company’s CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with ~~U.S.~~ GAAP.

Management’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with ~~U.S.~~ GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

As of December 31, ~~2017,~~2019, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria established in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (the 2013 framework). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2019.

PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, as stated in their report, which appears in Part II, Item 8 of this Annual Report on Form 10-K.

Remediation of Previously Reported Material Weakness

Management has completed the testing of design and operating effectiveness of the new and enhanced controls related to the following previously reported material weakness. A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis.

~~Based on the assessment, management determined that the Company did not maintain effective internal control over financial reporting as of December 31, 2017, because of~~ Management considers the material weaknesses noted below. These deficiencies could result in misstatements of the accounts and disclosures noted below that in turn, would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.weakness remediated:

1. Control Environment, Risk Assessment, Control Activities and Monitoring

We did not maintain effective internal control over financial reporting related to ~~the following areas:~~our control environment, risk assessment, control activities and monitoring:

•Management did not effectively execute a strategy to hire and retain a sufficient complement of personnel with an appropriate level of knowledge, experience, and training in certain areas important to financial reporting.

•The tone at the top was insufficient to ensure there were adequate mechanisms and oversight to ensure accountability for the performance of internal control over financial reporting responsibilities and to ensure corrective actions were appropriately prioritized and implemented in a timely manner.

121

•There was not adequate management oversight of accounting and financial reporting activities in implementing certain accounting practices to conform to the Company’s policies and ~~U.S.~~ GAAP.

•There was not an adequate assessment of changes in risks by management that could significantly impact internal control over financial reporting or an adequate determination and prioritization of how those risks should be managed.

•There was not adequate management oversight and identification of models, spreadsheets and completeness and accuracy of data material to financial reporting.

•There were insufficiently documented Company accounting policies and insufficiently detailed Company procedures to put policies into effective action.

•There was a lack of appropriate tone at the top in establishing an effective control owner risk and controls self-assessment process which contributed to a lack of clarity about ownership of ~~risks~~risk assessments and control design and effectiveness. There was insufficient governance, oversight and monitoring of the credit loss allowance and accretion processes and a lack of defined roles and responsibilities in monitoring functions.

~~This material weakness in control environment contributes to each of the following identified material weaknesses:~~

~~2. Development, Approval, and Monitoring of Models Used to Estimate the Credit Loss Allowance~~

Various deficiencies were identified in the credit loss allowance process related to review, monitoring and approval processes over models and model changes that aggregated to a material weakness. The following controls did not operate effectively:

Review controls over completeness and accuracy of data, inputs and assumptions in models and spreadsheets used for estimating credit loss allowance and related model changes were not effective and management did not adequately challenge significant assumptions.

~~Review and approval controls over the development of new models to estimate credit loss allowance and related model changes were ineffective.~~

~~Adequate and comprehensive performance monitoring over related model output results was not performed and we did not maintain adequate model documentation.~~

This material weakness relates to the following financial statement line items: the credit loss allowance, provision for credit losses, and the related disclosures within Note 2 - Finance Receivables and Note 4 - Credit Loss Allowance and Credit Quality.

~~3. Identification, Governance, and Monitoring of Models Used to Estimate Accretion~~

Various deficiencies were identified in the accretion process related to review, monitoring and governance processes over models that aggregated to a material weakness. The following controls did not operate effectively:

Review controls over completeness and accuracy of data, inputs, calculation and assumptions in models and spreadsheets used for estimating accretion were not effective and management did not adequately challenge significant assumptions.

~~Review and approval controls over the development of new models to estimate accretion and related model changes were ineffective.~~

~~Adequate and comprehensive performance monitoring over related model output results was not performed and we did not maintain adequate model documentation.~~

This material weakness relates to the following financial statement line items: finance receivables held for investment, net, finance receivables held for sale, net, interest on finance receivables and loans, provision for credit losses, investment gains and losses, net, and the related disclosures within Note 2 - Finance Receivables, Note 4 - Credit Loss Allowance and Credit Quality and Note 18 - Investment Gains (Losses), Net.

~~Remediation Status of Reported Material Weaknesses~~

The Company is currently working to remediate the material weaknesses described above, including assessing the need for additional remediation steps and implementing additional measures to remediate the underlying causes that gave rise to the material weaknesses. The Company is committed to maintaining a strong internal control environment and to ensure that a proper, consistent tone is communicated throughout the organization, including the expectation that previously existing deficiencies will be remediated through implementation of processes and controls to ensure strict compliance with U.S. GAAP.

To address the material weakness, ~~in the Control Environment, Risk Assessment, Control Activities and Monitoring (Material Weakness 1,~~ noted ~~above),~~above, the Company has taken the following measures:

•Appointed an additional independent director to the Audit Committee of the Board with extensive experience as a financial expert in our industry to provide further experience on the committee.

•Established regular working group meetings, with appropriate oversight by management of both the Company and its parent to strengthen accountability for performance of internal control over financial reporting responsibilities and prioritization of corrective actions.

•Hired a Chief Accounting Officer and other key personnel with significant public-company financial reporting experience and the requisite skillsets in areas important to financial reporting.

•Developed and implemented a plan to enhance its risk assessment processes, control procedures and documentation.

•Reallocated additional Company resources to improve the oversight for certain financial models.

•Increased accounting resources with qualified permanent resources to ensure sufficient staffing to conduct enhanced financial reporting procedures and to continue the remediation efforts. Improved management documentation, review controls and oversight of accounting and financial reporting activities to ensure accounting practices conform to the Company’s policies and ~~U.S.~~ GAAP.

•Increased accounting participation in critical governance activities to ensure an adequate assessment of risk activities which may impact financial reporting or the related internal controls.

•Completed a comprehensive review and update of all accounting policies, process descriptions and control activities.

•Developed and implemented additional documentation, controls and governance for the credit loss allowance and accretion processes.

~~To address~~•Conducted internal training courses over Sarbanes-Oxley regulations and the ~~material weaknesses related to~~Company’s internal control over financial reporting program for Company personnel that take part and assist in the ~~Development, Approval, and Monitoring of Models Used to Estimate the Credit Loss Allowance (Material Weakness 2, noted above), the Company has taken the following measures:~~

~~Completed a comprehensive design effectiveness review and augmentation of the controls to ensure all critical risks are addressed.~~

~~Implemented a more comprehensive monitoring plan for credit loss allowance with a specific focus on model inputs, changes in model assumptions and model outputs to ensure an effective~~ execution of the ~~Company’s risk strategy.~~program.

