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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2021


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

Commission File Number: 001-36270

SANTANDER CONSUMER USA HOLDINGS INC.

(Exact Name of Registrant as Specified in Its Charter)


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

1601 Elm Street

Suite 800

Dallas

Texas

75201

(Address of principal executive offices)

Registrant’s telephone number, including area code (214) 634-1110

Not Applicable

(Former name, former address, and formal fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Outstanding shares at ~~July~~October 2625, 2021

Common Stock ($0.01 par value)

New York Stock Exchange

306,~~081~~111,~~081~~379

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐

No ☒

INDEX

Cautionary Note Regarding Forward-Looking Information		3
PART I: FINANCIAL INFORMATION		7
Item 1.	Unaudited Condensed Consolidated Financial Statements	7
	Unaudited Condensed Consolidated Balance Sheets	7
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income	8
	Unaudited Condensed Consolidated Statements of Equity	9
	Unaudited Condensed Consolidated Statements of Cash Flows	11
	Note 1. Description of Business, Basis of Presentation, and Accounting Policies	13
	Note 2. Finance Receivables	14
	Note 3. Credit Loss Allowance and Credit Quality	16
	Note 4. Leases	20
	Note 5. Other Assets	2122
	Note 6. Variable Interest Entities	2324
	Note 7. Debt	2526
	Note 8. Shareholders' Equity	2829
	Note 9. Derivative Financial Instruments	3031
	Note 10. Fair Value of Financial Instruments	3234
	Note 11. Investment Gains (Losses), Net	3638
	Note 12. Income Taxes	3739
	Note 13. Computation of Basic and Diluted Earnings per Common Share	3739
	Note 14. Commitments and Contingencies	3839
	Note 15. Related-Party Transactions	4142
	Note 16. Employee Benefit Plans	4445
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4547
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6365
Item 4.	Controls and Procedures	6365
PART II: OTHER INFORMATION		6466
Item 1.	Legal Proceedings	6466
Item 1A.	Risk Factors	6466
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6466
Item 3.	Defaults upon Senior Securities	6466
Item 4.	Mine Safety Disclosures	6466
Item 5.	Other Information	6466
Item 6.	Exhibits	6668
SIGNATURES		6769

Unless otherwise specified or the context otherwise requires, the use herein of the terms “we,” “our,” “us,” “SC,” and the “Company” refer to Santander Consumer USA Holdings Inc. and its consolidated subsidiaries.

Cautionary Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements about the Company’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends,” and similar words or phrases. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties which are subject to change based on various important factors, some of which are beyond the Company’s control. Among the factors that could cause the Company’s actual performance to differ materially from those suggested by the forward-looking statements are:

•There can be no assurance that the proposed acquisition of all of our outstanding common stock by SHUSA will be approved and ultimately consummated, and the terms of any such transaction may differ materially from those originally proposed by SHUSA;

•our agreement with Stellantis may not result in currently anticipated levels of growth;

•the adverse impact of COVID-19 on our business, financial condition, liquidity and results of operations;

•there can be no assurance that the proposed acquisition of all of our outstanding common stock by SHUSA will be agreed upon, approved and ultimately consummated, and the terms of any such transaction may differ materially from those originally proposed by SHUSA;

•our agreement with Stellantis N.V. may not result in currently anticipated levels of growth and is subject to certain conditions that could result in termination of the agreement;

•continually changing federal, state, and local laws and regulations could materially adversely affect our business, including changes to tax laws and regulations and the outcome of ongoing tax audits by federal, state and local income tax authorities that may require the Company to pay additional taxes or recover fewer overpayments compared to what has been accrued or paid as of period-end;

•adverse economic conditions in the United States and worldwide may negatively impact our results;

•our business could suffer if our access to funding is reduced;

•significant risks we face implementing our growth strategy including our ability to grow revenue, manage expenses, attract and retain highly-skilled people and raise capital necessary to achieve our business goals;

•our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships;

•our financial condition, liquidity, and results of operations depend on the credit performance of our loans;

•loss of our key management or other personnel, or an inability to attract such management and personnel;

•the effects of regulation, actions and/or policies of the Federal Reserve Bank of Boston (FRBB), the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), and the European Central Bank (ECB), whose oversight and regulation may limit certain of our activities, including share repurchase programs, the timing and amount of dividends and other limitations on our business;

•acts of God, including pandemics and other significant public health emergencies, and other natural or man-made disasters, and the Company’s ability to deal with disruptions caused by such acts, emergencies and disasters;

•inflation, interest rate, market and monetary fluctuations, including effects from the pending discontinuation of LIBOR as an interest rate benchmark, may, among other things, reduce net interest margins and impact funding sources, revenue and expenses, and the value of assets and obligations;

•adverse publicity, and negative public opinion, whether specific to the Company or regarding other industry participants or industry-wide factors, or other reputational harm;

•the ability of the Company and its third-party vendors to convert, maintain and upgrade, as necessary, the Company’s data processing and other IT infrastructure on a timely and acceptable basis, within projected cost estimates and without significant disruption to the Company’s business;

•the Company’s ability to control operational risks, data security breach risks and outsourcing risks, and the possibility of errors in quantitative models and software the Company uses in its business, including as a result of cyberattacks, technological failure, human error, fraud or malice by internal or external parties, and the possibility that the Company’s controls will prove insufficient, fail or be circumvented;

•future changes in our relationship with SHUSA and Banco Santander that could adversely affect our operations; and

•the other factors that are described in Part I, Item IA – Risk Factors of the Annual Report of the Company on Form 10-K for the year ended December 31, 2020 (the 2020 Annual Report on Form 10-K).

If one or more of the factors affecting the Company’s forward-looking information and statements renders forward-looking information or statements incorrect, the Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Therefore, the Company cautions the reader not to place undue reliance on any forward-looking information or statements. The effect of these factors is difficult to predict. Factors other than these also could adversely affect the Company’s results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties as new factors emerge from time to time. Management cannot assess the impact of any such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause

~~impact of any such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause~~ results to differ materially from those contained in any forward-looking statement. Forward-looking statements reflect the current beliefs and expectations of the Company's management and only speak as of the date of this document, and the Company undertakes no obligation to update any forward-looking information or statements, whether written or oral, to reflect any change, except as required by law. All forward-looking statements attributable to the Company are expressly qualified by these cautionary statements.

Glossary

The following is a list of abbreviations, acronyms, and commonly used terms used in this Quarterly Report on Form 10-Q.

ABS			Asset-backed securities
ACL			Allowance for credit loss
Advance Rate			The maximum percentage of collateral that a lender is willing to lend.
Affiliates			A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity.
AFS			Available for sale
ALG			Automotive Lease Guide
Amortized costs			Includes unpaid principal balance (UPB), net of discounts and premiums
APR			Annual Percentage Rate
ARRC			Alternative Reference Rates Committee
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Bluestem			Bluestem Brands, Inc., an online retailer for whose customers SC provides financing
Board			SC’s Board of Directors
CARES Act			The Coronavirus Aid, Relief, and Economic Security Act
CBP			Citizens Bank of Pennsylvania
CCAR			Comprehensive Capital Analysis and Review
CCAP			Chrysler Capital
CDO			Chief Diversity Officer
CECL			Current Expected Credit Loss, Amendments based on ASU 2016-13, ASU 2019-04, and ASU 2019-11
CEO			Chief Executive Officer
CFPB			Consumer Financial Protection Bureau
CFO			Chief Financial Officer
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
COVID-19			Coronavirus disease 2019
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 Loan, real estate loan, working capital loan, or other credit extended to an automobile dealer
DOJ			U.S. Department of Justice
EIR			Effective interest rate
ECL			Expected credit losses
Exchange Act			Securities Exchange Act of 1934, as amended
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
GAAP			U.S. Generally Accepted Accounting Principles
HPI			Housing Price Index
HTM			Held to maturity
IPO			SC’s Initial Public Offering
ISDA			International Swaps and Derivative Association
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
MPLFA			Ten-year master private-label financing agreement with Stellantis ~~N.V.~~, signed in May 2013
OCC			Office of the Comptroller of the Currency
Overcollateralization			A credit enhancement method whereby more collateral is posted than is required to obtain financing

PD Probability of default PDLA Platform Development and License Agreement Private-label Financing branded in the name of the product manufacturer rather than in the name of the finance provider RC The Risk Committee of the Board Remarketing The controlled disposal of vehicles at the end of 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 Retail installment contracts Includes retail installment contracts individually acquired or originated by the Company and purchased non-credit deteriorated finance receivables ROU Right-of-use (related to operating leases) 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 SCART Santander Consumer Auto Receivables Trust, a securitization platform SC Illinois Santander Consumer USA Inc., an Illinois 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 SHUSA Santander Holdings USA, Inc., a wholly-owned subsidiary of Santander and the majority stockholder of SC SPAIN Santander Prime Auto Issuing Note Trust, a securitization platform SRT Santander Retail Auto Lease Trust, a lease securitization platform Stellantis ~~N.V.~~ FCA US LLC, its parent Stellantis N.V., and/or any affiliates 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 Troubled Debt Restructuring Trusts Special purpose entities utilized in SC’s financing transactions VIE Variable Interest Entity Warehouse Line A revolving line of credit generally used to fund finance receivable originations

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (Dollars in thousands, except share amounts)

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
ASSETS
Cash and cash equivalents - $262,805 and $32,490 held at affiliates, respectively	$	321,976	$	109,053
Cash and cash equivalents - $2,016,932 and $32,490 held at affiliates, respectively	$	2,106,405	$	109,053
Finance receivables held for sale, net	~~391~~359,~~209~~561		1,567,527
Finance receivables held for investment, at amortized cost	33,~~120~~183,~~008~~439		33,114,638
Allowance for credit loss	(5,~~818~~699,~~382~~698)		(6,110,633)
Finance receivables held for investment, at amortized cost, net	27,~~301~~483,~~626~~741		27,004,005
Restricted cash - $6,027 and $27 held at affiliates, respectively	2,660,662		2,221,094
Restricted cash - $6,808 and $27 held at affiliates, respectively	2,248,667		2,221,094
Accrued interest receivable	~~347~~323,~~722~~469		415,765
Leased vehicles, net	1615,~~120~~529,~~051~~610		16,391,107
Furniture and equipment, net of accumulated depreciation of $111,238 and $104,452, respectively	57,419		62,032
Furniture and equipment, net of accumulated depreciation of $116,431 and $104,452, respectively	62,168		62,032
Goodwill	74,056		74,056
Intangible assets, net of amortization of $72,296 and $63,488, respectively	79,183		70,128
Intangible assets, net of amortization of $70,984 and $63,488, respectively	75,176		70,128
Other assets - $9,488 and $14,451 held at affiliates, respectively	892,030		972,726
Other assets - $6,956 and $14,451 held at affiliates, respectively	811,597		972,726
TOTAL ASSETS	$	4849,~~245~~074,~~934~~450	$	48,887,493
LIABILITIES AND EQUITY
LIABILITIES
Borrowings and other debt obligations - $10,250,000 and $10,801,318 to/from affiliates, respectively	$	38,202,642	$	41,138,674
Borrowings and other debt obligations - $9,600,000 and $10,801,318 to/from affiliates, respectively	$	38,431,858	$	41,138,674
Deferred tax liabilities, net	1,~~718~~855,~~538~~859		1,263,796
Accounts payable and accrued expenses - $85,790 and $80,428 held at affiliates, respectively	682,450		531,369
Accounts payable and accrued expenses - $74,945 and $80,428 held at affiliates, respectively	554,581		531,369
Other liabilities - $3,213 and $463 held at affiliates, respectively	412,674		331,693
Other liabilities - $2,368 and $463 held at affiliates, respectively	299,422		331,693
TOTAL LIABILITIES	41,~~016~~141,~~304~~720		43,265,532
Commitments and contingencies (Notes 7 and 14)
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value — 1,100,000,000 shares authorized;
363,506,463 and 363,159,613 shares issued and 306,081,081 and 306,091,978 shares outstanding, respectively	3,060		3,061
363,536,761 and 363,159,613 shares issued and 306,111,379 and 306,091,978 shares outstanding, respectively	3,061		3,061
Additional paid-in capital	~~389~~391,~~890~~343		393,800
Accumulated other comprehensive income (loss), net of taxes	(3631,~~855~~194)		(50,566)
Retained earnings	67,~~873~~569,~~535~~520		5,275,666
TOTAL STOCKHOLDERS' EQUITY	7,~~229~~932,~~630~~730		5,621,961
TOTAL LIABILITIES AND EQUITY	$	4849,~~245~~074,~~934~~450	$	48,887,493

See notes to unaudited condensed consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited) (Dollars in thousands, except per share amounts)

	For the Three Months Ended				For the ~~Six~~Nine Months Ended
	June 30,				June 30,
	September 30,				September 30,
	2021		2020		2021		2020
Interest on finance receivables and loans	$	1,~~229~~215,~~492~~121	$	1,~~236~~300,~~600~~694	$	23,~~534~~749,~~143~~264	$	23,~~510~~811,~~419~~113
Leased vehicle income	~~703~~670,~~916~~334		~~737~~725,~~549~~156		12,~~444~~115,~~800~~134		12,~~485~~210,~~528~~684
Other finance and interest income	31,~~068~~631		2,~~657~~146		46,~~494~~125		1012,~~208~~354
Total finance and other interest income	1,~~936~~887,~~476~~086		12,~~976~~027,~~806~~996		35,~~983~~870,~~437~~523		46,~~006~~034,~~155~~151
Interest expense — Including $84,006, $71,055 , $169,909 and $133,825 to affiliates, respectively	237,195		308,982		490,732		637,816
Interest expense — Including $77,407, $87,851 , $247,327 and $221,676 to affiliates, respectively	218,747		292,118		709,479		929,934
Leased vehicle expense	~~294~~325,~~720~~259		~~610~~467,~~861~~172		~~718~~1,~~515~~043,774		1,~~163~~630,~~773~~945
Net finance and other interest income	1,~~404~~343,~~561~~080		1,~~056~~268,~~963~~706		24,~~774~~117,~~190~~270		23,~~204~~473,~~566~~272
Credit loss expense (benefit)	~~(263~~42,~~751)~~058		~~861~~340,~~896~~548		(~~127~~85,~~542~~484)		12,~~769~~110,~~783~~331
Net finance and other interest income after credit loss expense	1,~~668~~301,~~312~~022		~~195~~928,~~067~~158		24,~~901~~202,~~732~~754		~~434~~1,~~783~~362,941
Profit sharing	5041,~~553~~009		1130,~~530~~414		~~117~~158,~~879~~888		2556,~~825~~239
Net finance and other interest income after credit loss expense and profit sharing	1,~~617~~260,~~759~~013		~~183~~897,~~537~~744		24,~~783~~043,~~853~~866		~~408~~1,~~958~~306,702
Investment gains (losses), net	25,~~414~~241		(~~147~~68,~~582~~989)		(127,~~298~~057)		(~~211~~279,~~008~~997)
Servicing fee income — Including $10,104, $11,321, $19,301 and $23,873 from affiliates, respectively	22,812		19,120		41,506		38,223
Servicing fee income — Including $9,916, $10,050, $29,217 and $33,923 from affiliates, respectively	19,975		18,574		61,481		56,797
Fees, commissions, and other — Including $4,134, $6,567, $7,464 and $9,873 from affiliates, respectively	50,847		82,069		151,375		177,199
Fees, commissions, and other — Including $2,965, $1,254, $10,429 and $11,127 from affiliates, respectively	48,867		78,924		200,242		256,123
Total other income	7674,~~073~~083		~~(46~~28,~~393)~~509		~~180~~254,~~583~~666		432,~~414~~923
Compensation and benefits	~~156~~149,~~450~~669		127,~~643~~991		~~310~~460,~~345~~014		~~260~~388,~~969~~960
Repossession expense	3833,~~845~~349		2235,~~289~~910		84117,~~191~~540		79115,~~951~~861
Other expenses — Including $1,758, $1,208, $3,535 and $2,305 to affiliates, respectively	107,915		116,747		203,166		208,432
Other expenses — Including $2,144, $1,456, $5,679 and $3,762 to affiliates, respectively	179,147		99,761		382,313		308,193
Total operating expenses	~~303~~362,~~210~~165		~~266~~263,~~679~~662		~~597~~959,~~702~~867		~~549~~813,~~352~~014
Income (loss) before income taxes	1,390,622		(129,535)		2,366,734		(135,980)
Income before income taxes	971,931		662,591		3,338,665		526,611
Income tax expense (benefit)	332,420		(32,857)		566,877		(35,315)
Income tax expense	208,607		172,476		775,484		137,161
Net income (loss)	$	1,058,202	$	(96,678)	$	1,799,857	$	(100,665)
Net income	$	763,324	$	490,115	$	2,563,181	$	389,450
Net income (loss)	$	1,058,202	$	(96,678)	$	1,799,857	$	(100,665)
Net income	$	763,324	$	490,115	$	2,563,181	$	389,450
Other comprehensive income (loss):
Unrealized gains (losses) on cash flow hedges, net of tax of $1,614, $41, $4,563 and $(12,502) respectively	5,344		180		14,410		(38,838)
Unrealized gains (losses) on cash flow hedges, net of tax of $2,006, $2,083, $6,568 and $(10,419) respectively	5,962		7,112		20,372		(31,726)
Unrealized gains (losses) on available-for-sale and held-to-maturity debt securities net of tax of $(121), $(74), $(224) and $587, respectively	(381)		(230)		(699)		1,826
Unrealized gains (losses) on available-for-sale and held-to-maturity debt securities net of tax of $(100), $(88), $(324) and $500, respectively	(301)		(289)		(1,000)		1,537
Comprehensive income (loss)	$	1,063,165	$	(96,728)	$	1,813,568	$	(137,677)
Comprehensive income	$	768,985	$	496,938	$	2,582,553	$	359,261
Net income per common share (basic)	$	32.4649	$	(01.~~30)~~58	$	58.8837	$	(01.~~31)~~21
Net income per common share (diluted)	$	32.4549	$	(01.~~30)~~58	$	58.8837	$	(01.~~31)~~21
Dividend declared per common share	$	0.22	$	0.22	$	0.6688	$	0.4466
Weighted average common shares (basic)	306,~~057~~093,~~004~~379		~~319~~310,~~773~~150,~~636~~293		306,~~082~~086,~~852~~399		~~326~~321,~~899~~275,~~844~~907
Weighted average common shares (diluted)	306,~~289~~378,~~395~~733		~~319~~310,~~878~~307,~~145~~265		306,~~327~~354,~~116~~463		~~327~~321,~~137~~492,~~104~~331

See notes to unaudited condensed consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited) (In thousands except per share amounts)

