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

		
ý	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the fiscal year ended December 31, 2016

		
¨	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
(214) 634-1110
(Address, including zip code, and telephone number, including area code, of principal executive offices)
_______________________________________________________________   
Securities registered pursuant to Section 12(b) of the Act:

	

Title of Class	 	Name of Exchange on Which Registered	
Common Stock, $0.01 par value per share	 	New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act:
None
_______________________________________________________________   
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   ¨  No   ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes   ¨     No   ý
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 ST (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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨

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

							
 	 	 	 	 	 	 	
Large accelerated filer	 	ý	 	Accelerated filer	 	¨	
Non-accelerated filer	 	¨	 	Smaller reporting company	 	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes   ¨     No   ý
As of June 30, 2016, the Registrant’s common stock, par value $0.01 per share, held by non-affiliates had an aggregate market value of approximately $1.2 billion based on the closing price on that date on the New York Stock Exchange of $10.33 per share.

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 February 17, 2017	
Common Stock ($0.01 par value)	 	359,096,990 shares	

Documents Incorporated By Reference
Portions of the registrant’s definitive proxy statement to its 2017 annual meeting of stockholders (the Proxy Statement) are incorporated by reference into Part III of the Annual Report on Form 10-K where indicated.                                                                                                                          

INDEX

	

Cautionary Note Regarding Forward-Looking Information	3	
 	 	
PART I	6	
Item 1 - Business	6	
Item 1A - Risk Factors	18	
Item 1B - Unresolved Staff Comments	39	
Item 2 - Properties	39	
Item 3 - Legal Proceedings	39	
Item 4 - Mine Safety Disclosures	39	
 	 	
PART II	39	
Item 5 - Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40	
Item 6 - Selected Financial Data	42	
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)	46	
Item 7A - Quantitative and Qualitative Disclosures About Market Risk	81	
Item 8 - Financial Statements and Supplementary Data	81	
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	145	
Item 9A - Controls and Procedures	145	
Item 9B - Other Information	150	
 	 	
PART III	150	
Item 10 - Directors, Executive Officers and Corporate Governance	150	
Item 11 - Executive Compensation	150	
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	150	
Item 13 - Certain Relationships and Related Transactions, and Director Independence	150	
Item 14 - Principal Accounting Fees and Services	150	
 	 	
PART IV	150	
Item 15 - Exhibits and Financial Statement Schedules	150	
Item 16 - Form 10-K Summary	151	
Signatures	152	

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 Annual Report on Form 10-K 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 that are subject to change based on various important factors, some of which are beyond the Company's control. Among the factors that could cause the Company's financial performance to differ materially from that 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 of 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 Fiat Chrysler Automobiles US LLC (FCA) may not result in currently anticipated levels of growth and is subject to certain 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 Santander Holdings USA, Inc. (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;	
		
•	future changes in the Company's relationship with SHUSA or Banco Santander, S.A. could adversely affect its operations; and	
		
•	the other factors that are described in Part I, Item IA - Risk Factors of this Annual Report on Form 10-K.	

If one or more of the factors affecting the Company's forward-looking information and statements renders forward-looking information or statements incorrect, the Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Therefore, the Company cautions not to place undue reliance on any forward-looking information or statements. The effect of these factors is difficult to predict. Factors other than these also could adversely affect the Company's results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. New factors emerge from time to time, and management cannot assess the impact of any such factor on the Company's business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements only speak as of the date of this document, and the Company undertakes no obligation to update any forward-looking information or statements, whether written or oral, to reflect any change, except as required by law. All forward-looking statements attributable to the Company are expressly qualified by these cautionary statements.

3

Glossary

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

		
ABS	Asset-backed securities	
Advance Rate	The maximum percentage of unpaid principal balance that a lender is willing to lend	
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	
Capmark	Capmark Financial Group Inc., an investment company	
CBP	Citizens Bank of Pennsylvania	
CCAR	Comprehensive Capital Analysis and Review	
CCART	Chrysler Capital Auto Receivables Trust, a securitization platform	
Centerbridge	Centerbridge Partners, L.P., a private equity firm	
CEO	Chief Executive Officer	
CFPB	Consumer Financial Protection Bureau	
CFO	Chief Financial Officer	
Chrysler Agreement	Ten-year 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	
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	
ECB	European Central Bank	
ECOA	Equal Credit Opportunity Act	
ERM	Enterprise Risk Management	
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	Board of Governors of the Federal Reserve System	
FRBB	Federal Reserve Bank of Boston	
FTC	Federal Trade Commission	

4

	
		
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	
NADA	National Automobile Dealers Association	
Nonaccretable Difference	The difference between the undiscounted contractual cash flows and the undiscounted expected cash flows of a portfolio acquired with deteriorated credit quality	
NYSE	New York Stock Exchange	
OCC	Office of the Comptroller of the Currency	
Original Filing	Annual Report on Form 10-K for the year ended December 31, 2015 issued on March 31, 2016	
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	
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	
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	
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	
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	
Turn-down	A program where by a lender has the opportunity to review a credit application for approval only after the primary lender or lenders have declined the application	
U.S. GAAP	U.S. Generally Accepted Accounting Principles	
VIE	Variable Interest Entity	
Warehouse Facility	A revolving line of credit generally used to fund finance receivable originations	

5

PART I

ITEM I.     BUSINESS
General
Santander Consumer USA Holdings Inc. (SC or the Company) was incorporated in 2013 in the State of Delaware and is the holding company for Santander Consumer USA Inc., an Illinois corporation, and 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 the Chrysler Agreement, a ten -year private-label financing 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 other relationships through which it holds personal loans, private-label credit cards and other consumer finance products. However, in October 2015, the Company announced its exit from personal lending, and accordingly, substantially all of its personal lending assets are classified as held for sale at December 31, 2016.
As of February 17, 2017 , the Company was owned approximately 58.8% by SHUSA, approximately 31.5% by public shareholders, approximately 9.7% by DDFS LLC, an entity affiliated with Thomas G. Dundon, the Company’s former Chairman and CEO, and by other shareholders, primarily members of senior management, who hold an insignificant ownership interest in the Company. Pursuant to a Separation Agreement with Mr. Dundon, SHUSA was deemed to have delivered, as of July 3, 2015, an irrevocable notice to exercise the call option with respect to all the shares of SC common stock owned by DDFS LLC and consummate the transactions contemplated by the call option notice, subject to required regulatory approvals and any other approvals required by law being obtained (the Call Transaction). Because the Call Transaction was not consummated prior to October 15, 2015 (the Call End Date), DDFS LLC is free to transfer any or all of its shares of SC common stock, subject to the terms and conditions of the Amended and Restated Loan agreement, dated as of July 16, 2014, between DDFS and Santander. Because the Call Transaction was not completed prior to 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 SC common stock ultimately sold in the Call Transaction.
SC's Markets
The consumer finance industry in the United States has approximately $2.9 trillion of outstanding borrowings as of December 31, 2016 and includes vehicle loans and leases, credit cards, home equity lines of credit, private student loans, and personal loans. As economic conditions have recovered from the 2008 and 2009 downturn, there has been a significant demand for consumer financing, particularly financing of vehicle sales. The U.S. auto industry sold 17.5 million new light-vehicles in 2016 , which was an increase of 68% over the number of new light-vehicles sold in 2009.
$2.9 trillion Consumer Finance Industry

Sources: Federal Reserve Bank of New York; Consumer Financial Protection Bureau

6

The Company's primary focus is the vehicle finance segment of the U.S. consumer finance industry. Vehicle finance includes loans and leases taken out by consumers to fund the purchase of new and used automobiles, as well as motorcycles, recreational vehicles, and watercraft. Within the vehicle finance segment, the Company maintains a strong presence in the auto finance market. The auto finance market features a fungible product resulting in an efficient pricing market, but it is highly fragmented, with no individual lender accounting for more than 10% of total market share. As of December 31, 2016 , there were approximately $ 1.2 trillion of auto loans outstanding in the United States.
Through the economic downturn, auto loans generally were not as adversely impacted as most other consumer lending products. This performance was largely attributable to several factors, including: (i) the importance that automobiles serve in consumers’ everyday lives; (ii) the ability to locate, repossess and sell a vehicle to mitigate losses on defaulted loans; and (iii) the robustness of the used car market and residual values. This last factor is subject to fluctuations in the supply and demand of automobiles. The primary metrics used by the market to monitor the strength of the used car market are the Manheim Used Vehicle Index and NADA Price Index, measures of wholesale used car prices adjusted by their mileage or vintage. As of December 31, 2016 , used car financing represented 59% of SC's outstanding retail installment contracts, of which 83% consisted of nonprime auto loans. The Manheim Used Vehicle Index has recently been well above historical norms and during the economic downturn, it rebounded in nine months while the broader economy took several years to rebound. This strength in the used car market reflects the importance of cars to U.S. consumers.

Source: Manheim Inc., as of December 31, 2016 & NADA Price Index, as of December 31, 2016
Note: Indexed to a basis of 100 at 1995 levels.

7

SC originates both prime and nonprime vehicle loans, and maintains on its balance sheet primarily nonprime loans. The Company also originates leases, substantially all of which are extended to prime borrowers. Historically, used car financing has made up a majority of the Company's business. In 2016 , through the third quarter, used automobiles accounted for 69% of total automobiles sold in the United States, and approximately 54% of used car purchases were financed. Most loans in the used auto finance space are extended to nonprime consumers, who comprise a significant portion of the U.S. population. Of the more than 200 million Americans with a credit history, 31% have Fair Isaac Corporation (FICO ®) scores below 650. Although nonprime auto loans typically produce higher losses than prime loans, SC's data-driven approach, extensive experience, and adaptive platform have enabled it to estimate future cash flows and effectively price loans for their inherent risk.

Source: FICO Banking Analytics Blog Fair Isaac Corporation
Note: Nonprime based on FICO Scores <650

8

Through the Chrysler Capital brand, SC is increasing its focus on the new auto finance space by providing financing for the acquisition of new FCA vehicles. The new auto market has substantially recovered from the economic downturn. In 2016 , there were 17.5 million new cars sold in the U.S., an increase of 68% over the number of new cars sold in 2009. In 2016 , through the third quarter, approximately 86% of total new auto sales were financed. Future growth of new auto sales in the United States, and the parallel growth of consumer loans and leases to finance those sales, are driven by improving economic conditions, new automobile product offerings, and the need to replace aging automobiles. The average age of U.S. autos in 2016 increased to a record high of 11.6 years, up slightly from 2015. Chrysler Capital loan and lease growth will be driven by the volume of new FCA vehicles sold in the United States.

Source: Ward's Automotive Reports; U.S. Department of Commerce: Bureau of Economic Analysis

Source: FCA US LLC

9

SC is a leading originator of nonprime auto loans. National and regional banks have historically been the largest originators of used and nonprime vehicle loans and leases due to their broad geographic footprint and wide array of vehicle finance products. SC primarily competes against national and regional banks, as well as automobile manufacturers’ captive finance businesses, to originate loans and leases to finance consumers’ purchases of new and used cars. The Company has a significant portfolio of prime loans and leases serviced for others, as it typically originates and then sells prime assets with servicing rights retained.
Net Percent of Banks Reporting Stronger Demand for Consumer Loans

In 2015, SC made a strategic decision to exit the personal lending market to focus on its core objectives of expanding the reach and realizing the full value of its vehicle finance and serviced for others platforms. The Company believes this shift will create other opportunities, such as diversifying funding sources and growing capital. Throughout 2016, SC marketed personal lending assets to potential buyers. On February 1, 2016, SC completed a sale of assets from its personal lending portfolio to an unrelated third party. The portfolio was comprised solely of LendingClub installment loans with an unpaid principal balance of approximately $900 million as of December 31, 2015. Additionally, on March 24, 2016, the Company notified certain retailers that it would no longer fund new point-of-sale credit originations effective April 11, 2016. As the Company refocuses on core objectives, it continues to perform under various other agreements under which specified volumes of personal loans originated by third parties are purchased.
In both the vehicle finance and personal lending markets, SC generates originations indirectly and directly. The indirect model requires relationships with third parties who are generally active in the market, are looking for an additional source of financing for their customers, and agree to direct certain customers to SC. The direct model requires an internally-managed platform through which consumers are able to make requests for credit directly to SC. While the Company has historically focused on the indirect model, it has a presence in the direct vehicle finance market through the RoadLoans.com platform. Additionally, the Company continues to develop relationships with third parties to further broaden its origination channels.
SC's Business Strategy
SC's primary goal is to create stockholder value by leveraging its efficient, scalable technology and risk infrastructure and data to underwrite, originate and service profitable assets while treating customers, stockholders, employees and all stakeholders in a simple, personal and fair manner.
Expand SC's Vehicle Finance Franchise
Organic Growth in Indirect Auto Finance. SC has extensive data on and experience with consumer behavior across the full credit spectrum and is a key player in the U.S. vehicle finance market. The Company has the ability to continue to increase market penetration in the vehicle finance sector, subject to attractive market conditions, via the number and depth of its dealer relationships. The Company plans to achieve this growth in part through alliance programs with national vehicle dealer groups and financial institutions, including banks, credit unions, and other lenders, in both the prime and nonprime vehicle finance markets. SC's technology-based platform enables the Company to integrate seamlessly with other originators and thereby benefit from their channels and brands.

10

Growth in Direct-to-Consumer Exposure. SC is working to further diversify its vehicle finance product offerings by expanding its web-based, direct-to-consumer offerings. The Company is focused on engaging the consumer at the early stages of the car buying experience. The RoadLoans.com program is a preferred finance resource for many major vehicle shopping websites, including Cars.com and AutoTrader.com, each of which have links on their websites promoting RoadLoans.com for financing. SC will continue to focus on securing relationships with additional vehicle-related websites. The Company anticipates that the next generation of its web-based direct-to-consumer offerings will include additional strategic relationships, an enhanced online experience, and additional products and services to assist with all stages of the vehicle ownership life cycle, including research, financing, buying, servicing, selling, and refinancing.
Expansion of Fee-Based Income Opportunities. SC seeks opportunities to leverage its technologically sophisticated and highly adaptable servicing platform for both prime and nonprime loans, as well as other vehicle finance (including recreational and marine vehicles) and personal lending products. The Company collects fees to service loan portfolios for third parties, and handles both secured and personal loan products across the full credit spectrum. Loans and leases sold to or sourced to banks through flow agreements and off-balance sheet securitizations also provide additional opportunities to service large vehicle loan and lease pools. SC's loan servicing business is scalable and provides an attractive return on equity. The Company intends to continue to develop new third-party relationships to increase its size. In 2016 , the Company added more than $3.6 billion of assets to its portfolio of assets serviced by others.
SC's Products and Services
SC offers vehicle-related financing products, primarily consisting of consumer loans and leases, and servicing of those assets.
Consumer Vehicle Loans
SC's primary business is to indirectly originate vehicle loans through automotive dealerships throughout the United States. The Company has a substantial dealer network, most of which consists of manufacturer-affiliated or large and reputable independent dealers. The Company uses a risk-adjusted methodology to determine the price to pay the automotive dealer for the loan, which may be above or below the principal amount of the loan depending on characteristics such as the contractual annual percentage rate (APR) and the borrower’s credit profile. The consumer is obligated to make payments in an amount equal to the principal amount of the loan plus interest at the APR negotiated with the dealer. The consumer is also responsible for charges related to past-due payments. Dealers may retain some portion of the finance charge as compensation. SC's agreements with dealers place a limit on the amount of the finance charges they are entitled to retain. Although SC does not own the vehicles it finances through loans, it holds a perfected security interest in those vehicles. Loans with below-market APRs are frequently offered through manufacturer incentive programs. The manufacturer will compensate the originator of these loans for the amount of the financing rate that is below market. These payments are called rate subvention. SC is entitled to receive rate subvention payments from FCA as its preferred provider through the Chrysler Agreement.
Since 2008, SC has also directly originated loans through its branded online RoadLoans.com platform. Additionally, the Company has acquired loans in bulk from third parties. The loans acquired in bulk acquisitions have primarily been collateralized by automobiles. However, a small amount of such loans have been collateralized by marine and recreational vehicles. SC generates revenue on these loans through finance charges.
Vehicle Leases
SC acquires leases primarily from FCA-affiliated automotive dealers and, as a result, becomes titleholder for leased vehicles. The acquisition cost for these leases is based on the underlying value of the vehicle, the contractual lease payments and the residual value, which is the expected value of the vehicle at the time of the lease termination. The Company uses projected residual values that are estimated by third parties, such as Automotive Lease Guide (ALG) and internal forecasts based on current market conditions, and other relevant data points. The residual value used to determine lease payments, or the contractual residual value, may be adjusted upward as part of marketing incentives provided by the manufacturer of the vehicle. When a contractual residual value is written up, the lease payments the Company offers become more attractive to consumers. The marketing incentive payment that manufacturers pay SC is equal to the expected difference between the projected ALG residual value and the contractual residual value. This residual support payment is a form of subvention. SC is a preferred provider of subvented leases through Chrysler Capital. Substantially all of these leases are to prime consumers. The consumer, or lessee, is responsible for the contractual lease payments and any excessive mileage or wear and tear on the vehicle that results in a lower residual value of the vehicle at the time of the lease’s termination. The consumer is also generally responsible for charges related to past due payments. SC's leases are primarily closed-ended, meaning the consumer does not bear the residual risk.

11

SC generates revenue on leases through monthly lease payments and fees and, depending on the market value of the off-lease vehicle, the Company may recognize a gain or loss upon remarketing. The Company's agreement with FCA permits SC to share any residual losses over a threshold, determined on an individual lease basis, with FCA.
Servicing for Others
SC services a portfolio of vehicle loans originated or otherwise independently acquired by SBNA, as well as vehicle leases originated by SBNA under terms of a flow agreement. SC also services loans sold through flow agreements and through Chrysler Capital off-balance sheet securitizations, as well as several smaller loan portfolios for various third-party institutions. SC generates revenue on these assets through servicing and other fees collected from the institutional owners and the borrowers, and may also generate a gain or loss on the sale of assets. The Company intends to continue growing this off-balance sheet portfolio and the stream of revenue it provides.
Origination and Servicing
Vehicle Finance
SC's origination platform delivers automated 24/7 underwriting decision-making through a proprietary credit-scoring system designed to provide consistency and efficiency, with dealers receiving a decision in under ten seconds for 95% of all requests. Every loan application received is processed by the Company's risk scoring and pricing models. SC's credit scorecard development process is supported by an extensive market database that includes 20 years of historical data on the loans that SC has acquired as well as extensive consumer finance third-party data. The Company continuously evaluates loan performance and consumer behavior to improve underwriting decisions. As a result of the Company's readily adaptable and scalable systems, it is able to quickly implement changes in pricing and scoring credit policy rules and modify underwriting standards to match the economic environment. SC's scorecard methodology supports underwriting decisions for consumers across the full credit spectrum and has been designed to allow the Company to maximize modeled risk-adjusted yield for a given consumer’s credit profile.
The Company has built a servicing approach based on years of experience as a nonprime lender. SC's servicing activities consist largely of processing customer payments, responding to customer inquiries (such as requests for payoff quotes or complaints), processing customer requests for account revisions (such as payment deferrals), maintaining a perfected security interest in the financed vehicle, monitoring vehicle insurance coverage, pursuing collection of delinquent accounts, and remarketing repossessed or off-lease vehicles. The Company has made significant investments in staffing and servicing systems technology in order to make servicing activities compliant with federal and local consumer lending rules in all 50 states.
Through its servicing platform, SC seeks to maximize collections while providing outstanding customer service. SC's servicing practices are closely integrated with the originations platform, resulting in an efficient exchange of customer related data, market information and understanding of the latest trends in consumer behavior. The customer account management process is model-driven and utilizes predictive customer service and collection strategies. SC validates its models with data back-testing and can be adjusted to reflect new information received throughout the Company, such as new vehicle loan and lease applications, refreshed consumer credit data, and consumer behavior observed through servicing operations. SC's robust processes and sophisticated technology support the servicing platform to maximize efficiency, consistent loan treatment, and cost control.
To provide the best possible customer service, SC provides multiple convenient options to customers and has implemented strategies to monitor and improve the customer experience. In addition to live agent assistance, SC's customers are offered a wide range of self-service options via an interactive voice response system and through its customer website. Self-service options include demographic management (such as updating a customer’s address, phone number, and other identifying information), payment and payoff capability, and payment history reporting, as well as online chat and communication requests. Quality assurance teams perform account reviews and are responsible for grading phone calls to monitor adherence to policies and procedures as well as compliance with regulatory requirements. SC's analytics software converts speech from every call into text so that each conversation with a customer can be analyzed and subsequently data-mined. This is used to identify inappropriate words or phrases in real-time for potential intervention from a manager, and to search for the omission of words or phrases that are required for specific conversations. A quality control team provides an independent, objective assessment of the servicing department’s internal control systems and underlying business processes. These processes help identify organizational improvements while protecting SC's franchise reputation and brand. Lastly, complaint tracking processes are designed to ensure customer complaints are addressed appropriately and that the customers receive status updates. These systems assign the account to a specialized team until the complaint is deemed to be closed. This team tracks and resolves customer complaints and is subject to a robust quality assurance program.

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The servicing process is divided into stages based on delinquency status and the servicing agents for each stage receive specialized training. In the event that a retail installment contract becomes delinquent, the Company follows an established set of procedures that maximizes ultimate recovery on the loan or lease. Late stage account managers employ skip tracing, utilize specialized negotiation skills, and are trained to tailor their collection attempts based on the proprietary borrower behavioral score assigned to each customer. Collection efforts include calling within one business day when an obligor has broken a promise to make a payment on a certain date, and using alternative methods of contact such as location gathering via references, employers, landlords, credit bureaus, and cross-directories. If the borrower is qualified, the account manager may offer an extension of the maturity date, a temporary reduction in payment, or a modification permanently lowering the interest rate or principal. If attempts to work with the customer to cure the delinquency are unsuccessful, the customer is sent a “right to cure” letter in accordance with state laws, and the loan is assigned a risk score based on SC's historical days-to-repossess data. This score is used to prioritize repossessions, and each repossession is systematically assigned to a third-party repossession agent according to the agent's recent performance. Once the vehicle has been secured, any repairs required are performed and the vehicle is remarketed as quickly as possible, typically through an auction process.
Most of the Company's servicing processes and quality-control measures serve a dual purpose in that they are both designed to ensure that SC complies with applicable laws and regulations and that SC delivers the best possible customer service. Additionally, the servicing platform and all of the features offered to customers are scalable and can be tailored through statistical modeling and automation.
SC's Relationship with FCA
In February 2013, SC entered into the Chrysler Agreement, pursuant to which the Company became the preferred provider for FCA’s consumer loans and leases and dealer loans effective May 1, 2013. Business generated under terms of the Chrysler Agreement is branded as Chrysler Capital. During 2016, SC originated more than $8.0 billion of Chrysler Capital retail installment contracts and more than $5.5 billion of Chrysler Capital vehicle leases.
The Chrysler Agreement requires, among other things, that SC bears the risk of loss on loans originated pursuant to the agreement, but also that FCA shares in any residual gains and losses from consumer leases. The agreement also requires that SC maintains 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 SC.
The Chrysler Agreement has a ten-year term, subject to early termination in certain circumstances, including the failure by either party to comply with certain of their ongoing obligations. These obligations include, for SC, meeting specified escalating penetration rates for the first five years, and, for FCA, treating SC in a manner consistent with comparable OEMs' treatment of their captive providers, primarily regarding sales support. In addition, FCA may also terminate the agreement if, among other circumstances, (i) a person other than Santander and its affiliates or its other stockholders owns 20% or more of its common stock and Santander and its affiliates own fewer shares of common stock than such person, (ii) the Company becomes, controls, or becomes controlled by, an OEM that competes with Chrysler, or (iii) if certain of SC's credit facilities become impaired.
In connection with entering into the Chrysler Agreement, SC paid FCA a $150 million upfront, nonrefundable fee on May 1, 2013. This fee is considered payment for future profits generated from the Chrysler Agreement. Accordingly, the Company amortizes the Chrysler Agreement over the expected ten-year term as a component of net finance and other interest income. The Company has also executed an Equity Option Agreement with FCA, whereby FCA may elect to purchase, at any time during the term of the Chrysler Agreement, at fair market value, an equity participation of any percentage in the Chrysler Capital portion of SC's business.
For a period of 20 business days after FCA's delivery to SC of a notice of intent to exercise its option, the Company is to discuss with FCA, in good faith, the structure and valuation of the proposed equity participation. If the parties are unable to agree on a structure and FCA still intends to exercise its option, SC will be required to create a new company into which the Chrysler Capital assets will be transferred and which will own and operate the Chrysler Capital business. If FCA and SC cannot agree on a fair market value during the 20-day negotiation period, each party will engage an investment bank and the appointed banks will mutually appoint a third independent investment bank to determine the value, with the cost of the valuation divided evenly between FCA and SC. Each party has the right to a one-time deferral of the independent valuation process for up to nine months. FCA will have a period of 90 days after a valuation has been determined, either by negotiation between the parties or by an investment bank, to deliver a binding notice of exercise. Following this notice, FCA's purchase is to be paid and settled within 10 business days, subject to a delay of up to 180 days if necessary to obtain any required consents from governmental authorities.
Any new company formed to effect FCA's exercise of its equity option will be a Delaware limited liability company unless otherwise agreed to by the parties. As long as each party owns at least 20% of the business, FCA and SC will have equal voting and governance rights without regard to ownership percentage. If either party has an ownership interest in the business of less

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than 20% , the party with less than 20% ownership will have the right to designate a number of directors proportionate to its ownership and will have other customary minority voting rights.
Because the equity option is exercisable at fair market value, SC could recognize a gain or loss upon exercise if the fair market value is determined to be different from book value. The Company believes that the fair market value of its Chrysler Capital financing business currently exceeds book value and therefore has not recorded a contingent liability for potential loss upon FCA's exercise.
Subsequent to the exercise of the equity option, SC's rights under the Chrysler Agreement would be assigned to the jointly owned business. Exercise of the equity option would be considered a triggering event requiring re-evaluation of whether or not the remaining unamortized balance of the upfront fee the Company paid to FCA on May 1, 2013 should be impaired.
Until January 31, 2017, SC had a flow agreement with Bank of America whereby the Company was committed to sell a contractually determined amount of eligible Chrysler Capital loans to Bank of America on a monthly basis, depending on the amount and credit quality of eligible current month originations and prior month sales. The agreement originally extended through May 31, 2018. On July 27, 2016, the flow agreement was amended to reduce the maximum commitment to sell eligible loans each month to $300,000. On October 27, 2016, Bank of America notified the Company that it was terminating the flow agreement effective January 31, 2017, and accordingly, the flow agreement is now terminated. For loans sold under the agreement, SC retains the servicing rights at contractually agreed-upon rates. The Company may also 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 the time of sale.