~~Implemented improved controls over the development of new models or changes to models used to estimate credit loss allowance.~~

~~Implemented enhanced on going performance monitoring procedures.~~

~~Developed comprehensive model documentation.~~

~~Enhanced the Company’s communication on related issues with its senior leadership team and the Board, including the Risk Committee and the Audit Committee.~~

~~Increased resources dedicated to the analysis, review and documentation to ensure compliance with U.S. GAAP and the Company’s policy.~~

To address the material weaknesses related to the Identification, Governance and Monitoring of Models Used to Estimate Accretion (Material Weakness 3, noted above), the Company has taken the following measures:

~~Developed a comprehensive accretion model documentation manual and implemented on-going performance monitoring to ensure compliance with required standards.~~

Automated the process for the application of the effective interest rate method for accreting discounts, subvention payments from manufacturers and other origination costs on individually acquired retail installment contracts.

~~Implemented a comprehensive review controls over data, inputs and assumptions used in the models.~~

~~Strengthened review controls and change management procedures over the models used to estimate accretion.~~

~~Increased accounting resources with qualified, permanent resources to ensure an adequate level of review and execution of control activities.~~

While progress has been made to remediate all of these areas, as of December 31, 2017, we are still in the process of implementing the enhanced processes and procedures and testing the operating effectiveness of these improved controls. We believe our actions will be effective in remediating the material weaknesses, and we continue to devote significant time and attention to these efforts. In addition, the material weaknesses will not be considered remediated until the applicable remedial processes and procedures have been in place for a sufficient period of time and management has concluded, through testing, that these controls are effective. Accordingly, the material weaknesses are not remediated as of December 31, 2017.

~~Remediation Status of Previously Reported Material Weaknesses~~

~~Management has completed the implementation of remediation efforts related to the following previously reported material weaknesses and considers the following remediated:~~

~~Application of Effective Interest Method for Accretion~~

The Company’s policies and controls related to the methodology used for applying the effective interest rate method in accordance with U.S. GAAP, specifically as it relates the review of key assumptions over prepayment curves, pool segmentation and presentation in financial statements either were not designed appropriately or failed to operate effectively. Additionally the resources dedicated to the reviews were not sufficient to identify all relevant instances of non-compliance with policies and U.S. GAAP and did not sufficiently review supporting methodologies and practices to identify variances from the Company’s policy and U.S. GAAP.

To remediate this material weakness, we formalized a process for documenting assumptions related to the accretion methodology and added additional review procedures of key assumptions to ensure the Company's accretion methodology conforms to Company policy and U.S. GAAP. Additionally, we increased accounting resources with qualified, permanent employees to ensure an adequate level of review and execution of control activities.

~~Methodology to Estimate Credit Loss Allowance~~

The Company’s policies and controls related to the methodology used for estimating the credit loss allowance in accordance with U.S. GAAP, specifically as it relates to the calculation of impairment for TDRs separately from the general allowance on loans not classified as TDRs, the consideration of net discounts and the calculation of selling costs when estimating the allowance either were not designed appropriately or failed to operate effectively. Additionally the resources dedicated to the reviews were not sufficient to identify all relevant instances of non-compliance with policies and U.S. GAAP and did not sufficiently review supporting methodologies and practices to identify variances from the Company’s policy and U.S. GAAP.

To remediate this material weakness, we conducted a comprehensive design effectiveness review and augmentation of the controls to ensure all critical risks were addressed. Additionally, we enhanced the documentation and review controls over the estimation of the credit loss allowance to ensure the Company’s policies and procedures align with U.S. GAAP. Specifically, the enhanced controls ensure that the calculation of impairment for TDRs is evaluated separately from the general allowance on loans not classified as TDRs and that net discounts and selling costs are considered when estimating the allowance. In addition, we formalized controls for documenting assumptions and decisions related to the credit loss allowance.

~~Loans Modified as TDRs~~

~~The following controls over the identification of TDRs and inputs used to estimate TDR impairment did not operate effectively:~~

~~Review controls of the TDR footnote disclosures and supporting information did not effectively identify that parameters used to query the loan data were incorrect.~~

A review of inputs used to estimate the expected and present value of cash flows of loans modified in TDRs did not identify errors in types of cash flows included and in the assumed timing and amount of defaults and did not identify that the discount rate was incorrect.

To remediate this material weakness, management implemented a comprehensive monitoring plan for TDRs with a specific focus on new and enhanced controls over the completeness and accuracy of the population of TDRs, inputs and assumptions to the model used to estimate expected and present value of cash flows and enhanced disclosure controls. In addition, we increased resources dedicated to the analysis, review and documentation over TDRs to ensure compliance with U.S. GAAP and the Company’s polices. Finally, we implemented enhanced controls over the review of financial statements disclosures for TDRs to ensure compliance with the Company's policies and U.S. GAAP.

~~Review of New, Unusual or Significant Transactions~~

Management identified an error in the accounting treatment of certain transactions related to separation agreements with the former Chairman of the Board and CEO of the Company. Specifically, controls over the review of new, unusual or significant transactions related to application of the appropriate accounting and tax treatment to this transaction in accordance with U.S. GAAP did not operate effectively in that management failed to detect as part of the review procedures that regulatory approval was a prerequisite to recording the transaction and that approval had not been obtained prior to recording the transaction and therefore should have not been recorded.

To remediate this material weakness, we formalized controls to identify and evaluate all new, unusual or significant transactions, including instituting regular periodic meetings with key members of management to ensure that such transactions are recorded in accordance with Company's policies and U.S. GAAP.

~~Review of Financial Statement Disclosures~~

Management identified errors relating to financial statement disclosures. Specifically, the Company's controls over both the preparation and review and over the completeness and accuracy of financial statement disclosures did not operate effectively to ensure complete, accurate, and proper presentation of the financial statement disclosures in accordance with U.S. GAAP.

To remediate this material weakness, we improved the controls over the preparation and review of the financial statements and the related disclosures to include a more comprehensive documentation of key issues and matters considered complex. Additionally, we enhanced our disclosure checklist and strengthened review procedures performed by key members of management.