	Common Stock			AdditionalPaid-In Capital		AccumulatedOtherComprehensive Income (Loss)		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance — April 1, 2021	306,034	$	3,060	$	387,946	$	(41,818)	$	5,882,665	$	6,231,853
Balance — July 1, 2021	306,081	$	3,060	$	389,890	$	(36,855)	$	6,873,535	$	7,229,630
Stock issued in connection with employee incentive compensation plans	4730	—1		~~(363)~~219		—		—		~~(363)~~220
Stock-based compensation expense	—	—		21,~~307~~234		—		—		21,~~307~~234
Stock repurchase/Treasury stock	—	—		—		—		—		—
Dividends-Common stock, $0.22/share	—	—		—		—		(67,339)		(67,339)
Dividends-Common stock, $0.22/share	—	—		—		—		(67,332)		(67,332)
Net income	—	—		—		—		763,324		763,324
Net income (loss)	—	—		—		—		1,058,202		1,058,202
Other comprehensive income, net of taxes	—	—		—		5,661		—		5,661
Other comprehensive income (loss), net of taxes	—	—		—		4,963		—		4,963
Balance — September 30, 2021	306,111	$	3,061	$	391,343	$	(31,194)	$	7,569,520	$	7,932,730
Balance — June 30, 2021	306,081	$	3,060	$	389,890	$	(36,855)	$	6,873,535	$	7,229,630
Balance — July 1, 2020	316,235	$	3,162	$	624,554	$	(63,705)	$	4,331,454	$	4,895,465
Balance — April 1, 2020	321,118	$	3,211	$	707,384	$	(63,655)	$	4,499,163	$	5,146,103
Stock issued in connection with employee incentive compensation plans	34	—		237		—		—		237
Tax impact of adoption of ASU 2019-12	—	—		—		—		(382)		(382)
Stock-based compensation expense	—	—		1,010		—		—		1,010
Stock issued in connection with employee incentive compensation plans	29	—		(112)		—		—		(112)
Stock repurchase/Treasury stock	(10,198)	(101)		(223,415)		—		—		(223,516)
Stock-based compensation expense	—	—		1,113		—		—		1,113
Dividends-Common stock, $0.22/share	—	—		—		—		(67,364)		(67,364)
Stock repurchase/Treasury stock	(4,912)	(49)		(83,939)		—		—		(83,988)
Tax sharing with affiliate	—	—		(7,958)		—		—		(7,958)
Dividends-Common stock, $0.22/share	—	—		—		—		(70,649)		(70,649)
Net income	—	—		—		—		490,115		490,115
Tax sharing with affiliate	—	—		108		—		—		108
Other comprehensive income, net of taxes	—	—		—		6,823		—		6,823
Net income (loss)	—	—		—		—		(96,678)		(96,678)
Balance — September 30, 2020	306,071	$	3,061	$	394,428	$	(56,882)	$	4,754,205	$	5,094,812
Other comprehensive income (loss), net of taxes	—	—		—		(50)		—		(50)
Balance — June 30, 2020	316,235	$	3,162	$	624,554	$	(63,705)	$	4,331,454	$	4,895,465

See notes to unaudited condensed consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited) (In thousands except per share amounts)

	Common Stock			AdditionalPaid-In Capital		AccumulatedOtherComprehensive Income (Loss)		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance — January 1, 2021	306,092	$	3,061	$	393,800	$	(50,566)	$	5,275,666	$	5,621,961
Stock issued in connection with employee incentive compensation plans	~~347~~377	34		(21,~~195~~975)		—		—		(21,~~192~~971)
Stock-based compensation expense	—	—		78,~~756~~989		—		—		78,~~756~~989
Stock repurchase/Treasury stock	(358)	(4)		(9,471)		—		—		(9,475)
Dividends-Common stock, $0.66/share	—	—		—		—		(201,988)		(201,988)
Dividends-Common stock, $0.88/share	—	—		—		—		(269,327)		(269,327)
Net income (loss)	—	—		—		—		1,799,857		1,799,857
Net income	—	—		—		—		2,563,181		2,563,181
Other comprehensive income (Loss), net of taxes	—	—		—		13,711		—		13,711
Other comprehensive income, net of taxes	—	—		—		19,372		—		19,372
Balance — June 30, 2021	306,081	$	3,060	$	389,890	$	(36,855)	$	6,873,535	$	7,229,630
Balance — September 30, 2021	306,111	$	3,061	$	391,343	$	(31,194)	$	7,569,520	$	7,932,730
Balance — January 1, 2020	339,202	3,392		1,173,262		(26,693)		6,168,659		7,318,620
Cumulative-effect adjustment upon adoption of ASU 2016-13	—	—		—		—		(1,590,885)		(1,590,885)
Tax impact of adoption of ASU 2019-12	—	—		—		—		(382)		(382)
Stock issued in connection with employee incentive compensation plans	~~305~~340	3		(1,~~746~~509)		—		—		(1,~~743~~506)
Stock-based compensation expense	—	—		56,~~150~~161		—		—		56,~~150~~161
Stock repurchase/Treasury stock	(2333,~~272~~471)	(~~233~~334)		(~~552~~775,~~220~~636)		—		—		(~~552~~775,~~453~~970)
Dividends-Common stock, $0.44/share	—	—		—		—		(145,273)		(145,273)
Dividends-Common stock, $0.66/share	—	—		—		—		(212,637)		(212,637)
Tax sharing with affiliate	—	—		~~108~~(7,850)		—		—		~~108~~(7,850)
Net income	—	—		—		—		~~(100~~389,~~665)~~450		~~(100~~389,~~665)~~450
Other comprehensive income (loss), net of taxes	—	—		—		(3730,~~012~~189)		—		(3730,~~012~~189)
Balance — June 30, 2020	316,235	$	3,162	$	624,554	$	(63,705)	$	4,331,454	$	4,895,465
Balance — September 30, 2020	306,071	$	3,061	$	394,428	$	(56,882)	$	4,754,205	$	5,094,812

See notes to unaudited condensed consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (Dollars in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net income (loss)

1,799,857

(100,665)

Net income

2,563,181

389,450

Adjustments to reconcile net income to net cash provided by operating activities

Derivative mark to market

(1,~~348~~205)

910,~~708~~022

Credit loss expense

(127,542)

1,769,783

Credit loss (benefit)/expense

(85,484)

2,110,331

Depreciation, amortization and accretion

~~842~~1,~~017~~262,383

1,~~226~~711,~~945~~125

Originations and purchases of receivables held for sale

(1,~~162~~171,~~802~~287)

(1,637,194)

Proceeds from sales of and collections on retail installment contracts held for sale (a)

1,~~568~~747,~~407~~471

63545,~~587~~293

Investment losses, net

127,~~298~~057

~~211~~279,~~008~~997

Stock-based compensation

78,~~756~~989

56,~~150~~161

Deferred tax expense/(benefit)

450,403

(34,812)

Deferred tax expense

585,820

142,554

Net change in:

Revolving personal loans

34,247

(2559,~~598~~096)

Other assets

~~152~~135,~~170~~023

(~~175~~203,~~220~~634)

Other liabilities

~~241~~45,~~575~~380

(~~120~~43,~~587~~067)

Net cash provided by operating activities

35,~~817~~131,~~038~~575

13,~~192~~251,~~105~~942

Cash flows from investing activities:

Originations and purchases of portfolios on finance receivables held for investment

(913,~~211~~816,~~622~~075)

(712,~~335~~782,~~524~~253)

Collections on finance receivables held for investment

711,~~668~~685,~~926~~416

69,~~010~~223,~~706~~448

Proceeds from sales of retail installment contracts held for sale, originated as held for investment (b)

2,~~086~~356,~~562~~205

~~512~~803,~~286~~614

Leased vehicles purchased

(45,~~280~~896,~~352~~254)

(34,~~022~~891,~~996~~504)

Proceeds from sale of leased vehicles

35,~~590~~444,~~432~~161

13,~~757~~094,~~528~~294

Manufacturer incentives received

~~100~~73,~~832~~920

~~209~~339,~~659~~717

Change in revolving personal loans, net

31,121

5475,~~159~~318

Proceeds from repayments and maturities of available-for-sale securities

5,000

—

Purchases of held-to-maturity investment securities

—

(2454,~~040~~584)

Proceeds from repayments and maturities of held-to-maturity securities

2033,~~130~~987

~~698~~4,203

Purchases of furniture and equipment

(820,~~801~~557)

(1418,~~874~~117)

Sales of furniture and equipment

113,~~378~~580

Net cash provided by (used in) investing activities

3,606

(1,852,397)

Net cash used in investing activities

(89,496)

(4,205,861)

Cash flows from financing activities:

Proceeds from borrowings and other debt obligations, net of debt issuance costs - $4,065,000 and $7,815,000 from affiliates, respectively

20,395,876

23,961,221

Proceeds from borrowings and other debt obligations, net of debt issuance costs - $4,731,607 and $11,545,000 from affiliates, respectively

28,769,569

37,972,329

Payments on borrowings and other debt obligations - $(4,615,000) and $(4,265,000) to affiliates, respectively

(23,353,083)

(22,531,448)

Payments on borrowings and other debt obligations - $(5,931,607) and $(5,995,000) to affiliates, respectively

(31,508,722)

(35,818,793)

Proceeds from stock option exercises, gross

~~517~~801

~~409~~673

Shares repurchased

(9,475)

(~~552~~775,~~453~~970)

Dividends paid

(~~201~~269,~~988~~327)

(~~145~~212,~~273~~637)

Net cash provided by (used in) financing activities

(3,~~168~~017,~~153~~154)

~~732~~1,~~456~~165,602

(a)Included in this balance is sales proceeds from Bluestem portfolio sale of $608 million for loans originated as held for sale.

(b)Included in this balance is sales proceeds from Bluestem portfolio sale of $188 million for loans originated as held for investment.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited) (Dollars in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2021

2020

Net increase (decrease) in cash and cash equivalents and restricted cash

~~652~~2,~~491~~024,925

72211,~~164~~683

Cash and cash equivalents and restricted cash— Beginning of year

2,330,147

2,161,087

Cash and cash equivalents and restricted cash— End of year

24,~~982~~355,~~638~~072

2,~~233~~372,~~251~~770

Supplemental cash flow information:

Cash and cash equivalents

~~321~~2,~~976~~106,405

~~175~~105,~~936~~616

Restricted cash

2,~~660~~248,~~662~~667

2,~~057~~267,~~315~~154

Total cash, cash equivalents and restricted cash

24,~~982~~355,~~638~~072

2,~~233~~372,~~251~~770

See notes to unaudited condensed consolidated financial statements.

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

The Company is the holding company for SC Illinois, and its subsidiaries, a specialized consumer finance company focused on vehicle finance and third-party servicing and delivering service to dealers and customers across the full credit spectrum. The Company’s primary business is the indirect origination and 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. Additionally, the Company 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 financing brand and is available as a finance option for automotive dealers across the United States.

Since May 2013, under the MPLFA with Stellantis ~~N.V.~~, the Company has operated as Stellantis ~~N.V.~~’s preferred provider for consumer loans, leases and dealer loans and provides services to Stellantis ~~N.V.~~ customers and dealers under the 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.

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 other consumer finance products.

As of ~~June~~September 30, 2021, the Company was owned approximately 80.2% by SHUSA, a subsidiary of Santander, and approximately 19.8% by other shareholders.

OnIn ~~July~~August 22021, ~~2021~~the Company entered into a definitive agreement whereby SHUSA agreed to acquire all of the outstanding shares of the common stock of the Company ~~announced~~not ~~that~~already itowned ~~received~~by aSHUSA ~~non~~via an all-~~binding~~cash ~~proposal~~tender (offer. Under the ~~“Proposal”)~~terms ~~from~~of ~~SHUSA~~the definitive agreement, a wholly-owned subsidiary of SHUSA commenced a tender offer to acquire all of the outstanding shares of the Company's common stock that ~~are~~SHUSA does not ~~currently~~yet ~~owned~~own ~~by SHUSA~~ at a ~~purchase~~ price of $3941.0050 per share in cash,. ~~subject~~SHUSA agreed to ~~conditions~~acquire ~~set~~all ~~forth~~remaining inshares ~~the~~not ~~Proposal~~tendered (in the ~~“Proposed~~offer ~~Transaction”).~~through ~~The~~a ~~Board~~second- ~~formed~~step anmerger ~~independent~~at ~~special committee (~~the ~~“Special~~same ~~Committee”),~~price ~~composed~~as ofin ~~William~~the ~~Rainer,~~tender ~~William~~offer. ~~Muir,~~Consummation ~~and~~of ~~Robert~~the ~~McCarthy~~tender ~~and~~offer ~~elected~~is ~~William~~subject ~~Rainer~~to asvarious ~~its chairperson~~conditions, toincluding ~~consider~~regulatory approval of the ~~Proposal.~~Board ~~The~~of ~~Special~~Governors ~~Committee~~of ~~has~~the ~~engaged~~Federal ~~independent~~Reserve ~~financial~~System and ~~legal~~other ~~advisors~~customary toconditions. ~~assist~~Upon incompletion ~~its evaluation~~ of the ~~Proposal.~~transaction, ~~There can be no assurance~~ the ~~Proposed~~Company ~~Transaction~~would ~~will~~become bea ~~completed,~~wholly-owned orsubsidiary ~~as to the terms~~ of ~~any such transaction~~SHUSA.

During the first quarter of 2021, the Company completed the sale of the Bluestem personal lending portfolio to a third party. In addition, the Company executed a forward flow sale agreement with a third party to purchase new advances of all personal lending receivables that the Company purchases from Bluestem through the term of the agreement with Bluestem.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, including certain Trusts that are considered VIEs. The Company also consolidates other VIEs for which it is deemed to be the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to SEC regulations. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a normal and recurring nature necessary for a fair statement of the Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Income, Statements of Stockholder's Equity and Statement of Cash Flow for the interim periods indicated, and contain adequate disclosure to make the information presented not misleading. Results of operations for the periods presented herein are not necessarily indicative of results of operations for the entire year. These financial statements should be read in conjunction with the Annual Report of the Company on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report on Form 10-K").

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates and those differences may be material. The most significant estimates include the determination of credit loss allowance, fair value measurements, expected end-of-term lease residual values, and income taxes. These estimates, although based on actual historical trends and modeling, may show significant variances over time.

Business Segment Information

The Company has one reportable segment, Consumer Finance, which includes the Company’s vehicle financial products and services, including retail installment contracts, vehicle leases, and financial products and services related to recreational vehicles and marine vehicles.

Accounting Policies

There have been no changes in the Company's accounting policies from those disclosed in Part II, Item 8 - Financial Statements and Supplementary Data in the 2020 Annual Report on Form 10-K.

2. Finance Receivables

Held for Investment

Finance receivables held for investment, net is comprised of the following at September 30, 2021 and December 31, 2020:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
Retail installment contracts, net (a)	$	27,~~278~~461,~~329~~064	$	26,975,368
Purchased receivables - credit deteriorated	21,~~569~~440		6,197
Finance lease receivables (Note 4)	2021,~~728~~237		22,440
Finance receivables held for investment, net	$	27,~~301~~483,~~626~~741	$	27,004,005

(a) The Company has elected the fair value option for certain retail installment contracts reported in finance receivables held for investment, net.

As of ~~June~~September 30, 2021 and December 31, 2020, $26,~~841~~170 and $5,614 of loans were recorded at fair value, respectively (Note 10).

The Company’s held for investment portfolio of retail installment contracts is comprised of the following at September 30, 2021 and December 31, 2020:

June 30, 2021

September 30, 2021

Retail Installment Contracts

Non-TDR

TDR

Unpaid principal balance

28,~~576~~779,~~765~~433

43,~~161~~952,~~892~~344

ACL

(4,~~299~~398,~~670~~303)

(1,~~514~~297,~~994~~841)

Discount/(premium) (net of subvention and participation)

~~258~~326,~~071~~675

(53,~~123~~601)

Capitalized origination costs and fees

9698,~~897~~549

43,~~491~~808

Net carrying balance

24,~~632~~806,~~063~~354

2,~~646~~654,~~266~~710

ACL as a percentage of unpaid principal balance

15.03

3632.48

ACL and discount as a percentage of unpaid principal balance

14.1

3632.59

	December 31, 2020
	Retail Installment Contracts
	Non-TDR			TDR
Unpaid principal balance	$	28,977,299		$	3,945,040
ACL	(4,792,464)			(1,314,170)
Discount (net of subvention and participation)	66,373			(8,389)
Capitalized origination costs and fees	97,638			4,041
Net carrying balance	$	24,348,846		$	2,626,522
ACL as a percentage of unpaid principal balance	16.5		%	33.3		%
ACL and discount as a percentage of unpaid principal balance	16.3		%	33.5		%


	December 31, 2020
	Retail Installment Contracts
	Non-TDR			TDR
Unpaid principal balance	$	28,977,299		$	3,945,040
ACL	(4,792,464)			(1,314,170)

Discount (net of subvention and participation)	66,373			(8,389)
Capitalized origination costs and fees	97,638			4,041
Net carrying balance	$	24,348,846		$	2,626,522
ACL as a percentage of unpaid principal balance	16.5		%	33.3		%
ACL and discount as a percentage of unpaid principal balance	16.3		%	33.5		%

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 lines or securitization bonds (Note 7). Most of the borrowers on the Company’s retail installment contracts held for investment are retail consumers; however, $~~966~~973,~~348~~205 and $864,680 of the unpaid principal balance represented fleet contracts with commercial borrowers as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

During the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company originated (including through the SBNA originations program) $811,~~277~~125,~~265~~634 and $711,~~310~~145,~~275~~890, respectively, in CCAP loans which represented 5653% and 6261%, respectively, of the total retail installment contract originations (including the SBNA originations program).

As of ~~June~~September 30, 2021, borrowers on the Company’s retail installment contracts held for investment are located in Texas (1617%), Florida (11%), California (8%), Georgia (65%) and other states each individually representing less than 5% of the Company’s total portfolio.

Purchased receivables

During the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the ~~Company~~company ~~did~~purchased ~~not~~financial ~~acquire~~receivables ~~any vehicle loan portfolios~~ from third party lenders for $67,018, and zero, respectively. The unpaid principal balance of these loans as of the acquisition date was $112,061 and zero, respectively.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company recognized certain retail installment contracts with an unpaid principal balance of ~~zero~~$42,264, ~~zero~~$42,264, zero and $76,878, respectively, previously held by non-consolidated securitization Trusts, under optional clean-up calls (Note 6). Following the initial recognition of these loans at fair value, the performing loans in the portfolio 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 10).

Held for Sale

The carrying value of the Company’s finance receivables held for sale, net is comprised of the following at September 30, 2021 and December 31, 2020:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
Retail installment contracts acquired individually	$	~~391~~359,~~209~~561	$	674,048
Personal loans (a)	—		893,479

(a) On March 31, 2021, the Company sold the personal lending portfolio. Refer to Note 1 – “Description of Business, Basis of Presentation, and Accounting Principles” to these Condensed Consolidated Financial Statements for more information.

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Sales of retail installment contracts to third parties	$	309,784	$	512,286	$	2,690,569	$	512,286
Sales of Personal Loans to third parties	—		—		1,253,746		—
Proceeds from sales of charged-off assets to third parties	13,901		—		13,901		20,875

Sales of retail installment contracts, personal loans to third parties (unpaid principal balance), and proceeds from sales of charged-off assets for the three and nine months ended September 30, 2021 and 2020 were as follows:


	Three Months Ended				Nine Months Ended

	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Sales of retail installment contracts to third parties	$	277,898	$	636,301	$	2,968,467	$	1,148,587
Sales of Personal Loans to third parties	—		—		1,253,746		—

Proceeds from sales of charged-off assets to third parties	—		9,144		13,901		30,019

3. Allowance for Credit Loss and Credit Quality

Allowance for Credit Loss

The Company maintains an ACL on the retail installment contracts held for investment, excluding those loans measured at fair value in accordance with applicable accounting standards. The Company maintains an expected ACL for receivables from dealers based on risk ratings and individually evaluates loans for specific impairment as necessary. As of June 30, 2021, there is no ACL on receivables from dealers as the portfolio has a zero balance. As of June 30, 2020, the ACL for receivables from dealers was comprised entirely of general allowance as none of these receivables have been determined to be individually impaired. The Company estimates losses on the finance lease receivable portfolio based on delinquency status, loss experience to date, future expectation of losses as well as various economic factors.