The Company has sold loans to Citizens Bank of Pennsylvania (CBP) under terms of a flow agreement and other predecessor sale agreements. SC retains 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. On June 25, 2015, SC executed an amendment to the servicing agreement with CBP, which increased the servicing fees. This amendment amended the flow agreement between CBP and SC, effective August 1, 2015, to reduce CBP's committed purchases of Chrysler Capital prime loans from a maximum of  $600 million and a minimum of  $250 million  per quarter to a maximum of  $200 million  and a minimum of  $50 million  per quarter. On February 13, 2017, the Company and CBP entered into a mutual agreement to terminate the flow agreement effective May 1, 2017.
Segments
The Company has one reportable segment: Consumer Finance, which includes SC'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, RVs, and marine vehicles. It also includes the Company's personal loan and point-of-sale financing operations.
Subsidiaries
SC has two principal consolidated wholly-owned subsidiaries: Santander Consumer USA Inc. and Santander Consumer International Puerto Rico, LLC (a wholly-owned subsidiary of Santander Consumer USA Inc.).
Employees
At December 31, 2016 , SC had approximately 5,100 employees, none of whom are represented by a collective bargaining agreement.
Geographic Financial Information
For the years ended December 31, 2016, 2015 and 2014, all of the Company's revenues were derived from the United States. As of December 31, 2016 and 2015, all of the Company's long-lived assets were located in the United States.
Seasonality
SC's origination volume is generally highest in March and April each year due to consumers receiving tax refunds, which provides additional discretionary income. The Company's delinquencies are generally highest in the period from November through January due to consumers’ holiday spending, which reduces income available for car payments.
Intellectual Property
SC has the right to use the Santander name on the basis of a non-exclusive, royalty-free, and non-transferable license from Santander, which only extends to uses in connection with SC's current and future operations within the United States. Santander

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may terminate the license at any time Santander ceases to own, directly or indirectly, 50% or more of the Company's common stock.
In connection with the Company's agreement with FCA, SC has been granted a limited, non-exclusive, non-transferable, royalty-free license to use certain FCA trademarks, including the term “Chrysler Capital,” for as long as the Chrysler Agreement is in effect. SC is required to adhere to specified guidelines and other usage instructions related to these trademarks, as well as to obtain prior written approval of any materials, including financing documents and promotional materials, using the trademarks. This license does not grant SC any ownership rights in FCA's trademarks.
In connection with the 2008 acquisition of Roadloan.com, a direct-to-consumer online platform, the Company purchased the "Roadloan.com" trade name which constitutes an intellectual property right.
Competition
The automotive finance industry is highly competitive. SC competes on the pricing offered on loans and leases as well as the customer service provided to automotive dealer customers. Pricing for these loans and leases is transparent because SC, along with industry competitors, post pricing for loans and leases on web-based credit application aggregation platforms. When dealers submit applications for consumers acquiring vehicles, they can compare SC's pricing against competitors’ pricing. Dealer relationships are important in the automotive finance industry. Vehicle finance providers tailor product offerings to meet each individual dealer’s needs.
The Company can effectively compete because SC's proprietary scorecards and industry experience enable appropriate risk pricing. In addition, SC benefits from FCA subvention programs through the Chrysler Agreement. The Company has developed strong dealer relationships through a nationwide sales force and a long history in the automotive finance space. Further, the Company expects to continue deepening dealer relationships through the Chrysler Capital product offerings.
SC's primary competitors to SC in the vehicle finance space are:

•	national and regional banks;	
		
•	credit unions;	
		
•	independent financial institutions; and	
		
•	the affiliated finance companies of automotive manufacturers.	
While the used car financing market is fragmented with no single lender accounting for more than 10% of the market, there are a number of competitors in both the new and used car markets that have substantial positions nationally or in the markets in which they operate. Some of SC's competitors may have lower cost structures, or funding costs, and be less reliant on securitizations. The Company believes it can compete effectively by continuing to expand and deepen its relationships with dealers. In addition, through its Chrysler Capital brand, the Company benefits from FCA’s subvention programs and relationships with its dealers.
Supervision and Regulation
The U.S. lending industry is highly regulated under various U.S. federal laws, including the Truth-in-Lending Act (TILA); Equal Credit Opportunity Act (ECOA), Electronic Fund Transfer Act (EFTA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), Consumer Leasing Act, Servicemembers Civil Relief Act, Telephone Consumer Protection Act, Financial Institutions Reform, Recovery, and Enforcement Act, Dodd-Frank Act and Gramm-Leach-Bliley Act (GLBA), as well as various state laws. SC is subject to inspections, examinations, supervision, and regulation by the Securities and Exchange Commission (SEC), the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), and the Department of Justice (DOJ) and by regulatory agencies in each state in which the Company is licensed. In addition, SC 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 European Central Bank (ECB), and the Federal Reserve Bank of Boston (FRBB), which has the ability to limit certain of its activities, such as the timing and amount of dividends and certain transactions that it might otherwise desire to enter into, such as merger and acquisition opportunities, or to impose other limitations on its growth. Additional legal and regulatory matters affecting the Company’s activities are further discussed in Part I, Item 1A—Risk Factors of this Annual Report on Form 10-K.
Dodd-Frank Wall Street Reform and Consumer Protection Act
Congress enacted comprehensive financial regulatory reform legislation on July 21, 2010. A significant focus of the new law (the Dodd-Frank Act) is heightened consumer protection. The Dodd-Frank Act established the CFPB, which has regulatory, supervisory, and enforcement powers over providers of consumer financial products and services, including SC, and explicit

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supervisory authority to examine and require registration of non-depository lenders and promulgate rules that can affect the practices and activities of lenders. Although the Dodd-Frank Act expressly provides that the CFPB has no authority to establish usury limits, some consumer advocacy groups have suggested that various forms of alternative financial services or specific features of consumer loan products should be a regulatory priority. It is possible that at some time in the future the CFPB could propose and adopt rules making such lending services materially less profitable or impractical, which may impact finance loans or other products that the Company offers.
In March 2013, the CFPB issued a bulletin recommending that indirect vehicle lenders, which includes SC, take steps to monitor and impose controls over dealer markup policies, whereby dealers charge consumers higher interest rates, with the markup shared between the dealer and the lender. SC has implemented a policy whereby SC's dealers are allowed to mark up interest rates by a maximum of 1.75% . SC remediates dealer mark-up above 1.75% to the customer. SC has also implemented procedures and controls in order to improve its oversight of its dealers and markup. SC will continue to evaluate this policy for effectiveness, and may make further changes to strengthen oversight of dealers and markup.
The CFPB is also conducting supervisory audits of large vehicle lenders and has indicated it intends to study and take action with respect to possible ECOA “disparate impact” credit discrimination in indirect vehicle finance. If the CFPB enters into a consent decree with one or more lenders on disparate impact claims, it could negatively impact the business of the affected lenders, and potentially, the business of dealers and other lenders in the vehicle finance market. This potential impact on dealers and lenders could increase the Company's regulatory compliance requirements and associated costs.
In addition to granting certain regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties.
The Dodd-Frank Act also included risk retention requirements. In 2014, six federal agencies approved a final rule implementing these requirements. The rule generally requires sponsors of Asset Backed Securitizations (ABS) to retain at least five percent of the credit risk of the assets collateralizing the ABS issuance. The rule also sets forth prohibitions on transferring or hedging the credit risk that the sponsor is required to retain. Compliance with the risk retention rules began with respect to offerings of ABS (other than ABS collateralized by residential mortgages) on December 24, 2016.
Dividend Restrictions
The Dodd-Frank Act also requires certain banks and bank holding companies, including SHUSA, to perform a stress test and submit a capital plan to the Federal Reserve Board on an annual basis. On March 26, 2014, the FRBB informed SHUSA that, based on qualitative concerns, it objected to SHUSA’s capital plan (the capital plan) that SHUSA had previously submitted to the FRBB. On May 1, 2014, the Company's Board declared a dividend of $0.15 per share of SC's common stock, payable on May 30, 2014 to shareholders of record on May 12, 2014 (the May Dividend).
The FRBB informed SHUSA on May 22, 2014, that it did not object to the Company's payment of the May Dividend, provided that Santander contribute at least $20.9 million of capital to SHUSA prior to such payment, so that SHUSA’s consolidated capital position would be unaffected by the May Dividend. On May 30, 2014, Santander provided $21.0 million of additional capital to SHUSA, and the Company paid the May Dividend. The FRBB also informed SHUSA that, until the FRBB issues a written non-objection to SHUSA’s capital plan, any future SC dividend would require prior receipt of a written non-objection from the FRBB.
On September 15, 2014, SHUSA entered into a written agreement with the FRBB memorializing prior discussions under which, among other things, SHUSA is prohibited from allowing its non-wholly-owned nonbank subsidiaries, including SC, to declare or pay any dividend, or to make any capital distribution, until such time as SHUSA has submitted to the FRBB a capital plan and the FRBB has issued a written non-objection to the plan, or the FRB otherwise issues its written non-objection to the proposed capital action. The Company will not pay any future dividends until such time as the FRBB issues a written non-objection to a capital plan submitted by SHUSA or the FRBB otherwise issues its written non-objection to the payment of a dividend by the Company.
Regulation AB II
In response to investor requests for greater transparency, on August 27, 2014, the SEC unanimously voted to adopt final rules known as "Regulation AB II," that, among other things, expanded ABS disclosure requirements and modified the offering and shelf registration process. All offerings of publicly registered ABS and all reports under the Exchange Act for outstanding publicly registered ABS must comply with the new rules and disclosures on or after November 23, 2015, except asset-level disclosures. Compliance with these new rules regarding asset-level disclosures is required for all offerings of publicly

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registered ABS on or after November 23, 2016. The Company must comply with these rules, which will affect the Company's public securitization platform.
Additional legal and regulatory matters affecting the Company’s activities are further discussed in Part I, Item 1A—Risk Factors.
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 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 the Company through its relationship with Santander. During the period covered by this annual report:

•	Santander U.K. holds two savings accounts and one current account for two customers resident in the U.K. who are currently designated by the U.S. under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander U.K. on these accounts in the year ended December 31, 2016 were negligible relative to the overall revenues and profits of Banco Santander S.A.	
		
•	Santander U.K. held a savings account for a customer resident in the U.K. who is currently designated by the U.S. under the SDGT sanctions program. The savings account was closed on July 26, 2016. Revenue generated by Santander U.K. on this account in the year ended December 31, 2016 was negligible relative to the overall revenues of Banco Santander S.A.	
		
•	Santander U.K. held a current account for a customer resident in the U.K. who is currently designated by the U.S. under the SDGT sanctions program. The current account was closed on December 22, 2016. Revenue generated by Santander U.K. on this account in the year ended December 31, 2016 was negligible relative to the overall revenues of Banco Santander S.A.	
		
•	Santander U.K. holds two frozen current accounts for two U.K. nationals who are designated by the U.S. under the SDGT sanctions program. The accounts held by each customer have been frozen since their designation and have remained frozen through the year ended December 31, 2016. The accounts are in arrears (£1,844.73 in debit combined) and are currently being managed by Santander U.K. Collections & Recoveries department. Revenues and profits generated by Santander U.K. on these accounts in the year ended December 31, 2016 were negligible relative to the overall revenues and profits of Banco Santander S.A.	
		
•	In addition, during the year ended December 31, 2016, Santander U.K. had an OFAC match on a power of attorney account. The power of attorney listed on the account is currently designated by the U.S. under the SDGT and Iranian Financial Sanctions Regulations (IFSR) sanctions program. The power of attorney was removed from the account on July 29, 2016. During the year ended December 31, 2016, revenues and profits generated by Santander U.K. were negligible relative to the overall revenues and profits of Banco Santander S.A.	
		
•	An Iranian national, resident in the U.K., who is currently designated by the U.S. under the Iranian Financial Sanctions Regulations and the Non-Proliferation of Weapons of Mass Destruction (NPWMD) designation, held a mortgage with Santander U.K. that was issued prior to such designation. The mortgage account was redeemed and closed on April 13, 2016. No further drawdown has been made (or would be allowed) under this mortgage although the Company continued to receive repayment installments prior to redemption. Revenues generated by Santander U.K. on this account in the year ended December 31, 2016 were negligible relative to the overall revenues of Banco Santander S.A. The same Iranian national also held two investment accounts with Santander ISA Managers Limited. The funds within both accounts were invested in the same portfolio fund. The accounts remained frozen until the investments were closed on May 12, 2016 and bank checks issued to the customer. Revenues generated by Santander U.K. on these accounts in the year ended December 31, 2016 were negligible relative to the overall revenues of Banco Santander S.A.	
		
•	In addition, during the year ended December 31, 2016, Santander U.K. held a basic current account for an Iranian national, resident in U.K., previously designated under the OFAC Iran designation. The account was closed in	

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September 2016. Revenues generated by Santander U.K. on this account in the year ended December 31, 2016 were negligible relative to the overall revenues of Banco Santander S.A.

In addition, Santander has an outstanding legacy export credit facility with Bank Mellat. In 2005 Banco Santander S.A. participated in a syndicated credit facility for Bank Mellat of €15.5 million, which matured on July 6, 2015. As of December 31, 2016, Santander was owed €0.1 million not paid at maturity under this credit facility, corresponding to the 5% that was not covered by official export credit agencies.

Banco Santander has not been receiving payments from Bank Mellat under this or other credit facilities in recent years. Banco Santander has been and expects to continue to be repaid any amounts due by official export credit agencies. No funds have been extended by Santander under this facility since it was granted.

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 year ended December 31, 2016, which were negligible relative to the overall revenues and profits of Banco Santander, S.A. 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, 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.
Available Information
All reports filed electronically by the Company with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those reports, are accessible on the SEC’s website at  www.sec.gov . These forms are also accessible at no cost on the Company’s website at  www.santanderconsumerusa.com . The information contained on SC's website is not being incorporated herein.

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ITEM 1A.    RISK FACTORS

The Company is subject to a number of risks that could materially and adversely affect our business, financial condition and results of operations in addition to other possible adverse consequences. We operate in a continually changing business and regulatory environment and, therefore, new risks emerge from time to time. The following are the risks of which we are currently aware that could be material to our business.

Risks Related to our Business

Legal, Regulatory and Compliance Risks

We operate in a highly regulated industry and continually changing federal, state, and local laws and regulations could materially adversely affect our business, financial condition and results of operations.

Due to the highly regulated nature of the consumer finance industry, we are required to comply with a wide array of federal, state, and local laws and regulations that affect, among other things, the manner in which we conduct our origination and servicing operations. These regulations directly impact our business and require constant compliance, monitoring, and internal and external audits. Although we have an enterprise-wide compliance framework structured to continuously monitor our activities, compliance with applicable law is costly and may create operational constraints.

These laws and their implementing regulations include, among others, usury laws, Anti-Money Laundering requirements (Bank Secrecy Act and USA PATRIOT Act), ECOA, Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Privacy Regulations (Gramm-Leach Bliley Act (GLBA) and Right to Financial Privacy Act), Electronic Funds Transfer Act (EFTA), SCRA, Telephone Consumer Protection Act, Truth-in-Lending Act (TILA), Financial Institutions Reform, Recovery and Enforcement Act, the Consumer Leasing Act, the Dodd-Frank Act and requirements related to unfair, deceptive, or abusive acts or practices.

Many states and local jurisdictions have consumer protection laws analogous to, or in addition to, those listed above. These federal, state, and local laws regulate the manner in which financial institutions deal with customers when making loans or conducting other types of financial transactions.

New legislation and regulation may include changes with respect to consumer financial protection measures and systematic risk oversight authority. Such changes present the risk of financial loss due to regulatory fines or penalties, restrictions or suspensions of business, or costs associated with compliance or mandatory corrective action as a result of failure to adhere to applicable laws, regulations, and supervisory guidance. Failure to comply with these laws and regulations could also give rise to regulatory sanctions, customer rescission rights, actions by state and local attorneys general, civil or criminal liability, or damage to our reputation, which could materially and adversely affect our business, financial condition, and results of operations.

Other regulatory reforms adopted or proposed in the wake of the financial crisis have materially increased and may continue to materially increase our operating costs and negatively impact our business model. In addition, the volume, granularity, frequency and scale of regulatory and other reporting requirements necessitate a clear data strategy to enable consistent data aggregation, reporting and management. Inadequate management information systems or processes, including those relating to risk data aggregation and risk reporting, could lead to a failure to meet regulatory reporting requirements, or other internal or external information demands, and we may face supervisory measures as a result.

We are subject to certain banking regulations that limit our business activities, including our ability to pay dividends and enter into certain business transactions without the approval of the FRBB.

Because our controlling shareholder, SHUSA, is a bank holding company and because we provide third party services to banks, we are directly and indirectly subject to certain banking and financial services regulations, including oversight by the FRBB, the ECB, and the OCC. We also are subject to oversight by the CFPB. Such regulations and oversight could limit the activities and the types of businesses that we may conduct. The FRBB has broad enforcement authority over bank holding companies and their subsidiaries. The FRBB could exercise its power to restrict SHUSA from having a non-bank subsidiary that is engaged in any activity that, in the FRBB’s opinion, is unauthorized or constitutes an unsafe or unsound business practice, and could exercise its power to restrict us from engaging in any such activity. This power includes the authority to prohibit or limit the payment of dividends if, in the FRBB’s opinion, such payment would constitute an unsafe or unsound practice. Moreover, certain banks and bank holding companies, including SHUSA, are required to perform a stress test and submit a capital plan to the FRBB on an annual basis, and to receive a notice of non-objection, or approval, to the plan from the FRBB before taking

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capital actions, such as paying dividends, implementing common equity repurchase programs, or redeeming or repurchasing capital instruments.

Due to the FRBB's objections, based on qualitative concerns, in 2014, 2015 and 2016 to SHUSA’s capital plan submissions, we currently are prohibited from paying dividends until either the FRBB issues a non-objection to SHUSA's next capital plan submission or otherwise approves a planned dividend payment. Also, on September 15, 2014, SHUSA entered into a written agreement with the FRBB memorializing prior discussions under which, among other things, SHUSA is prohibited from allowing its non-wholly-owned nonbank subsidiaries, including us, to declare or pay any dividend, or to make any capital distribution, without the prior written approval of FRBB.

SHUSA and the Company also are subject to increasingly stringent oversight by the FRBB due to the FRBB’s objection to SHUSA’s capital plan submissions and, in response, SHUSA has made a concentrated effort to improve its and its subsidiaries' governance, oversight and internal controls, policies, procedures and functions, including as they relate to us. We have incurred, and expect to continue to incur, higher costs than originally anticipated in connection with ensuring compliance with, and assisting SHUSA in, the CCAR process.

The FRBB may also impose substantial fines and other penalties for violations that we may commit, and has the authority to approve or disallow acquisitions or other activities we may contemplate, which may limit our future growth plans. To the extent that we are subject to banking regulation, we could be at a competitive disadvantage because some of our competitors are not subject to these limitations.

The suspension of our ability to pay dividends or other limitations placed on us by the FRBB, the ECB, or any other regulator and additional costs associated with regulatory compliance could have a material adverse effect on us and the trading price of our common stock.

We are or may become involved in investigations, examinations, and proceedings by government and self-regulatory agencies, which may result in material adverse consequences to our business, financial condition and results of operations.

From time to time, we are or may become involved in formal and informal reviews, investigations, examinations, proceedings, and information-gathering requests by federal and state government and self-regulatory agencies, including, among others, the FRBB, the CFPB, the DOJ, the SEC, the FTC and various state regulatory and enforcement agencies. Currently, such proceedings include 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. Additionally, on October 28, 2014, the Company received a preservation letter and request for documents from the SEC requesting the preservation and production of documents and communications that, among other things, relate to the underwriting and securitization of auto loans since January 1, 2011. In addition, on August 3, 2016, the SEC issued a subpoena to us requesting the production of documents and communications that, among other things, relate to the underwriting and securitization of auto loans since 2013. We also have received civil subpoenas from various state Attorneys General requesting similar documents and communications. We are complying with the requests for information and document preservation and continues to discuss these matters with the relevant government authorities. On January 10, 2017, the Attorney General of the State of Mississippi (the Mississippi AG) filed a lawsuit against us alleging that we 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 and seeks unspecified civil penalties, equitable relief and other relief.

On November 4, 2015, we entered into an Assurance of Discontinuance (AOD) with the Office of Attorney General of the Commonwealth of Massachusetts (the Massachusetts AG). The Massachusetts AG had alleged that we violated the maximum permissible interest rates allowed by Massachusetts law due to the inclusion of guaranteed auto protection (GAP) charges in the calculation of finance charges. Among other things, the AOD requires us, with respect to any loan that exceeded the maximum rates, to issue refunds of all finance charges paid to date and to waive all future finance charges. The AOD also requires us to undertake certain remedial measures, including ensuring that interest rates on its loans do not exceed maximum rates (when GAP charges are included) in the future, and provides that the Company pay $150,000 to the Massachusetts AG to reimburse its costs in implementing the AOD.

On February 25, 2015, we 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 us to pay a civil fine in the amount of $55,000 , as well as at least $9.4 million to affected servicemembers, consisting of $10,000 per servicemember plus compensation for any lost equity (with interest) for each repossession by us and $5,000 per servicemember for each instance where we sought to collect repossession-related fees on

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accounts where a repossession was conducted by a prior account holder. The consent order also requires us to undertake additional remedial measures. The consent order also subjects us to monitoring by the DOJ for compliance with SCRA for a period of five years.

On July 31, 2015, the CFPB notified us that it had referred to the DOJ certain alleged violations by the Company of the ECOA regarding (i) statistical disparities in markups charged by automobile dealers to protected groups on loans originated by those dealers and purchased by the Company and (ii) the treatment of certain types of income in our underwriting process. On September 25, 2015, the DOJ notified us that it has initiated, based on the referral from the CFPB, an investigation under the ECOA of our pricing of automobile loans.

Each of the matters set forth above may result in material adverse consequences to us including, without limitation, adverse judgments, significant settlements, fines, penalties, injunctions, or other actions.

We are subject to capital planning and systemic risk regimes as a subsidiary of SHUSA, which impose significant restrictions and requirements.

As a bank holding company with $50 billion or more of consolidated assets, SHUSA is required to conduct periodic stress tests that are evaluated by the FRBB. As a subsidiary of SHUSA, the predicted performance of the Company under the stress test conditions must be taken into account when SHUSA conducts these periodic stress tests. SHUSA is also required to submit a proposed capital action plan to the FRBB annually that includes a description of all planned capital actions, including all planned capital actions by the Company, over a nine-quarter planning horizon, including any issuance of a debt or equity capital instrument, any capital distribution, and any similar action that the FRBB determines could have an impact on SHUSA’s consolidated capital. The proposed capital action plan must also include a discussion of how SHUSA would maintain capital above the minimum regulatory capital ratios and above a Tier 1 common equity-to-total-risk-weighted assets ratio of five percent, and serve as a source of strength to SBNA, a wholly-owned subsidiary of SHUSA. The FRBB will either object to a proposed capital plan, in whole or in part, or provide notice of non-objection. A failure to receive a notice of non-objection, or an approval, from the FRBB prohibits us from paying dividends and making other capital distributions. As noted above, the FRBB objected to SHUSA’s proposed capital plans in 2014, 2015 and 2016, and we currently are prohibited from paying dividends and making other capital distributions until either the FRBB issues a non-objection to SHUSA's next capital plan submission or a non-objection to a planned dividend payment, including pursuant to the 2014 Written Agreement with the FRBB.

In February 2014, the Federal Reserve Board issued a final rule to implement certain of the enhanced prudential standards mandated by Section 165 of the Dodd-Frank Act for large bank holding companies such as SHUSA. The final rule generally became effective on January 1, 2015. Among other things, the final rule requires SHUSA to maintain a sufficient quantity of highly liquid assets to survive a projected 30-day liquidity stress event and implement various liquidity-related corporate governance measures and imposes certain requirements, duties and qualifications for the risk committee and chief risk officers of SHUSA. SHUSA calculates its liquidity figures on a consolidated basis with certain of its subsidiaries, including us. As a result, our predicted performance under the liquidity stress event must be taken into account when SHUSA conducts its 30-day liquidity stress event analysis. Due to these requirements, we will be required to have an increased amount of liquidity and will incur increased costs of funding and liquidity capacity.

These enhanced prudential standards could adversely affect our business, financial condition and results of operations.

Our business may be adversely affected upon our implementation of the revised capital requirements under the U.S. Basel III final rules.

In December 2010, the Basel Committee reached an agreement on the Basel III capital framework, which was designed to increase the quality and quantity of regulatory capital by introducing new risk-based and leverage capital standards. In July 2013, the U.S. banking regulators finalized rules implementing the U.S. Basel III capital framework and related Dodd-Frank Act provisions. The U.S. Basel III final rules represent substantial revisions to the previously effective regulatory capital standards for U.S. banking organizations. SHUSA became subject to the U.S. Basel III final rules beginning January 1, 2015. Certain aspects of the U.S. Basel III final rules, including new capital buffers and regulatory capital deductions, will be phased in over several years. The U.S. Basel III final rules subject SHUSA to higher minimum risk-based capital ratios and a capital conservation buffer above these minimum ratios. SHUSA calculates its capital figures on a consolidated basis with certain of its subsidiaries, including us. Failure to maintain the full amount of the buffer would result in restrictions on our ability to make capital distributions, including dividend payments and stock repurchases and redemptions, and to pay discretionary bonuses to executive officers.

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If SHUSA were to fail to satisfy regulatory capital requirements, SHUSA, together with its subsidiaries, including us, may be subject to serious regulatory sanctions ranging in severity from being precluded from making acquisitions or engaging in new activities to becoming subject to informal or formal supervisory actions by the FRBB. If any of these were to occur, such actions could prevent us from successfully executing our business plan and could have a material adverse effect on our business, financial condition and results of operations. To maintain its status as a financial holding company (FHC), SHUSA and its bank subsidiary and our affiliate, SBNA, must remain “well-capitalized” and “well-managed,” as defined under applicable law.

For the current capital planning and stress testing cycle that began in April 2016, the Dodd-Frank company-run stress tests and supervisory stress tests to which SHUSA is subject, the annual capital plan that SHUSA must submit and the Federal Reserve Board’s annual post-stress capital analysis under the CCAR must incorporate the more stringent capital requirements in the U.S. Basel III final rules as they are phased in over the nine-quarter forward-looking planning horizon. We are prohibited from paying dividends and making other capital distributions until the FRBB either issues a non-objection to SHUSA's next capital plan submission or a non-objection to a planned dividend payment.