~~Preparation and Review of Consolidated Statement of Cash Flows~~

The controls over the review of the impact of significant and unusual transactions on the classification and presentation of the Consolidated Statement of Cash Flows (SCF) did not operate effectively, which led to the misclassification of cash flows between operating activities and investing activities in the preliminary SCF for certain proceeds from loan sales. The misclassification was corrected prior to the issuance of our Quarterly Report on Form 10-Q for the period ended June 30, 2015 and had no impact to previously issued interim or annual financial statements of the Company.

~~To remediate this material weakness, we strengthened the controls over reconciliation, variance and trend analyses and review related to the SCF.~~

Changes in Internal Control over Financial Reporting

~~Except as described above under Remediation of Previously Reported Material Weaknesses, there~~There were no changes in the ~~Company's~~Company’s internal control over financial reporting identified in connection with the evaluation required by ~~Rule~~Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the ~~three months~~quarter ended December 31, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Disclosure Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

ITEM 9B. OTHER INFORMATION


~~ITEM 9B.~~	~~OTHER INFORMATION~~

As previously disclosed, effective as of August 27, 2017, the Board appointed Scott Powell as President and CEO of the Company. Mr. Powell also serves as the President and CEO and a director of SHUSA. At the time of Mr. Powell’s appointment as the Company’s President and CEO, the Board had not yet determined his compensation arrangements, including the allocation of his compensation between SHUSA and the Company in light of Mr. Powell’s dual roles.

On February 23, 2018, the Compensation Committee of the Company recommended and approved, and the Board approved, Mr. Powell’s final compensation amounts and allocations for 2017. Mr. Powell’s 2017 compensation is comprised of a mix of base salary and both cash- and equity-based incentive compensation. The Company and SHUSA have agreed that for 2017, all of the cash compensation earned by Mr. Powell through August will be allocated to SHUSA, and the cash compensation earned by Mr. Powell from September through December will be allocated approximately 69% to the Company and 31% to SHUSA, based on working days spent at each entity. The Company and SHUSA have also agreed that Mr. Powell’s equity-based incentive compensation for 2017 will be allocated 50% to the Company (paid in the form of stock-settled RSUs) and 50% to SHUSA (paid in the form of Santander ADRs), irrespective of the number of working days spent at each company, in order to establish Mr. Powell’s initial ownership stake in the Company and further align his interests with the Company’s stockholders.None

Under the compensation arrangement described above, the following compensation payable to Mr. Powell for 2017 will be allocated to the Company. The amounts below do not include compensation payable to Mr. Powell for 2017 that will be allocated to SHUSA.

~~Base salary of approximately $455,400 for the period of September 1 through December 31, 2017.~~

122

A payment of $272,670 in settlement of the cash portion of Mr. Powell’s 2017 annual bonus attributed to the Company. This cash payment will be made under the terms of the Company’s Omnibus Incentive Plan and annual bonus plan, and structured to comply with CRD IV-50% will be paid immediately and 50% will be deferred and payable over five years based on a mix of time- and performance-based vesting conditions.

Stock-settled RSUs with a grant date value of $598,750, payable in settlement of the equity portion of Mr. Powell’s 2017 annual bonus allocated to the Company. These RSUs will be granted under the Company’s Omnibus Incentive Plan and annual bonus plan, and structured to comply with CRD IV-50% will be settled immediately and 50% will become earned and payable over five years based on a mix of time- and performance-based vesting conditions.

A payment of $56,600 in settlement of the cash portion of Mr. Powell’s 2017 award under SHUSA’s Special Regulatory Incentive Plan (SRIP) attributed to the Company. This cash payment will be made under the terms of the SRIP and the Company’s Omnibus Incentive Plan, and structured to comply with CRD IV-50% will be paid immediately and 50% will be deferred and payable over five years based on a mix of time- and performance-based vesting conditions.

Stock-settled RSUs with a grant date value of $125,000, payable in settlement of the equity portion of Mr. Powell’s 2017 SRIP award allocated to the Company. These RSUs will be granted under the SRIP and the Company’s Omnibus Incentive Plan, and structured to comply with CRD IV-50% will be settled immediately and 50% will become earned and payable over five years based on a mix of time- and performance-based vesting conditions.

Please see the Executive Compensation section of SHUSA’s Annual Report on 10-K for the fiscal year ended December 31, 2017 for complete information regarding compensation paid to Mr. Powell for 2017 by both SHUSA and the Company for his dual service to SHUSA and the Company.

PART III


~~ITEM 10.~~	~~DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE~~

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to the ~~Company's~~Company’s Proxy Statement for its ~~2018~~2020 Annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, ~~2017.~~2019.


~~ITEM 11.~~	~~EXECUTIVE COMPENSATION~~

ITEM 11. EXECUTIVE COMPENSATION


~~ITEM 12.~~	~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


~~ITEM 13.~~	~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


~~ITEM 14.~~	~~PRINCIPAL ACCOUNTING FEES AND SERVICES~~

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV


~~ITEM 15.~~	~~EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1. The following Consolidated Financial Statements as set forth in Part II, Item 8 of this ~~report~~Annual Report on Form 10-K are filed herein:

Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2. All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are omitted because the required information is either not applicable, not required or is shown in the respective financial statements or in the notes thereto.

