UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

		
ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the quarterly period ended September 30, 2017

		
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
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)	 	(Zip Code)	
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)
 
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   ý  No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes   ý     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	 	ý	 	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   ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	
			
Class	 	Outstanding at October 31, 2017	
Common Stock ($0.01 par value)	 	359,946,656 shares	

INDEX

	

Cautionary Note Regarding Forward-Looking Information	3	
PART I: FINANCIAL INFORMATION	6	
Item 1. 	Unaudited Condensed Consolidated Financial Statements	6	
 	Unaudited Condensed Consolidated Balance Sheets	6	
 	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income	8	
 	Unaudited Condensed Consolidated Statements of Equity	9	
 	Unaudited Condensed Consolidated Statements of Cash Flows	10	
 	Note 1. Description of Business, Basis of Presentation, and Significant Accounting Policies and Practices	11	
 	Note 2. Finance Receivables	16	
 	Note 3. Leases	18	
 	Note 4. Credit Loss Allowance and Credit Quality	19	
 	Note 5. Debt	25	
 	Note 6. Variable Interest Entities	28	
 	Note 7. Derivative Financial Instruments	30	
 	Note 8. Other Assets	33	
 	Note 9. Income Taxes	34	
 	Note 10. Commitments and Contingencies	34	
 	Note 11. Related-Party Transactions	40	
 	Note 12. Computation of Basic and Diluted Earnings per Common Share	45	
 	Note 13. Fair Value of Financial Instruments	45	
 	Note 14. Employee Benefit Plans	50	
 	Note 15. Shareholders' Equity	51	
 	Note 16. Investment Gains (Losses), Net	52	
Item 2. 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52	
Item 3. 	Quantitative and Qualitative Disclosures About Market Risk	84	
Item 4. 	Controls and Procedures	84	
PART II: OTHER INFORMATION	89	
Item 1. 	Legal Proceedings	89	
Item 1A. 	Risk Factors	89	
Item 2. 	Unregistered Sales of Equity Securities and Use of Proceeds	89	
Item 3.	Defaults upon Senior Securities	89	
Item 4.	Mine Safety Disclosures	89	
Item 5.	Other Information	89	
Item 6. 	Exhibits	91	
SIGNATURES	92	
EXHIBITS	 	

2

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. For more information regarding these risks and uncertainties as well as certain additional risks that the Company faces, refer to the Risk Factors detailed in Item 1A of Part I of the 2016 Annual Report on Form 10-K, as well as factors more fully described in Part I, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, including the exhibits hereto, and subsequent reports and registration statements filed from time to time with the SEC. Among the factors that could cause the Company's actual results to differ materially from those suggested by the forward-looking statements are:

•	the Company operates in a highly regulated industry and continually changing federal, state, and local laws and regulations could materially adversely affect its business;	
		
•	the Company's ability to remediate any material weaknesses in internal controls over financial reporting completely and in a timely manner;	
		
•	adverse economic conditions in the United States and worldwide may negatively impact the Company's results;	
		
•	the business could suffer if access to funding is reduced;	
		
•	the Company faces significant risks implementing its growth strategy, some of which are outside its control;	
		
•	the Company may not realize the anticipated benefits from, and may incur unexpected costs and delays in connection with, exiting its personal lending business;	
		
•	the Company's agreement with FCA may not result in anticipated levels of growth and is subject to performance conditions that could result in termination of the agreement;	
		
•	the business could suffer if the Company is unsuccessful in developing and maintaining relationships with automobile dealerships;	
		
•	the Company's financial condition, liquidity, and results of operations depend on the credit performance of its loans;	
		
•	loss of the Company's key management or other personnel, or an inability to attract such management and personnel, could negatively impact its business;	
		
•	the Company is directly and indirectly, through its relationship with SHUSA, subject to certain banking and financial services regulations, including oversight by the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), the European Central Bank, and the Federal Reserve Bank of Boston (FRBB); such oversight and regulation may limit certain of the Company's activities, including the timing and amount of dividends and other limitations on the Company's business; and	
		
•	future changes in the Company's relationship with Santander could adversely affect its operations.	

If one or more of the factors affecting the Company's forward-looking statements proves incorrect, its actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking statements. Therefore, the Company cautions the reader not to place undue reliance on any forward-looking 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. Any forward-looking statements only speak as of the date of this document, and the Company undertakes no obligation to update any forward-looking 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.

3

Glossary

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

		
2016 Annual Report on Form 10-K
	Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 28, 2017 and Amendment No. 1 on Form 10-K/A filed with the SEC on March 2, 2017
	
ABS	Asset-backed securities	
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.
	
ALG	Automotive Lease Guide	
APR	Annual Percentage Rate	
ASC	Accounting Standards Codification	
ASU	Accounting Standards Update	
Auto Finance Holdings	Sponsor Auto Finance Holdings Series LP, a former investor in SC	
Bluestem	Bluestem Brands, Inc., an online retailer for whose customers SC provides financing	
Board	SC’s Board of Directors	
CBP	Citizens Bank of Pennsylvania	
CCART	Chrysler Capital Auto Receivables Trust, a securitization platform	
CEO	Chief Executive Officer	
CFPB	Consumer Financial Protection Bureau	
CFO	Chief Financial Officer	
Chrysler Agreement	Ten-year private-label financing agreement with FCA	
Clean-up Call	The early redemption of a debt instrument by the issuer, generally when the underlying portfolio has amortized to 10% of its original balance	
Commission	U.S. Securities and Exchange Commission	
Credit Enhancement	A method such as overcollateralization, insurance, or a third-party guarantee, whereby a borrower reduces default risk	
DCF	Discounted Cash Flow Analysis	
DDFS	Dundon DFS LLC	
Dealer Loan	A floorplan line of credit, real estate loan, working capital loan, or other credit extended to an automobile dealer	
Dodd-Frank Act	Comprehensive financial regulatory reform legislation enacted by the U.S. Congress on July 21, 2010	
DOJ	U.S. Department of Justice	
DRIVE	Drive Auto Receivables Trust, a securitization platform	
ECOA	Equal Credit Opportunity Act	
Employment Agreement	The amended and restated employment agreement, executed as of December 31, 2011, by and among SC, Banco Santander, S.A. and Thomas G. Dundon	
Exchange Act	Securities Exchange Act of 1934, as amended	
FASB	Financial Accounting Standards Board	
FCA	Fiat Chrysler Automobiles US LLC, formerly Chrysler Group LLC	
FICO®	A common credit score created by Fair Isaac Corporation that is used on the credit reports that lenders use to assess an applicant’s credit risk. FICO® is computed using mathematical models that take into account five factors: payment history, current level of indebtedness, types of credit used, length of credit history, and new credit	
FIRREA	Financial Institutions Reform, Recovery and Enforcement Act of 1989	
Floorplan Loan	A revolving line of credit that finances inventory until sold	
Federal Reserve	Board of Governors of the Federal Reserve System	
FRBB	Federal Reserve Bank of Boston	
FTC	Federal Trade Commission	

4

	
		
GAP	Guaranteed Auto Protection	
IPO	SC's Initial Public Offering	
ISDA	International Swaps and Derivative Association	
LendingClub	LendingClub Corporation, a peer-to-peer personal lending platform company from which SC acquired loans under terms of flow agreements	
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	
MSA	Master Service Agreement	
Nonaccretable Difference	The difference between the undiscounted contractual cash flows and the undiscounted expected cash flows of a portfolio acquired with deteriorated credit quality	
OCC	Office of the Comptroller of the Currency	
Overcollateralization	A credit enhancement method whereby more collateral is posted than is required to obtain financing	
OEM	Original equipment manufacturer	
Private-label	Financing branded in the name of the product manufacturer rather than in the name of the finance provider	
RC	Risk Committee	
Remarketing	The controlled disposal of leased vehicles that have been reached the end of their lease term or of financed vehicles obtained through repossession	
Residual Value	The future value of a leased asset at the end of its lease term	
RSU	Restricted stock unit	
Santander	Banco Santander, S.A.	
SBNA	Santander Bank, N.A., a wholly-owned subsidiary of SHUSA. Formerly Sovereign Bank, N.A.	
SC	Santander Consumer USA Holdings Inc., a Delaware corporation, and its consolidated subsidiaries	
SCI	Santander Consumer International Puerto Rico, LLC	
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	
Separation Agreement	The Separation Agreement dated July 2, 2015 entered into by Thomas G. Dundon with SC, DDFS LLC, SHUSA, Santander Consumer USA Inc. (the wholly owned subsidiary of SC) and Banco Santander, S.A.	
Shareholders Agreement
	The Shareholders Agreement dated January 28, 2014, by and among the Company, SHUSA, DDFS, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP, and, for the certain sections set forth therein, Banco Santander, as amended	
SHUSA	Santander Holdings USA, Inc., a wholly-owned subsidiary of Santander and the majority owner of SC	
SPAIN	Santander Prime Auto Issuing Note Trust, a securitization platform	
Subvention	Reimbursement of the finance provider by a manufacturer for the difference between a market loan or lease rate and the below-market rate given to a customer	
TDR	Troubled Debt Restructuring	
Trusts	Special purpose financing trusts utilized in SC’s financing transactions	
U.S. GAAP	U.S. Generally Accepted Accounting Principles	
VIE	Variable Interest Entity	
Warehouse Line	A revolving line of credit generally used to fund finance receivable originations	

5

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 per share amounts)

								
 	September 30,
2017	 	December 31,
2016	
Assets	 	 	 	
Cash and cash equivalents - $71,870 and $98,536 held at affiliates, respectively	$	397,311		 	$	160,180		
Finance receivables held for sale, net	1,775,459		 	2,123,415		
Finance receivables held for investment, net (includes $24,799 and $24,495 of loans recorded at fair value, respectively)	22,667,203		 	23,481,001		
Restricted cash - $3,035 and $11,629 held at affiliates, respectively	2,559,246		 	2,757,299		
Accrued interest receivable	330,554		 	373,274		
Leased vehicles, net	9,931,283		 	8,564,628		
Furniture and equipment, net of accumulated depreciation of $49,963 and $47,365, respectively	72,519		 	67,509		
Federal, state and other income taxes receivable	112,794		 	87,352		
Related party taxes receivable	467		 	1,087		
Goodwill	74,056		 	74,056		
Intangible assets, net of amortization of $39,265 and $33,652, respectively	31,534		 	32,623		
Due from affiliates	26,871		 	31,270		
Other assets	786,260		 	785,410		
Total assets	$	38,765,557		 	$	38,539,104		
Liabilities and Equity	 	 	 	
Liabilities:	 	 	 	
Notes payable — credit facilities	$	4,965,888		 	$	6,739,817		
Notes payable — secured structured financings	23,258,363		 	21,608,889		
Notes payable — related party	2,369,850		 	2,975,000		
Accrued interest payable	38,012		 	33,346		
Accounts payable and accrued expenses	336,390		 	379,021		
Deferred tax liabilities, net	1,515,932		 	1,278,064		
Due to affiliates	67,059		 	50,620		
Other liabilities	328,829		 	235,728		
Total liabilities	32,880,323		 	33,300,485		
Commitments and contingencies (Notes 5 and 10)		 		
Equity:	 	 	 	
Common stock, $0.01 par value — 1,100,000,000 shares authorized;	 	 	 	
359,873,905 and 359,002,145 shares issued and 359,750,398 and 358,907,550 shares outstanding, respectively	3,598		 	3,589		
Additional paid-in capital	1,672,392		 	1,657,611		
Accumulated other comprehensive income, net	27,481		 	28,259		
Retained earnings	4,181,763		 	3,549,160		
Total stockholders’ equity	5,885,234		 	5,238,619		
Total liabilities and equity	$	38,765,557		 	$	38,539,104		

See notes to unaudited condensed consolidated financial statements.

6

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Dollars in thousands)

The assets of consolidated variable interest entities ( 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:

								
 	September 30,
2017	 	December 31,
2016	
Assets	 	 	 	
Restricted cash	$	1,969,094		 	$	2,087,177		
Finance receivables held for sale, net	832,394		 	1,012,277		
Finance receivables held for investment, net	21,902,383		 	22,919,312		
Leased vehicles, net	9,931,283		 	8,564,628		
Various other assets	634,338		 	686,253		
Total assets	$	35,269,492		 	$	35,269,647		
Liabilities	 	 	 	
Notes payable	$	28,651,897		 	$	31,659,203		
Various other liabilities	153,942		 	91,234		
Total liabilities	$	28,805,839		 	$	31,750,437		

Certain 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 U.S. GAAP.

See notes to unaudited condensed consolidated financial statements.

7

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 
 September 30,	 	For the Nine Months Ended 
 September 30,	
 	2017	 	2016	 	2017	 	2016	
Interest on finance receivables and loans	$	1,185,059		 	$	1,246,386		 	$	3,626,497		 	$	3,804,322		
Leased vehicle income	457,932		 	388,501		 	1,305,429		 	1,086,651		
Other finance and interest income	6,385		 	3,638		 	15,415		 	11,440		
Total finance and other interest income	1,649,376		 	1,638,525		 	4,947,341		 	4,902,413		
Interest expense — Including $35,132, $28,131, $109,648 and $88,814 to affiliates, respectively	250,674		 	207,175		 	711,134		 	590,504		
Leased vehicle expense	339,581		 	252,730		 	927,976		 	717,230		
Net finance and other interest income	1,059,121		 	1,178,620		 	3,308,231		 	3,594,679		
Provision for credit losses	536,447		 	610,398		 	1,692,015		 	1,782,489		
Net finance and other interest income after provision for credit losses	522,674		 	568,222		 	1,616,216		 	1,812,190		
Profit sharing	5,945		 	6,400		 	22,333		 	35,640		
Net finance and other interest income after provision for credit losses and profit sharing	516,729		 	561,822		 	1,593,883		 	1,776,550		
Investment gains (losses), net — Including $29,081, $346, $22,900, and $346 from affiliates, respectively	(52,592	)	 	(106,050	)	 	(228,513	)	 	(276,415	)	
Servicing fee income — Including $2,739, $4,049, $8,627 and $13,180 from affiliates, respectively	28,673		 	36,447		 	92,310		 	123,929		
Fees, commissions, and other — Including $225, $225, $830 and $675 from affiliates, respectively	82,866		 	96,285		 	275,025		 	294,028		
Total other income	58,947		 	26,682		 	138,822		 	141,542		
Compensation expense	134,169		 	128,056		 	398,325		 	371,242		
Repossession expense	66,877		 	75,920		 	205,445		 	217,816		
Other operating costs — Including $1,037, ($871), $3,403, and $3,615 to affiliates, respectively	96,857		 	80,508		 	281,626		 	258,509		
Total operating expenses	297,903		 	284,484		 	885,396		 	847,567		
Income before income taxes	277,773		 	304,020		 	847,309		 	1,070,525		
Income tax expense	78,385		 	90,473		 	239,819		 	365,334		
Net income	$	199,388		 	$	213,547		 	$	607,490		 	$	705,191		
 	 	 	 	 	 	 	 	
Net income	$	199,388		 	$	213,547		 	$	607,490		 	$	705,191		
Other comprehensive income (loss):	 	 	 	 	 	 	 	
Change in unrealized gains (losses) on cash flow hedges, net of tax of $201, (14,397), $297, and $17,081, respectively	(379	)	 	24,168		 	(778	)	 	(28,723	)	
Comprehensive income	$	199,009		 	$	237,715		 	$	606,712		 	$	676,468		
Net income per common share (basic)	$	0.55		 	$	0.60		 	$	1.69		 	$	1.97		
Net income per common share (diluted)	$	0.55		 	$	0.59		 	$	1.69		 	$	1.96		
Weighted average common shares (basic)	359,619,083		 	358,343,781		 	359,397,063		 	358,179,618		
Weighted average common shares (diluted)	360,460,353		 	360,087,749		 	360,069,449		 	359,635,034		

See notes to unaudited condensed consolidated financial statements.

8

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited) (In thousands)

	
																							
 	Common Stock	 	Additional
Paid-In Capital	 	Accumulated
Other
Comprehensive Income (Loss)	 	Retained Earnings	 	Total
Stockholders’ Equity	
 	Shares	 	Amount	 		 		 		 		
Balance — January 1, 2016	357,946		 	$	3,579		 	$	1,644,151		 	$	2,125		 	$	2,782,694		 	$	4,432,549		
Stock issued in connection with employee incentive compensation plans	410		 	5		 	2,014		 	—		 	—		 	2,019		
Stock-based compensation expense	—		 	—		 	7,013		 	—		 	—		 	7,013		
 Tax sharing with affiliate	—		 	—		 	(392	)	 	—		 	—		 	(392	)	
 Net income	—		 	—		 	—		 	—		 	705,191		 	705,191		
Other comprehensive income (loss), net of taxes	—		 	—		 	—		 	(28,723	)	 	—		 	(28,723	)	
Balance — September 30, 2016	358,356		 	$	3,584		 	$	1,652,786		 	$	(26,598	)	 	$	3,487,885		 	$	5,117,657		
 	 	 	 	 	 	 	 	 	 	 	 	
Balance — January 1, 2017	358,908		 	$	3,589		 	$	1,657,611		 	$	28,259		 	$	3,549,160		 	$	5,238,619		
Cumulative-effect adjustment upon adoption of ASU 2016-09 (Note 1)	—		 	—		 	1,439		 	—		 	25,113		 	26,552		
Stock issued in connection with employee incentive compensation plans	871		 	9		 	1,582		 	—		 	—		 	1,591		
 Stock-based compensation expense	—		 	—		 	12,166		 	—		 	—		 	12,166		
Purchase of treasury stock	(29	)	 	—		 	(404	)	 	—		 	—		 	(404	)	
 Tax sharing with affiliate	—		 	—		 	(2	)	 	—		 	—		 	(2	)	
 Net income	—		 	—		 	—		 	—		 	607,490		 	607,490		
Other comprehensive income (loss), net of taxes	—		 	—		 	—		 	(778	)	 	—		 	(778	)	
Balance — September 30, 2017	359,750		 	$	3,598		 	$	1,672,392		 	$	27,481		 	$	4,181,763		 	$	5,885,234		
 
See notes to unaudited condensed consolidated financial statements.

9

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Dollars in thousands)

								
 	For the Nine Months Ended 
 September 30,	
 	2017	 	2016	
Cash flows from operating activities:	 	 	 	
Net income	$	607,490		 	$	705,191		
Adjustments to reconcile net income to net cash provided by operating activities	 	 	 	
Derivative mark to market	(7,694	)	 	4,653		
Provision for credit losses	1,692,015		 	1,782,489		
Depreciation and amortization	1,013,738		 	788,084		
Accretion of discount	(193,473	)	 	(281,295	)	
Originations and purchases of receivables held for sale	(2,773,407	)	 	(3,018,287	)	
Proceeds from sales of and collections on receivables held for sale	3,032,688		 	2,460,399		
Change in revolving personal loans	(139,358	)	 	(471,061	)	
Investment losses, net	228,513		 	276,415		
Stock-based compensation	12,166		 	7,013		
Deferred tax expense	264,720		 	363,036		
Changes in assets and liabilities:	 	 	 	
Accrued interest receivable	21,729		 	13,591		
Accounts receivable	(6,049	)	 	7,161		
Federal income tax and other taxes	(24,823	)	 	176,978		
Other assets	(61,765	)	 	(31,572	)	
Accrued interest payable	(86	)	 	6,657		
Other liabilities	(28,176	)	 	(106,879	)	
Due to/from affiliates	27,858		 	(6,440	)	
Net cash provided by operating activities	3,666,086		 	2,676,133		
Cash flows from investing activities:	 	 	 	
Originations of and disbursements on finance receivables held for investment	(8,448,231	)	 	(9,769,563	)	
Purchases of portfolios of finance receivables held for investment	(228,843	)	 	(427,384	)	
Collections on finance receivables held for investment	7,744,969		 	7,875,592		
Proceeds from sale of loans held for investment	135,577		 	823,877		
Leased vehicles purchased	(4,718,388	)	 	(4,624,096	)	
Manufacturer incentives received	787,093		 	1,081,399		
Proceeds from sale of leased vehicles	1,807,729		 	1,135,723		
Change in revolving personal loans	57,761		 	362,671		
Purchases of furniture and equipment	(15,113	)	 	(19,971	)	
Sales of furniture and equipment	747		 	1,985		
Change in restricted cash	191,842		 	(460,749	)	
Other investing activities	(5,852	)	 	(6,165	)	
Net cash used in investing activities	(2,690,709	)	 	(4,026,681	)	
Cash flows from financing activities:	 	 	 	
Proceeds from notes payable related to secured structured financings — net of debt issuance costs	12,272,344		 	9,637,933		
Payments on notes payable related to secured structured financings	(10,638,153	)	 	(9,130,280	)	
Proceeds from unsecured notes payable	6,165,000		 	6,718,900		
Payments on unsecured notes payable	(4,885,577	)	 	(6,968,900	)	
Proceeds from notes payable	15,466,611		 	15,885,951		
Payments on notes payable	(19,123,441	)	 	(14,738,924	)	
Proceeds from stock option exercises, gross	4,970		 	2,848		
Net cash provided by (used in) financing activities	(738,246	)	 	1,407,528		
Net increase in cash and cash equivalents	237,131		 	56,980		
Cash — Beginning of period	160,180		 	18,893		
Cash — End of period	$	397,311		 	$	75,873		
 	 	 	 	
Noncash investing and financing transactions:	 	 	 	
Transfer of secured notes payable to (from) unsecured notes payable	$	(495,991	)	 	$	—		

See notes to unaudited condensed consolidated financial statements.

10

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 Significant Accounting Policies and Practices
Santander Consumer USA Holdings Inc., a Delaware corporation (together with its subsidiaries, SC or the Company), is the holding company for Santander Consumer USA Inc., an Illinois corporation (SC Illinois), and its subsidiaries, a specialized consumer finance company focused on vehicle finance and third-party servicing. The Company’s primary business is the indirect origination and securitization of retail installment contracts principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers.
In conjunction with a ten -year private label financing agreement (the Chrysler Agreement) with Fiat Chrysler Automobiles US LLC (FCA) that became effective May 1, 2013, the Company offers a full spectrum of auto financing products and services to FCA customers and dealers under the Chrysler Capital 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 several relationships through which it provides personal loans, private-label credit cards and other consumer finance products.
As of September 30, 2017 , the Company was owned approximately 58.7% by Santander Holdings USA, Inc. (SHUSA), a subsidiary of Banco Santander, S.A. (Santander), approximately 31.6% by public shareholders, approximately 9.7% by DDFS LLC, an entity affiliated with Thomas G. Dundon, the Company’s former Chairman and CEO, and an insignificant amount held by other holders, primarily members of senior management.
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries, including certain Trusts, which are considered variable interest entities (VIEs). The Company also consolidates other VIEs for which it was deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying condensed consolidated financial statements as of September 30, 2017 and December 31, 2016 , and for the three and nine months ended September 30, 2017 and 2016 , have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the financial position, results of operations and cash flows for the periods indicated. 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 2016 Annual Report on Form 10-K.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities, as of the date of the financial statements and the amount of revenue and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. These estimates include the determination of credit loss allowance, discount accretion, impairment, fair value, expected end-of-term lease residual values, values of repossessed assets, and income taxes. These estimates, although based on actual historical trends and modeling, may potentially show significant variances over time.

Business Segment Information

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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 dealer loans, as well as financial products and services related to motorcycles, recreational vehicles, and marine vehicles. It also includes the Company’s personal loan and point-of-sale financing operations.
Accounting Policies
There have been no material changes in the Company's accounting policies from those disclosed in Part II, Item 8 - Financial Statements and Supplementary Data in the 2016 Annual Report on Form 10-K.
Recently Adopted Accounting Standards
Since January 1, 2017, the Company adopted the following Financial Accounting Standards Board (FASB) Accounting Standards Updates (ASUs):
		
•	ASU 2016-09, Compensation - Stock Compensation (Topic 718) . This new guidance simplifies certain aspects related to income taxes, the Statement of Cash Flows (SCF), and forfeitures when accounting for share-based payment transactions. ASU 2016-09 eliminates the requirement to recognize excess tax benefits in APIC pools, and instead requires companies to record all excess tax benefits and deficiencies at settlement, vesting or expiration in the income statement as provision for income taxes. At adoption of ASU 2016-09 on January 1, 2017, the cumulative-effect for previously unrecognized excess tax benefits totaled $26,552 net of tax, and was recognized, as an increase, through an adjustment in beginning retained earnings. The Company recorded excess tax deficiency, net of tax of $671 and $430 in the provision for income taxes rather than as an increase to additional paid-in capital for the three and nine months ended September 30, 2017 , respectively, on a prospective basis. Therefore, the prior period presented has not been adjusted. All excess tax benefits along with other income tax cash flows are now being classified as operating activities rather than financing activities in the SCF on a prospective basis.	
In addition, the Company changed its accounting policy on forfeitures from previously recognizing forfeitures based on estimating the number of awards expected to be forfeited to electing to recognize forfeiture of awards as they occur to simplify the accounting for forfeitures. This resulted in a cumulative adjustment, as a decrease to, beginning retained earnings of $1,439 .
		
•	ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships . The new guidance clarifies that a change in the counterparties to a derivative contract, i.e., a novation, in and of itself, does not require the de-designation of a hedging relationship. An entity will, however, still need to evaluate whether it is probable that the counterparty will perform under the contract as part of its ongoing effectiveness assessment for hedge accounting. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.	
		
•	ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This new guidance clarifies that an exercise contingency does not need to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis of hybrid financial instruments. In other words, a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument without regard to the nature of the exercise contingency. However, as required under existing guidance, companies will still need to evaluate other relevant embedded derivative guidance, such as whether the payoff from the contingent put or call option is adjusted based on changes in an index other than interest rates or credit risk, and whether the debt involves a substantial premium or discount. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.	
		
•	ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323) . The new guidance eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. Instead, the equity method of accounting should be applied prospectively from the date significant influence is obtained. Investors should add the cost of acquiring the additional interest in the investee (if any) to the current basis of their previously held interest. The new standard also provides specific guidance for available-for-sale securities that become eligible for the equity method of accounting. In those cases, any unrealized gain	

12

or loss recorded within accumulated other comprehensive income should be recognized in earnings at the date the investment initially qualifies for the use of the equity method of accounting. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.
		
•	ASU 2016-17, Consolidation (Topic 810), Interest Held Through Related Parties That Are Under Common Control, which amends the guidance in U.S. GAAP on related parties that are under common control. Specifically, the new ASU requires that a single decision maker consider indirect interests held by related parties under common control on a proportionate basis in a manner consistent with its evaluation of indirect interests held through other related parties. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.	
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , superseding the revenue recognition requirements in ASC 605. This ASU requires an entity to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment includes a five-step process to assist an entity in achieving the main principle(s) of revenue recognition under ASC 605. In August 2015, the FASB issued ASU 2015-14, which formalized the deferral of the effective date of the amendment for a period of one year from the original effective date. Following the issuance of ASU 2015-14, the amendment will be effective for the Company for the first annual period beginning after December 15, 2017. In March 2016, the FASB also issued ASU 2016-08, an amendment to the guidance in ASU 2014-09, which revises the structure of the indicators to provide indicators of when the entity is the principal or agent in a revenue transaction, and eliminated two of the indicators (“the entity’s consideration is in the form of a commission” and “the entity is not exposed to credit risk”) in making that determination. This amendment also clarifies that each indicator may be more or less relevant to the assessment depending on the terms and conditions of the contract. In April 2016, the FASB issued ASU 2016-10, which clarifies the implementation guidance on identifying promised goods or services and on determining whether an entity’s promise to grant a license with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU 2016-12, an amendment to ASU 2014-09, which provided practical expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on transition, collectability, non-cash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB issued ASU 2016-20, a separate update for technical corrections and improvements to Topic 606 and other Topics amended by Update 2014-09 to increase stakeholders’ awareness of the proposals and to expedite improvements to Update 2014-09. The amendments, collectively, should be applied retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.
Because ASU 2014-09 does not apply to revenue associated with leases and financial instruments (including loans and securities), the Company does not expect the new guidance to have a material impact on the elements of its Consolidated Statements of Operations most closely associated with leases and financial instruments (such as interest income, interest expense and investment gain). The Company expects to adopt this ASU in the first quarter of 2018 with a cumulative-effect adjustment to opening retained earnings. The Company’s ongoing implementation efforts include the identification of other revenue streams that are within the scope of the new guidance and reviewing related contracts with customers. Upon adoption of this standard, the Company does not expect the impact to be material to its financial position, results of operation or cash flow and expects the impact to be disclosure only.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities . This amendment requires that equity investments, except those accounted for under the equity method of accounting or which result in consolidation of the investee, to be measured at fair value, with changes in the fair value being recorded in net income. However, equity investments that do not have readily determinable fair values will be measured at cost less impairment, if any, plus the effect of changes resulting from observable price transactions in orderly transactions or for the identical or similar investment of the same issuer. The amendment also simplifies the impairment assessment of equity instruments that do not have readily determinable fair values, eliminates the requirement to disclose methods and assumptions used to estimate fair value of instruments measured at their amortized cost on the balance sheet, requires that the disclosed

13

fair values of financial instruments represent "exit price," requires entities to separately present in other comprehensive income the portion of the total change in fair value of a liability resulting from instrument-specific credit risk when the fair value option has been elected for that liability, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes, and clarifies that an entity should evaluate the need for a valuation allowance on its deferred tax asset related to its available-for-sale securities in combination with its other deferred tax assets. This amendment will be effective for the Company for the first reporting period beginning after December 15, 2017, with earlier adoption permitted by public entities on a limited basis. Adoption of the amendment must be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, except for amendments related to equity instruments that do not have readily determinable fair values, for which it should be applied prospectively. Upon adoption of this standard, the Company does not expect the impact to be material to its financial position, results of operations, cash flows or disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases, which will, among other impacts, change the criteria under which leases are identified and accounted for as on- or off-balance sheet. The guidance will be effective for the fiscal year beginning after December 15, 2018, including interim periods within that year. Once effective, the new guidance must be applied for all periods presented. The Company does not expect the new guidance to have a material impact on the Consolidated Statements of Income or the Consolidated Statements of Shareholders' Equity, since the Company recognizes assets and liabilities for all of its vehicle lease transactions. The Company will continue to evaluate the impact of the new guidance on its operating leases primarily for office space and computer equipment. Upon adoption, the Company will gross up its balance sheet by the present value of future minimum lease payments for these operating leases.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses , which changes the criteria under which credit losses are measured. The amendment introduces a new credit reserving model known as the Current Expected Credit Loss (CECL) model, which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to establish credit loss estimates. The guidance will be effective for the fiscal year beginning after December 15, 2019, including interim periods within that year. The Company does not intend to adopt the new standard early and is currently evaluating the impact the new guidance will have on its financial position, results of operations and cash flows; however, it is expected that the new CECL model will alter the assumptions used in calculating the Company's credit losses, given the change to estimated losses for the estimated life of the financial asset, and will likely result in material changes to the Company’s credit and capital reserves.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments . This update amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the SCF. The ASU’s amendments add or clarify guidance on eight cash flow issues including debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The guidance will be effective for the fiscal year beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted, including adoption in an interim period, however any adjustments should be reflected as of the beginning of the fiscal year that includes the period of adoption. All of the amended guidance must be adopted in the same period. Upon adoption of this standard, the Company does not expect the impact to be material to its financial position, results of operations or cash flows.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory , which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This eliminates the current exception for all intra-entity transfers of an asset other than inventory that requires deferral of the tax effects until the asset is sold to a third party or otherwise recovered through use. The guidance will be effective for the Company for annual reporting periods beginning after December 15, 2017, including interim reporting periods. Early adoption is permitted at the beginning of an annual reporting period for which annual or interim financial statements have not been issued or made available for issuance. Upon

14

adoption of this standard, the Company does not expect the impact to be material to its financial position, results of operation or cash flow.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (A consensus of the FASB Emerging Issues Task Force) , which requires that the statement of cash flows include restricted cash in the beginning and end-of-period total amounts shown on the statement of cash flows and that the statement of cash flows explain changes in restricted cash during the period. The guidance will be effective for the Company for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, however, adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company does not expect the adoption of this ASU to have an impact on its financial position, results of operations or cash flows and expects the impact to be disclosure only.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business . The new guidance revises the definition of a business, potentially affecting areas of accounting such as acquisitions, disposals, goodwill impairment, and consolidation. Under the new guidance, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the assets acquired (or disposed of) would not represent a business. If this initial screen is met, no further analysis would be required. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create an output. In addition, the amendments narrow the definition of the term “output” so that it is consistent with how outputs are defined in ASC Topic 606, Revenue from Contracts with Customers . This new guidance will be effective for the Company for the first reporting period beginning after December 15, 2017, with earlier adoption permitted. Adoption of the amendments must be applied on a prospective basis. The Company does not expect the adoption of this ASU to have an impact on its financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill & Other (Topic 350): Simplifying the Accounting for Goodwill Impairment . It removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. The new rules state that a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. The revised guidance will be applied prospectively, and is effective January 1, 2020, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company expects to early adopt this ASU in the fourth quarter of 2017 and does not expect the adoption of this ASU to have an impact on its financial position, results of operations or cash flows and expects the impact to be disclosure only.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the ASU, entities will apply modification accounting guidance if the value, vesting conditions or classification of award changes. The new guidance also clarifies that a modification to an award could be significant and therefore require disclosure, even if modification accounting is not required. The guidance will be applied prospectively to awards modified on or after the adoption date and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including in an interim period. The Company does not expect the adoption of this ASU to have an impact on its financial position, results of operations or cash flows.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities . The new guidance amends the hedge accounting model to enable entities to better portray their risk management activities in the financial statements. The amendments expand an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line in which the earnings effect of the hedged item is reported. The new guidance is effective for public business entities for fiscal years beginning after December 15,

15

2018, with early adoption, including adoption in an interim period, permitted. The Company is in the process of evaluating the impact of the adoption of this ASU.
		