The Dodd-Frank Act and the creation of the CFPB, in addition to associated rules and guidance, will likely continue to increase our regulatory compliance burden and associated costs.

The Dodd-Frank Act introduced a substantial number of reforms that continue to reshape the tenor and structure of financial services industry regulation. In particular, the Dodd-Frank Act, among other things, created the CFPB, which is authorized to promulgate and enforce consumer protection regulations relating to financial products and services.

In March 2013, the CFPB issued a bulletin recommending that indirect vehicle lenders, a class that includes us, take steps to monitor and impose controls over dealer markup policies where dealers charge consumers higher interest rates as compensation for facilitating the loan, with the markup shared between the dealer and the lender. The CFPB is also conducting supervisory audits of large vehicle lenders and has indicated it intends to study and take action with respect to possible ECOA “disparate impact” credit discrimination in indirect vehicle finance. From 2013 to present, the CFPB and the DOJ have entered into consent orders with multiple lenders pertaining to allegations of disparate impact regarding auto dealer markups. These consent orders have required lenders to revise their pricing and compensation systems to substantially reduce dealer discretion and other financial incentives to mark up interest rates and to pay restitution to borrowers as well as fines and penalties.  If the CFPB continues to enter into consent decrees with lenders on disparate impact claims, it could negatively impact the business of the affected lenders, and potentially the business of dealers and other lenders in the vehicle finance market. This impact on dealers and lenders could increase our regulatory compliance requirements and associated costs. Unlike competitors that are banks, we are subject to the licensing and operational requirements of states and other jurisdictions, and our business would be adversely affected if we lost our licenses.

The Dodd-Frank Act also included risk retention requirements. In October 2014, six federal agencies approved a final rule implementing these requirements. The rule generally requires sponsors of ABS to retain not less than five percent of the credit risk of the assets collateralizing the ABS issuance. The rule also sets forth prohibitions on transferring or hedging the credit risk that the sponsor is required to retain. Compliance with the risk retention rules was required with respect to offerings of ABS (other than ABS collateralized by residential mortgages) beginning December 24, 2016. Certain of our securitization structures may be adversely impacted by the risk retention requirement.

Unlike competitors that are banks, we are subject to the licensing and operational requirements of states and other jurisdictions, and our business would be adversely affected if we lost our licenses.

Because we are not a nationally-chartered depository institution, we do not benefit from exemptions to state loan servicing or debt collection licensing and regulatory requirements. To the extent that they exist, we must comply with state licensing and various operational compliance requirements in all 50 states and the District of Columbia. These include, among others, requirements regarding form and content of contracts, other documentation, collection practices and disclosures, and record keeping. We are sensitive to regulatory changes that may increase our costs through stricter licensing laws, disclosure laws, or increased fees. Currently, we have all required licenses, as applicable, to do business in all 50 states and the District of Columbia.

In addition, we are subject to periodic examinations by state and other regulators. The states that currently do not provide extensive regulation of our business may later choose to do so. The failure to comply with licensing or permit requirements and other local regulatory requirements could result in significant statutory civil and criminal penalties, monetary damages, attorneys’ fees and costs, possible review of licenses, and damage to reputation, brand, and valued customer relationships.

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We are subject to potential intervention by any of our regulators or supervisors.

As noted above, our business and operations are subject to increasingly significant rules and regulations applicable to conducting banking and financial services business. These apply to business operations, affect financial returns, include reserve and reporting requirements, and prudential and conduct of business regulations. These requirements are set by the relevant central banks and state and federal regulatory authorities that authorize, regulate and supervise us in the jurisdictions in which we operate.

In their supervisory roles, the regulators seek to maintain the safety and soundness of financial institutions and the financial system as a whole, with the aim of strengthening, but not guaranteeing, the protection of customers and the financial system. The supervisors' continuing supervision of financial institutions is conducted through a variety of regulatory tools, including the collection of information by way of prudential examinations and requests, reports obtained from skilled persons, visits to firms and regular meetings with management to discuss issues such as performance, risk management and strategy. In general, these regulators have a more outcome-focused regulatory approach that involves more proactive enforcement and more punitive penalties for infringement. As a result, we face increased supervisory intrusion and scrutiny (resulting in increasing internal compliance costs and supervision fees), and in the event we fail to meet regulatory obligations or expectations we are likely to face more stringent regulatory fines. Some of the regulators are focusing strongly on consumer protection and on conduct risk, and will continue to do so. This has included a focus on the design and operation of products, the treatment of customers and the operation of markets.

Some of the laws in the jurisdictions in which we operate give the regulators the power to make temporary product intervention rules either to improve a firm’s systems and controls in relation to product design, product management and implementation, or to address problems identified with financial products. These problems may potentially cause significant detriment to consumers because of certain product features or governance flaws or distribution strategies. Such rules may prevent institutions from entering into product agreements with customers until such problems have been solved. Some of the regulatory regimes in the relevant jurisdictions in which we operate require us to be in compliance across all aspects of our business, including the training, authorization and supervision of personnel, systems, processes and documentation. If we fail to be compliant with such regulations, there likely would be an adverse impact on our business from sanctions, fines or other actions imposed by the regulatory authorities.

Customers of financial services institutions, including our customers, may seek redress for loss as a result of inaccuracies or misrepresentations made during the sale of a particular product or through incorrect application of the terms and conditions of a particular product. An adverse outcome in litigation related to these matters could harm our reputation or have a material adverse effect on our business, financial condition and results of operations arising from any penalties imposed or compensation awarded, together with the costs of defending such an action, thereby reducing our profitability.

Adverse outcomes to current and future litigation against us may negatively impact our financial position, liquidity, and results of operations.

We are party to various litigation claims and legal proceedings. As a consumer finance company, we are subject to various consumer claims and litigation seeking damages and statutory penalties. Some litigation against us could take the form of class action complaints by consumers. As the assignee of loans originated by automotive dealers, we also may be named as a co-defendant in lawsuits filed by consumers principally against automotive dealers.

Additionally, we are party to two purported securities class action lawsuits and two shareholder derivative complaints.

We are party to a purported securities class action lawsuit seeking to represent a class consisting of all those who purchased or otherwise acquired our securities pursuant and/or traceable to our Registration Statement and Prospectus issued in connection with our IPO, and a class consisting of all those who purchased or otherwise acquired our securities between January 23, 2014 and June 12, 2014. The amended class action complaint alleges that our Registration Statement and Prospectus and certain subsequent public disclosures contained misleading statements concerning the Company’s compliance systems and ability to pay dividends. 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 2, 2016, the plaintiffs moved to certify the proposed classes.

We are also party to a purported securities class action lawsuit seeking to represent a class consisting of all those who purchased our securities between February 3, 2015 and March 15, 2016. The complaint alleges, among other things, that certain of our public disclosures contained misleading statements regarding our accounting methodology for estimating credit loss

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allowance. The 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.

Additionally, we are party to a shareholder derivative complaint pending in the Court of Chancery of the State of Delaware. The 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 nonprime auto lending practices, resulting in harm to the Company. The complaint seeks unspecified damages and equitable relief. On December 29, 2015, this derivative action was stayed, pending the resolution of the first securities class action.

We are also party to an additional shareholder derivative complaint pending in the Court of Chancery of the State of Delaware. The 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 by causing the Company to lack adequate internal controls and engage in improper activities, causing harm to the Company. The complaint seeks unspecified damages and equitable relief.

We evaluate these and other litigation claims and legal proceedings to assess the probability of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves or disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from our current assessments and estimates, and any adverse resolution of litigation pending or threatened against us could negatively impact our financial position, liquidity, and results of operations.

Negative publicity associated with litigation, governmental investigations, regulatory actions, and other public statements could damage our reputation.

From time to time, there are negative media stories about us or the nonprime credit industry. These stories may follow the announcement of actual or threatened litigation or regulatory actions involving us or others in our industry. Our ability to attract consumers is highly dependent upon external perceptions of our level of service, trustworthiness, business practices, and financial condition. Negative publicity about such matters, our alleged or actual practices, or our industry generally could adversely affect our business, financial condition and results of operations, including our ability to retain and attract employees.

An incorrect interpretation of tax laws and regulations may adversely affect us.

The preparation of our tax returns requires the use of estimates and interpretations of complex tax laws and regulations, and is subject to review by taxing authorities. We are subject to the income tax laws of the United States and certain foreign countries. These tax laws are complex and subject to different interpretations by the taxpayer and relevant governmental taxing authorities, which are sometimes subject to prolonged evaluation periods until a final resolution, are reached. In establishing a provision for income tax expense and filing returns, we must make judgments and interpretations about the application of these inherently complex tax laws. If the judgments, estimates, and assumptions we use in preparing our tax returns are subsequently found to be incorrect, there could be a material effect on our results of operations.

Changes in taxes and other assessments may adversely affect us.

The legislatures and tax authorities in the tax jurisdictions in which we operate regularly enact reforms to the tax and other assessment regimes to which we and our customers are subject. Such reforms include changes in the rate of assessments and, occasionally, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes. The effects of these changes and any other changes that result from enactment of additional tax reforms cannot be quantified and there can be no assurance that any such reforms would not have an adverse effect upon our business.

Liquidity and Financing Risks

Our business could be negatively impacted if our access to funding is reduced.

We rely upon our ability to sell securities in the ABS market and upon our ability to access various credit facilities to fund our operations. The ABS market, along with credit markets in general, experienced unprecedented disruptions during the economic downturn. Although market conditions have improved since 2009, for a number of years following the economic downturn, certain issuers experienced increased risk premiums while there was a relatively lower level of investor demand for certain ABS (particularly those securities backed by nonprime collateral). The demand for lower credit grade ABS could become

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limited or illiquid, as it did during the 2008 and 2009 economic downturn, restricting our ability to access the ABS market for nonprime collateralized receivables. In addition, the risk of volatility surrounding the global economic system and uncertainty surrounding regulatory reforms such as the Dodd-Frank Act continue to create uncertainty around access to the capital markets. Also, regulatory reforms requires us to retain a minimum specified portion (5%) of the credit risk on assets collateralizing ABS issuances, reducing the amount of liquidity otherwise generally available through ABS programs. As a result of these risks, there can be no assurance that we will continue to be successful in selling securities in the ABS market. Adverse changes in our ABS program or in the ABS market generally could materially adversely affect our ability to securitize loans on a timely basis or upon terms acceptable to us. This could increase our cost of funding, reduce our margins, or cause us to hold assets until investor demand improves.

We also depend on various credit facilities and flow agreements to fund our future liquidity needs. We cannot guarantee that these financing sources will continue to be available beyond the current maturity dates, on reasonable terms, or at all. For example, our flow agreement with Bank of America terminated effective January 31, 2017, and our flow agreement with CBP will terminate effective May 1, 2017. We are currently seeking to enter into new flow agreements with one or more parties; however, there can be no assurance that the new flow agreements will be executed or that the new flow agreements will be on terms as favorable to prior agreements, including our prior flow agreements with Bank of America and CBP.

As our volume of loan acquisitions and originations increases, especially due to our relationship with FCA, we will require the expanded borrowing capacity of existing or additional credit facilities and flow agreements. The availability of these financing sources depends, in part, on factors outside of our control, including regulatory capital treatment for unfunded bank lines of credit, the financial strength and strategic objectives of Santander and the other banks that participate in our credit facilities and flow agreements, and the availability of bank liquidity in general. We may also experience the occurrence of events of default or breach of financial covenants, which could reduce our access to bank funding. In the event of a sudden or unexpected shortage of funds in the banking system, we cannot be sure that we will be able to maintain necessary levels of funding without incurring high funding costs, a reduction in the term of funding instruments, or the liquidation of certain assets.

We are not isolated from general market conditions that may affect issuers of ABS and other borrowers, and we could experience increased risk premiums or funding costs in the future. In addition, if the sources of funding described above are not available to us on a regular basis for any reason, we may have to curtail or suspend our loan acquisition and origination activities. Downsizing the scale of our business would have a material adverse effect on our financial position, liquidity, and results of operations.

Poor portfolio performance may trigger credit enhancement provisions in our revolving credit facilities or secured structured financings.

Our revolving credit facilities generally have net spread, delinquency, and net loss ratio limits on the receivables pledged to each facility that, if exceeded, would increase the level of credit enhancement requirements for that facility and redirect all excess cash to the credit providers. Generally, these limits are calculated based on the portfolio collateralizing the respective credit line; however, for certain of our warehouse facilities, delinquency, and net loss ratios are calculated with respect to our serviced portfolio as a whole. Our facilities used to finance vehicle lease originations also have a residual loss ratio limit calculated with respect to our serviced lease portfolio as a whole.

The documents that govern our secured structured financings also contain cumulative net loss ratio limits on the receivables included in each securitization trust. If, at any measurement date, a cumulative net loss trigger with respect to any financing were to exceed the specified limits, provisions of the financing agreements would increase the level of credit enhancement requirements for that financing and redirect all excess cash to the holders of the ABS. During this period, excess cash flows, if any, from the facility would be used to fund the increased credit enhancement levels rather than being distributed to us. Once an impacted trust reaches the new requirement, we would return to receiving a residual distribution from the trust.

We apply financial leverage to our operations, which may materially adversely affect our business, financial condition and results of operations.

We currently apply financial leverage, pledging most of our assets to credit facilities and securitization trusts, and we intend to continue to apply financial leverage in our retail lending operations. Our debt-to-assets ratio is 81.3% as of December 31, 2016 . Although our total borrowings are restricted by covenants in our credit facilities and market conditions, we may change our target borrowing levels at any time. Incurring substantial debt subjects us to the risk that our cash flow from operations may be insufficient to service our outstanding debt.

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Our indebtedness and other obligations are significant and impose restrictions on our business.

We have a significant amount of indebtedness. At December 31, 2016 and 2015 , we had $31.3 billion and $30.4 billion , respectively, in principal amount of indebtedness outstanding (including $29.7 billion and $29.0 billion , respectively, in secured indebtedness). Interest expense on our indebtedness constituted 14.6% of our total net finance and other interest income, net of leased vehicle expense, for the twelve months ended December 31, 2016 .

Our debt reduces operational flexibility and creates default risks. Our revolving credit facilities contain a borrowing base or advance rate formula that requires us to pledge finance contracts in excess of the amounts that we can borrow under the facilities. We are also required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under the credit facilities. In addition, certain facilities require the replacement of delinquent or defaulted collateral, and the finance contracts pledged as collateral in securitizations must be less than 31 days delinquent at the time the securitization is issued. Accordingly, increases in delinquencies or defaults resulting from weakened economic conditions would require us to pledge additional finance contracts to support the same borrowing levels and may cause us to be unable to securitize loans to the extent we desire. These outcomes would adversely impact our financial position, liquidity, and results of operations.
Additionally, the credit facilities generally contain various covenants requiring, in certain cases, minimum financial ratios, asset quality, and portfolio performance ratios (portfolio net loss and delinquency ratios, and pool level cumulative net loss ratios), as well as limits on deferral levels. Generally, these limits are calculated based on the portfolio collateralizing the respective line; however, for certain of our third-party credit facilities, delinquency and net loss ratios are calculated with respect to our serviced portfolio as a whole. Covenants on our debts also limit our ability to:

• incur or guarantee additional indebtedness;
• purchase large loan portfolios in bulk;
• sell assets, including our loan portfolio or the capital stock of our subsidiaries;
• enter into transactions with affiliates;
• create or incur liens; and
• consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets.

Additionally, certain of our credit facilities contain minimum tangible net worth requirements, and certain of our credit facilities contain covenants that require timely filing of periodic reports with the SEC.  In 2016, the Company failed to timely file our periodic reports with the SEC, but the Company was able to obtain waivers under the applicable credit facilities for our failure to file such periodic reports.  While the Company was able to obtain such waivers during 2016, there can be no assurance that we would be able to obtain similar waivers, if needed, in the future.  Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements, restrict our ability to obtain additional borrowings under these agreements and/or remove us as servicer.  Such an event of default could have a material adverse effect on our financial condition, liquidity, and results of operations.

We currently have the ability to pledge retained residuals and create additional unsecured indebtedness on our credit facilities provided by Santander. As we execute on our strategy to reduce our reliance on borrowings under commitments from Santander, we must find other funding sources. If our debt service obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional indebtedness, we may be required to dedicate a significant portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, which would reduce the funds available for other purposes. Our indebtedness also could limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions.

In addition, certain of our funding arrangements may require us to make payments to third parties if losses exceed certain thresholds, including, for example, certain of our flow agreements and arrangements with certain third-party loan originators of loans that we purchase on a periodic basis.

Credit Risks

Our financial condition, liquidity and results of operations depend on the credit performance of our loans.

As of December 31, 2016 , more than 83% of our vehicle consumer loans are nonprime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, a lack of or adverse credit history, low income levels and/or the inability to provide adequate down payments. While underwriting guidelines were designed to establish that, notwithstanding such factors, the obligor would be a reasonable credit risk, the receivables nonetheless will

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experience higher default rates than a portfolio of obligations of prime obligors. In the event of a default on an auto loan, generally the most practical alternative is repossession of the financed vehicle, although the collateral value of the vehicle usually does not cover the outstanding account balance and costs of recovery. Repossessions and foreclosure sales that do not yield sufficient proceeds to repay the receivables in full could result in losses on those receivables. We repossessed 300,526 vehicles, incurring $2.3 billion in net losses, during the twelve months ended December 31, 2016 , of which 289,770 repossessions and $2.1 billion of net losses were on nonprime receivables. We experienced a default rate of 8.7% for nonprime receivables and 4.6% for prime receivables during the twelve months ended December 31, 2016 .

In addition, our prime portfolio has grown in proportion to our overall portfolio over the past several years. While prime portfolios typically have lower default rates than nonprime portfolios, we have less ability to make risk adjustments to the pricing of prime loans compared to nonprime loans. As a result, a larger proportion of our business will consist of loans with respect to which we have less flexibility to adjust pricing to absorb losses. As a result of these factors, we may sustain higher losses than anticipated in our prime portfolio. Additionally, if our prime loan losses are higher than expected then we may also be at risk with regards to our forecasted losses, which could impact our loss reserves.

Our allowance for credit losses and impairments may prove to be insufficient to absorb probable losses inherent in our loan portfolio.

We maintain an allowance for credit losses, established through a provision for credit losses charged to expense, that we believe is appropriate to provide for probable losses inherent in our originated loan portfolio. The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends using existing quantitative and qualitative information, all of which are subject to material changes.

For receivables portfolios purchased from other lenders at a discount to the aggregate principal balance of the receivables, the portion of the discount that was attributable to credit deterioration since origination of the loans is recorded as a nonaccretable difference. Any deterioration in the performance of the purchased portfolios after acquisition results in an incremental allowance. Our credit loss allowance as of December 31, 2016 , is $3.4 billion , or 12.6% of outstanding principal balances. The determination of the appropriate level of the allowance for credit losses and nonaccretable difference inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which are subject to change. Changes in economic conditions affecting borrowers, new information regarding our loans, and other factors, both within and outside of our control, may require an increase in the allowance for credit losses. Furthermore, growth in our loan portfolio generally would lead to an increase in the provision for credit losses. In addition, if net charge-offs in future periods exceed the allowance for credit losses, we will need to make additional provisions to increase the allowance. There is no precisely accurate method for predicting credit losses, and we cannot provide assurance that our current or future credit loss allowance will be sufficient to cover actual losses.

The process for determining our allowance for credit losses is complex, and we may from time to time make changes to our process for determining our allowance for credit losses. In addition, regulatory agencies periodically review our allowance for credit losses, as well as our methodology for calculating our allowance for credit losses and may require an increase in the provision for loan losses or the recognition of additional loan charge-offs, based on judgments different than those of management. Changes that we make to enhance our process for determining our allowance for credit losses may lead to an increase in our allowance for credit losses. Any increase in our allowance for credit losses will result in a decrease in net income and capital, and may have a material adverse effect on us and material changes to our methodology for determining our allowance for loan losses could result in the need to restate our financial statements or fines, penalties, potential regulatory action and damage to our reputation.

Market Risks

Adverse economic conditions in the United States and worldwide may negatively impact our business, financial condition and results of operations.

We are subject to changes in general economic conditions that are beyond our control. During periods of economic slowdown such as the 2008 and 2009 economic downturn, delinquencies, defaults, repossessions, and losses generally increase while proceeds from auction sales decrease. These periods may also be accompanied by increasing unemployment rates, decreasing consumer demand for automobiles and other consumer products, and declining values of automobiles and other consumer products securing outstanding accounts, which weaken collateral coverage and increase the amount of a loss in the event of default.

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Additionally, higher gasoline prices, unstable real estate values, reset of adjustable rate mortgages to higher interest rates, general availability of consumer credit, or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles and other consumer products as well as weaken collateral values on certain types of automobiles and other consumer products. Although declines in commodity prices, and more particularly gasoline prices, generally are financially beneficial to the individual consumer, such declines may also have a negative impact on unemployment rates in geographic areas that are highly dependent upon the oil and natural gas industry, which could adversely affect the credit quality of consumers in those areas.

Our balance sheet consists of predominantly nonprime consumers, which are associated with higher than average delinquency rates. The actual rates of delinquencies, defaults, repossessions, and losses on these loans could be more dramatically affected by a general economic downturn. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our finance charge income.

Furthermore, our business is significantly affected by monetary and regulatory policies of the U.S. federal government and its agencies. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control and could have a material adverse effect on us through interest rate changes, costs of compliance with increased regulation, and other factors. Although market conditions have improved since the 2008-2009 economic downturn, conditions remain challenging for financial institutions. In addition, the global recession and disruption of the financial markets led to concerns over the solvency of certain European countries, affecting these countries’ capital markets access and in some cases sovereign credit ratings, as well as market perception of financial institutions that have significant direct or indirect exposure to these countries. These concerns continue even as the global economy is recovering and some previously stressed European economies have experienced at least partial recoveries from their low points during the recession. The global market volatility increased in recent months due to the U.S. presidential election and the expectations for a more growth-oriented economic policy. However, higher pressure exists for keeping the existing growth path if inflation rates and interest rate levels increase more than expected. If realized, these risk scenarios could contribute to severe financial market stress or a global recession, likely affecting the economy and capital markets in the United States as well.

The process we use to estimate losses inherent in our credit exposure requires complex judgments, including forecasts of economic conditions and how those economic conditions might impair the ability of our borrowers to repay their loans. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the quality of our assets.

Changes in interest rates may adversely impact our profitability and risk profile.

Our profitability may be directly affected by interest rate levels and fluctuations in interest rates. As interest rates change, our gross interest rate spread on originations either increases or decreases because the rates charged on the contracts originated or purchased from dealers are limited by market and competitive conditions, restricting our ability to pass on increased interest costs to the consumer. Additionally, although the majority of our borrowers are nonprime and are not highly sensitive to interest rate movement, increases in interest rates may reduce the volume of loans we originate. While we monitor the interest rate environment and employ hedging strategies designed to mitigate the impact of increased interest rates, we cannot provide assurance that hedging strategies will fully mitigate the impact of changes in interest rates.

Our business, financial condition and results of operations could be materially adversely affected if the value of used cars declines, resulting in lower residual values of our vehicle leases and lower recoveries in sales of repossessed vehicles.

General economic conditions, the supply of off-lease and other used vehicles to be sold, new vehicle market prices and marketing programs, vehicle brand image and strength, perceived vehicle quality, general consumer preference and confidence levels, seasonality, and overall price and price volatility of gasoline or diesel fuel, among other factors, heavily influence used vehicle prices and thus the residual value of our leased vehicles and the amount we recover in remarketing repossessed vehicles. We expect our financial results to be more sensitive to used auto prices as leases continue to become a larger part of our business.

Our expectation of the residual value of a leased vehicle is a critical input in determining the amount of the lease payments at the inception of a lease contract. Our lease customers are responsible only for any deviation from expected residual value that is caused by excess mileage or excess wear and tear, while we retain the obligation to absorb any general market changes in the value of the vehicle. Therefore, our operating lease expense is increased when we have to take an impairment on our residual values or when the realized residual value of a vehicle at lease termination is less than the expected residual value for the vehicle at lease inception. In addition, the timeliness, effectiveness, and quality of our remarketing of off-lease vehicles affects the net proceeds realized from the vehicle sales.    

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Lower used vehicle prices also reduce the amount we can recover when remarketing repossessed vehicles that serve as collateral on the underlying loans. As a result, declines in used vehicle prices could have a negative impact on our business, financial condition and results of operations.

Our growth, asset quality and profitability may be adversely affected by volatile macroeconomic and political conditions.

In addition, our revenues are subject to risk of loss from unfavorable political and diplomatic developments, social instability, and changes in governmental policies, international ownership legislation, interest-rate caps and tax policies.

Growth, asset quality and profitability may be affected by volatile macroeconomic and political conditions.

We are subject to market, operational, and other related risks associated with our derivative transactions that could have a material adverse effect on us.

We enter into derivative transactions for economic hedging purposes. We are subject to market and operational risks associated with these transactions, including basis risk, the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost, credit or default risk, the risk of insolvency, or other inability of the counterparty to a particular transaction to perform its obligations thereunder, including providing sufficient collateral. Additionally, certain of our derivative agreements require us to post collateral when the fair value of the derivative is negative. Our ability to adequately monitor, analyze, and report derivative transactions continues to depend, to a great extent, on our information technology systems. This fact further increases the risks associated with these transactions and could have a material adverse effect on us.

General Business and Industry Risks

We face significant risks in implementing our growth strategy, some of which are outside our control.

We intend to continue our growth strategy to expand our vehicle finance franchise by increasing market penetration via the number and depth of our relationships in the vehicle finance market, pursuing additional relationships with OEMs, expanding our direct-to-consumer footprint and growing our serviced for others platform. Our ability to execute this growth strategy is subject to significant risks, some of which are beyond our control, including:

• the inherent uncertainty regarding general economic conditions;
• our ability to obtain adequate financing for our expansion plans;
		
•	the prevailing laws and regulatory environment of each state in which we operate or seek to operate, and, federal laws and regulations, to the extent applicable, which are subject to change at any time;	
• the degree of competition in our markets and its effect on our ability to attract customers;
• our ability to recruit qualified personnel, in particular, in areas where we face a great deal of competition; and
		
•	our ability to obtain and maintain any regulatory approvals, government permits, or licenses that may be required on a timely basis.	

Our agreement with FCA may not result in currently anticipated levels of growth and is subject to certain performance conditions that could result in termination of the agreement. If we fail to meet certain of these performance conditions, FCA may elect to terminate the agreement.