3. See the Exhibit Index immediately following ~~the signatures~~this page of this Annual Report on Form 10-K.

ITEM 16. FORM 10-K SUMMARY

Not applicable

123


~~ITEM 16.~~Exhibit Number	~~FORM~~	Description

2.1		Agreement and Plan of Merger, dated as of January 15, 2014, by and between Santander Consumer USA Holdings Inc., Santander Consumer USA Inc. and SC Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Amendment No. 6 to Form S-1 filed January 17, 2014; File No. 333-189807)
3.1		Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Registrant’s Amendment No. 6 to Form S-1 filed January 17, 2014; File No. 333-189807)
3.2		Third Amended and Restated Bylaws of Santander Consumer USA Holdings Inc. (incorporated by reference to Exhibit 3.1 to Registrant’s Form 8-K filed May 27, 2015; File No. 001-36270)
4.1		Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to Registrant’s Amendment No. 4 to Form S-1 filed January 6, 2014; File No. 333-189807)
4.2*		Description of Santander Consumer USA Holdings Inc. Common Stock
4.3		Form of Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A. (incorporated by reference to Exhibit 4.2 to Registrant’s Amendment No. 6 to Form S-1 filed January 17, 2014; File No. 333-189807)
4.4		First Amendment, dated May 20, 2015, to the Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A. (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed May 27, 2015; File No. 001-36270)
4.5		Second Amendment, dated August 31, 2016, to the Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A. (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed September 7, 2016; File No. 001-36270)
4.6		Third Amendment, dated August 31, 2016, to the Shareholders Agreement, dated as of January 28, 2014, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP, and, solely for the certain sections set forth therein, Banco Santander, S.A. 2017 (incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed September 7, 2016; File No. 001-36270)
4.7		Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Rich Morrin (incorporated by reference to Exhibit 4.7 to Registrant’s Amendment No. 1 to Form S-1 filed November 22, 2013; File No. 333-189807)#
4.8		Form of Shareholders Agreement between Santander Consumer USA Inc. and Management Equity Plan Participant (incorporated by reference to Exhibit 4.11 to Registrant’s Amendment No. 3 to Form S-1 filed December 31, 2013; File No. 333-189807)#
4.9		Form of Amendment No. 1 to Shareholders Agreement, dated as of December 31, 2011, by and among Santander Consumer USA Inc., Santander Consumer USA Holdings Inc. and Management Equity Plan Participant (incorporated by reference to Exhibit 4.13 to Registrant’s Amendment No. 6 to Form S-1 filed January 17, 2014; File No. 333-189807)#
10.1		Master Private Label Financing Agreement, dated as of February 6, 2013, by and between Santander Consumer USA Inc. and Chrysler Group LLC (certain identified information has been excluded from this exhibit because it has been granted confidential treatment by the Securities and Exchange Commission) (incorporated by reference to Exhibit 10.10 to Registrant’s Amendment No. 1 to Form S-1 filed November 22, 2013; File No. 333-189807) †
10.2		Amendment to the Master Private Label Financing Agreement, dated June 28, 2019 (certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed) 2017 (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed July 1, 2019; File No. 001-36270)
10.3		Confidential Employment Agreement, dated August 24, 2011, by and between Santander Consumer USA Inc. and Richard Morrin (incorporated by reference to Exhibit 10.6 to Registrant’s Form S-1 filed July 3, 2013; File No. 333-189807)^#
10.4		Santander Consumer USA Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.8 to Registrant’s Form S-1 filed July 3, 2013; File No. 333-189807)#
10.5		Amendment No. 1 to Santander Consumer USA Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.13 to Registrant’s Amendment No. 5 to Form S-1 filed January 9, 2014; File No. 333-189807)^#
10.6		Form of Non-Employee Independent Director Option Award Agreement under the Santander Consumer USA Holdings Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.17 to Registrant’s Amendment No. 7 to Form S-1 filed January 22, 2014; File No. 333-189807)^#
10.7		Santander Consumer USA Holdings Inc. Omnibus Incentive Plan, as amended and restated effective as of June 16, 2016 (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed June 17, 2016; File No. 001-36270)^#
10.8		Form of Restricted Stock Unit Award Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.20 to Registrant’s Form 10-K ~~SUMMARY~~filed March 2, 2015; File No. 001-36270)#
10.9		Form of Long-Term Cash Award Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan 2017 (incorporated by reference to Exhibit 10.21 to Registrant’s Form 10-K filed March 2, 2015; File No. 001-36270)#
10.10		Form of Restricted Stock Unit Award Agreement (for Directors) under the Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to Registrant’s Form 10-Q filed October 29, 2015; File No. 001-36270)^#

~~Not applicable~~

124


10.11						Offer Letter, by and among Sandra Broderick and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated September 20, 2017 (incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed October 2, 2017; File No. 001-36270)^#
10.12						Amended Letter Agreement, dated October 23, 2019, by and between Santander Consumer USA Holdings Inc. and Sandra Broderick (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed October 28, 2019; File No. 001-36270)#
10.13						Offer Letter, by and among Juan Carlos Alvarez de Soto and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated September 28, 2017 (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed October 2, 2017; File No. 001-36270)^#
10.14						Offer Letter, by and among Reza Leaali and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated January 24, 2018 (incorporated by reference to Exhibit 10.30 to Registrant’s Form 10-K filed February 28, 2018; File No. 001-36270)^#
10.15						Offer Letter, by and among Joshua Baer and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated February 23, 2018 (incorporated by reference to Exhibit 10.1 to Registrant’s Form 10-Q filed May 2, 2018; File No. 001-36270)^#
10.16						Letter Agreement, dated September 14, 2018, by and between Santander Holdings USA, Inc. and Scott Powell (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed September 20, 2018; File No. 001-36270)^#
10.17						Form of Award Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.23 to Registrant’s Form 10-K filed February 26, 2019; File No. 001-36270)#
10.18						Offer letter, dated July 23, 2019, by and among Fahmi Karam and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc. (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed July 24, 2019; File No. 001-36270)#
10.19						Post-Employment Agreement, effective December 9, 2019, executed by Scott Powell in favor of Santander Holdings USA,Inc. and the Santander Consumer USA Holdings Inc. (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed December 12, 2019; File No. 001-36270)#
10.20						Offer Letter, dated February 11, 2020, by and between Santander Consumer USA Inc. and Mahesh C. Aditya (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed February 18, 2020; File No. 001-36270)#
21.1*						Subsidiaries of Santander Consumer USA Holdings Inc.
23.1*						Consent of PricewaterhouseCoopers LLP
31.1*						Chief Executive Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Chief Financial Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						Inline XBRL Instance Document - this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document
101.SCH*						Inline XBRL Taxonomy Extension Schema
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase
104*						Cover page formatted as Inline XBRL and contained in Exhibit 101


*			Filed herewith.
#			Indicates management contract or compensatory plan or arrangement

125

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



						Santander Consumer USA Holdings Inc. (Registrant)

By:						/s/ ~~Scott Powell~~Mahesh Aditya
						Name: ~~Scott Powell~~Mahesh Aditya
						Title: President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature

Title

Date

~~/s/ Scott Powell~~/s/ Mahesh Aditya

President, Chief Executive Officer & Director

February ~~28, 2018~~27, 2020

~~Scott Powell~~Mahesh Aditya

(Principal Executive Officer)

/s/ ~~Juan Carlos Alvarez de Soto~~Fahmi Karam

Chief Financial Officer

February ~~28, 2018~~27, 2020

~~Juan Carlos Alvarez de Soto~~Fahmi Karam

(Principal Financial and Accounting Officer)