2.	Finance Receivables	
Held For Investment
Finance receivables held for investment, net is comprised of the following at September 30, 2017 and December 31, 2016 :

								
 	September 30,
2017	 	December 31, 2016	
Retail installment contracts acquired individually (a)	$	22,599,161		 	$	23,219,724		
Purchased receivables	30,396		 	158,264		
Receivables from dealers	15,902		 	68,707		
Personal loans	5,623		 	12,272		
Capital lease receivables (Note 3)	16,121		 	22,034		
Finance receivables held for investment, net	$	22,667,203		 	$	23,481,001		
(a) The Company has elected the fair value option for certain retail installment contracts reported in finance receivables held for investment, net. As at September 30, 2017 and December 31, 2016 , $24,799 and $24,495 of loans were recorded at fair value (Note 13).
The Company's held for investment portfolio of retail installment contracts acquired individually, receivables from dealers, and personal loans is comprised of the following at September 30, 2017 and December 31, 2016 :

																
	September 30, 2017	
	Retail Installment Contracts
Acquired
Individually		Receivables from
Dealers		Personal Loans	
	Non-TDR		TDR					
Unpaid principal balance	$	20,044,330			$	6,276,659			$	16,069			$	9,188		
Credit loss allowance - specific	—			(1,782,114	)		—			—		
Credit loss allowance - collective	(1,589,151	)		—			(167	)		(3,725	)	
Discount	(331,179	)		(84,588	)		—			(16	)	
Capitalized origination costs and fees	59,295			5,909			—			176		
Net carrying balance	$	18,183,295			$	4,415,866			$	15,902			$	5,623		

																
	December 31, 2016	
	Retail Installment Contracts
Acquired
Individually		Receivables from
Dealers		Personal Loans	
	Non-TDR		TDR					
Unpaid principal balance	$	21,528,406			$	5,599,567			$	69,431			$	19,361		
Credit loss allowance - specific	—			(1,611,295	)		—			—		
Credit loss allowance - collective	(1,799,760	)		—			(724	)		—		
Discount	(467,757	)		(91,359	)		—			(7,721	)	
Capitalized origination costs and fees	56,704			5,218			—			632		
Net carrying balance	$	19,317,593			$	3,902,131			$	68,707			$	12,272		
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 5). Most of the borrowers on the Company’s retail installment contracts held for investment are retail consumers; however, $634,677 and $848,918 of the unpaid principal balance represented fleet contracts with commercial borrowers as of September 30, 2017 and December 31, 2016 , respectively.

16

During the nine months ended September 30, 2017 and 2016 , the Company originated $5,168,089 and $6,507,597 , respectively, in Chrysler Capital loans which represented 46% and 51% , respectively, of the total retail installment contract originations. Additionally, during the nine months ended September 30, 2017 and 2016 , the Company originated $4,693,392 and $4,612,284 , respectively, in Chrysler Capital leases. As of September 30, 2017 and December 31, 2016 , the Company's auto retail installment contract portfolio consisted of $6,936,988 and $7,365,444 , respectively, of Chrysler loans which represents 31% and 32% , respectively, of the Company's auto retail installment contract portfolio. Retail installment contracts and vehicle leases entered into with FCA customers, as part of the Chrysler Agreement, represent a significant concentration of those portfolios and there is a risk that the Chrysler Agreement could be terminated prior to its expiration date. Termination of the Chrysler Agreement could result in a decrease in the amount of new retail installment contracts and vehicle leases entered into with FCA customers.
As of September 30, 2017 , borrowers on the Company’s retail installment contracts held for investment are located in Texas ( 16% ), Florida ( 12% ), California ( 9% ), Georgia ( 6% ) and other states each individually representing less than 5% of the Company’s total portfolio.
Purchased receivables

Purchased receivables portfolios, which were acquired with deteriorated credit quality, is comprised of the following at September 30, 2017 and December 31, 2016 :

								
 	September 30,
2017	 	December 31, 2016	
Outstanding balance	$	49,089		 	$	231,360		
Outstanding recorded investment, net of impairment	30,646		 	159,451		
Changes in accretable yield on the Company’s purchased receivables portfolios for the periods indicated were as follows: 

																
 	For the Three Months Ended 
 September 30,	 	For the Nine Months Ended 
 September 30,	
 	2017	 	2016	 	2017	 	2016	
Balance — beginning of period	$	87,994		 	$	137,747		 	$	107,041		 	$	178,582		
Accretion of accretable yield	(5,223	)	 	(17,830	)	 	(26,670	)	 	(58,774	)	
Disposals/transfers	(62,183	)	 	—		 	(62,183	)	 	—		
Reclassifications from (to) nonaccretable difference (a)	1,648		 	(8,627	)	 	4,048		 	(8,518	)	
Balance — end of period	$	22,236		 	$	111,290		 	$	22,236		 	$	111,290		
(a) Reclassifications from (to) nonaccretable difference represents the increases (decreases) in accretable yield resulting from higher (lower) estimated undiscounted cash flows.
During the three months ended September 30, 2017 , the Company sold receivables previously acquired with deteriorated credit quality to SBNA (Note 11). Carrying value of the receivables at the date of sale was $99,301 . No such sales occurred during the three or nine months ended September 30, 2016.
During the three and nine months ended September 30, 2017 and 2016 , the Company did not acquire any vehicle loan portfolios for which it was probable at acquisition that not all contractually required payments would be collected. However, during the three months ended September 30, 2016, the Company recognized certain retail installment contracts with an unpaid principal balance of $135,772 ( nil for the three months ended September 30, 2017 ) and for the nine months ended September 30, 2017 and 2016, the Company recognized certain retail installment contracts with an unpaid principal balance of $226,613 and $327,443 , respectively, held by non-consolidated securitization Trusts, under optional clean-up calls. 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 re-recognition date), for which it was probable that not all contractually required payments would be collected (Note 13).
Receivable from Dealers

17

The receivables from dealers held for investment are all Chrysler Agreement-related. As of September 30, 2017 , borrowers on these dealer receivables are located in Virginia ( 62% ), New York ( 28% ), Missouri ( 10% ) and Wisconsin ( 1% ). The Company previously held a term loan with a third-party vehicle dealer and lender that operates in multiple states. The loan allowed committed borrowings of $50,000 at December 31, 2016 . During the three months ended September 30, 2017 , the unpaid principal balance of the facility of $50,000 along with accrued interest was repaid.
Personal Loans
At September 30, 2016, the Company determined that its intent to sell certain personal revolving loans had changed and now expects to hold these loans through their maturity. The Company recorded a lower of cost or market adjustment through investment gains (losses), net, immediately prior to transferring the loans to finance receivables held for investment at their new recorded investment. The carrying value of these loans was $5,623 and $11,733 at September 30, 2017 and December 31, 2016 , respectively.
Held For Sale
The carrying value of the Company's finance receivables held for sale, net is comprised of the following at September 30, 2017 and December 31, 2016 :

								
 	September 30,
2017	 	December 31, 2016	
Retail installment contracts acquired individually	$	845,910		 	$	1,045,815		
Personal loans	929,549		 	1,077,600		
Finance receivables held for sale, net	$	1,775,459		 	$	2,123,415		
Sales of retail installment contracts to third parties and proceeds from sales of charged-off assets for the three and nine months ended September 30, 2017 and 2016 were as follows:

														
 	For the Three Months Ended 
 September 30,	 	For the Nine Months Ended 
 September 30,	
 	2017	 	2016	 	2017	 	2016	
Sales of retail installment contracts to third parties	—		 	$	793,804		 	260,568		 	$	2,312,983		
Proceeds from sales of charged-off assets	27,954		 	12,521		 	76,746		 	47,594		

The Company retains servicing of retail installment contracts and leases sold to third parties. Total contracts sold to unrelated third parties and serviced as of September 30, 2017 and December 31, 2016 were as follows:

								
 	September 30,
2017	 	December 31, 2016	
Serviced balance of retail installment contracts and leases sold to third parties	$	6,674,980		 	$	10,116,788		

3.	Leases	
The Company has both operating and capital 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 capital leases are included in finance receivables held for investment, net.
Operating Leases
Leased vehicles, net, which is comprised of leases originated under the Chrysler Agreement, consisted of the following as of September 30, 2017 and December 31, 2016 :

18

	
								
 	September 30,
2017	 	December 31,
2016	
Leased vehicles	$	13,831,441		 	$	11,939,295		
Less: accumulated depreciation	(2,830,041	)	 	(2,326,342	)	
Depreciated net capitalized cost	11,001,400		 	9,612,953		
Manufacturer subvention payments, net of accretion	(1,098,331	)	 	(1,066,531	)	
Origination fees and other costs	28,214		 	18,206		
Net book value	$	9,931,283		 	$	8,564,628		
Periodically, the Company executes bulk sales of Chrysler Capital leases to a third party. The bulk sale agreements include certain provisions whereby the Company agrees to share in residual losses for lease terminations with losses over a specific percentage threshold (Note 10). The Company has retained servicing on the sold leases. During the three and nine months ended September 30, 2017 and 2016, the Company did not execute any bulk sales of leases originated under the Chrysler Capital program.

The following summarizes the future minimum rental payments due to the Company as lessor under operating leases as of September 30, 2017 :

				
 	 	
Remainder of 2017	$	474,217		
2018	1,497,436		
2019	859,498		
2020	219,541		
2021	4,282		
Thereafter	—		
Total	$	3,054,974		
Capital Leases
Certain leases originated by the Company are accounted for as capital leases, as the contractual residual values are nominal amounts. Capital lease receivables, net consisted of the following as of September 30, 2017 and December 31, 2016 :

								
 	September 30,
2017	 	December 31,
2016	
Gross investment in capital leases	$	25,725		 	$	39,417		
Origination fees and other	79		 	150		
Less: unearned income	(4,077	)	 	(7,545	)	
   Net investment in capital leases before allowance	21,727		 	32,022		
Less: allowance for lease losses	(5,606	)	 	(9,988	)	
   Net investment in capital leases	$	16,121		 	$	22,034		

The following summarizes the future minimum lease payments due to the Company as lessor under capital leases as of September 30, 2017 :

				
 	 	
Remainder of 2017	$	2,864		
2018	11,004		
2019	5,907		
2020	3,206		
2021	1,994		
Thereafter	750		
Total	$	25,725		

4.	Credit Loss Allowance and Credit Quality	

19

Credit Loss Allowance
The Company estimates the allowance for credit losses on individually acquired retail installment contracts and personal loans held for investment not classified as TDRs based on delinquency status, historical loss experience, estimated values of underlying collateral, when applicable, and various economic factors. In developing the allowance, the Company utilizes a loss emergence period assumption, a loss given default assumption applied to recorded investment, and a probability of default assumption based on a loss forecasting model. The loss emergence period assumption represents the average length of time between when a loss event is first estimated to have occurred and when the account is charged-off. The recorded investment represents unpaid principal balance adjusted for unaccreted net discounts, subvention from manufacturers, and origination costs. Under this approach, the resulting allowance represents the expected net losses of recorded investment inherent in the portfolio.
For loans classified as TDRs, impairment is generally measured based on the present value of expected future cash flows discounted at the original effective interest rate. For loans that are considered collateral-dependent, such as certain bankruptcy modifications, impairment is measured based on the fair value of the collateral, less its estimated cost to sell. The amount of the allowance is equal to the difference between the loan’s impaired value and the recorded investment.
The Company maintains a general credit loss allowance for receivables from dealers based on risk ratings and individually evaluates loans for specific impairment as necessary. As of September 30, 2017 and 2016, the credit loss allowance for receivables from dealers is comprised of a general allowance of $167 and $648 , respectively, as none of these receivables have been determined to be individually impaired.
The activity in the credit loss allowance for individually acquired and dealer loans for the three and nine months ended September 30, 2017 and 2016 was as follows: 

																				
 	Three Months Ended September 30, 2017	 	Three Months Ended September 30, 2016	
 	Retail Installment Contracts Acquired Individually	 	Receivables from Dealers	 	Personal Loans	 	Retail Installment Contracts Acquired Individually	 	Receivables from Dealers	
 		 		 		 		 		
Balance — beginning of period	$	3,446,968		 	$	713		 	$	4,362		 	$	3,422,736		 	$	837		
Provision for credit losses	535,427		 	(546	)	 	1,134		 	609,396		 	(189	)	
Charge-offs (a)	(1,206,059	)	 	—		 	(1,976	)	 	(1,246,760	)	 	—		
Recoveries	594,929		 	—		 	205		 	615,913		 	—		
Balance — end of period	$	3,371,265		 	$	167		 	$	3,725		 	$	3,401,285		 	$	648		
(a) For the three months ended September 30, 2017, charge-offs for retail installment contracts acquired individually includes approximately $18 million for the partial write-down of loans to the collateral value less estimated costs to sell, for which a bankruptcy notice was received. No such charge-offs were recorded for the three months ended September 30, 2016.

																				
 	Nine Months Ended September 30, 2017	 	Nine Months Ended September 30, 2016	
 	Retail Installment Contracts Acquired Individually	 	Receivables from Dealers	 	Personal Loans	 	Retail Installment Contracts Acquired Individually	 	Receivables from Dealers	
 		 		 		 		 		
Balance — beginning of period	$	3,411,055		 	$	724		 	$	—		 	$	3,197,414		 	$	916		
Provision for credit losses	1,682,894		 	(557	)	 	10,275		 	1,787,277		 	(133	)	
Charge-offs (a)	(3,542,471	)	 	—		 	(7,194	)	 	(3,429,905	)	 	(135	)	
Recoveries	1,819,787		 	—		 	644		 	1,846,499		 	—		
Balance — end of period	$	3,371,265		 	$	167		 	$	3,725		 	$	3,401,285		 	$	648		
(a) For the nine months ended September 30, 2017, charge-offs for retail installment contracts acquired individually includes approximately $66 million for the partial write-down of loans to the collateral value less estimated costs to sell, for which a bankruptcy notice was received. No such charge-offs were recorded for the nine months ended September 30, 2016.

20

The impairment activity related to purchased receivables portfolios for the three and nine months ended September 30, 2017 and 2016 was as follows: 

																
 	Three Months Ended 
 September 30,	 	Nine Months Ended 
 September 30,	
 	2017	 	2016	 	2017	 	2016	
Balance — beginning of period	$	169,323		 	$	168,518		 	$	169,323		 	$	172,308		
Incremental provisions for purchased receivable portfolios	—		 	—		 	—		 	—		
Incremental reversal of provisions for purchased receivable portfolios	—		 	804		 	—		 	(2,986	)	
Balance — end of period	$	169,323		 	$	169,322		 	$	169,323		 	$	169,322		
The Company estimates lease losses on the capital lease receivable portfolio based on delinquency status and loss experience to date, as well as various economic factors. The activity in the lease loss allowance for capital leases for the three and nine months ended September 30, 2017 and 2016 was as follows:

																
 	Three Months Ended 
 September 30,	 	Nine Months Ended 
 September 30,	
 	2017	 	2016	 	2017	 	2016	
Balance — beginning of period	$	6,367		 	$	12,752		 	$	9,988		 	$	19,878		
Provision for lease losses	432		 	387		 	(597	)	 	(1,669	)	
Charge-offs	(2,655	)	 	(5,712	)	 	(9,415	)	 	(28,267	)	
Recoveries	1,462		 	3,617		 	5,630		 	21,102		
Balance — end of period	$	5,606		 	$	11,044		 	$	5,606		 	$	11,044		

Delinquencies

Retail installment contracts are generally classified as non-performing when they are greater than 60 days past due as to contractual principal or interest payments. See discussion of TDR loans below. 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 status, previously accrued and uncollected interest is reversed against interest income. If an account is returned to a performing status, the Company returns to accruing interest on the contract.

The Company considers an account delinquent when an obligor fails to pay the required minimum portion of the scheduled payment by the due date. With respect to receivables originated by the Company prior to January 1, 2017 and through its “Chrysler Capital” channel, the required minimum payment is 90% of the scheduled payment. With respect to all other receivables originated by the Company or acquired by the Company from an unaffiliated third-party originator prior to January 1, 2017, the required minimum payment is 50% of the scheduled payment. With respect to receivables originated by the Company or acquired by the Company from an unaffiliated third-party originator on or after January 1, 2017, the required minimum payment is 90% of the scheduled payment, regardless of which channel the receivable was originated through. In each case, the period of delinquency is based on the number of days payments are contractually past due.

As of September 30, 2017 and December 31, 2016 , a summary of delinquencies on retail installment contracts held for investment portfolio is as follows:

												
 	September 30, 2017	
 	Retail Installment Contracts Held for Investment	
 	Loans
Acquired
Individually	 	Purchased
Receivables
Portfolios	 	Total	
Principal, 30-59 days past due	$	2,574,165		 	$	6,061		 	$	2,580,226		
Delinquent principal over 59 days (a)	1,460,793		 	3,750		 	1,464,543		
Total delinquent principal	$	4,034,958		 	$	9,811		 	$	4,044,769		

21

	
												
 	December 31, 2016	
 	Retail Installment Contracts Held for Investment	
 	Loans
Acquired
Individually	 	Purchased
Receivables
Portfolios	 	Total	
Principal, 30-59 days past due	$	2,911,800		 	$	13,703		 	$	2,925,503		
Delinquent principal over 59 days (a)	1,520,105		 	6,638		 	1,526,743		
Total delinquent principal	$	4,431,905		 	$	20,341		 	$	4,452,246		
(a) Interest is accrued until 60 days past due in accordance with the Company's accounting policy for retail installment contracts. The Company's delinquency ratio continues to be calculated using the end of period delinquent principal over 60 days.

The balances in the above tables reflect total unpaid principal balance rather than net recorded investment before allowance.

As of September 30, 2017 and December 31, 2016 , there were no receivables from dealers that were 30 days or more delinquent. As of September 30, 2017 and December 31, 2016 , there were $34,109 and $33,886 , respectively, of retail installment contracts held for sale that were 30 days or more delinquent.
Credit Quality Indicators
FICO ® Distribution  — A summary of the credit risk profile of the Company’s retail installment contracts held for investment by FICO ® distribution, determined at origination, as of September 30, 2017 and December 31, 2016 was as follows:

					
FICO ®  Band	 	September 30, 2017	 	December 31, 2016	
Commercial (a)	 	2.4%	 	3.1%	
No-FICOs	 	11.6%	 	12.2%	
<540	 	22.4%	 	22.1%	
540-599	 	32.4%	 	31.4%	
600-639	 	17.5%	 	17.4%	
>640	 	13.7%	 	13.8%	

(a) FICO scores are not obtained on loans to commercial borrowers.

Commercial Lending  — The Company's risk department performs a commercial analysis and classifies certain loans over an internal threshold based on the commercial lending classifications described in Note 4 of the 2016 Annual Report on Form 10-K. Fleet loan credit quality indicators for retail installment contracts held for investment with commercial borrowers as of September 30, 2017 and December 31, 2016 were as follows:

								
 	September 30,
2017	 	December 31,
2016	
Pass	$	13,482		 	$	17,585		
Special Mention	5,688		 	2,790		
Substandard	808		 	1,488		
Doubtful	—		 	—		
Loss	—		 	—		
Total	$	19,978		 	$	21,863		

22

Commercial loan credit quality indicators for receivables from dealers held for investment as of September 30, 2017 and December 31, 2016 were as follows: 

								
 	September 30,
2017	 	December 31,
2016	
Pass	$	14,340		 	$	67,681		
Special Mention	117		 	—		
Substandard	1,613		 	1,750		
Doubtful	—		 	—		
Loss	—		 	—		
Unpaid principal balance	$	16,069		 	$	69,431		

Troubled Debt Restructurings
In certain circumstances, the Company modifies the terms of its finance receivables to troubled borrowers. 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. Management considers TDRs to include all individually acquired retail installment contracts that have been modified at least once, deferred for a period of 90 days or more, or deferred at least twice. Additionally, restructurings through bankruptcy proceedings are deemed to be TDRs. The purchased receivables portfolio, operating and capital leases, and loans held for sale, including personal loans, are excluded from the scope of the applicable guidance. The Company's TDR balance as of September 30, 2017 and December 31, 2016 primarily consisted of loans that had been deferred or modified to receive a temporary reduction in monthly payment. As of September 30, 2017 and December 31, 2016 , 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 all 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.
The table below presents the Company’s TDRs as of September 30, 2017 and December 31, 2016 :

								
 	September 30,
2017	 	December 31, 2016	
 	Retail Installment Contracts	
Outstanding recorded investment (a)	$	6,330,331		 	$	5,637,792		
Impairment	(1,782,114	)	 	(1,611,295	)	
Outstanding recorded investment, net of impairment	$	4,548,217		 	$	4,026,497		
(a) As of September 30, 2017 , the outstanding recorded investment excludes $50.7 million of collateral-dependent bankruptcy TDRs that has been written down by $23.7 million to fair value less cost to sell.

A summary of the Company’s delinquent TDRs at September 30, 2017 and December 31, 2016 , is as follows:

								
 	September 30,
2017	 	December 31, 2016	
 	Retail Installment Contracts	
Principal, 30-59 days past due	$	1,184,804		 	$	1,253,848		
Delinquent principal over 59 days	753,606		 	736,691		
Total delinquent TDR principal	$	1,938,410		 	$	1,990,539		
(a) The balances in the above table reflects total unpaid principal balance rather than net recorded investment before allowance.
 
A loan that has been classified as a TDR remains so until the loan is liquidated through payoff or charge-off. TDRs are placed on nonaccrual status when the Company believes repayment under the revised terms is not reasonably assured and, at the latest, when the account becomes past due more than 60 days, and considered for return to accrual when a sustained period of repayment performance has been achieved. As of September 30, 2017, the Company had $482,593

23

of TDR loans which were less than 60 days past due, but for which repayment was not reasonably assured, and were therefore in nonaccrual status.

Average recorded investment and income recognized on TDR loans are as follows:

								
 	Three Months Ended	
 	September 30, 2017	 	September 30, 2016	
 	Retail Installment Contracts	
Average outstanding recorded investment in TDRs	$	6,143,345		 	$	5,213,132		
Interest income recognized	$	225,871		 	$	207,115		

								
 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	
 	Retail Installment Contracts	
Average outstanding recorded investment in TDRs	$	5,929,146		 	$	4,940,280		
Interest income recognized	$	711,033		 	$	576,682		
The following table summarizes the financial effects of TDRs that occurred during the three and nine months ended September 30, 2017 and 2016 :

								
 	Three Months Ended	
 	September 30, 2017	 	September 30, 2016	
 	Retail Installment Contracts	
Outstanding recorded investment before TDR	$	1,123,080		 	$	929,871		
Outstanding recorded investment after TDR	$	1,122,450		 	$	932,472		
Number of contracts (not in thousands)	66,001		 	52,780		

								
 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	
 	Retail Installment Contracts	
Outstanding recorded investment before TDR	$	2,778,407		 	$	2,463,409		
Outstanding recorded investment after TDR	$	2,776,006		 	$	2,478,035		
Number of contracts (not in thousands)	160,098		 	139,524		
Loan restructurings accounted for as TDRs within the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2017 and 2016 are summarized in the following table:

								
 	Three Months Ended	
 	September 30, 2017	 	September 30, 2016	
 	Retail Installment Contracts	
Recorded investment in TDRs that subsequently defaulted (a)	$	197,953		 	$	206,247		
Number of contracts (not in thousands)	11,219		 	11,745		

								
 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	
 	Retail Installment Contracts	
Recorded investment in TDRs that subsequently defaulted (a)	$	600,117		 	$	565,724		
Number of contracts (not in thousands)	33,735		 	32,256		
(a) For TDR modifications and TDR modifications that subsequently defaults, the allowance methodology remains unchanged.

24

5.    Debt
Revolving Credit Facilities
The following table presents information regarding credit facilities as of September 30, 2017 and December 31, 2016 :

																				
 	September 30, 2017	
 	Maturity Date(s)	 	Utilized Balance	 	Committed Amount	 	Effective Rate	 	Assets Pledged	 	Restricted Cash Pledged	
Facilities with third parties:	 	 	 	 	 	 	 	 	 	 	 	
Warehouse line	January 2018	 	$	181,083		 	$	500,000		 	2.96%	 	$	276,519		 	$	—		
Warehouse line	Various (a)	 	258,545		 	1,250,000		 	1.21%	 	387,668		 	11,554		
Warehouse line (b)	August 2018	 	—		 	780,000		 	1.39%	 	2,329		 	121		
Warehouse line (c)	August 2018	 	2,766,543		 	3,120,000		 	2.22%	 	3,724,088		 	61,367		
Warehouse line	October 2018	 	445,277		 	1,800,000		 	3.45%	 	661,090		 	12,644		
Repurchase facility (d)	December 2017	 	254,120		 	254,120		 	3.35%	 	—		 	13,708		
Repurchase facility (d)	April 2018	 	202,311		 	202,311		 	2.62%	 	—		 	—		
Repurchase facility (d)	March 2018	 	148,690		 	148,690		 	3.88%	 	—		 	—		
Repurchase facility (d)	November 2017	 	53,335		 	53,335		 	2.43%	 	—		 	—		
Warehouse line	November 2018	 	274,499		 	1,000,000		 	3.44%	 	401,219		 	7,920		
Warehouse line	October 2018	 	87,965		 	400,000		 	3.72%	 	132,197		 	2,852		
Warehouse line	November 2018	 	57,820		 	500,000		 	4.54%	 	63,712		 	2,215		
Warehouse line (e)	October 2017	 	235,700		 	300,000		 	2.67%	 	276,521		 	9,278		
Total facilities with third parties	 	 	4,965,888		 	10,308,456		 	 	 	5,925,343		 	121,659		
Facilities with Santander and related subsidiaries (f,g):	 	 	 	 	 	 	 	 	 	 	 	
Line of credit	December 2017	 	—		 	1,000,000		 	3.04%	 	—		 	—		
Line of credit	December 2018	 	—		 	1,000,000		 	3.09%	 	—		 	—		
Promissory Note	March 2019	 	300,000		 	300,000		 	2.45%	 	—		 	—		
Promissory Note	May 2020	 	500,000		 	500,000		 	3.49%	 	—		 	—		
Promissory Note (h)	March 2022	 	650,000		 	650,000		 	4.20%	 	—		 	—		
Promissory Note	August 2021	 	650,000		 	650,000		 	3.44%	 	—		 	—		
Line of credit	December 2018	 	265,400		 	750,000		 	3.77%	 	—		 	—		
Line of credit	March 2019	 	—		 	3,000,000		 	3.94%	 	—		 	—		
Total facilities with Santander and related subsidiaries	 	 	2,365,400		 	7,850,000		 		 	—		 	—		
Total revolving credit facilities	 	 	$	7,331,288		 	$	18,158,456		 	 	 	$	5,925,343		 	$	121,659		

(a)	Half of the outstanding balance on this facility matures in March 2018 and half matures in March 2019.	
		
(b)	This line is held exclusively for financing of Chrysler Capital loans.	
		
(c)	This line is held exclusively for financing of Chrysler Capital leases.	
		
(d)	These repurchase facilities are collateralized by securitization notes payable retained by the Company. These facilities have rolling maturities of up to one year .	
		
(e)	In October 2017, the warehouse line that matured was extended to December 2017.	
		
(f)	The lines of credit generally are also collateralized by securitization notes payable and residuals retained by the Company. As of September 30, 2017 and December 31, 2016 , zero and $1,316,568 , respectively, of the aggregate outstanding balances on these facilities were unsecured.	
		
(g)	In October 2017, the Company executed a $400 million promissory note with SHUSA. The promissory note matures October 10, 2020.	
		
(h)	The Company entered into an interest rate swap to hedge the interest rate risk on this fixed rate debt. During the three months ended September 30, 2017, the Company terminated the fair value hedge. At the time of termination, the fair value hedge adjustment was $4.5 million , the amortization of which will reduce interest expense over the remaining life of the fixed rate debt.	