Retail installment contracts

The activity in the ACL for the retail installment contracts for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was as follows:

Three Months Ended

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

Retail Installment Contracts

Non-TDR

TDR

Non-TDR

TDR

Balance — beginning of period

4,~~662~~299,~~633~~670

1,~~338~~514,~~708~~994

4,~~482~~818,~~663~~187

~~973~~1,~~236~~037,628

Credit loss expense (benefit)

~~(481~~188,~~217)~~195

~~215~~(144,~~318~~772)

~~744~~24,~~511~~841

~~116~~314,~~419~~075

Charge-offs (a)

(342,030)

(190,511)

(721,218)

(127,617)

Charge-offs

(427,659)

(206,111)

(334,938)

(200,352)

Recoveries

~~460~~338,~~284~~097

~~151~~133,~~479~~730

~~312~~392,~~231~~042

7597,~~590~~171

Balance — end of period

4,~~299~~398,~~670~~303

1,~~514~~297,~~994~~841

4,~~818~~900,~~187~~132

1,~~037~~248,~~628~~522

Six Months Ended

Nine Months Ended

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

Retail Installment Contracts

Non-TDR

TDR

Non-TDR

TDR

Balance — beginning of period

4,792,464

1,314,170

2,123,878

914,718

Day 1 - Adjustment to allowance for adoption of CECL standard

—

2,030,473

71,833

Credit loss expense (benefit)

(~~441~~252,~~158~~963)

~~314~~169,~~040~~268

1,~~501~~526,~~704~~545

~~267~~581,~~268~~344

Charge-offs (a)

(~~928~~1,~~823~~356,482)

(~~392~~599,~~972~~083)

(1,~~620~~955,~~768~~706)

(~~417~~617,~~184~~536)

Recoveries

~~877~~1,~~187~~215,284

~~279~~413,~~756~~486

~~782~~1,~~900~~174,942

~~200~~298,~~993~~163

Balance — end of period

4,~~299~~398,~~670~~303

1,~~514~~297,~~994~~841

4,~~818~~900,~~187~~132

1,~~037~~248,~~628~~522

(a) Charge-offs decreased significantly, primarily driven by macro-economic improvements ~~and lower delinquencies~~. Additionally, Charge-offs for retail installment contracts includes partial write-down of loans to the collateral value less estimated costs to sell, for which a bankruptcy notice was received. There is no additional ACL on these loans.

The credit risk in the Company’s loan portfolios is driven by credit and collateral quality, and is affected by borrower-specific and economy-wide factors. In general, there is an inverse relationship between credit quality of loans and projections of impairment losses so that loans with better credit quality require a lower expected loss. The Company manages this risk through its underwriting, pricing strategies, credit policy standards, and servicing guidelines and practices, as well as through the application of geographic and other concentration limits.

The Company estimates current expected credit losses based on prospective information as well as account level models based on historical data. Unemployment, HPI, and used vehicle index growth rates, along with loan level characteristics, are the key inputs used in the models for prediction of the likelihood that the borrower will default in ~~the forecasted period (the probability of default). The used vehicle index is also used to estimate the loss in the event of default.~~

The Company has determined the reasonable and supportable period to be three years at which time economic forecasts generally tend to revert to historical averages. The Company utilizes qualitative factors to capture any additional risks that may not be captured in either the economic forecasts or in the historical data, including consideration of the current levels of delinquency and used vehicle prices.

the forecasted period (the probability of default). The used vehicle index is also used to estimate the loss in the event of default.

The Company generally uses a third-party vendor's consensus baseline macroeconomic scenario for the quantitative estimate and additional positive and negative macroeconomic scenarios to make a qualitative adjustment for macroeconomic uncertainty, and considers adjustments to macroeconomic inputs and outputs based on market volatility. The scenarios used are periodically updated with weightings assigned by management and approved through established committee governance.

The Company’s ACL decreased $~~0.2~~119 ~~billion~~million and $~~0.3~~410 ~~billion~~million for the three and ~~six~~nine months ended ~~June~~September 30, 2021. The decrease was primarily due to an improved macroeconomic outlook ~~and~~as awell ~~decrease~~as ofimproved ~~lifetime expected~~ credit ~~losses for non-TDR loans mainly due to credit~~ quality and performance.

Other portfolios

The ACL for the period end and its activity for the finance lease receivable portfolio and purchased receivable portfolio-credit deteriorated, for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, was insignificant.

Delinquencies

Retail installment contracts and personal amortizing term loans are generally classified as non-performing (or nonaccrual) when they are greater than 60 days past due as to contractual principal or interest payments. Dealer receivables are classified as non-performing when they are greater than 90 days past due. At the time a loan is placed in non-performing (nonaccrual) status, previously accrued and uncollected interest is reversed against interest income. If an account is returned to a performing (accrual) status, the Company returns to accruing interest on the loan. When an account is deferred, the loan is returned to accrual status during the deferral period and accrued interest related to the loan is evaluated for collectability.

The Company considers an account delinquent when an obligor fails to pay substantially all (defined as 90%) of the scheduled payment by the due date. In each case, the period of delinquency is based on the number of days payments are contractually past due.

A summary of delinquencies as of September 30, 2021, and December 31, 2020 is as follows:

June 30, 2021

September 30, 2021

Finance Receivables Held for Investment

Retail Installment Contract Loans

Purchased Receivables Portfolios - credit deteriorated

Total

Percent

Amortized cost, 30-59 days past due

12,~~816~~253,~~384~~907

~~589~~401

12,~~816~~254,~~973~~308

56.58

Amortized cost over 59 days

~~791~~1,~~144~~106,673

~~421~~400

~~791~~1,~~565~~107,073

23.43

Total delinquent balance at amortized cost (a)

23,~~607~~360,~~528~~580

~~1,010~~801

23,~~608~~361,~~538~~381

710.91

(a) The amount of accrued interest excluded from the disclosed amortized cost table is $5863,~~889~~205.


	December 31, 2020
	Finance Receivables Held for Investment
	Retail Installment Contract Loans		Purchased Receivables Portfolios - credit impaired		Total		Percent

Amortized cost, 30-59 days past due	$	1,971,766	$	687	$	1,972,453	6.0	%
Amortized cost over 59 days	1,038,869		441		1,039,310		3.1	%
Total delinquent balance at amortized cost (a)	$	3,010,635	$	1,128	$	3,011,763	9.1	%

(a) The amount of accrued interest excluded from the disclosed amortized cost table is $73,794.

On March 31, 2021, the Company sold the personal lending portfolio. Refer to Note 1 – “Description of Business, Basis of Presentation, and Accounting Principles” to these Condensed Consolidated Financial Statements for more information. The unpaid principal balance on revolving personal loans 90 days past due and still accruing totaled $78,880 as of December 31, 2020.

Non-Accrual Loans for Retail Installment Contracts

The amortized cost basis of financial instruments that are either non-accrual with related expected credit loss or non-accrual without related expected credit loss for retail installment contracts is as follows:


	September 30, 2021
	Non-accrual loans		Non-accrual loans with no allowance (a)		Interest income recognized on nonaccrual loans (YTD)		Non-accrual loans as a percent of total amortized cost
Non-TDR	$	818,292	$	157,314	$	46,445	2.5	%
TDR	391,834		47,281		26,576		1.2	%
Total non-accrual loans	$	1,210,126	$	204,595	$	73,021	3.7	%

	June 30, 2021
	Non-accrual loans		Non-accrual loans with no allowance (a)		Interest income recognized on nonaccrual loans (YTD)		Non-accrual loans as a percent of total amortized cost
Non-TDR	$	585,677	$	148,965	$	30,071	1.8	%
TDR	318,933		45,766		16,641		1.0	%
Total non-accrual loans	$	904,610	$	194,731	$	46,712	2.8	%


	December 31, 2020
	Non-accrual loans		Non-accrual loans with no allowance (a)		Interest income recognized on nonaccrual loans (YTD)		Non-accrual loans as a percent of total amortized cost
Non-TDR	$	748,026	$	145,287	$	72,926	2.3	%
TDR	385,021		46,498		35,620		1.2	%
Total nonaccrual loans	$	1,133,047	$	191,785	$	108,546	3.5	%

(a) These represent loans for which a bankruptcy notice was received and that have been partially written down to the collateral value less estimated costs to sell. Accordingly, there is no additional ACL on these loans.

Delinquent balances and nonaccrual balances are lower as of ~~June 30, 2021 compared to~~ December 31, 2020 primarily due to government stimulus payments ~~and~~provided ~~tax~~to ~~refunds~~customers ~~provided~~related to ~~customers~~COVID-19 pandemic.

Credit Quality Indicators

FICO® Distribution (determined at origination) — Amortized Cost Basis (in millions) by Origination Year for Retail Installment Contacts

Total

June 30,

2021

2020

2019

2018

2017

2016

Prior

Amount

September 30,

2021

2020

2019

2018

2017

2016

Prior

Amount

No-FICO®s

1,~~224~~603

1,~~358~~173

~~859~~738

~~394~~337

~~332~~266

~~147~~112

7350

4,~~387~~279

1312.39%

<540

1,~~164~~573

1,~~477~~306

~~1,083~~948

~~701~~608

~~335~~283

~~184~~151

~~162~~125

54,~~106~~994

15.41%

540-599

34,~~155~~364

3,~~478~~038

2,~~340~~030

1,~~322~~134

~~491~~413

~~288~~234

~~207~~156

11,~~281~~369

34.13%

600-639

2,~~036~~828

21,~~117~~831

1,~~372~~182

~~732~~625

~~238~~201

~~149~~123

9065

6,~~734~~855

20.37%

>=640 (a)

12,~~705~~345

1,~~918~~655

~~999~~853

~~597~~506

~~184~~151

~~116~~105

6645

5,~~585~~660

1617.90%

Total (b)

912,~~284~~713

109,~~348~~003

65,~~653~~751

3,~~746~~210

1,~~580~~314

~~884~~725

~~598~~441

33,~~093~~157

100.00%

(a) Beginning in 2021, loans with FICO score of 640 are disclosed in the >=640 category.

(b) The amount of accrued interest excluded from the disclosed amortized cost table is $~~348~~323 million.


															Total
December 31,	2020		2019		2018		2017		2016		2015		Prior		Amount		%

No-FICO®s	1,760		1,151		530		501		247		128		26		4,343		13.1%
<540	1,789		1,370		913		454		263		186		90		5,065		15.3%
540-599	4,269		3,005		1,736		673		423		264		96		10,466		31.7%
600-639	2,759		1,838		990		335		230		126		47		6,325		19.1%
>640 (a)	4,040		1,411		810		265		200		124		33		6,883		20.8%
Total (b)	$	14,617	$	8,775	$	4,979	$	2,228	$	1,363	$	828	$	292	$	33,082	100.0%

(a) As of December 31, 2020, loans with FICO score of 640 were included in the 600-639 category.

(b) The amount of accrued interest excluded from the disclosed amortized cost table is $416 million.

Troubled Debt Restructurings

In certain circumstances, the Company modifies the terms of its finance receivables to financially troubled borrowers. Modifications may include a temporary reduction in monthly payment, reduction in interest rate, an extension of the maturity date, rescheduling of future cash flows, or a combination thereof. A modification of finance receivable terms is considered a TDR if the Company grants a concession to a borrower for economic or legal reasons related to the debtor’s financial difficulties that would not otherwise have been considered. The purchased receivables portfolio - credit deteriorated, operating and finance leases, and loans held for sale are excluded from the scope of the applicable guidance. The Company’s TDR balance as of June 30, 2021 and December 31, 2020 primarily consisted of loans that

~~had~~Troubled ~~been~~Debt ~~deferred or modified to receive a temporary reduction in monthly payment. As of June 30, 2021 and December 31, 2020, there were no receivables from dealers classified as a TDR.~~Restructurings

In certain circumstances, the Company modifies the terms of its finance receivables to financially troubled borrowers. Modifications may include a temporary reduction in monthly payment, reduction in interest rate, an extension of the maturity date, rescheduling of future cash flows, or a combination thereof. A modification of finance receivable terms is considered a TDR if the Company grants a concession to a borrower for economic or legal reasons related to the debtor’s financial difficulties that would not otherwise have been considered. The purchased receivables portfolio - credit deteriorated, operating and finance leases, and loans held for sale are excluded from the scope of the applicable guidance. The Company’s TDR balance as of September 30, 2021 and December 31, 2020 primarily consisted of loans that had been deferred or modified to receive a temporary reduction in monthly payment. As of September 30, 2021 and December 31, 2020, there were no receivables from dealers classified as a TDR.

For loans not classified as TDRs, the Company generally estimates an appropriate allowance for credit losses based on delinquency status, the Company’s historical loss experience, estimated values of underlying collateral, and various economic factors. Once a loan has been classified as a TDR, it is generally assessed for impairment based on the present value of expected future cash flows discounted at the loan’s original effective interest rate considering available evidence. 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.

A loan that has been classified as a TDR remains so until the loan is liquidated through payoff or charge-off. The recognition of interest income on TDR loans reflects management’s best estimate of the amount that is reasonably assured of collection and is consistent with the estimate of future cash flows used in the impairment measurement. Any accrued but unpaid interest is fully reserved through the recognition of additional impairment, if not expected to be collected.

The table below presents the Company’s amortized cost of TDRs as of September 30, 2021 and December 31, 2020:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
	Retail Installment Contracts
Amortized Cost (including accrued interest) (a)	$	43,~~210~~980,~~211~~920	$	4,011,780
Impairment	(1,~~514~~297,~~994~~841)		(1,314,170)
Amortized cost including accrued interest, net of impairment	$	2,~~695~~683,~~217~~079	$	2,697,610

(a) As of ~~June~~September 30, 2021, this balance excludes $6056.52 million of collateral-dependent bankruptcy TDRs that have been written down by $~~14.~~8.9 million to fair value less cost to sell. As of December 31, 2020, this balance excludes $67.9 million of collateral-dependent bankruptcy TDRs that have been written down by $21.4 million to fair value less cost to sell.

A summary of the amortized cost of the Company’s delinquent TDRs at September 30, 2021 and December 31, 2020 is as follows:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
	Retail Installment Contracts
30-59 days past due	$	~~670~~744,~~680~~637	$	637,560
Delinquent balance over 59 days	~~308~~381,~~503~~840		344,776
Total delinquent TDRs	$	~~979~~1,~~183~~126,477	$	982,336

Average amortized cost and interest income recognized on TDR loans are as follows:

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Retail Installment Contracts

Average amortized cost (including accrued interest)

4,~~364~~142,~~132~~089

3,~~759~~960,~~022~~119

4,~~262~~203,~~180~~685

3,~~801~~802,~~801~~823

Interest income recognized

~~213~~212,~~835~~073

~~135~~165,~~768~~637

~~423~~635,~~115~~188

~~292~~457,~~006~~642

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	Retail Installment Contracts				Retail Installment Contracts
Amortized cost (including accrued interest) before TDR	$	204,035	$	905,143	$	1,106,179	$	1,082,358
Amortized cost (including accrued interest) after TDR (a)	204,671		920,850		1,112,578		1,098,453
Number of contracts (not in thousands)	11,100		45,340		55,291		55,166

(a) excluding collateral-dependent bankruptcy TDRs

A TDR is considered to be in default at charge-off. For retail installment contracts, charge-off is at the earlier of the date of repossession or 120 days past due. Loan restructurings accounted for as TDRs within the previous twelve months that subsequently defaulted during the three and six months ended June 30, 2021 and 2020 are summarized in

The following table summarizes the financial effects, excluding impacts related to credit loss allowance and impairment, of TDRs that occurred for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended				~~Six~~Nine Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	Retail Installment Contracts				Retail Installment Contracts
Amortized cost (including accrued interest) in TDRs that subsequently defaulted (a)`	$	82,476	$	31,534	$	192,655	$	100,868
Amortized cost (including accrued interest) before TDR	$	219,898	$	317,455	$	1,326,077	$	1,399,813
Number of contracts (not in thousands)	4,135		2,003		9,772		6,088
Amortized cost (including accrued interest) after TDR (a)	220,679		319,027		1,333,257		1,417,480
Number of contracts (not in thousands)	12,063		14,620		67,354		69,786

(a) excluding collateral-dependent bankruptcy TDRs

A TDR is considered to be in default at charge-off. For retail installment contracts, charge-off is at the earlier of the date of repossession or 120 days past due. Loan restructurings accounted for as TDRs within the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2021 and 2020 are summarized in the following table:



	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	Retail Installment Contracts				Retail Installment Contracts
Amortized cost (including accrued interest) in TDRs that subsequently defaulted (a)`	$	91,260	$	83,002	$	283,914	$	183,871
Number of contracts (not in thousands)	4,724		4,379		14,496		10,467

(a) For TDR modifications and TDR modifications that subsequently default, the allowance methodology remains unchanged; however, the transition rates of the TDR loans are adjusted to reflect the respective risks.

4. Leases (SC as Lessor)

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

For modified or extended leases, income continues to accrue during the extension period and remaining lease payments are recorded on a straight-line basis over the modified lease term.

Beginning in the second quarter of 2021, the Company agreed to provide SBNA with origination support services in connection with the processing, underwriting and purchase of vehicle leases, primarily from Stellantis dealers, that are funded and owned by SBNA. In addition, the Company has agreed to perform the servicing for any leases originated on SBNA's behalf. Refer to Note 15 – “Related Party Transactions" for additional information.

Operating Leases

Leased vehicles, net, which is comprised of leases originated under the MPLFA, consisted of the following as of September 30, 2021 and December 31, 2020:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
Leased vehicles	$	2120,~~085~~032,~~807~~832	$	22,056,063
Less: accumulated depreciation	(43,~~249~~920,~~968~~416)		(4,796,595)
Depreciated net capitalized cost	16,~~835~~112,~~839~~416		17,259,468
Manufacturer subvention payments, net of accretion	(~~813~~700,~~508~~783)		(934,381)
Origination fees and other costs	97117,~~720~~977		66,020
Net book value	$	1615,~~120~~529,~~051~~610	$	16,391,107

Remainder of 2021	$	1,564,223
2022	1,932,353
2023	1,151,719
2024	153,851
2025	8,519
Thereafter	813
Total	$	4,811,478

Finance Leases

	June 30, 2021		December 31, 2020
Gross investment in finance leases	$	32,881	$	34,461
Origination fees and other	296		289
Less: unearned income	(8,731)		(8,311)
Net investment in finance leases before allowance	24,446		26,439
Less: allowance for lease losses (a)	(3,718)		(3,999)
Net investment in finance leases	$	20,728	$	22,440

The following summarizes the maturity analysis of lease payments due to the Company, as lessor, under operating leases as of September 30, 2021:

Remainder of 2021	$	5910,~~224~~739
2022	92,~~545~~101,818
2023	81,~~017~~363,807
2024	5286,~~863~~598
2025	325,~~432~~093
Thereafter	~~800~~1,295
Total	$	324,~~881~~689,350

Finance Leases

Certain leases originated by the Company are accounted for as direct financing leases, as the contractual residual values are nominal amounts. Finance lease receivables, net consisted of the following as of September 30, 2021 and December 31, 2020:


	September 30, 2021		December 31, 2020
Gross investment in finance leases	$	33,498	$	34,461
Origination fees and other	283		289
Less: unearned income	(8,990)		(8,311)
Net investment in finance leases before allowance	24,791		26,439
Less: allowance for lease losses	(3,554)		(3,999)
Net investment in finance leases	$	21,237	$	22,440

The following summarizes the maturity analysis of lease payments due to the Company, as lessor, under finance leases as of September 30, 2021:



Remainder of 2021	$	2,688
2022	10,275
2023	8,547
2024	6,509
2025	4,054
Thereafter	1,425
Total	$	33,498

5. Other Assets

Other assets were comprised as follows:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
Vehicles (a)	$	~~304~~269,~~889~~627	$	311,557
Manufacturer subvention payments receivable (b)	3829,~~876~~361		57,996
Upfront fee (b)	5447,~~439~~015		69,286
Derivative assets at fair value (c)	1713,~~571~~314		4,740
Derivative - collateral	7723,~~494~~037		92,132
Operating leases (Right-of-use-assets)	4761,~~567~~590		46,441
Available-for-sale debt securities	90,~~642~~688		95,654
Held-to-maturity debt securities (d)	~~115~~101,~~736~~874		44,875
Equity securities not held for trading	32,~~157~~671		1,380
Prepaids	4435,~~946~~152		45,667
Accounts receivable	5228,~~853~~737		34,607
Federal and State tax receivable	176,~~396~~113		99,666
Other	4232,~~464~~418		68,725
Other assets	$	~~892~~811,~~030~~597	$	972,726

(a)Includes vehicles recovered through repossession as well as vehicles recovered due to lease terminations.