~~/s/~~/s/ William Rainer

Chairman of the Board

February ~~28, 2018~~27, 2020

William Rainer

~~/s/ José Doncel~~

~~Director~~

~~February 28, 2018~~

~~José Doncel~~

~~/s/~~/s/ Stephen A. Ferriss

~~Director~~Vice Chairman of the Board

February ~~28, 2018~~27, 2020

Stephen A. Ferriss

~~/s/ Brian Gunn~~

~~Director~~

~~February 28, 2018~~

~~Brian Gunn~~

~~/s/ Victor Hill~~

~~Director~~

~~February 28, 2018~~

~~Victor Hill~~

~~/s/~~/s/ Edith E. Holiday

Director

February ~~28, 2018~~27, 2020

Edith E. Holiday

~~/s/~~/s/ Homaira Akbari

Director

February 27, 2020

Homaira Akbari

/s/ Javier Maldonado

Director

February ~~28, 2018~~27, 2020

Javier Maldonado

~~/s/ Robert J. McCarthy~~

~~Director~~

~~February 28, 2018~~

~~Robert J. McCarthy~~

~~/s/ William F. Muir~~

~~Director~~

~~February 28, 2018~~

~~William F. Muir~~

~~/s/ Mahesh Aditya~~

~~Director~~

~~February 28, 2018~~

~~Mahesh Aditya~~



~~Exhibit~~ ~~Number~~		~~Description~~
~~2.1~~		~~Agreement and Plan of Merger, dated as of January 15, 2014, by and between Santander Consumer USA Holdings Inc., Santander Consumer USA Inc. and SC Merger Sub Inc.~~
~~3.1~~		~~Second Amended and Restated Certificate of Incorporation~~
~~3.2~~		~~Third Amended and Restated Bylaws of Santander Consumer USA Holdings Inc.~~
~~4.1~~		~~Specimen common stock certificate~~
~~4.2~~		Form of Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A.
~~4.3~~		First Amendment, dated May 20, 2015, to the Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A.
~~4.4~~		Second Amendment, dated July 2, 2015, to the Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A.^#
~~4.5~~		Third Amendment, dated as of August 31, 2016, to the Shareholders Agreement, dated as of January 28, 2014,by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G.Dundon, Sponsor Auto Finance Holdings Series LP, and, solely for the certain sections set forth therein, Banco Santander, S.A.
~~4.6~~		~~Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Matt Fitzgerald~~^#
~~4.7~~		~~Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Rich Morrin~~^#
~~4.8~~		~~Form of Shareholders Agreement between Santander Consumer USA Inc. and Management Equity Plan Participant~~^#
~~4.9~~		~~Form of Amendment No. 1 to Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc., Santander Consumer USA Holdings Inc. and Management Equity Plan Participant~~^#
~~10.1~~		~~Confidential Employment Agreement, dated August 24, 2011, by and between Santander Consumer USA Inc. and Richard Morrin~~^#
~~10.2~~		~~Santander Consumer USA Inc. 2011 Management Equity Plan~~^#
~~10.3~~		~~Form of Option Award Agreement under the Santander Consumer USA Inc. 2011 Management Equity Plan~~^#
~~10.4~~		~~Master Private Label Financing Agreement, dated as of February 6, 2013, by and between Santander Consumer USA Inc. and Chrysler Group LLC~~ †
~~10.5~~		~~Form of Restricted Stock Award Agreement (for Management) under the Santander Consumer USA Inc. Omnibus Incentive Plan~~^#
~~10.6~~		~~Amendment No. 1 to Santander Consumer USA Inc. 2011 Management Equity Plan~~^#
~~10.7~~		~~Form of Amendment No. 1 to Form of Option Award Agreement under the Santander Consumer USA Inc. 2011 Management Equity Plan (Optionees other than Thomas G. Dundon and Jason W, Grubb)~~^#
~~10.8~~		~~Santander Consumer USA Holdings Inc. Senior Executive Annual Bonus Plan~~^#
~~10.9~~		~~Form of Non-Employee Independent Director Option Award Agreement under the Santander Consumer USA Holdings Inc. 2011 Management Equity Plan~~ ^#
~~10.10~~		~~Form of Time- and Performance-based Option Award Agreement (Series 3) under the Santander Consumer USA Holdings Inc. 2011 Management Equity Plan~~^#
~~10.11~~		~~Form of Time-Based Option Agreement (Series 2) under the Santander Consumer USA Holdings Inc. 2011 Management Equity Plan~~^#
~~10.12~~		~~Form of Restricted Stock Unit Award Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan~~^#
~~10.13~~		~~Form of Long-Term Cash Award Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan~~^#
~~10.14~~		~~Form of Non-qualified Stock Option Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan~~^#
~~10.15~~		~~Form of Restricted Stock Unit Award Agreement (for Directors) under the Omnibus Incentive Plan~~^#
~~10.16~~		Separation Agreement, dated July 2, 2015, by and among Santander Consumer USA Holdings Inc., Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC and Thomas G. Dundon^#
~~10.17~~		First Amendment, dated July 20, 2015, to the Separation Agreement dated July 2, 2015 by and among Santander Consumer USA Holdings Inc., Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC and Thomas G. Dundon#
~~10.18~~		Second Amendment, dated as of August 31, 2016, to the Separation Agreement, dated as of July 2, 2015, by and among Santander Consumer USA Holdings Inc., Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC and Thomas G. Dundon^#

~~10.19~~

~~Letter Agreement, by and between Santander Consumer USA Holdings Inc., Santander Consumer USA Inc. and Kalyan Seshan, dated June 22, 2016~~^#

~~10.20~~

~~Santander Consumer USA Holdings Inc. Omnibus Incentive Plan, as amended and restated effective as of June 16, 2016~~^#

~~10.21~~

~~Separation Agreement, dated September 15, 2016, by and among Jennifer Davis, Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc~~.^#

~~10.22~~

~~Form of Confidentiality and Restrictive Covenant Agreement~~^#

~~10.23~~

~~Amended and Restated Letter Agreement, by and between Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc. and Ismail Dawood, dated December 1, 2016~~^#

~~10.24~~

~~Offer Letter, effective as of May 1, 2017, by and between Santander Consumer USA Holdings Inc., Santander Consumer USA Inc. and Dale T. Cochran II~~.^#