25

	
																				
 	December 31, 2016	
 	Maturity Date(s)	 	Utilized Balance	 	Committed Amount	 	Effective Rate	 	Assets Pledged	 	Restricted Cash Pledged	
Facilities with third parties:	 	 	 	 	 	 	 	 	 	 	 	
Warehouse line	January 2018	 	$	153,784		 	$	500,000		 	3.17%	 	$	213,578		 	$	—		
Warehouse line	Various	 	462,085		 	1,250,000		 	2.52%	 	653,014		 	14,916		
Warehouse line	August 2018	 	534,220		 	780,000		 	1.98%	 	608,025		 	24,520		
Warehouse line	August 2018	 	3,119,943		 	3,120,000		 	1.91%	 	4,700,774		 	70,991		
Warehouse line	October 2018	 	702,377		 	1,800,000		 	2.51%	 	994,684		 	23,378		
Repurchase facility	December 2017	 	507,800		 	507,800		 	2.83%	 	—		 	22,613		
Repurchase facility	April 2017	 	235,509		 	235,509		 	2.04%	 	—		 	—		
Warehouse line	November 2018	 	578,999		 	1,000,000		 	1.56%	 	850,758		 	17,642		
Warehouse line	October 2018	 	202,000		 	400,000		 	2.22%	 	290,867		 	5,435		
Warehouse line	November 2018	 	—		 	500,000		 	2.07%	 	—		 	—		
Warehouse line	October 2017	 	243,100		 	300,000		 	2.38%	 	295,045		 	9,235		
Total facilities with third parties	 	 	6,739,817		 	10,393,309		 	 	 	8,606,745		 	188,730		
Facilities with Santander and related subsidiaries:	 	 	 	 	 	 	 	 	 	 	 	
Line of credit	December 2017	 	500,000		 	500,000		 	3.04%	 	—		 	—		
Line of credit	December 2018	 	175,000		 	500,000		 	3.87%	 	—		 	—		
Line of credit	December 2017	 	1,000,000		 	1,000,000		 	2.86%	 	—		 	—		
Line of credit	December 2018	 	1,000,000		 	1,000,000		 	2.88%	 	—		 	—		
Line of credit	March 2017	 	300,000		 	300,000		 	2.25%	 	—		 	—		
Line of credit	March 2019	 	—		 	3,000,000		 	3.74%	 	—		 	—		
Total facilities with Santander and related subsidiaries	 	 	2,975,000		 	6,300,000		 	 	 	—		 	—		
Total revolving credit facilities	 	 	$	9,714,817		 	$	16,693,309		 	 	 	$	8,606,745		 	$	188,730		
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 3), securitization notes payables and residuals retained by the Company.`
Facilities with Santander and Related Subsidiaries
Lines of Credit
Through SHUSA, Santander provides the Company with $3,000,000 of committed revolving credit that can be drawn on an unsecured basis. Through its New York branch, Santander provides the Company with $2,750,000 of long-term committed revolving credit facilities. The facilities offered through the New York branch are structured as three - and five -year floating rate facilities, with current maturity dates of December 31, 2017 and December 31, 2018 , respectively. These facilities currently permit unsecured borrowing but generally are collateralized by retail installment contracts and retained residuals. Any secured balances outstanding under the facilities at the time of their maturity will amortize to match the maturities and expected cash flows of the corresponding collateral.
Promissory Notes
Through SHUSA, Santander provides the Company with $2,100,000 of promissory notes. Santander Consumer ABS Funding 2, LLC (a subsidiary) established a committed facility of $300 million with SHUSA on March 6, 2014. This facility matured on March 6, 2017 and was replaced on the same day with a $300 million term promissory note executed by SC Illinois as the borrower and SHUSA as the lender. Interest accrues on this note at a rate equal to three-month LIBOR plus 1.35% . The note has a maturity date of March 6, 2019.
In addition, SC Illinois as borrower executed the following promissory notes with SHUSA;
• a $500 million term promissory note on May 11, 2017. Interest accrues on this note at the rate of 3.49% . The note has a maturity date of May 11, 2020.

26

• a $650 million term promissory note on March 31, 2017. Interest accrues on this note at the rate of 4.20% . The note has a maturity date of March 31, 2022.
• a $650 million term promissory note on August 3, 2017. Interest accrues on this note at the rate of 3.44% . The note has a maturity date of August 3, 2021.

Secured Structured Financings
 
The following table presents information regarding secured structured financings as of September 30, 2017 and December 31, 2016 :

																				
 	September 30, 2017	
 	Original Estimated Maturity Date(s)	 	Balance	 	Initial Note Amounts Issued	 	Initial Weighted Average Interest Rate	 	Collateral (b)	 	Restricted Cash	
2013 Securitizations	April 2019 - March 2021	 	$	612,494		 	$	5,439,700		 	0.90% - 1.59%	 	$	797,901		 	$	166,215		
2014 Securitizations	February 2020 - April 2022	 	1,340,311		 	6,391,020		 	1.16% - 1.72%	 	1,584,279		 	220,843		
2015 Securitizations	April 2020- January 2023	 	2,821,425		 	9,185,032		 	1.33% - 2.29%	 	3,964,228		 	387,272		
2016 Securitizations	April 2022 - March 2024	 	4,087,267		 	7,462,790		 	1.63% - 2.80%	 	5,425,003		 	366,363		
2017 Securitizations	April 2023 - Sept 2024	 	6,066,240		 	7,391,890		 	1.35% - 2.52%	 	7,853,934		 	346,534		
Public securitizations (a)	 	 	14,927,737		 	35,870,432		 	 	 	19,625,345		 	1,487,227		
2011 Private issuances	December 2018	 	360,029		 	1,700,000		 	1.46%	 	475,937		 	23,648		
2013 Private issuances	September 2018	 	2,379,762		 	2,044,054		 	1.28% - 1.38%	 	3,716,406		 	153,499		
2014 Private issuances	March 2018 -November 2021	 	159,957		 	1,530,125		 	1.05% - 1.40%	 	274,552		 	11,055		
2015 Private issuances	December 2016 - July 2019	 	2,223,017		 	2,305,062		 	0.88% - 2.81%	 	1,137,412		 	52,172		
2016 Private issuances	May 2020 - September 2024	 	1,720,933		 	3,050,000		 	1.55% - 2.86%	 	2,441,657		 	89,456		
2017 Private issuances	April 2021 - September 2021	 	1,486,928		 	1,600,000		 	1.85% - 2.44%	 	1,877,131		 	41,287		
Privately issued amortizing notes	 	 	8,330,626		 	12,229,241		 	 	 	9,923,095		 	371,117		
Total secured structured financings	 	 	$	23,258,363		 	$	48,099,673		 	 	 	$	29,548,440		 	$	1,858,344		
		
(a)	Secured structured financings 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.	

27

	
																				
 	December 31, 2016	
 	Original Estimated Maturity Date(s)	 	Balance	 	Initial Note Amounts Issued	 	Initial Weighted Average Interest Rate	 	Collateral	 	Restricted Cash	
2012 Securitizations	September 2018	 	$	197,470		 	$	2,525,540		 	0.92%-1.23%	 	$	312,710		 	$	73,733		
2013 Securitizations	January 2019 - January 2021	 	1,172,904		 	6,689,700		 	0.89%-1.59%	 	1,484,014		 	222,187		
2014 Securitizations	February 2020 - January 2021	 	1,858,600		 	6,391,020		 	1.16%-1.72%	 	2,360,939		 	250,806		
2015 Securitizations	September 2019 - January 2023	 	4,326,292		 	9,317,032		 	1.33%-2.29%	 	5,743,884		 	468,787		
2016 Securitizations	April 2022 - March 2024	 	5,881,216		 	7,462,790		 	1.63%-2.46%	 	7,572,977		 	408,086		
Securitizations	 	 	13,436,482		 	32,386,082		 	 	 	17,474,524		 	1,423,599		
2010 Private issuances	June 2011	 	113,157		 	516,000		 	1.29%	 	213,235		 	6,270		
2011 Private issuances	December 2018	 	342,369		 	1,700,000		 	1.46%	 	617,945		 	31,425		
2013 Private issuances	September 2018-September 2020	 	2,375,964		 	2,693,754		 	1.13%-1.38%	 	4,122,963		 	164,740		
2014 Private issuances	March 2018 - December 2021	 	643,428		 	3,271,175		 	1.05%-1.40%	 	1,129,506		 	68,072		
2015 Private issuances	December 2016 - July 2019	 	2,185,166		 	2,855,062		 	 0.88%-2.81%	 	2,384,661		 	140,269		
2016 Securitizations	May 2020 - September 2024	 	2,512,323		 	3,050,000		 	1.55%-2.86%	 	3,553,577		 	90,092		
Privately issued amortizing notes	 	 	8,172,407		 	14,085,991		 	 	 	12,021,887		 	500,868		
Total secured structured financings	 	 	$	21,608,889		 	$	46,472,073		 	 	 	$	29,496,411		 	$	1,924,467		

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 September 30, 2017 and December 31, 2016 , the Company had private issuances of notes backed by vehicle leases totaling $5,507,315 and $3,862,274 , 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 debt issuance costs were $9,489 and $7,021 for the three months ended September 30, 2017 and 2016 , respectively, and $26,595 and $20,224 for the nine months ended September 30, 2017 and 2016 , 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 acquired notes payable is also included in interest expense using the effective interest method over the estimated remaining life of the acquired notes. Total interest expense on secured structured financings for the three months ended September 30, 2017 and 2016 was $152,950 and $108,720 , respectively and for the nine months ended September 30, 2017 and 2016 was $409,968 and $305,677 , respectively.

6.	Variable Interest Entities	
The Company transfers retail installment contracts and leased vehicles 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 U.S. 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 Note 7 of the 2016 Annual Report on Form 10-K.
On-balance sheet variable interest entities

28

The Company retains servicing 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, 2017 and December 31, 2016 , the Company was servicing $26,315,659 and $27,802,971 , respectively, of gross retail installment contracts that have been transferred to consolidated Trusts. The remainder of the Company’s retail installment contracts remain unpledged.
A summary of the cash flows received from consolidated securitization trusts during the three and nine months ended September 30, 2017 and 2016 , is as follows:

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Assets securitized	$	2,998,430		 	$	2,043,114		 	$	15,395,158		 	$	12,026,706		
 	 	 	 	 	 	 	 	
Net proceeds from new securitizations (a)	$	2,936,719		 	$	1,688,822		 	$	11,998,611		 	$	9,509,135		
Net proceeds from sale of retained bonds	—		 	—		 	273,733		 	128,798		
Cash received for servicing fees (b)	228,131		 	200,634		 	653,048		 	595,070		
Net distributions from Trusts (b)	666,179		 	776,306		 	2,073,965		 	2,167,512		
Total cash received from Trusts	$	3,831,029		 	$	2,665,762		 	$	14,999,357		 	$	12,400,515		
		
(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
During the three and nine months ended September 30, 2017 , the Company sold $1,347,010 and $2,583,341 of gross retail installment contracts to VIEs in off-balance sheet securitizations for a loss of $6,846 and $13,026 , respectively, which is recorded in investment losses, net in the accompanying condensed consolidated statements of income. The transactions were executed under securitization platforms with Santander. S antander, as a majority owned affiliate, will hold eligible vertical interest in Notes and Certificates of not less than 5% to comply with the Dodd-Frank Act risk retention rules. For the three and nine months ended September 30, 2016, the Company executed no off-balance sheet securitizations with VIEs with which it has continuing involvement.
As of September 30, 2017 and December 31, 2016 , the Company was servicing $3,955,935 and $2,741,101 , 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: 

								
 	September 30, 2017	 	December 31, 2016	
SPAIN	$	2,265,206		 	$	—		
Total serviced for related parties	2,265,206		 	—		
Chrysler Capital securitizations	1,690,729		 	2,472,756		
Other third parties	—		 	268,345		
Total serviced for third parties	1,690,729		 	2,741,101		
Total serviced for others portfolio	$	3,955,935		 	$	2,741,101		
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 during the three and nine months ended September 30, 2017 and 2016 is as follows:

29

	
																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Receivables securitized (a)	$	1,347,010		 	$	—		 	$	2,583,341		 	$	—		
 	 	 	 	 	 	 	 	
Net proceeds from new securitizations	$	1,347,430		 	$	—		 	$	2,588,227		 	$	—		
Cash received for servicing fees	12,309		 	10,027		 	25,677		 	38,885		
Total cash received from securitization trusts	$	1,359,739		 	$	10,027		 	$	2,613,904		 	$	38,885		
(a) Represents the unpaid principal balance at the time of original securitization.

7.	Derivative Financial Instruments	
The Company uses derivatives 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.

In addition, the Company is the holder of a warrant that gives it the right, if certain vesting conditions are satisfied, to purchase additional shares in a company in which it has a cost method investment. This warrant was issued in 2012 and is carried at its estimated fair value of zero at September 30, 2017 and December 31, 2016 .
The underlying notional amounts and aggregate fair values of these derivatives financial instruments at September 30, 2017 and December 31, 2016 , are as follows: 

																
 	September 30, 2017	
 	Notional	 	Fair Value	 	Asset	 	Liability	
Interest rate swap agreements designated as cash flow hedges	$	4,978,500		 	$	39,986		 	$	39,986		 	$	—		
Interest rate swap agreements not designated as hedges	1,493,800		 	8,801		 	8,801		 	—		
Interest rate cap agreements	11,900,578		 	90,313		 	116,568		 	(26,255	)	
Options for interest rate cap agreements	11,900,578		 	(90,259	)	 	26,304		 	(116,563	)	

																
 	December 31, 2016	
 	Notional	 	Fair Value	 	Asset	 	Liability	
Interest rate swap agreements designated as cash flow hedges	$	7,854,700		 	$	44,618		 	$	45,551		 	$	(933	)	
Interest rate swap agreements not designated as hedges	1,019,900		 	1,939		 	2,076		 	(137	)	
Interest rate cap agreements	9,463,935		 	76,269		 	76,269		 	—		
Options for interest rate cap agreements	9,463,935		 	(76,281	)	 	—		 	(76,281	)	
Total return settlement	658,471		 	(30,618	)	 	—		 	(30,618	)	
During the three months ended June 30, 2017, the Company entered into an interest rate swap to hedge the interest rate risk on a certain fixed rate debt. This derivative was designated as a fair value hedge at inception and was accounted for by recording the change in the fair value of the derivative instrument and the related hedged item attributable to interest rate risk on the Condensed Consolidated Balance Sheets, with the corresponding income or expense recorded in the Condensed Consolidated Statements of Operations. During the three months ended September 30, 2017, the Company terminated the interest rate swap.

The Company purchased price holdback payments and total return settlement payments that were considered to be derivatives, collectively referred to herein as “total return settlement,” and accordingly were marked to fair value each reporting period. The Company was obligated to make purchase price holdback payments on a periodic basis to a third-party originator of loans that the Company has purchased, when losses are lower than originally expected. The Company also was obligated to make total return settlement payments to this third-party originator in 2016 and 2017 if returns on the purchased loans are greater than originally expected. All purchase price holdback payments and all total return settlement payments due in 2016 and 2017 have been made and as of September 30, 2017, the derivative instrument has been settled.

See Note 13 for disclosure of fair value and balance sheet location of the Company's derivative financial instruments.

30

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 Condensed 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 September 30, 2017 and December 31, 2016 :

												
 	Gross Amounts Not Offset in the
Condensed Consolidated Balance Sheet	
 	Assets Presented
in the
Condensed Consolidated
Balance Sheet	 	Cash
Collateral
Received (a)	 	Net
Amount	
September 30, 2017	 	 	 	 	 	
Interest rate swaps - Santander and affiliates	$	6,042		 	$	(336	)	 	$	5,706		
Interest rate swaps - third party	42,745		 	(27,146	)	 	15,599		
Interest rate caps - Santander and affiliates	5,053		 	(5,053	)	 	—		
Interest rate caps - third party	111,515		 	(78,896	)	 	32,619		
Back to back - Santander & affiliates	$	9,775		 	—		 	$	9,775		
Back to back - third party	$	16,529		 	—		 	$	16,529		
Total derivatives subject to a master netting arrangement or similar arrangement	191,659		 	(111,431	)	 	80,228		
Total derivatives not subject to a master netting arrangement or similar arrangement	—		 	—		 	—		
Total derivative assets	$	191,659		 	$	(111,431	)	 	$	80,228		
Total financial assets	$	191,659		 	$	(111,431	)	 	$	80,228		
 	 	 	 	 	 	
December 31, 2016	 	 	 	 	 	
Interest rate swaps - Santander and affiliates	$	5,372		 	$	—		 	$	5,372		
Interest rate swaps - third party	42,254		 	(22,100	)	 	20,154		
Interest rate caps - Santander and affiliates	7,593		 	—		 	7,593		
Interest rate caps - third party	68,676		 	—		 	68,676		
Total derivatives subject to a master netting arrangement or similar arrangement	123,895		 	(22,100	)	 	101,795		
Total derivatives not subject to a master netting arrangement or similar arrangement	—		 	—		 	—		
Total derivative assets	$	123,895		 	$	(22,100	)	 	$	101,795		
Total financial assets	$	123,895		 	$	(22,100	)	 	$	101,795		
		
(a)	Cash collateral received is reported in Other liabilities or Due to affiliate, as applicable, in the condensed consolidated balance sheet.	

31

	
												
 	Gross Amounts Not Offset in the
Condensed Consolidated Balance Sheet	
 	Liabilities Presented
in the Condensed
Consolidated
Balance Sheet	 	Cash
Collateral
Pledged (a)	 	Net
Amount	
September 30, 2017	 	 	 	 	 	
Interest rate swaps - Santander & affiliates	$	—		 	$	—		 	$	—		
Interest rate swaps - third party	—		 	—		 	—		
Interest rate caps - Santander and affiliates	9,775		 	—		 	9,775		
Interest rate caps - third party	16,480		 	$	(372	)	 	16,108		
Back to back - Santander & affiliates	5,053		 	(5,053	)	 	—		
Back to back - third party	111,510		 	(46,650	)	 	64,860		
Total derivatives subject to a master netting arrangement or similar arrangement	142,818		 	(52,075	)	 	90,743		
Total derivatives not subject to a master netting arrangement or similar arrangement	—		 	—		 	—		
Total derivative liabilities	$	142,818		 	$	(52,075	)	 	$	90,743		
Total financial liabilities	$	142,818		 	$	(52,075	)	 	$	90,743		
 	 	 	 	 	 	
December 31, 2016	 	 	 	 	 	
Interest rate swaps - Santander & affiliates	$	546		 	$	(546	)	 	$	—		
Interest rate swaps - third party	524		 	(524	)	 	—		
Back to back - Santander & affiliates	7,593		 	(7,593	)	 	—		
Back to back - third party	68,688		 	(68,688	)	 	—		
Total derivatives subject to a master netting arrangement or similar arrangement	77,351		 	(77,351	)	 	—		
Total return settlement	30,618		 	—		 	30,618		
Total derivatives not subject to a master netting arrangement or similar arrangement	30,618		 	—		 	30,618		
Total derivative liabilities	$	107,969		 	$	(77,351	)	 	$	30,618		
Total financial liabilities	$	107,969		 	$	(77,351	)	 	$	30,618		
		
(a)	Cash collateral pledged is reported in Other assets or Due from affiliate, as applicable, in the condensed consolidated balance sheet. In certain instances, the Company is over-collateralized since the actual amount of cash pledged as collateral exceeds the associated financial liability. As a result, the actual amount of cash collateral pledged that is reported in Other assets or Due from affiliates may be greater than the amount shown in the table above.	

The gross gains (losses) reclassified from accumulated other comprehensive income (loss) to net income, and gains (losses) recognized in net income, are included as components of interest expense. The impacts on the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2017 and 2016 were as follows:

												
 	Three Months Ended September 30, 2017	
 	Recognized in Earnings	 	Gross Gains (Losses) Recognized in Accumulated Other Comprehensive Income (Loss)	 	Gross Gains (Losses) Reclassified From Accumulated Other Comprehensive 
Income to Interest Expense	
Interest rate swap agreements designated as cash flow hedges	$	(2,061	)	 	$	(882	)	 	$	1,461		
Interest rate swap agreements designated as fair value hedges	(1,232	)	 	—		 	—		
Total	$	(3,293	)	 	$	(882	)	 	$	1,461		
 	 	 	 	 	 	
Derivative instruments not designated as hedges:	 	 	 	 	 	
     Gains (losses) recognized in interest expense	$	90		 	 	 	 	
     Gains (losses) recognized in operating expenses	$	(2,723	)	 	 	 	 	

32

	
												
 	Three Months Ended September 30, 2016	
 	Recognized in Earnings	 	Gross Gains (Losses) Recognized in Accumulated Other Comprehensive Income (Loss)	 	Gross Gains (Losses) Reclassified From Accumulated Other Comprehensive 
Income to Interest Expense	
Interest rate swap agreements designated as cash flow hedges	$	293		 	$	27,764		 	$	(10,799	)	
 	 	 	 	 	 	
Derivative instruments not designated as hedges:	 	 	 	 	 	
     Gains (losses) recognized in interest expense	$	(3,769	)	 	 	 	 	
     Gains (losses) recognized in operating expenses	$	343		 	 	 	 	

	
												
 	Nine Months Ended September 30, 2017	
 	Recognized in Earnings	 	Gross Gains (Losses) Recognized in Accumulated Other Comprehensive Income (Loss)	 	Gross Gains (Losses) Reclassified From Accumulated Other Comprehensive 
Income to Interest Expense	
Interest rate swap agreements designated as cash flow hedges	$	(11,573	)	 	$	4,233		 	$	(3,158	)	
 	 	 	 	 	 	
Derivative instruments not designated as hedges:	 	 	 	 	 	
     Gains (losses) recognized in interest expense	$	90		 	 	 	 	
     Gains (losses) recognized in operating expenses	$	(2,297	)	 	 	 	 	

	
												
 	Nine Months Ended September 30, 2016	
 	Recognized in Earnings	 	Gross Gains (Losses) Recognized in Accumulated Other Comprehensive Income (Loss)	 	Gross Gains (Losses) Reclassified From Accumulated Other Comprehensive 
Income to Interest Expense	
Interest rate swap agreements designated as cash flow hedges	$	528			$	(81,247	)		$	(35,442	)	
 	 	 	 	 	 	
Derivative instruments not designated as hedges:	 	 	 	 	 	
     Gains (losses) recognized in interest expense	$	2,428		 	 	 	 	
     Gains (losses) recognized in operating expenses	$	(2,337	)	 	 	 	 	

The ineffectiveness related to the interest rate swap agreements designated as cash flow hedges was insignificant for the nine months ended September 30, 2017 and 2016 . The Company estimates that approximately $12,648 of unrealized gains included in accumulated other comprehensive income (loss) will be reclassified to interest expense within the next twelve months.

		
8.	Other Assets	
Other assets were comprised as follows:

33

	
								
 	September 30,
2017	 	December 31,
2016	
Vehicles (a)	$	206,076		 	$	257,382		
Manufacturer subvention payments receivable (b)	102,383		 	161,447		
Upfront fee (b)	83,750		 	95,000		
Derivative assets at fair value (c)	170,789		 	110,930		
Derivative - third party collateral	120,711		 	75,089		
Prepaids	41,324		 	46,177		
Accounts receivable	28,758		 	22,480		
Other	32,469		 	16,905		
Other assets	$	786,260		 	$	785,410		

(a)	Includes vehicles obtained through repossession as well as vehicles obtained due to lease terminations.	
		
(b)	These amounts relate to the Chrysler Agreement. The Company paid a $150,000 upfront fee upon the May 2013 inception of the agreement. The fee is being amortized into finance and other interest income over a ten -year term. As the preferred financing provider for FCA, the Company is entitled to subvention payments on loans and leases with below-market customer payments.	
		
(c)	Derivative assets at fair value represent the gross amount of derivatives presented in the condensed consolidated financial statements. Refer to Note 7 to these Condensed Consolidated Financial Statements for the detail of these amounts.	

9.	Income Taxes	
The Company recorded income tax expense of $78,385 ( 28.2% effective tax rate) and $90,473 ( 29.8% effective tax rate) during the three months ended September 30, 2017 and 2016 , respectively, and $239,819  ( 28.3%  effective tax rate) and  $365,334  ( 34.1%   effective tax rate) during the  nine  months ended  September 30, 2017 and 2016 , respectively.
The Company has historically provided deferred taxes under ASC 740-30-25, formerly APB 23, for the presumed repatriation to the United States earnings from the Company’s Puerto Rican subsidiary, SCI. In June 2017, the Company asserted that undistributed net earnings of SCI would be indefinitely reinvested outside the United States. This change in assertion was primarily driven by future United States cash projections and the Company’s intent to invest the earnings generated outside the United States. Under ASC 740-30 (formerly APB 23), unremitted earnings that are no longer permanently invested would become subject to deferred income taxes under United States law. The Company had $156.7 million of undistributed net earnings and a $52.8 million unrecorded deferred tax liability at September 30, 2017.
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  $467 and $1,087 at September 30, 2017 and December 31, 2016 , respectively, which was included in related party taxes receivable in the condensed consolidated balance sheet.
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 results of operations. The reserve for uncertain tax positions, as well as associated penalties and interest, is a component of the income tax provision.

10.	Commitments and Contingencies	

The following table summarizes liabilities recorded for commitments and contingencies as of September 30, 2017 and December 31, 2016 , all of which are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets:

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Agreement or Legal Matter	 	Commitment or Contingency	 	September 30, 2017	 	December 31, 2016	
Chrysler Agreement	 	Revenue-sharing and gain-sharing payments	 	$	13,270		 	$	10,134		
Agreement with Bank of America	 	Servicer performance fee	 	8,066		 	9,797		
Agreement with CBP	 	Loss-sharing payments	 	4,874		 	4,563		
Other Contingencies	 	Consumer arrangements	 	8,637		 	—		
Legal and regulatory proceedings	 	Aggregate legal and regulatory liabilities	 	17,800		 	39,200		

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

Chrysler Agreement
Under terms of the Chrysler Agreement, the Company must make revenue sharing payments to FCA and gain-sharing payments when residual gains on leased vehicles exceed a specified threshold. The Company had accrued $13,270 and $ 10,134 at September 30, 2017 and December 31, 2016 , respectively, related to these obligations.
The Chrysler Agreement requires, among other things, that the Company bear the risk of loss on loans originated pursuant to the agreement, but also that FCA shares in any residual gains and losses from consumer leases. The agreement also requires that the Company maintain at least $5.0 billion in funding available for dealer inventory financing and $4.5 billion of financing dedicated to FCA retail financing. In turn, FCA must provide designated minimum threshold percentages of its subvention business to the Company. The Chrysler Agreement is subject to early termination in certain circumstances, including the failure by either party to comply with certain of their ongoing obligations under the Chrysler Agreement. These obligations include the Company's meeting specified escalating penetration rates for the first five years of the agreement. The Company has not met these penetration rates at September 30, 2017 . If the Chrysler Agreement were to terminate, there could be a materially adverse impact to the Company's financial condition and results of operations.

Agreement with Bank of America
Until January 31, 2017, the Company had a flow agreement with Bank of America whereby the Company was committed to sell up to $300,000 of eligible loans to the bank each month. On October 27, 2016, Bank of America notified the Company that it was terminating the flow agreement effective January 31, 2017, and accordingly, the flow agreement is terminated. The Company retains servicing on all sold loans and may receive or pay a servicer performance payment based on an agreed-upon formula if performance on the sold loans is better or worse, respectively, than expected performance at time of sale. Servicer performance payments are due six years from the cut-off date of each loan sale. The Company had accrued $8,066 and $9,797 at September 30, 2017 and December 31, 2016 , respectively, related to this obligation.
Agreement with CBP
Until May 1, 2017, the Company sold loans to CBP under terms of a flow agreement and predecessor sale agreements. Under the flow agreement, as amended, CBP's committed purchases of Chrysler Capital prime loans were a maximum of $200,000 and a minimum of $50,000 per quarter. The Company retained servicing on the sold loans and will owe 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 $4,874 and $4,563 at September 30, 2017 and December 31, 2016 , 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 $8,637 and zero at September 30, 2017 and December 31, 2016 , respectively, for other miscellaneous contingencies.
Legal and regulatory proceedings

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Periodically, the Company is party to, or otherwise involved in, various lawsuits and other legal proceedings that arise in the ordinary course of business. In view of the inherent difficulty of predicting the outcome of any such lawsuit, regulatory matter and legal proceeding, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict the eventual outcome of the pending matters, the timing of the ultimate resolution of the matters, or the eventual loss, fines or penalties related to the matter. Accordingly, except as provided below, the Company is unable to reasonably estimate its potential exposure, if any, to these lawsuits, regulatory matters and other legal proceedings at this time. However, 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 have a material adverse effect on the Company's financial position, liquidity, and results of operation.

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

As of September 30, 2017 , the Company has accrued aggregate legal and regulatory liabilities of $17,800 . Further, the Company believes that the estimate of the aggregate range of reasonably possible losses, in excess of reserves established, for legal and regulatory proceedings is up to $18,000 as of September 30, 2017. Set forth below are descriptions of the material lawsuits, regulatory matters and other legal proceedings to which the Company is subject.

Securities Class Action and Shareholder Derivative Lawsuits

• Deka Lawsuit
On August 26, 2014, a purported securities class action lawsuit was filed in the United States District Court, Southern District of New York, captioned Steck v. Santander Consumer USA Holdings Inc. et al., No. 1:14-cv-06942 (the Deka Lawsuit). The Deka Lawsuit was brought against the Company, certain of its current and former directors and executive officers and certain institutions that served as underwriters in the Company's IPO on behalf of a class consisting of those who purchased or otherwise acquired our securities between January 23, 2014 and June 12, 2014. In June 2015, the venue of the Deka Lawsuit was transferred to the United States District Court, Northern District of Texas. In September 2015, the court granted a motion to appoint lead plaintiffs and lead counsel, and the Deka Lawsuit is now captioned Deka Investment GmbH et al. v. Santander Consumer USA Holdings Inc. et al., No. 3:15-cv-2129-K.

The amended class action complaint in the Deka Lawsuit alleges that our Registration Statement and Prospectus and certain subsequent public disclosures contained misleading statements concerning the Company’s ability to pay dividends and the adequacy of the Company’s compliance systems and oversight. The amended complaint asserts claims under Sections 11, 12(a) and 15 of the Securities Act of 1933 and under Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and seeks damages and other relief. On December 18, 2015, the Company and the individual defendants moved to dismiss the amended class action complaint, and on June 13, 2016, the motion to dismiss was denied. On December 2, 2016, the plaintiffs moved to certify the proposed classes, on February 17, 2017, the Company filed an opposition to the plaintiffs' motion to certify the proposed classes, and on March 31, 2017, the plaintiffs filed their reply brief. On July 11, 2017, the court granted an order staying the Deka Lawsuit pending the resolution of the appeal of a class certification order in In re Cobalt Int’l Energy, Inc. Sec. Litig., No. H-14-3428, 2017 U.S. Dist. LEXIS 91938 (S.D. Tex. June 15, 2017).

• Feldman Lawsuit
On October 15, 2015, a shareholder derivative complaint was filed in the Court of Chancery of the State of Delaware, captioned Feldman v. Jason A. Kulas, et al., C.A. No. 11614 (the Feldman Lawsuit). The Feldman Lawsuit names as defendants current and former members of the Board, and names the Company as a nominal defendant. The complaint alleges, among other things, that the current and former director defendants breached their fiduciary duties in connection with overseeing the Company’s subprime auto lending practices, resulting in harm to the Company. The

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complaint seeks unspecified damages and equitable relief. On December 29, 2015, the Feldman Lawsuit was stayed pending the resolution of the Deka Lawsuit.

• Parmelee Lawsuit
On March 18, 2016, a purported securities class action lawsuit was filed in the United States District Court, Northern District of Texas, captioned Parmelee v. Santander Consumer USA Holdings Inc. et al., No. 3:16-cv-783 (the Parmelee Lawsuit). On April 4, 2016, another purported securities class action lawsuit was filed in the United States District Court, Northern District of Texas, captioned Benson v. Santander Consumer USA Holdings Inc. et al., No. 3:16-cv-919 (the Benson Lawsuit). Both the Parmelee Lawsuit and the Benson Lawsuit were filed against the Company and certain of its current and former directors and executive officers on behalf of a class consisting of all those who purchased or otherwise acquired our securities between February 3, 2015 and March 15, 2016. On May 25, 2016, the Benson Lawsuit was consolidated into the Parmelee Lawsuit, with the consolidated case captioned as Parmelee v. Santander Consumer USA Holdings Inc. et al., No. 3:16-cv-783.

On December 20, 2016, the plaintiffs filed an amended class action complaint. The amended class action complaint in the Parmelee Lawsuit alleges that the Company made false or misleading statements, as well as failed to disclose material adverse facts, in prior Annual and Quarterly Reports filed under the Exchange Act and certain other public disclosures, in connection with, among other things, the Company’s change in its methodology for estimating its allowance for credit losses and correction of such allowance for prior periods in, among other public disclosures, the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, and the Company’s amended filings for prior reporting periods. The amended class action complaint asserts claims under Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and seeks damages and other relief. On March 14, 2017, the Company filed a motion to dismiss the Parmelee Lawsuit, on April 25, 2017, the plaintiffs filed an opposition to the motion to dismiss, and on June 9, 2017, the Company filed a reply to the plaintiffs’ opposition.