(b)These amounts relate to the MPLFA. The Company paid a $150,000 upfront fee upon the May 2013 inception of the MPLFA. The fee is being amortized into finance and other interest income over a ten-year term. In addition, in June 2019, in connection with the execution of an amendment to the MPLFA, the Company paid a $60,000 upfront fee to Stellantis N.~~V..~~ This fee is being amortized into finance and other interest income over the remaining term of the MPLFA.

(c)Derivative assets at fair value represent the gross amount of derivatives presented in the condensed consolidated financial statements. Refer to Note 9 - "Derivative Financial Instruments" to these Condensed Consolidated Financial Statements for the detail of these amounts.

(d)Held-to-maturity debt securities includes accrued interest as of ~~June~~September 30, 2021.

Operating Leases (SC as Lessee)

The Company has entered into various operating leases, primarily for office space. Operating leases are included within other assets as operating lease ROU assets and other liabilities within our condensed consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Most of our real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 15 years or more. The exercise of lease renewal options is at our sole discretion. The Company does not include any of the renewal options in the lease term as it is not reasonably certain that these options will be exercised.

Supplemental information relating to these operating leases is as follows:


	September 30, 2021			December 31, 2020
Operating leases-right of use assets	$	61,590		$	46,441
Other liabilities	77,854			64,927
Weighted average lease term	6.2			5.5
Weighted average discount rate	2.7		%	3.4		%

	June 30, 2021			December 31, 2020
Operating leases-right of use assets	$	47,567		$	46,441
Other liabilities	64,480			64,927
Weighted average lease term	4.7			5.5
Weighted average discount rate	3.2		%	3.4		%

Lease expense incurred totaled $3,084 and $3,479 for the three months ended September 30, 2021 and 2020, respectively, and $9,577 and $10,586 for the nine months ended September 30, 2021 and 2020, respectively and is included within “other operating costs” in the income statement. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Cash paid for amounts included in the measurement of operating lease liabilities was $12,863 and $12,947 during the nine months ended September 30, 2021 and 2020, respectively.

Lease expense incurred totaled $3,225 and $3,545 for the three months ended June 30, 2021 and 2020, respectively, and $6,492 and $7,107 for the six months ended June 30, 2021 and 2020, respectively and is included within “other operating costs” in the income statement. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Cash paid for amounts included in the measurement of operating lease liabilities was $8,631 and $8,582 during the six months ended June 30, 2021 and 2020, respectively. 22

The maturity of lease liabilities at September 30, 2021 are as follows:

	June 30, 2021
	September 30, 2021
2021	$	84,~~298~~078
2022	1617,~~236~~409
2023	1214,~~762~~343
2024	1214,~~701~~313
2025	1214,~~765~~397
Thereafter	618,~~925~~029
Total	$	6982,~~687~~569
Less: Interest	(54,~~207~~715)
Present value of lease liabilities	$	6477,~~480~~854

Available-for-sale and Held-to-maturity debt securities

Debt securities expected to be held for an indefinite period of time are classified as AFS and are carried at fair value, with temporary unrealized gains and losses reported as a component of accumulated other comprehensive income within stockholder's equity, net of estimated income taxes. These securities are used to satisfy collateral requirements for our derivative financial instruments.

Debt securities that the Company has the positive intent and ability to hold until maturity are classified as HTM securities. HTM securities are reported at cost and adjusted for payments, charge-offs, amortization of premium and accretion of discount. These securities are used to meet risk retention requirements under regulatory rules.

Realized gains and losses on sales of investment securities are recognized on the trade date and are determined using the specific identification method and are included in earnings within Investment gain (losses) on sale of securities. Unamortized premiums and discounts are recognized in interest income over the estimated life of the security using the interest method.

The following tables present the amortized cost, gross unrealized gains and losses and approximate fair values of debt securities available-for-sale and held-to-maturity debt securities:

June 30, 2021

September 30, 2021

Amortized cost (before unrealized gains / losses)

Gross Unrealized gain

Gross Unrealized loss

Fair value

Available-for-sale debt securities (US Treasury securities)

8889,~~989~~437

1,~~653~~251

—

90,~~642~~688

Held-to-maturity debt securities (Asset-Backed Notes)

~~115~~101,~~672~~815

~~642~~634

—

~~116~~102,~~314~~449

Contractual Maturities

The contractual maturities of available-for-sale and held-to-maturity debt instruments are summarized in the following table:

June 30, 2021

September 30, 2021

Available-for-sale debt securities

Held-to-maturity debt securities

Amortized cost

Fair value

Amortized cost

Fair value

Due within one year

5066,~~774~~924

5167,~~412~~650

—

Due after one year but within 5 years

3822,~~215~~513

3923,~~230~~038

5548,~~115~~200

5548,~~461~~491

Due after 5 year but within 10 years

—

6053,~~557~~615

6053,~~853~~958

Total

8889,~~989~~437

90,~~642~~688

~~115~~101,~~672~~815

~~116~~102,~~314~~449

There were no transfers of securities between available-for-sale and held-to-maturity periods ended ~~June~~September 30, 2021 or December 31, 2020.

The Company did not record an allowance for credit-related losses on available-for-sale and held-to-maturity securities at June 30, 2021 or December 31, 2020. As discussed in Part II, Item 8 – Financial Statements and Supplementary Data (Note 1) in the 2020 Annual Report on Form 10-K, there is no reserve for securities for which management has an expectation that nonpayment of the amortized cost basis is zero.23

The Company did not record an allowance for credit-related losses on available-for-sale and held-to-maturity securities at September 30, 2021 or December 31, 2020. As discussed in Part II, Item 8 – Financial Statements and Supplementary Data (Note 1) in the 2020 Annual Report on Form 10-K, there is no reserve for securities for which management has an expectation that nonpayment of the amortized cost basis is zero.

Other Investments

Other investments includes equity securities not held for trading. The Company generally retains 5% of the investments created in its off-balance sheet securitization to meet regulatory risk retention requirements. Equity securities are measured at fair value as of ~~June~~September 30, 2021 for $32,~~157~~671, with changes in fair value recognized in net income.

6. Variable Interest Entities

The Company transfers retail installment contracts and vehicle leases into newly formed Trusts that then issue one or more classes of notes payable backed by the collateral. The Company’s continuing involvement with these Trusts is in the form of servicing the assets and, generally, through holding residual interests in the Trusts. The Trusts are considered VIEs under GAAP and the Company may or may not consolidate these VIEs on the condensed consolidated balance sheets.

For further description of the Company’s securitization activities, involvement with VIEs and accounting policies regarding consolidation of VIEs, see Part II, Item 8 – Financial Statements and Supplementary Data (Note 7) in the 2020 Annual Report on Form 10-K.

On-balance sheet variable interest entities

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 the Company’s general credit were as follows:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
Assets
Restricted cash	$	1,~~977~~682,~~541~~654	$	1,737,021
Finance receivables held for sale, net	~~269~~113,~~168~~313		581,938
Finance receivables held for investment, net	21,~~773~~785,~~401~~308		22,572,549
Leased vehicles, net	1615,~~120~~529,~~051~~610		16,391,107
Various other assets	~~777~~706,~~437~~130		791,306
Total assets	$	4039,~~917~~817,~~598~~015	$	42,073,921
Liabilities
Notes payable	$	2930,~~589~~632,~~557~~558	$	31,700,709
Various other liabilities	23107,~~707~~743		84,922
Total liabilities	$	2930,~~613~~740,~~264~~301	$	31,785,631

23Certain amounts shown above are greater than the amounts shown in the corresponding line items in the accompanying condensed 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 GAAP.The Company retains servicing rights for receivables transferred to the Trusts and receives a monthly servicing fee on the outstanding principal balance. Supplemental fees, such as late charges, for servicing the receivables are reflected in fees, commissions and other income. As of September 30, 2021 and December 31, 2020, the Company was servicing $26,079,950 and $27,658,182, respectively, of gross retail installment contracts that had been transferred to consolidated Trusts. The remainder of the Company’s retail installment contracts remain unpledged.

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Assets securitized	$	7,238,608	$	3,887,075	$	11,361,659	$	10,562,806
Net proceeds from new securitizations (a)	$	5,990,485	$	2,932,117	$	9,576,609	$	6,808,647
Net proceeds from retained bonds	132,186		1,526		195,967		55,993
Cash received for servicing fees (b)	230,408		246,545		458,595		493,288
Net distributions from Trusts (b)	1,903,257		621,708		3,043,634		1,557,381
Total cash received from Trusts	$	8,256,336	$	3,801,896	$	13,274,805	$	8,915,309

A summary of the cash flows received from consolidated securitization Trusts during the three and nine months ended September 30, 2021 and 2020, is as follows:


	Three Months Ended				Nine Months Ended

	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020

Assets securitized	$	7,095,782	$	5,282,901	$	18,457,441	$	15,845,707

Net proceeds from new securitizations (a)	$	6,591,786	$	4,662,211	$	16,168,394	$	11,470,857
Net proceeds from retained bonds	—		1,293		195,967		57,286
Cash received for servicing fees (b)	228,194		242,245		686,789		735,533
Net distributions from Trusts (b)	1,391,970		1,173,276		4,435,605		2,730,657
Total cash received from Trusts	$	8,211,950	$	6,079,025	$	21,486,755	$	14,994,333

(a)Includes additional advances on existing securitizations.

(b)These amounts are not reflected in the accompanying condensed consolidated statements of cash flows because these cash flows are intra-company and eliminated in consolidation.

Off-balance sheet variable interest entities

	June 30, 2021		December 31, 2020
Related party SPAIN serviced securitizations	$	840,143	$	1,214,644
Third party SCART serviced securitizations	2,338,472		929,429
Third party CCAP serviced securitizations	46,561		82,713
Total serviced for others portfolio	$	3,225,176	$	2,226,786

During the nine months ended September 30, 2021 and 2020, the Company sold $1,891,278 and $1,148,587 respectively, of gross retail installment contracts to third party investors in off-balance sheet securitizations for a gain of $7,233 and a loss of $40,553, respectively. Gains and losses are recorded in investment gains, net, in the accompanying condensed consolidated statements of income.

As of September 30, 2021 and December 31, 2020, the Company was servicing $2,754,314 and $2,226,786, respectively, of gross retail installment contracts that have been sold in off-balance sheet securitizations and were subject to an optional clean-up call. The portfolio was comprised as follows:

	Three Months Ended				Six Months Ended
	September 30, 2021		December 31, 2020
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Related party SPAIN serviced securitizations	$	687,158	$	1,214,644
Receivables securitized (a)	$	—	$	512,286	$	1,891,278	$	512,286
Third party SCART serviced securitizations	2,067,156		929,429
Net proceeds from new securitizations	—		460,086		1,779,532		460,086
Third party CCAP serviced securitizations	—		82,713
Cash received for servicing fees	9,294		5,079		16,021		11,258
Total serviced for others portfolio	$	2,754,314	$	2,226,786
Total cash received from securitization trusts	9,294		465,165		$	1,795,553	$	471,344

Other than repurchases of sold assets due to standard representations and warranties, the Company has no exposure to loss as a result of its involvement with these VIEs.

A summary of the cash flows received from off-balance sheet securitization Trusts for the three and nine months ended September 30, 2021 and 2020, is as follows:



	Three Months Ended				Nine Months Ended

	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Receivables securitized (a)	$	—	$	636,301	$	1,891,278	$	1,148,587

Net proceeds from new securitizations	—		592,455		1,779,532		1,052,541
Cash received for servicing fees	8,041		6,598		24,061		17,856
Total cash received from securitization trusts	8,041		599,053		$	1,803,593	$	1,070,397

(a) Represents the unpaid principal balance at the time of original securitization.

Total borrowings and other debt obligations as of June 30, 2021 and December 31, 2020 consists of:
	June 30, 2021		December 31, 2020
Notes Payable — Facilities with Third Parties	$	761,045	$	4,159,955
Notes Payable — Secured Structured Financings	27,191,597		26,177,401
Notes Payable — Facilities with Santander and Related Subsidiaries (a)	10,250,000		10,801,318
	$	38,202,642	$	41,138,674

Notes Payable - Credit Facilities

	June 30, 2021
	Maturity Date(s)	Utilized Balance		Committed Amount		Effective Rate	Assets Pledged		Restricted Cash Pledged
Facilities with third parties:
Warehouse line	June 2023	$	—	$	500,000	—%	$	257,653	$	—
Warehouse line	March 2023	61,045		1,250,000		1.49%	642,823		1
Warehouse line	October 2022	—		1,500,000		—%	352,012		—
Warehouse line	October 2022	—		3,500,000		10.64%	356,412		—
Warehouse line	October 2022	—		500,000		—%	20,859		500
Warehouse line	October 2022	—		2,100,000		—%	464,045		64
Warehouse line	January 2023	700,000		1,000,000		1.29%	1,408,652		—
Warehouse line	November 2022	—		500,000		—%	326,272		—
Warehouse line	July 2022	—		900,000		—%	—		1,684
Total facilities with third parties		761,045		11,750,000			3,828,728		2,249
Facilities with Santander and related subsidiaries:
Promissory Note	December 2021	250,000		250,000		3.70%	—		—
Promissory Note	December 2022	250,000		250,000		3.95%	—		—
Promissory Note	December 2023	250,000		250,000		5.25%	—		—
Promissory Note	December 2022	250,000		250,000		5.00%	—		—
Promissory Note	May 2023	350,000		350,000		3.80%	—		—
Promissory Note	November 2022	400,000		400,000		3.00%	—		—
Promissory Note	April 2023	450,000		450,000		6.13%	—		—
Promissory Note	June 2022	500,000		500,000		3.30%	—		—
Promissory Note	July 2024	500,000		500,000		3.90%	—		—
Promissory Note	March 2022	650,000		650,000		4.20%	—		—
Promissory Note	August 2021	650,000		650,000		3.44%	—		—
Promissory Note	September 2023	750,000		750,000		3.28%	—		—
Promissory Note	May 2025	1,000,000		1,000,000		3.99%	—		—
Promissory Note	June 2022	2,000,000		2,000,000		1.34%	—		—
Promissory Note	September 2022	2,000,000		2,000,000		1.04%	—		—
Line of credit	July 2021	—		500,000		2.10%	—		—
Line of credit	March 2023	—		2,500,000		3.30%	—		—
Total facilities with Santander and related subsidiaries		10,250,000		13,250,000			—		—
Total revolving credit facilities		$	11,011,045	$	25,000,000		$	3,828,728	$	2,249

(a) In 2017, the Company entered into an interest rate swap to hedge the interest rate risk on this fixed rate debt. This derivative was designated as fair value hedge at inception. This derivative was later terminated and the unamortized fair value hedge adjustment as of June 30, 2021 and December 31, 2020 was zero and $1.3 million, respectively, the amortization of which reduced interest expense over the life of the fixed rate debt.

7. Debt

	December 31, 2020
Total borrowings and other debt obligations as of September 30, 2021 and December 31, 2020 consists of:
	Maturity Date(s)		Utilized Balance		Committed Amount		Effective Rate	Assets Pledged		Restricted Cash Pledged
	September 30, 2021		December 31, 2020
Facilities with third parties:
Notes Payable — Facilities with Third Parties	$	—	$	4,159,955
Warehouse line	August 2022		$	—	$	500,000	1.50%	$	159,348	$	—
Notes Payable — Secured Structured Financings	28,831,858		26,177,401
Warehouse line	March 2022		942,845		1,250,000		1.34%	1,621,206		1
Notes Payable — Facilities with Santander and Related Subsidiaries (a)	9,600,000		10,801,318
Warehouse line	October 2022		1,000,600		1,500,000		1.85%	639,875		—
	$	38,431,858	$	41,138,674
Warehouse line	October 2022		441,143		3,500,000		3.45%	2,057,758		—
Warehouse line	October 2022		168,300		500,000		3.07%	243,649		1,201
Warehouse line	October 2022		845,800		2,100,000		3.29%	1,156,885		—
Warehouse line	January 2022		415,700		1,000,000		1.81%	595,518		—
Warehouse line	November 2022		177,600		500,000		1.18%	371,959		—
Warehouse line	July 2022		—		900,000		1.46%	—		1,684
Repurchase facility	January 2021		167,967		167,967		1.64%	217,200		—
Total facilities with third parties			4,159,955		11,917,967			7,063,398		2,886
Facilities with Santander and related subsidiaries:
Promissory Note	December 2021		250,000		250,000		3.70%	—		—
Promissory Note	December 2022		250,000		250,000		3.95%	—		—
Promissory Note	December 2023		250,000		250,000		5.25%	—		—
Promissory Note	December 2022		250,000		250,000		5.00%	—		—
Promissory Note	May 2021		250,000		250,000		2.25%	—		—
Promissory Note	March 2021		300,000		300,000		3.95%	—		—
Promissory Note	May 2023		350,000		350,000		3.80%	—		—
Promissory Note	November 2022		400,000		400,000		3.00%	—		—
Promissory Note	April 2023		450,000		450,000		6.13%	—		—
Promissory Note	June 2022		500,000		500,000		3.30%	—		—
Promissory Note	July 2024		500,000		500,000		3.90%	—		—
Promissory Note	March 2022		650,000		650,000		4.20%	—		—
Promissory Note	August 2021		650,000		650,000		3.44%	—		—
Promissory Note	September 2023		750,000		750,000		3.27%	—		—
Promissory Note	May 2025		1,000,000		1,000,000		3.99%	—		—
Promissory Note	June 2022		2,000,000		2,000,000		1.40%	—		—
Promissory Note	September 2022		2,000,000		2,000,000		1.04%	—		—
Line of credit	July 2021		—		500,000		2.19%	—		—
Line of credit	March 2022		—		2,500,000		3.34%	—		—
Total facilities with Santander and related subsidiaries			10,800,000		13,800,000			—		—
Total revolving credit facilities			14,959,955		25,717,967			7,063,398		2,886

Notes Payable - Credit Facilities

The following table presents information regarding the Company’s credit facilities as of September 30, 2021 and December 31, 2020:


	September 30, 2021
	Maturity Date(s)	Utilized Balance		Committed Amount		Effective Rate	Assets Pledged		Restricted Cash Pledged
Facilities with third parties:
Warehouse line	June 2023	$	—	$	500,000	—%	$	367,404	$	—
Warehouse line	March 2023	—		1,250,000		—%	246,480		1
Warehouse line	October 2022	—		1,500,000		—%	121,046		—
Warehouse line	October 2022	—		3,500,000		—%	133,429		—
Warehouse line	October 2022	—		500,000		—%	13,409		500
Warehouse line	October 2022	—		2,100,000		—%	175,624		64
Warehouse line	January 2023	—		1,000,000		—%	477,840		—
Warehouse line	November 2022	—		500,000		—%	279,703		—
Warehouse line	July 2022	—		900,000		—%	—		—
Total facilities with third parties		—		11,750,000			1,814,935		565
Facilities with Santander and related subsidiaries:
Promissory Note	December 2021	250,000		250,000		3.58%	—		—
Promissory Note	December 2022	250,000		250,000		3.82%	—		—
Promissory Note	December 2023	250,000		250,000		5.07%	—		—
Promissory Note	December 2022	250,000		250,000		4.83%	—		—
Promissory Note	May 2023	350,000		350,000		3.67%	—		—
Promissory Note	November 2022	400,000		400,000		2.90%	—		—
Promissory Note	April 2023	450,000		450,000		5.92%	—		—
Promissory Note	June 2022	500,000		500,000		3.19%	—		—
Promissory Note	July 2024	500,000		500,000		3.77%	—		—
Promissory Note	March 2022	650,000		650,000		4.06%	—		—

Promissory Note	September 2023	750,000		750,000		3.17%	—		—
Promissory Note	May 2025	1,000,000		1,000,000		3.86%	—		—
Promissory Note	June 2022	2,000,000		2,000,000		2.03%	—		—
Promissory Note	September 2022	2,000,000		2,000,000		1.01%	—		—
Line of credit	July 2024	—		500,000		2.08%	—		—
Line of credit	March 2023	—		2,500,000		3.28%	—		—
Total facilities with Santander and related subsidiaries		9,600,000		12,600,000			—		—
Total revolving credit facilities		$	9,600,000	$	24,350,000		$	1,814,935	$	565

(a) In 2017, the Company entered into an interest rate swap to hedge the interest rate risk on this fixed rate debt. This derivative was designated as fair value hedge at inception. This derivative was later terminated and the unamortized fair value hedge adjustment as of September 30, 2021 and December 31, 2020 was zero and $1.3 million, respectively, the amortization of which reduced interest expense over the life of the fixed rate debt.