~~10.25~~

Waiver and Release of Claims Agreement, effective September 7, 2017, executed by Jason A. Kulas in favor of Santander Consumer USA Holdings Inc., Santander Holdings USA Inc., Santander Consumer USA, Inc., Santander Consumer USA Inc. Foundation, Santander Bank, N.A., and Banco Santander, S.A.^#

~~10.26~~

~~Offer Letter, by and among Sandra Broderick and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated September 20, 2017~~^#

~~10.27~~

~~Offer Letter, by and among~~/s/ Juan Carlos Alvarez de Soto ~~and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated September 28, 2017~~^#

Director

February 27, 2020

~~10.28~~Juan Carlos Alvarez de Soto

~~Separation Agreement and Release and Waiver of Claims, by and among Ismail Dawood and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated October 3, 2017~~^#

~~10.29~~/s/ Robert J. McCarthy

Settlement Agreement, dated November 15, 2017, by and among Santander Consumer USA Holdings Inc., Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC and Thomas G. Dundon^#

Director

February 27, 2020

10.30*Robert J. McCarthy

~~Offer Letter, by and among Reza Leaali and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated January 24, 2018.#~~

21.1*/s/ Victor Hill

~~Subsidiaries of Santander Consumer USA Holdings Inc.~~

Director

February 27, 2020

23.1*Victor Hill

~~Consent of PricewaterhouseCoopers LLP~~

23.2*/s/ William F. Muir

~~Consent of Deloitte & Touche LLP~~

Director

February 27, 2020

31.1*William F. Muir

~~Chief Executive Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

31.2*

~~Chief Financial Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

32.1*

~~Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

32.2*

~~Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

101.INS*

~~XBRL Instance Document~~

101.SCH*

~~XBRL Taxonomy Extension Schema~~

101.CAL*

~~XBRL Taxonomy Extension Calculation Linkbase~~

101.DEF*

~~XBRL Taxonomy Extension Definition Linkbase~~

101.LAB*

~~XBRL Taxonomy Extension Label Linkbase~~

101.PRE*

~~XBRL Taxonomy Extension Presentation Linkbase~~



#	~~Indicates management contract or compensatory plan or arrangement~~
^†	~~Confidential treatment has been granted to portions of this exhibit by the Securities and Exchange Commission.~~
*	~~Furnished herewith.~~

~~153~~



Delaware		32-0414408
~~Delaware~~	~~32-0414408~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)



~~Class~~		~~Outstanding at February 15, 2018~~
~~Common Stock ($0.01 par value)~~		~~360,608,237 shares~~


Cautionary Note Regarding Forward-Looking Information


~~Cautionary Note Regarding Forward-Looking Information~~ PART I	26

~~PART I~~	6
Item 1 - Business	6
Item 1A - Risk Factors		1615
Item 1B - Unresolved Staff Comments		34
Item 2 - Properties		34
Item 3 - Legal Proceedings		34
Item 4 - Mine Safety Disclosures		34

PART II		3435
Item 5 - Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		35
Item 6 - Selected Financial Data		3837
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)		4239
Item 7A - Quantitative and Qualitative Disclosures About Market Risk		7861
Item 8 - Financial Statements and Supplementary Data		7862
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		~~143~~121
Item 9A - Controls and Procedures		~~144~~121
Item 9B - Other Information		~~149~~122

PART III		~~149~~123
Item 10 - Directors, Executive Officers and Corporate Governance		~~149~~123
Item 11 - Executive Compensation		~~149~~123
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~149~~123
Item 13 - Certain Relationships and Related Transactions, and Director Independence		~~150~~123
Item 14 - Principal ~~Accounting~~Accountant Fees and Services		~~150~~123

PART IV		~~150~~123
Item 15 - Exhibits and Financial Statement Schedules		~~150~~123
Item 16 - Form 10-K Summary		~~150~~123
Signatures		~~151~~126



ABS		Asset-backed securities
Advance Rate		The maximum percentage of ~~unpaid principal balance~~collateral that a lender is willing to ~~lend~~lend.
~~ALG~~Affiliates		A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity.
ALG		Automotive Lease Guide
~~APR~~Amendment		Amendment to the Chrysler Agreement with FCA, dated June 28, 2019.
APR		Annual Percentage Rate
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
~~Auto Finance Holdings~~		~~Sponsor Auto Finance Holdings Series LP, a former investor in SC~~
Bluestem		Bluestem Brands, Inc., an online retailer for whose customers SC provides financing
Board		SC’s Board of Directors
~~Capmark~~	~~Capmark Financial Group Inc., an investment company~~



CBP			Citizens Bank of Pennsylvania
~~CCAR~~			~~Comprehensive Capital Analysis and Review~~
~~CCART~~CCAP			Chrysler Capital
CCART			Chrysler Capital Auto Receivables Trust, a securitization platform
~~Centerbridge~~			~~Centerbridge Partners, L.P., a private equity firm~~
CEO			Chief Executive Officer
CFPB			Consumer Financial Protection Bureau
CFO			Chief Financial Officer
Chrysler Agreement			Ten-year master private-label financing agreement with FCA
Clean-up Call			The early redemption of a debt instrument by the issuer, generally when the underlying portfolio has amortized to 5% or 10% of its original balance
Commission			U.S. Securities and Exchange Commission
Credit Enhancement			A method such as overcollateralization, insurance, or a third-party guarantee, whereby a borrower reduces default risk
DCF			Discounted Cash Flow Analysis

Dealer Loan			A ~~floorplan line of credit,~~Floorplan Loan, real estate loan, working capital loan, or other credit extended to an automobile dealer
Dodd-Frank Act			Comprehensive financial regulatory reform legislation enacted by the U.S. Congress on July 21, 2010
DOJ			U.S. Department of Justice
DRIVE			Drive Auto Receivables Trust, a securitization platform
~~ECB~~			~~European Central Bank~~
~~ECOA~~			~~Equal Credit Opportunity Act~~
~~ERMC~~			~~Enterprise Risk Management Committee~~
~~Employment Agreement~~			~~The amended and restated employment agreement, executed as of December 31, 2011, by and among SC, Banco Santander, S.A. and Thomas G. Dundon~~
Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
FCA			~~Fiat Chrysler Automobiles~~FCA US LLC, formerly Chrysler Group LLC
FICO®			A common credit score created by Fair Isaac Corporation that is used on the credit reports that lenders use to assess an applicant’s credit risk. FICO® is computed using mathematical models that take into account five factors: payment history, current level of indebtedness, types of credit used, length of credit history, and new credit
FIRREA			Financial Institutions Reform, Recovery and Enforcement Act of 1989
Floorplan Loan			A revolving line of credit that finances dealer inventory until sold
Federal Reserve Board			Board of Governors of the Federal Reserve System
FRBB			Federal Reserve Bank of Boston
FTC			Federal Trade Commission
GAP			Guaranteed Auto Protection
~~IPO~~GAAP			~~SC's~~U.S. Generally Accepted Accounting Principles
IPO			SC’s Initial Public Offering
ISDA			International Swaps and Derivative Association
~~J.D. Power~~			~~J.D. Power and Associates~~
~~LendingClub~~			~~LendingClub Corporation, a peer-to-peer personal lending platform company from which SC acquired loans under terms of flow agreements~~