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

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 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.

• Civil Subpoenas Relating to Underwriting and Securitization of Nonprime Loans
Currently, such proceedings include, but are not limited to, a civil subpoena from the DOJ, under FIRREA, requesting the production of documents and communications that, among other things, relate to the underwriting and securitization of nonprime auto loans since 2007, and from the SEC requesting the production of documents and communications that, among other things, relate to the underwriting and securitization of nonprime auto loans since 2013.

• 2017 Written Agreement with the Federal Reserve

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

• Attorneys General Enforcement Actions
In October 2014, May 2015, July 2015, and February 2017, the Company received subpoenas and/or Civil Investigative Demands (CIDs) from the Attorneys General of California, Illinois, Oregon, New Jersey, Maryland and Washington under the authority of each state's consumer protection statutes. The Company has been informed that these states will serve as an executive committee on behalf of a group of 30 state Attorneys General. The subpoenas and/or CIDs from the executive committee states contain broad requests for information and the production of documents related to the Company's underwriting, securitization, servicing and collection of nonprime auto loans. The Company believes that several other companies in the auto finance sector have received similar subpoenas and CIDs. The Company is cooperating with the Attorneys General of the states involved. The Company believes that it is reasonably possible that it will suffer a loss related to the Attorneys General, however, any such loss is not currently estimable.

• Mississippi Attorney General Lawsuit
On January 10, 2017, the Attorney General of the State of Mississippi (the Mississippi AG) filed a lawsuit against the Company in the Chancery Court of the First Judicial District of Hinds County, State of Mississippi, captioned State of Mississippi ex rel. Jim Hood, Attorney General of the State of Mississippi v. Santander Consumer USA Inc., C.A. # G-2017-28. The complaint alleges that the Company engaged in unfair and deceptive business practices to induce Mississippi consumers to apply for loans that they could not afford. The complaint asserts claims under the Mississippi Consumer Protection Act (the MCPA) and seeks unspecified civil penalties, equitable relief and other relief. On March 31, 2017, the Company filed motions to dismiss the Mississippi AG’s lawsuit. On May 18, 2017, the Company filed a motion to stay the Mississippi AG’s lawsuit pending the resolution of an interlocutory appeal relating to the MCPA before the Mississippi Supreme Court in Purdue Pharma, L.P., et al. v. State, No. 2017-IA- 00300-SCT, on May 30, 2017, the Mississippi AG filed an opposition to the motion to stay, and on June 14, 2017, the Company filed a reply to the Mississippi AG’s opposition. On September 25, 2017, the court granted the motion to stay and ordered a stay of all proceedings, excluding discovery and final briefing on motions to dismiss.

• SCRA Consent Order
On February 25, 2015, the Company entered into a consent order with the DOJ, approved by the United States District Court for the Northern District of Texas, that resolves the DOJ's claims against the Company that certain of its repossession and collection activities during the period of time between January 2008 and February 2013 violated the Servicemembers Civil Relief Act (SCRA). The consent order requires the Company to pay a civil fine in the amount of $55 , as well as at least $9,360 to affected servicemembers consisting of $10 per servicemember plus compensation for any lost equity (with interest) for each repossession by the Company, and $5 per servicemember for each instance where the Company sought to collect repossession-related fees on accounts where a repossession was conducted by a prior account holder. The consent order also provides for monitoring by the DOJ for the Company’s SCRA compliance for a period of five years and requires the Company to undertake certain additional remedial measures.

• ECOA Investigation
On July 31, 2015, the CFPB notified the Company that it had referred to the DOJ certain alleged violations by the Company of the ECOA regarding statistical disparities in markups charged by automobile dealers to protected groups on loans originated by those dealers and purchased by the Company and the treatment of certain types of income in the Company’s underwriting process. On September 25, 2015, the DOJ notified the Company that it has initiated, based on the referral from the CFPB, an investigation under the ECOA of the Company's pricing of automobile loans.
Agreements
The Company committed to purchase certain new advances on personal revolving financings originated by a third party retailer, along with existing balances on accounts with new advances, for an initial term ending in April 2020 and renewing through April 2022 at the retailer's option. Each customer account generated under the agreements generally is approved with a credit limit higher than the amount of the initial purchase, with each subsequent purchase automatically approved as long as it does not cause the account to exceed its limit and the customer is in good standing. As of September 30, 2017 and December 31, 2016 , the Company was obligated to purchase $12,865 and $12,634 , respectively, in receivables that had been originated by the retailer but not yet purchased by the Company.

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The Company also is required to make a profit-sharing payment to the retailer each month if performance exceeds a specified return threshold. During the year ended December 31, 2015, the Company and the third-party retailer executed an amendment that, among other provisions, increases the profit-sharing percentage retained by the Company, gives the retailer the right to repurchase up to 9.99% of the existing portfolio at any time during the term of the agreement, and, provided that repurchase right is exercised, gives the retailer the right to retain up to 20% of new accounts subsequently originated.
Under terms of an application transfer agreement with another OEM, the Company has the first opportunity to review for its own portfolio any credit applications turned down by the OEM's captive finance company. The agreement does not require the Company to originate any loans, but for each loan originated the Company will pay the OEM a referral fee.
The Company also has agreements with SBNA to service recreational and marine vehicle portfolios. These agreements call for a periodic retroactive adjustment, based on cumulative return performance, of the servicing fee rate to inception of the contract. The Company recorded no adjustments for the three and nine months ended September 30, 2017 and downward adjustments of zero and  $836  for the  three and nine months ended September 30, 2016, respectively. 
In connection with the sale of retail installment contracts through securitizations and other sales, the Company has made standard representations and warranties customary to the consumer finance industry. Violations of these representations and warranties may require the Company to repurchase loans previously sold to on- or off-balance sheet Trusts or other third parties. As of September 30, 2017 , 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 will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.
Santander has provided guarantees on the covenants, agreements, and obligations of the Company under the governing documents of its warehouse lines and privately issued amortizing notes. These guarantees are limited to the obligations of the Company as servicer.
The Company provided SBNA with the first right to review and approve consumer vehicle lease applications, subject to volume constraints, under terms of a flow agreement that was terminated on May 9, 2015. The Company has indemnified SBNA for potential credit and residual losses on $48,226 of leases that had been originated by SBNA under this program but were subsequently determined not to meet SBNA’s underwriting requirements. This indemnification agreement is supported by an equal amount of cash collateral posted by the Company in an SBNA bank account. The collateral account balance is included in restricted cash in the Company's condensed consolidated balance sheets. As of September 30, 2017 , the balance in the collateral account is $22 . In January 2015, the Company additionally agreed to indemnify SBNA for residual losses, up to a cap, on certain leases originated under the flow agreement between September 24, 2014 and May 9, 2015 for which SBNA and the Company had differing residual value expectations at lease inception. As of September 30, 2017 and December 31, 2016 , the Company had a recorded liability of $2,983 and $2,691 , respectively, related to the residual losses covered under the agreement.
On March 31, 2015, the Company executed a forward flow asset sale agreement with a third party under terms of which the Company committed to sell charged off loan receivables in bankruptcy status on a quarterly basis until sales total at least $200,000 in proceeds. On June 29, 2015, the Company and the third party executed an amendment to the forward flow asset sale agreement, which increased the committed sales of charged off loan receivables in bankruptcy status to $275,000 . On September 30, 2015, the Company and the third party executed a second amendment to the forward flow asset sale agreement, which required sales to occur quarterly. On November 13, 2015, the Company and the third party executed a third amendment to the forward flow asset sale agreement, which increased the committed sales of charged off loan receivables in bankruptcy status to $350,000 . However, any sale more than $275,000 is subject to a market price check. As of September 30, 2017 and December 31, 2016 , the remaining aggregate commitment was $108,403 and $166,167 , respectively.
Employment Agreements
Pursuant to the terms of a Separation Agreement among former CEO Thomas G. Dundon, the Company, DDFS LLC, SHUSA and Santander, upon satisfaction of applicable conditions, including receipt of required regulatory approvals, the Company will owe Mr. Dundon a cash payment of up to $115,139 (Note 11).

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Leases

The Company has entered into various operating leases, primarily for office space and computer equipment. Lease expense incurred totaled $2,773 and $8,240 for the three and nine months ended September 30, 2017 , respectively and $2,749 and $8,588 for the three and nine months ended September 30, 2016 , respectively. The remaining obligations under lease commitments at September 30, 2017 are as follows:

				
Years ended December 31,	 	
2017	$	2,992		
2018	12,645		
2019	12,773		
2020	13,035		
2021	12,910		
Thereafter	56,794		
Total	$	111,149		

11.	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 affiliate lines/letters of credit for the three and nine months ended September 30, 2017 and 2016 , was as follows:

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Line of credit agreement with Santander - New York Branch (Note 5)	$	8,158		 	$	16,404		 	$	46,624		 	$	52,800		
Debt facilities with SHUSA (Note 5)	26,211		 	6,023		 	59,105		 	14,892		
Accrued interest for affiliate lines/letters of credit at September 30, 2017 and December 31, 2016 , was as follows:

								
 	September 30,
2017	 	December 31, 2016	
Line of credit agreement with Santander - New York Branch (Note 5)	$	1,409		 	$	6,297		
Debt facilities with SHUSA (Note 5)	15,192		 	1,737		
In August 2015, under an agreement with Santander, the Company agreed to begin incurring a fee of 12.5 basis points (per annum) on certain warehouse lines, as they renew, for which Santander provides a guarantee of the Company's servicing obligations. The Company recognized guarantee fee expense of $1,672 and $4,620 for the three and nine months ended September 30, 2017 , respectively, and $1,616 and $4,783 for the three and nine months ended September 30, 2016 , respectively. As of September 30, 2017 and December 31, 2016 , the Company had $6,239 and $1,620 of related fees payable to Santander, respectively.
Derivatives
The Company has derivative financial instruments with Santander and affiliates with outstanding notional amounts of $4,372,800 and $7,259,400 at September 30, 2017 and December 31, 2016 , respectively (Note 7). The Company had a collateral overage on derivative liabilities with Santander and affiliates of $9,169 and $15,092 at September 30, 2017 and December 31, 2016 , respectively. Interest expense and mark-to-market adjustments on these agreements totaled $1,227 and $1,932 for the three months ended September 30, 2017 and 2016 , respectively, and $1,443 and $16,098 for the nine  months ended September 30, 2017 and 2016 , respectively.
Originations

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The Company is required to permit SBNA a first right to review and assess Chrysler Capital dealer lending opportunities, and SBNA is required to pay the Company a relationship management fee based upon the performance and yields of Chrysler Capital dealer loans held by SBNA. On April 15, 2016, the relationship management fee was replaced with an origination fee and annual renewal fee for each loan. The Company did no t recognize any relationship management fee income the three and nine month period ended September 30, 2017. The Company recognized relationship management fee income of zero and $419 for the three and nine month period ended September 30, 2016. The Company recognized $246 and $1,009 of origination fee income for the three months ended September 30, 2017 and 2016, respectively, and $1,213 and $2,292 of origination fee income for the nine months ended September 30, 2017 and 2016, respectively. Additionally, the Company recognized $357 and $158 of renewal fee income for the three months ended September 30, 2017 and 2016, respectively, and $935 and $271 for the nine months ended September 30, 2017 and 2016 , respectively. As of September 30, 2017 and December 31, 2016 , the Company had origination and renewal fees receivable from SBNA of $237 and $552 . The agreement also transferred the servicing of all Chrysler Capital receivables from dealers, including receivables held by SBNA and by the Company, from the Company to SBNA. Servicing fee expense under this agreement totaled $21 and $77 for the three and nine months ended September 30, 2017 . As of September 30, 2017 and December 31, 2016 , the Company had $16 and $21 , respectively, of servicing fees payable 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 September 30, 2017 or December 31, 2016 for such advances.
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, who settles the transaction with the dealer. The Company owed SBNA $3,482 and $2,761 related to such originations as of September 30, 2017 and December 31, 2016 , respectively.
The Company received a $9,000 referral fee in connection with the original arrangement and was amortizing the fee into income over the ten -year term of the agreement. The remaining balance of the referral fee SBNA paid to the Company in connection with the original sourcing and servicing agreement is considered a referral fee in connection with the new agreements and will continue to be amortized into income through the July 1, 2022 termination date of the new agreements. As of September 30, 2017 and December 31, 2016 , the unamortized fee balance was $5,175 and $5,850 , respectively. The Company recognized $225 and $675 of income related to the referral fee for the three and nine months ended September 30, 2017 and 2016 , respectively.
The Company also has agreements with SBNA to service auto retail installment contracts and recreational and marine vehicle portfolios. Servicing fee income recognized under these agreements totaled $887 and $1,140 for the three months ended September 30, 2017 and 2016 , respectively and $2,658 and $4,457 for the nine months ended September 30, 2017 and 2016 , respectively. Other information on the serviced auto loan and retail installment contract portfolios for SBNA as of September 30, 2017 and December 31, 2016 is as follows: 

								
 	September 30,
2017		December 31,
2016	
Total serviced portfolio	$	427,168			$	531,117		
Cash collections due to owner	13,425			21,427		
Servicing fees receivable	983			1,123		

During the three months ended September 30, 2017 , the Company sold certain receivables previously acquired with deteriorated credit quality to SBNA. These loans were sold with a gain of $35,927 recognized in investment losses, net in the accompanying condensed consolidated financial statements. The Company will continue to perform the servicing of these assets and has recorded $231 of servicing fee income from SBNA during the period ended September 30, 2017.

Other information on the serviced receivables for SBNA as of September 30, 2017 is as follows:

				
 	September 30,
2017	
Total serviced portfolio	$	129,727		
Cash collections due to owner	273		
Servicing fees receivable	110		

Beginning in 2016, the Company agreed to pay SBNA a market rate-based fee expense for payments made at SBNA retail branch locations for accounts originated/serviced by the Company and the costs associated with modifying the

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Advanced Teller platform to the payments. The Company incurred $62 and $178 for these services during the three and nine months ended September 30, 2017 .
Flow Agreements
Until May 9, 2015, the Company was party to a flow agreement with SBNA whereby SBNA had the first right to review and approve Chrysler Capital consumer vehicle lease applications. The Company could review any applications declined by SBNA for the Company’s own portfolio. The Company received an origination fee on all leases originated under this agreement and continues to service these vehicles leases. Pursuant to the Chrysler Agreement, the Company pays FCA on behalf of SBNA for residual gains and losses on the flowed leases. Servicing fee income recognized on leases serviced for SBNA totaled $1,066 and $1,742 for the three months ended September 30, 2017 and 2016, respectively, and $4,115 and $5,741 for the nine months ended September 30, 2017 and 2016 , respectively. Other information on the consumer vehicle lease portfolio serviced for SBNA as of September 30, 2017 and December 31, 2016 is as follows: 

								
 	September 30,
2017		December 31,
2016	
Total serviced portfolio	$	459,524			$	1,297,317		
Cash collections due to owner	—			78		
Origination and servicing fees receivable	2,020			926		
Revenue share reimbursement receivable	3,365			612		

On June 30, 2014, the Company entered into an indemnification agreement with SBNA whereby the Company indemnifies SBNA for any credit or residual losses on a pool of $48,226 in leases originated under the flow agreement. The covered leases are non-conforming units because they did not meet SBNA’s credit criteria at origination. At the time of the agreement, the Company established a $48,226 collateral account with SBNA in restricted cash that will be released over time to SBNA, in the case of losses, and the Company, in the case of payments and sale proceeds. As of September 30, 2017 and December 31, 2016 , the balance in the collateral account is $22 and $11,329 , respectively. The Company recognized no indemnification expense for the three and nine months ended September 30, 2017 , and 2016 .

Also, in January 2015, the Company agreed to indemnify SBNA for residual losses, up to a cap, on certain leases originated under the flow agreement between September 24, 2014 and May 9, 2015 for which SBNA and the Company had differing residual value expectations at lease inception. At the time of the agreement, the Company established a collateral account held by SBNA to cover the expected losses, as of September 30, 2017 and December 31, 2016, the balance in the collateral account was $2,713 and $2,706 , respectively. As of September 30, 2017 and December 31, 2016 , the Company had a recorded liability of $2,983 and $2,691 respectively, related to the residual losses covered under the agreement.
Securitizations
On March 29, 2017, the Company entered into a Master Securities Purchase Agreement (MSPA) with Santander, whereby it has the option to sell a contractually determined amount of eligible prime loans to Santander, through the SPAIN securitization platform, for a term ending in December 2018. The Company will provide servicing on all loans originated under this arrangement. As at September 30, 2017 , the Company sold $1,236,331 of loans under this arrangement. Under a separate securities purchase agreement, the Company sold $1,347,010 of prime loans to Santander during the three months ended September 30, 2017. A total loss of $6,846 and $13,026 was recognized for the three and nine months period ended September 30, 2017 , which is included in investment losses, net in the accompanying condensed consolidated financial statements. Servicing fee income recognized totaled $529 and $1,419 for the three and nine ended September 30, 2017 . The Company had $14,083 of collections due to Santander as of September 30, 2017 .
Employment Agreements
On July 2, 2015, the Company announced the departure of Thomas G. Dundon from his roles as Chairman of the Board and CEO of the Company, effective as of the close of business on July 2, 2015. In connection with his departure, and subject to the terms and conditions of his Employment Agreement, including Mr. Dundon's execution of a release of claims against the Company, Mr. Dundon became entitled to receive certain payments and benefits under his Employment Agreement.

42

Also in connection with his departure, Mr. Dundon entered into a Separation Agreement with the Company, DDFS LLC, SHUSA and Santander. Subject to applicable regulatory approvals and law, the Separation Agreement provided, among other things, that Mr. Dundon’s outstanding stock options would remain exercisable until the third anniversary of his resignation, and subject to certain time limitations, Mr. Dundon would be permitted to exercise such options in whole, but not in part, and settle such options for a cash payment equal to the difference between the closing trading price of a share of Company common stock as of the date immediately preceding such exercise and the exercise price of such option. Mr. Dundon exercised this cash settlement option on July 2, 2015. The Separation Agreement also provided for the modification of terms for certain other equity-based awards (Note 14), subject to limitations of banking regulators and applicable law. The Separation Agreement also provided that Mr. Dundon would serve as a consultant to the Company for twelve months from the date of the Separation Agreement at a mutually agreed rate, subject to required regulatory approvals.
As of September 30, 2017 , the Company has not made any payments to Mr. Dundon, nor recorded any liability or obligation arising from or pursuant to the terms of the Separation Agreement. If all applicable conditions are satisfied, including receipt of required regulatory approvals and satisfaction of any conditions thereto, the Company will be obligated to make a cash payment to Mr. Dundon of up to $115,139 . This amount would be recorded as compensation expense in the condensed consolidated statement of income and comprehensive income in the period in which approval is obtained.

Also, in connection with, and pursuant to, the Separation Agreement, on July 2, 2015, Mr. Dundon, the Company, DDFS LLC, SHUSA and Santander entered into an amendment to the Shareholders Agreement (the Second Amendment). The Second Amendment amended, for purposes of calculating the price per share to be paid in the event that a put or call option was exercised with respect to the shares of Company Common Stock owned by DDFS LLC in accordance with the terms and conditions of the Shareholders Agreement, the definition of the term “Average Stock Price” to mean  $26.83 . Pursuant to the Separation Agreement, SHUSA was deemed to have delivered as of July 3, 2015 an irrevocable notice to exercise the call option with respect to all  34,598,506  shares of the Company's Common Stock owned by DDFS LLC and consummate the transactions contemplated by such call option notice, subject to the receipt of required bank regulatory approvals and any other approvals required by law (the Call Transaction). Because the Call Transaction was not consummated prior to the Call End Date, DDFS LLC is free to transfer any or all shares of Company Common Stock it owns, subject to the terms and conditions of the Amended and Restated Loan Agreement, dated as of July 16, 2014, between DDFS LLC and Santander (the Loan Agreement). The Loan Agreement provides for a  $300,000  revolving loan which, as of the maturity date, had a $290,000 unpaid principal balance. Pursuant to the Loan Agreement,  29,598,506  shares of the Company’s common stock owned by DDFS LLC are pledged as collateral under a related pledge agreement (the Pledge Agreement). Because the Call Transaction was not completed on or before the Call End Date, interest began accruing on the price paid per share in the Call Transaction at the overnight LIBOR rate on the third business day preceding the consummation of the Call Transaction plus  100 basis points  with respect to any shares of Company Common Stock ultimately sold in the Call Transaction. The Shareholder Agreement further provides that Santander may, at its option, become the direct beneficiary of the Call Option. If consummated in full, SHUSA would pay DDFS LLC $928,278  plus interest that has accrued since the Call End Date. To date, the Call Transaction has not been consummated.

Pursuant to the Loan Agreement, if at any time the value of the Common Stock pledged under the Pledge Agreement is less than  150%  of the aggregate principal amount outstanding under the Loan Agreement, DDFS LLC has an obligation to either (a) repay a portion of such outstanding principal amount such that the value of the pledged collateral is equal to at least  200%  of the outstanding principal amount, or (b) pledge additional shares of Company Common Stock such that the value of the additional shares of Common Stock, together with the  29,598,506  shares already pledged under the Pledge Agreement, is equal to at least  200%  of the outstanding principal amount. The value of the pledged collateral is less than  150%  of aggregate principal amount outstanding under the Loan Agreement, and DDFS LLC has not taken any of the collateral posting actions described in clauses (a) or (b) above. If Santander declares the borrower’s obligations under the Loan Agreement due and payable as a result of an event of default (including with respect to the collateral posting obligations described above), under the terms of the Loan Agreement and the Pledge Agreement, Santander’s ability to rely upon the shares of SC Common Stock subject to the Pledge Agreement is, subject to certain exceptions, limited to the exercise by SHUSA and/or Santander of the right to deliver the call option notice and to consummate the Call Transaction at the price specified in the Shareholders Agreement. If the borrower fails to pay obligations under the Loan Agreement when due, including because of Santander’s declaration of such obligations as due and payable as a result of an event of default, a higher default interest rate will apply to such overdue amounts.

43

In connection with, and pursuant to, the Separation Agreement, on July 2, 2015, DDFS LLC and Santander entered into an amendment to the Loan Agreement and an amendment to the Pledge Agreement that provide, among other things, that outstanding balance under the Loan Agreement shall become due and payable upon the consummation of the Call Transaction and that the amount otherwise payable to DDFS LLC under the Call Transaction shall be reduced by the amount outstanding under the Loan Agreement, including principal, interest and fees, and further that any net cash proceeds received by DDFS LLC on account of sales of Company Common Stock after the Call End Date shall be applied to the outstanding balance under the Loan Agreement.

On August 31, 2016, Mr. Dundon, DDFS LLC, the Company, Santander and SHUSA entered into a Second Amendment to the Separation Agreement, and Mr. Dundon, DDFS LLC, Santander and SHUSA entered into a Third Amendment to the Shareholders Agreement, whereby the price per share to be paid to DDFS LLC in connection with the Call Transaction was reduced from $26.83 to $26.17 , the arithmetic mean of the daily volume-weighted average price for a share of Company common stock for each of the ten consecutive complete trading days immediately prior to July 2, 2015, the date on which the call option was exercised.

On April 17, 2017, the Loan Agreement matured and became due and payable with an unpaid principal balance of approximately $290,000 as of that date. Because the borrower failed to pay obligations under the Loan Agreement on April 17, 2017, the borrower is in default and is currently being charged the default interest rate as defined by the Loan Agreement. The Loan Agreement generally defines the default interest rate as the Base Rate plus 2% . The Base Rate as defined in the Loan Agreement is the higher of (i) the federal funds rate plus ½ of 1% or (ii) the prime rate, which is the annual rate of interest publicly announced by the New York Branch of Santander from time to time. As of April 21, 2017, the prime rate as announced by the New York Branch of Santander was 4% .

The parties continue in discussions on these matters. Any future agreement on these matters would be subject to any required internal and regulatory approvals and execution of definitive documentation.

Other related-party transactions

As of September 30, 2017 , Jason Kulas and Mr. Dundon, both being former members of the Board and CEO of the Company, along with a Santander employee who was a member of the Board until the second quarter of 2015, each had a minority equity investment in a property in which the Company leases 373,000 square feet as its corporate headquarters. For the three months ended September 30, 2017 and 2016 , the Company recorded $1,275 and $1,361 , respectively, in lease expenses on this property and for the nine months ended September 30, 2017 and 2016 , the Company recorded $3,836 and $3,832 , respectively, in lease expenses on this property. The Company subleases approximately 13,000 square feet of its corporate office space to SBNA. For the three months ended September 30, 2017 and 2016 , the Company recorded $41 in sublease revenue on this property, and for the nine months ended September 30, 2017 and 2016 , the Company recorded $122 in sublease revenue on this property. Future minimum lease payments over the remainder of the 9 -year term of the lease, which extends through 2026, total $64,050 .

The Company's wholly-owned subsidiary, Santander Consumer International Puerto Rico, LLC (SCI), opened deposit accounts with Banco Santander Puerto Rico, an affiliated entity. As of  September 30, 2017 and December 31, 2016 , SCI had cash of  $72,170 and $98,836 , respectively, on deposit with Banco Santander Puerto Rico.

During 2015, Santander Investment Securities Inc. (SIS), an affiliated entity, purchased an investment of  $2,000  in the Class A3 notes of CCART 2013-A, a securitization Trust formed by the Company in 2013. Although CCART 2013-A is not a consolidated entity of the Company, the Company continues to service the assets of the associated trust. SIS also serves as co-manager on certain of the Company’s securitizations. Amounts paid to SIS as co-manager for the three months ended  September 30, 2017 and 2016 , totaled  $100 and zero , respectively, and totaled $1,259 and $1,049 for the nine months ended September 30, 2017 and 2016 , respectively, and are included in debt issuance costs in the accompanying condensed consolidated financial statements.

Produban Servicios Informaticos Generales S.L., a Santander affiliate, is under contract with the Company to provide professional services, telecommunications, and internal and/or external applications. Expenses incurred, which are included as a component of other operating costs in the accompanying consolidated statements of income, totaled $16 and $64 for the three and nine months ended September 30, 2016 . No such expenses were incurred for the three and nine months ended September 30, 2017.

44

The Company is party to an MSA with a company in which it has a cost method investment and holds a warrant to increase its ownership if certain vesting conditions are satisfied. This cost method investment was carried at a value of zero in the Company's condensed consolidated balance sheets as of September 30, 2017 , as it had been fully impaired. The MSA enables the Company to review point-of-sale credit applications of retail store customers. During the six months ending June 30, 2016, the Company did not originate any loans under the MSA and effective August 17, 2016, the Company ceased funding new originations from all of the retailers for which it reviews credit applications under this MSA.

Beginning in 2017, the Company and SBNA entered into a Credit Card Agreement (Card Agreement) whereby SBNA will provide credit card services for travel and related business expenses and for vendor payments. This service is at zero cost but generate rebates based on purchases made. As at September 30, 2017 , the activities associated with the program were insignificant.

Effective April 1, 2017, the Company contracted Aquanima, a Santander affiliate, to provide procurement services. Expenses incurred totaled $142 and $354 for the three and nine months ended September 30, 2017 . As of September 30, 2017, the amount outstanding was $354 .

		
12.	Computation of Basic and Diluted Earnings per Common Share	

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

The calculation of diluted EPS excludes 778,019 employee stock option awards for the three and nine months ended September 30, 2017 , as the effect of those securities would be anti-dilutive if exercised and issued. The calculation of diluted EPS excludes 1,933,659 employee stock option awards for the three and nine months ended September 30, 2016, as the effect of those securities would be anti-dilutive if exercised and issued.

Restricted stock units of zero and 620,625 for three and nine months ended September 30, 2017 ( nil for three and nine months ended September 30, 2016), respectively, were excluded from the calculation of diluted EPS as the effect of those securities would be anti-dilutive.

The following table represents EPS numbers for the three and nine months ended September 30, 2017 and 2016 :

																
 	Three Months Ended 
 September 30,	 	Nine Months Ended 
 September 30,	
 	2017	 	2016	 	2017	 	2016	
Earnings per common share	 	 	 	 	 	 	 	
Net income	$	199,388		 	$	213,547		 	$	607,490		 	$	705,191		
Weighted average number of common shares outstanding before restricted participating shares (in thousands)	359,496		 	357,994		 	359,274		 	357,830		
Weighted average number of participating restricted common shares outstanding (in thousands)	123		 	350		 	123		 	350		
Weighted average number of common shares outstanding (in thousands)	359,619		 	358,344		 	359,397		 	358,180		
Earnings per common share	$	0.55		 	$	0.60		 	$	1.69		 	$	1.97		
Earnings per common share - assuming dilution	 	 	 	 	 	 	 	
Net income	$	199,388		 	$	213,547		 	$	607,490		 	$	705,191		
Weighted average number of common shares outstanding (in thousands)	359,619		 	358,344		 	359,397		 	358,180		
Effect of employee stock-based awards (in thousands)	841		 	1,743		 	672		 	1,455		
Weighted average number of common shares outstanding - assuming dilution (in thousands)	360,460		 	360,088		 	360,069		 	359,635		
Earnings per common share - assuming dilution	$	0.55		 	$	0.59		 	$	1.69		 	$	1.96		

		
13.	Fair Value of Financial Instruments	

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Fair value measurement requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs and also establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value 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 for the asset or liability and are used to measure fair value to the extent relevant observable inputs are not available.
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following tables present the carrying value and estimated fair value of the Company’s financial assets and liabilities disclosed, but not carried, at fair value at September 30, 2017 and December 31, 2016 , and the level within the fair value hierarchy:

																				
 	September 30, 2017	
 	Carrying
Value	 	Estimated
Fair Value	 	Level 1	 	Level 2	 	Level 3	
Assets:	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents (a)	$	397,311		 	$	397,311		 	$	397,311		 	$	—		 	$	—		
Finance receivables held for investment, net (b)	22,540,414		 	23,590,105		 	—		 	—		 	23,590,105		
Restricted cash (a)	2,559,246		 	2,559,246		 	2,559,246		 	—		 	—		
Total	$	25,496,971		 	$	26,546,662		 	$	2,956,557		 	$	—		 	$	23,590,105		
Liabilities:	 	 	 	 	 	 	 	 	 	
Notes payable — credit facilities (c)	$	4,965,888		 	$	4,965,888		 	$	—		 	$	—		 	$	4,965,888		
Notes payable — secured structured financings (d)	23,258,363		 	23,541,974		 	—		 	13,889,699		 	9,652,275		
Notes payable — related party (e)	2,369,850		 	2,369,850		 	—		 	—		 	2,369,850		
Total	$	30,594,101		 	$	30,877,712		 	$	—		 	$	13,889,699		 	$	16,988,013		

																				
 	December 31, 2016	
 	Carrying
Value	 	Estimated
Fair Value	 	Level 1	 	Level 2	 	Level 3	
Assets:	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents (a)	$	160,180		 	$	160,180		 	$	160,180		 	$	—		 	$	—		
Finance receivables held for investment, net (b)	23,456,506		 	24,630,599		 	—		 	—		 	24,630,599		
Restricted cash (a)	2,757,299		 	2,757,299		 	2,757,299		 	—		 	—		
Total	$	26,373,985		 	$	27,548,078		 	$	2,917,479		 	$	—		 	$	24,630,599		
Liabilities:	 	 	 	 	 	 	 	 	 	
Notes payable — credit facilities (c)	$	6,739,817		 	$	6,739,817		 	$	—		 	$	—		 	$	6,739,817		
Notes payable — secured structured financings (d)	21,608,889		 	21,712,691		 	—		 	13,530,045		 	8,182,646		
Notes payable — related party (e)	2,975,000		 	2,975,000		 	—		 	—		 	2,975,000		
Total	$	31,323,706		 	$	31,427,508		 	$	—		 	$	13,530,045		 	$	17,897,463		

(a)	Cash and cash equivalents and restricted cash — The carrying amount of cash and cash equivalents, including restricted cash, is at an approximated fair value as the instruments mature within 90 days or less and bear interest at market rates.	
		