	December 31, 2020
	Maturity Date(s)	Utilized Balance		Committed Amount		Effective Rate	Assets Pledged		Restricted Cash Pledged
Facilities with third parties:
Warehouse line	August 2022	$	—	$	500,000	1.50%	$	159,348	$	—
Warehouse line	March 2022	942,845		1,250,000		1.34%	1,621,206		1
Warehouse line	October 2022	1,000,600		1,500,000		1.85%	639,875		—
Warehouse line	October 2022	441,143		3,500,000		3.45%	2,057,758		—
Warehouse line	October 2022	168,300		500,000		3.07%	243,649		1,201
Warehouse line	October 2022	845,800		2,100,000		3.29%	1,156,885		—
Warehouse line	January 2022	415,700		1,000,000		1.81%	595,518		—
Warehouse line	November 2022	177,600		500,000		1.18%	371,959		—
Warehouse line	July 2022	—		900,000		1.46%	—		1,684
Repurchase facility	January 2021	167,967		167,967		1.64%	217,200		—

Total facilities with third parties		4,159,955		11,917,967			7,063,398		2,886
Facilities with Santander and related subsidiaries:
Promissory Note	December 2021	250,000		250,000		3.70%	—		—
Promissory Note	December 2022	250,000		250,000		3.95%	—		—
Promissory Note	December 2023	250,000		250,000		5.25%	—		—
Promissory Note	December 2022	250,000		250,000		5.00%	—		—
Promissory Note	May 2021	250,000		250,000		2.25%	—		—
Promissory Note	March 2021	300,000		300,000		3.95%	—		—
Promissory Note	May 2023	350,000		350,000		3.80%	—		—
Promissory Note	November 2022	400,000		400,000		3.00%	—		—
Promissory Note	April 2023	450,000		450,000		6.13%	—		—
Promissory Note	June 2022	500,000		500,000		3.30%	—		—
Promissory Note	July 2024	500,000		500,000		3.90%	—		—
Promissory Note	March 2022	650,000		650,000		4.20%	—		—
Promissory Note	August 2021	650,000		650,000		3.44%	—		—
Promissory Note	September 2023	750,000		750,000		3.27%	—		—
Promissory Note	May 2025	1,000,000		1,000,000		3.99%	—		—
Promissory Note	June 2022	2,000,000		2,000,000		1.40%	—		—
Promissory Note	September 2022	2,000,000		2,000,000		1.04%	—		—
Line of credit	July 2021	—		500,000		2.08%	—		—
Line of credit	March 2022	—		2,500,000		3.28%	—		—
Total facilities with Santander and related subsidiaries		10,800,000		13,800,000			—		—
Total revolving credit facilities		14,959,955		25,717,967			7,063,398		2,886

Notes Payable - Facilities with Third Parties

The warehouse lines and repurchase facilities are fully collateralized by a designated portion of the Company’s retail installment contracts (Note 2), leased vehicles (Note 4), securitization notes payables and residuals retained by the Company.

Facilities with Santander and Related Subsidiaries

Lines of Credit

SHUSA provides the Company with $500,000 of committed revolving credit and $2,500,000 of contingent liquidity that can be drawn on an unsecured basis.

Promissory Notes

SHUSA provides the Company with $65,~~250~~600,000 of unsecured promissory notes.

Santander provides the Company with $4,000,000 of unsecured promissory notes.

Notes Payable - Secured Structured Financings

The following table presents information regarding secured structured financings as of September 30, 2021 and December 31, 2020:

June 30, 2021

September 30, 2021

Estimated Maturity Date(s) at Issuance

Balance

Initial Note Amounts Issued (d)

Initial Weighted Average Interest Rate

Collateral (b)

Restricted Cash

2017 Securitizations

July 2022 - September 2024

~~476~~118,~~322~~293

53,~~137~~889,~~510~~470

1.35% - 2.52%

~~829~~564,~~908~~070

~~125~~90,~~501~~895

2018 Securitizations

February 2024 - April 2026

1,~~823~~606,~~831~~743

11,000,280

2.41% - 3.42%

2,~~940~~510,~~950~~723

~~321~~264,~~561~~577

2019 Securitizations

May 2024 - February 2027

54,~~095~~249,~~697~~645

11,924,720

2.08% - 3.34%

65,~~707~~788,~~597~~406

~~565~~466,~~785~~789

2020 Securitizations

November 2024 - May 2028

65,~~506~~629,~~638~~703

10,028,425

0.60% - 2.73%

87,~~269~~256,~~593~~352

~~609~~364,~~700~~410

2021 Securitizations

November 2025 - ~~January~~March 2029

813,~~136~~052,~~579~~747

814,~~796~~986,~~820~~600

0.5048% - 0.65%

915,~~437~~283,~~490~~626

~~336~~479,~~411~~199

Public Securitizations (a)

2224,~~039~~657,~~067~~131

4651,~~887~~829,~~755~~495

2831,~~185~~403,~~538~~177

1,~~958~~665,~~958~~870

2013 Private issuances

July 2024 - September 2024

~~340~~230,~~578~~404

1,537,025

1.28%

1,~~248~~015,~~507~~024

751

2018 Private issuances

June 2022 - April 2024

1,~~738~~452,~~648~~711

2,200,002

2.42% - 3.17%

2,~~458~~111,~~541~~645

—

2019 Private issuance

September 2022 - November 2026

1,~~990~~517,~~776~~437

3,524,536

2.45% - 3.90%

2,~~818~~300,~~356~~073

10,~~682~~566

2020 Private issuance

April 2024 - December 2027

1974,~~082,528~~175

1,500,000

1.29% - 2.68%

1,~~488~~330,~~621~~694

4,902

Privately issued amortizing notes (c)

54,~~152~~174,~~530~~727

8,761,563

86,~~014~~757,~~025~~436

16,~~335~~219

Total secured structured financings

2728,~~191~~831,~~597~~858

5560,~~649~~591,~~318~~058

3638,~~199~~160,~~563~~613

1,~~975~~682,~~293~~089

(a)Securitizations executed under Rule 144A of the Securities Act are included within this balance.

(b)Secured structured financings may be collateralized by the Company’s collateral overages of other issuances.

(c)All privately issued amortizing notes issued in 2014 through 2017 were paid in full.

(d)Excludes securitizations that no longer have outstanding debt and excludes any incremental borrowings.

2728


	December 31, 2020
	Estimated Maturity Date(s) at Issuance	Balance		Initial Note Amounts Issued		Initial Weighted Average Interest Rate	Collateral		Restricted Cash
2016 Securitizations	August 2022 - March 2024	$	259,078	$	2,519,810	1.63% - 2.34%	$	354,985	$	85,041
2017 Securitizations	July 2022 - September 2024	1,049,867		8,262,940		1.35% - 2.52%	1,661,845		211,606
2018 Securitizations	May 2022 - April 2026	2,723,099		12,039,840		2.41% - 3.42%	4,130,936		376,246
2019 Securitizations	May 2024 - February 2027	6,653,226		11,924,720		2.08% - 3.34%	8,582,241		488,546
2020 Securitizations	November 2024 - May 2028	8,256,890		10,028,425		0.60% - 2.73%	10,292,570		548,912
Public Securitizations		18,942,160		44,775,735			25,022,577		1,710,351
2013 Private issuances	July 2024 - September 2024	777,210		1,537,025		1.28%	1,843,443		751
2018 Private issuances	June 2022 - April 2024	2,768,145		4,186,002		2.42%- 3.53%	4,223,567		7,675
2019 Private issuance	September 2022 - November 2026	2,584,974		3,524,536		2.45% - 3.90%	3,632,833		10,457
2020 Private issuance	April 2024 - December 2027	1,104,912		1,500,000		1.29% - 2.68%	1,532,280		4,902
Privately issued amortizing notes		7,235,241		10,747,563			11,232,123		23,785
Total secured structured financings		$	26,177,401	$	55,523,298		$	36,254,700	$	1,734,136

Most of the Company’s secured structured financings are in the form of public, SEC-registered securitizations. The Company also executes private securitizations under Rule 144A of the Securities Act and periodically issues private term amortizing notes, which are structured similarly to securitizations but are acquired by banks and conduits. The Company’s securitizations and private issuances are collateralized by vehicle retail installment contracts and loans or leases. As of ~~June~~September 30, 2021 and December 31, 2020, the Company had private issuances of notes backed by vehicle leases totaling $86.06 billion and $8.7 billion, respectively.

Unamortized debt issuance costs are amortized as interest expense over the terms of the related notes payable using the effective interest method and are classified as a discount to the related recorded debt balance. ~~Amortized~~Amortization of debt issuance costs were $513,~~851~~213 and $810,~~683~~265 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and $2337,~~887~~100 and $1828,~~036~~301 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. For securitizations, the term takes into consideration the expected execution of the contractual call option, if applicable. Amortization of premium or accretion of discount on notes payable is also included in interest expense using the effective interest method over the estimated remaining life of the notes. Total interest expense on secured structured financings for the three months ended ~~June~~September 30, 2021 and 2020 was $~~116~~103,~~143~~511 and $~~173~~150,~~069~~734, respectively, and for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was $~~238~~342,~~657~~168 and $~~371~~522,~~532~~266, respectively.

8. Shareholders’ Equity

In August, the Company and SHUSA entered into a definitive agreement whereby SHUSA will acquire the remaining shares of the Company for $41.50 per share in cash, which represents a total equity value of $12.7 billion. Please refer to Note 1 - “Description of Business, Basis of Presentation, and Accounting Policies” to these Condensed Consolidated Financial Statements for additional information related to the agreement.

Share Repurchases

In June 2019, the Company announced that the Board had authorized 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. During the three months ended March 31, 2020, the Company purchased shares of its common stock through a modified Dutch Auction Tender Offer, and extended the share repurchase program through the end of the third quarter of 2020.

On July 31, 2020, the Company announced that SHUSA’s request for certain exceptions to the Federal Reserve Board’s interim policy (the “Interim Policy”), prohibiting share repurchases (other than repurchases relating to issuances of common stock under employee stock ownership plans) and limiting dividends paid by certain CCAR institutions to the average trailing four quarters of net income, had been approved. Such exception approval permitted the Company to continue its share repurchase program through the end of the third quarter of 2020. On August 10, 2020, the Company announced that it had substantially exhausted the amount of shares the Company was permitted to 29

28On July 31, 2020, the Company announced that SHUSA’s request for certain exceptions to the Federal Reserve Board’s interim policy (the “Interim Policy”), prohibiting share repurchases (other than repurchases relating to issuances of common stock under employee stock ownership plans) and limiting dividends paid by certain CCAR institutions to the average trailing four quarters of net income, had been approved. Such exception approval permitted the Company to continue its share repurchase program through the end of the third quarter of 2020. On August 10, 2020, the Company announced that it had substantially exhausted the amount of shares the Company was permitted to repurchase under the exception approval and that the Company expected to repurchase an immaterial number of shares remaining under the exception approval. After substantially exhausting its share repurchase authorization on August 10, 2020, and through the end of the second quarter of 2021, the Company was only permitted to repurchase shares of the Company’s common stock equal to the amount of share issuances related to the Company’s expensed employee compensation. The Company does not presently have permission to repurchase any shares of the Company’s common stock.

Please find below the details of the Company's tender offer and other share repurchase programs for the three and nine months ended September 30, 2021 and 2020:

repurchase under the exception approval and that the Company expected to repurchase an immaterial number of shares remaining under the exception approval.


	Three Months Ended				Nine Months Ended

	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Tender offer (a):
Number of shares purchased	—		—		—		17,514,707
Average price per share	$	—	$	—	$	—	$	26.00
Cost of shares purchased (b)	$	—	$	—	$	—	$	455,382

Other share repurchases:
Number of shares purchased	—		10,198,800		357,747		15,956,561
Average price per share	$	—	$	21.91	$	26.46	$	20.00
Cost of shares purchased (b)	$	—	$	223,485	$	9,468	$	319,075

Total number of shares purchased	—		10,198,800		357,747		33,471,268
Average price per share	$	—	$	21.91	$	26.46	$	23.14
Total cost of shares purchased (b)	$	—	$	223,485	$	9,468	$	774,457

Subsequently, the Federal Reserve Board extended the Interim Policy through the second quarter of 2021. As a result of the extension of the Interim Policy, the Company, consistent with the Interim Policy, could repurchase only a number of shares of the Company’s common stock equal to the amount of share issuances related to the Company’s expensed employee compensation through the second quarter of 2021.

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Tender offer (a):
Number of shares purchased	—		—		—		17,514,707
Average price per share	$	—	$	—	$	—	$	26.00
Cost of shares purchased (b)	$	—	$	—	$	—	$	455,382
Other share repurchases:
Number of shares purchased	—		4,911,300		357,747		5,757,761
Average price per share	$	—	$	17.08	$	26.46	$	16.60
Cost of shares purchased (b)	$	—	$	83,890	$	9,468	$	95,590
Total number of shares purchased	—		4,911,300		357,747		23,272,468
Average price per share	$	—	$	17.08	$	26.46	$	23.67
Total cost of shares purchased (b)	$	—	$	83,890	$	9,468	$	550,972

(a) During the three months ended March 31, 2020, the Company purchased shares of its common stock through a modified Dutch Auction Tender Offer.

(b) Cost of shares exclude commissions

Refer to Part II Item 2 - "Unregistered Sales of Equity Securities and Use of Proceeds" below section for additional details on share repurchases.

Treasury Stock

The Company had 57,425,382 and 57,067,635 shares of treasury stock outstanding, with a cost of $1,311,339 and $1,301,864 as of ~~June~~September 30, 2021 and December 31, 2020, respectively. No shares were withheld to cover income taxes related to stock issued in connection with employee incentive compensation plans for the ~~six~~nine months ended ~~June~~September 30, 2021. The value of the treasury stock is 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 three and nine months ended September 30, 2021 and 2020 is as follows:

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Beginning balance, unrealized gains (losses)

(4136,~~818~~855)

(63,~~655~~705)

(50,566)

(26,693)

Other comprehensive income (loss) before reclassifications (gross)

~~(781)~~414

~~(5,722)~~94

2,~~189~~603

(43,~~306~~212)

Amounts (gross) reclassified out of accumulated other comprehensive income (loss)

5,~~744~~247

56,~~672~~729

1116,~~522~~769

613,~~294~~023

Ending balance, unrealized gains (losses)

(3631,~~855~~194)

(6356,~~705~~882)

(3631,~~855~~194)

(6356,~~705~~882)

2930

Amounts (gross) reclassified out of accumulated other comprehensive income (loss) during the three and nine months ended September 30, 2021 and 2020 consist of the following:

Three Months Ended

~~Six~~Nine Months Ended

Income statement line item

Reclassification

~~June~~September 30, 2021

~~June~~September 30, 2020

~~June~~September 30, 2021

~~June~~September 30, 2020

Cash flow hedges

76,~~650~~946

78,~~497~~939

1522,~~308~~254

817,~~321~~260

Interest expense

Tax benefit

(1,~~906~~699)

(12,~~825~~210)

(35,~~786~~485)

(24,~~027~~237)

Net of tax

5,~~744~~247

56,~~672~~729

1116,~~522~~769

613,~~294~~023

Dividends

The Company paid a cash dividend of $0.22 per share of common stock to shareholders in ~~May~~August 2021. ~~Further,~~SHUSA ~~the~~has ~~Company~~requested ~~has~~regulatory ~~declared~~approval ato ~~cash~~authorize ~~dividend~~the ofCompany’s ~~$0.22~~Board ~~per~~of ~~share,~~Directors to beconsider ~~paid~~declaring ona ~~August 19,~~dividend ~~2021,~~in tothe ~~shareholders~~fourth ofquarter. ~~record~~To asdate, ofapproval ~~the~~has ~~close~~not ofbeen ~~business on August 9, 2021~~received.

9. Derivative Financial Instruments

The Company uses derivative financial instruments such as interest rate swaps, interest rate caps and the corresponding options written in order to ~~offset the interest rate caps to~~ manage the Company’s exposure to changing interest rates. The Company uses both derivatives that qualify for hedge accounting treatment and economic hedges.

The underlying notional amounts of these derivative financial instruments at September 30, 2021 and December 31, 2020, are as follows:

	June 30, 2021						December 31, 2020
	September 30, 2021						December 31, 2020
	Notional		Asset		Liability		Notional		Asset		Liability
Interest rate swap agreements designated as cash flow hedges	$	~~2,150,000~~—	$	~~704~~—	$	~~(52,065)~~—	$	2,450,000	$	123	$	(70,589)
Interest rate swap agreements not designated as hedges	250,000		—		(98,~~615~~085)		250,000		—		(12,934)
Interest rate cap agreements	87,~~640~~649,~~189~~971		1613,~~867~~314		—		10,199,134		4,617		—
Options for interest rate cap agreements	87,~~640~~649,~~189~~971		—		(1613,~~867~~314)		10,199,134		—		(4,617)

The aggregate fair value of the interest rate swap agreements is included on the Company’s consolidated balance sheets in other assets and other liabilities, as appropriate. The aggregate fair value of interest rate cap agreements are included in other assets and the related options in other liabilities on the Company’s consolidated balance sheets. See Note 10 - “Fair Value of Financial Instruments” to these Condensed Consolidated Financial Statements for additional disclosure of fair value and balance sheet location of the Company’s derivative financial instruments.

The Company enters into legally enforceable master netting agreements that reduce risk by permitting netting of transactions, such as derivatives and collateral posting, with the same counterparty on the occurrence of certain events. A master netting agreement allows two counterparties the ability to net-settle amounts under all contracts, including any related collateral posted, through a single payment. The right to offset and certain terms regarding the collateral process, such as valuation, credit events and settlement, are contained in ISDA master agreements. The Company has elected to present derivative balances on a gross basis even if the derivative is subject to a legally enforceable master netting (ISDA) agreement. Collateral that is received or pledged for these transactions is disclosed within the “Gross Amounts Not Offset in the Consolidated Balance Sheet” section of the tables below. Information on the offsetting of derivative assets and derivative liabilities due to the right of offset was as follows, as of ~~June~~September 30, 2021 and December 31, 2020:

3031

	Gross Amounts Not Offset in theConsolidated Balance Sheet
	Assets Presented in the Consolidated Balance Sheet		CollateralReceived (a)		NetAmount
June 30, 2021
September 30, 2021
Interest rate swaps - third party (b)	$	704	$	(704)	$	—
Interest rate caps - Santander and affiliates	$	2,334	$	(2,334)	$	—
Interest rate caps - Santander and affiliates	$	3,213	$	(3,213)	$	—
Interest rate caps - third party	10,980		(10,980)		—
Interest rate caps - third party	13,654		(13,654)		—
Total derivatives subject to a master netting arrangement or similar arrangement	13,314		(13,314)		—
Total derivatives subject to a master netting arrangement or similar arrangement	17,571		(17,571)		—
Total derivatives not subject to a master netting arrangement or similar arrangement	—		—		—
Total derivative assets	$	1713,~~571~~314	$	(1713,~~571~~314)	$	—
Total financial assets	$	1713,~~571~~314	$	(1713,~~571~~314)	$	—
December 31, 2020
Interest rate swaps - third party (b)	$	123	$	(123)	$	—
Interest rate caps - Santander and affiliates	463		(463)		—
Interest rate caps - third party	4,154		(4,154)		—
Total derivatives subject to a master netting arrangement or similar arrangement	4,740		(4,740)		—
Total derivatives not subject to a master netting arrangement or similar arrangement	—		—		—
Total derivative assets	$	4,740	$	(4,740)	$	—
Total financial assets	$	4,740	$	(4,740)	$	—

(a) Collateral received includes cash, cash equivalents, initial margin and other financial instruments. Cash collateral received is reported in Other liabilities in the consolidated balance sheet. Financial instruments that are pledged to the Company are not reflected in the accompanying balance sheet since the Company does not control or have the ability of rehypothecation of these instruments. In certain instances, the counter party is over-collateralized since the actual amount of collateral received exceeds the associated financial asset. As a result, the actual amount of collateral received that is reported may be greater than the amount shown in the table above.