ý☒			Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



¨☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from to


Managed Assets			Managed assets included assets (a) owned and serviced by the Company; (b) owned by the Company and serviced by others; and (c) serviced for ~~others.~~ others
~~MSA~~			~~Master Service Agreement~~
Nonaccretable Difference			The difference between the undiscounted contractual cash flows and the undiscounted expected cash flows of a portfolio acquired with deteriorated credit quality
~~NYSE~~			~~New York Stock Exchange~~
OCC			Office of the Comptroller of the Currency
Overcollateralization			A credit enhancement method whereby more collateral is posted than is required to obtain financing


OEM
~~OEM~~	Original equipment manufacturer
Private-label		Financing branded in the name of the product manufacturer rather than in the name of the finance provider
~~Remarketing~~
PSRT		Private Santander Retail Auto Lease Trust, a lease securitization platform
RC		The Risk Committee of the Board
Remarketing		The controlled disposal of ~~leased~~ vehicles ~~that have reached~~at the end of ~~their~~the lease term or upon early termination or of financed vehicles obtained through repossession and their subsequent sale
Residual Value		The future value of a leased asset at the end of its lease term
~~Santander~~Retail installment contracts		Includes retail installment contracts individually acquired or originated by the Company and purchased non-credit impaired finance receivables
RSU		Restricted stock unit
SAF		Santander Auto Finance
Santander		Banco Santander, S.A.
SBNA		Santander Bank, N.A., a wholly-owned subsidiary of SHUSA. Formerly Sovereign Bank, N.A.
SC		Santander Consumer USA Holdings Inc., a Delaware corporation, and its consolidated subsidiaries
SCI		Santander Consumer International Puerto Rico, LLC, a wholly-owned subsidiary of SC Illinois
SC Illinois		Santander Consumer USA Inc., an Illinois ~~Corporation~~corporation and wholly-owned subsidiary of SC
SCRA		Servicemembers Civil Relief Act
SDART		Santander Drive Auto Receivables Trust, a securitization platform
SEC		U.S. Securities and Exchange Commission
~~Separation Agreement~~		~~The Separation Agreement dated July 2, 2015 entered into by Thomas G. Dundon with SC, DDFS LLC, SHUSA, Santander Consumer USA Inc. (the wholly owned subsidiary of SC) and Banco Santander, S.A.~~
~~Shareholders Agreement~~		The Shareholders Agreement dated January 28, 2014, by and among the Company, SHUSA, DDFS, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP, and, for the certain sections set forth therein, Banco Santander, as amended
SHUSA		Santander Holdings USA, Inc., a wholly-owned subsidiary of Santander and the majority ~~owner~~stockholder of SC
SPAIN		Santander Prime Auto Issuing Note Trust, a securitization platform
SRT		Santander Retail Auto Lease Trust, a lease securitization platform
~~Subvention~~SREV		Santander Revolving Auto Loan Trust, a securitization platform
Subvention		Reimbursement of the finance provider by a manufacturer for the difference between a market loan or lease rate and the below-market rate given to a customer
~~TDR~~
TDR		Troubled Debt Restructuring
Trusts		Special purpose financing trusts utilized in SC’s financing transactions
~~U.S. GAAP~~		~~U.S. Generally Accepted Accounting Principles~~
~~VIE~~
VIE		Variable Interest Entity
Warehouse ~~Facility~~Line		A revolving line of credit generally used to fund finance receivable originations


2.	Comment letter on Form 10-K for the fiscal year ended December 31, 2016, as filed on February 28, 2017 and Form 10-Q for the quarter ended June 30, 2017, as filed on August 2, 2017, with respect to certain clarifications in our disclosures in the filings.


▪	~~a 200,000 square foot servicing facility in North Richland Hills, Texas,~~


▪	~~a 117,000 square foot servicing facility in Mesa, Arizona,~~


▪	~~a 73,000 square foot servicing facility in Lewisville, Texas,~~


▪	~~a 43,000 and an adjacent 21,000 square foot servicing facility in Englewood, Colorado,~~


▪	~~a 21,000 square foot servicing facility in San Juan, Puerto Rico,~~


~~ITEM I.~~	~~BUSINESS~~


~~ITEM 1A.~~	~~RISK FACTORS~~


~~ITEM 1B.~~	~~UNRESOLVED STAFF COMMENTS~~


~~ITEM 2.~~	~~PROPERTIES~~


▪	~~a 3,000 square foot operations facility in Denton, Texas,~~


▪	~~a 2,000 square foot operations facility in Costa Mesa, California, and~~


▪	~~a 1,000 square foot operations facility in Aurora, Colorado.~~


~~ITEM 5.~~	~~MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~



	High	Low	Cash dividends paid
Year Ended December 31, 2016
First Quarter	$15.79	$8.87	—
Second Quarter	$13.41	$9.69	—
Third Quarter	$12.58	$9.90	—
Fourth Quarter	$14.84	$10.93	—

Year Ended December 31, 2017
First Quarter	$14.97	$12.88	—
Second Quarter	$13.34	$11.17	—
Third Quarter	$15.37	$12.69	—
Fourth Quarter	$18.62	$15.07	$0.03