(b)	Finance receivables held for investment, net — Finance receivables held for investment, net are carried at amortized cost, net of an allowance. The estimated fair value for the underlying financial instruments are determined as follows:	
		
•	Retail installment contracts held for investment, net — The estimated fair value is calculated based on a DCF in which the Company uses significant unobservable inputs on key assumptions, including	

46

historical default rates and adjustments to reflect prepayment rates, expected recovery rates, discount rates reflective of the cost of funding, and credit loss expectations.
		
•	Receivables from dealers held for investment and Capital lease receivables, net — Receivables from dealers held for investment are carried at amortized cost, net of credit loss allowance. Capital lease receivables are carried at gross investment, 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)	Notes payable — credit facilities  — The carrying amount of notes payable related to revolving credit facilities is estimated to approximate fair value. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements as the facilities are subject to short-term floating interest rates that approximate rates available to the Company.	
		
(d)	Notes payable — secured structured financings  — The estimated fair value of notes payable related to secured structured financings is calculated based on market observable prices and spreads for the Company's publicly traded debt and market observed prices of similar notes issued by the Company, or recent market transactions involving similar debt with similar credit risks, which are considered level 2 inputs. The estimated fair value of notes payable related to privately issued amortizing notes is calculated based on a combination of discounted cash flow analysis and market observable spreads for similar liabilities in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect prepayment rates, discount rates reflective of the cost of funding, and credit loss expectations, which are considered level 3 inputs.	
		
(e)	Notes payable — related party  — The carrying amount of notes payable to a related party is estimated to approximate fair value as the facilities are subject to short-term floating interest rates that approximate rates available to the Company.	
Financial Instruments Measured At Fair Value On A Recurring Basis
The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016 , and the level within the fair value hierarchy:

																
 	Fair Value Measurements at September 30, 2017	
 	Total	 	Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)	 	Significant
Other
Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	
Other assets — trading interest rate caps (a)	$	111,515		 	$	—		 	$	111,515		 	$	—		
Due from affiliates — trading interest rate caps (a)	5,053		 	—		 	5,053		 	—		
Other assets — cash flow hedging interest rate swaps (a)	35,381		 	—		 	35,381		 	—		
Due from affiliates — cash flow hedging interest rate swaps (a)	4,605		 	—		 	4,605		 	—		
Other assets — trading interest rate swaps (a)	7,364		 	—		 	7,364		 	—		
Due from affiliates — trading interest rate swaps (a)	1,437		 	—		 	1,437		 	—		
Other assets — trading options for interest rate caps (a)
	16,529		 	—		 	16,529		 	—		
Due from affiliates — trading options for interest rate caps (a)	9,775		 	—		 	9,775		 	—		
Other liabilities — trading options for interest rate caps (a)	111,510		 	—		 	111,510		 	—		
Due to affiliates — trading options for interest rate caps (a)	5,053		 	—		 	5,053		 	—		
Other liabilities — trading interest rate caps (a)	16,480		 	—		 	16,480		 	—		
Due to affiliates — trading interest rate caps (a)	9,775		 	—		 	9,775		 	—		
Retail installment contracts acquired individually (c)	24,799		 	—		 	—		 	24,799		

47

	
																
 	Fair Value Measurements at December 31, 2016	
 	Total	 	Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)	 	Significant
Other
Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	
Other assets — trading interest rate caps (a)	$	68,676		 	$	—		 	$	68,676		 	$	—		
Due from affiliates — trading interest rate caps (a)	7,593		 	—		 	7,593		 	—		
Other assets — cash flow hedging interest rate swaps (a)	41,471		 	—		 	41,471		 	—		
Due from affiliates — cash flow hedging interest rate swaps (a)	4,080		 	—		 	4,080		 	—		
Other assets — trading interest rate swaps (a)	783		 	—		 	783		 	—		
Due from affiliates — trading interest rate swaps (a)	1,292		 	—		 	1,292		 	—		
Other liabilities — trading options for interest rate caps (a)	68,688		 	—		 	68,688		 	—		
Due to affiliates — trading options for interest rate caps (a)	7,593		 	—		 	7,593		 	—		
Other liabilities — cash flow hedging interest rate swaps (a)	482		 	—		 	482		 	—		
Due to affiliates — cash flow hedging interest rate swaps (a)	451		 	—		 	451		 	—		
Other liabilities — trading interest rate swaps (a)	42		 	—		 	42		 	—		
Due to affiliates — trading interest rate swaps (a)	95		 	—		 	95		 	—		
Other liabilities — total return settlement (a,b)	30,618		 	—		 	—		 	30,618		
Retail installment contracts acquired individually (c)	24,495		 	—		 	—		 	24,495		
		
(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 7).	
		
(b)	The significant unobservable inputs for total return settlement derivative contracts used in the fair value measurement of the Company's liabilities are discount percentages, which are based on comparable financial instruments.	
		
(c)	For certain retail installment contracts reported in finance receivables held for investment, net, the Company has elected the fair value option. The fair values of the retail installment contracts are estimated using a DCF model. When estimating the fair value using this model, the Company uses significant unobservable inputs on key assumptions, which includes historical default rates and adjustments to reflect prepayment rates based on available data from a comparable market securitization of similar assets, discount rates reflective of the cost of funding of debt issuance and recent historical equity yields, and recovery rates based on the average severity utilizing reported severity rates and loss severity utilizing available market data from a comparable securitized pool. Accordingly, retail installment contracts held for investment are classified as Level 3. Changes in the fair value are recorded in investment gains (losses), net in the condensed consolidated statement of income.	
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, 2017 and 2016 :

																
 	Three Months Ended September 30,	 	Nine Months Ended September 30,	
 	2017	 	2016	 	2017	 	2016	
Balance — beginning of period	$	30,489		 	$	12,602		 	$	24,495		 	$	6,770		
Additions / issuances	—		 	11,838		 	19,727		 	23,712		
Net collection activities	(6,517	)	 	(5,740	)	 	(23,640	)	 	(11,782	)	
Gains recognized in earnings	827		 	—		 	4,217		 	—		
Balance — end of period	$	24,799		 	$	18,700		 	$	24,799		 	$	18,700		
The following table presents the changes in the total return settlement balance, which is classified as Level 3, for the three and nine months ended September 30, 2017 and 2016 :

48

	
																
 	Three Months Ended September 30,	 	Nine Months Ended September 30,	
 	2017	 	2016	 	2017	 	2016	
Balance — beginning of period	$	31,123		 	$	53,543		 	$	30,618		 	$	53,432		
(Gains)/losses recognized in earnings	—		 	(343	)	 	505		 	2,337		
Settlements	(31,123	)	 	(23,336	)	 	(31,123	)	 	(25,905	)	
Balance — end of period	$	—		 	$	29,864		 	$	—		 	$	29,864		
The Company did not have any transfers between Levels 1 and 2 during the three and nine months ended September 30, 2017 and 2016 . There were no amounts transferred into or out of Level 3 during the three and nine months ended and September 30, 2017 and 2016 .
Financial Instruments Measured At Fair Value On A Nonrecurring Basis
The following table presents the Company’s assets that are measured at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016 , and the level within the fair value hierarchy:

																				
 	Fair Value Measurements at September 30, 2017	
 	Total	 	Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)	 	Significant
Other
Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	 	Lower of cost or fair value expense for the nine months ended September 30, 2017	
Other assets — vehicles (a)	$	206,076		 	$	—		 	$	206,076		 	$	—		 	$	—		
Personal loans held for sale (b)	929,549		 	—		 	—		 	929,549		 	237,980		
Retail installment contracts held for sale (c)	845,910		 	—		 	—		 	845,910		 	8,542		
Auto loans impaired due to bankruptcy (d)	101,990		 	—		 	101,990		 	—		 	65,584		

																				
 	Fair Value Measurements at December 31, 2016	
 	Total	 	Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)	 	Significant
Other
Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	 	Lower of cost or fair value expense for the year ended December 31, 2016	
Other assets — vehicles (a)	$	257,382		 	$	—		 	$	257,382		 	$	—		 	$	—		
Personal loans held for sale (b)	1,077,600		 	—		 	—		 	1,077,600		 	414,703		
Retail installment contracts held for sale (c)	1,045,815		 	—		 	—		 	1,045,815		 	8,913		
		
(a)	The Company estimates the fair value of its vehicles, which are obtained either through repossession or lease termination, using historical auction rates and current market levels of used car prices.	
		
(b)	Represents the portion of the portfolio specifically impaired as of period-end. The estimated fair value for personal loans held for sale is calculated based on a combination of estimated cash flows and market rates for similar loans with similar credit risks and a DCF analysis in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect prepayment rates, discount rates reflective of the cost of funding, and credit loss expectations. The lower of cost or fair value adjustment for personal loans held for sale includes customer default activity and adjustments related to the net change in the portfolio balance during the reporting period.	
		
(c)	The estimated fair value is calculated based on a DCF analysis in which the Company uses significant unobservable inputs on key assumptions, including expected default rates, prepayment rates, recovery rates, and discount rates reflective of the cost of funds and appropriate rate of returns.	
		
(d)	For loans that are considered collateral-dependent, such as certain bankruptcy loans, impairment is measured based on the fair value of the collateral, less its estimated cost to sell. For the underlying collateral, the estimated fair value is obtained using historical auction rates and current market levels of used car prices.	
Quantitative Information about Level 3 Fair Value Measurements
The following table presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis at September 30, 2017 :

49

	
												
 	Financial Instruments	 	Fair Value at September 30, 2017	 	Valuation Technique	 	Unobservable Inputs	 	Range	
 	Financial Assets:	
 	Retail installment contracts held for investment	 	$	24,799		 	Discounted Cash Flow	 	Discount Rate	 	9.0% - 9.5%	
 									Default Rate		18% - 22%	
 									Prepayment Rate		6%	
 	Personal loans held for sale	 	$	929,549		 	Market / Income Approach	 	Discount Rate	 	15% - 30%	
 												
 								 	Default Rate	 	30% - 40%	
 	Retail installment contracts held for sale	 	$	845,910		 	Discounted Cash Flow	 	Discount Rate	 	3% - 8%	
 									Default Rate		3.8% - 8.3%	
 									Prepayment Rate		17.8%	

14.    Employee Benefit Plans
The Company has granted stock options to certain executives, other employees, and independent directors under the 2011 Management Equity Plan (the Plan), which enabled the Company to make stock awards up to a total of approximately 29 million common shares (net of shares canceled and forfeited), and expired on January 31, 2015. The Company has granted stock options, restricted stock awards and restricted stock units (RSUs) under the Omnibus Incentive 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 5,192,640 common shares. The Omnibus Incentive Plan was amended and restated as of June 16, 2016.
Stock options granted 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 income over the vesting period as time and performance vesting conditions are met.
Compensation expense related to the 583,890 shares of restricted stock the Company has issued to certain executives is recognized over a five -year vesting period, with $(220) and $182 recorded for the three months ended September 30, 2017 and 2016 , and $139 and $543 for the nine months ended September 30, 2017 and 2016 , respectively,
A summary of the Company’s stock options and related activity as of and for the nine months ended September 30, 2017 is as follows:

														
 	Shares	 	Weighted
Average
Exercise
Price	 	Weighted
Average
Remaining
Contractual
Term (Years)	 	Aggregate
Intrinsic
Value	
Options outstanding at January 1, 2017	4,295,830		 	$	12.70		 	5.6		 	$	12,982		
Granted	—		 	—		 	—		 	—		
Exercised	(594,110	)	 	9.40		 	—		 	2,503		
Expired	(142,795	)	 	12.64		 	—		 	—		
Forfeited	(653,258	)	 	14.57		 	—		 	—		
Options outstanding at September 30, 2017	2,905,667		 	12.96		 	5.0		 	6,999		
Options exercisable at September 30, 2017	2,641,214		 	$	12.15		 	4.8		 	$	8,517		

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. Such RSUs were granted during the nine months ended September 30, 2017 . Under the Company's Omnibus

50

Incentive Plan, a portion of these RSUs vest immediately upon grant, and a portion vest annually over the following three or five years . The Company also has granted certain officers RSUs that vest over either a three or five year period, with vesting dependent on Banco Santander performance over that time. After the shares subject to the RSUs vest and are settled, they are subject to transfer and sale restrictions for one year . The Company also has granted certain directors RSUs that vest either upon the earlier of the first anniversary of grant date or the first annual meeting following the grant date.
On July 2, 2015, Mr. Dundon exercised a right under the Separation Agreement to settle his vested options for a cash payment. Subject to limitations of banking regulators and applicable law, Mr. Dundon’s Separation Agreement also provided that his unvested stock options would vest in full and his unvested restricted stock awards would continue to vest in accordance with their terms as if he remained employed by the Company. In addition, any service-based vesting requirements that were applicable to Mr. Dundon’s outstanding RSUs in respect of his 2014 annual bonus were waived, and such RSUs continue to vest and be settled in accordance with the underlying award agreement. However, because the Separation Agreement did not receive the required regulatory approvals within 60 days of Mr. Dundon’s termination without cause, both the vested and unvested stock options are considered to have expired.

15.	Shareholders' Equity	
Treasury Stock
The Company had 123,507 shares of treasury stock outstanding, with a cost of $2,004 , as of September 30, 2017 and 94,595 shares of treasury stock outstanding, with a cost of $1,600 , as of December 31, 2016 . Prior to the IPO, the Company repurchased 3,154 shares as a result of an employee leaving the Company. Additionally, 120,353 shares were withheld to cover income taxes related to the vesting of RSUs awarded to certain executive officers. The value of the treasury stock is immaterial and included within 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, 2017 and 2016 is as follows:

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Beginning balance, unrealized gains (losses) on cash flow hedges	$	27,860		 	$	(50,766	)	 	$	28,259		 	$	2,125		
Other comprehensive gain (loss) before reclassifications	1,061		 	17,391		 	(3,062	)	 	(50,949	)	
Amounts reclassified out of accumulated other comprehensive income (loss) (a)	(1,440	)	 	6,777		 	2,284		 	22,226		
Ending balance, unrealized gains (losses) on cash flow hedges	$	27,481		 	$	(26,598	)	 	$	27,481		 	$	(26,598	)	
		
(a)	Amounts reclassified out of accumulated other comprehensive income (loss) during the three and nine months ended September 30, 2017 and 2016 consist of the following:	

												
 	Three Months Ended September 30, 2017	 	Three Months Ended September 30, 2016	
Reclassification	Amount reclassified	 	Income statement line item	 	Amount reclassified	 	Income statement line item	
Cash flow hedges:	 	 	 	 	 	 	 	
Settlements of derivatives	$	(1,461	)	 	Interest expense	 	$	10,799		 	Interest expense	
Tax expense (benefit)	21		 	 	 	(4,022	)	 	 	
Net of tax	$	(1,440	)	 	 	 	$	6,777		 	 	

												
 	Nine Months Ended September 30, 2017	 	Nine Months Ended September 30, 2016	
Reclassification	Amount reclassified	 	Income statement line item	 	Amount reclassified	 	Income statement line item	
Cash flow hedges:	 	 	 	 	 	 	 	
Settlements of derivatives	$	3,158		 	Interest expense	 	$	35,442		 	Interest expense	
Tax expense (benefit)	(874	)	 	 	 	(13,216	)	 	 	
Net of tax	$	2,284		 	 	 	$	22,226		 	 	

Dividends

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On October 25, 2017, the Company declared a cash dividend of $0.03 per share, to be paid November 17, 2017 to shareholders of record as of close of business on November 7, 2017. The Company's capital action plan also includes dividend payments for the Company’s stockholders of $0.05 per share in the first and second quarters of 2018.
		
16.	Investment Losses, Net	
When the Company sells individually acquired retail installment contracts, personal loans or leases, the Company recognizes a gain or loss for the difference between the cash proceeds and carrying value of the assets sold. The gain or loss is recorded in investment gains (losses), net. Lower of cost or market adjustments on the recorded investment of finance receivables held for sale are also recorded in investment gains (losses), net.
Investment losses, net was comprised of the following for the three and nine months ended September 30, 2017 and 2016 :

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Gain (loss) on sale of loans and leases	$	29,974		 	$	(3,765	)	 	$	16,913		 	$	(1,418	)	
Lower of cost or market adjustments	(84,718	)	 	(97,532	)	 	(246,522	)	 	(266,506	)	
Other gains, losses and impairments, net	2,152		 	(4,753	)	 	1,096		 	(8,491	)	
 	$	(52,592	)	 	$	(106,050	)	 	$	(228,513	)	 	$	(276,415	)	

The lower of cost or market adjustments for the three and nine months ended September 30, 2017 included $112,055 and $336,413 in customer default activity, respectively, and net favorable adjustments of $27,337 and $89,891 , respectively, primarily related to net changes in the unpaid principal balance on the personal lending portfolio, most of which has been classified as held for sale since September 30, 2015. The lower of cost or market adjustments for the three and nine months ended September 30, 2016 included  $114,477  and  $312,993  in customer default activity and favorable adjustments of  18,831  and  48,373 , respectively, related to net changes in the unpaid principal balance on the personal lending portfolio. The key driver to continued write-downs due to customer default activity, is the lower of cost or market adjustment recorded for each new originated loan, based on forecasted lifetime loss.

	
		
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 2016 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, 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 SEC’s website also contains current reports and other information regarding the Company at www.sec.gov .
Overview

Santander Consumer USA Holdings Inc. is the holding company for Santander Consumer USA Inc., a full-service, technology-driven consumer finance company focused on vehicle finance and third-party servicing. The Company is majority-owned (as of September 30, 2017 , approximately 58.7% ) by SHUSA, a wholly-owned subsidiary of Santander.
The Company is managed through a single reporting segment, Consumer Finance, which includes its vehicle financial products and services, including retail installment contracts, vehicle leases, and dealer loans, as well as financial products and services related to motorcycles, RVs, and marine vehicles. The Consumer Finance segment also includes personal loan and point-of-sale financing operations.
Since May 1, 2013, the Company has been the preferred provider for FCA’s consumer loans and leases and dealer loans under terms of a ten-year agreement with FCA. Business generated under terms of the Chrysler Agreement is branded as Chrysler Capital. In conjunction with the Chrysler Agreement, the Company offers a full spectrum of auto financing products and services to FCA customers and dealers under the Chrysler Capital 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.

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Under the terms of the Chrysler Agreement, the parties agreed to certain standards, including the Company meeting specified penetration rates that escalate over the first five years, and FCA treating the Company in a manner consistent with comparable OEMs' treatment of their captive providers, primarily in regard to sales support. The failure of either party to meet its obligations under the agreement could result in the agreement being terminated. The targeted and actual penetration rates under the terms of the Chrysler Agreement are as follows:

											
 	Program Year (a)	
 	1	2	3	4	5-10	
Retail	20	%	30	%	40	%	50	%	50	%	
Lease	11	%	14	%	14	%	14	%	15	%	
Total	31	%	44	%	54	%	64	%	65	%	
 	 	 	 	 	 	
Actual Penetration (b)	30	%	29	%	26	%	19	%	21	%	
		
(a)	Program years run from May 1 to April 30. Retail and lease penetration is based on a percentage of FCA retail sales.	
		
(b)	Actual penetration rates shown for Program Year 1, 2 , 3 and 4 are as of April 30, 2014, 2015, 2016 and 2017, respectively, the end date of each of those Program Years. Actual penetration rate shown for Program Year 5, which ends April 30, 2018, is for the three months ended September 30, 2017 .	

The target penetration rate as of April 30, 2018 is 65% . The Company's actual penetration rate for three months ended September 30, 2017 was 21% . The penetration rate has been constrained due to the competitive landscape and low interest rates, causing the subvented loan offers not to be materially more attractive than other lenders' offers. While the Company has not achieved the target penetration rates to date, Chrysler Capital continues to be a focal point of its strategy, the Company continues to work with FCA to improve penetration rates, and it remains committed to the Chrysler Agreement.
The Company has worked strategically and collaboratively with FCA to continue to strengthen its relationship and create value within the Chrysler Capital program. The Company has partnered with FCA to roll out two pilot programs, including a dealer rewards program and a nonprime subvention program. During the nine months ended September 30, 2017 , the Company originated $5.2 billion in Chrysler Capital loans which represented 46% of total retail installment contract originations, with an approximately even share between prime and non-prime, as well as more than $4.7 billion in Chrysler Capital leases. Since its May 1, 2013, launch, Chrysler Capital has originated $43.7 billion in retail loans and $22.3 billion in leases, and facilitated the origination of $3.0 billion in leases and dealer loans for an affiliate. As of September 30, 2017 , the Company's auto retail installment contract portfolio consisted of $6.9 billion of Chrysler Capital loans which represents 31% of the Company's auto retail installment contract portfolio.
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 several relationships through which it has provided personal loans, private-label credit cards and other consumer finance products. In October 2015, the Company announced its planned exit from the personal lending business.
The Company has dedicated financing facilities in place for its Chrysler Capital business. The Company periodically sells consumer retail installment contracts through these flow agreements, and, when market conditions are favorable, it accesses the ABS market through securitizations of consumer retail installment contracts. The Company also periodically enters into bulk sales of consumer vehicle leases with a third party. The Company typically retains servicing of loans and leases sold or securitized, and may also retain some residual risk in sales of leases. The Company has also entered into an agreement with a third party whereby the Company will periodically sell charged-off loans.
Economic and Business Environment
The U.S. economy continues to stabilize. Unemployment rates declined to pre-recession levels of 4.2% as reported by the Bureau of Labor Statistics for September 30, 2017 . The Federal Reserve raised its federal funds rate by 25 basis points , to 100 - 125 basis points in June 2017, the second rate increase during fiscal 2017. The energy sector has also stabilized after the market for oil bottomed out in January 2016 and has since continued to recover throughout the year.
Despite this stability, consumer debt levels continued to rise, specifically auto debt. As consumers assume higher debt levels, the Company may experience an increase in delinquencies and credit losses. Additionally, the Company is exposed to geographic customer concentration risk, which could have an adverse effect on the Company's financial position, results of operations or cash flow.

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The following table shows the percentage of unpaid principal balance on the Company's retail installment contracts by state concentration. Total unpaid principal balance of retail installment contracts held for investment was $26,369,828 and $27,358,147 at September 30, 2017 and December 31, 2016 , respectively.

						
 	September 30,
2017	 	December 31, 2016	
 	Retail Installment Contracts Held for Investment	
Texas	16	%	 	17	%	
Florida	12	%	 	13	%	
California	9	%	 	10	%	
Georgia	6	%	 	5	%	
North Carolina	4	%	 	4	%	
Illinois	4	%	 	4	%	
New York	4	%	 	4	%	
Pennsylvania	3	%	 	3	%	
Louisiana	3	%	 	3	%	
Ohio	3	%	 	2	%	
Other states	36	%	 	35	%	
 	100	%	 	100	%	

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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, 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 Commission, the CFPB, the FTC, 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 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.
Additional legal and regulatory matters affecting the Company's activities are further discussed in Part I, Item 1A - Risk Factors of the 2016 Annual Report on Form 10-K.
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 Treasury swap curve and spot and forward rates are monitored.	
		
•	Net credit losses — The Company performs net credit loss analysis at the vintage level for individually acquired retail installment contracts, loans and leases, and at the pool level for purchased portfolios, enabling it to pinpoint drivers of any unusual or unexpected trends. The Company also monitors its recovery rates as well as industry-wide 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 allowance for credit losses.	
		
•	Other income — The Company's flow agreements in connection with the Chrysler Agreement 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. Additionally, due to the classification of the Company's personal lending portfolio as held for sale upon the decision to exit the personal lending line of business, adjustments to record this portfolio at the lower of cost or market are included in investment gains (losses), net, which is a component of other income (losses).	
		
•	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.	

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).

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Third Quarter 2017 Summary of Results
Key highlights of the Company's performance in the third quarter of 2017 included:

•	Total auto originations of $5.0 billion , down 3% from $5.2 billion originated in the same quarter in 2016 ;	
		
•	Net finance and other interest income of $1.1 billion , down 10% compared to the same quarter in 2016 ;	
		
•	Return on average assets of 2.0% , down from 2.2% compared to the same quarter in 2016 ;	
		
•	Common equity tier 1 (CET1) ratio of 15.0% , up 190 bps compared to the same quarter in 2016 ; and	
		
•	Net leased vehicle income of $118.4 million , down 13% compared to the same quarter in 2016 .	
Recent Developments and Other Factors Affecting The Company's Results of Operations
Changes to Board of Directors & Management Team

On August 28, 2017, the Company announced the departure of its President and Chief Executive Officer (CEO), Mr. Jason Kulas, effective August 27, 2017. Mr. Scott Powell was named successor and was also appointed to the Executive Committee of the Board. Both appointments were effective August 27, 2017. Mr. Mahesh Aditya was also elected to the Board to fill the vacancy created by the departure of Mr. Kulas effective August 27, 2017.

On October 2, 2017, the Company announced the departure of its Chief Financial Officer (CFO), Mr. Ismail Dawood, effective September 29, 2017. Mr. Juan Carlos Alvarez de Soto was named successor effective September 29, 2017.
Impact from Hurricanes
During the three months ended September 30, 2017, the Company's operations were impacted by Hurricanes Harvey and Irma. As a result of the hurricanes, the Company incurred costs to repair damaged assets and facilities, suffered losses under its contracts, and incurred costs to clean up and recover its operations. At the time of the hurricanes, the Company had insurance that provided coverage for, among other things, property damage and business interruption impact on net profitability. The Company has yet to submit or recover any losses under its insurance program and accordingly, no insurance recoveries were recorded in the condensed consolidated financial statements as of and during the period ended September 30, 2017. The Company has considered the impact of both Hurricanes in its allowance for credit losses recorded as of September 30, 2017.
Personal Lending
As a result of the strategic evaluation of its personal lending portfolio, in the third quarter of 2015, the Company began reviewing strategic alternatives for exiting the personal loan portfolios. On February 1, 2016, the Company completed the sale of substantially all LendingClub loans to a third-party buyer at an immaterial premium to par value. On April 14, 2017, the Company sold the remaining portfolio comprised of personal installment loans to a third-party buyer.
The Company's other significant personal lending relationship is with Bluestem. The Company continues to perform in accordance with the terms and operative provisions of agreements under which it is obligated to purchase personal revolving loans originated by Bluestem for a term ending in 2020, or 2022 if extended at Bluestem's option. The Bluestem portfolio is carried as held for sale in the Company's condensed consolidated financial statements. Accordingly, the Company has recorded $238 million million year-to-date in lower of cost or market adjustments on this portfolio, and there may be further such adjustments required in future periods' financial statements. The Company is currently evaluating alternatives for sale of the Bluestem portfolio, which had a carrying value of  $930 million at  September 30, 2017 .
Securitizations
On March 29, 2017, the Company entered into a Master Securities Purchase Agreement (MSPA) with Santander, whereby the Company has the option to sell a contractually determined amount of eligible prime loans to Santander, through the SPAIN securitization platform, for a term ending in December 2018. The Company provides servicing on all loans originated under this arrangement. For the nine months ended September 30, 2017 , the Company sold $1.2 billion of loans under this agreement. Under a separate securities purchase agreement, the Company sold $1.3 billion of prime loans to Santander during the three months ended September 30, 2017. The Company provides servicing of these loans sold.
Dividends
The Company was restricted from declaring or paying any future dividends, or making any capital distribution, until such time as the FRBB issues a written non-objection to a revised capital plan submitted by SHUSA or the FRBB otherwise issues its written non-objection to the payment of a dividend by the Company. In June 2017, SHUSA announced that the FRBB did not

56

object to the planned capital actions described in SHUSA’s 2017 Capital Plan that was submitted as part of the annual Comprehensive Capital Analysis and Review (CCAR). Included in SHUSA’s capital actions were proposed dividend payments for the Company’s stockholders.
On October 25, 2017, the Company declared a cash dividend of $0.03 per share, to be paid November 17, 2017 to shareholders of record as of close of business on November 7, 2017. The Company's capital action plan also includes dividend payments for the Company’s stockholders of $0.05 per share in the first and second quarters of 2018.

57

Volume
The Company's originations of individually acquired loans and leases, including net balance increases on revolving loans, average APR, and discount during the three and nine months ended September 30, 2017 and 2016 were as follows:

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
 	(Dollar amounts in thousands)	
Retained Originations	 	 	 	 	 	 	 	
Retail installment contracts	$	2,570,228		 	$	3,281,112		 	$	8,619,961		 	$	10,545,592		
Average APR	16.1	%	 	14.7	%	 	17.2	%	 	15.1	%	
Average FICO® (a)	605		 	612		 	591		 	606		
Discount	1.2	%	 	0.1	%	 	0.8	%	 	0.4	%	
 	 	 	 	 	 	 	 	
Personal loans	$	—		 	$	—		 	$	5,660		 	$	9,281		
Average APR	—		 	—		 	25.7	%	 	25.0	%	
 	 	 	 	 	 	 	 	
Leased vehicles	$	1,665,776		 	$	1,300,375		 	$	4,693,392		 	$	4,612,284		
 	 	 	 	 	 	 	 	
Capital lease	$	2,477		 	$	2,319		 	$	4,655		 	$	5,977		
Total originations retained	$	4,238,481		 	$	4,583,806		 	$	13,323,668		 	$	15,173,134		
 	 	 	 	 	 	 	 	
Sold Originations	 	 	 	 	 	 	 	
Retail installment contracts	$	757,720		 	$	580,242		 	$	2,550,065		 	$	2,201,659		
Average APR	6.0	%	 	3.2	%	 	6.2	%	 	3.0	%	
Average FICO® (b)	729		 	760		 	727		 	759		
 	 	 	 	 	 	 	 	
Total originations	$	4,996,201		 	$	5,164,048		 	$	15,873,733		 	$	17,374,793		
		
(a)	Unpaid principal balance excluded from the weighted average FICO score is $311 million and $492 million for the three months ended September 30, 2017 and 2016 , respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $37 million and $74 million , respectively, were commercial loans. Unpaid principal balance excluded from the weighted average FICO score is $1.2 billion and $1.8 billion for the nine months ended September 30, 2017 and 2016 , respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $95 million and $370 million, respectively, were commercial loans.	
		
(b)	Unpaid principal balance excluded from the weighted average FICO score is $93 million and $59 million for the three months ended September 30, 2017 and 2016 , respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $26 million and zero, respectively, were commercial loans. Unpaid principal balance excluded from the weighted average FICO score is $319 million and $263 million for the nine months ended September 30, 2017 and 2016 , respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts, $102 million and zero, respectively, were commercial loans.	

Total originations decreased  $1.5 billion , or  9% , from the  nine  months ended  September 30, 2016  to the  nine  months ended  September 30, 2017 . The decrease was primarily attributable to the continued high competition in the auto loan originations market, particularly the prime environment. The Company continues to focus on optimizing the loan quality of its portfolio with an appropriate balance of volume and risk. Chrysler Capital volume and penetration rates are influenced by strategies implemented by FCA, including product mix and incentives.