In February 2013, we entered into a ten-year Master Private Label Financing Agreement (the Chrysler Agreement) with FCA whereby we launched the Chrysler Capital brand, which originates private-label loans and leases to facilitate the purchase of FCA vehicles by consumers and FCA-franchised automotive dealers. The financing services that we provide under the Chrysler Agreement, which launched May 1, 2013, include credit lines to finance FCA-franchised dealers’ acquisitions of vehicles and other products that FCA sells or distributes, automotive loans and leases to finance consumer acquisitions of new and used vehicles at FCA-franchised dealerships, financing for commercial and fleet customers, and ancillary services. In addition, we may facilitate, for an affiliate, offerings to dealers for dealer loan financing, construction loans, real estate loans, working capital loans, and revolving lines of credit. In accordance with the terms of the Chrysler Agreement, in May 2013 we paid FCA a $150 million upfront, nonrefundable payment, which will be amortized over ten years. The unamortized portion would be recognized as expense immediately if the Chrysler Agreement is terminated in accordance with its terms.

As part of the Chrysler Agreement, we received limited exclusivity rights to participate in specified minimum percentages of certain of FCA's financing incentive programs, which include loan rate subvention and automotive lease residual support subvention. We have committed to certain revenue sharing arrangements. We bear the risk of loss on loans originated pursuant

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to the Chrysler Agreement, while FCA shares in any residual gains and losses in respect of automotive leases, subject to specific provisions in the Chrysler Agreement, including limitations on our participation in gains and losses. In addition, under the Chrysler Agreement, FCA has the option to acquire, for fair market value, an equity participation in an operating entity through which the financial services contemplated by the Chrysler Agreement are offered and provided, through either an equity interest in the new entity or participation in a joint venture or other similar business relationship or structure. There is no maximum limit on the size of FCA’s potential equity participation. Although the Chrysler Agreement contains provisions that are designed to address a situation in which the parties disagree on the fair market value of the equity participation interest, there is a risk that we ultimately receive less than what we believe to be the fair market value for such interest.

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. We have not met these penetration rates in the past and may not meet these penetration rates in the future. If we continue not to meet these specified penetration rates, FCA may elect to terminate the Chrysler Agreement. FCA may also terminate the agreement if, among other circumstances, (i) a person other than Santander and its affiliates or our other stockholders owns 20% or more of our common stock and Santander and its affiliates own fewer shares of common stock than such person, (ii) we become, control, or become controlled by, an OEM that competes with FCA or (iii) certain of our credit facilities become impaired.    

The loans and leases originated through Chrysler Capital are expected to provide us with a significant portion of our projected growth over the next several years. Our ability to realize the full strategic and financial benefits of our relationship with FCA depends in part on the successful development of our Chrysler Capital business, which will require a significant amount of management’s time and effort. If we are unable to realize the expected benefits of our relationship with FCA, or if the Chrysler Agreement were to terminate, there would be a materially adverse impact to our business, financial condition, results of operations, profitability, loan and lease volume, credit quality of our portfolio, liquidity, funding and growth, and the Company’s ability to implement its business strategy would be materially adversely affected.

Our business, financial condition and results of operations could be negatively impacted if we fail to manage and complete divestitures.

We regularly evaluate our portfolio in order to determine whether an asset or business may no longer be aligned with our strategic objectives. For example, in October     2015, we disclosed a decision to exit our personal lending business and to explore strategic alternatives for our existing personal lending assets. When we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives. We may also experience greater costs and dissynergies than expected, and the impact of the divestiture on our revenue may be larger than projected. Additionally, we may ultimately dispose of assets or a business at a price or on terms that are less favorable than those we had originally anticipated. After reaching a definitive agreement with a buyer, we typically must satisfy pre-closing conditions and the completion of the transaction may be subject to regulatory and governmental approvals. Failure of these conditions and approvals to be satisfied or obtained may prevent us from completing the transaction. Divestitures involve a number of risks, including the diversion of management and employee attention, significant costs and expenses, and a decrease in revenues and earnings associated with the divested business. Divestitures may also involve continued financial involvement in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations. Under these arrangements, performance by the divested businesses or other conditions outside of our control could have a material adverse impact on our business, financial condition and results of operations.

Our two primary personal lending relationships have been with LendingClub and Bluestem. We completed the sale of substantially all of our LendingClub loans in February 2016. We continue to hold our Bluestem portfolio, which had a balance of approximately $1.1 billion as of December 31, 2016 , and we remain a party to agreements with Bluestem that obligate us, among other things, to purchase new advances originated by Bluestem and existing balances on accounts with new advances, for an initial term ending in April 2020 and renewable through April 2022 at Bluestem’s option. Although we are seeking a third party to assume this obligation, we may not be successful in finding such a party, and Bluestem may not agree to the substitution. We continue to classify the Bluestem portfolio as held-for-sale. We have recorded significant lower-of-cost-or-market adjustments on this portfolio and may continue to do so as long as we hold the portfolio, particularly due to the new volume we are committed to purchase.

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Our business, financial condition and results of operations could be negatively impacted if we are unsuccessful in developing and maintaining relationships with automobile dealerships.

Our ability to acquire loans and automotive leases depends on our relationships with automotive dealers. In particular, our automotive finance operations depend in large part upon our ability to establish and maintain relationships with reputable automotive dealers that direct customers to our offices or originate loans at the point-of-sale, which we subsequently purchase. Although we have relationships with certain automotive dealers, none of our relationships are exclusive and any may be terminated at any time. As a result of the economic downturn and contraction of credit to both dealers and their customers, there was an increase in dealership closures and our existing dealer base experienced decreased sales and loan volume in the past and may experience decreased sales and loan volume in the future, which may have an adverse effect on our business, financial condition and results of operation.

Our business, financial condition and results of operations could be negatively impacted if we are unsuccessful in developing and maintaining our serviced for others portfolio.

A significant and growing portion of our business strategy is to increase the revenue stream from our serviced for others portfolio by continuing to add assets to this portfolio. If an institution for which we currently service assets chooses to terminate our rights as servicer, or if we fail to add additional institutions or portfolios to our servicing platform, we may not achieve the desired revenue or income from this strategy.

A reduction in demand for our products and failure by us to adapt to such reduction could adversely affect our business, financial condition and results of operations.

The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences or financial conditions, regulatory restrictions that decrease customer access to particular products or the availability of competing products. If we fail to adapt to significant changes in our customers’ demand for, or access to, our products, our revenues could decrease significantly and our operations could be harmed. Even if we do make changes to our product offerings to fulfill customer demand, customers may resist such changes or may reject such products. Moreover, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time, and, by that time, it may be too late to make further modifications to such product without causing further harm to our business, results of operations and financial condition.

We depend on the accuracy and completeness of information about borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.

In deciding whether to approve loans or to enter into other transactions with borrowers and counterparties in our retail lending and commercial lending businesses, we may rely on information furnished to us by or on behalf of borrowers and counterparties, including financial statements and other financial information such as income. We also may rely on representations of borrowers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected. Whether a misrepresentation is made by the loan applicant, another third party or one of our employees, we generally bear the risk of loss associated with the misrepresentation. Our controls and processes may not have detected or may not detect all misrepresented information in our loan originations or from our business clients. Any such misrepresented information could adversely affect our business, financial condition and results of operations.

Loss of our key management or other personnel, or an inability to attract such management and other personnel, could negatively impact our business, financial condition and results of operations.

The successful implementation of our growth strategy depends in part on our ability to retain our experienced management team and key employees and on our ability to attract appropriately qualified personnel as well as have an effective succession planning framework in place. The loss of any key member of our management team or other key employees could hinder or delay our ability to implement our growth strategy effectively. Further, if we are unable to attract appropriately qualified personnel as we expand, we may not be successful in implementing our growth strategy. In either instance, our profitability and business, financial condition and results of operations could be adversely affected.

Due to our relationship with Santander, we also are subject to indirect regulation by the European Central Bank, which imposes compensation restrictions that may apply to certain of our executive officers and other employees under Capital Requirements Directive 2013/36/EU (also known as CRD IV). These restrictions may impact our ability to retain our experienced

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management team and key employees and our ability to attract appropriately qualified personnel, which could have a material adverse impact on our business, financial condition and results of operations.

Future changes in our relationship with Santander may adversely affect our business, financial condition and results of operations.

Santander, through SHUSA, owns 210,995,049 shares (approximately 58.8% ) of our common stock and has delivered, as of July 3, 2015, an irrevocable notice to exercise the call option with respect to all 34,598,506 shares (approximately 9.7% ) of our common stock owned by DDFS LLC, the consummation of which is subject to required bank regulatory approvals and any other approvals required by law being obtained. We rely on our relationship with Santander, through SHUSA, for several competitive advantages including relationships with OEMs and regulatory best practices. Santander also provides us with significant funding support, through both committed liquidity and opportunistic extensions of credit.

During the financial downturn, Santander and its affiliates provided us with more than $6 billion in financing that enabled us to pursue several acquisitions and/or conversions of vehicle loan portfolios at a time when most major banks were curtailing or eliminating their commercial lending activities. If Santander or SHUSA elects not to provide such support or not to provide it to the same degree, we may not be able to replace such support ourselves or to obtain substitute arrangements with third parties. We may be unable to obtain such support because of financial or other constraints, or be unable to implement substitute arrangements on a timely basis on terms that are comparable, or at all, which could adversely affect our business, financial condition and results of operations.

Furthermore, Santander may sell its interest in us. If Santander reduces its equity interest in us, it may be less willing to provide us with the support it has provided in the past. In addition, our right to use the Santander name is on the basis of a non-exclusive, royalty-free, and non-transferable license from Santander, and further only extends to uses in connection with our current and future operations within the United States. Santander may terminate such license at any time Santander ceases to own, directly or indirectly, 50% or more of our common stock. If we were required to change our name, we would incur the administrative costs and burden associated with revising legal documents and marketing materials, and also may experience loss of brand and loss of business or loss of funding due to consumers’ and banks’ relative lack of familiarity with our new name. Additionally, FCA may terminate the Chrysler Agreement if a person other than Santander and its affiliates or our other stockholders owns 20% or more of our common stock, and Santander and its affiliates own fewer shares of common stock than such person.

Santander has provided guarantees of our covenants, agreements and obligations under the governing documents of our warehouse facilities and privately issued amortizing notes. These guarantees are limited to our obligations as servicer. We have agreed to pay Santander a fee of 12.5 basis points on certain debt facilities in exchange for providing the guarantees, and this fee increases our cost of funding. SHUSA may provide similar guarantees in the future, and we have agreed to pay SHUSA the same fee as Santander for any such guarantees that may be provided.

Some terms of our credit agreements are influenced by, among other things, the credit ratings of Santander. If Santander were to suffer credit rating downgrades or other adverse financial developments, we could be negatively impacted, either directly or indirectly. Santander’s short-term credit ratings downgrades in 2012, from A-1 to A-2 (Standard & Poor’s) and from P-1 to P-2 (Moody’s), did not directly impact our cost of funds. However, due to the contractual terms of certain of our debt agreements, these downgrades resulted in the loss of our ability to commingle funds on most facilities. The loss of commingling increased the amount of funds we were required to borrow, thereby indirectly raising our cost of funds by approximately $1 million per month. In addition, because of the methodologies applied by credit rating agencies, our securitization ratings in our ABS offerings are indirectly tied to Santander’s credit ratings. Further, during October 2016, Moody’s Investors Service downgraded SHUSA's senior unsecured debt to Baa3 from Baa2, with a rating outlook of stable.

Santander applies certain standardized banking policies, procedures, and standards across its affiliated entities, including with respect to internal audit, credit approval, governance, risk management, and compensation practices. We currently follow certain of these Santander policies and may in the future become subject to additional Santander policies, procedures, and standards, which could result in changes to our practices.

It is also possible that our continuing relationship with Santander or SHUSA could reduce the willingness of other banks to develop relationships with us due to general competitive dynamics among such financial institutions.

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Negative changes in the business of the OEMs with which we have strategic relationships, including FCA, could adversely affect our business, financial condition and results of operations.

A significant adverse change in FCA’s or other automotive manufacturers’ business, including (i) significant adverse changes in their respective liquidity position and access to the capital markets, (ii) the production or sale of FCA or other automotive manufacturers’ vehicles (including the effects of any product recalls), (iii) the quality or resale value of FCA or other vehicles, (iv) the use of marketing incentives, (v) FCA’s or other automotive manufacturers’ relationships with their key suppliers, or (vi) FCA’s or other automotive manufacturers’ respective relationships with the United Auto Workers and other labor unions, and other factors impacting automotive manufacturers or their employees could have a material adverse effect on our profitability and business, financial condition and results of operations.

Under the Chrysler Agreement, we originate private-label loans and leases to facilitate the purchase of FCA vehicles by consumers and FCA-franchised automotive dealers. In the future, it is possible that FCA or other automotive manufacturers with whom we have relationships could utilize other companies to support their financing needs, including offering products or terms that we would not or could not offer, which could have a material adverse impact on our business, financial condition and results of operations. Furthermore, FCA or other automotive manufacturers could expand, establish, or acquire captive finance companies to support their financing need; thus, reducing their need for our services.

There can be no assurance that the global automotive market, or Chrysler’s or our other OEM partners’ share of that market, will not suffer downturns in the future, and any negative impact could in turn have a material adverse effect on our business, financial condition and results of operations.

Future significant loan, lease, or personal loan repurchase requirements could harm our business, liquidity, financial condition and results of operations.

We have repurchase obligations in our capacity as servicer in securitizations and whole-loan sales. If a servicer breaches a representation, warranty, or servicing covenant with respect to the loans sold, the servicer may be required by the servicing provisions to repurchase that asset from the purchaser or otherwise compensate one or more classes of investors for losses caused by the breach. If significant repurchases of assets or other payments are required under our responsibility as servicer, it could have a material adverse effect on our business, financial condition, liquidity, and results of operations. As we have increased the number of loans sold, the potential impact of such repurchases has increased.

We have treated sales of the debt and equity in certain of our securitizations as sales of the underlying finance receivables. The exercise of our clean-up call option on each of these securitizations when the collateral pool balance reaches 10% of its original balance would result in the repurchase of the remaining underlying finance receivables, exposing us to credit performance risk for the remainder of the pool's life.

Competition with other lenders could adversely affect us.

The vehicle finance market is very competitive and is served by a variety of entities, including the captive finance affiliates of major automotive manufacturers, banks, savings and loan associations, credit unions, and independent finance companies. The market is highly fragmented, with no individual lender capturing more than 10% of the market. Our competitors often provide financing on terms more favorable to automobile purchasers or dealers than we offer. Many of these competitors also have long-standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing that we do not offer.

We anticipate that we will encounter greater competition as we expand our operations and as the economy continues to improve. In addition, certain of our competitors are not subject to the same regulatory regimes that we are. As a result, these competitors may have advantages in conducting certain businesses and providing certain services, and may be more aggressive in their loan origination activities. Increasing competition could also require us to lower the rates we charge on loans in order to maintain loan origination volume, which could also have a material adverse effect on our business, financial condition and results of operations.

We partially rely on third parties to deliver services, and failure by those parties to provide these services or meet contractual requirements could have a material adverse effect on our business, financial condition and results of operations.

We depend on third-party service providers for many aspects of our business operations. For example, we depend on third parties like Experian to obtain data related to our market that we use in our origination and servicing platforms. In addition, we rely on third-party servicing centers for a portion of our servicing activities and on third-party repossession agents. If a service

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provider fails to provide the services that we require or expect, or fails to meet contractual requirements, such as service levels or compliance with applicable laws, a failure could negatively impact our business by adversely affecting our ability to process customers’ transactions in a timely and accurate manner, otherwise hampering our ability to service our customers, or subjecting us to litigation or regulatory risk for poor vendor oversight. Such a failure could adversely affect the perception of the reliability of our networks and services, and the quality of our brands, and could have a material and adverse effect on our business, financial condition and results of operations.

Goodwill and intangible asset impairments may be required in relation to acquired businesses.

We have made business acquisitions for which it is possible that the goodwill and intangible assets which have been attributed to those businesses may have to be written down if our valuation assumptions are required to be reassessed as a result of any deterioration in the business’ underlying profitability, asset quality or other relevant matters. Impairment testing with respect to goodwill and intangible assets is performed annually, or more frequently if impairment indicators are present. Goodwill and intangible asset impairment analysis and measurement is a process that requires significant judgment. Our stock price and various other factors affect the assessment of the fair value of our underlying business for purposes of performing any goodwill and intangible asset impairment assessment. We had impairment on intangible assets of zero , $3.5 million and $16.8 million during the years ended December 31, 2016, 2015 and 2014, respectively. Additionally, our stock price has declined since December 31, 2015, and we may be required to record impairment of our $74 million in goodwill in periods subsequent to December 31, 2016.

Catastrophic events may negatively affect our business, financial condition, and results of operations.

Natural disasters, acts of war, terrorist attacks, and the escalation of military activity in response to these attacks or otherwise may have negative and significant effects, such as imposition of increased security measures, changes in applicable laws, market disruptions, and job losses. These events may have an adverse effect on the economy in general. Moreover, the potential for future terrorist attacks and the national and international responses to these threats could affect our business in ways that cannot be predicted. The effect of any of these events or threats could have a material adverse effect on our business, financial condition and results of operations.

Technology Risks

Our information technology may not support our future volumes and business strategies.

We rely on our proprietary software, commercial systems, and third parties to continuously adapt our products and services to evolving consumer behavior, changing vehicle finance and consumer loan products, and third party purchaser requirements. We employ engineers, product managers, designers, analysts and technical specialists to ensure that our technology and digital capabilities remain competitive. However, due to the continued rapid changes in technology, and potential for digital market disruptors to augment consumer digital behaviors, there can be no assurance that our technology solutions will continue to be adequate for our business or provide a competitive advantage.

Our technology platforms, underlying infrastructure and infrastructure of integrated third party services are important to our operating activities and any high severity incidents or outages could disrupt our ability to process loan applications, originate loans, or service our existing loan portfolios, which could have a material adverse impact on our operating activities. Outages may be caused by unforeseen catastrophic events, including natural disasters, terrorist attacks, large-scale power outages, software or hardware defects, computer viruses, cyber-attacks, external or internal security breaches, acts of vandalism, misplaced or lost data, programming or human errors, or other similar events. Although we maintain, and regularly assess the adequacy of, a business continuity plan and have designed our infrastructure for high availability to mitigate the risk of such events, we cannot be certain that our plan will function as intended, or otherwise resolve or compensate for such effects. Such a failure in business continuity, if and when experienced, may have a material adverse effect on our revenue and ability to support and service our customer base.

A security breach or a cyber-attack could adversely affect our business, financial condition and results of operations.

In the normal course of business, we collect, process, and retain sensitive and confidential consumer information and may, subject to applicable law, share that information with our third-party service providers. Despite the security measures we have in place, our facilities and systems, and those of third-party service providers, could be vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, or other similar events. A security breach or cyber-attack of our computer systems could interrupt or damage our operations or harm our reputation. If third parties or our employees are able to penetrate our network security or otherwise misappropriate our

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customers’ personal information or contract information, or if we give third parties or our employees improper access to consumers’ personal information or contract information, we could be subject to liability. This liability could include investigations, fines, or penalties imposed by state or federal regulatory agencies, including the loss of necessary permits or licenses. This liability could also include identity theft or other similar fraud-related claims, claims for other misuses, or losses of personal information, including for unauthorized marketing purposes or claims alleging misrepresentation of our privacy and data security practices.

We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure online transmission of confidential consumer information. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the algorithms that we use to protect sensitive consumer transaction data. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend capital and other resources to protect against such security breaches or cyber-attacks, or to alleviate problems caused by such breaches or attacks.

We have seen in recent years computer systems of companies and organizations being targeted, not only by cyber criminals, but also by activists and rogue states. We have been and continue to be subject to a range of cyber-attacks, such as denial of service, malware and phishing. Cyber-attacks could give rise to the loss of significant amounts of customer data and other sensitive information, as well as significant levels of liquid assets (including cash). In addition, cyber-attacks could give rise to the disablement of our information technology systems used to service our customers. As attempted attacks continue to evolve in scope and sophistication, we may incur significant costs in our attempt to modify or enhance our protective measures against such attacks, or to investigate or remediate any vulnerability or resulting breach, or in communicating cyber-attacks to our customers. If we fail to effectively manage our cyber-security risk by failing to update our systems and processes in response to new threats, this could harm our reputation and materially and adversely affect our business, financial condition and results of operations through the payment of customer compensation, regulatory penalties and fines and/or through the loss of assets.

We manage and hold confidential personal information of customers in the ordinary course of our business. Although we have procedures and controls to safeguard personal information in our possession, unauthorized disclosures could subject us to legal actions and administrative sanctions, as well as damages that could materially and adversely affect our business, financial condition and results of operations. Further, our business is exposed to risk from potential non-compliance with policies, employee misconduct or negligence and fraud, which could result in regulatory sanctions and serious reputational or financial harm. It is not always possible to deter or prevent employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. In addition, we may be required to report events related to information security issues (including any cyber-security issues), events where customer information may be compromised, unauthorized access and other security breaches, to the relevant regulatory authorities. Any material disruption or slowdown of our systems could cause information, including data related to customer requests, to be lost or to be delivered to our clients with delays or errors, which could reduce demand for our services and products, and could materially and adversely affect us.

Financial Reporting and Control Risks

We are required to make significant estimates and assumptions in the preparation of our financial statements, and our estimates and assumptions may not be accurate. We also rely on pricing, accounting, risk management and other models which may fail to accurately predict outcomes.

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires our management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the consolidated financial statements, and the reported amounts of income and expense during the reporting periods. We also use estimates and assumptions in determining the residual values of leased vehicles. Critical estimates are made by management in determining, among other things, the allowance for credit losses, amounts of impairment, and valuation of income taxes. The process we use to estimate losses inherent in our credit exposure requires complex judgments, including forecasts of economic conditions and how those economic conditions might impair the ability of our borrowers to repay their loans. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the quality of our assets. If our underlying estimates and assumptions prove to be incorrect, our financial condition and results of operations may be materially adversely affected.

We use models in various aspects of our business, including for pricing our extensions of credit, accounting determinations, risk management and other purposes and to assist with certain business decisions, and these models rely on many estimates and assumptions. The estimates and assumptions embedded in our models may prove to be inaccurate and furthermore our models

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may include deficiencies such as errors in coding or formulas, incorrect input or gathering of data, insufficient control over model changes and use of models other than for their intended purposes. If our models fail to accurately predict outcomes, we may not make appropriate business or financial decisions which could adversely impact our financial condition and results of operations and our capitalization as well as our relationships with regulators, customers and counterparties.

Lapses in internal controls including internal control over financial reporting could materially and adversely affect our operations, liquidity and/or reputation.
We have identified control deficiencies in our financial reporting process that constitute material weaknesses and for which remediation is still in process as of December 31, 2016. These control deficiencies contributed to the restatement of the audited consolidated financial statements in our previously filed Form 10-K for the year ended December 31, 2015. See Part II, Item 9A, Controls and Procedures in this Form 10-K. We have initiated certain measures, including the enhancement of our model framework and documentation process and increasing the number of employees on, and the expertise of, our financial reporting team, to remediate these weaknesses, and plan to implement additional appropriate measures as part of this effort.

There can be no assurance that we will be able to fully remediate our existing material weaknesses. Further, there can be no assurance that we will not suffer from other material weaknesses in the future. If we fail to remediate these material weaknesses or fail to otherwise maintain effective internal controls over financial reporting in the future, such failure could result in a material misstatement of our annual or quarterly financial statements that would not be prevented or detected on a timely basis and which could cause investors and other users to lose confidence in our financial statements, limit our ability to raise capital and have a negative effect on the trading price of our common stock. Additionally, failure to remediate the material weaknesses or otherwise failing to maintain effective internal controls over financial reporting may negatively impact our business, financial condition and results of operations, impair our ability to timely file our periodic reports with the SEC, subject us to additional litigation and regulatory actions and cause us to incur substantial additional costs in future periods relating to the implementation of remedial measures.

Internal control over financial reporting may not prevent or detect all errors or acts of fraud.

We maintain disclosure controls and procedures designed to ensure that we timely report information as specified in the rules and regulations of the SEC. We also maintain a system of internal control over financial reporting. However, these controls may not achieve, and in some cases have not achieved, their intended objectives. Control processes that involve human diligence and compliance, such as our disclosure controls and procedures and internal control over financial reporting, are subject to lapses in judgment and breakdowns resulting from human failures. Controls can also be circumvented by collusion or improper management override of such controls. Because of such limitations, there are risks that material misstatements due to error or fraud may not be prevented or detected, and that information may not be reported on a timely basis. The failure of our controls to be effective could have a material adverse effect on our business, financial condition, results of operations, and market for our common stock, and could subject us to regulatory scrutiny and penalties.

We have identified material weaknesses in internal control over financial reporting for which remediation is still in process as of December 31, 2016. Certain of these material weaknesses involved the design of controls and failure of controls to operate effectively, resulting in misstatements in our publicly filed financial statements. As a result, we restated the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015 and the unaudited financial statements included in certain of our previously filed Quarterly Reports on Form 10-Q.

If we are unable to effectively remediate and adequately manage our internal controls over financial reporting in the future, we may be unable to produce accurate or timely financial information. As a result, we may be unable to meet our ongoing reporting obligations or comply with applicable legal requirements, which could lead to the imposition of sanctions or further investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements could lead investors and other users to lose confidence in our financial data and could adversely affect our business and the trading price of our common stock. Significant deficiencies or material weaknesses in our internal controls over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain.

Failure to satisfy obligations associated with being a public company may have adverse regulatory, economic, and reputational consequences.

As a public company, we are required to prepare and file periodic reports containing our consolidated financial statements with the SEC, prepare and distribute other stockholder communications in compliance with our obligations under the federal securities laws and applicable stock exchange rules, evaluate and maintain our system of internal control over financial

36

reporting, and report on management’s assessment thereof, in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board (PCAOB); involve and retain outside legal counsel and accountants in connection with the activities listed above; maintain an investor relations function; and maintain internal policies, including those relating to disclosure controls and procedures.

We have previously failed to file our periodic reports timely with the SEC. On February 29, 2016, we filed an extension request under Rule 12b-25 with the SEC, resulting in the extension of the deadline for filing the Annual Report on Form 10-K (the Original Filing) from 60 days after the fiscal year-end (February 29, 2016) to 75 days after the fiscal-year end (March 15, 2016). We did not file the Form 10-K by the extended filing deadline. Further, on August 9, 2016, we filed an extension request under Rule 12b-25 with the SEC, resulting in the extension of the deadline for our Quarterly Report on Form 10-Q for the period ended June 30, 2016 from 40 days after the fiscal quarter-end (August 9, 2016) to 45 days after the fiscal quarter-end (August 15, 2016). We did not file this Form 10-Q by the extended filing deadline.