(b) Includes derivative instruments originally transacted with Santander and affiliates and subsequently amended to reflect clearing with central clearing counterparties.

	Gross Amounts Not Offset in the Consolidated Balance Sheet
	Liabilities Presented in the Consolidated Balance Sheet		CollateralPledged (a)		NetAmount
June 30, 2021
September 30, 2021
Interest rate swaps - third party (b)	$	618,~~680~~085	$	(618,~~680~~085)	$	—
Interest rate caps - Santander and affiliates	32,~~213~~334		(32,~~050~~334)		~~163~~—
Interest rate caps - third party	1310,~~654~~980		(64,~~153~~885)		76,~~501~~095
Total derivatives subject to a master netting arrangement or similar arrangement	7821,~~547~~399		(7015,~~883~~304)		76,~~664~~095
Total derivatives not subject to a master netting arrangement or similar arrangement	—		—		—
Total derivative liabilities	$	7821,~~547~~399	$	(7015,~~883~~304)	$	76,~~664~~095
Total financial liabilities	$	7821,~~547~~399	$	(7015,~~883~~304)	$	76,~~664~~095
December 31, 2020
Interest rate swaps - third party	$	83,523	$	(83,523)	$	—
Interest rate caps - Santander and affiliates	463		(463)		—
Interest rate caps - third party	4,154		(4,154)		—
Total derivatives subject to a master netting arrangement or similar arrangement	88,140		(88,140)		—
Total derivatives not subject to a master netting arrangement or similar arrangement	—		—		—
Total derivative liabilities	$	88,140	$	(88,140)	$	—
Total financial liabilities	$	88,140	$	(88,140)	$	—

(a) Collateral pledged includes cash, cash equivalents, initial margin and other financial instruments. These balances are reported in Other assets in the consolidated balance sheet. In certain instances, the Company is over-collateralized since the actual amount of collateral pledged exceeds the associated financial liability. As a result, the actual amount of collateral pledged that is reported in Other assets may be greater than the amount shown in the table above.

(b) Includes derivative instruments originally transacted with Santander and affiliates and subsequently amended to reflect clearing with central clearing counterparties.

~~The~~During ~~gross~~2018, ~~gains~~2019 ~~(losses)~~and ~~reclassified~~2020, ~~from~~the ~~accumulated~~Company ~~other~~entered ~~comprehensive~~into ~~income~~interest ~~(loss)~~rate toswap ~~net~~agreements ~~income,~~with ~~are~~an ~~included~~aggregate asnotional ~~components~~amount of ~~interest~~$2.2 ~~expense~~billion. The ~~impacts~~interest onrate swaps were to be used to hedge the ~~consolidated~~Company’s ~~statements~~variable ofrate ~~income~~debt and ~~comprehensive~~had ~~income~~maturity dates ranging from two to five years. During the third quarter of 2021, the Company de-designated the hedge

3132

	Three Months Ended June 30, 2021
	Recognized in Earnings		Gross Gains (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)		Gross amount Reclassified From Accumulated Other Comprehensive Income to Interest Expense
Interest rate swap agreements designated as cash flow hedges	$	—	$	(694)	$	(7,650)
Derivative instruments not designated as hedges
Losses (Gains) recognized in interest expenses	$	214

relationships and terminated the swaps resulting in a fair value adjustment of $6.5 million recorded as a reduction to interest expense. Amounts previously recorded in accumulated other comprehensive income/loss related to these interest rate swaps, totaling $50.6 million, are being reclassified into earnings over the term as the previously hedged cash flows impact earnings. For the terminated swaps, the Company reclassified $7.9 million previously recorded in accumulated other comprehensive income/loss into interest expense during the quarter ending September 30, 2021.

The gross gains (losses) reclassified from accumulated other comprehensive income (loss) to net income, are included as components of interest expense. The impacts on the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended June 30, 2020

Three Months Ended September 30, 2021

Recognized in Earnings

Gross Gains (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)

Gross amount Reclassified From Accumulated Other Comprehensive Income to Interest Expense

Interest rate swap agreements designated as cash flow hedges

—

(71,~~275)~~023

(76,~~497~~946)

Derivative instruments not designated as hedges

Derivative instruments not designated as hedges:

Losses (Gains) recognized in interest expenses

~~1,036~~143

Six Months Ended June 30, 2021

Three Months Ended September 30, 2020

Recognized in Earnings

Gross Gains (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)

Gross amount Reclassified From Accumulated Other Comprehensive Income to Interest Expense

Interest rate swap agreements designated as cash flow hedges

—

~~3,664~~256

(158,~~308~~939)

Derivative instruments not designated as hedges

Derivative instruments not designated as hedges:

Losses (Gains) recognized in interest expenses

~~(30)~~567

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021

Recognized in Earnings

Gross Gains (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)

Gross amount Reclassified From Accumulated Other Comprehensive Income to Interest Expense

Interest rate swap agreements designated as cash flow hedges

—

~~(59~~4,~~661)~~687

(822,~~321~~254)

Derivative instruments not designated as hedges

Derivative instruments not designated as hedges:

Losses (Gains) recognized in interest expenses

~~10,207~~113

The Company estimates that approximately $27,376 of unrealized gains included in accumulated other comprehensive income (loss) will be reclassified to interest expense within the next twelve months.


	Nine Months Ended September 30, 2020
	Recognized in Earnings		Gross Gains (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)		Gross amount Reclassified From Accumulated Other Comprehensive Income to Interest Expense
Interest rate swap agreements designated as cash flow hedges	$	—	$	(59,405)	$	(17,260)





Derivative instruments not designated as hedges:
Losses (Gains) recognized in interest expenses	$	10,774

The Company estimates that approximately $24,259 of unrealized gains included in accumulated other comprehensive income (loss) will be reclassified to interest expense within the next twelve months.

10. 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 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.

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 or not readily observable for the asset or liability and are used to measure fair value to the extent relevant observable inputs are not available.

Financial Instruments Measured At Fair Value on a Recurring Basis

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020, and the level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Balance at ~~June~~September 30, 2021		Level 1		Level 2		Level 3		Balance at December 31, 2020
Other assets:
Trading interest rate caps (a)	$	—	$	1613,~~867~~314	$	—	$	1613,~~867~~314	$	—	$	4,617	$	—	$	4,617
Cash flow hedging interest rate swaps (a)	—		~~704~~—		—		$	~~704~~—	—		123		—		$	123
Available-for-sale-debt securities (b)	—		90,~~642~~688		—		$	90,~~642~~688	—		95,654		—		$	95,654
Retail installment contracts (c)(d)	—		—3,774		2,~~841~~396		$	26,~~841~~170	—		—		5,614		$	5,614
Other liabilities:
Trading options for interest rate caps (a)	—		1613,~~867~~314		—		$	1613,~~867~~314	—		4,617		—		$	4,617
Cash flow hedging interest rate swaps (a)	—		~~52,065~~—		—		$	~~52,065~~—	—		70,589		—		$	70,589
Trading interest rate swaps (a)	—		98,~~615~~085		—		$	98,~~615~~085	—		12,934		—		$	12,934

(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 9).

(b)The Company's AFS 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 its securities are therefore, classified as Level 2.

(c)The fair values of the retail installment contracts are estimated using a DCF model and are classified as Level 3. As of September 30, 2021, the Company had used the most recent purchase price as the fair value for certain loans and hence classified those retail installment contracts as Level 2. 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 ~~June~~September 30, 2021 and December 31, 2020, is $~~343~~541 and $1,129, respectively.

Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the changes in retail installment contracts held for investment balances classified as Level 3 balances for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance — beginning of year	$	32,~~965~~841	$	1510,~~307~~585	$	5,614	$	4,719
Additions / issuances	—1,171		—		—1,171		2,512
Transfer from level 2 (a)	—		—		—		17,634
Net collection activities	(1,~~124~~616)		(42,~~764~~410)		(24,~~773~~389)		(1416,~~444~~854)
Gains recognized in earnings	—		4273		—		~~164~~237
Balance — end of year	$	2,~~841~~396	$	108,~~585~~248	$	2,~~841~~396	$	108,~~585~~248

(a) The Company transferred retail installment contracts from Level 2 to Level 3 during the three months ended March 31, 2020 because the fair value for these assets could not be determined by using readily observable inputs at March 31, 2020. There were no other material transfers in or out of Level 3 during the three months ended ~~June~~September 30, 2020 and during the three and ~~six~~nine months ended ~~June~~September 30, 2021.

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 September 30, 2021 and December 31, 2020, respectively:


	Nine Months Ended September 30, 2021				Year Ended December 31, 2020
	Total		Lower of cost or fair value expense		Total		Lower of cost or fair value expense
Other assets — vehicles (a)	$	269,627	$	—	$	311,557	$	—
Personal loans held for sale (b)	—		—		893,479		355,136
Retail installment contracts held for sale (c)	359,561		—		674,048		$	7,385
Auto loans impaired due to bankruptcy (d)	204,594		—		191,785		—

	Six Months Ended June 30, 2021				Year Ended December 31, 2020
	Total		Lower of cost or fair value expense		Total		Lower of cost or fair value expense
Other assets — vehicles (a)	$	304,889	$	—	$	311,557	$	—
Personal loans held for sale (b)	—		—		893,479		355,136
Retail installment contracts held for sale (c)	391,209		—		674,048		$	7,385
Auto loans impaired due to bankruptcy (d)	194,731		—		191,785		—

(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) 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. 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. On March 31, 2021, the Company sold the personal lending portfolio. Refer to Note 1 – “Description of Business, Basis of Presentation, and Accounting Principles” to these Condensed Consolidated Financial Statements for more information.

(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. No additional lower of cost or fair value expense was recorded for the ~~six~~nine months ended ~~June~~September 30, 2021.

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 ~~June~~September 30, 2021 and December 31, 2020, respectively:

Financial Instruments

Fair Value at ~~June~~September 30, 2021

Valuation Technique

Unobservable Inputs

Range (weighted average) (a)

Financial Assets:

Retail installment contracts held for investment

2,~~841~~396

Discounted Cash Flow

Discount Rate

7%-13% (9%)

Default Rate

4%-10% (57%)

Prepayment Rate

4%-15% (15%)

Loss Severity Rate

50%-60% (56%)

Retail installment contracts held for sale

~~391~~359,~~209~~561

Discounted Cash Flow

Discount Rate

1% - 2% (2%)

Default Rate

4% - 10% (67%)

Prepayment Rate

15% - 20% (17%)

Loss Severity Rate

50% - 55% (52%)

(a) Weighted average was developed by weighting the associated relative unpaid principal balances.


Financial Instruments	Fair Value at December 31, 2020		Valuation Technique	Unobservable Inputs	Range
Financial Assets:
Retail installment contracts held for investment	$	5,614	Discounted Cash Flow	Discount Rate	7%-11%
				Default Rate	4%-20%
				Prepayment Rate	15%-25%
				Loss Severity Rate	50%-60%
Personal loans held for sale	$	893,479	Lower of Market or Income Approach	Market Approach
				Market Participant View	60%-70%
				Income Approach
				Discount Rate	20%-30%

				Default Rate	35%-45%
				Net Principal & Interest Payment Rate	65%-75%
				Loss Severity Rate	90%-95%
Retail installment contracts held for sale	$	674,048	Discounted Cash Flow	Discount Rate	1.5% - 2.5%
				Default Rate	2% - 4%
				Prepayment Rate	10% - 20%
				Loss Severity Rate	50% - 60%

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 ~~June~~September 30, 2021 and December 31, 2020, and the level within the fair value hierarchy:

	June 30, 2021										December 31, 2020
	September 30, 2021										December 31, 2020
	CarryingValue		EstimatedFair Value		Level 1		Level 2		Level 3		CarryingValue		EstimatedFair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents (a)	$	~~321~~2,~~976~~106,405	$	~~321~~2,~~976~~106,405	$	~~321~~2,~~976~~106,405	$	—	$	—	$	109,053	$	109,053	$	109,053	$	—	$	—
Finance receivables held for investment, net (b)	27,~~104~~272,~~054~~976		29,~~725~~878,~~219~~212		—		—47,691		29,~~725~~830,~~219~~521		26,806,606		29,464,066		—		—		29,464,066
Restricted cash (a)	2,~~660~~248,~~662~~667		2,~~660~~248,~~662~~667		2,~~660~~248,~~662~~667		—		—		2,221,094		2,221,094		2,221,094		—		—
Investments in debt securities held to maturity (c)	~~115~~101,~~672~~815		~~116~~102,~~314~~449		—		~~116~~102,~~314~~449		—		44,841		45,606		—		45,606		—
Total	$	3031,~~202~~729,~~364~~863	$	3234,~~824~~335,~~171~~733	$	24,~~982~~355,~~638~~072	$	~~116~~150,~~314~~140	$	29,~~725~~830,~~219~~521	$	29,181,594	$	31,839,819	$	2,330,147	$	45,606	$	29,464,066
Liabilities:
Notes Payable:
Facilities with third parties (d)	$	~~761,045~~—	$	~~761,045~~—	$	—	$	—	$	~~761,045~~—	$	4,159,955	$	4,159,955	$	—	$	—	$	4,159,955
Secured structured financings (e)	2728,~~191~~831,~~597~~858		2729,~~499~~089,~~646~~183		—		2224,~~075~~644,~~935~~581		54,~~423~~444,~~711~~602		26,177,401		26,673,970		—		18,291,898		8,382,072
Facilities with Santander and related subsidiaries (f)	109,~~250~~600,000		109,~~446~~798,~~800~~720		—		—		109,~~446~~798,~~800~~720		10,801,318		11,333,823		—		—		11,333,823
Total	$	38,~~202~~431,~~642~~858	$	38,~~707~~887,~~491~~903	$	—	$	2224,~~075~~644,~~935~~581	$	1614,~~631~~243,~~556~~322	$	41,138,674	$	42,167,748	$	—	$	18,291,898	$	23,875,850

(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. 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 is determined as follows:

•Retail installment contracts held for investment and purchased receivables - credit deteriorated — The estimated fair value for certain finance receivables at September 30, 2021 is based on the most recent purchase price and hence has classified these amounts as Level 2. The estimated fair value of ~~all~~these remaining finance receivables at ~~June~~September 30, 2021 is estimated using a DCF model, and such receivables are classified as Level 3.

•Finance lease receivables — Finance lease receivables are carried at gross investments, net of unearned income and allowance for lease losses. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements.

(c)Investments in debt securities held to maturity - Investments in debt securities held to maturity are recorded at amortized cost and are priced by third-party pricing vendors. The third-party vendors use a variety of methods when pricing these securities that incorporate relevant observable market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. These investment securities are, therefore, considered Level 2.

(d)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.

(e)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, which are considered Level 3 inputs.

(f)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.

11. Investment Gains (Losses), Net

When the Company sells retail installment contracts, 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, retained securities, 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 amortized cost 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 three and nine months ended September 30, 2021 and 2020:

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Gain (loss) on sale of loans and leases

12,~~052~~003

(2613,~~884~~669)

1719,~~409~~412

(2640,~~884~~553)

Lower of cost or market adjustments

—

(~~121~~56,~~642~~598)

(31,848)

(~~184~~241,~~600~~198)

Other gains, net

13,~~362~~238

~~944~~1,278

25,~~141~~379

~~476~~1,754

25,~~414~~241

(~~147~~68,~~582~~989)

(127,~~298~~057)

(~~211~~279,~~008~~997)

The lower of cost or market adjustments for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 included zero, $65,047, $8681,~~698~~247 and $~~196~~278,~~897~~144, respectively, in customer default activity, and unfavorable/(favorable) adjustments of zero, $(33,199), $3424,~~944~~649 and $~~(12~~36,~~297)~~946 respectively, primarily related to net changes in the unpaid principal balance on the personal lending portfolio.

On March 31, 2021, the Company sold the personal lending portfolio. Refer to Note 1 - “Description of Business, Basis of Presentation, and Accounting Principles” to these Condensed Consolidated Financial Statements for more information.

12. Income Taxes

The Company recorded income tax expense/(benefit) of $~~332~~208,~~420~~607 (2321.95% effective tax rate) and $~~(32~~172,~~857)~~476 (2526.40% effective tax rate) during the three months ended ~~June~~September 30, 2021 and 2020, respectively. The Company recorded income tax expense/(benefit) of $~~566~~775,~~877~~484 (2423.02% effective tax rate) and $~~(35~~137,~~315)~~161 (26.0% effective tax rate) during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. The effective tax rate decreased primarily due to increased benefits from electrical vehicle credits, lower effective state tax rate, discrete state tax return to provision adjustments and an increase to pre-tax income that diluted unfavorable components of the effective tax rate and allowed for absorption of favorable discrete activity to produce an effective tax rate reduction.

The Company is a party to a tax sharing agreement requiring that the unitary state tax liability among affiliates included in unitary state tax returns be allocated using the hypothetical separate company tax calculation method. The Company had a net receivable from affiliates under the tax sharing agreement of $642 and $11,191 at ~~June~~September 30, 2021 and December 31, 2020, respectively, which was included in related party taxes receivable in the condensed consolidated balance sheet.

The Company provides U.S. income taxes on earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered indefinitely reinvested outside of the United States. As of June 30, 2021 and December 31, 2020, the Company has no earnings that are considered indefinitely reinvested. 38

The Company provides U.S. income taxes on earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered indefinitely reinvested outside of the United States. As of September 30, 2021 and December 31, 2020, the Company has no earnings that are considered indefinitely reinvested.

The Company applies an aggregate portfolio approach whereby disproportionate income tax effects from accumulated other comprehensive income are released only when an entire portfolio (i.e., all related units of account) of a particular type is liquidated, sold or extinguished.

Significant judgment is required in evaluating and reserving for uncertain tax positions. Although management believes adequate reserves have been established for all uncertain tax positions, the final outcomes of these matters may differ. Management does not believe the outcome of any uncertain tax position, individually or combined, will have a material effect on the Company’s business, financial position or results of operations. The reserve for uncertain tax positions, as well as associated penalties and interest, is a component of the income tax provision.

13. Computation of Basic and Diluted Earnings per Common Share Earnings per common share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding during the periodThe calculation of diluted EPS excludes the effect of exercise or settlement that would be anti-dilutive for employee stock options of zero for the three and nine months ended September 30, 2021 and 52,114 for the three and nine months ended September 30, 2020.The following table represents EPS numbers for the three and nine months ended September 30, 2021 and 2020:

Earnings per common share (“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 awards have non-forfeitable dividend rights in the event of a declaration of a dividend on the Company’s common shares.


	Three Months Ended September 30,				Nine Months Ended September 30,

	2021		2020		2021		2020
Earnings per common share
Net income (loss)	$	763,324	$	490,115	$	2,563,181	$	389,450


Weighted average number of common shares outstanding (in thousands)	306,093		310,150		306,086		321,276
Earnings per common share	$	2.49	$	1.58	$	8.37	$	1.21
Earnings per common share - assuming dilution
Net income (loss)	$	763,324	$	490,115	$	2,563,181	$	389,450
Weighted average number of common shares outstanding (in thousands)	306,093		310,150		306,086		321,276
Effect of employee stock-based awards (in thousands)	286		157		268		216
Weighted average number of common shares outstanding - assuming dilution (in thousands)	306,379		310,307		306,354		321,492
Earnings per common share - assuming dilution	$	2.49	$	1.58	$	8.37	$	1.21

The calculation of diluted EPS excludes the effect of exercise or settlement that would be anti-dilutive for employee stock options of zero for the three and six months ended June 30, 2021 and 52,114 for the three and six months ended June 30, 2020.