58

The Company's originations of individually acquired retail installment contracts and leases by vehicle type during the three and nine months ended September 30, 2017 and 2016 were as follows: 

																								
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
 	(Dollars amounts in thousands)	
Retail installment contracts	 	 	 	 	 	 	 	 	 	 	 	
Car	$	1,265,729		38.0	%	 	$	1,599,590		41.4	%	 	$	4,657,357		41.7	%	 	$	5,356,793		42.0	%	
Truck and utility	1,727,628		51.9	%	 	1,938,720		50.2	%	 	5,582,482		50.0	%	 	6,402,820		50.2	%	
Van and other (a)	334,591		10.1	%	 	323,044		8.4	%	 	930,187		8.3	%	 	987,638		7.7	%	
 	$	3,327,948		100.0	%	 	$	3,861,354		100.0	%	 	$	11,170,026		100.0	%	 	$	12,747,251		100.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	
Leased vehicles	 	 	 	 	 	 	 	 	 	 	 	
Car	$	239,628		14.4	%	 	$	193,759		14.9	%	 	$	875,862		18.7	%	 	$	522,437		11.3	%	
Truck and utility	1,359,411		81.6	%	 	944,137		72.6	%	 	3,543,077		75.5	%	 	3,588,033		77.8	%	
Van and other (a)	66,737		4.0	%	 	162,479		12.5	%	 	274,453		5.8	%	 	501,814		10.9	%	
 	$	1,665,776		100.0	%	 	$	1,300,375		100.0	%	 	$	4,693,392		100.0	%	 	$	4,612,284		100.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	
Total originations by vehicle type	 	 	 	 	 	 	 	 	 	 	 	
Car	$	1,505,357		30.1	%	 	$	1,793,349		34.7	%	 	$	5,533,219		34.9	%	 	$	5,879,230		33.9	%	
Truck and utility	3,087,039		61.8	%	 	2,882,857		55.9	%	 	9,125,559		57.5	%	 	9,990,853		57.6	%	
Van and other (a)	401,328		8.0	%	 	485,523		9.4	%	 	1,204,640		7.6	%	 	1,489,452		8.6	%	
 	$	4,993,724		100.0	%	 	$	5,161,729		100.0	%	 	$	15,863,418		100.0	%	 	$	17,359,535		100.0	%	
(a) Other primarily consists of commercial vehicles.
The Company's asset sales for the three and nine months ended September 30, 2017 and 2016 were as follows:

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
 	(Dollar amounts in thousands)	
Retail installment contracts	$	1,482,134		 	$	793,804		 	$	2,979,033		 	$	2,312,983		
Average APR	6.2	%	 	3.0	%	 	6.2	%	 	2.9	%	
Average FICO®	716		 	762		 	721		 	762		
 	 	 	 	 	 	 	 	
Personal loans	$	—		 	$	—		 	$	—		 	$	869,349		
Average APR	—		 	—		 	—		 	17.9	%	
Total asset sales	$	1,482,134		 	$	793,804		 	$	2,979,033		 	$	3,182,332		

Total assets sales decreased  $203 million , or 6% from the  nine  months ended  September 30, 2016  to the  nine  months ended  September 30, 2017 . The decrease resulted from terminations of the forward flow agreements with CBP and Bank of America during fiscal 2017, partially offset by the two new securitizations executed in 2017, whereby eligible prime loans are sold to Santander.

59

The Company's portfolio of retail installment contracts held for investment and leases by vehicle type as of September 30, 2017 and December 31, 2016 are as follows: 

												
 	September 30,
2017	 	December 31,
2016	
 	(Dollars amounts in thousands)	
Retail installment contracts	 	 	 	 	 	
Car	$	14,056,979		53.3	%	 	$	14,835,303		54.2	%	
Truck and utility	11,023,428		41.8	%	 	10,967,816		40.1	%	
Van and other (a)	1,289,421		4.9	%	 	1,555,028		5.7	%	
 	$	26,369,828		100.0	%	 	$	27,358,147		100.0	%	
 	 	 	 	 	 	
Leased vehicles	 	 	 	 	 	
Car	$	1,599,837		14.5	%	 	$	1,213,371		12.6	%	
Truck and utility	8,502,258		77.3	%	 	7,447,718		77.5	%	
Van and other (a)	899,305		8.2	%	 	951,864		9.9	%	
 	$	11,001,400		100.0	%	 	$	9,612,953		100.0	%	
 	 	 	 	 	 	
Total by vehicle type	 	 	 	 	 	
Car	$	15,656,816		41.9	%	 	16,048,674		43.4	%	
Truck and utility	19,525,686		52.2	%	 	18,415,534		49.8	%	
Van and other (a)	2,188,726		5.9	%	 	2,506,892		6.8	%	
 	$	37,371,228		100.0	%	 	$	36,971,100		100.0	%	
(a) Other primarily consists of commercial vehicles.
The unpaid principal balance, average APR, and remaining unaccreted dealer discount of the Company's held for investment portfolio as of September 30, 2017 and December 31, 2016 are as follows:

								
 	September 30,
2017	 	December 31, 2016	
 	(Dollar amounts in thousands)	
Retail installment contracts (a)	$	26,369,828		 	$	27,358,147		
Average APR	16.7	%	 	16.4	%	
Discount	1.6	%	 	2.3	%	
 	 	 	 	
Personal loans	$	9,188		 	$	19,361		
Average APR	31.9	%	 	31.5	%	
 	 	 	 	
Receivables from dealers	$	16,069		 	$	69,431		
Average APR	4.2	%	 	4.9	%	
 	 	 	 	
Leased vehicles	$	11,001,400		 	$	9,612,953		
 	 	 	 	
Capital leases	$	21,648		 	$	31,872		
(a) Of this balance as of  September 30, 2017 , $7.4 billion , $7.4 billion , $6.1 billion , and $2.9 billion was originated during the nine months ended  September 30, 2017 , and the years ended 2016, 2015, and 2014, respectively.

The Company records interest income from individually acquired retail installment contracts, personal loans, and receivables from dealers in accordance with the terms of the loans, generally discontinuing and reversing accrued income once a loan becomes more than 60 days past due, except in the case of revolving personal loans, for which the Company continues to accrue interest until charge-off, in the month in which the loan becomes 180 days past due, and receivables from dealers, for which the Company continues to accrue interest until the loan becomes more than 90 days past due. The Company generally does not acquire receivables from dealers and term personal loans at a discount. The Company amortizes discounts, subvention payments from manufacturers, and origination costs as adjustments to income from individually acquired retail

60

installment contracts using the effective yield method. The Company estimates future principal prepayments specific to pools of homogenous loans which are based on the vintage, credit quality at origination and term of the loan. The resulting prepayment rate specific to each pool is, based on historical experience, and is used as an input in the calculation of the constant effective yield.

The Company amortizes the discount, if applicable, on revolving personal loans straight-line over the estimated period over which the receivables are expected to be outstanding. For individually acquired retail installment contracts, personal loans, capital leases, and receivables from dealers, the Company also establishes a credit loss allowance for the estimated losses inherent in the portfolio. The Company estimates probable losses based on contractual delinquency status, historical loss experience, expected recovery rates from sale of repossessed collateral, bankruptcy trends, and general economic conditions. For loans within these portfolios that are classified as TDRs, impairment is generally measured based on the present value of expected future cash flows discounted at the original effective interest rate. For loans that are considered collateral-dependent, such as certain bankruptcy modifications, impairment is measured based on the fair value of the collateral, less its estimated cost to sell.

The Company classifies most of its vehicle leases as operating leases. The Company records the net capitalized cost of each lease as an asset, which is depreciated straight-line over the contractual term of the lease to the expected residual value. Lease payments due from customers are recorded as income until and unless a customer becomes more than 60 days delinquent, at which time the accrual of revenue is discontinued and reversed. The Company resumes and reinstates the accrual if a delinquent account subsequently becomes 60 days or less past due. The Company amortizes subvention payments from the manufacturer, down payments from the customer, and initial direct costs incurred in connection with originating the lease straight-line over the contractual term of the lease.
Historically, the Company's primary means of acquiring retail installment contracts has been through individual acquisitions immediately after origination by a dealer. The Company also periodically purchases pools of receivables and had significant volumes of these purchases during the credit crisis. While the Company continues to pursue such opportunities when available, it did not purchase any pools during the nine months ended September 30, 2017 and 2016 . However, during the three months ended September 30, 2016, the Company recognized certain retail installment contracts with an unpaid principal balance of $135,772 (nil for the three months ended September 30, 2017 ), and for the nine months ended September 30, 2017 and 2016, the Company recognized certain retail installment contracts with an unpaid principal balance of $226,613 and $327,443 , respectively, held by non-consolidated securitization Trusts, under optional clean-up calls. Following the initial recognition of these loans at fair value, the performing loans in the portfolio will be 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 re-recognition date), for which it was probable that not all contractually required payments would be collected. All of the retail installment contracts acquired during these periods were acquired individually. For the Company's existing purchased receivables portfolios, which were acquired at a discount partially attributable to credit deterioration since origination, the Company estimates the expected yield on each portfolio at acquisition and record monthly accretion income based on this expectation. The Company periodically re-evaluates performance expectations and may increase the accretion rate if a pool is performing better than expected. If a pool is performing worse than expected, the Company is required to continue to record accretion income at the previously established rate and to record impairment to account for the worsening performance.

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Selected Financial Data

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Income Statement Data	(Dollar amounts in thousands, except per share data)	
Interest on individually acquired retail installment contracts	$	1,095,554		 	$	1,148,669		 	$	3,332,339		 	$	3,485,106		
Interest on purchased receivables portfolios	5,223		 	17,830		 	26,670		 	58,774		
Interest on receivables from dealers	808		 	1,176		 	2,696		 	2,822		
Interest on personal loans	83,474		 	78,711		 	264,792		 	257,620		
Interest on finance receivables and loans	1,185,059		 	1,246,386		 	3,626,497		 	3,804,322		
Net leased vehicle income	118,351		 	135,771		 	377,453		 	369,421		
Other finance and interest income	6,385		 	3,638		 	15,415		 	11,440		
Interest expense	250,674		 	207,175		 	711,134		 	590,504		
Net finance and other interest income	1,059,121		 	1,178,620		 	3,308,231		 	3,594,679		
Provision for credit losses on individually acquired retail installment contracts	535,427		 	609,396		 	1,682,894		 	1,787,277		
Increase (decrease) in impairment related to purchased receivables portfolios	—		 	804		 	—		 	(2,986	)	
Provision for credit losses on receivables from dealers	(546	)	 	(189	)	 	(557	)	 	(133	)	
Provision for credit losses on personal loans	1,134		 	—		 	10,275		 	—		
Provision for credit losses on capital leases	432		 	387		 	(597	)	 	(1,669	)	
Provision for credit losses	536,447		 	610,398		 	1,692,015		 	1,782,489		
Profit sharing	5,945		 	6,400		 	22,333		 	35,640		
Other income	58,947		 	26,682		 	138,822		 	141,542		
Operating expenses	297,903		 	284,484		 	885,396		 	847,567		
Income before tax expense	277,773		 	304,020		 	847,309		 	1,070,525		
Income tax expense	78,385		 	90,473		 	239,819		 	365,334		
Net income	$	199,388		 	$	213,547		 	$	607,490		 	$	705,191		
Share Data	 	 	 	 	 	 	 	
Weighted-average common shares outstanding	 	 	 	 	 	 	 	
Basic	359,619,083		 	358,343,781		 	359,397,063		 	358,179,618		
Diluted	360,460,353		 	360,087,749		 	360,069,449		 	359,635,034		
Earnings per share	 	 	 	 	 	 	 	
Basic	$	0.55		 	$	0.60		 	$	1.69		 	$	1.97		
Diluted	$	0.55		 	$	0.59		 	$	1.69		 	$	1.96		
Balance Sheet Data	 	 	 	 	 	 	 	
Finance receivables held for investment, net	$	22,667,203		 	$	23,686,391		 	$	22,667,203		 	$	23,686,391		
Finance receivables held for sale, net	1,775,459		 	2,572,429		 	1,775,459		 	2,572,429		
Goodwill and intangible assets	105,590		 	107,084		 	105,590		 	107,084		
Total assets	38,765,557		 	38,771,636		 	38,765,557		 	38,771,636		
Total borrowings	30,594,101		 	31,799,895		 	30,594,101		 	31,799,895		
Total liabilities	32,880,323		 	33,653,979		 	32,880,323		 	33,653,979		
Total equity	5,885,234		 	5,117,657		 	5,885,234		 	5,117,657		
Allowance for credit losses	3,380,763		 	3,412,977		 	3,380,763		 	3,412,977		

62

	
																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Other Information	(Dollar amounts in thousands)	
Charge-offs, net of recoveries, on individually acquired retail installment contracts	$	611,130		 	$	630,847		 	$	1,722,684		 	$	1,583,406		
Charge-offs, net of recoveries, on purchased receivables portfolios	769		 	254		 	1,541		 	(807	)	
Charge-offs, net of recoveries, on receivables from dealers	—		 	—		 	—		 	135		
Charge-offs, net of recoveries, on personal loans	1,771		 	—		 	6,550		 	—		
Charge-offs, net of recoveries, on capital leases	1,193		 	2,095		 	3,785		 	7,165		
Total charge-offs, net of recoveries	614,863		 	633,196		 	1,734,560		 	1,589,899		
End of period delinquent principal over 60 days, individually acquired retail installment contracts held for investment	1,338,635		 	1,260,255		 	1,338,635		 	1,260,255		
End of period personal loans delinquent principal over 60 days	183,919		 	179,443		 	183,919		 	179,443		
End of period delinquent principal over 60 days, loans held for investment	1,342,335		 	1,267,950		 	1,342,335		 	1,267,950		
End of period assets covered by allowance for credit losses	26,367,894		 	27,490,290		 	26,367,894		 	27,490,290		
End of period gross individually acquired retail installment contracts held for investment	26,320,989		 	27,370,995		 	26,320,989		 	27,370,995		
End of period gross personal loans	1,337,114		 	1,337,692		 	1,337,114		 	1,337,692		
End of period gross finance receivables and loans held for investment	26,395,085		 	27,706,307		 	26,395,085		 	27,706,307		
End of period gross finance receivables, loans, and leases held for investment	37,418,133		 	37,295,993		 	37,418,133		 	37,295,993		
Average gross individually acquired retail installment contracts held for investment	26,762,472		 	27,075,151		 	26,976,810		 	27,276,903		
Average gross personal loans held for investment	10,549		 	6,937		 	13,935		 	6,869		
Average gross individually acquired retail installment contracts	28,144,133		 	28,970,039		 	28,182,386		 	28,710,402		
Average gross purchased receivables portfolios	120,245		 	266,749		 	176,792		 	301,026		
Average gross receivables from dealers	53,715		 	70,392		 	63,401		 	72,735		
Average gross personal loans	1,367,445		 	1,343,099		 	1,419,223		 	1,572,297		
Average gross capital leases	22,544		 	39,974		 	26,415		 	49,625		
Average gross finance receivables and loans	29,708,082		 	30,690,253		 	29,868,217		 	30,706,085		
Average gross finance receivables, loans, and leases	40,419,023		 	40,037,873		 	40,125,969		 	39,299,213		
Average managed assets	49,998,111		 	52,675,379		 	50,555,068		 	52,983,740		
Average total assets	39,496,278		 	38,473,832		 	39,192,434		 	37,844,330		
Average debt	31,554,026		 	31,671,237		 	31,538,355		 	31,343,204		
Average total equity	5,764,119		 	4,994,511		 	5,542,255		 	4,736,826		
Ratios	 	 	 	 	 	 	 	
Yield on individually acquired retail installment contracts	15.6	%	 	15.9	%	 	15.8	%	 	16.2	 %	
Yield on purchased receivables portfolios	17.4	%	 	26.7	%	 	20.1	%	 	26.0	 %	
Yield on receivables from dealers	6.0	%	 	6.7	%	 	5.7	%	 	5.2	 %	
Yield on personal loans (1)	24.4	%	 	23.4	%	 	24.9	%	 	21.8	 %	
Yield on earning assets (2)	13.0	%	 	13.8	%	 	13.4	%	 	14.2	 %	
Cost of debt (3)	3.2	%	 	2.6	%	 	3.0	%	 	2.5	 %	
Net interest margin (4)	10.5	%	 	11.8	%	 	11.0	%	 	12.2	 %	
Expense ratio (5)	2.4	%	 	2.2	%	 	2.3	%	 	2.1	 %	
Return on average assets (6)	2.0	%	 	2.2	%	 	2.1	%	 	2.5	 %	
Return on average equity (7)	13.8	%	 	17.1	%	 	14.6	%	 	19.8	 %	
Net charge-off ratio on individually acquired retail installment contracts (8)	9.1	%	 	9.3	%	 	8.5	%	 	7.7	 %	
Net charge-off ratio on purchased receivables portfolios (8)	2.6	%	 	0.4	%	 	1.2	%	 	(0.4	)%	
Net charge-off ratio on receivables from dealers (8)	—		 	—		 	—		 	0.2	 %	
Net charge-off ratio on personal loans (8)	67.2	%	 	—		 	62.7	%	 	—		
Net charge-off ratio (8)	9.1	%	 	9.2	%	 	8.5	%	 	7.7	 %	
Delinquency ratio on individually acquired retail installment contracts held for investment, end of period (9)	5.1	%	 	4.6	%	 	5.1	%	 	4.6	 %	
Delinquency ratio on personal loans, end of period (9)	13.8	%	 	13.4	%	 	13.8	%	 	13.4	 %	
Delinquency ratio on loans held for investment, end of period (9)	5.1	%	 	4.6	%	 	5.1	%	 	4.6	 %	
Equity to assets ratio (10)	15.2	%	 	13.2	%	 	15.2	%	 	13.2	 %	
Tangible common equity to tangible assets (10)	14.9	%	 	13.0	%	 	14.9	%	 	13.0	 %	
Allowance ratio (11)	12.8	%	 	12.4	%	 	12.8	%	 	12.4	 %	
Common Equity Tier 1 capital ratio (12)	15.0	%	 	13.1	%	 	15.0	%	 	13.1	 %	

(1)	Includes finance and other interest income; excludes fees	
		
(2)	“Yield on earning assets” is defined as the ratio of annualized Total finance and other interest income, net of Leased vehicle expense, to Average gross finance receivables, loans and leases	

63

		
(3)	“Cost of debt” is defined as the ratio of annualized Interest expense to Average debt	
		
(4)	“Net interest margin” is defined as the ratio of annualized Net finance and other interest income to Average gross finance receivables, loans and leases	
		
(5)	"Expense ratio" is defined as the ratio of annualized Operating expenses to Average managed assets	
		
(6)	“Return on average assets” is defined as the ratio of annualized Net income to Average total assets	
		
(7)	“Return on average equity” is defined as the ratio of annualized Net income to Average total equity	
		
(8)	“Net charge-off ratio” is defined as the ratio of annualized Charge-offs on a recorded investment basis, net of recoveries, to average unpaid principal balance of the respective held-for-investment portfolio. Effective as of September 30, 2016, the Company records the charge-off activity for certain personal loans within the provision for credit losses due to the reclassification of these loans from held for sale to held for investment.	
		
(9)	“Delinquency ratio” is defined as the ratio of End of period Delinquent principal over 60 days to End of period gross balance of the respective portfolio, excludes capital leases	
		
(10)	“Tangible common equity to tangible assets” is defined as the ratio of Total equity, excluding Goodwill and intangible assets, to Total assets, excluding Goodwill and intangible assets. Management believes this non-GAAP financial measure is useful to assess and monitor the adequacy of the Company's capitalization. This additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP and may not be comparable to similarly-titled measures used by other financial institutions. A reconciliation from GAAP to this non-GAAP measure for the periods ended September 30, 2017 and 2016 is as follows:	

								
 	September 30, 2017	 	September 30, 2016	
 	(Dollar amounts in thousands)	
Total equity	$	5,885,234		 	$	5,117,657		
  Deduct: Goodwill and intangibles	105,590		 	107,084		
Tangible common equity	$	5,779,644		 	$	5,010,573		
 	 	 	 	
Total assets	$	38,765,557		 	$	38,771,636		
  Deduct: Goodwill and intangibles	105,590		 	107,084		
Tangible assets	$	38,659,967		 	$	38,664,552		
 	 	 	 	
Equity to assets ratio	15.2	%	 	13.2	%	
Tangible common equity to tangible assets	14.9	%	 	13.0	%	

(11)	“Allowance ratio” is defined as the ratio of Allowance for credit losses, which excludes impairment on purchased receivables portfolios, to End of period assets covered by allowance for credit losses.	
		
(12)	"Common Equity Tier 1 Capital ratio" is defined as the ratio of Total Common Equity Tier 1 Capital (CET1) to Total risk-weighted assets.     	

								
 	September 30, 2017	 	September 30, 2016	
Total equity	$	5,885,234		 	$	5,117,657		
  Deduct: Goodwill, intangibles, and other assets, net of deferred tax liabilities	172,502		 	191,850		
  Deduct: Accumulated other comprehensive income (loss), net	27,481		 	(26,598	)	
Tier 1 common capital	$	5,685,251		 	$	4,952,405		
Risk weighted assets (a)	$	37,828,130		 	$	37,828,982		
Common Equity Tier 1 capital ratio (b)	15.0	%	 	13.1	%	
		
(a)	Under the banking agencies' risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together with the measure for market risk, resulting in the Company's total Risk weighted assets.	
		
(b)	CET1 is calculated under Basel III regulations required as of January 1, 2015. The fully phased-in capital ratios are non-GAAP financial measures.	

64

The following tables present an analysis of net yield on interest earning assets:

																						
 	Three Months Ended September 30,	
 	2017	 	2016	
 	(Dollar amounts in thousands)	
 	Average Balances	 	Interest Income/Interest Expense	 	Yield/Rate	 	Average Balances	 	Interest Income/Interest Expense	 	Yield/Rate	
Assets	 	 	 	 	 	 	 	 	 	 	 	
Retail installment contracts acquired individually	$	28,144,133		 	$	1,095,554		 	15.6	%	 	$	28,970,039		 	$	1,148,669		 	15.9	%	
Purchased receivables	120,245		 	5,223		 	17.4	%	 	266,749		 	17,830		 	26.7	%	
Receivables from dealers	53,715		 	808		 	6.0	%	 	70,392		 	1,176		 	6.7	%	
Personal loans	1,367,445		 	83,474		 	24.4	%	 	1,343,099		 	78,711		 	23.4	%	
Capital lease receivables	22,544		 	775		 	13.8	%	 	39,974		 	2,062		 	20.6	%	
Finance receivables held for investment, net	29,708,082		 	1,185,834		 	16.0	%	 	30,690,253		 	1,248,448		 	16.3	%	
Leased vehicles, net	10,710,941		 	118,351		 	4.4	%	 	9,347,620		 	135,771		 	5.8	%	
Other assets	2,516,253		 	5,610		 	0.9	%	 	1,866,410		 	1,576		 	0.3	%	
Allowance for credit losses	(3,438,998	)	 	—		 	—		 	(3,430,451	)	 	—		 	—		
Total assets	$	39,496,278		 	$	1,309,795		 	 	 	$	38,473,832		 	$	1,385,795		 	 	
Liabilities and equity	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Notes payable	$	31,554,026		 	$	250,674		 	3.2	%	 	$	31,671,237		 	$	207,175		 	2.6	%	
Other liabilities	2,178,133		 	—		 	—		 	1,808,084		 	—		 	—		
Total liabilities	33,732,159		 	250,674		 	 	 	33,479,321		 	207,175		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders' equity	5,764,119		 	—		 	 	 	4,994,511		 	—		 	 	
Total liabilities and equity	$	39,496,278		 	$	250,674		 	 	 	$	38,473,832		 	$	207,175		 	 	

	
																						
 	Nine Months Ended September 30,	
 	2017	 	2016	
 	(Dollar amounts in thousands)	
 	Average Balances	 	Interest Income/Interest Expense	 	Yield/Rate	 	Average Balances	 	Interest Income/Interest Expense	 	Yield/Rate	
Assets	 	 	 	 	 	 	 	 	 	 	 	
Retail installment contracts acquired individually	$	28,182,386		 	$	3,332,339		 	15.8	%	 	$	28,710,402		 	$	3,485,106		 	16.2	%	
Purchased receivables	176,792		 	26,670		 	20.1	%	 	301,026		 	58,774		 	26.0	%	
Receivables from dealers	63,401		 	2,696		 	5.7	%	 	72,735		 	2,822		 	5.2	%	
Personal loans	1,419,223		 	264,792		 	24.9	%	 	1,572,297		 	257,620		 	21.8	%	
Capital lease receivables	26,415		 	3,302		 	16.7	%	 	49,625		 	7,093		 	19.1	%	
Finance receivables held for investment, net	29,868,217		 	3,629,799		 	16.2	%	 	30,706,085		 	3,811,415		 	16.6	%	
Leased vehicles, net	10,257,752		 	377,453		 	4.9	%	 	8,593,128		 	369,421		 	5.7	%	
Other assets	2,504,968		 	12,113		 	0.6	%	 	1,953,562		 	4,347		 	0.3	%	
Allowance for credit losses	(3,438,503	)	 	—		 	—		 	(3,408,445	)	 	—		 	—		
Total assets	$	39,192,434		 	$	4,019,365		 	 	 	$	37,844,330		 	$	4,185,183		 	 	
Liabilities and equity	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Notes payable	$	31,538,355		 	$	711,134		 	3.0	%	 	$	31,343,204		 	$	590,504		 	2.5	%	
Other liabilities	2,111,824		 	—		 	—		 	1,764,300		 	—		 	—		
Total liabilities	33,650,179		 	711,134		 	 	 	33,107,504		 	590,504		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders' equity	5,542,255		 	—		 	 	 	4,736,826		 	—		 	 	
Total liabilities and equity	$	39,192,434		 	$	711,134		 	 	 	$	37,844,330		 	$	590,504		 	 	

65

Results of Operations
The following table presents the Company's results of operations for the three and nine months ended September 30, 2017 and 2016 :

																
 	For the Three Months Ended September 30,	 	For the Nine Months Ended 
 September 30,	
 	2017	 	2016	 	2017	 	2016	
 	(Dollar amounts in thousands)	 	 	 	 	
Interest on finance receivables and loans	$	1,185,059		 	$	1,246,386		 	$	3,626,497		 	$	3,804,322		
Leased vehicle income	457,932		 	388,501		 	1,305,429		 	1,086,651		
Other finance and interest income	6,385		 	3,638		 	15,415		 	11,440		
Total finance and other interest income	1,649,376		 	1,638,525		 	4,947,341		 	4,902,413		
Interest expense	250,674		 	207,175		 	711,134		 	590,504		
Leased vehicle expense	339,581		 	252,730		 	927,976		 	717,230		
Net finance and other interest income	1,059,121		 	1,178,620		 	3,308,231		 	3,594,679		
Provision for credit losses	536,447		 	610,398		 	1,692,015		 	1,782,489		
Net finance and other interest income after provision for credit losses	522,674		 	568,222		 	1,616,216		 	1,812,190		
Profit sharing	5,945		 	6,400		 	22,333		 	35,640		
Net finance and other interest income after provision for credit losses and profit sharing	516,729		 	561,822		 	1,593,883		 	1,776,550		
Total other income	58,947		 	26,682		 	138,822		 	141,542		
Total operating expenses	297,903		 	284,484		 	885,396		 	847,567		
Income before income taxes	277,773		 	304,020		 	847,309		 	1,070,525		
Income tax expense	78,385		 	90,473		 	239,819		 	365,334		
Net income	$	199,388		 	$	213,547		 	$	607,490		 	$	705,191		
 	 	 	 	 	 	 	 	
Net income	$	199,388		 	$	213,547		 	$	607,490		 	$	705,191		
Change in unrealized gains (losses) on cash flow hedges, net of tax	(379	)	 	24,168		 	(778	)	 	(28,723	)	
Comprehensive income	$	199,009		 	$	237,715		 	$	606,712		 	$	676,468		

66

Three and Nine Months Ended September 30, 2017 Compared to Three and Nine Months Ended September 30, 2016
Interest on Finance Receivables and Loans

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Income from individually acquired retail installment contracts	$	1,095,554		 	$	1,148,669		 	$	(53,115	)	 	(5	)%	 	$	3,332,339		 	$	3,485,106		 	$	(152,767	)	 	(4	)%	
Income from purchased receivables portfolios	5,223		 	17,830		 	(12,607	)	 	(71	)%	 	26,670		 	58,774		 	(32,104	)	 	(55	)%	
Income from receivables from dealers	808		 	1,176		 	(368	)	 	(31	)%	 	2,696		 	2,822		 	(126	)	 	(4	)%	
Income from personal loans	83,474		 	78,711		 	4,763		 	6	 %	 	264,792		 	257,620		 	7,172		 	3	 %	
Total interest on finance receivables and loans	$	1,185,059		 	$	1,246,386		 	$	(61,327	)	 	(5	)%	 	$	3,626,497		 	$	3,804,322		 	$	(177,825	)	 	(5	)%	

Income from individually acquired retail installment contracts decreased $53 million , or 5% , from the third quarter of 2016 to the third quarter of 2017 , and decreased   $153 million , or  4% , from the  nine  months ended  September 30, 2016  to the  nine  months ended  September 30, 2017 , greater than the 2.9% and 1.8% decline respectively, in the average outstanding balance of portfolio primarily due to lower interest income accruals for specific categories of loans classified as TDRs.

Income from purchased receivables portfolios decreased $13 million , or 71% , from the third quarter of 2016 to the third quarter of 2017 , and decreased   $32 million , or  55% , from the  nine  months ended  September 30, 2016  to the  nine  months ended  September 30, 2017 , due to the sale of a majority of the purchased receivables to SHUSA during the quarter and the continued runoff of the portfolios, as the Company has made no portfolio acquisitions accounted for under ASC 310-30 since 2012. The average balance of the portfolio decreased from $267 million in the third quarter of 2016, to $120 million in the third quarter of 2017, and decreased from $301 million from the nine months ended September 30, 2016 to $177 million for the nine months ended September 30, 2017 .
Income from personal loans increased $5 million , or 6% , from the third quarter of 2016 to the third quarter of 2017 , and increased $7 million , or 3% , from the  nine  months ended  September 30, 2016  to the  nine  months ended  September 30, 2017 , as the sale of the entire LendingClub personal loan portfolio left only higher-yielding revolving loan portfolio.
Leased Vehicle Income and Expense

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Leased vehicle income	$	457,932		 	$	388,501		 	$	69,431		 	18	 %	 	$	1,305,429		 	$	1,086,651		 	$	218,778		 	20	%	
Leased vehicle expense	339,581		 	252,730		 	86,851		 	34	 %	 	927,976		 	717,230		 	210,746		 	29	%	
Leased vehicle income, net	$	118,351		 	$	135,771		 	$	(17,420	)	 	(13	)%	 	$	377,453		 	$	369,421		 	$	8,032		 	2	%	
Leased vehicle income and expense increased in the three and nine months ended September 30, 2017 when compared to the same periods in 2016, due to the continual growth in the portfolio since the Company launched Chrysler Capital in 2013.
Interest Expense

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Interest expense on notes payable	$	253,478		 	$	194,602		 	$	58,876		 	30	 %	 	$	709,001		 	$	547,160		 	$	161,841		 	30	 %	
Interest expense on derivatives	(2,804	)	 	12,573		 	(15,377	)	 	(122	)%	 	2,133		 	43,344		 	(41,211	)	 	(95	)%	
Total interest expense	$	250,674		 	$	207,175		 	$	43,499		 	21	 %	 	$	711,134		 	$	590,504		 	$	120,630		 	20	 %	
Interest expense on notes payable increased $59 million , or 30% , from the third quarter of 2016 to the third quarter of 2017 , and increased $162 million , or 30% , from the nine months ended September 30, 2016 to the nine months ended September 30,

67

2017 , primarily due to the increased cost of funds resulting from higher market rates and wider spreads. The average balance of the portfolio also increased slightly from $31.3 billion from the nine months ended September 30, 2016 to $31.5 billion for the nine months ended September 30, 2017 .