Among other consequences, our failure to file our Form 10-K and Form 10-Q by the extended filing deadlines results in the suspension of our eligibility to use Form S-3 registration statements until we have timely filed our SEC periodic reports for a period of twelve months, which may increase the time and resources we need to expend if we choose to access the public capital markets. 

Risks Related to our Common Stock

The market price of our common stock could decline due to the large number of outstanding shares of our common stock eligible for future sale.

Sales of substantial amounts of our common stock in the public market in future offerings, or the perception that these sales could occur, could cause the market price of our common stock to decline. These sales could also make it more difficult for us to sell equity or equity-related securities in the future, at a time and price that we deem appropriate. In addition, the sale of our common stock by our officers and directors or controlling stockholder in the public market, or the perception that such sales may occur, could cause the market price of our common stock to decline. We may issue shares of our common stock or other securities from time to time as consideration for, or to finance, future acquisitions and investments or for other capital needs. We cannot predict the size of future issuances of our shares or the effect, if any, that future sales and issuances of shares would have on the market price of our common stock. If any such acquisition or investment is significant, the number of ordinary shares or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial and may result in additional dilution to our shareholders. We may also grant registration rights covering shares of our common stock or other securities that we may issue in connection with any such acquisitions and investments.

The market price of our common stock may be volatile, which could cause the value of an investment in our common stock to decline.

The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including:

• general market conditions;
• domestic and international economic factors unrelated to our performance;
• actual or anticipated fluctuations in our quarterly operating results;
		
•	changes in or failure to meet publicly disclosed expectations as to our future financial performance or ability to pay dividends;	
		
•	downgrades in securities analysts' estimates of our financial performance or lack of research and reports by industry analysts;	
		
•	changes in market valuations or earnings of similar companies;	
		
•	any future sales of our common stock or other securities; and	
		
•	additions or departures of key personnel.	

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. For example, we are currently operating in, and have benefited from, a protracted period of historically low interest rates that will not be sustained indefinitely, and future fluctuations in interest rates could cause an increase in volatility of the market price of our common stock. These types of broad market fluctuations may adversely affect the trading price of our common stock. The existing and any potential future securities class action litigation against us could result in substantial costs, divert management’s attention and resources, and harm our business or results of operations.

37

Certain provisions of our amended and restated certificate of incorporation, and amended and restated bylaws, have anti-takeover effects, which could limit the price investors might be willing to pay in the future for our common stock. In addition, Delaware law may inhibit takeovers of us and could limit our ability to engage in certain strategic transactions our Board believes would be in the best interests of stockholders.

Certain provisions of our amended and restated certificate of incorporation, and amended and restated bylaws, could discourage unsolicited takeover proposals that stockholders might consider to be in their best interests. Among other things, our amended and restated certificate of incorporation, and amended and restated bylaws, include provisions that:

•	do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;	
		
•	limit the ability of our stockholders to nominate candidates for election to our Board;	
		
•	authorize the issuance of “blank check” preferred stock without any need for action by stockholders;	
		
•	limit the ability of stockholders to call special meetings of stockholders or to act by written consent in lieu of a meeting; and	
		
•	establish advance notice requirements for nominations for election to our Board or for proposing matters that may be acted on by stockholders at stockholder meetings.	

The foregoing factors, as well as the significant common stock ownership by SHUSA, could impede a merger, takeover, or other business combination, or discourage a potential investor from making a tender offer for our common stock, which, under certain circumstances, could reduce the market value of our common stock.

In addition, Section 203 of the Delaware General Corporation Law (DGCL) generally affects the ability of an “interested stockholder” to engage in certain business combinations, including mergers, consolidations, or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an “interested stockholder.” An “interested stockholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a corporation. We elected in our amended and restated certificate of incorporation not to be subject to Section 203 of the DGCL. However, our amended and restated certificate of incorporation contains provisions that have the same effect as Section 203, except that they provide that each of SHUSA and its successors and affiliates and certain of its direct transferees are not deemed to be “interested stockholders,” and, accordingly, are not subject to such restrictions as long as it and its affiliates own at least 10% of our outstanding shares of common stock.

Our common stock is subordinate to all of our existing and future indebtedness and any preferred stock, and effectively subordinated to all indebtedness and preferred equity claims against our subsidiaries.

Shares of our common stock are common equity interests in us and, as such, rank junior to all of our existing and future indebtedness and other liabilities. Additionally, holders of our common stock may become subject to the prior dividend and liquidation rights of holders of any classes or series of preferred stock that our Board may designate and issue without any action on the part of the holders of our common stock. Furthermore, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors and preferred stockholders.

SHUSA has significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of key transactions, including a change of control.

SHUSA owns approximately 58.8% of our common stock and, accordingly, has significant influence over us, including and pursuant to the terms of the shareholders agreement that was entered into among us and certain of our shareholders, including SHUSA and DDFS LLC (the Shareholders Agreement). Pursuant to the Shareholders Agreement, SHUSA has the right to nominate a majority of our directors, provided certain minimum share ownership thresholds are maintained. Further, because SHUSA owns a majority of our common stock, it has the power to elect our entire Board. Through our Board, and through functional reporting lines of SHUSA and SC management, SHUSA controls our policies and operations, including, among other things, the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock, the incurrence of debt by us, and the entering into of extraordinary transactions. Additionally, SHUSA may elect not to permit us to undertake certain actions or activities if SHUSA were to determine that such actions or activities could or would be viewed negatively by the FRBB or other regulators.

In addition, the Shareholders Agreement provides the directors nominated by SHUSA with approval rights over certain specific material actions taken by us, provided certain minimum share ownership thresholds are maintained. These material actions

38

include changes in material accounting policies, changes in material tax policies or positions and changes in our principal line of business.

We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

SHUSA owns a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

•	the requirement that our executive committee (which has the responsibilities under its charter of a nominating and governance committee) be composed entirely of independent directors; and	
		
•	the requirement that our compensation committee be composed entirely of independent directors.	

We utilize these exemptions. As a result, our compensation and executive committees are not composed entirely of independent directors. Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

SC currently has an open comment letter from the Division of Corporation Finance of the SEC on its Form 10-K for the fiscal year ended December 31, 2014, as filed on March 2, 2015, and Form 10-Q for the quarter ended September 30, 2015, as filed on October 29, 2015, with respect to estimating its credit loss allowance, including the removal of seasonality and the increase in TDR impairment during the quarterly period ended September 30, 2015, as well as certain TDR disclosures in such filings.

ITEM 2.    PROPERTIES
SC's corporate headquarters are located in Dallas, Texas, where it leases approximately 373,000 square feet of office and operations space pursuant to a lease agreement expiring in 2026 . The Company also leases a 200,000 square foot servicing facility in North Richland Hills, Texas, a 73,000 square foot servicing facility in Lewisville, Texas, a 43,000 and an adjacent 21,000 square foot servicing facility in Englewood, Colorado, a 3,000 square foot operation in Richardson, Texas, a 21,000 square foot servicing facility in San Juan, Puerto Rico, a 117,000 square foot servicing facility in Mesa, Arizona, a 2,000 square foot operations facility in Costa Mesa, California, a 3,000 square foot operations facility in Denton, Texas, and a 1,000 square foot operations facility in Aurora, CO under leases that expire at various dates through 2027 . Management believes the terms of the leases are consistent with market standards. For additional information regarding the Company’s properties refer to Note 11— "Commitments and Contingencies" in the Notes to Consolidated Financial Statements.

ITEM 3.    LEGAL PROCEEDINGS
Reference should be made to Note 11 to the Consolidated Financial Statements of the Company's 2016 Annual Report on Form 10-K for information regarding legal proceedings in which the Company is involved.

ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

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PART II
ITEM 5.    MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock began trading on the NYSE (under the symbol SC) on January 23, 2014. Prior to January 23, 2014, there was no established public trading market for the Company’s common stock. The approximate number of record holders of the Company’s common stock as of February 17, 2017 was 16 , although the Company estimates the number of beneficial stockholders to be much higher as many of its shares are held by brokers or dealers for their customers in street name.
The following table sets forth the high and low closing per share sales prices for the Company's common stock for the periods indicated:

			
 	High	Low	
Year Ended December 31, 2015	 	 	
First Quarter	$23.34	$17.85	
Second Quarter	$26.52	$22.38	
Third Quarter	$26.48	$20.22	
Fourth Quarter	$22.35	$15.15	
 	 	 	
Year Ended December 31, 2016	 	 	
First Quarter	$15.79	$8.87	
Second Quarter	$13.41	$9.69	
Third Quarter	$12.58	$9.90	
Fourth Quarter	$14.84	$10.93	
Dividends
The Company did not pay dividends in 2016 or 2015 and will not pay any future dividends until such time as the FRBB issues a written non-objection to SHUSA's capital plan or otherwise approves or gives a written non-objection to the payment of dividends by the Company. The Company currently intends to declare quarterly dividends when permitted by the FRBB; however, its Board may elect to limit the amount or payment of dividends on the basis of operational results, financial condition, liquidity requirements, and other factors deemed relevant by its Board. See Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation - Recent Developments and Other Factors Affecting SC's Results of Operations.

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Company Stock Performance
The following graph shows a comparison of cumulative stockholder return, calculated on a dividend reinvested basis, for the Company, the S&P 500 index, and the S&P 500 Financials index for the period from the Company's IPO date (January 23, 2014) through December 31, 2016 . The graph assumes $100 was invested in each of the Company's common stock, the S&P 500 index, and the S&P 500 Financials index as of market close on January 23, 2014. Historical stock prices are not necessarily indicative of future stock price performance.

Equity Compensation Plan Information
The Company has an Omnibus Incentive Plan, which enables it to grant awards of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units and other awards that may be settled in or based upon the value of 5,192,640 shares of its common stock. At December 31, 2016 , an aggregate of 3,093,493 shares were available for future awards under this plan.
The Company also manages its 2011 Management Equity Plan, under which eligible employees and directors were previously granted non-qualified stock options to purchase its common stock. Currently, no shares are available for issuance under this plan and, therefore, no future awards will be made under this plan.

Recent Sales of Unregistered Securities
None.

Issuer Purchases of Equity Securities
None.

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ITEM 6.    SELECTED FINANCIAL DATA

																				
 	Year Ended December 31,	
 	2016	 	2015	 	2014	 	2013	 	2012	
 	(Dollar amounts in thousands, except per share data)	
Income Statement Data	 	 	 	 	 	 	 	 	 	
Interest on individually acquired retail installment contracts	$	4,615,459		 	$	4,483,054		 	$	3,941,170		 	$	3,158,636		 	$	2,203,700		
Interest on purchased receivables portfolios	69,701		 	91,157		 	199,151		 	409,895		 	704,770		
Interest on receivables from dealers	3,718		 	4,537		 	4,814		 	6,663		 	7,177		
Interest on personal loans	337,912		 	453,081		 	348,278		 	128,351		 	—		
Interest on finance receivables and loans	5,026,790		 	5,031,829		 	4,493,413		 	3,703,545		 	2,915,647		
Net leased vehicle income	492,212		 	311,373		 	175,340		 	33,377		 	—		
Other finance and interest income	15,135		 	18,162		 	8,068		 	6,010		 	12,722		
Interest expense	807,484		 	628,791		 	523,203		 	408,787		 	377,258		
Net finance and other interest income	4,726,653		 	4,732,573		 	4,153,618		 	3,334,145		 	2,551,111		
Provision for credit losses on individually acquired retail installment contracts	2,471,490		 	2,433,617		 	2,101,744		 	1,506,107		 	958,671		
Increase (decrease) in impairment related to purchased receivables portfolios	(2,985	)	 	(13,818	)	 	(24,082	)	 	13,964		 	3,378		
Provision for credit losses on receivables from dealers	201		 	242		 	(416	)	 	1,090		 	—		
Provision for credit losses on personal loans	—		 	324,634		 	434,030		 	192,745		 	—		
Provision for credit losses on capital leases	(506	)	 	41,196		 	9,991		 	—		 	—		
Provision for credit losses	2,468,200		 	2,785,871		 	2,521,267		 	1,713,906		 	962,049		
Profit sharing	47,816		 	57,484		 	74,925		 	78,246		 	—		
Other income	93,546		 	421,643		 	559,902		 	312,578		 	281,317		
Operating expenses	1,143,472		 	1,021,249		 	996,193		 	706,264		 	523,903		
Income before tax expense	1,160,711		 	1,289,612		 	1,121,135		 	1,148,307		 	1,346,476		
Income tax expense	394,245		 	465,572		 	395,851		 	427,142		 	505,651		
Net income	766,466		 	824,040		 	725,284		 	721,165		 	840,825		
Noncontrolling interests	—		 	—		 	—		 	1,821		 	(7,737	)	
Net income attributable to Santander Consumer USA Holdings Inc. shareholders	$	766,466		 	$	824,040		 	$	725,284		 	$	722,986		 	$	833,088		
Share Data	 	 	 	 	 	 	 	 	 	
Weighted-average common shares outstanding	 	 	 	 	 	 	 	 	 	
Basic	358,280,814		 	355,102,742		 	348,723,472		 	346,177,515		 	346,164,717		
Diluted	359,078,337		 	356,163,076		 	355,722,363		 	346,177,515		 	346,164,717		
Earnings per share	 	 	 	 	 	 	 	 	 	
Basic	$	2.14		 	$	2.32		 	$	2.08		 	$	2.09		 	$	2.41		
Diluted	$	2.13		 	$	2.31		 	$	2.04		 	$	2.09		 	$	2.41		
Dividends declared per share	$	—		 	$	—		 	$	0.15		 	$	0.84		 	$	2.12		
Balance Sheet Data	 	 	 	 	 	 	 	 	 	
Finance receivables held for investment, net	$	23,481,001		 	$	23,367,788		 	$	23,911,649		 	$	21,347,861		 	$	16,288,244		
Finance receivables held for sale, net	2,123,415		 	2,859,575		 	46,586		 	81,956		 	—		
Goodwill and intangible assets	106,679		 	107,072		 	110,938		 	128,720		 	126,700		
Total assets	38,539,104		 	36,448,958		 	32,368,751		 	26,470,569		 	18,820,909		
Total borrowings	31,323,706		 	30,375,679		 	27,811,301		 	23,295,660		 	16,227,995		
Total liabilities	33,300,485		 	32,016,409		 	28,842,535		 	23,774,805		 	16,598,006		
Total equity	5,238,619		 	4,432,549		 	3,526,216		 	2,695,764		 	2,222,903		
Allowance for credit losses	3,421,767		 	3,218,208		 	2,945,608		 	2,129,488		 	1,428,034		

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 	Year Ended December 31,	
 	2016	 	2015	 	2014	 	2013	 	2012	
 	(Dollar amounts in thousands)	
Other Information	 	 	 	 	 	 	 	 	 	
Charge-offs, net of recoveries, on individually acquired retail installment contracts	$	2,257,849		 	$	1,795,771		 	$	1,464,107		 	$	985,093		 	$	495,031		
Charge-offs, net of recoveries, on purchased receivables portfolios	(17	)	 	(2,720	)	 	59,657		 	178,932		 	451,529		
Charge-offs, net of recoveries, on receivables from dealers	393		 	—		 	—		 	—		 	—		
Charge-offs, net of recoveries, on personal loans	—		 	673,294		 	264,720		 	13,395		 	—		
Charge-offs, net of recoveries, on capital leases	9,384		 	30,907		 	402		 	—		 	—		
Total charge-offs, net of recoveries	2,267,609		 	2,497,252		 	1,788,886		 	1,177,420		 	946,560		
End of period individually acquired retail installment contracts delinquent principal over 60 days	1,386,218		 	1,191,567		 	1,030,580		 	855,315		 	523,202		
End of period personal loans delinquent principal over 60 days	176,873		 	168,906		 	138,400		 	65,360		 	—		
End of period delinquent principal over 60 days	1,392,789		 	1,377,770		 	1,241,453		 	1,102,373		 	865,917		
End of period assets covered by allowance for credit losses	27,229,276		 	27,007,816		 	26,875,389		 	22,499,895		 	14,248,606		
End of period gross individually acquired retail installment contracts held for investment	27,127,973		 	26,863,946		 	24,555,106		 	21,238,281		 	14,186,712		
End of period gross personal loans	1,558,790		 	2,445,200		 	2,128,769		 	1,165,778		 	—		
End of period gross finance receivables and loans held for investment	27,427,578		 	27,368,579		 	27,721,744		 	24,542,911		 	18,655,497		
End of period gross finance receivables, loans, and leases held for investment	37,040,531		 	34,694,875		 	33,212,021		 	26,731,899		 	18,655,497		
Average gross individually acquired retail installment contracts	28,652,897		 	26,818,625		 	23,556,137		 	18,097,082		 	12,082,026		
Average gross purchased receivables portfolios	286,354		 	562,512		 	1,321,281		 	3,041,992		 	6,309,497		
Average Gross receivables from dealers	71,997		 	89,867		 	118,358		 	173,506		 	110,187		
Average Gross personal loans	1,413,440		 	2,229,080		 	1,505,387		 	425,229		 	—		
Average Gross capital leases	45,949		 	114,605		 	30,648		 	—		 	—		
Average Gross finance receivables and loans	30,470,637		 	29,814,689		 	26,531,811		 	21,737,809		 	18,501,710		
Average Gross finance receivables, loans, and leases	39,289,341		 	36,140,498		 	30,638,797		 	22,499,225		 	18,501,710		
Average managed assets	52,731,119		 	48,919,418		 	38,296,610		 	25,493,890		 	23,346,992		
Average total assets	37,944,529		 	35,050,503		 	29,827,722		 	22,561,866		 	18,461,069		
Average debt	31,330,686		 	29,699,885		 	26,158,708		 	19,675,851		 	15,677,522		
Average total equity	4,850,653		 	4,096,042		 	3,111,628		 	2,498,244		 	2,314,924		
Ratios	 	 	 	 	 	 	 	 	 	
Yield on individually acquired retail installment contracts	16.1	 %	 	16.7	 %	 	16.7	%	 	17.5	%	 	18.2	%	
Yield on purchased receivables portfolios	24.3	 %	 	16.2	 %	 	15.1	%	 	13.5	%	 	11.2	%	
Yield on receivables from dealers	5.2	 %	 	5.0	 %	 	4.1	%	 	3.8	%	 	6.5	%	
Yield on personal loans (1)	23.9	 %	 	20.3	 %	 	23.1	%	 	30.2	%	 	—		
Yield on earning assets (2)	14.1	 %	 	14.8	 %	 	15.3	%	 	16.6	%	 	15.8	%	
Cost of debt (3)	2.6	 %	 	2.1	 %	 	2.0	%	 	2.1	%	 	2.4	%	
Net interest margin (4)	12.0	 %	 	13.1	 %	 	13.6	%	 	14.8	%	 	13.8	%	
Expense ratio (5)	2.2	 %	 	2.1	 %	 	2.6	%	 	2.8	%	 	2.2	%	
Return on average assets (6)	2.0	 %	 	2.4	 %	 	2.4	%	 	3.2	%	 	4.6	%	
Return on average equity (7)	15.8	 %	 	20.1	 %	 	23.3	%	 	28.9	%	 	36.3	%	
Net charge-off ratio on individually acquired retail installment contracts (8)	7.9	 %	 	6.7	 %	 	6.2	%	 	5.4	%	 	4.1	%	
Net charge-off ratio on purchased receivables portfolios (8)	—		 	(0.5	)%	 	4.5	%	 	5.9	%	 	7.2	%	
Net charge-off ratio on receivables from dealers (8)	0.5	 %	 	—		 	—		 	—		 	—		
Net charge-off ratio on personal loans (8)	—		 	40.8	 %	 	17.6	%	 	3.2	%	 	—		
Net charge-off ratio (8)	7.8	 %	 	8.4	 %	 	6.7	%	 	5.4	%	 	5.1	%	
Delinquency ratio on individually acquired retail installment contracts held for investment, end of period (9)	5.1	 %	 	4.4	 %	 	4.2	%	 	4.0	%	 	3.7	%	
Delinquency ratio on personal loans, end of period (9)	11.3	 %	 	6.9	 %	 	6.5	%	 	5.6	%	 	—		
Delinquency ratio on loans held for investment, end of period (9)	5.1	 %	 	4.6	 %	 	4.5	%	 	4.5	%	 	4.6	%	
Equity to assets ratio (10)	13.6	 %	 	12.2	 %	 	10.9	%	 	10.2	%	 	11.8	%	
Tangible common equity to tangible assets (11)	13.4	 %	 	11.9	 %	 	10.6	%	 	9.7	%	 	11.2	%	
Common stock dividend payout ratio (12)	—		 	—		 	7.2	%	 	40.2	%	 	88.2	%	
Allowance ratio (13)	12.6	 %	 	11.9	 %	 	11.0	%	 	9.5	%	 	10.0	%	
Common Equity Tier 1 capital ratio (14)	13.4	 %	 	11.2	 %	 	n/a		 	n/a		 	n/a		

(1)	Includes finance and other interest income; excludes fees.	
		
(2)	“Yield on earning assets” is defined as the ratio of Total finance and other interest income, net of Leased vehicle expense, to Average gross finance receivables, loans and leases.	
		
(3)	“Cost of debt” is defined as the ratio of Interest expense to Average debt.	
		
(4)	“Net interest margin” is defined as the ratio of Net finance and other interest income to Average gross finance receivables, loans and leases.	
		
(5)	"Expense ratio" is defined as the ratio of Operating expenses to Average managed assets.	
		
(6)	“Return on average assets” is defined as the ratio of Net income to Average total assets.	
		
(7)	“Return on average equity” is defined as the ratio of Net income to Average total equity.	
		
(8)	“Net charge-off ratio” is defined as the ratio of Charge-offs on a recorded investment basis, net of recoveries, to average unpaid principal balance of the respective portfolio. Effective as of September 30, 2015, changes in the value of the personal lending portfolio driven by customer default activity are classified in net investment gains (losses) due to the classification of the portfolio as held for sale. As there was accordingly no charge-off activity on	

43

personal loans for the three months ended December 31, 2015, the annualized charge-off rate on personal loans reported as of September 30, 2015, has been used as the full-year charge-off rate. The average gross balance of personal loans used in the full-year charge-off rate was $2,201,551 . Additionally, the denominator of the aggregate Net charge-off ratios for the twelve months ended December 31, 2015, has been adjusted to $29,279,874 , to exclude personal lending balances for the three months ended December 31, 2015. During the year ended December 31, 2015, the Company recorded non-recurring impairment charges on finance receivables held for sale and on finance receivables sold during the period. The associated impairment was recorded through charge-off expense. The charge-off ratios for the year ended December 31, 2015, adjusted for these non-recurring impairments, are presented in the table below:

																								
 	Retail Installment Contracts Acquired Individually	 	Purchased Receivables	 	Personal Loans	 	Capital Lease	 	Receivables from
Dealers Held
for Investment	 	Total	
Charge-offs, net of recoveries	$	1,795,771		 	$	(2,720	)	 	$	673,294		 	$	30,907		 	$	—		 	$	2,497,252		
Less: Lower of cost or market adjustment upon transfer to held for sale	73,388		 	—		 	377,598		 	—		 	—		 	450,986		
Adjusted charge-offs net of recoveries	$	1,722,383		 	$	(2,720	)	 	$	295,696		 	$	30,907		 	$	—		 	$	2,046,266		
Average gross balance	$	26,818,625		 	$	562,512		 	$	2,201,551		 	$	114,605		 	$	89,867		 	$	29,279,874		
Adjusted charge-off ratio	6.4	%	 	(0.5	)%	 	17.9	%	 	27.0	%	 	—		 	7.0	%	

(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.	
		
(10)	"Equity to assets” is defined as the ratio of Total equity to Total assets,	
		
(11)	"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. The Company's Board utilizes this non-GAAP financial measure to assess and monitor the adequacy of its 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 is as follows:	

																				
 	Year Ended December 31,	
 	2016	 	2015	 	2014	 	2013	 	2012	
 	(Dollar amounts in thousands)	
Total equity	$	5,238,619		 	$	4,432,549		 	$	3,526,216		 	$	2,695,764		 	$	2,222,903		
  Deduct: Goodwill and intangibles	106,679		 	107,072		 	110,938		 	128,720		 	126,700		
Tangible common equity	$	5,131,940		 	$	4,325,477		 	$	3,415,278		 	$	2,567,044		 	$	2,096,203		
 	 	 	 	 	 	 	 	 	 	
Total assets	$	38,539,104		 	$	36,448,958		 	$	32,368,751		 	$	26,470,569		 	$	18,820,909		
  Deduct: Goodwill and intangibles	106,679		 	107,072		 	110,938		 	128,720		 	126,700		
Tangible assets	$	38,432,425		 	$	36,341,886		 	$	32,257,813		 	$	26,341,849		 	$	18,694,209		
 	 	 	 	 	 	 	 	 	 	
Equity to assets ratio	13.6	%	 	12.2	%	 	10.9	%	 	10.2	%	 	11.8	%	
Tangible common equity to tangible assets	13.4	%	 	11.9	%	 	10.6	%	 	9.7	%	 	11.2	%	

		
(12)	“Common stock dividend payout ratio” is defined as the ratio of Dividends declared per share of common stock to Earnings per share attributable to SC shareholders.	
		
(13)	“Allowance ratio” is defined as the ratio of Allowance for credit losses, which excludes impairment on purchased receivables portfolios and held-for-sale portfolios, to End of period assets covered by allowance for credit losses.	
		
(14)	"Common Equity Tier 1 Capital ratio" is a non-GAAP ratio defined as the ratio of Total common equity tier 1 capital to Total risk-weighted assets. The ratio was not reported prior to 2015 as it was implemented with the Basel III regulatory framework in 2015.	

								
 	Year ended December 31,	
 	2016	 	2015	
 	(Dollar amounts in thousands)	
Total equity	$	5,238,619		 	$	4,432,549		
  Deduct: Goodwill and other intangible assets, net of deferred tax liabilities	186,930		 	201,492		
  Deduct: Accumulated other comprehensive income, net	28,259		 	2,125		
Tier 1 common capital	$	5,023,430		 	$	4,228,932		
Risk weighted assets (b)	$	37,432,700		 	$	37,628,938		
Common Equity Tier 1 capital ratio	13.4	%	 	11.2	%	
		
(a)	CET1 is calculated under Basel III regulations required as of January 1, 2015.	
		
(b)	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 and the Bank's total Risk weighted assets.	