The following table represents EPS numbers for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Earnings per common share
Net income (loss)	$	1,058,202	$	(96,678)	$	1,799,857	$	(100,665)
Weighted average number of common shares outstanding before restricted participating shares (in thousands)	306,057		319,774		306,083		326,900
Weighted average number of common shares outstanding (in thousands)	306,057		319,774		306,083		326,900
Earnings per common share	$	3.46	$	(0.30)	$	5.88	$	(0.31)
Earnings per common share - assuming dilution
Net income (loss)	$	1,058,202	$	(96,678)	$	1,799,857	$	(100,665)
Weighted average number of common shares outstanding (in thousands)	306,057		319,774		306,083		326,900
Effect of employee stock-based awards (in thousands)	232		104		244		237
Weighted average number of common shares outstanding - assuming dilution (in thousands)	306,289		319,878		306,327		327,137
Earnings per common share - assuming dilution	$	3.45	$	(0.30)	$	5.88	$	(0.31)

14. Commitments and Contingencies

The following table summarizes liabilities recorded for commitments and contingencies as of September 30, 2021 and December 31, 2020, all of which are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets:

Agreement or Legal Matter

Commitment or Contingency

~~June~~September 30, 2021

December 31, 2020

MPLFA

Revenue-sharing and gain/(loss), net-sharing payments

~~102~~70,~~191~~675

43,778

Agreement with Bank of America

Servicer performance fee

~~(154)~~462

1,200

Agreement with CBP

Loss-sharing payments

~~(6)~~286

181

Other Contingencies

Consumer arrangements

2829,~~408~~070

22,155

Legal and regulatory proceedings

Aggregate legal and regulatory liabilities

136,~~867~~348

31,936

Total commitments and contingencies

~~144~~106,~~306~~841

99,250

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

MPLFA

Under terms of the MPLFA, the Company must make revenue sharing payments to Stellantis N.V. and also must share with Stellantis N.V. when residual gains/(losses) on leased vehicles exceed a specified threshold. The Company had accrued $102,191 and $43,778 at June 30, 2021 and December 31, 2020, respectively, related to these obligations. The MPLFA also requires that the Company maintain at least $5.0 billion in funding available for Floorplan Loans and $4.5 billion of financing dedicated to Stellantis N.V. retail financing. In turn, Stellantis N.V. must provide designated minimum threshold percentages of its subvention business to the Company.39

Under terms of the MPLFA, the Company must make revenue sharing payments to Stellantis and also must share with Stellantis when residual gains/(losses) on leased vehicles exceed a specified threshold. The Company had accrued $70,675 and $43,778 at September 30, 2021 and December 31, 2020, respectively, related to these obligations. The MPLFA also requires that the Company maintain at least $5.0 billion in funding available for Floorplan Loans and $4.5 billion of financing dedicated to Stellantis retail financing. In turn, Stellantis must provide designated minimum threshold percentages of its subvention business to the Company.

Agreement with Bank of America

Until January 2017, the Company had a flow agreement with Bank of America whereby the Company was committed to selling up to $300,000 of eligible loans to the bank each month. 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 $~~(154)~~462 and $1,200 at ~~June~~September 30, 2021 and December 31, 2020, respectively, related to this obligation.

Agreement with CBP

Until May 2017, the Company sold loans to CBP under terms of a flow agreement and predecessor sale agreements. The Company retained servicing on the sold loans and 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 $~~(6)~~286 and $181 at ~~June~~September 30, 2021 and December 31, 2020, 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 $2829,~~408~~070 and $22,155 at ~~June~~September 30, 2021 and December 31, 2020, respectively, for other miscellaneous contingencies.

Legal and regulatory proceedings

Periodically, the Company, including its subsidiaries, is and in the future expects to be party to, or otherwise involved in, various claims, disputes, lawsuits, investigations, regulatory matters and other legal matters and proceedings that arise in the ordinary course of business. In view of the inherent difficulty of predicting the outcome of any such claims, disputes, ~~lawsuit~~lawsuits, investigations, regulatory ~~matter~~matters or legal ~~proceeding~~proceedings, 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, if any. Accordingly, except as provided below, the Company is unable to reasonably estimate a range of its potential exposure, if any, to these claims, disputes, lawsuits, investigations, regulatory matters, and other legal proceedings at this time. Further, it is reasonably possible that actual outcomes or losses may differ materially from the 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 business, financial position, liquidity, and results of operation.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal and, regulatory proceedings when those matters present 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 legal or regulatory proceeding develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether the matter presents a loss contingency that is probable and estimable. If a determination is made during a given quarter that a loss contingency is probable and estimable, an accrued liability is established during such quarter with respect to such loss contingency and the Company continues to monitor the matter for further developments that could affect the amount of the accrued liability previously established.

As of ~~June~~September 30, 2021 and December 31, 2020, the Company accrued aggregate legal and regulatory liabilities of $146 million and $32 million, respectively. Further, the Company estimates the aggregate range of reasonably possible losses for legal and regulatory proceedings, in excess of reserves established, is zero as of ~~June~~September 30, 2021. Set ~~forth below are descriptions of the material lawsuits, regulatory matters and other legal proceedings to which the Company is subject.~~

forth below are descriptions of the material lawsuits, regulatory matters and other legal proceedings to which the Company is subject.

Shareholder Derivative Lawsuit

•Seattle City Employees’ Retirement System v. Santander Holdings USA, Inc., et al.: In November 2020, a shareholder derivative complaint was filed in the Court of Chancery of the State of Delaware, captioned Seattle City v. Santander Holdings USA, Inc., C.A. No. 2020-0977-AGB. The plaintiff seeks unspecified monetary damages and other injunctive relief in the complaint. The complaint alleges, among other things, that SHUSA and the current ~~director~~directors breached their fiduciary duties by causing the Company to engage in share repurchases for the purpose of increasing SHUSA’s ownership of the Company above 80%, which the complaint alleges would allow SHUSA to obtain tax and other benefits not available to the rest of the Company’s shareholders. The defendants filed an answer to the complaint.

•Caldwell v. Santander Consumer USA Holdings Inc.: In September 2021, a purported shareholder of the Company’s common stock filed a complaint against the Company and its Board of Directors in the United States District Court for the Southern District of New York, captioned Craig Caldwell v. Santander Consumer USA Holdings Inc. 1:21-cv-07842, alleging violations of Sections 14 and 20 of the Exchange Act based on the assertion that the Board allegedly authorized the filing of a materially incomplete and misleading Solicitation/Recommendation Statement with the SEC in connection with SHUSA’s proposed purchase of the remaining outstanding common stock of the Company that SHUSA did not already own. The plaintiff seeks to enjoin the defendants from proceeding with the proposed transaction. The complaint has not been served on any of the defendants.

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.

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

•Mississippi Attorney General Lawsuit: In January 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. In July 2021, the Company and the state of Mississippi entered into a settlement agreement resolving this matter for a monetary payment of $3,700 to the state of Mississippi.

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 account with new advances originated by Bluestem through April 2022.

During the first quarter inof 2021, the Company completed the sale of the Bluestem personal lending portfolio to a third party. In addition, the Company executed a forward flow sale agreement with a third party to purchase all personal lending receivables that the Company purchases from Bluestem through the term of the agreement with Bluestem.

As of December 31, 2020, the total unused credit available to customers was $2.7 billion. In 2021, the Company purchased $0.3 billion of receivables, out of the $2.7 billion unused credit available to customers as of December 31, 2020. In 2020, the Company purchased $1.2 billion of receivables, out of the $3.0 billion unused credit available to customers as of December 31, 2019. In addition, the Company purchased $24,865 and $78,785 of receivables related to newly opened customer accounts during the six months ended June 30, 2021 and 2020, respectively. 41

As of December 31, 2020, the total unused credit available to customers was $2.7 billion. In 2021, the Company purchased $0.3 billion of receivables, out of the $2.7 billion unused credit available to customers as of December 31, 2020. In 2020, the Company purchased $1.2 billion of receivables, out of the $3.0 billion unused credit available to customers as of December 31, 2019. In addition, the Company purchased $24,865 and $151,163 of receivables related to newly opened customer accounts during the nine months ended September 30, 2021 and 2020, 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.

•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 captive finance company. The agreement does not require the Company to originate any loans, but for each loan originated by the Company, it will pay Nissan a referral fee.

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 ~~June~~September 30, 2021, there were no loans that were the subject of a demand to repurchase or replace for breach of representations and warranties for the 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.

In 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. However, any sale more than $275,000 is subject to a market price check. The remaining aggregate commitment as of ~~June~~September 30, 2021 and December 31, 2020, not subject to market price check was $6,215 and $15,318, respectively.

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.

15. Related-Party Transactions

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

Credit Facilities

Interest expense, including unused fees, for lines of credit from SHUSA (Note 7) totaled $7268,~~211~~320 and $7079,~~352~~854 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and $~~146~~214,~~230~~550 and $~~133~~213,~~370~~224 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Accrued interest for lines of credit from SHUSA at ~~June~~September 30, 2021 and December 31, 2020 was $3734,~~489~~114 and $40,234, respectively.

Interest expense, including unused fees, for lines of credit from Santander (Note 7) totaled $11,~~795~~587 and $~~703~~7,997 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and $2335,~~680~~266 and $~~703~~8,700 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Accrued interest for lines of credit from Santander at ~~June~~September 30, 2021 and December 31, 2020 was $1,~~512~~472 and $1,603, respectively.

Derivatives

The Company has derivative financial instruments with Santander and affiliates with outstanding notional amounts of

$3,~~611~~255,~~862~~024 and $3,148,850 as of ~~June~~September 30, 2021 and December 31, 2020, respectively (Note 9). The Company had a collateral overage on derivative liabilities with Santander and affiliates of ~~zero~~$495 and $907 as of ~~June~~September 30, 2021 and December 31, 2020, 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 $317 and $472 for the three months ended September 30, 2021 and 2020, respectively, and $1,070 and $1,566 for the nine months ended September 30, 2021 and 2020, respectively. Other information on the serviced auto loan and retail installment contract portfolios for SBNA as of September 30, 2021 and December 31, 2020 is as follows:

	June 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
Total serviced portfolio	$	~~151~~135,~~917~~532	$	190,504
Cash collections due to owner	2724,~~449~~395		19,650
Servicing fees receivable	4,~~066~~194		1,769

Dealer Lending

Under the Company’s agreement with SBNA, the Company is required to permit SBNA a first right to review and assess CCAP dealer lending opportunities, and SBNA is required to pay the Company an origination fee for each loan originated under the agreement. The agreement also transferred the servicing of all CCAP receivables from dealers, including receivables held by SBNA to the Company, ~~and~~ 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 no outstanding receivable from SBNA as of ~~June~~September 30, 2021 or December 31, 2020 for such advances.

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



	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Origination and renewal fee income from SBNA	$	—	$	451	$	—	$	2,473
Servicing fees expenses charged by SBNA	33		(9)		193		63

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Origination and renewal fee income from SBNA	$	—	$	512	$	—	$	2,021
Servicing fees expenses charged by SBNA	70		(2)		160		72

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 SBNA, which settles the transaction with the dealer. The Company owed SBNA $5,431 and $7,548 related to such originations as of September 30, 2021 and December 31, 2020, respectively.

~~Under~~The ~~the~~Company ~~agreement~~received ~~with~~a ~~SBNA~~$9,000 ~~the~~referral ~~Company~~fee ~~may~~in ~~originate~~connection ~~retail~~with ~~consumer~~a ~~loans~~sourcing inand ~~connection~~servicing ~~with~~arrangement ~~sales~~and ofis ~~vehicles~~amortizing ~~that~~the ~~are~~fee ~~collateral~~into ~~held~~income ~~against~~over ~~floorplan~~the ~~loans~~ten-year byterm ~~SBNA.~~of ~~Upon~~the ~~origination~~agreement through July 1, 2022, the ~~Company~~termination ~~remits~~date ~~payment~~of tothe ~~SBNA~~agreement. As of September 30, ~~which~~2021 ~~settles~~and ~~the~~December ~~transaction~~31, ~~with~~2020, the ~~dealer~~unamortized fee balance was $1,575 and $2,250, respectively. The Company ~~owed~~recognized ~~SBNA~~ $~~6,743~~225 and $~~7,548~~675 of income related to ~~such~~the ~~originations~~referral asfee offor ~~June~~the three and nine months ended September 30, 2021 and ~~December 31,~~ 2020, respectively.

The Company received a $9,000 referral fee in connection with a sourcing and servicing arrangement and is amortizing the fee into income over the ten-year term of the agreement through July 1, 2022, the termination date of the agreement. As of June 30, 2021 and December 31, 2020, the unamortized fee balance was $1,800 and $2,250, respectively. The Company recognized $225 and $450 of income related to the referral fee for the three and six months ended June 30, 2021 and 2020, respectively.

Origination Support Services

Beginning in 2018, the Company agreed to provide SBNA with origination support services in connection with the processing, underwriting and purchase of retail loans, primarily from Stellantis N.V. dealers. In addition, the Company agreed to perform the servicing for any loans originated on SBNA’s behalf. For the three and six months ended June 30, 2021, the Company facilitated the purchase of $2.6 billion and $4.5 billion of retail installment contacts, respectively. For the three and six months ended June 30, 2020, the Company facilitated the purchase of $1.7 billion and $2.8 billion of retail installment contacts, respectively. The Company recognized origination fee and servicing fee income of $15,503, $27,069, $11,067 and $21,555 for the three and six months ended June 30, 2021 and 2020, respectively, of which $4,386 and $2,271 was receivable as of June 30, 2021 and 2020, respectively.Leases

Servicing fee income recognized on leases serviced for SBNA totaled $65 for the three and nine months ended

September 30, 2021

Other information on the consumer vehicle lease portfolio serviced for SBNA as of September 30, 2021 and December

31, 2020 is as follows:


	September 30, 2021		December 31, 2020
Total serviced portfolio	$	243,531	$	—
Origination and servicing fees receivable	342		—
Revenue share reimbursement receivable	48		—

Retail installment contracts

Beginning in 2018, the Company agreed to provide SBNA with origination support services in connection with the processing, underwriting and purchase of retail loans, primarily from Stellantis dealers. In addition, the Company agreed to perform the servicing for any loans originated by SBNA. For the three and nine months ended September 30, 2021, the Company facilitated the purchase of $1.5 billion and $6.1 billion of retail installment contacts, respectively. For the three and nine months ended September 30, 2020, the Company facilitated the purchase of $1.1 billion and $3.9 billion of retail installment contacts, respectively. The Company recognized origination fee and servicing fee income of $13,408, $40,477, $7,902 and $29,457 for the three and nine months ended September 30, 2021 and 2020, respectively, of which $1,987 and $4,089 was receivable as of September 30, 2021 and 2020, respectively.

Securitizations

The Company had a Master Securities Purchase Agreement (MSPA) with Santander, whereby the Company had the option to sell a contractually determined amount of eligible prime loans to Santander, through the SPAIN securitization platform, for a term that ended in December 2018. The Company provides servicing on all loans originated under this arrangement. For the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company received the servicing fee income of $21,~~404~~970, $57,~~293~~263, $54,~~220~~488 and $1115,~~193~~680, respectively, for the servicing of these loans.

Servicing fee receivable, as of ~~June~~September 30, 2021 and December 31, 2020, was $~~750~~614 and $1,070, respectively. The Company had $54,~~988~~789 and $6,203 of collections due to Santander, as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Santander Investment Securities Inc. (SIS), an affiliated entity, serves as joint book runner and co-manager on certain of the Company’s securitizations. Amounts paid to SIS for the three months ended ~~June~~September 30, 2021 and 2020 totaled $1,~~512~~354 and $~~713~~103, respectively, and totaled $24,~~704~~059 and $1,~~522~~625 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, and are included in debt issuance costs in the accompanying condensed consolidated financial statements.

Employee compensation

Certain employees of the Company and SHUSA provide services to each other. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company owed SHUSA approximately $914,~~582~~496 and $59,~~114~~221 and SHUSA owed the Company approximately $24,~~703~~467 and $24,~~413~~198 for such services, respectively.

Other related-party transactions

•The Company subleases approximately 13,000 square feet of its corporate office space to SBNA. For the three months ended ~~June~~September 30, 2021 and 2020, the Company recorded $44 and for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company recorded $88132 in sublease revenue on this property.

•The Company has certain deposit and checking accounts with SBNA. As of ~~June~~September 30, 2021 and December 31, 2020, the Company had a balance of $~~262~~2,~~805~~016,932 and $32,490, respectively, in these accounts. ~~The Company has~~

42•The Company has collateral accounts with SBNA with balances as of September 30, 2021 and December 31, 2020 of $6,808 and $27, respectively, in these accounts.

~~collateral~~•The ~~accounts~~Company ~~with~~and SBNA ~~with~~have ~~balances~~a asCredit ofCard ~~June~~Agreement ~~30,~~(Card ~~2021~~Agreement) ~~and~~whereby ~~December~~SBNA ~~31,~~provides ~~2020~~credit ofcard ~~$6,027~~services for travel and ~~$27~~related business expenses for vendor payments. This service is at zero cost but generates rebates based on purchases made. As of September 30, ~~respectively~~2021, inthe ~~these~~activities ~~accounts~~associated with the program were insignificant.

•The Company and SBNA have a Credit Card Agreement (Card Agreement) whereby SBNA provides credit card services for travel and related business expenses for vendor payments. This service is at zero cost but generates rebates based on purchases made. As of June 30, 2021, the activities associated with the program were insignificant.44

•The Company pays 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 totaled $3433 and $4339 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and $67100 and $~~101~~140 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

•The Company has contracted Aquanima, a Santander affiliate, to provide procurement services. Expenses incurred totaled $~~786~~1,062 and $~~784~~785 for the three months ended ~~June~~September 30, 2021, and 2020, respectively, and totaled $12,~~573~~635 and $12,~~294~~079 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

•Santander Global Tech (formerly known as Produban Servicios Informaticos Generales S.L.), a Santander affiliate, provides professional services, telecommunications, and internal and/or external applications to the Company. Expenses incurred, which are included as a component of other operating costs in the accompanying consolidated statements of income, totaled zero and $~~(108)~~279 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and zero and $71350 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

•The Company partners with SHUSA to place Cyber Liability Insurance in which participating worldwide Santander entities share €270 million aggregate limits. The Company repays SHUSA for the Company’s equitably allocated portion of insurance premiums and fees. Expenses incurred totaled $150 and $~~108~~97 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and totaled $~~301~~451 and $~~216~~313 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. In addition, the Company partners with SHUSA for various other insurance products. Expenses incurred totaled $~~513~~661 and $~~183~~416 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and totaled $1,~~027~~687 and $~~365~~781 and for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

•In ~~April~~July 2021, the Company entered into a ~~non-binding~~Platform ~~term~~Development ~~sheet~~and License Agreement ("PDLA") with AutoFi Inc. for the design and operation of a digital software platform for the sale and financing of automobiles. Mouro Capital, which is a wholly-owned subsidiary of Santander, owns 10.3% of the total equity of AutoFi Inc. The ~~term sheet~~PDLA, ~~which may be terminated by either party without penalty,~~ requires the Company to pay $~~250~~6,000 ~~per month~~ for the design and development of the digital software platform ~~until~~in the ~~parties~~first ~~execute~~year aof ~~definitive~~the ~~agreement~~PDLA. After the first year of the PDLA, the Company has agreed to pay AutoFi, Inc. between $2,400 and $3,000 per year plus certain transaction-related fees for software development, dealer onboarding and support, and hosting services.