Interest expense on derivatives decreased $15 million , or 122% , from the third quarter of 2016 to the third quarter of 2017, and decreased $41 million , or 95% , from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 primarily due to a favorable mark-to-market based on interest rate changes in 2017.
Provision for Credit Losses

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Provision for credit losses on individually acquired retail installment contracts	$	535,427		 	$	609,396		 	$	(73,969	)	 	(12	)%	 	$	1,682,894		 	$	1,787,277		 	$	(104,383	)	 	(6	)%	
Incremental increase (decrease) in impairment related to purchased receivables portfolios	—		 	804		 	(804	)	 	(100	)%	 	—		 	(2,986	)	 	2,986		 	(100	)%	
Provision for credit losses on receivables from dealers	(546	)	 	(189	)	 	(357	)	 	189	 %	 	(557	)	 	(133	)	 	(424	)	 	319	 %	
Provision for credit losses on personal loans	1,134		 	—		 	1,134		 	100	 %	 	10,275		 	—		 	10,275		 	100	 %	
Provision for credit losses on capital leases	432		 	387		 	45		 	12	 %	 	(597	)	 	(1,669	)	 	1,072		 	(64	)%	
Provision for credit losses	$	536,447		 	$	610,398		 	$	(73,951	)	 	(12	)%	 	$	1,692,015		 	$	1,782,489		 	$	(90,474	)	 	(5	)%	
Provision for credit losses on individually acquired retail installment contracts decreased $104 million , or 6% , from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 , primarily due to a lower build of the allowance for credit losses as a result of the decline in originations during the nine months ended September 30, 2017 , as compared to the same period in 2016, improved credit performance, and stabilizing recovery rates. This is partially offset by the lower benefit from bankruptcy sales and to a lesser extent, the additional allowance for credit losses recorded for customers affected by Hurricanes Harvey and Irma.
Provision for credit losses on personal loans was recorded during fiscal 2017 due to the reclassification of personal loans from held for sale to held for investment effective as of the end on the third quarter of 2016.
Profit Sharing

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Profit sharing	$	5,945		 	$	6,400		 	$	(455	)	 	(7	)%	 	$	22,333		 	$	35,640		 	$	(13,307	)	 	(37	)%	

Profit sharing consists of revenue sharing related to the Chrysler Agreement and profit sharing on personal loans originated pursuant to the agreements with Bluestem. Profit sharing with Bluestem decreased in the three and nine months ended September 30, 2017 compared to the same periods in 2016 , primarily due to amendments to the agreement governing the profit sharing calculation, including an increase in the percentage of profit retained by the Company. This effect was partially offset by an increase in Chrysler Capital revenue sharing due to continued growth in the portfolio.

68

Other Income

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Investment losses, net	$	(52,592	)	 	$	(106,050	)	 	$	(53,458	)	 	(50	)%	 	$	(228,513	)	 	$	(276,415	)	 	$	(47,902	)	 	(17	)%	
Servicing fee income	28,673		 	36,447		 	(7,774	)	 	(21	)%	 	92,310		 	123,929		 	(31,619	)	 	(26	)%	
Fees, commissions, and other	82,866		 	96,285		 	(13,419	)	 	(14	)%	 	275,025		 	294,028		 	(19,003	)	 	(6	)%	
Total other income	$	58,947		 	$	26,682		 	$	32,265		 	121	 %	 	$	138,822		 	$	141,542		 	$	(2,720	)	 	(2	)%	
Average serviced for others portfolio	$	9,579,089		 	$	12,622,328		 	$	(3,043,239	)	 	(24	)%	 	$	10,426,323		 	$	13,674,454		 	$	(3,248,131	)	 	(24	)%	
Investment losses, net for the three and nine months ended September 30, 2017 and 2016 , were as follows: 

																	
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Gain (loss) on sale of loans and leases	$	29,974		 	$	(3,765	)	 	$	16,913		 	$	(1,418	)	
Lower of cost or market adjustments	(84,718	)	 	(97,532	)	 	(246,522	)	 	(266,506	)	
Other gains, losses and impairments, net	2,152		 	(4,753	)	4		1,096		 	(8,491	)	
 	$	(52,592	)	 	$	(106,050	)	 	$	(228,513	)	 	$	(276,415	)	
Gain (loss) on sale of loans and leases changed from a $3.8 million loss during third quarter of 2016 , to a gain of $30.0 million for the third quarter of 2017 , and changed from a $1.4 million loss during the nine months ended September 30, 2016 , to a gain of $16.9 million as of September 30, 2017 . These changes were driven primarily by the $36 million gain recognized upon the sale of receivables previously acquired with deteriorated credit quality to SBNA during the quarter. The gain is partially offset by losses recognized from off-balance sheet securitizations and flow agreements.

The change in lower of cost or market adjustments relates to customer default activity and net changes in the unpaid principal balance on the personal lending portfolio, most of which has been classified as held for sale since September 30, 2015.
The Company records servicing fee income on loans that it services but does not own and does not report on its balance sheet. Servicing fee income decreased $8 million , or 21% , from the third quarter of 2016 to the third quarter of 2017 , and decreased $32 million , or 26% , from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 due to the decline in the Company's serviced portfolio. The serviced for others portfolio as of September 30, 2017 and 2016 was as follows:

								
 	September 30,	
 	2017	 	2016	
 	(Dollar amounts in thousands)	
SBNA and Santander retail installment contracts	$	2,822,102		 	$	566,088		
SBNA leases	459,524		 	1,502,518		
Total serviced for related parties	3,281,626		 	2,068,606		
Chrysler Capital securitizations	1,690,729		 	1,840,684		
Other third parties	4,984,251		 	8,247,402		
Total serviced for third parties	6,674,980		 	10,088,086		
Total serviced for others portfolio	$	9,956,606		 	$	12,156,692		

69

Total Operating Expenses

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Compensation expense	$	134,169		 	$	128,056		 	$	6,113		 	5	 %	 	$	398,325		 	$	371,242		 	$	27,083		 	7	 %	
Repossession expense	66,877		 	75,920		 	(9,043	)	 	(12	)%	 	205,445		 	217,816		 	(12,371	)	 	(6	)%	
Other operating costs	96,857		 	80,508		 	16,349		 	20	 %	 	281,626		 	258,509		 	23,117		 	9	 %	
Total operating expenses	$	297,903		 	$	284,484		 	$	13,419		 	5	 %	 	$	885,396		 	$	847,567		 	$	37,829		 	4	 %	
Compensation expense increased $6 million , or 5% , from the third quarter of 2016 to the third quarter of 2017 , and increased $27 million , or 7% , from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 , primarily due to the increase in severance expenses related to management changes and efficiency efforts and continued investment in compliance and control functions.
Repossession expense decreased $9 million, or 12% from the third quarter of 2016 to the third quarter of 2017 , and decreased $12 million, or 6%, from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 , primarily due to a decrease in repossessions related to repossessions held due to the impact of Hurricanes Harvey and Irma.
Other operating costs expense increased $16 million, or 20% from the third quarter of 2016 to the third quarter of 2017 , and increased $23 million, or 9%, from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 , primarily due to the loss recorded for certain contingencies.
Income Tax Expense

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Income tax expense	$	78,385		 	$	90,473		 	$	(12,088	)	 	(13	)%	 	$	239,819		 	$	365,334		 	$	(125,515	)	 	(34	)%	
Income before income taxes	277,773		 	304,020		 	(26,247	)	 	(9	)%	 	847,309		 	1,070,525		 	(223,216	)	 	(21	)%	
Effective tax rate	28.2	%	 	29.8	%	 	 	 	 	 	28.3	%	 	34.1	%	 	 	 	 	
The effective tax rate decreased from 29.8% in the third quarter of 2016 to 28.2% in the third quarter of 2017 , and decreased from 34.1% for the nine month period ended September 30, 2016 to 28.3% for the nine month period ended September 30, 2017 . The decreases were primarily due to the tax benefit recognized upon the assertion that undistributed net earnings of the Company’s Puerto Rico subsidiary would be indefinitely reinvested outside the United States in the current year offset by the release of the valuation allowance on capital losses in the prior year.
Other Comprehensive Income (Loss)

																														
 	Three Months Ended	 	Nine Months Ended	
 	September 30,	 	Increase (Decrease)	 	September 30,	 	Increase (Decrease)	
 	2017	 	2016	 	Amount	 	Percent	 	2017	 	2016	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Change in unrealized gains (losses) on cash flow hedges, net of tax	$	(379	)	 	$	24,168		 	$	(24,547	)	 	102	%	 	$	(778	)	 	$	(28,723	)	 	$	27,945		 	97	%	

The change in unrealized gains (losses) on cash flow hedges for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 was primarily driven by more favorable interest rate movements in 2017 than in 2016.

70

Credit Quality
Finance Receivables
Nonprime loans comprise 84% of the Company's portfolio as of September 30, 2017 . The Company records an allowance for credit losses to cover the estimate of inherent losses on individually acquired retail installment contracts and other loans and receivables held for investment. The Company's held for investment portfolio of retail installment contracts acquired individually, receivables from dealers, and personal loans was comprised of the following at September 30, 2017 and December 31, 2016 :

																
 	September 30, 2017	
 	Retail Installment Contracts
Acquired
Individually (a)	 	Receivables from
Dealers	 	Personal Loans	
 	Non-TDR	 	TDR	 		 		
Unpaid principal balance	$	20,044,330		 	$	6,276,659		 	$	16,069		 	$	9,188		
Credit loss allowance - specific	—		 	(1,782,114	)	 	—		 	—		
Credit loss allowance - collective	(1,589,151	)	 	—		 	(167	)	 	(3,725	)	
Discount	(331,179	)	 	(84,588	)	 	—		 	(16	)	
Capitalized origination costs and fees	59,295		 	5,909		 	—		 	176		
Net carrying balance	$	18,183,295		 	$	4,415,866		 	$	15,902		 	$	5,623		
Allowance as a percentage of unpaid principal balance	7.9	%	 	28.4	%	 	1.0	%	 	40.5	%	
Allowance and discount as a percentage of unpaid principal balance	9.6	%	 	29.7	%	 	1.0	%	 	40.7	%	
(a) As of September 30, 2017 , used car financing represented 61% of our outstanding retail installment contracts acquired individually. 88% of this
used car financing consisted of nonprime auto loans.

																
 	December 31, 2016	
 	Retail Installment Contracts
Acquired
Individually	 	Receivables from
Dealers	 	Personal Loans	
 	Non-TDR	 	TDR	 		 		
Unpaid principal balance	$	21,528,406		 	$	5,599,567		 	$	69,431		 	$	19,361		
Credit loss allowance - specific	—		 	(1,611,295	)	 	—		 	—		
Credit loss allowance - collective	(1,799,760	)	 	—		 	(724	)	 	—		
Discount	(467,757	)	 	(91,359	)	 	—		 	(7,721	)	
Capitalized origination costs and fees	56,704		 	5,218		 	—		 	632		
Net carrying balance	$	19,317,593		 	$	3,902,131		 	$	68,707		 	$	12,272		
Allowance as a percentage of unpaid principal balance	8.4	%	 	28.8	%	 	1.0	%	 	—		
Allowance and discount as a percentage of unpaid principal balance	10.5	%	 	30.4	%	 	1.0	%	 	39.9	%	

For most retail installment contracts that the Company acquired in pools at a discount due to credit deterioration subsequent to their origination, the Company anticipates the expected credit losses at purchase and records income thereafter based on the expected effective yield, recording impairment if performance is worse than expected at purchase. The balances of these purchased receivables portfolios were as follows at September 30, 2017 and December 31, 2016 :

								
 	September 30,
2017	 	December 31, 2016	
 	(Dollar amounts in thousands)	
Outstanding balance	$	49,089		 	$	231,360		
Outstanding recorded investment, net of impairment	$	30,646		 	$	159,451		
A summary of the credit risk profile of the Company's consumer loans by FICO® score, number of trade lines, and length of credit history, each as determined at origination, as of September 30, 2017 and December 31, 2016 was as follows (dollar amounts in billions, totals may not foot due to rounding):

71

	
																																
September 30, 2017	
Trade Lines	 	1	 	2	 	3	 	4+	 	Total	
FICO	Months History	 	$	%	 	$	%	 	$	%	 	$	%	 	$	%	
No-FICO	<36	 	$	2.3		96	%	 	$	0.1		4	%	 	$	—		—		 	$	—		—		 	$	2.4		9	%	
	36+	 	0.4		40	%	 	0.2		20	%	 	0.1		10	%	 	0.3		30	%	 	1.0		4	%	
<540	<36	 	0.2		40	%	 	0.1		20	%	 	0.1		20	%	 	0.1		20	%	 	0.5		2	%	
	36+	 	0.2		4	%	 	0.3		5	%	 	0.3		5	%	 	4.7		85	%	 	5.5		21	%	
540-599	<36	 	0.3		38	%	 	0.2		25	%	 	0.1		13	%	 	0.2		25	%	 	0.8		3	%	
	36+	 	0.2		3	%	 	0.3		4	%	 	0.3		4	%	 	7.0		90	%	 	7.8		29	%	
600-639	<36	 	0.2		33	%	 	0.1		17	%	 	0.1		17	%	 	0.2		33	%	 	0.6		2	%	
	36+	 	0.1		2	%	 	0.1		2	%	 	0.1		2	%	 	3.8		93	%	 	4.1		16	%	
>640	<36	 	0.2		40	%	 	0.1		20	%	 	0.1		20	%	 	0.1		20	%	 	0.5		2	%	
	36+	 	—		—		 	0.1		3	%	 	0.1		3	%	 	3.0		94	%	 	3.2		12	%	
Total	 	$	4.1		16	%	 	$	1.6		6	%	 	$	1.3		5	%	 	$	19.4		73	%	 	$	26.4		100	%	

																																
December 31, 2016	
Trade Lines	 	1	 	2	 	3	 	4+	 	Total	
FICO	Months History	 	$	%	 	$	%	 	$	%	 	$	%	 	$	%	
No-FICO	<36	 	$	2.8		97	%	 	$	0.1		3	%	 	$	—		—		 	$	—		—		 	$	2.9		11	%	
	36+	 	0.5		42	%	 	0.2		17	%	 	0.1		8	%	 	0.4		33	%	 	1.2		4	%	
<540	<36	 	0.2		40	%	 	0.1		20	%	 	0.1		20	%	 	0.1		20	%	 	0.5		2	%	
	36+	 	0.2		4	%	 	0.3		5	%	 	0.3		5	%	 	4.7		85	%	 	5.5		20	%	
540-599	<36	 	0.3		38	%	 	0.2		25	%	 	0.1		13	%	 	0.2		25	%	 	0.8		3	%	
	36+	 	0.2		3	%	 	0.3		4	%	 	0.3		4	%	 	7.0		90	%	 	7.8		28	%	
600-639	<36	 	0.2		40	%	 	0.1		20	%	 	0.1		20	%	 	0.1		20	%	 	0.5		2	%	
	36+	 	0.1		2	%	 	0.1		2	%	 	0.1		2	%	 	4.0		93	%	 	4.3		16	%	
>640	<36	 	0.3		50	%	 	0.1		17	%	 	0.1		17	%	 	0.1		17	%	 	0.6		2	%	
	36+	 	—		—		 	0.1		3.0	%	 	0.1		3.0	%	 	3.1		94	%	 	3.3		12	%	
Total	 	$	4.8		18	%	 	$	1.6		6	%	 	$	1.3		5	%	 	$	19.7		72	%	 	$	27.4		100	%	
Delinquency

The Company considers an account delinquent when an obligor fails to pay the required minimum portion of the scheduled payment by the due date. With respect to receivables originated by the Company prior to January 1, 2017 and through its “Chrysler Capital” channel, the required minimum payment is 90% of the scheduled payment. With respect to all other receivables originated by the Company or acquired by the Company from an unaffiliated third-party originator prior to January 1, 2017, the required minimum payment is 50% of the scheduled payment. With respect to receivables originated by the Company or acquired by the Company from an unaffiliated third-party originator on or after January 1, 2017, the required minimum payment is 90% of the scheduled payment, regardless of which channel the receivable was originated through. In each case, the period of delinquency is based on the number of days payments are contractually past due. Delinquencies may vary from period to period based upon the average age or seasoning of the portfolio, seasonality within the calendar year, and economic factors. Historically, the Company's delinquencies have been highest in the period from November through January due to consumers’ holiday spending.
As of September 30, 2017 and December 31, 2016 , a summary of delinquencies on retail installment contracts held for investment were as follows:

														
 	September 30, 2017	 	December 31, 2016	
 	Dollars (in thousands)	 	Percent (a)	 	Dollars (in thousands)	 	Percent (a)	
Principal 30-59 days past due	$	2,580,226		 	9.8	%	 	$	2,925,503		 	10.7	%	
Delinquent principal over 59 days (b)	1,464,543		 	5.6	%	 	1,526,743		 	5.6	%	
Total delinquent principal	$	4,044,769		 	15.4	%	 	$	4,452,246		 	16.3	%	
(a) Percent of unpaid principal balance.

72

(b) Interest is accrued until 60 days past due in accordance with the Company's accounting policy for retail installment contracts. The Company's delinquency ratio continues to be calculated using the end of period delinquent principal over 60 days.
All of the Company's receivables from dealers were current as of September 30, 2017 and December 31, 2016 .
Credit Loss Experience
The following is a summary of net losses and repossession activity on finance receivables held for investment for the nine months ended September 30, 2017 and 2016 .

								
 	Nine Months Ended September 30,	
 	2017	 	2016	
 	Retail Installment
Contracts	 	Retail Installment
Contracts	
 	(Dollar amounts in thousands)	
Principal outstanding at period end	$	26,369,828		 	$	27,624,259		
Average principal outstanding during the period	$	27,153,602		 	$	27,577,929		
Number of receivables outstanding at period end	1,714,785		 	1,656,786		
Average number of receivables outstanding during the period	1,727,313		 	1,669,992		
Number of repossessions (1)	225,393		 	221,298		
Number of repossessions as a percent of average number of receivables outstanding (2)	17.4	%	 	17.7	%	
Net losses	$	1,724,225		 	$	1,582,599		
Net losses as a percent of average principal amount outstanding (2)	8.5	%	 	7.7	%	
(1) Repossessions are net of redemptions. The number of repossessions includes repossessions from the outstanding portfolio and from accounts already charged off.
(2) Annualized; not necessarily indicative of a full year's actual results.
There were no charge-offs on the Company's receivables from dealers during 2017. There were charge-offs of zero and $135 on the Company's receivables from dealers for the three and nine months ended September 30, 2016 , respectively.
Deferrals and Troubled Debt Restructurings
In accordance with the Company's policies and guidelines, the Company from time to time, offer extensions (deferrals) to consumers on its retail installment contracts, whereby the consumer is allowed to move a maximum of three payments per event to the end of the loan. More than 90% of deferrals granted are for two months. The Company's policies and guidelines limit the frequency of each new deferral that may be granted to one deferral every six months, regardless of the length of any prior deferral. The maximum number of lifetime months extended for all automobile retail installment contracts is eight, while some marine and recreational vehicle contracts have a maximum of twelve months extended to reflect their longer term. Additionally, the Company generally limits the granting of deferrals on new accounts until a requisite number of payments has been received. During the deferral period, the Company continues to accrue and collect interest on the loan in accordance with the terms of the deferral agreement.
At the time a deferral is granted, all delinquent amounts may be deferred or paid, resulting in the classification of the loan as current and therefore not considered a delinquent account. Thereafter, such account is aged based on the timely payment of future installments in the same manner as any other account.
A loan that has been classified as a TDR remains so until the loan is liquidated through payoff or charge-off. TDRs are placed on nonaccrual status when the Company believes repayment under the revised terms is not reasonably assured and, at the latest when the account becomes past due more than 60 days, and considered for return to accrual when a sustained period of repayment performance has been achieved.
The following is a summary of deferrals on the retail installment contracts held for investment as of the dates indicated:

73

	
														
 	September 30, 2017	 	December 31, 2016	
 	(Dollar amounts in thousands)	
Never deferred	$	17,047,199		 	64.6	%	 	$	18,624,208		 	68.1	%	
Deferred once	4,430,862		 	16.8	%	 	4,428,467		 	16.2	%	
Deferred twice	2,209,958		 	8.4	%	 	2,110,758		 	7.7	%	
Deferred 3 - 4 times	2,612,620		 	9.9	%	 	2,130,140		 	7.8	%	
Deferred greater than 4 times	69,189		 	0.3	%	 	64,574		 	0.2	%	
Total	$	26,369,828		 	 	 	$	27,358,147		 	 	
The Company evaluates the results of deferral strategies based upon the amount of cash installments that are collected on accounts after they have been deferred versus the extent to which the collateral underlying the deferred accounts has depreciated over the same period of time. Based on this evaluation, the Company believes that payment deferrals granted according to its policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio.

Changes in deferral levels do not have a direct impact on the ultimate amount of consumer finance receivables charged off. However, the timing of a charge-off may be affected if the previously deferred account ultimately results in a charge-off. To the extent that deferrals impact the ultimate timing of when an account is charged off, historical charge-off ratios, loss confirmation periods, and cash flow forecasts for loans classified as TDRs used in the determination of the adequacy of the Company's allowance for credit losses are also impacted. Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the portfolio and therefore increase the allowance for credit losses and related provision for credit losses. Changes in these ratios and periods are considered in determining the appropriate level of allowance for credit losses and related provision for credit losses, including the allowance and provision for loans that are not classified as TDRs. For loans that are classified as TDRs, the Company generally compares the present value of expected cash flows to the outstanding recorded investment of TDRs to determine the amount of TDR impairment and related provision for credit losses that should be recorded. For loans that are considered collateral-dependent, such as certain bankruptcy modifications, impairment is measured based on the fair value of the collateral, less its estimated cost to sell.
The Company also may agree, or be required by operation of law or by a bankruptcy court, to grant a modification involving one or a combination of the following: a reduction in interest rate, a reduction in loan principal balance, a temporary reduction of monthly payment, or an extension of the maturity date. The servicer of the Company's revolving personal loans also may grant modifications in the form of principal or interest rate reductions or payment plans. Similar to deferrals, the Company believes modifications are an effective portfolio management technique. Not all modifications are classified as TDRs as the loan may not meet the scope of the applicable guidance or the modification may have been granted for a reason other than the borrower's financial difficulties. The following is a summary of the principal balance as of September 30, 2017 and December 31, 2016 of loans that have received these modifications and concessions:

								
 	September 30, 2017	 	December 31, 2016	
 	Retail Installment Contracts	 	Retail Installment Contracts	
 	(Dollar amounts in thousands)	
Temporary reduction of monthly payment	$	2,860,010		 	$	2,472,432		
Bankruptcy-related accounts	85,114		 	109,494		
Extension of maturity date	23,843		 	24,032		
Interest rate reduction	57,410		 	64,180		
Max buy rate (a)	2,783,465		 	1,308,506		
Other	124,356		 	79,554		
Total modified loans	$	5,934,198		 	$	4,058,198		
(a) Amount comprises of loans modified by the Company to adjust the interest rate quoted in a dealer-arranged financing. Beginning in the third quarter of 2016, in conjunction with consumer practices, the Company reassesses the contracted APR when changes in the deal structure are made (e.g. higher down payment, lower vehicle price, etc.). If any of the changes result in a lower APR, the contracted rate is reduced. These modifications are not considered a TDR event as they do not relate to a concession provided to a customer experiencing financial difficulty.
A summary of the Company's recorded investment in TDRs as of the dates indicated is as follows:

74

	
								
 	September 30, 2017	 	December 31,
2016	
 	Retail Installment Contracts	
 	(Dollar amounts in thousands)	
Outstanding recorded investment (a)	$	6,330,331		 	$	5,637,792		
Impairment	(1,782,114	)	 	(1,611,295	)	
Outstanding recorded investment, net of impairment	$	4,548,217		 	$	4,026,497		
(a) As of September 30, 2017 , the outstanding recorded investment excludes $50.7 million of collateral-dependent bankruptcy TDRs that has been written down by $23.7 million to fair value less cost to sell.
A summary of the principal balance on the Company's delinquent TDRs as of the dates indicated is as follows:

								
 	September 30, 2017	 	December 31,
2016	
 	Retail Installment Contracts	
 	(Dollar amounts in thousands)	
Principal 30-59 days past due	$	1,184,804		 	$	1,253,848		
Delinquent principal over 59 days	753,606		 	736,691		
Total delinquent TDRs	$	1,938,410		 	$	1,990,539		
(a) Interest is accrued until 60 days past due in accordance with the Company's accounting policy for retail installment contracts. The Company's delinquency ratio continues to be calculated using the end of period delinquent principal over 60 days.
As of September 30, 2017 and December 31, 2016 , the Company did not have any dealer loans classified as TDRs and had not granted deferrals or modifications on any of these loans.

The following table shows the components of the changes in the recorded investment in retail installment contract TDRs during the three and nine months ended September 30, 2017 and 2016 :

																
 	Three Months Ended	 	Nine Months Ended	
 	September 30, 2017	 	September 30, 2016	 	September 30, 2017	 	September 30, 2016	
Balance — beginning of period	$	5,929,392		 	$	5,061,608		 	$	5,637,792		 	$	4,601,502		
New TDRs	1,122,450		 	932,472		 	2,776,006		 	2,478,035		
Charge-offs	(488,646	)	 	(448,418	)	 	(1,420,073	)	 	(1,119,730	)	
Paydowns	(210,299	)	 	(180,396	)	 	(644,190	)	 	(594,695	)	
Other transfers	4,400		 	(610	)	 	7,762		 	(456	)	
Balance — end of period	$	6,357,297		 	$	5,364,656		 	$	6,357,297		 	$	5,364,656		
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 all 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. Due to this key distinction in allowance calculations, the coverage ratio is higher for TDRs in comparison to non-TDRs. The table below presents the Company’s allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of September 30, 2017 and December 31, 2016 :

75

	
								
 	September 30, 2017	 	December 31, 2016	
 	(Dollar amounts in thousands)	
TDR - Unpaid principal balance	$	6,276,659		 	$	5,599,567		
TDR - Impairment	1,782,114		 	1,611,295		
TDR allowance ratio	28.4	%	 	28.8	%	
 	 	 	 	
Non-TDR - Unpaid principal balance	$	20,044,330		 	$	21,528,406		
Non-TDR - Allowance	1,589,151		 	1,799,760		
Non-TDR allowance ratio	7.9	%	 	8.4	%	
 	 	 	 	
Total - Unpaid principal balance	$	26,320,989		 	$	27,127,973		
Total - Allowance	3,371,265		 	3,411,055		
Total allowance ratio	12.8	%	 	12.6	%	

The allowance ratio for both TDR and non-TDR retail installment contracts decreased from December 31, 2016 to September 30, 2017 . The decrease in the TDR allowance ratio is primarily driven by the non-accrual of interest income for certain TDR loans which is offset in the impairment as it reduces the carrying value of TDR loans. The allowance ratio for the non-TDR is driven by a combination of improved credit performance and stabilizing recovery rates. The total allowance on retail installment contracts however, increased from December 31, 2016 to September 30, 2017 due to an increase in the proportion of assets classified as TDRs.

Liquidity Management, Funding and Capital Resources
Source of Funding
The Company requires a significant amount of liquidity to originate and acquire loans and leases and to service debt. The Company funds its operations through its lending relationships with 13 third-party banks, SHUSA and Santander, as well as through securitizations in the ABS market and large flow agreements. The Company seeks to issue debt that appropriately matches the cash flows of the assets that it originates. The Company has more than $5.8 billion of stockholders’ equity that supports its access to the securitization markets, credit facilities, and flow agreements.
During the nine months ended September 30, 2017 , the Company completed on-balance sheet funding transactions totaling approximately $12.3 billion , including:
		
•	three securitizations on the Company's SDART platform for $3.1 billion ;	
		
•	issuance of two retained bonds on the Company's SDART platform for $155 million ;	
		
•	four securitizations on the Company's DRIVE, deeper subprime platform, for $4.1 billion ;	
		
•	issuance of a retained bond on the Company's DRIVE platform for $113 million ;	
		
•	four private amortizing lease facilities for $1.6 billion ; and	
		
•	seven top-ups and two re-levers of private amortizing loan and lease facilities for $3.2 billion .	
The Company also completed $3.0 billion in asset sales, which consists of $0.3 billion recurring monthly sales with its third party flow partners, $2.6 billion in sales to Santander and $0.1 billion in sales to SBNA.
As of September 30, 2017 and December 31, 2016 , the Company's debt consisted of the following:

76

	
								
 	September 30,
2017	 	December 31,
2016	
Third party revolving credit facilities	$	4,965,888		 	$	6,739,817		
Related party revolving credit facilities	2,369,850		 	2,975,000		
     Total revolving credit facilities	7,335,738		 	9,714,817		
 	 	 	 	
Public securitizations	14,927,738		 	13,436,482		
Privately issued amortizing notes	8,330,625		 	8,172,407		
     Total secured structured financings	23,258,363		 	21,608,889		
Total debt	$	30,594,101		 	$	31,323,706		
Credit Facilities
Third-party Revolving Credit Facilities
Warehouse Lines
The Company has two credit facilities with eight banks providing an aggregate commitment of $3.9 billion for the exclusive use of providing short-term liquidity needs to support Chrysler Capital retail financing. As of September 30, 2017 and December 31, 2016 , there was an outstanding balance of $2.8 billion and $3.7 billion , respectively, on these facilities in aggregate. One of the facilities can be used exclusively for loan financing and the other for lease financing. Both facilities require reduced advance rates in the event of delinquency, credit loss, or residual loss ratios exceeding specified thresholds.
Repurchase Facilities
The Company obtains financing through four investment management agreements whereby the Company pledges retained subordinate bonds on its own securitizations as collateral for repurchase agreements with various borrowers and at renewable terms ranging up to one year. As of September 30, 2017 and December 31, 2016, there was an outstanding balance of $658 million and $743 million, respectively, under these repurchase facilities.
Facilities with Santander and Related Subsidiaries
Santander and SHUSA historically have provided, and continues to provide, the Company with significant funding support in the form of committed credit facilities.The Company's debt with these affiliated entities consisted of the following:

																		
 	As of September 30, 2017 (amounts in thousands)	
 	Counterparty	 	Utilized Balance	 	Committed Amount	 	Average Outstanding Balance	 	Maximum Outstanding Balance	
Line of credit	Santander-NY	 	$	—		 	$	2,000,000		 	$	1,407,335		 	$	2,000,000		
Line of credit	Santander-NY	 	265,400		 	750,000		 	57,845		 	435,900		
Line of credit	SHUSA	 	—		 	3,000,000		 	139,973		 	750,000		
Promissory Note	SHUSA	 	300,000		 	300,000		 	228,832		 	300,000		
Promissory Note	SHUSA	 	650,000		 	650,000		 	436,496		 	650,000		
Promissory Note	SHUSA	 	650,000		 	650,000		 	257,383		 	650,000		
Promissory Note	SHUSA	 	500,000		 	500,000		 	305,556		 	500,000		
 	 	 	$	2,365,400		 	$	7,850,000		 		 		

77

	
																		
 	As of September 30, 2016 (amounts in thousands)	
 	Counterparty	 	Utilized Balance	 	Committed Amount	 	Average Outstanding Balance	 	Maximum Outstanding Balance	
Line of credit	Santander-NY	 	$	2,050,000		 	$	3,000,000		 	$	2,500,000		 	$	3,000,000		
Line of credit	SHUSA	 	—		 	1,500,000		 	10,200		 	200,000		
Line of credit	SHUSA	 	300,000		 	300,000		 	300,000		 	300,000		
 	 	 	$	2,350,000		 	$	4,800,000		 	 	 	 	
Through SHUSA, Santander provides the Company with $3.0 billion of committed revolving credit that can be drawn on an unsecured basis. Santander, through its New York branch, provides the Company with $2.8 billion of long-term committed revolving credit facilities. The facilities offered through the New York branch are structured as three- and five-year floating rate facilities, with current maturity dates of December 31, 2017 and 2018. These facilities currently permit unsecured borrowing and can also be collateralized by auto retail installment contracts and auto leases as well as securitization notes payables and residuals of the Company. Any balances outstanding under these facilities at the time of their commitment termination date will amortize to match the maturities and expected cash flows of the corresponding collateral.