    

44

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

																						
 	Year Ended December 31,	
 	2016	 	2015	
 	(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	$	28,652,897		 	$	4,615,459		 	16.1	%	 	$	26,818,625		 	$	4,483,054		 	16.7	%	
Purchased receivables	286,354		 	69,701		 	24.3	%	 	562,512		 	91,157		 	16.2	%	
Receivables from dealers	71,997		 	3,718		 	5.2	%	 	89,867		 	4,537		 	5.0	%	
Personal loans	1,413,440		 	337,912		 	23.9	%	 	2,229,080		 	453,081		 	20.3	%	
Capital lease receivables	45,949		 	9,130		 	19.9	%	 	114,605		 	16,883		 	14.7	%	
Finance receivables held for investment, net	30,470,637		 	5,035,920		 	16.5	%	 	29,814,689		 	5,048,712		 	16.9	%	
Leased vehicles, net	8,818,704		 	492,212		 	5.6	%	 	6,325,809		 	311,373		 	4.9	%	
Other assets	2,118,235		 	6,005		 	0.3	%	 	1,867,879		 	1,279		 	0.1	%	
Allowance for credit losses	(3,463,047	)	 	—		 	—		 	(2,957,874	)	 	—		 	—		
Total assets	$	37,944,529		 	$	5,534,137		 	 	 	$	35,050,503		 	$	5,361,364		 	 	
Liabilities and equity	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Notes payable	$	31,330,686		 	$	807,484		 	2.6	%	 	$	29,699,885		 	$	628,791		 	2.1	%	
Other liabilities	1,763,190		 	—		 	—		 	1,254,576		 	—		 	—		
Total liabilities	33,093,876		 	807,484		 	 	 	30,954,461		 	628,791		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders' equity	4,850,653		 	—		 	 	 	4,096,042		 	—		 	 	
Total liabilities and equity	$	37,944,529		 	$	807,484		 	 	 	$	35,050,503		 	$	628,791		 	 	

45

		
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	
Background and 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 December 31, 2016 , approximately 58.8% ) 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 its 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, SC 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.
Under the terms of the Chrysler Agreement, certain standards were agreed to, including SC meeting specified escalating penetration rates for the first five years, and FCA treating SC 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 respective obligations under the agreement could result in the agreement being terminated. The targeted and actual penetration rates that the Company must meet under the terms of the Chrysler Agreement are as follows as of December 31, 2016 .

						
 	Program Year (a)	
 	1	2	3	4	5	
Retail	20%	30%	40%	50%	50%	
Lease	11%	14%	14%	14%	15%	
Total	31%	44%	54%	64%	65%	
 	 	 	 	 	 	
Actual Penetration (b)	30%	29%	26%	17%	—	
		
(a)	Each Program Year runs 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 and 3 are as of April 30, 2014, 2015 and 2016, respectively, the end date of each of those Program Years. Actual penetration rate shown for Program Year 4, which ends April 30, 2017, is as of December 31, 2016 .	
The target penetration rate as of April 30, 2016 (the end of the third year of the Chrysler Agreement) was 54% . The Company's actual penetration rate as of December 31, 2016 was 17% , which declined from 29% in December 2015. SC's penetration rate has been constrained due to a more competitive landscape and low interest rates, causing its subvented loan offers not to be materially more attractive than other lenders' offers. While the Company has not achieved the targeted penetration rates to date, Chrysler Capital continues to be a focal point of its strategy, SC 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. During the fourth quarter of 2015, SC partnered with FCA to roll out two new pilot programs, including a dealer rewards program and a nonprime subvention program. During the year ended December 31, 2016 , the Company originated more than $8.0 billion in Chrysler Capital loans which represented 49% of total retail installment contract originations, with an approximately even share between prime and non-prime, as well as more than $5.5 billion in Chrysler Capital leases. Additionally, substantially all of the leases originated by the Company during the year ended December 31, 2016 were made under the Chrysler Capital Agreement. Since its May 1, 2013 launch, Chrysler Capital has originated more than $38.0 billion in retail loans and $17.6 billion in leases, and facilitated the origination of $3.0 billion in leases and dealer loans for an affiliate. As of December 31, 2016, SC's auto retail installment contract portfolio consisted of $7.4 billion of Chrysler Capital loans which represents 32% of SC's auto retail installment contract portfolio.
SC also originates vehicle loans through a web-based direct lending program, purchase vehicle retail installment contracts from other lenders, and service 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. In October 2015, SC announced a planned exit from the personal lending business.

46

SC 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. SC typically retains servicing of loans and leases sold or securitized, and may also retains some residual risk in sales of leases. SC has also entered into an agreement with the buyer of its leases whereby SC will periodically sell charged-off loans.
Economic and Business Environment
The U.S. economy has continued its recovery during 2016 . According to the Bureau of Labor Statistics, unemployment declined from 5.0% at the beginning of the year to 4.7% as of December 31, 2016 . In December 2016, the Federal Reserve Board raised its federal funds rate by 25 basis points, to 50 - 75 basis points. The increase in interest rates was signaled by the Federal Reserve Board throughout 2016 and indicates that the economy continues to strengthen. The Federal Reserve Board has signaled that it will gradually increase the federal funds rate to maintain its objective of maximum employment and two percent inflation. The energy sector has stabilized after the market for oil bottomed out in January 2016 and has since continued to recover throughout the year.
The U.S. auto industry sold 17.5 million light-vehicles in 2016 , which was consistent with 2015 new light-vehicle sales and 68% over the number of new light-vehicles sold in 2009. However, vehicle finance companies saw increased pressure on their stock prices due to lower than expected December 2016 sales results. The material increase in vehicle sales since 2009 is expected to impact future recovery rates.

The following table shows the percentage of unpaid principal balance on SC's retail installment contracts by state concentration. Total unpaid principal balance of retail installment contracts held for investment was $27,358,147 and $27,223,768 at December 31, 2016 , and 2015 , respectively. 

						
 	December 31, 2016	 	December 31, 2015	
 	Unpaid Principal Balance on Retail Installment Contracts Held for Investment	
Texas	17	%	 	17	%	
Florida	13	%	 	13	%	
California	10	%	 	10	%	
Georgia	5	%	 	5	%	
Illinois	4	%	 	4	%	
North Carolina	4	%	 	4	%	
New York	4	%	 	4	%	
Pennsylvania	3	%	 	3	%	
Louisiana	3	%	 	3	%	
Ohio	2	%	 	3	%	
Arizona	2	%	 	3	%	
Other states	33	%	 	31	%	
 	100	%	 	100	%	

47

How SC Assesses its Business Performance

Net income, and the associated return on assets and equity, are the primary metrics by which the SC judges the performance of its business. Accordingly, the Company closely monitors the primary drivers of net income:
		
•	Net financing income — SC 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. In addition, external rate trends, including the Treasury swap curve and spot and forward rates are monitored.	
		
•	Net credit losses — SC 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. SC 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 SC'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 (losses) — SC'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. SC 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 — SC assesses its operational efficiency using the cost-to-managed assets ratio. SC 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, SC also closely monitors origination and sales volume along with APR and discounts (including subvention and net of dealer participation).

48

Recent Developments and Other Factors Affecting SC's Results of Operations
Personal Lending
As a result of the strategic evaluation of its personal lending portfolio, in the third quarter of 2015, SC began reviewing strategic alternatives for exiting the personal loan portfolios. In connection with this review, on October 9, 2015, the Company delivered a 90-day notice of termination of its loan purchase agreement with LendingClub. On February 1, 2016, SC completed the sale of substantially all LendingClub loans to a third-party buyer at an immaterial premium to par value. The portfolio was comprised of personal installment loans with an unpaid principal balance of $869 million as of the date of the sale.
The Company's other significant personal lending relationship is with Bluestem. SC continues to perform in accordance with the terms and operative provisions of the 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. These revolving loan portfolios are carried as held for sale in the Company's consolidated financial statements. Accordingly, SC has recorded $386 million during 2016 in lower-of-cost-or market adjustments on this portfolio, and there may be further such adjustments required in future periods' financial statements. SC is currently evaluating alternatives for the sale of the Bluestem portfolio, which had a carrying value of $1.1 billion at December 31, 2016.
Regulatory Restrictions
As further described above under Item 1 - Business - Dividend Restrictions of this Form 10-K, the FRBB objected to the capital plans SHUSA submitted, resulting in, among other consequences, SC's inability to pay dividends until such time as SHUSA has submitted to the FRBB a revised capital plan and the FRBB issues a written non-objection to such plan, or the FRBB otherwise issues its written non-objection to the payment of a dividend. Additionally, SHUSA is prohibited by a written agreement with the FRBB from allowing its non-wholly-owned non-bank subsidiaries, including SC, to declare or pay any dividend, or to make any capital distribution, without the prior written approval of the FRBB.
The Company expects to incur additional compliance costs related to regulatory compliance, including CCAR, as it invests in compliance capabilities. Costs of the process will include, but may not be limited to, personnel, IT systems, consultants and advisors, and legal costs. These costs, as well as other aspects of the current regulatory environment applicable to the Company (including dividend and growth restrictions), could limit the Company's earnings growth.
Chrysler Capital
Since May 1, 2013, SC has been the preferred provider for FCA’s consumer loans and leases and dealer loans under the terms of the ten-year Chrysler Agreement. Business generated under the terms of the Chrysler Agreement is branded as Chrysler Capital. In connection with entering into the Chrysler Agreement, SC paid FCA a $150 million upfront, non-refundable fee, which is being amortized over the ten-year term as an adjustment to finance and other interest income. SC has also executed an Equity Option Agreement with FCA, whereby FCA may elect to purchase an equity participation of any percentage in the Chrysler Capital portion of SC's business at fair market value.
Until January 31, 2017, the Company had a flow agreement with Bank of America whereby it was committed to sell a contractually determined amount of eligible Chrysler Capital loans to Bank of America on a monthly basis, depending on the amount and credit quality of eligible current month originations and prior month sales. On July 27, 2016, the flow agreement was amended to reduce the maximum commitment to sell eligible loans each month to $300,000 . On October 27, 2016, Bank of America notified the Company that it was terminating the flow agreement effective January 31, 2017, and accordingly, the flow agreement is now terminated. For loans sold, SC retains the servicing rights at contractually agreed-upon rates. The Company also 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 the time of sale. These servicer performance payments are limited to a dollar amount known at the time of sale and are not expected to be significant to the Company's total servicing compensation from the flow agreement. For the years ended December 31, 2016 and 2015 , SC sold $2.1 billion and $3.0 billion of loans under this agreement, respectively.
In June 2013, SC entered into a flow agreement with SBNA, whereby it provided the bank with the first right to review and assess dealer lending opportunities and, if SBNA elected, to provide the proposed financing. SC provided servicing on all loans originated under this arrangement. SC also received or paid a servicer performance payment if yields, net of credit losses, on the loans are higher or lower, respectively, than expected at origination. The agreement was terminated on October 1, 2014, and replaced with a revised arrangement. Under the revised terms, the servicing of all Chrysler Capital receivables from dealers, including receivables held by SBNA and by the Company, was transferred to SBNA. The agreement executed in connection with this transfer requires SC to permit SBNA first right to review and assess Chrysler Capital dealer lending opportunities, and requires SBNA to pay the Company a relationship management fee based upon the performance and yields of Chrysler Capital

49

dealer loans held by SBNA. Relationship management fee income for the years ended December 31, 2016 and 2015 , totaled $0.4 million and $7 million , respectively.
Until May 2015, SC 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 inclusion in its portfolio. SC provides servicing and received an origination fee on all leases originated under this agreement. Pursuant to the Chrysler Agreement, the Company pays FCA on behalf of SBNA for residual gains and losses on the flowed leases.
The Company has sold loans to CBP under terms of a flow agreement and predecessor sale agreements. The Company retains 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. On June 25, 2015, SC executed an amendment to the servicing agreement with CBP, which increased the servicing fee the Company receives, and reduced, effective from and after August 1, 2015, CBP's committed purchases of Chrysler Capital prime loans from a maximum of  $600 million  and a minimum of  $250 million  per quarter to a maximum of  $200 million  and a minimum of  $50 million  per quarter, as may be adjusted according to the agreement. During the years ended December 31, 2016 and 2015 , the Company sold $0.7 billion and $1.3 billion , respectively, to CBP under terms of this flow agreement and predecessor purchase agreements. In January 2016, the Company executed an amendment to the servicing agreement with CBP that decreased the servicing fee received on loans it sold to CBP under the flow agreement. On February 13, 2017, SC and CBP entered into a mutual agreement to terminate the flow agreement effective May 1, 2017.
During 2015, SC also entered into a flow agreement, including subsequent amendments, under which it is committed to selling charged off loan receivables in bankruptcy status.
The Company is currently seeking to enter into new flow agreements related to Chrysler Capital loans and leases with one or more parties; however, there can be no assurance that new flow agreements will be executed or that the new flow agreements will be on terms as favorable to prior agreements, including SC's prior flow agreements with Bank of America and CBP.
Other OEM Relationships
In April 2014, the Company executed an application transfer agreement with Nissan, whereby it provides non-prime retail auto financing through a turn-down program for new and used vehicles for Nissan’s customers and dealers in the U.S. During the years ended December 31, 2016 and 2015 , the Company originated $635 million and $800 million , respectively, under this agreement.
Our Reportable Segment
The Company has one reportable segment: Consumer Finance. This segment includes SC'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, RVs, and marine vehicles. It also includes the Company's personal loan and point-of-sale financing operations.

50

Volume
SC's originations of individually acquired loans and leases, including net balance increases on revolving loans, average APR, and discount during the year ended December 31, 2016 , 2015 , and 2014 have been as follows:

												
 	For the Year Ended	
 	December 31, 2016	 	December 31, 2015	 	December 31, 2014	
Retained Originations	(Dollar amounts in thousands)	
Retail installment contracts	$	12,726,912		 	$	16,692,229		 	$	13,531,801		
Average APR	15.7	%	 	16.9	%	 	15.6	%	
Average FICO® (a)	598		 	584		 	593		
Discount	0.5	%	 	1.8	%	 	2.8	%	
 		 	 	 	 	
Personal loans	$	199,424		 	$	887,483		 	$	1,182,171		
Average APR	25.1	%	 	21.2	%	 	20.1	%	
Discount	—		 	—		 	—		
 	 	 	 	 	 	
Receivables from dealers	$	—		 	$	—		 	$	25,515		
Average APR	—		 	—		 	4.1	%	
Discount	—		 	—		 	—		
 	 	 	 	 	 	
Leased vehicles	$	5,584,149		 	$	5,132,053		 	$	4,111,146		
 			 	 	 	 	
Capital leases	$	7,401		 	$	67,244		 	$	93,444		
Total originations retained	$	18,517,886		 	$	22,779,009		 	$	18,944,077		
 	 	 	 	 	 	
Sold Originations	 	 	 	 	 	
Retail installment contracts	$	3,573,658		 	$	5,419,730		 	$	6,049,653		
Average APR	4.3	%	 	4.2	%	 	4.8	%	
Average FICO® (b)	745		 	743		 	734		
 	 	 	 	 	 	
Receivables from dealers	$	—		 	$	—		 	$	8,724		
Average APR	—		 	—		 	5.3	%	
 	 	 	 	 	 	
Leased vehicles	$	—		 	$	—		 	$	369,114		
Total originations sold	$	3,573,658		 	$	5,419,730		 	$	6,427,491		
 	 	 	 	 	 	
Total SC originations	$	22,091,544		 	$	28,198,739		 	$	25,371,568		
 	 	 	 	 	 	
Facilitated Originations	 	 	 	 	 	
Receivables from dealers	$	—		 	$	—		 	$	392,920		
Leased vehicles	—		 	632,471		 	1,761,512		
Total originations facilitated for affiliates	$	—		 	$	632,471		 	$	2,154,432		
 	 	 	 	 	 	
Total originations (c)	$	22,091,544		 	$	28,831,210		 	$	27,526,000		
		
(a)	Unpaid principal balance excluded from the weighted average FICO score is $2.1 billion , $3.2 billion , and $2.1 billion for the years ended 2016, 2015, and 2014, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts $364 million , $650 million , and $693 million, respectively, were commercial loans.	
		
(b)	Unpaid principal balance excluded from the weighted average FICO score is $451 million , $647 million , and $534 million for the years ended 2016, 2015, and 2014, respectively, as the borrowers on these loans did not have FICO scores at origination. Of these amounts $86 million , $108 million , and $49 million, were commercial loans.	
		
(c)	Auto originations decreased in 2016 from 2015 due to our disciplined underwriting standards in a competitive market and increased competition with banks in the prime space.	

51

SC's originations of individually acquired retail installment contracts and leases by vehicle type during the years ended December 31, 2016 , 2015 and 2014 were as follows:

																		
 	Years Ended	
 	December 31,
2016	 	December 31,
2015	 	December 31,
2014	
 	(Dollar amounts in thousands)	
Retail installment contracts	 	 	 	 	 	 	 	 	
Car	$	6,878,899		42.2	%	 	$	10,061,801		45.5	%	 	$	8,552,542		43.7	%	
Truck and utility	8,187,007		50.2	%	 	10,454,371		47.3	%	 	9,605,457		49.1	%	
Van and other (a)	1,234,664		7.6	%	 	1,595,787		7.2	%	 	1,423,455		7.2	%	
 	$	16,300,570		100.0	%	 	$	22,111,959		100.0	%	 	$	19,581,454		100.0	%	
 	 	 	 	 	 	 	 	 	
Leased vehicles	 	 	 	 	 	 	 	 	
Car	$	668,442		12.0	%	 	$	717,040		14.0	%	 	$	947,686		21.2	%	
Truck and utility	4,294,803		76.9	%	 	3,975,547		77.5	%	 	3,159,588		70.5	%	
Van and other (a)	620,904		11.1	%	 	439,466		8.5	%	 	372,986		8.3	%	
 	$	5,584,149		100.0	%	 	$	5,132,053		100.0	%	 	$	4,480,260		100.0	%	
 	 	 	 	 	 	 	 	 	
Total originations by vehicle type	 	 	 	 	 	 	 	 	
Car	$	7,547,341		34.5	%	 	$	10,778,841		39.6	%	 	$	9,500,228		39.5	%	
Truck and utility	12,481,810		57.0	%	 	14,429,918		53.0	%	 	12,765,045		53.1	%	
Van and other (a)	1,855,568		8.5	%	 	2,035,253		7.4	%	 	1,796,441		7.4	%	
 	$	21,884,719		100.0	%	 	$	27,244,012		100.0	%	 	$	24,061,714		100.0	%	
		
(a)	Other primarily consists of commercial vehicles.	
SC's asset sales for the years ended December 31, 2016 , 2015 and 2014 were as follows:

												
 	For the Year Ended	
 	December 31, 2016	 	December 31, 2015	 	December 31, 2014	
 	(Dollar amounts in thousands)	
Retail installment contracts	$	3,694,019		 	$	7,862,520		 	$	6,620,620		
Average APR	4.2	%	 	7.2	%	 	4.8	%	
Average FICO®	746		 	704		 	734		
 	 	 	 	 	 	
Personal loans	$	869,349		 	$	—		 	$	—		
Average APR	17.9	%	 	—		 	—		
 	 	 	 	 	 	
Receivables from dealers	$	—		 	$	—		 	$	18,227		
Average APR	—		 	—		 	4.7	%	
 	 	 	 	 	 	
Leased vehicles	$	—		 	$	1,316,958		 	$	369,114		
Total asset sales	$	4,563,368		 	$	9,179,478		 	$	7,007,961		

52

The Company's portfolio of retail installment contracts held for investment and leases by vehicle type as of December 31, 2016 and 2015 are as follows:

												
 	December 31,
2016	 	December 31,
2015	
 	(Dollar amounts in thousands)	
Retail installment contracts	 	 	 	 	 	
Car	$	14,835,303		54.2	%	 	$	15,095,256		55.4	%	
Truck and utility	10,967,816		40.1	%	 	10,276,231		37.7	%	
Van and other (a)	1,555,028		5.7	%	 	1,852,281		6.9	%	
 	$	27,358,147		100.0	%	 	$	27,223,768		100.0	%	
 	 	 	 	 	 	
Leased vehicles	 	 	 	 	 	
Car	$	1,213,371		12.6	%	 	$	1,224,830		16.7	%	
Truck and utility	7,447,718		77.5	%	 	5,428,189		74.1	%	
Van and other (a)	951,864		9.9	%	 	673,277		9.2	%	
 	$	9,612,953		100.0	%	 	$	7,326,296		100.0	%	
 	 	 	 	 	 	
Total by vehicle type	 	 	 	 	 	
Car	$	16,048,674		43.4	%	 	$	16,320,086		47.2	%	
Truck and utility	18,415,534		49.8	%	 	15,704,420		45.5	%	
Van and other (a)	2,506,892		6.8	%	 	2,525,558		7.3	%	
 	$	36,971,100		100.0	%	 	$	34,550,064		100.0	%	
		
(a)	Other primarily consists of commercial vehicles.	
The unpaid principal balance, average APR, and remaining unaccreted discount of SC's held for investment portfolio as of December 31, 2016 and 2015 , are as follows:

								
 	December 31, 2016	 	December 31, 2015	
 	(Dollar amounts in thousands)	
Retail installment contracts (a)	$	27,358,147		 	$	27,223,768		
Average APR	16.4	%	 	16.8	%	
Discount	2.3	%	 	2.7	%	
 	 	 	 	
Personal loans	$	19,361		 	$	941		
Average APR	31.5	%	 	20.9	%	
Discount	—		 	—		
 	 	 	 	
Receivables from dealers	$	69,431		 	$	76,941		
Average APR	4.9	%	 	4.6	%	
Discount	—		 	—		
 	 	 	 	
Leased vehicles	$	9,612,953		 	$	7,326,296		
 	 	 	 	
Capital leases	$	31,872		 	$	66,929		
		
(a)	Of this balance as of December 31, 2016 , $10,123,168, $8,786,632, and $4,311,194 was originated in the years ended December 31, 2016 , 2015 , and 2014 , respectively.	

53

SC 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 SC continues to accrue interest until the loan becomes more than 90 days past due. SC 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 installment contracts using the effective yield method. SC 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. SC 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 such as unemployment rates. For loans within these portfolios that are classified as TDRs, impairment is measured based on the present value of expected future cash flows discounted at the
original effective interest rate.

The Company classifies most of its vehicle leases as operating leases. SC 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. SC records lease payments due from customers as income until and unless a customer becomes more than 60 days delinquent, at which time the accrual of revenue is discontinued and reversed. SC resumes and reinstates the accrual if a delinquent account subsequently becomes 60 days or less past due. SC 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. SC 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 years ended December 31, 2016 and 2015 . However, during the years ended December 31, 2016 and 2015, SC did recognize certain retail installment contracts with an unpaid principal balance of $466,050 and $95,596 , 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, SC 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.

54

Results of Operations
This MD&A should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this Report. The following table presents the Company's results of operations for the years ended December 31, 2016 , 2015 , and 2014 . 

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
 	(Dollar amounts in thousands)	
Interest on finance receivables and loans	$	5,026,790		 	$	5,031,829		 	$	4,493,413		
Leased vehicle income	1,487,671		 	1,037,793		 	651,590		
Other finance and interest income	15,135		 	18,162		 	8,068		
Total finance and other interest income	6,529,596		 	6,087,784		 	5,153,071		
Interest expense	807,484		 	628,791		 	523,203		
Leased vehicle expense	995,459		 	726,420		 	476,250		
Net finance and other interest income	4,726,653		 	4,732,573		 	4,153,618		
Provision for credit losses	2,468,200		 	2,785,871		 	2,521,267		
Net finance and other interest income after provision for credit losses	2,258,453		 	1,946,702		 	1,632,351		
Profit sharing	47,816		 	57,484		 	74,925		
Net finance and other interest income after provision for credit losses and profit sharing	2,210,637		 	1,889,218		 	1,557,426		
Total other income	93,546		 	421,643		 	559,902		
Total operating expenses	1,143,472		 	1,021,249		 	996,193		
Income before income taxes	1,160,711		 	1,289,612		 	1,121,135		
Income tax expense	394,245		 	465,572		 	395,851		
Net income	$	766,466		 	$	824,040		 	$	725,284		
 	 	 	 	 	 	
Net income	$	766,466		 	$	824,040		 	$	725,284		
Change in unrealized gains (losses) on cash flow hedges, net of tax	26,134		 	(1,428	)	 	6,406		
Comprehensive income	$	792,600		 	$	822,612		 	$	731,690		

55

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Interest on Finance Receivables and Loans

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Interest on individually acquired retail installment contracts	$	4,615,459		 	$	4,483,054		 	$	132,405		 	3	 %	
Interest on purchased receivables portfolios	69,701		 	91,157		 	(21,456	)	 	(24	)%	
Interest on receivables from dealers	3,718		 	4,537		 	(819	)	 	(18	)%	
Interest on personal loans	337,912		 	453,081		 	(115,169	)	 	(25	)%	
Total interest on finance receivables and loans	$	5,026,790		 	$	5,031,829		 	$	(5,039	)	 	—	 %	
Income from individually acquired retail installment contracts increased $132 million , or 3% , from 2015 to 2016 , consistent with the 7% growth in the average outstanding balance of SC's portfolio of these contracts and a shift in credit quality mix.
Income from purchased receivables portfolios decreased $21 million , or 24% , from 2015 to 2016 , due to the continued runoff of the portfolios, as the Company has made no portfolio acquisitions since 2012. The average balance of the portfolios decreased from $0.6 billion in 2015 to $0.3 billion , or 49% , in 2016 .
Income from personal loans decreased $115 million , or 25% , from 2015 to 2016 , less than the 37% decrease in the average outstanding portfolio, as the sale of the LendingClub loans in February 2016 left only the higher-yielding revolving loan portfolio. The average balance of the portfolios decreased from $2.2 billion in 2015 to $1.4 billion in 2016 .
Leased Vehicle Income and Expense

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Leased vehicle income	1,487,671		 	$	1,037,793		 	$	449,878		 	43	%	
Leased vehicle expense	995,459		 	726,420		 	269,039		 	37	%	
Leased vehicle income, net	$	492,212		 	$	311,373		 	$	180,839		 	58	%	
Leased vehicle income and expense increased significantly from prior year due to the continual growth in the portfolio since the Company launched Chrysler Capital in 2013. During the year ended December 31, 2016 , originations have continued to outpace the maturity (or runoff) of existing leases. Through the Chrysler Agreement, the Company receives manufacturer incentives on new leases originated under the program in the form of lease subvention payments, which are amortized over the term of the lease and reduce depreciation expense within Leased vehicle expense.
Interest Expense

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Interest expense on notes payable	$	754,687		 	$	561,750		 	$	192,937		 	34	 %	
Interest expense on derivatives	52,797		 	67,041		 	(14,244	)	 	(21	)%	
Total interest expense	$	807,484		 	$	628,791		 	$	178,693		 	28	 %	
Interest expense on notes payable increased $193 million , or 34% , from 2015 to 2016 , higher than the growth in average debt outstanding of 5% . The Company's cost of funds has increased due to higher market rates and wider spreads in 2016 .