16. Employee Benefit Plans

The Company has granted stock options to certain executives, other employees, and independent directors under the Company’s 2011 Management Equity Plan (the MEP), which enabled the Company to grant stock option awards up to a total of approximately 29 million common shares (net of shares canceled and forfeited). The MEP expired in January 2015, and the Company will not grant any further awards under the MEP. The Company has granted stock options, restricted stock awards and restricted stock units (RSUs) under the Omnibus Incentive Plan (the Plan), which was established in 2013 and enables the Company to grant awards of cash and of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, RSUs, and other awards that may be settled in or based upon the value of the Company’s common stock up to a total of 5,192,641 shares of common stock. 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 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 expense over the vesting period as time and performance vesting conditions are met.

In connection with compensation restrictions imposed on certain executive officers and other employees by the European Central Bank under the Capital Requirements Directive IV prudential rules, which require a portion of such officers’ and employees’ variable compensation to be paid in the form of equity, the Company periodically grants RSUs. Under the Plan, a portion of these RSUs vest immediately upon grant, and a portion vest annually over the following three or five years. Awards granted to certain participants may also be subject to the achievement of certain performance conditions. After the shares subject to the RSUs vest and are settled, they are subject to transfer and sale restrictions for one year. In addition, the Company grants RSUs to certain officers and employees as part of variable compensation, and these RSUs typically vest over three years. The Company also has granted certain independent directors RSUs that vest upon the earlier of the first anniversary of grant date or the first annual stockholder meeting following the grant date. RSUs are valued based upon the fair market value on the date of the grant.

The Company recognized $7,756 and $5,150 related to stock options and restricted stock units within compensation expense for the six months ended June 30, 2021 and 2020, respectively. In addition, the Company recognizes forfeitures of awards as they occur.45

	Shares	WeightedAverageExercisePrice		WeightedAverageRemainingContractualTerm (Years)	AggregateIntrinsicValue
Options outstanding at January 1, 2021	169,369	$	13.01	1.9	$	1,543
Granted	—	—		—	—
Exercised	(52,561)	9.53		—	883
Expired	—	—		—	—
Forfeited	—	—		—	—
Other (a)	—	—		—	—
Options outstanding at June 30, 2021	116,808	14.58		1.8	2,539
Options exercisable at June 30, 2021	116,808	$	14.58	1.8	$	2,539
Options expected to vest at June 30, 2021	—	$	—	0	$	—

directors RSUs that vest upon the earlier of the first anniversary of grant date or the first annual stockholder meeting following the grant date. RSUs are valued based upon the fair market value on the date of the grant.

The Company recognized $8,989 and $6,161 related to stock options and restricted stock units within compensation expense for the nine months ended September 30, 2021 and 2020, respectively. In addition, the Company recognizes forfeitures of awards as they occur.

A summary of the Company’s stock options and related activity as of and for the nine months ended September 30, 2021 is as follows:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2021	169,369	$	13.01	1.9	$	1,543
Granted	—	—		—	—
Exercised	(77,885)	10.08		—	1,650
Expired	—	—		—	—
Forfeited	—	—		—	—
Other (a)	—	—		—	—
Options outstanding at September 30, 2021	91,484	15.51		1.8	2,396
Options exercisable at September 30, 2021	91,484	$	15.51	1.8	$	2,396
Options expected to vest at September 30, 2021	—	$	—	0	$	—

(a) Represents stock options that were reinstated.

A summary of the Company’s Restricted Stock Units and performance stock units and related activity as of and for the nine months ended September 30, 2021 is as follows:


	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2021	367,012	$	19.78	0.8	$	8,082
Granted	438,435	27.71		—	—
Vested	(401,549)	23.04		—	10,847
Forfeited/canceled	(7,549)	14.67		—	—
Non-vested at September 30, 2021	396,349	$	25.10	1.1	$	16,528

	Shares	WeightedAverageGrant Date Fair Value		WeightedAverageRemainingContractualTerm (Years)	AggregateIntrinsicValue
Outstanding as of January 1, 2021	367,012	$	19.78	0.8	$	8,082
Granted	438,435	27.71		—	—
Vested	(395,025)	23.06		—	10,580
Forfeited/canceled	(7,493)	14.63		—	—
Non-vested at June 30, 2021	402,929	$	25.25	1.4	$	14,634


ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q should be read in conjunction with the 2020 Annual Report on Form 10-K and in conjunction with the condensed consolidated financial statements and the accompanying notes included elsewhere in this report. Additional information, not part of this filing, about the Company is available on the Company’s website at www.santanderconsumerusa.com. The Company’s recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, as well as other filings with the SEC, are available free of charge through the Company’s website by clicking on the “Investors” page and selecting “SEC Filings.” The Company’s filings with the SEC and other information may also be accessed at the SEC’s website at www.sec.gov.

Background and Overview

The Company was formed in 2013 as a corporation in the state of Delaware and is the holding company for SC Illinois, a full-service, technology-driven consumer finance company focused on vehicle finance and third-party servicing. The Company is majority-owned (as of ~~July~~October 2625, 2021, approximately 80.2%) by SHUSA, a wholly-owned subsidiary of Santander. Refer to Note 1 - "Description of Business" to the accompanying condensed consolidated financial statements for the details onregarding the definitive agreement entered into between SHUSA ~~offer~~and the Company for SHUSA to acquire all of the outstanding shares of the Company's stock that is does not yet own.

The Company is managed through a single reporting segment, Consumer Finance, which includes vehicle financial products and services, including retail installment contracts, vehicle leases, and financial products and services related to recreational and marine vehicles, and other consumer finance products.

~~CCAP continues to be a focal point of the Company’s strategy.~~ Since May 2013, under the MPLFA with ~~FCA~~Stellantis, the Company has operated as Stellantis ~~N.V.~~'s preferred provider for consumer loans, leases and dealer loans and provides services to Stellantis ~~N.V.~~ customers and dealers under the CCAP brand. The Company’s average penetration rate under the MPLFA for the ~~second~~third quarter ended ~~June~~September 30, 2021 was 3427%, a decrease from 3733% for the same period in 2020.

The Company has dedicated financing facilities in place for its CCAP business and has ~~worked~~pursued ~~strategically~~a ~~and~~strategy of working collaboratively with Stellantis ~~N.V.~~ to ~~continue to~~ strengthen ~~its~~their relationship and to create value within the CCAP program. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company originated $811.31 billion in CCAP loans which represented 5653% of total retail installment contract originations (unpaid principal balance), as well as $45.28 billion in CCAP leases. Additionally, all of the leases originated by the Company during the ~~six~~nine months ended ~~June~~September 30, 2021 were under the MPLFA.

Economic and Business Environment

Unemployment ~~rates~~rate ~~are~~is 54.9080% as reported by the Bureau of Labor Statistics for ~~June~~September 30, 2021, and the federal funds rate was in the range of 0.00% to 0.25% on ~~June~~September 30, 2021.

Additionally, the Company is exposed to geographic customer concentration risk, which could have an adverse effect on the Company’s business, financial position, results of operations or cash flow. Refer to Note 2 - "Finance Receivables" to the accompanying condensed consolidated financial statements for the details on the Company’s retail installment contracts by state concentration.

Regulatory Matters

The U.S. lending industry is highly regulated under various U.S. federal laws, including the Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting, Fair Debt Collection Practices, SCRA, and Unfair, Deceptive, or Abusive Acts or Practices, Credit CARD, Bank Secrecy Act, Telephone Consumer Protection, FIRREA, and Gramm-Leach-Bliley Acts, as well as various state laws. The Company is subject to inspections, examinations, supervision, and regulation by the SEC, the CFPB, the FTC, and the DOJ and by regulatory agencies in each state in which the Company is licensed. In addition, the Company is directly and indirectly, through its relationship with SHUSA, subject to certain bank regulations, including oversight by the OCC, the European Central Bank, and the Federal Reserve, which have the ability to limit certain of the Company’s activities, such as share repurchase program, the timing and amount of dividends and certain transactions that the Company might otherwise desire to enter into, such as merger and acquisition opportunities, or to impose other limitations on the Company’s growth.

The March 5, 2021, announcement by the U.K.’s Financial Conduct Authority (FCA) confirmed unavailability of USD LIBOR rates beyond June 30, 2023 and cessation of one-week and two-month USD LIBOR by December 31, 2021. ISDA announced these statements are an “Index Cessation Event” under the IBOR Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol, which in turn triggers a “Spread Adjustment Fixing Date” under the Bloomberg IBOR Fallback Rate Adjustments Rule Book. As a result, when USD LIBOR tenors cease and the fallback rates apply, fallbacks for derivatives under ISDA’s documentation shift to forms of the Secured Overnight Financing Rate (SOFR) plus the fixed spread adjustment.

The regulatory agencies also confirmed that the March 5, 2021 announcements constitute a “Benchmark Transition Event” with respect to all LIBOR settings.

The Company holds debt, derivatives, and other financial instruments that use USD LIBOR as a reference rate and that will be impacted by the demise of LIBOR. Transition away from LIBOR to new reference rates presents legal, financial, reputational, and operational risks to the Company as well as to other participants in the market. As of ~~June~~September 30, 2021, the Company has approximately $43 billion of liabilities with LIBOR exposure. The Company also had approximately $2016 billion in notional amounts of derivative contracts with LIBOR exposure.

Additional legal and regulatory matters affecting the Company’s activities are further discussed in Part I, Item 1A – Risk Factors of the 2020 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

How the Company Assesses its Business Performance

Net income and the associated return on assets and equity, are the primary metrics by which the Company judges the performance of its business. Accordingly, the Company closely monitors the primary drivers of net income:

•Net financing income — The Company tracks the spread between the interest and finance charge income earned on assets and the interest expense incurred on liabilities, and continually monitors the components of its yield and cost of funds. The Company’s effective interest rate on borrowing is driven by various items including, but not limited to, credit quality of the collateral assigned, used/unused portion of facilities, and reference rate for the credit spread. These drivers, as well as external rate trends, including the swap curve, spot and forward rates are monitored.

•Net credit losses — The Company performs net credit loss analysis at the vintage level for retail installment contracts, loans and leases, and at the pool level for purchased portfolios-credit deteriorated, enabling it to pinpoint drivers of any unusual or unexpected trends. The Company also monitors its and industry-wide recovery rates. Additionally, because delinquencies are an early indicator of future net credit losses, the Company analyzes delinquency trends, adjusting for seasonality, to determine if the Company’s loans are performing in line with original estimations. The net credit loss analysis does not include considerations of the Company’s estimated ACL.

•Other income — The Company’s flow agreements and third-party servicing agreements have resulted in a large portfolio of assets serviced for others. These assets provide a steady stream of servicing income and may provide a gain or loss on sale. The Company monitors the size of the portfolio and average servicing fee rate and gain.

•Operating expenses — The Company assesses its operational efficiency using the cost-to-managed assets ratio. The Company performs extensive analysis to determine whether observed fluctuations in operating expense levels indicate a trend or are the nonrecurring impact of large projects. The operating expense analysis also includes a loan- and portfolio-level review of origination and servicing costs to assist the Company in assessing profitability by pool and vintage.

portfolio-level review of origination and servicing costs to assist the Company in assessing profitability by pool and vintage.

Because volume and portfolio size determine the magnitude of the impact of each of the above factors on the Company’s earnings, the Company also closely monitors origination and sales volume along with APR and discounts (including subvention and net of dealer participation).

Recent Developments and Other Factors Affecting The Company’s Results of Operations

COVID-19 Summary

Beginning in March 2020, the novel strain of coronavirus, or COVID-19, had materially impacted our business. Similar to many other financial institutions, we took measures to mitigate our customers’ COVID-19 related economic challenges. We experienced an increase in requests for extensions and modifications related to COVID-19 nationwide and a significant number of such extensions and modifications have been granted.

Please refer to Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2020 Annual Report on Form 10-K for additional details regarding COVID-19.

~~SHUSA~~Acquisition ~~Proposal~~by SHUSA

On July 2, 2021 the Company announced that it received a non-binding proposal (the “Proposal”) from SHUSA to acquire all of the outstanding shares of the Company’s common stock that are not currently owned by SHUSA ~~at a purchase price of $39.00 per share in cash~~, subject to the conditions set forth in the Proposal. The Board formed an independent special committee (the “Special Committee”), composed of William Rainer, William Muir, and Robert McCarthy and elected William Rainer as its chairperson, to consider the Proposal. The Special Committee ~~has~~ engaged independent financial and legal advisors to assist in its evaluation of the Proposal. There can be no assurance the Proposed Transaction will be completed, or as to the terms of any such transaction. The review and consideration of the Proposal, as well as any alternatives that may become available to the Company, may require the expenditure of significant time and resources by the Company.

47In August 2021, the Company entered into a definitive agreement whereby SHUSA agreed to acquire all of the outstanding shares of the common stock of the Company not already owned by SHUSA via an all-cash tender offer. Under the terms of the definitive agreement, a wholly-owned subsidiary of SHUSA commenced a tender offer to acquire all of the outstanding shares of the Company's common stock that SHUSA does not yet own at a price of $41.50 per share in cash. SHUSA agreed to acquire all remaining shares not tendered in the offer through a second- step merger at the same price as in the tender offer. Consummation of the tender offer is subject to various conditions, including regulatory approval of the Board of Governors of the Federal Reserve System and other customary conditions. Upon completion of the transaction, the Company would become a wholly-owned subsidiary of SHUSA.

Volume

The Company’s originations of retail installment contracts and leases, including revolving loans, average APR, and dealer discount (net of dealer participation) for the three and nine months ended September 30, 2021 and 2020 were as follows:

	Three Months Ended						~~Six~~Nine Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
	(Dollar amounts in thousands)
Retained Originations
Retail installment contracts	$	54,~~871~~432,~~823~~175		$	5,~~098~~344,~~496~~755		$	1014,~~115~~298,~~312~~345		$	813,~~832~~608,~~741~~298
Average APR	14.48		%	1113.7 %			1415.70		%	13.38 %
Average FICO® (a)	~~608~~606			~~657~~637			~~606~~603			~~635~~631
Premium	(2.34)		%	(01.93)		%	(2.01)		%	(01.80)		%
Personal loans (b)	$	—		$	~~347~~305,~~238~~039		$	—		$	~~618~~923,~~073~~112
Average APR	—		%	29.64 %			—		%	29.54 %
Leased vehicles	$	21,~~067~~577,~~741~~539		$	~~986~~1,~~617~~856,166		$	45,~~222~~799,~~247~~786		$	34,~~007~~863,~~338~~504
Finance lease	$	2,~~534~~816		$	14,~~927~~087		$	58,~~331~~147		$	49,~~929~~016
Total originations retained	$	76,~~942~~012,~~098~~530		$	67,~~434~~510,~~278~~047		$	1420,~~342~~106,~~890~~278		$	1219,~~463~~403,~~081~~930
Sold Originations
Retail installment contracts	$	—39,325		$	—80,144		$	~~235~~523,~~395~~862		$	~~111~~761,~~981~~323
Average APR	—4.9		%	—5.2 %		%	75.~~7 %~~3		%	4.48 %
Average FICO® (c)	—730			—738			~~699~~720			~~722~~734
Personal Loans (d)	$	—		$	—		$	292,709		$	—
Average APR	—		%	—		%	29.7		%	$	—
Total Originations Sold	$	—39,325		$	—80,144		$	~~528~~816,~~104~~571		$	~~111~~761,~~981~~323
Total originations (excluding SBNA Originations Program)	$	76,~~942~~051,~~098~~855		$	67,~~434~~590,~~278~~191		$	1420,~~870~~922,~~994~~849		$	1220,~~575~~165,~~062~~253

(a)Unpaid principal balance excluded from the weighted average FICO score is $~~559~~386 million and $~~586~~571 million for the three months ended ~~June~~September 30, 2021 and 2020, respectively, as the borrowers on these loans did not have FICO scores at origination and of these amounts, $~~187~~129 million and $~~102~~145 million, respectively, were commercial loans. Unpaid principal balance excluded from the weighted average FICO score is $1.04 billion and $1.05 billion for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, as the borrowers on these loans did not have FICO scores at origination and of these amounts, $~~341~~469 million and $~~241~~386 million, respectively, were commercial loans.

(b) Included in the total origination volume is $5872 million and $79151 million, for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, related to newly opened accounts.

(c) Unpaid principal balance excluded from the weighted average FICO score is $828 million and $980 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, zero were commercial loans for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

(d) Included in the total origination volume is $25 million for the three months ended March 31, 2021 related to related to newly opened accounts.

Total auto originations (excluding SBNA Origination Program) increased $21.97 billion, or 248.47%, from the ~~six~~nine months ended ~~June~~September 30, 2020 to ~~six~~nine months ended ~~June~~September 30, 2021. The Company's initiatives to improve our pricing, as well as, our dealer and customer experience have increased our competitive position in the market. The Company continues to focus on optimizing the loan quality of its portfolio with an appropriate balance of volume and risk. CCAP volume and penetration rates are influenced by strategies implemented by Stellantis ~~N.V.~~ and the Company, including product mix and incentives.

Beginning in 2018, the Company agreed to provide SBNA with origination support services in connection with the processing, underwriting and purchase of retail auto loans, primarily from Stellantis ~~N.V.~~ dealers. In addition, the Company agreed to perform the servicing for any loans originated on SBNA’s behalf. During the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020

4850

~~2020~~ the Company facilitated the purchase of $21.65 billion, $46.51 billion, $1.71 billion and $23.89 billion of retail installment contacts, respectively.

The Company’s originations of retail installment contracts and leases by vehicle type during the three and nine months ended September 30, 2021 and 2020 were as follows:

	Three Months Ended								~~Six~~Nine Months Ended
	June 30, 2021				June 30, 2020				June 30, 2021				June 30, 2020
	September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
	(Dollar amounts in thousands)
Retail installment contracts
Car	$	1,~~985~~537,~~636~~270	3334.84	%	$	1,~~180~~516,~~348~~163	2327.29	%	$	34,~~461~~998,~~375~~645	33.47	%	$	23,~~409~~926,~~963~~126	2627.93	%
Truck and utility	32,~~705~~788,~~706~~208		6362.13	%	3,~~760~~686,~~422~~966		7368.70	%	69,~~553~~341,~~153~~361		63.40	%	69,~~185~~872,~~934~~900		6968.27	%
Van and other (a)	~~180~~146,~~481~~022		3.13	%	~~157~~221,~~726~~770		34.1	%	~~336~~482,~~179~~201		3.23	%	~~348~~570,~~825~~595		34.90	%
	$	54,~~871~~471,~~823~~500	100.0	%	$	5,~~098~~424,~~496~~899	100.0	%	$	1014,~~350~~822,~~707~~207	100.0	%	$	814,~~944~~369,~~722~~621	100.0	%
Leased vehicles
Car	$	36,~~250~~489	12.83	%	$	4353,~~295~~985	42.49	%	$	71109,~~641~~199	1.79	%	$	~~113~~167,~~447~~432	3.84	%
Truck and utility	21,~~006~~517,~~334~~749		9796.02	%	~~924~~1,~~064~~769,518		9395.63	%	45,~~076~~593,~~244~~418		96.54	%	24,~~823~~593,~~632~~150		9394.95	%
Van and other (a)	2523,~~157~~301		1.25	%	1932,~~258~~663		21.08	%	7497,~~362~~169		1.87	%	70102,~~259~~922		2.31	%
	$	21,~~067~~577,~~741~~539	100.0	%	$	~~986~~1,~~617~~856,166	100.0	%	$	45,~~222~~799,~~247~~786	100.0	%	$	34,~~007~~863,~~338~~504	100.0	%
Total originations by vehicle type
Car	$	21,~~021~~573,~~886~~759	2526.50	%	$	1,~~223~~570,~~643~~148	2021.16	%

Filing Compare · Santander Consumer USA Holdings Inc.