SHUSA provides the Company with $2.1 billion of term promissory notes with maturities ranging from March 2019 to March 2022.
In August 2015, the Company began incurring a fee of 12.5 basis points (per annum) on certain warehouse facilities, as they renew, for which Santander provides a guarantee of the Company's servicing obligations. For revolving commitments, the guarantee fee will be paid on the total committed amount and for amortizing commitments, the guarantee fee will be paid against each month's ending balance. The guarantee fee will be applicable only for additional facilities upon the execution of the counter-guaranty agreement related to a new facility or if reaffirmation is required on existing revolving or amortizing commitments as evidenced by an executed counter-guaranty agreement. The Company recognized guarantee fee expense of $4.6 million and $4.8 million for the nine months ended September 30, 2017 and 2016 , respectively.
The Company also has derivative financial instruments with Santander and affiliates as counterparty with outstanding notional amounts of $4.4 billion and $7.3 billion at September 30, 2017 and December 31, 2016 , respectively. The Company had a collateral overage on derivative liabilities with Santander and affiliates of $9 million and $15 million at September 30, 2017 and December 31, 2016 , respectively. Interest expense on these agreements includes amounts totaling $1 million and $16 million for the nine months ended September 30, 2017 and 2016 , respectively.
Secured Structured Financings
The Company's secured structured financings primarily consist of public, SEC-registered securitizations. The Company also executes private securitizations under Rule 144A of the Securities Act and privately issue amortizing notes. The Company has completed eleven securitizations year-to-date in 2017 and currently has 37 securitizations outstanding in the market with a cumulative ABS balance of approximately $15 billion. 
Flow Agreements

In addition to the Company's credit facilities and secured structured financings, the Company has a flow agreement in place with a third party for charged off assets. Previously, the Company also had flow agreements with Bank of America and CBP. However, those agreements were terminated effective January 31 and May 1, 2017, respectively.

Loans and leases sold under these flow agreements are not on the Company's balance sheet but provide a stable stream of servicing fee income and may also provide a gain or loss on sale. The Company continues to actively seek additional such flow agreements.
Off-Balance Sheet Financing
Beginning in March 2017, the Company has the option to sell a contractually determined amount of eligible prime loans to Santander, through securitization platforms. As all of the notes and residual interests in the securitizations are issued to Santander, the Company recorded these transactions as true sales of the retail installment contracts securitized, and removed the sold assets from the Company's condensed consolidated balance sheets.

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The Company also continues to periodically execute Chrysler Capital-branded securitizations under Rule 144A of the Securities Act. Upon transferring all of the notes and residual interests in these securitizations to third parties, the Company records these transactions as true sales of the retail installment contracts securitized, and removes the sold assets from the Company's condensed consolidated balance sheet.
Use of Funds
The Company believes that the liquidity and capital resources from U.S. operations are adequate to fund its U.S. operations and corporate activities. The Company has asserted indefinite reinvestment of earnings from its Puerto Rico operations as determined by management’s judgment about its intentions concerning the future operations of the Company. The Company does not believe that the amounts reinvested will have a material impact on liquidity.
The Company uses liquidity to service its debt, repay borrowings, as well as for funding loan commitments and to pay dividends to shareholders.
Cash Flow Comparison
The Company continues to produce positive net cash from operating activities. The Company's investing activities primarily consist of originations and acquisitions of finance receivables and leased vehicles. The financing activities primarily consist of borrowing and repayments of debt.

								
 	Nine Months Ended September 30,	
 	2017	 	2016	
 	(Dollar amounts in thousands)	
Net cash provided by operating activities	$	3,666,086		 	$	2,676,133		
Net cash used in investing activities	(2,690,709	)	 	(4,026,681	)	
Net cash provided by (used in) financing activities	(738,246	)	 	1,407,528		
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased by $990 million from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 , mainly due to the decrease in outflows of $245 million for originations of assets held for sale and the higher proceeds of $572 million from assets held for sale.
Net Cash Used in Investing Activities
Net cash used in investing activities decreased by $1.3 billion from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 , primarily due by the decrease of $1.3 billion in originations held for investment.
Net Cash Provided by Financing Activities
Net cash provided by (used in) financing activities decreased by $2.1 billion from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 , primarily due to the higher payments on borrowings.
Contingencies and Off-Balance Sheet Arrangements
For information regarding the Company's contingencies and off-balance sheet arrangements, refer to Note 10 - Commitments and Contingencies in the accompanying condensed consolidated financial statements.
Contractual Obligations
The Company leases its headquarters in Dallas, Texas, its servicing centers in Texas, Colorado, Arizona, and Puerto Rico, and an operations facilities in California, Texas and Colorado under non-cancelable operating leases that expire at various dates through 2027. The Company also has various debt obligations entered into in the normal course of business as a source of funds.
The following table summarizes the Company's contractual obligations as of September 30, 2017 :

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 	Less than 1 year	 	1-3
years	 	3-5
years	 	More than
5 years	 	Total	
 	(In thousands)	
Operating lease obligations	$	12,518			$	25,785			$	25,275			$	47,571			$	111,149		
Notes payable - revolving facilities	3,971,054			2,060,234			1,300,000			—			7,331,288		
Notes payable - secured structured financings	1,619,104			5,219,206			12,065,609			4,406,565			23,310,484		
Contractual interest on debt	690,654			697,847			215,708			34,562			1,638,771		
 	$	6,293,330			$	8,003,072			$	13,606,592			$	4,488,698			$	32,391,692		

Risk Management Framework

The Company's risk management framework is overseen by its board of directors, its Risk Committee (RC), its management committees, its executive management team, an independent risk management function, an internal audit function and all of its associates. The RC, along with the Company's full board of directors, is responsible for establishing the governance over the risk management process, providing oversight in managing the aggregate risk position and reporting on the comprehensive portfolio of risk categories and the potential impact these risks can have on the Company's risk profile. The Company's primary risks include, but are not limited to, credit risk, market risk, liquidity risk, operational risk and model risk. For more information regarding the Company's risk management framework, please refer to the Risk Management Framework section of the Company's 2016 Annual Report on Form 10-K.

Credit Risk

The risk inherent in the Company's loan and lease portfolios is driven by credit quality and is affected by borrower-specific and economy-wide factors such as changes in employment. The Company manages this risk through its underwriting and credit approval guidelines and servicing policies and practices, as well as geographic and manufacturer concentration limits.
The Company's automated originations process reflects a disciplined approach to credit risk management. The Company's robust historical data on both organically originated and acquired loans provides the Company with the ability to perform advanced loss forecasting. Each applicant is automatically assigned a proprietary loss forecasting score (LFS) using information such as FICO ® , debt-to-income ratio, loan-to-value ratio, and over 30 other predictive factors, placing the applicant in one of 100 pricing tiers. The pricing in each tier is continuously monitored and adjusted to reflect market and risk trends. In addition to the automated process, the Company maintains a team of underwriters for manual review, consideration of exceptions, and review of deal structures with dealers. The Company generally tightens its underwriting requirements in times of greater economic uncertainty (including during the recent financial crisis) to compete in the market at loss and approval rates acceptable for meeting the Company's required returns. The Company's underwriting policy has also been adjusted to meet the requirements of the Company's contracts such as the Chrysler Agreement. In both cases, the Company has accomplished this by adjusting risk-based pricing, the material components of which include interest rate, down payment, and loan-to-value.
The Company monitors early payment defaults and other potential indicators of dealer or customer fraud and uses the monitoring results to identify dealers who will be subject to more extensive stipulations when presenting customer applications, as well as dealers with whom the Company will not do business at all.
Market Risk
Interest Rate Risk
The Company measures and monitors interest rate risk on at least a monthly basis. The Company borrows money from a variety of market participants in to provide loans and leases to the Company's customers. The Company's gross interest rate spread, which is the difference between the income earned through the interest and finance charges on the Company's finance receivables and lease contracts and the interest paid on the Company's funding, will be negatively affected if the expense incurred on the Company's borrowings increases at a faster pace than the income generated by the Company's assets.
The Company's Interest Rate Risk policy is designed to measure, monitor and manage the potential volatility in earnings stemming from changes in interest rates. The Company generates finance receivables which are predominantly fixed rate and borrow with a mix of fixed and variable rate funding. To the extent that the Company's asset and liability re-pricing

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characteristics are not effectively matched, the Company may utilize interest rate derivatives, such as interest rate swap agreements, to manage its desired outcome. As of September 30, 2017 , the notional value of the Company's interest rate swap agreements was $6.5 billion . The Company also enters into Interest Rate Cap agreements as required under certain lending agreements. In order to mitigate any interest rate risk assumed in the Cap agreement required under the lending agreement, the Company may enter into a second interest rate cap (Back-to-Back). As of September 30, 2017 the notional value of the Company’s interest rate cap agreements was $11.9 billion , under which, all notional was executed Back-to-Back.
The Company monitors its interest rate exposure by conducting interest rate sensitivity analysis. For purposes of reflecting a possible impact to earnings, the twelve-month net interest income impact of an instantaneous 100 basis point parallel shift in prevailing interest rates is measured. As of September 30, 2017 , the twelve-month impact of a 100 basis point parallel increase in the interest rate curve would decrease the Company's net interest income by $22 million . In addition to the sensitivity analysis on net interest income, the Company also measures Market Value of Equity (MVE) to view the interest rate risk position. MVE measures the change in value of Balance Sheet instruments in response to an instantaneous 100 basis point parallel increase, including and beyond the net interest income twelve-month horizon. As of September 30, 2017 , the impact of a 100 basis point parallel increase in the interest rate curve would decrease the Company's MVE by $81 million .
Collateral Risk and FCA Residual Risk Sharing Agreement
The Company's lease portfolio presents an inherent risk that residual values recognized upon lease termination will be lower than those used to price the contracts at inception. Although the Company has elected not to purchase residual value insurance at the present time, the Company's residual risk is somewhat mitigated by the Company's residual risk-sharing agreement with FCA.The mechanics of the agreement hold the Company responsible for incurring the first portion of any residual value gains or losses up to the first 8%. The Company and FCA then equally share the next 4% of any residual value gains or losses (i.e., those gains or losses that exceed 8% but are less than 12%). Finally, FCA is responsible for residual value gains or losses over 12%, capped at a certain limit, after which SC incurs any remaining gains or losses. From the inception of the agreement with FCA through the third quarter of 2017, approximately 87% of full term leases have not exceeded the first and second portions of any residual losses under the agreement. The Company also utilizes industry data, including the ALG benchmark for residual values, and employ a team of individuals experienced in forecasting residual values.  
Similarly, lower used vehicle prices also reduce the amount that can be recovered when remarketing repossessed vehicles that serve as collateral underlying loans. The Company manages this risk through loan-to-value limits on originations, monitoring of new and used vehicle values using standard industry guides, and active, targeted management of the repossession process.
The Company does not currently have material exposure to currency fluctuations or inflation.
Liquidity Risk
The Company views liquidity as integral to other key elements such as capital adequacy, asset quality and profitability. Because the Company's debt is nearly entirely serviced by collections on consumer receivables, the Company's primary liquidity risk relates to the ability to fund originations. The Company has a robust liquidity policy in place to manage this risk. The liquidity policy establishes the following guidelines:
		
•	that the Company maintain at least eight external credit providers (as of September 30, 2017 , it had fourteen );	
		
•	that the Company relies on Santander and affiliates for no more than 30% of its funding (as of September 30, 2017 , Santander and affiliates provided 8% of its funding);	
		
•	that no single lender's commitment should comprise more than 33% of the overall committed external lines (as of September 30, 2017 , the highest single lender's commitment was 21% );	
		
•	that no more than 35% of the Company's debt mature in the next six months and no more than 65% of the Company's debt mature in the next twelve months (as of September 30, 2017 , 15% and 55% of the Company's debt is scheduled to mature in the next six and twelve months, respectively); and	
		
•	that the Company maintain unused capacity of at least $6.0 billion , including flow agreements, in excess of the Company's expected peak usage over the following twelve months (as of September 30, 2017 , the Company had twelve-month rolling unused capacity of $12.2 billion ).	
The Company's liquidity policy also requires that the Company's Asset Liability Committee monitor many indicators, both market-wide and company-specific, to determine if action may be necessary to maintain the Company's liquidity position. The Company's liquidity management tools include daily, monthly and twelve-month rolling cash requirements forecasts, monthly funding usage and availability reports, daily sources and uses reporting, structural liquidity risk exercises, and the establishment

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of liquidity contingency plans. The Company also performs quarterly stress tests in which it forecasts the impact of various negative scenarios (alone and in combination), including reduced credit availability, higher funding costs, lower advance rates, lower customer interest rates, lower dealer discount rates, and higher credit losses.
The Company generally looks for funding first from structured secured financings, second from third-party credit facilities, and last from Santander. The Company believes this strategy helps avoid being overly reliant on Santander for funding. Additionally, the Company can reduce originations to significantly lower levels if necessary during times of limited liquidity.
The Company has established a qualified like-kind exchange program in order to defer tax liability on gains on sale of vehicle assets at lease termination. If the Company does not meet the safe harbor requirements of IRS Revenue Procedure 2003-39, the Company may be subject to large, unexpected tax liabilities, thereby generating immediate liquidity needs. The Company believes that its compliance monitoring policies and procedures are adequate to enable the Company to remain in compliance with the program requirements.
Operational Risk
The Company is exposed to operational risk loss arising from failures in the execution of its business activities. These relate to failures arising from inadequate or failed processes, failures in its people or systems, or from external events. The Company's operational risk management program encompasses Third Party Management, Business Continuity Management, Information Risk Management, Fraud Risk Management, and Operational Risk Management, with key program elements covering Loss Event, Issue Management, Risk Reporting and Monitoring, and Risk Control Self-Assessment (RCSA).
To mitigate operational risk, the Company maintains an extensive compliance, internal control, and monitoring framework, which includes the gathering of corporate control performance threshold indicators, Sarbanes-Oxley testing, monthly quality control tests, ongoing monitoring of compliance with all applicable regulations, internal control documentation and review of processes, and internal audits. The Company also utilizes internal and external legal counsel for expertise when needed. Upon hire and annually, all associates receive comprehensive mandatory regulatory compliance training. In addition, the Board receives annual regulatory and compliance training. The Company uses industry-leading call mining and other software solutions that assist the Company in analyzing potential breaches of regulatory requirements and customer service. The Company's call mining software analyzes all customer service calls, converting speech to text and mining for specific words and phrases that may indicate inappropriate comments by a representative. The software also detects escalated voice volume, enabling a supervisor to intervene if necessary. This tool enables the Company to effectively manage and identify training opportunities for associates, as well as track and resolve customer complaints through a robust quality assurance program.
Model Risk
The Company mitigates model risk through a robust model validation process, which includes committee governance and a series of tests and controls. The Company utilizes SHUSA's Model Risk Management group for all model validation to verify models are performing as expected and in line with their design objectives and business uses.
Critical Accounting Estimates
Accounting policies are integral to understanding the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations. The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company reviews its accounting policies, assumptions, estimates and judgments to ensure that its financial statements are presented fairly and in accordance with U.S. GAAP. There have been no material changes in the Company's critical accounting estimates from those disclosed in Item 7 of the 2016 Annual Report on Form 10-K.
Recent Accounting Pronouncements
Information concerning the Company's implementation and impact of new accounting standards issued by the Financial Accounting Standards Board (FASB) is discussed in Note 1 to the Consolidated Financial Statements under "Recently Issued Accounting Pronouncements."
Other Information

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Further information on risk factors can be found under Part II, Item 1A - “Risk Factors.” 

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Item 3.	Quantitative and Qualitative Disclosures About Market Risk	
Incorporated by reference from Part I, Item 2 - “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Risk Management Framework” above.

	
		
Item 4.	Controls and Procedures	

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of September 30, 2017 , we did not maintain effective disclosure controls and procedures because of the material weaknesses in internal control over financial reporting described below. In light of these material weaknesses, management completed additional procedures and analyses to validate the accuracy and completeness of the financial results impacted by the control deficiencies including the validation of data underlying key financial models and the addition of substantive logic inspection, fluctuation analysis and testing procedures. In addition, management engaged the Audit Committee directly, in detail, to discuss the procedures and analysis performed to ensure the reliability of the Company’s financial reporting. As a result, management concluded the condensed consolidated financial statements included in this report fairly present, in all material respects, our financial position, results of operations, capital position, and cash flows for the periods presented, in conformity with U.S. GAAP.

A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis.

Based on the assessment, management determined that the Company did not maintain effective internal control over financial reporting as of September 30, 2017 , as a result of material weaknesses in the following areas:

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

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

•	Management did not effectively execute a strategy to hire and retain a sufficient complement of personnel with an appropriate level of knowledge, experience, and training in certain areas important to financial reporting.	
		
•	The tone at the top was insufficient to ensure there were adequate mechanisms and oversight to ensure accountability for the performance of internal control over financial reporting responsibilities and to ensure corrective actions were appropriately prioritized and implemented in a timely manner.	
		
•	There was not adequate management oversight of accounting and financial reporting activities in implementing certain accounting practices to conform to the Company’s policies and U.S. GAAP.	
		
•	There was not an adequate assessment of changes in risks by management that could significantly impact internal control over financial reporting or an adequate determination and prioritization of how those risks should be managed.	
		
•	There was not adequate management oversight and identification of models, spreadsheets and completeness and accuracy of data material to financial reporting.	
		
•	There were insufficiently documented Company accounting policies and insufficiently detailed Company procedures to put policies into effective action.	
		
•	There was a lack of appropriate tone at the top in establishing an effective control owner risk and controls self-assessment process which contributed to a lack of clarity about ownership of risks assessments and control design and effectiveness. There was insufficient governance, oversight and monitoring of the credit loss allowance and accretion processes and a lack of defined roles and responsibilities in monitoring functions.	

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

2. Application of Effective Interest Method for Accretion

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

This resulted in errors in the Company’s application of the effective interest method for accreting discounts, which include discounts upon origination of the loan, subvention payments from manufacturers, and other origination costs on individually acquired retail installment contracts.

This material weakness relates to the following financial statement line items: finance receivables held for investment, net, finance receivables held for sale, net, interest on finance receivables and loans, provision for credit losses, investment gains and losses, net, and the related disclosures within Note 2 - Finance Receivables, Note 4 - Credit Loss Allowance and Credit Quality and Note 16 - Investment Gains (Losses), Net.

3. Methodology to Estimate Credit Loss Allowance

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

This resulted in errors in the Company’s methodology for determining the credit loss allowance, specifically not calculating impairment for TDRs separately from a general allowance on loans not classified as TDRs, inappropriately omitting the consideration of net discounts when estimating the allowance and recording charge-offs, and calculating appropriate selling costs for inclusion in the analysis.

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

4. Loans Modified as TDRs
The following controls over the identification of TDRs and inputs used to estimate TDR impairment did not operate effectively:

•	Review controls of the TDR footnote disclosures and supporting information did not effectively identify that parameters used to query the loan data were incorrect.	
		
•	A review of inputs used to estimate the expected and present value of cash flows of loans modified in TDRs did not identify errors in types of cash flows included and in the assumed timing and amount of defaults and did not identify that the discount rate was incorrect.	

As a result, management determined that it had incorrectly identified the population of loans that should be classified as TDRs and, separately, had incorrectly estimated the impairment on these loans due to model input errors.

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

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

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

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

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•	Review and approval controls over the development of new models to estimate credit loss allowance and related model changes were ineffective.	
		
•	Adequate and comprehensive performance monitoring over related model output results was not performed and we did not maintain adequate model documentation.	

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

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

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

•	Review controls over completeness and accuracy of data, inputs, calculation and assumptions in models and spreadsheets used for estimating accretion were not effective and management did not adequately challenge significant assumptions.	
		
•	Review and approval controls over the development of new models to estimate accretion and related model changes were ineffective.	
		
•	Adequate and comprehensive performance monitoring over related model output results was not performed and we did not maintain adequate model documentation.	

This material weakness relates to the following financial statement line items: finance receivables held for investment, net, finance receivables held for sale, net, interest on finance receivables and loans, provision for credit losses, investment gains and losses, net, and the related disclosures within Note 2 - Finance Receivables, Note 4 - Credit Loss Allowance and Credit Quality and Note 16 - Investment Gains (Losses), Net.

7. Review of New, Unusual or Significant Transactions

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

This material weakness relates to the following financial statement line items: compensation expense, other liabilities, deferred tax liabilities, net, and additional paid in capital and the related disclosures within Note 15 - Shareholders' Equity.

8. Review of Financial Statement Disclosures

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

This material weakness relates to various disclosures in the financial statements.

9. Preparation and Review of Consolidated Statement of Cash Flows

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

These control deficiencies could result in misstatements of the aforementioned accounts and disclosures that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that these control deficiencies constitutes material weaknesses.

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Remediation Status of Reported Material Weaknesses

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

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

•	Appointed an additional independent director to the Audit Committee of the Board with extensive experience as a financial expert in our industry to provide further experience on the committee.	
		
•	Established regular working group meetings, with appropriate oversight by management of both the Company and its parent to strengthen accountability for performance of internal control over financial reporting responsibilities and prioritization of corrective actions.	
		
•	Hired a Chief Accounting Officer and other key personnel with significant public-company financial reporting experience and the requisite skillsets in areas important to financial reporting.	
		
•	Developed and implemented a plan to enhance its risk assessment processes, control procedures and documentation.	
		
•	Reallocated additional Company resources to improve the oversight for certain financial models.	
		
•	Increased accounting resources with qualified permanent resources to ensure sufficient staffing to conduct enhanced financial reporting procedures and to begin the remediation efforts.	
		
•	Improved management documentation, review controls and oversight of accounting and financial reporting activities to ensure accounting practices conform to the Company’s policies and U.S. GAAP.	
		
•	Increased accounting participation in critical governance activities to ensure an adequate assessment of risk activities which may impact financial reporting or the related internal controls.	
		
•	Completed a comprehensive review and update of all accounting policies, process descriptions and control activities.	
		
•	Developed and implemented additional documentation, controls and governance for the credit loss allowance and accretion processes.	

To address the material weaknesses related to the Application of Effective Interest Method for Accretion (Material Weakness 2, noted above) and the Identification, Governance and Monitoring of Models Used to Estimate Accretion (Material Weakness 6, noted above), the Company is in process of strengthening its processes and controls as follows:

•	Enhanced its accounting documentation and review procedures of key assumptions to ensure the Company’s accretion methodology conforms to Company policy and U.S. GAAP.	
		
•	Automated the process for the application of the effective interest rate method for accreting discounts, subvention payments from manufacturers and other origination costs on individually acquired retail installment contracts.	
		
•	Implemented a comprehensive review controls over data, inputs and assumptions used in the models.	
		
•	Strengthened review controls and change management procedures over the models used to estimate accretion.	
		
•	Increased accounting resources with qualified, permanent resources to ensure an adequate level of review and execution of control activities.	
		
•	Developed a comprehensive accretion model documentation manual and implemented on-going performance monitoring to ensure compliance with required standards.	

To address the material weaknesses related to the Methodology to Estimate Credit Loss Allowance (Material Weakness 3, noted above), Loans Modified as TDRs (Material Weakness 4, noted above), and Development, Approval, and Monitoring of Models Used to Estimate the Credit Loss Allowance (Material Weakness 5, noted above), the Company has taken the following measures:

•	Conducted a comprehensive design effectiveness review and augmentation of the controls to ensure all critical risks are addressed.	
		
•	Enhanced its accounting documentation and review procedures relating to credit loss allowance and TDRs to demonstrate how the Company’s policies and procedures align with U.S. GAAP and produce a repeatable process.	

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•	Implemented enhanced review controls over financial statement disclosures for credit loss allowance and TDR’s to ensure compliance with the Company’s polices and U. S. GAAP.	
		
•	Implemented a more comprehensive monitoring plan for credit loss allowance and TDRs with a specific focus on model inputs, changes in model assumptions and model outputs to ensure an effective execution of the Company’s risk strategy.	
		
•	Enhanced the Company’s communication on related issues with its senior leadership team and the Board, including the Risk Committee and the Audit Committee.	
		
•	Increased resources dedicated to the analysis, review and documentation to ensure compliance with U.S. GAAP and the Company’s policy.	

To address the material weaknesses in the Review of New, Unusual or Significant Transactions (Material Weakness 7, noted above), Review of Financial Statement Disclosures (Material Weakness 8, noted above) and Preparation and Review of Consolidated Statement of Cash Flows (Material Weakness 9, noted above), the Company is in the process of strengthening its processes and controls as follows:

•	Increased the documentation, analysis and governance over new, significant and unusual transactions to ensure that these transactions are recorded in accordance with Company’s policies and U.S. GAAP.	
		
•	Improved the review controls over financial statements and the related disclosures to include a more comprehensive disclosure checklist and improved review procedures from certain members of the management.	
		
•	Strengthened the review controls, reconciliations and supporting documentation related to the classification of cash flows between operating activities and investing activities in the Statement of Cash Flows.	

While progress has been made to remediate all of these areas, as of September 30, 2017 , we are still in the process of developing and implementing the enhanced processes and procedures and testing the operating effectiveness of these improved controls. We believe our actions will be effective in remediating the material weaknesses, and we continue to devote significant time and attention to these efforts. In addition, the material weaknesses will not be considered remediated until the applicable remedial processes and procedures have been in place for a sufficient period of time and management has concluded, through testing, that these controls are effective. Accordingly, the material weaknesses are not remediated as of September 30, 2017 .

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended September 30, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.

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PART II: OTHER INFORMATION

		
Item 1.	Legal Proceedings	
    
Reference should be made to Note 10 to the Condensed Consolidated Financial Statements, which is incorporated herein by reference, for information regarding legal proceedings in which the Company is involved, which supplements the discussion of legal proceedings set forth in Note 11 to the Condensed Consolidated Financial Statements of the 2016 Annual Report on Form 10-K.

		
Item 1A.	Risk Factors	

There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A “Risk Factors” in the 2016 Annual Report on Form 10-K.

		
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	
There were no unregistered sales of the Company’s common stock during the period covered by this Quarterly Report on Form 10-Q.

		
Item 3.	Defaults upon Senior Securities	
None.

		
Item 4.	Mine Safety Disclosures	
Not applicable.

		
Item 5.	Other Information	
Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
    
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the Exchange Act), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.

The following activities are disclosed in response to Section 13(r) with respect to affiliates of Santander UK within Santander. During the period covered by this report:

•	Santander UK holds two savings accounts and one current account for two customers resident in the UK who are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts for the nine months during 2017 were negligible relative to the overall revenues and profits of Santander.	

•	Santander UK holds two frozen current accounts for two UK nationals who are designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts held by each customer have been frozen since their designation and have remained frozen through the nine months of 2017. The accounts are in arrears (£1,844 in debit combined) and are currently being managed by Santander UK Collections & Recoveries department. No revenues or profits were generated by Santander UK on this account during the nine months of 2017.	

Santander also has certain legacy performance guarantees for the benefit of Bank Sepah and Bank Mellat (stand-by letters of credit to guarantee the obligations - either under tender documents or under contracting agreements - of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.

In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the period ended September 30, 2017, which were negligible relative to the overall revenues and profits of Santander. Santander has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein,

89

including correspondent relationships, deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. Santander is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, Santander intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.

90

    

		
Item 6.	Exhibits	
The following exhibits are included herein:

	
			
Exhibit
Number	 	Description	
10.1	 	Waiver and Release of Claims Agreement, effective September 7, 2017, executed by Jason A. Kulas in favor of Santander Consumer USA Holdings Inc., Santander Holdings USA Inc., Santander Consumer USA, Inc., Santander Consumer USA Inc. Foundation, Santander Bank, N.A., and Banco Santander, S.A. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on September 13, 2017).	
10.2	 	Offer Letter, by and among Sandra Broderick and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated September 20, 2017 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on October 2, 2017).	
10.3	 	Offer Letter, by and among Juan Carlos Alvarez de Soto and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated September 28, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on October 2, 2017).	
10.4	 	Separation Agreement and Release and Waiver of Claims, by and among Ismail Dawood and Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc., dated October 3, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on October 3, 2017).	
31.1*	 	 Chief Executive Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
31.2*	 	 Chief Financial Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
32.1*	 	 Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
32.2*	 	 Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
101.INS*	 	 
XBRL Instance Document	
101.SCH*	 	 
XBRL Taxonomy Extension Schema	
101.CAL*	 	 
XBRL Taxonomy Extension Calculation Linkbase	
101.DEF*	 	 
XBRL Taxonomy Extension Definition Linkbase	
101.LAB*	 	 
XBRL Taxonomy Extension Label Linkbase	
101.PRE*	 	 
XBRL Taxonomy Extension Presentation Linkbase	

		
*	Filed herewith.	

91

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

	
			
 	 	Santander Consumer USA Holdings Inc.
(Registrant)	
 	 	 	
By:	 	/s/ Scott Powell	
 	 	Name:  Scott Powell	
 	 	Title:  President and Chief Executive Officer	
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

	
					
Signature	 	Title	 	Date	
 
/s/ Scott Powell	 	President and Chief Executive Officer	 	November 2, 2017	
Scott Powell	 	(Principal Executive Officer)	 	 	
 
  /s/ Juan Carlos Alvarez de Soto	 	 
Chief Financial Officer	 	November 2, 2017	
Juan Carlos Alvarez de Soto	 	(Principal Financial and Accounting Officer)	 	 	

92

EXHIBITS
Exhibit 31.1
 
CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott Powell, President and Chief Executive Officer of Santander Consumer USA Holdings Inc., certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Santander Consumer USA Holdings Inc.;	
		
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
		
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
		
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
		
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be	
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared
		
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
		
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
		
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
		
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:	
		
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
		
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

		
/s/ Scott Powell	
Name:	Scott Powell	
Title:	President and Chief Executive Officer	
November 2, 2017

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Juan Carlos Alvarez de Soto, Chief Financial Officer of Santander Consumer USA Holdings Inc., certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Santander Consumer USA Holdings Inc.;
		
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
		
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
		
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
		
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be	
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
		
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
		
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
		
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
		
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:	
		
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
		
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

	
		
/s/ Juan Carlos Alvarez de Soto	
Name:	Juan Carlos Alvarez de Soto	
Title:	Chief Financial Officer	

November 2, 2017

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the period ended September 30, 2017 of Santander Consumer USA Holdings Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Powell, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
		
(1)	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
		
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	
		
/s/ Scott Powell	
Name:	Scott Powell	
Title:	President and Chief Executive Officer	
November 2, 2017
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the period ended September 30, 2017 of Santander Consumer USA Holdings Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Juan Carlos Alvarez de Soto, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
		
(1)	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
		
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	
		
/s/ Juan Carlos Alvarez de Soto	
Name:	Juan Carlos Alvarez de Soto	
Title:	Chief Financial Officer	
November 2, 2017
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.