56

Interest expense on derivatives decreased $14 million , or 21% , from 2015 to 2016 , primarily due to a decrease in the outstanding notional amounts on the Company's derivatives which was due to a favorable mark-to-market impact in 2016 versus an unfavorable mark-to-market impact in 2015 driven by interest rate changes.
Provision for Credit Losses

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Provision for credit losses on individually acquired retail installment contracts	$	2,471,490		 	$	2,433,617		 	$	37,873		 	2	 %	
Increase (decrease) in impairment related to purchased receivables portfolios	(2,985	)	 	(13,818	)	 	10,833		 	(78	)%	
Provision for credit losses on receivables from dealers	201		 	242		 	(41	)	 	(17	)%	
Provision for credit losses on personal loans	—		 	324,634		 	(324,634	)	 	(100	)%	
Provision for credit losses on capital leases	(506	)	 	41,196		 	(41,702	)	 	(101	)%	
Provision for credit losses	$	2,468,200		 	$	2,785,871		 	$	(317,671	)	 	(11	)%	
Provision for credit losses on the Company's individually acquired retail installment contracts increased $38 million , or 2% , from 2015 to 2016 , primarily due to unfavorable variances in net charge-offs which increased by $462 million . The increases in net charge-offs were primarily attributable to portfolio aging and mix shift, lower realized recovery rates, and smaller benefit from bankruptcy sales. The increases in net charge-offs were substantially offset by a smaller build of the allowance for credit losses primarily due to higher credit quality originations during 2016 as compared to 2015.
The change in impairment related to the purchased receivables portfolios was primarily attributable to a larger release of impairment on purchased receivables in 2015 compared to 2016 as the portfolios continued to run off.
Provision for credit losses on personal loans decreased $325 million , or 100% , from 2015 to 2016 , due to the reclassification of personal loans from held for investment to held for sale effective as of the end of the third quarter of 2015. Subsequent to the reclassification, personal loans are accounted for at the lower of cost or market, with the associated adjustments reported in investment gains (losses), net.
In early 2015, the Company ceased originations in the primary program that gave rise to the capital lease portfolio, and provisions for credit losses on this portfolio have decreased as the portfolio liquidates.
Profit Sharing

														
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Profit sharing	$	47,816		 	$	57,484		 	$	(9,668	)	 	(17)%	
Profit sharing consists of revenue sharing related to the Chrysler Agreement and profit sharing on personal loans originated pursuant to the Company's agreements with Bluestem. Profit sharing with Bluestem decreased in 2016 compared to 2015 , as in 2016 the Bluestem portfolio became more seasoned and increased delinquencies and charge-offs decreased the amount of payments due to Bluestem. This was partially offset by an increase in Chrysler Capital revenue sharing due to continued growth in the portfolio.

57

Other Income

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Investment gains (losses), net	$	(444,759	)	 	$	(95,214	)	 	$	(349,545	)	 	367	 %	
Servicing fee income	156,134		 	131,113		 	25,021		 	19	 %	
Fees, commissions, and other	382,171		 	385,744		 	(3,573	)	 	(1	)%	
Total other income	$	93,546		 	$	421,643		 	$	(328,097	)	 	(78	)%	
Average serviced for others portfolio	$	13,306,988		 	$	12,963,334		 	$	343,654		 	3	 %	
Investment losses, net increased $350 million , or 367% from 2015 to 2016 . Investment gains (losses), net for the years ended December 31, 2016 and 2015 , were as follows:

								
 	For the Year Ended December 31,	
 	2016	 	2015	
Gain (loss) on sale of loans and leases	$	(11,549	)	 	$	155,408		
Lower of cost or market adjustments	(423,616	)	 	(236,396	)	
Other losses and impairments	(9,594	)	 	(14,226	)	
 	$	(444,759	)	 	$	(95,214	)	
Gain (loss) on sale of loans and leases changed from a $155 million gain in 2015 to a $12 million loss in 2016. This change was driven primarily by two bulk lease sales executed in 2015 , whereas no such sales occurred in 2016 . Additionally, the off-balance sheet securitizations in 2015 resulted in gains on sale compared to losses from securitizations in 2016.

Lower of cost or market adjustments for the year ended December 31, 2016  included  $429 million in customer default activity and net favorable adjustments of  $14 million 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. Additionally, the Company had net unfavorable lower of cost or market adjustments on individually acquired retail installment contracts of  $9 million  during the year ended December 31, 2016 . This compares to lower of cost or market adjustments of $236 million on SC's personal lending portfolio during the year ended December 31, 2015 , which included $123 million related to customer defaults and $113 million related to other changes in the unpaid principal balance and market value of its held for sale portfolio.
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 increased 19% from 2015 to 2016, despite the decrease in the serviced for other portfolio, due to the greater proportion of lower credit quality, higher servicing fee assets in the portfolio in the current year, and the result of the sale during the third quarter of 2015 of residual interests in aged securitizations. The Company's serviced for others portfolio as of December 31, 2016 and 2015 , was as follows:

								
 	December 31,	
 	2016	 	2015	
 	(Dollar amounts in thousands)	
SBNA retail installment contracts	$	531,117		 	$	692,291		
SBNA leases	1,297,317		 	2,198,519		
Total serviced for related parties	1,828,434		 	2,890,810		
Chrysler Capital securitizations	2,472,757		 	2,663,494		
Other third parties	7,644,031		 	9,492,350		
Total serviced for third parties	10,116,788		 	12,155,844		
Total serviced for others portfolio	$	11,945,222		 	$	15,046,654		

58

Total Operating Expenses

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Compensation expense	$	498,224		 	$	434,041		 	$	64,183		 	15	%	
Repossession expense	293,355		 	241,522		 	51,833		 	21	%	
Other operating costs	351,893		 	345,686		 	6,207		 	2	%	
Total operating expenses	$	1,143,472		 	$	1,021,249		 	$	122,223		 	12	%	
Compensation expense increased by $64 million , or 15% , from 2015 to 2016 , primarily due to increased headcount as the Company continues to invest in enhancing the control and compliance functions. Repossession expense and other operating costs increased from 2015 to 2016 as a result of portfolio growth and higher gross losses.
Income Tax Expense

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Income tax expense	$	394,245		 	$	465,572		 	$	(71,327	)	 	(15	)%	
Income before income taxes	1,160,711		 	1,289,612		 	(128,901	)	 	(10	)%	
Effective tax rate	34.0	%	 	36.1	%	 	 	 	 	
The Company's effective tax rate decreased from 36.1% in 2015 to 34.0% in 2016 , primarily due to the decrease in pretax book income and the release of the valuation allowance for capital loss carryforwards.
Other Comprehensive Income

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2016	 	2015	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Change in unrealized gains (losses) on cash flow hedges, net of tax	$	26,134		 	$	(1,428	)	 	$	27,562		 	(1,930	)%	
The change in unrealized gains (losses) on cash flow hedges was primarily driven by the mark to market movement associated hedges entered into during 2016 which accounted for $21.2 million of gains.  Additionally, $6.4 million of the change in unrealized gains (losses) on cash flow hedges is due to the favorable movements in interest rates as a result of steepening of the forward LIBOR curve in 2016 relative to 2015.  SC pays fixed rate on interest rate swaps, as such, these movements resulted in a gain.

59

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Interest on Finance Receivables and Loans

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Interest on individually acquired retail installment contracts	$	4,483,054		 	$	3,941,170		 	$	541,884		 	14	 %	
Interest on purchased receivables portfolios	91,157		 	199,151		 	(107,994	)	 	(54	)%	
Interest on receivables from dealers	4,537		 	4,814		 	(277	)	 	(6	)%	
Interest on personal loans	453,081		 	348,278		 	104,803		 	30	 %	
Total interest on finance receivables and loans	$	5,031,829		 	$	4,493,413		 	$	538,416		 	12	 %	
Income from individually acquired retail installment contracts increased $542 million , or 14% , from 2014 to 2015 , consistent with the growth in the average outstanding balance of the Company's portfolio of these contracts.
Income from purchased receivables portfolios decreased $108 million , or 54% , from 2014 to 2015 due to the continued runoff of the portfolios, as the Company has made no portfolio acquisitions since 2012. The average balance of the portfolios decreased from $1.3 billion in 2014 to $0.6 billion in 2015 .
Income from personal loans increased from $105 million , or 30% , from 2014 to 2015 , less than the growth in the average outstanding portfolio of 48% due to increasing mix of installment loans, which are of higher average credit quality and bear a lower average interest rate than the Company's revolving loans. Similar trends, however, are not expected in future periods as a result of SC's decision in 2015 to reduce its exposure to personal loans on a prospective basis and to sell its existing personal lending portfolio. On October 9, 2015, SC delivered a 90-day notice of termination of a loan purchase agreement with LendingClub. Further, on February 1, 2016, the Company closed on a sale of assets from its personal lending portfolio to an unrelated third party, at an immaterial premium to par value. The portfolio was comprised solely of installment loans with an unpaid principal balance of approximately $900 million as of December 31, 2015.
Leased Vehicle Income and Expense

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Leased vehicle income	$	1,037,793		 	$	651,590		 	$	386,203		 	59	%	
Leased vehicle expense	726,420		 	476,250		 	250,170		 	53	%	
Leased vehicles income, net	$	311,373		 	$	175,340		 	$	136,033		 	78	%	
Leased vehicle income and expense increased significantly from prior year due to the continual growth in the portfolio since the Company launched Chrysler Capital in 2013. During the year ended December 31, 2015, originations have continued to outpace the maturity (or run-off) of existing leases. Through the Chrysler Agreement, SC receives manufacturer incentives on new leases originated under the program in the form of lease subvention payments, which are amortized over the term of the lease and reduce depreciation expense within Leased vehicle expense.
Interest Expense

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Interest expense on notes payable	$	561,750		 	$	476,338		 	$	85,412		 	18	%	
Interest expense on derivatives	67,041		 	46,865		 	20,176		 	43	%	
Total interest expense	$	628,791		 	$	523,203		 	$	105,588		 	20	%	

60

Interest expense on notes payable increased $85 million , or 18% , from 2014 to 2015 , more than the growth in average debt outstanding of 14%, due to an increase in the Company's cost of funds in 2015.
Interest expense on derivatives increased $20 million , or 43% , from 2014 to 2015 , primarily due to an increase in the outstanding notional amounts on the Company's derivatives and less favorable mark-to-market adjustments impacted by interest rate changes during 2015 . These effects were partially offset by the positive impact of the expiration of a total return swap during the year ended December 31, 2015.
Provision for Credit Losses

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Provision for credit losses on individually acquired retail installment contracts	$	2,433,617		 	$	2,101,744		 	$	331,873		 	16	 %	
Increase (decrease) in impairment related to purchased receivables portfolios	(13,818	)	 	(24,082	)	 	10,264		 	(43	)%	
Provision for credit losses on receivables from dealers	242		 	(416	)	 	658		 	(158	)%	
Provision for credit losses on personal loans	324,634		 	434,030		 	(109,396	)	 	(25	)%	
Provision for credit losses on capital leases	$	41,196		 	$	9,991		 	31,205		 	312	 %	
Provision for credit losses	$	2,785,871		 	$	2,521,267		 	$	264,604		 	10	 %	
Provision for credit losses on the Company's individually acquired retail installment contracts increased $332 million , or 16% , from 2014 to 2015 , primarily due to higher projected charge offs as mix shifted to a lower average credit quality. The ending 2015 held for investment portfolio was comprised of 88% of loans falling into the <640 FICO® band group as compared to 82% at the end of 2014. Additionally, during 2015, the percentage of the portfolio represented by loans to borrowers with limited credit experience increased, driving a qualitative adjustment to the allowance.
Change in incremental increase (decrease) in impairment related to purchased receivables portfolios resulted from the release of less impairment on purchased receivables as the portfolios continued to run off.
Provision for credit losses on personal loans decreased $109 million , or 25% , from 2014 to 2015 , due to the reclassification of personal loans from held for investment to held for sale effective as of the end of the third quarter of 2015. Subsequently, personal loans are accounted for at the lower of cost or market, with the associated adjustments reported in investment gains (losses), net.
The Company began recording provision for credit losses on capital leases in 2014 as it established a portfolio of leases classified as capital leases and began recording provision on these assets. In early 2015, the Company terminated the leasing relationship that gave rise to the majority of its capital lease portfolio and increased provisions as it observed deterioration in the performance of this liquidating portfolio.
Profit Sharing

														
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Profit sharing	$	57,484		 	$	74,925		 	$	(17,441	)	 	(23)%	
Profit sharing consists of revenue sharing related to the Chrysler Agreement and profit sharing on personal loans originated pursuant to the Company's agreements with Bluestem. Profit sharing with Bluestem decreased moderately in 2015 compared to 2014, as the Bluestem portfolio became more seasoned reflecting increased delinquencies, and charge-offs were recognized, resulting in a decrease in the amount of payments due to Bluestem. This was partially offset by an increase in Chrysler Capital revenue sharing due to continued growth in the portfolio and the addition of third party lease sales in 2015, as well as step-ups in the revenue sharing rate upon the April 30 anniversary of the Chrysler Agreement in 2014 and 2015.

61

Other Income

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Investment gains (losses), net	$	(95,214	)	 	$	113,147		 	$	(208,361	)	 	(184	)%	
Servicing fee income	131,113		 	72,627		 	58,486		 	81	 %	
Fees, commissions, and other	385,744		 	374,128		 	11,616		 	3	 %	
Total other income	$	421,643		 	$	559,902		 	$	(138,259	)	 	(25	)%	
Average serviced for others portfolio	$	12,963,334		 	$	7,595,071		 	$	5,368,263		 	71	 %	
Investment gains (losses), net changed from a $113 million gain in 2014 to a $95 million loss in 2015, primarily due to the reclassification of the personal lending portfolio to held for sale, effective as of the end of the third quarter of 2015. Investment gains (losses), net for the years ended December 31, 2015 and 2014, were as follows:

								
 	For the Year Ended December 31,	
 	2015	 	2014	
Gain (loss) on sale of loans and leases	$	155,408		 	$	113,147		
Lower of cost or market adjustments	(236,396	)	 	—		
Other losses and impairments	(14,226	)	 	—		
 	$	(95,214	)	 	$	113,147		
Gain on sale of loans and leases increased $42 million or 37% from $113 million in 2014 to $155 million in 2015. This increase was driven primarily by two bulk lease sales executed in 2015, whereas no such sales occurred in 2014. These bulk lease sales resulted in gains of $23 million.
The Company recorded lower of cost or market adjustments of $236 million on its personal lending portfolio subsequent to its designation as held for sale on September 30, 2015. These lower of cost or market adjustments included $123 million related to customer defaults and $113 million related to other changes in the unpaid principal balance and market value of SC's held for sale portfolio, determined at the portfolio level.
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 increased 81%, from 2014 to 2015, as the Company continued to grow its serviced portfolio through asset sales. The Company's serviced for others portfolio as of December 31, 2015 and 2014, was as follows:

								
 	December 31,	
 	2015	 	2014	
 	(Dollar amounts in thousands)	
SBNA retail installment contracts	$	692,291		 	$	896,300		
SBNA leases	2,198,519		 	1,989,967		
Total serviced for related parties	2,890,810		 	2,886,267		
Chrysler Capital securitizations	2,663,494		 	2,157,808		
Other third parties	9,492,350		 	5,215,076		
Total serviced for third parties	12,155,844		 	7,372,884		
Total serviced for others portfolio	$	15,046,654		 	$	10,259,151		

62

Total Operating Expenses

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Compensation expense	$	434,041		 	$	482,637		 	$	(48,596	)	 	(10	)%	
Repossession expense	241,522		 	201,017		 	40,505		 	20	 %	
Other operating costs	345,686		 	312,539		 	33,147		 	11	 %	
Total operating expenses	$	1,021,249		 	$	996,193		 	$	25,056		 	3	 %	
Compensation expense decreased by $49 million, or 10%, from 2014 to 2015, primarily due to the non-recurrence of $120 million in stock compensation and other IPO-related expenses recorded upon, and in connection with, the Company's IPO in January 2014, partly offset by increased headcount. Repossession expense and other operating costs increased from 2014 to 2015 as a result of portfolio growth. After adjusting for the IPO-related expenses in 2014, the Company's expense ratio decreased from 2.3% in 2014 to 2.1% in 2015.
Income Tax Expense

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Income tax expense	$	465,572		 	$	395,851		 	$	69,721		 	18	%	
Income before income taxes	1,289,612		 	1,121,135		 	168,477		 	15	%	
Effective tax rate	36.1	%	 	35.3	%	 	 	 	 	
The Company's effective tax rate increased from 35.3% in 2014 to 36.1% in 2015, primarily due to an increase in state taxes. SC's ownership of leased vehicles throughout the U.S. has changed its geographic earnings mix, thereby increasing the amount of income taxed in higher-rate states. This is offset by the small decrease in the valuation allowance in 2015 as compared to an increase in 2014. The prior year increase was attributable to capital loss carryforwards and state tax net operating loss carryforwards that are expected to expire unused.
Other Comprehensive Income

															
 	For the Year Ended	
 	December 31,	 	December 31,	 	Increase (Decrease)	
 	2015	 	2014	 	Amount	 	Percent	
 	(Dollar amounts in thousands)	
Change in unrealized gains (losses) on cash flow hedges, net of tax	$	(1,428	)	 	$	6,406		 	$	(7,834	)	 	(122	)%	
The change in unrealized gains (losses) on cash flow hedges was primarily driven by unfavorable interest rate movements in 2015 as compared to favorable interest rate movements in 2014.

63

Credit Quality
Loans and Other Finance Receivables
Non-prime loans comprise 83% of the Company's retail installment contract portfolio as of December 31, 2016 . SC 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 December 31, 2016 and 2015 :

												
 	December 31, 2016	
 	Retail Installment Contracts
Acquired
Individually	 	Receivables from
Dealers	 	Personal Loans	
 	(Dollar amounts in thousands)	
Unpaid principal balance	$	27,127,973		 	$	69,431		 	$	19,361		
Credit loss allowance	(3,411,055	)	 	(724	)	 	—		
Discount	(559,116	)	 	—		 	(7,721	)	
Capitalized origination costs and fees	61,922		 	—		 	632		
Net carrying balance	$	23,219,724		 	$	68,707		 	$	12,272		
Allowance as a percentage of unpaid principal balance	12.6	%	 	1.0	%	 	—		
Allowance and discount as a percentage of unpaid principal balance	14.6	%	 	1.0	%	 	39.9	%	

												
 	December 31, 2015	
 	Retail Installment Contracts
Acquired
Individually	 	Receivables from
Dealers	 	Personal Loans	
 	(Dollar amounts in thousands)	
Unpaid principal balance	$	26,863,946		 	$	76,941		 	$	941		
Credit loss allowance	(3,197,414	)	 	(916	)	 	—		
Discount	(722,701	)	 	—		 	—		
Capitalized origination costs and fees	60,234		 	—		 	—		
Net carrying balance	$	23,004,065		 	$	76,025		 	$	941		
Allowance as a percentage of unpaid principal balance	11.9	%	 	1.2	%	 	—		
Allowance and discount as a percentage of unpaid principal balance	14.6	%	 	1.2	%	 	—		

For retail installment contracts the Company acquired in pools 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 December 31, 2016 and 2015 :

								
 	December 31, 2016	 	December 31, 2015	
 	(In thousands)	
Outstanding balance	$	231,360		 	$	362,212		
Outstanding recorded investment, net of impairment	$	159,451		 	$	239,551		

64

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 December 31, 2016 and 2015 was as follows (dollar amounts in billions, totals may not foot due to rounding): 

																																
December 31, 2016	
Trade Lines (a)	 	1	 	2	 	3	 	4+	 	Total	
FICO	Months History	 	$	%	 	$	%	 	$	%	 	$	%	 	$	%	
No-FICO	<36	 	$	2.8		97	%	 	$	0.1		2	%	 	$	—		—		 	$	—		—		 	$	2.9		11	%	
	36+	 	0.5		37	%	 	0.2		19	%	 	0.1		11	%	 	0.4		33	%	 	1.2		4	%	
<540	<36	 	0.2		45	%	 	0.1		21	%	 	0.1		13	%	 	0.1		20	%	 	0.5		2	%	
	36+	 	0.2		3	%	 	0.3		6	%	 	0.3		6	%	 	4.7		85	%	 	5.5		20	%	
540-599	<36	 	0.3		38	%	 	0.2		21	%	 	0.1		15	%	 	0.2		26	%	 	0.8		3	%	
	36+	 	0.2		2	%	 	0.3		3	%	 	0.3		4	%	 	7.0		91	%	 	7.8		28	%	
600-639	<36	 	0.2		37	%	 	0.1		21	%	 	0.1		15	%	 	0.1		27	%	 	0.5		2	%	
	36+	 	0.1		1	%	 	0.1		2	%	 	0.1		2	%	 	4.0		95	%	 	4.3		16	%	
>640	<36	 	0.3		48	%	 	0.1		18	%	 	0.1		12	%	 	0.1		23	%	 	0.6		2	%	
	36+	 	—		1	%	 	0.1		2	%	 	0.1		2	%	 	3.1		96	%	 	3.3		12	%	
Total	 	$	4.8		18	%	 	$	1.6		6	%	 	$	1.3		5	%	 	$	19.7		72	%	 	$	27.4		100	%	
		
(a)	Trade lines represent the number of accounts or lines of credit at any financial institution at the time of origination	
.

																																
December 31, 2015	
Trade Lines	 	1	 	2	 	3	 	4+	 	Total	
FICO	Months History	 	$	%	 	$	%	 	$	%	 	$	%	 	$	%	
No-FICO	<36	 	$	3.0		97	%	 	$	0.1		3	%	 	$	—		—		 	$	—		—		 	$	3.1		11	%	
	36+	 	0.5		38	%	 	0.3		19	%	 	0.2		11	%	 	0.4		33	%	 	1.3		5	%	
<540	<36	 	0.3		48	%	 	0.1		21	%	 	0.1		12	%	 	0.1		19	%	 	0.6		2	%	
	36+	 	0.2		3	%	 	0.3		5	%	 	0.4		7	%	 	4.9		84	%	 	5.8		21	%	
540-599	<36	 	0.3		43	%	 	0.1		14	%	 	0.1		14	%	 	0.2		29	%	 	0.7		3	%	
	36+	 	0.2		3	%	 	0.3		4	%	 	0.3		4	%	 	7.0		91	%	 	7.7		28	%	
600-639	<36	 	0.2		43	%	 	0.1		19	%	 	0.1		14	%	 	0.1		24	%	 	0.4		1	%	
	36+	 	—		—		 	0.1		2	%	 	0.1		2	%	 	4.1		95	%	 	4.3		16	%	
>640	<36	 	0.2		57	%	 	0.1		14	%	 	—		10	%	 	0.1		18	%	 	0.4		1	%	
	36+	 	—		—		 	—		—		 	—		—		 	2.8		97	%	 	2.9		11	%	
Total	 	$	4.9		18	%	 	$	1.4		5	%	 	$	1.2		4	%	 	$	19.7		72	%	 	$	27.2		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 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, the required minimum payment is 50% of the scheduled payment. 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.

65

The following is a summary of delinquencies as of December 31, 2016 and 2015 : 

															
 	December 31, 2016	 	December 31, 2015	 	
 	Retail Installment Contracts Held for Investment (a)	 	Retail Installment Contracts Held for Investment (a)	 	
 	Dollars (in thousands)	 	Percent (b)	 	Dollars (in thousands)	 	Percent (b)	 	
Principal 31-60 days past due	$	2,749,147		 	10.0	%	 	$	2,485,428		 	9.1	%	 	
Delinquent principal over 60 days	1,392,789		 	5.1	%	 	1,208,864		 	4.5	%	 	
Total delinquent contracts	$	4,141,936		 	15.1	%	 	$	3,694,292		 	13.6	%	 	
		
(a)	Includes retail installment contracts acquired individually and purchased receivables portfolios.	
		
(b)	Percent of unpaid principal balance.	

As of December 31, 2016 and 2015 , there were no receivables from dealers that were 31 days or more delinquent. As of December 31, 2016 and 2015 , there were $33,886 and zero , respectively, of retail installment contracts held for sale that were 31 days or more delinquent.
Credit Loss Experience
The following is a summary of the Company's net losses and repossession activity on finance receivables for the years ended December 31, 2016 and 2015 :

												
 	For the Year Ended December 31,	
 	2016	 	2015	
 	Retail Installment Contracts Held for Investment	 	Retail Installment Contracts Held for Investment	 	Personal Loans (c)	
 	(Dollar amounts in thousands)	
Principal outstanding at period end	$	27,358,147		 	$	27,223,768		 	$	941		
Average principal outstanding during the period	$	27,540,110		 	$	26,512,419		 	$	2,229,080		
Number of receivables outstanding at period end	1,706,261		 	1,634,471		 	2,122		
Average number of receivables outstanding during the period	1,677,089		 	1,652,149		 	1,967,795		
Number of repossessions (a)	300,526		 	252,281		 	n/a		
Number of repossessions as a percent of average number of receivables outstanding	17.9	%	 	15.3	%	 	n/a		
Net losses (b)	$	2,257,832		 	$	1,793,051		 	$	673,294		
Net losses as a percent of average principal amount outstanding	8.2	%	 	6.8	%	 	30.2	%	
		
(a)	Repossessions are net of redemptions. The number of repossessions includes repossessions from the outstanding portfolio and from accounts already charged off.	
		
(b)	For the year ended December 31, 2015, net losses on retail installment contracts held for investment and personal loans include lower of cost or market adjustments of $73,388 and $377,598, respectively, which were charged off against the credit loss allowance.	
		
(c)	As of December 31, 2016 and 2015, substantially all of the Company's personal loans were classified as held for sale.	
The Company had charge-offs on receivables from dealers of $393 and zero for the years ended December 31, 2016 and 2015 , respectively. Net charge-offs on the capital lease receivables portfolio, which is in run-off, totaled $9,384 and $30,907 for the years ended December 31, 2016 and 2015 , respectively.
Deferrals and Troubled Debt Restructurings
In accordance with the Company's policies and guidelines, SC from time to time offers extensions (deferrals) to consumers on its retail installment contracts, whereby the consumer is allowed to defer 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, SC 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.