	Year Ended December 31,
	2017			2016			2015			2014			2013
	(Dollar amounts in thousands, except per share data)
Income Statement Data
Interest on individually acquired retail installment contracts	$	4,374,874		$	4,615,459		$	4,483,054		$	3,941,170		$	3,158,636
Interest on purchased receivables portfolios	30,129			69,701			91,157			199,151			409,895
Interest on receivables from dealers	2,802			3,718			4,537			4,814			6,663
Interest on personal loans	347,873			337,912			453,081			348,278			128,351
Interest on finance receivables and loans	4,755,678			5,026,790			5,031,829			4,493,413			3,703,545
Net leased vehicle income	489,944			492,212			311,373			175,340			33,377
Other finance and interest income	19,885			15,135			18,162			8,068			6,010
Interest expense	947,734			807,484			628,791			523,203			408,787
Net finance and other interest income	4,317,773			4,726,653			4,732,573			4,153,618			3,334,145
Provision for credit losses on individually acquired retail installment contracts	2,244,182			2,471,490			2,433,617			2,101,744			1,506,107
Increase (decrease) in impairment related to purchased receivables portfolios	—			(2,985		)	(13,818		)	(24,082		)	13,964
Provision for credit losses on receivables from dealers	(560		)	201			242			(416		)	1,090
Provision for credit losses on personal loans	10,691			—			324,634			434,030			192,745
Provision for credit losses on capital leases	48			(506		)	41,196			9,991			—
Provision for credit losses	2,254,361			2,468,200			2,785,871			2,521,267			1,713,906
Profit sharing	29,568			47,816			57,484			74,925			78,246
Other income	101,106			93,546			421,643			559,902			312,578
Operating expenses	1,311,436			1,143,472			1,021,249			996,193			706,264
Income before tax expense	823,514			1,160,711			1,289,612			1,121,135			1,148,307
Income tax (benefit) / expense (a)	(364,092		)	394,245			465,572			395,851			427,142
Net income	1,187,606			766,466			824,040			725,284			721,165
Noncontrolling interests	—			—			—			—			1,821
Net income attributable to Santander Consumer USA Holdings Inc. shareholders	$	1,187,606		$	766,466		$	824,040		$	725,284		$	722,986
Share Data
Weighted-average common shares outstanding
Basic	359,613,714			358,280,814			355,102,742			348,723,472			346,177,515
Diluted	360,292,330			359,078,337			356,163,076			355,722,363			346,177,515
Earnings per share
Basic	$	3.30		$	2.14		$	2.32		$	2.08		$	2.09
Diluted	$	3.30		$	2.13		$	2.31		$	2.04		$	2.09
Dividend paid per share	$	0.03		$	—		$	—		$	0.15		$	0.84
Balance Sheet Data
Finance receivables held for investment, net	$	22,427,769		$	23,481,001		$	23,367,788		$	23,911,649		$	21,347,861
Finance receivables held for sale, net	2,210,421			2,123,415			2,859,575			46,586			81,956
Goodwill and intangible assets	103,790			106,679			107,072			110,938			128,720
Total assets	39,422,304			38,539,104			36,448,958			32,368,751			26,470,569
Total borrowings	31,160,434			31,323,706			30,375,679			27,811,301			23,295,660
Total liabilities	32,941,803			33,300,485			32,016,409			28,842,535			23,774,805
Total equity	6,480,501			5,238,619			4,432,549			3,526,216			2,695,764
Allowance for credit losses	3,269,506			3,421,767			3,218,208			2,945,608			2,129,488


~~(1)~~	~~Includes finance and other interest income; excludes fees.~~


~~(2)~~	~~“Yield on earning assets” is defined as the ratio of 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 Interest expense to Average debt.~~


~~(4)~~	~~“Net interest margin” is defined as the ratio of Net finance and other interest income to Average gross finance receivables, loans and leases.~~


~~(5)~~	~~"Expense ratio" is defined as the ratio of Operating expenses to Average managed assets.~~


~~(6)~~	~~“Return on average assets” is defined as the ratio of Net income to Average total assets.~~


~~(7)~~	~~“Return on average equity” is defined as the ratio of Net income to Average total equity.~~


~~(8)~~	“Net charge-off ratio” is defined as the ratio of annualized Charge-offs on a recorded investment basis, net of recoveries, to average unpaid principal balance of the respective held-for-investment portfolio. Effective as of September 30, 2016, the Company records the charge-off activity for certain


	Total Number of Shares Purchased	Average Price paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Repurchase program of up to $200 million
Year ended December 31, 2018 (a)	—	$	—	—	$	17,761
January 1 - January 31	965,430	18.40		965,430	—
Total	965,430			965,430	—
Repurchase program of up to $400 million
April 1 - April 30	—	—		—	400,000
May 1 - May 31	365,055	22.79		365,055	391,680
June 1 - June 30	3,384,637	23.19		3,384,637	313,174
Total	3,749,692	23.16		3,749,692	313,174
Repurchase program of up to $1.1 billion
June 1 - June 30	—	—		—	1,100,000
July 1 - July 31	2,269,628	25.48		2,269,628	1,042,170
August 1 - August 31	2,029,983	25.81		2,029,983	989,776
September 1 - September 30	1,180,039	26.00		1,180,039	959,095
October 1 - October 31	3,226,268	25.22		3,226,268	877,729
November 1 - November 30	449,370	24.21		449,370	866,849
December 1 - December 31	—	—		—	866,849
Total	9,155,288	25.47		9,155,288	866,849
	13,870,410			13,870,410


~~(9)~~	~~“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, excluding capital leases.~~



	Year Ended December 31,
	2017			��	2016			2015			2014			2013
	(Dollar amounts in thousands)
Total equity	$	6,480,501			$	5,238,619		$	4,432,549		$	3,526,216		$	2,695,764
Deduct: Goodwill and intangibles	103,790				106,679			107,072			110,938			128,720
Tangible common equity	$	6,376,711			$	5,131,940		$	4,325,477		$	3,415,278		$	2,567,044

Total assets	$	39,422,304			$	38,539,104		$	36,448,958		$	32,368,751		$	26,470,569
Deduct: Goodwill and intangibles	103,790				106,679			107,072			110,938			128,720
Tangible assets	$	39,318,514			$	38,432,425		$	36,341,886		$	32,257,813		$	26,341,849

Equity to assets ratio	16.4		%		13.6		%	12.2		%	10.9		%	10.2		%
Tangible common equity to tangible assets	16.2		%		13.4		%	11.9		%	10.6		%	9.7		%


~~(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)~~	“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.


~~(13)~~	~~"Common Equity Tier 1 Capital ratio" is defined as the ratio of Total Common Equity Tier 1 Capital (CET1) to Total risk-weighted assets.~~