66

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.
The following is a summary of deferrals on the Company's retail installment contracts held for investment as of the dates indicated:

														
 	December 31, 2016	 	December 31, 2015	
 	(Dollar amounts in thousands)	
Never deferred	$	18,624,208		 	68.1	%	 	$	19,946,478		 	73.3	%	
Deferred once	4,428,467		 	16.2	%	 	3,923,705		 	14.4	%	
Deferred twice	2,110,758		 	7.7	%	 	1,660,482		 	6.1	%	
Deferred 3 - 4 times	2,130,140		 	7.8	%	 	1,639,092		 	6.0	%	
Deferred greater than 4 times	64,574		 	0.2	%	 	54,011		 	0.2	%	
Total	$	27,358,147		 	 	 	$	27,223,768		 	 	
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, SC 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 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.
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 SC'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 December 31, 2016 and 2015 of loans that have received these modifications and concessions:

								
 	December 31, 2016	 	December 31, 2015	
 	Retail Installment Contracts	
 	(Dollar amounts in thousands)	
Temporary reduction of monthly payment (a)	$	2,472,432		 	$	1,746,399		
Bankruptcy-related accounts	109,494		 	104,355		
Extension of maturity date	24,032		 	45,119		
Interest rate reduction	64,180		 	77,976		
Other (b)	1,388,060		 	59,179		
Total modified loans	$	4,058,198		 	$	2,033,028		
		
(a)	Reduces a customer's payment for a temporary time period (no more than six months)	
		
(b)	Of these modifications, $1.3 billion and $6 million at December 31, 2016 and 2015, respectively, are modifications related to our dealer mark-up and maximum buy-rate policies. These modifications are not classified as TDRs as they have been granted for a reason other than the borrower's financial difficulties.	

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A summary of the Company's recorded investment in TDRs as of the dates indicated is as follows:

								
 	December 31, 2016	 	December 31, 2015	
 	Retail Installment Contracts	
 	(Dollar amounts in thousands)	
Outstanding recorded investment	$	5,637,792		 	$	4,601,502		
Impairment	(1,611,295	)	 	(1,363,023	)	
Outstanding recorded investment, net of impairment	$	4,026,497		 	$	3,238,479		
A summary of the principal balance on the Company's delinquent TDRs as of the dates indicated is as follows:

								
 	December 31, 2016	 	December 31, 2015	
 	Retail Installment Contracts	
 	(Dollar amounts in thousands)	
Principal, 31-60 days past due	$	1,194,819		 	$	942,021		
Delinquent principal over 60 days	665,068		 	510,015		
Total delinquent TDR principal	$	1,859,887		 	$	1,452,036		
As of December 31, 2016 and 2015 , 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 summarizes the cumulative changes in the total outstanding recorded investment in TDRs, and its components, for retail installment contracts for the years ended December 31, 2016 and 2015 : 

								
 	For the Year Ended	
 	December 31, 2016	 	December 31, 2015	
 	(Dollar amounts in thousands)	
Balance — beginning of year	$	4,601,502		 	$	4,044,070		
New TDRs	3,419,990		 	3,445,103		
Charge-offs	(1,613,754	)	 	(1,280,884	)	
Repurchases (sales)	8,686		 	(473,054	)	
Paydowns	(771,693	)	 	(704,167	)	
Transfers to held for sale	(6,939	)	 	(429,566	)	
Balance — end of year	$	5,637,792		 	$	4,601,502		
For loans not classified as TDRs, the Company generally estimates an appropriate allowance for credit losses based on delinquency status, its historical loss experience, estimated values of underlying collateral, and various economic factors. Once a loan has been classified as a TDR, it is 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.  Due to this key distinction in accounting treatment, the coverage ratio is higher for TDRs in comparison to non-TDRs.

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The table below presents the Company’s allowance ratio for TDR and non-TDR individually acquired retail installment contracts as of December 31, 2016 and 2015 :

								
 	December 31, 2016	 	December 31, 2015	
 	(Dollar amounts in thousands)	
TDR - Unpaid principal balance	$	5,599,567		 	$	4,579,931		
TDR - Impairment	1,611,295		 	1,363,023		
TDR allowance ratio	28.8	%	 	29.8	%	
 		 	 	
Non-TDR - Unpaid principal balance	$	21,528,406		 	$	22,284,015		
Non-TDR - Allowance	1,799,760		 	1,834,391		
Non-TDR allowance ratio	8.4	%	 	8.2	%	
 		 	 	
Total - Unpaid principal balance	$	27,127,973		 	$	26,863,946		
Total - Allowance	3,411,055		 	3,197,414		
Total allowance ratio	12.6	%	 	11.9	%	

The Company's total allowance ratio on retail installment contracts increased from 11.9% in 2015 to 12.6% in 2016 due to the increased balance of loans classified as TDRs which take into consideration expected lifetime losses and, therefore, have a higher allowance ratio compared to non-TDR loans.
Liquidity Management, Funding and Capital Resources
The Company requires a significant amount of liquidity to originate and acquire loans and leases, and to service debt. SC funds its operations through lending relationships with 13 third-party banks and Santander and SHUSA, as well as through securitization 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. SC has more than $5.2 billion of stockholders’ equity that supports its access to the securitization markets, credit facilities, and flow agreements.
During the year ended December 31, 2016 , the Company completed on-balance sheet funding transactions totaling approximately $13 billion, including:
		
•	three securitizations on the SDART platform for $3.4 billion;	
		
•	issuances of retained bonds on the SDART platform for $429 million;	
		
•	three securitizations on the DRIVE, deeper nonprime platform, for $3.1 billion;	
		
•	a securitization on the CCART platform for $945 million;	
		
•	four private amortizing lease facilities for $1.4 billion;	
		
•	four private amortizing loan facilities for $1.7 billion; and	
		
•	nine top-ups of private amortizing lease facilities for $2 billion	
The Company also completed $4.6 billion in asset sales, including $2.8 billion in recurring monthly sales with its third party flow partners, an off-balance sheet CCART securitization of $886 million , and a sale of personal lending assets of $869 million . Additionally, SC completed several sales of charged off assets totaling $65 million in proceeds.

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As of December 31, 2016 , SC's debt consisted of the following:

				
Third party revolving credit facilities	$	6,739,817		
Related party revolving credit facilities	2,975,000		
     Total revolving credit facilities	9,714,817		
 	 	
Public securitizations	13,436,482		
Privately issued amortizing notes	8,172,407		
     Total secured structured financings	21,608,889		
Total debt	$	31,323,706		
Credit Facilities
Third-party Revolving Credit Facilities
Warehouse Facilities
The Company uses warehouse facilities to fund its originations. Each facility specifies the required collateral characteristics, collateral concentrations, credit enhancement, and advance rates. SC's warehouse facilities generally are backed by auto retail installment contracts and auto leases, in some cases, personal loans. These facilities generally have one- or two-year commitments, staggered maturities and floating interest rates. The Company maintains daily funding forecasts for originations, acquisitions, and other large outflows such as tax payments to balance the desire to minimize funding costs with liquidity needs.
The Company's warehouse facilities generally have net spread, delinquency, and net loss ratio limits. Generally, these limits are calculated based on the portfolio collateralizing the respective line; however, for two of SC's warehouse facilities, delinquency and net loss ratios are calculated with respect to the serviced portfolio as a whole. Failure to meet any of these covenants could trigger increased overcollateralization requirements or, in the case of limits calculated with respect to the specific portfolio underlying certain credit lines, result in an event of default under these agreements. If an event of default occurs under one of these agreements, the lenders could elect to declare all amounts outstanding under the impacted agreement to be immediately due and payable, enforce their interests against collateral pledged under the agreement, restrict the Company's ability to obtain additional borrowings under the agreement, and/or remove it as servicer. SC has never had a warehouse facility terminated due to failure to comply with any ratio or a failure to meet any covenant. A default under one of these agreements can be enforced only with respect to the impacted facility.
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 FCA retail financing. As of December 31, 2016 , there was an outstanding balance of $3.7 billion . 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 Facility

The Company also obtains financing through two investment management agreements whereby retained subordinate bonds are pledged on SC securitizations as collateral for repurchase agreements with various borrowers and at renewable terms ranging up to 365 days. As of December 31, 2016 , there was an outstanding balance of $743 million under these repurchase facilities.

Lines of Credit with Santander and Related Subsidiaries
Santander historically has provided, and continues to provide, SC with significant funding support in the form of committed credit facilities. Through its New York branch, Santander provides the Company with a $3 billion of long-term committed revolving credit facility. SHUSA provides SC with an additional $3.3 billion of committed revolving credit, $300 million of which is collateralized by residuals retained on SC's securitizations and $3 billion of which is unsecured. As of December 31, 2016 and 2015 , the Company had borrowed $3.0 billion and $2.6 billion , respectively, under the lines of credit with Santander and SHUSA.
The facilities offered through the New York branch are structured as three- and five-year floating rate facilities, with current commitment termination dates of December 2017 and 2018. These facilities currently permit unsecured borrowing and can also

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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.
Until March 4, 2016, when the facilities offered through the New York branch were lowered to $3.0 billion , the commitments from the branch totaled $4.5 billion . There was an average outstanding balance of $2.4 billion and $3.7 billion under these facilities during the twelve months ended December 31, 2016 and 2015 , respectively. The maximum outstanding balance during each period was $3.0 billion and $4.4 billion , respectively.
Until November 1, 2016, when the SHUSA commitments were increased to $3.3 billion , the commitments from SHUSA totaled $1.8 billion . The commitments from SHUSA consisted of a $300 million facility with an average outstanding balance of $300 million during the twelve months ended December 31, 2016 and 2015 ; the maximum outstanding balance during each of those years was $300 million . Additionally, the commitments from SHUSA included $3 billion of unsecured revolving credit which had an average outstanding balance of $3.3 million during the twelve months ended December 31, 2016 ; the maximum outstanding balance during 2016 was $200 million .
The Company also has derivative financial instruments with Santander and affiliates as counterparty with outstanding notional amounts of $7.3 billion and $13.7 billion at December 31, 2016 and 2015 , respectively. SC had a collateral overage on derivative liabilities with Santander and affiliates of $15 million and $21 million at December 31, 2016 and 2015 , respectively. Interest expense on these agreements includes amounts totaling $16 million , $58 million , and $44 million for the years ended December 31, 2016 , 2015 , and 2014 , respectively.
In August 2015, under a new agreement with Santander, the Company agreed to begin 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 SC'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 months ending balance. The guarantee fee will only be applicable 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 a duly executed counter-guaranty agreement. The Company recognized guarantee fee expense of $6.4 million and $2.3 million for the years ended December 31, 2016 and 2015, respectively.
Secured Structured Financings

The Company's secured structured financings consist of both public, SEC-registered securitizations, as well as private securitizations under Rule 144A of the Securities Act and privately issue amortizing notes.
The Company obtains long-term funding for its receivables through securitization in the ABS market. ABS provides an attractive source of funding due to the cost efficiency of the market, a large and deep investor base, and tenors that appropriately match the cash flows of the debt to the cash flows of the underlying assets. The term structure of a securitization generally locks in fixed rate funding for the life of the underlying fixed rate assets, and the matching amortization of the assets and liabilities provides committed funding for the collateralized loans throughout their terms. In certain cases, SC may choose to issue floating rate securities based on market conditions. Because of prevailing market rates, the Company did not issue ABS transactions in 2008 and 2009, but began issuing ABS again in 2010. SC has been the largest issuer of retail auto ABS since 2011 and has issued a total of more than $53 billion in retail auto ABS since 2010.
The Company executes each securitization transaction by selling receivables to securitization Trusts that issue ABS to investors. To attain specified credit ratings for each class of bonds, these securitization transactions have credit enhancement requirements in the form of subordination, restricted cash accounts, excess cash flow, and overcollateralization, whereby more receivables are transferred to the Trusts than the amount of ABS issued by the Trusts.
Excess cash flows result from the difference between the finance and interest income received from the obligors on the receivables and the interest paid to the ABS investors, net of credit losses and expenses. Initially, excess cash flows generated by the Trusts are used to pay down outstanding debt in the Trusts, increasing overcollateralization until the targeted percentage level of assets has been reached. Once the targeted percentage level of overcollateralization is reached and maintained, excess cash flows generated by the Trusts are released to SC as distributions from the Trusts. The Company also receives monthly servicing fees as servicer for the Trusts. SC's securitizations may require an increase in credit enhancement levels if Cumulative Net Losses, as defined in the documents underlying each ABS transaction, exceed a specified percentage of the pool balance. None of SC's securitizations have Cumulative Net Loss percentages above their respective limits.

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SC's on-balance sheet securitization transactions utilize bankruptcy-remote special purpose entities, which are considered VIEs and meet the requirements to be consolidated in the Company's financial statements. Following a securitization, the finance receivables and the notes payable related to the securitized retail installment contracts remain on the consolidated balance sheets. The Company recognizes finance and interest income as well as fee income on the collateralized retail installment contracts and interest expense on the ABS issued. SC also records a provision for credit losses to cover the estimate of inherent credit losses on the retail installment contracts. While these Trusts are consolidated in the Company's financial statements, these Trusts are separate legal entities. Thus, the finance receivables and other assets sold to these Trusts are legally owned by these Trusts, are available only to satisfy the notes payable related to the securitized retail installment contracts, and are not available to SC's creditors or its other subsidiaries.

ABS credit spreads began widening in the second half of 2015 and continued into early 2016.  However, beginning in second quarter of 2016 and through the end of the year, ABS credit spreads have improved through strong market demand. SC completed eight securitizations in 2016 , in addition to issuing several retained bonds on existing securitizations. The Company currently has 35 securitizations outstanding in the market with a cumulative ABS balance of approximately $14.4 billion . SC's securitizations generally have several classes of notes, with principal paid sequentially based on seniority and any excess spread distributed to the residual holder. SC generally retains the lowest bond class and the residual, except in the case of off-balance sheet securitizations, which are described further below. The Company uses the proceeds from securitization transactions to repay borrowings outstanding under its credit facilities, originate and acquire loans and leases, and for general corporate purposes. The Company generally exercises clean-up call options on its securitizations when the collateral pool balance reaches 10% of its original balance.
SC also periodically privately issues amortizing notes in transactions that are structured similarly to its public and Rule 144A securitizations but are issued to banks and conduits. SC's securitizations and private issuances are collateralized by vehicle retail installment contracts, loans and vehicle leases.
Flow Agreements

In addition to its credit facilities and secured structured financings, the Company has flow agreements in place for Chrysler Capital retail installment contracts and for charged off assets.
To manage the balance sheet and provide funding for the Company's originations, it has entered into flow agreements under which it will sell, or otherwise source to third parties, loans on a periodic basis. These loans are not on SC'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 flow agreements.
Off-Balance Sheet Financing

The Company periodically executes Chrysler Capital-branded securitizations under Rule 144A of the Securities Act. Because all of the notes and residual interests in these securitizations are issued to third parties, these transactions are recorded as true sales of the retail installment contracts securitized, and the sold assets are removed from its consolidated balance sheets. During the year ended December 31, 2016 , the Company executed one off-balance sheet securitization under the Chrysler Capital Auto Receivables Trust, (CCART) a securitization platform, selling $886 million of gross retail installment contracts.
During the year ended December 31, 2015, the Company sold residual interests in certain Trusts and certain retained bonds in those Trusts to an unrelated third party. SC received cash proceeds of $662 million for the year ended December 31, 2015, related to the sale of these residual interests and retained bonds. Each of these Trusts was previously determined to be a VIE. Prior to the sale of these residual interests, the Company consolidated the associated Trusts because it held a variable interest in each VIE and had determined that it was the primary beneficiary of the VIEs. The Company will continue to service the loans of these Trusts and may reacquire certain retail installment loans from the Trusts through the exercise of an optional clean-up call, as permitted through the respective servicing agreements. Although SC will continue to service the loans in the associated Trusts and, therefore, will have the power to direct the activities that most significantly impact the economic performance of the Trust, the Company concluded that it was no longer the primary beneficiary of the Trusts upon the sale of the its residual interests. As a result, SC deconsolidated the assets and liabilities of the corresponding Trusts upon their sale. Upon settlement of these transactions, the Company derecognized $1.9 billion in assets and $1.2 billion in notes payable and other liabilities of the Trust. For the year ended December 31, 2015, the sale of these interests resulted in a net decrease to provision for credit losses of $113 million , after giving effect to lower of cost or market adjustments of $73 million .

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During the year ended December 31, 2015, SC executed two bulk sales of leases with an aggregate depreciated net capitalized cost of $1.3 billion to a third party. Due to the accelerated depreciation permitted for tax purposes, these two sales generated large taxable gains that were deferred through a qualified like-kind exchange program. To qualify for this deferral, the Company was required to maintain the sale proceeds in escrow until reinvested in new lease originations. Because the sale proceeds also were needed to pay down the third party credit facilities on which SC had financed the leases prior to their sale, the Company increased borrowings on its related party credit facilities temporarily until the sale proceeds could be reinvested over the 180 days following each sale. Taxable gains related to proceeds not reinvested were recognized following the 180-day deferral period.
Cash Flow Comparison
SC has produced positive net cash from operating activities every year since 2003. The Company's investing activities primarily consist of originations and acquisitions of retail installment contracts. SC's financing activities primarily consist of borrowing, repayments of debt, and payment of dividends.

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
 	(Dollar amounts in thousands)	
Net cash provided by operating activities	$	4,473,117		 	$	3,909,706		 	$	3,894,518		
Net cash used in investing activities	$	(5,267,814	)	 	$	(7,715,212	)	 	$	(8,339,145	)	
Net cash provided by financing activities	$	935,984		 	$	3,791,242		 	$	4,467,253		
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Net cash provided by operating activities increased from $3.9 billion for the year ended December 31, 2015 to $4.5 billion for the year ended December 31, 2016 , as there was a $1.5 billion decrease in outflows for originations of assets held for sale and a $265 million increase in non-cash net expenses, which was partially offset by a decrease of $757 million of proceeds from sales of assets held for sale, and a $131 million net decrease in cash due to a non-recurring $377 million tax refund in 2015 and a decrease in cash outflows from operation expenses, partially offset by an increase in collections.
Net cash used in investing activities decreased by $2.4 billion from the year ended December 31, 2015 to the year ended December 31, 2016 , primarily due to a $4.0 billion decrease in outflows for originations of loans held for investment, partially offset by a $1.4 billion decrease in proceeds from sale of loans held for investment and a $447 million increase in purchases of leased vehicles.
Net cash provided by financing activities decreased by $2.9 billion from the year ended December 31, 2015 to the year ended December 31, 2016 , primarily due to $2.8 billion lower net proceeds from borrowings, as the Company decreased its use of off-balance sheet sales to finance originations.

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Net cash provided by operating activities remained consistent at $3.9 billion from the year ended December 31, 2014 to the year ended December 31, 2015 , as the $1.5 billion increase in outflows for originations of assets held for sale was offset by $610 million in proceeds from sales of these assets, a $481 million increase in non-cash net expenses and a $470 million net increase from changes in assets and liabilities, primarily comprised of a $377 million swing in tax payments from a net payment in 2014 to a net refund in 2015.
Net cash used in investing activities decreased by $624 million from the year ended December 31, 2014 to the year ended December 31, 2015 , primarily due to:

•	a $1.5 billion increase in proceeds from sale of leased vehicles, as leases originated under the Chrysler Capital program beginning in 2013 began to reach maturity in 2015, and	
		
•	an $896 million increase in collections on finance receivables held for investment, as the Company's portfolio grew.	

These increased inflows were partly offset by:

•	a $1.2 billion in increased outflows for originations of leases and loans held for investment, and	
		
•	$636 million lower proceeds from sale of loans held for investment, due to the classification of more loans as held for sale upon origination.	

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Net cash provided by financing activities decreased by $676 million from the year ended December 31, 2014 to the year ended December 31, 2015 , primarily due to $798 million lower net proceeds from borrowings, as the Company increased its use of off-balance sheet sales to finance originations, partly offset by the impact of $63 million in increased proceeds from employee stock option exercises and the payment of no dividends in 2015 after paying $52 million in 2014.

Contingencies and Off-Balance Sheet Arrangements

Lending Arrangements

The Company is obligated to make purchase price holdback payments to a third-party originator of loans that it purchases on a periodic basis when losses are lower than originally expected. SC is also obligated to make total return settlement payments to this third-party originator in 2017 if returns on the purchased loans are greater than originally expected. These obligations are accounted for as derivatives.
The Company has extended revolving lines of credit to certain auto dealers. Under these arrangements, SC is committed to lend up to each dealer’s established credit limit. At December 31, 2016 , there was an outstanding balance of $2.5 million and a committed amount of $2.9 million .
Under terms of agreements with LendingClub, the Company was previously committed to purchase, at a minimum, the lesser of $30,000 per month or 50% of the lending platform company’s aggregate "near-prime" (as that term is defined in the agreements) originations. This commitment could be reduced or canceled with 90 days' notice. In October 2015, SC gave notice of termination of its agreement with LendingClub, and, accordingly, ceased originations on this platform in January 2016.
In April 2013, SC entered into certain agreements with Bluestem. The terms of the agreements include a commitment by the Company to purchase new advances originated by Bluestem, along with existing balances on accounts with new advances, for an initial term ending in April 2020 and, based on an amendment in June 2014, renewable through April 2022 at Bluestem'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. The Company is required to make a monthly profit-sharing payment to Bluestem. Although SC has classified loans originated under this agreement as held for sale, it continues to perform in accordance with the terms and operative provisions of these agreements. The Company expects seasonal origination volumes to remain consistent with historical trends.
In April 2014, SC entered into an application transfer agreement with Nissan, whereby it has the first opportunity to review for its own portfolio any credit applications turned down by Nissan's captive finance company. The agreement does not require the Company to originate any loans, but for each loan originated the Company will pay Nissan a referral fee, comprised of a volume bonus fee and a loss betterment bonus fee. The loss betterment bonus fee will be calculated annually and is based on the amount by which losses on loans originated under the agreement are lower than an established percentage threshold.
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.
Flow Agreements

SC's retail installment contract flow agreements with Bank of America and CBP may require the Company to make servicer performance or loss-sharing payments. These agreements relate to the Company's Chrysler Capital relationship and are described in Recent Developments and Other Factors Affecting SC's Results of Operations .
Credit Enhancement Arrangements
In connection with the sale of retail installment contracts to securitization trusts, the Company has made standard representations and warranties customary to the consumer finance industry. Violations of these representations and warranties may require SC to repurchase loans previously sold. As of December 31, 2016 , 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.

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Chrysler Agreement-related Contingencies
Throughout the ten-year term of the Chrysler Agreement, SC is obligated to make quarterly payments to FCA representing a percentage of gross profits earned from a portion of the Chrysler Capital consumer loan and lease platform. The Company is also obligated to make quarterly payments to FCA sharing residual gains on leases in quarters in which the Company experiences lease terminations with gains over a specified percentage threshold.
Contractual Obligations
The Company leases its headquarters in Dallas, Texas, servicing centers in Texas, Colorado, Arizona, and Puerto Rico, and operations facilities in California, Texas and Colorado under non-cancelable operating leases that expire at various dates through 2027.
The following table summarizes SC's contractual obligations as of December 31, 2016 :

																				
 	Less than 1 year	 	1-3
years	 	3-5
years	 	More than
5 years	 	Total	
 	(In thousands)	
Operating lease obligations	$	11,992		 	$	25,564		 	$	25,945		 	$	56,794		 	$	120,295		
Notes payable - revolving facilities	3,017,452		 	6,697,365		 	—		 	—		 	9,714,817		
Notes payable - secured structured financings	1,878,807		 	5,018,578		 	9,782,700		 	4,972,792		 	21,652,877		
Contractual interest on debt	674,403		 	641,601		 	145,151		 	26,741		 	1,487,896		
 	$	5,582,654		 	$	12,383,108		 	$	9,953,796		 	$	5,056,327		 	$	32,975,885		
Risk Management Framework
SC has established a Board-approved Governance Framework that outlines governance principles organized into the following sections: strategic plan; risk identification and assessment; risk appetite; delegation of authority, decision making and accountability; risk management, risk taking and risk ownership; oversight and controls; monitoring, reporting and escalation; incentive compensation; and shared services. SC also uses three lines of defense risk governance structure that assigns responsibility for risk management among front-line business personnel, an independent risk management function, and internal audit. The Chief Risk Officer (CRO), who reports to the CEO and to the Risk Committee of the Board and is independent of any business line, is responsible for developing and maintaining a risk framework designed to ensure that risks are appropriately identified and mitigated, and for reporting on the overall level of risk in the Company. The CRO is also accountable to SHUSA's Chief Risk Officer.
The Risk Committee is charged with responsibility 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 Risk Committee meets no less often than quarterly and is chartered to assist the Board in promoting the best interests of the Company by overseeing policies, procedures and risk practices relating to enterprise-wide risk and compliance with regulatory guidance. Members of the Risk Committee are individuals whose experiences and qualifications can lead to broad and informed views on risk matters facing the Company and the financial services industry, including, but not limited to, risk matters that address credit, market, liquidity, operational, compliance, legal and other general business conditions. A comprehensive risk report is submitted by the CRO to the Risk Committee and to the Board at least quarterly providing management’s view of the Company's risk position.
In addition to the Board and the Risk Committee, the CEO and CRO delegate risk responsibility to management committees. These committees include the Asset Liability Committee and the Enterprise Risk Management (ERM) Committee. The CRO participates in each of these committees.
Additionally, the Company has established an Enterprise Risk Management (ERM) function and implemented a Board-approved Framework to manage risks across the organization in a comprehensive, consistent and effective fashion, enabling the firm to achieve its strategic priorities, including its business plan, within its expressed risk appetite. Accordingly, ERM implemented the Board-approved Enterprise Risk Appetite Framework through which ERM developed SC's Risk Appetite Statement, which details the type of risk and size of risk-taking activities permissible in the course of executing business strategy.

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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. SC 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. SC'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 using information such as FICO ® , debt-to-income ratio, loan-to-value ratio, and more than 30 other predictive factors, placing the applicant in one of 100 pricing tiers. The Company continuously maintains and adjusts the pricing in each tier 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 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 SC'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 SC 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 to provide loans and leases to SC's customers. The Company's gross interest rate spread, which is the difference between the income earned through the interest and finance charges on SC's finance receivables and lease contracts and the interest paid on SC's funding, will be negatively affected if the expense incurred on SC's borrowings increases at a faster pace than the income generated by SC 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. SC generates financing receivables which are predominantly fixed rate and borrow with a mix of fixed rate and variable rate funding. To the extent that the Company's asset and liability re-pricing characteristics are not effectively matched, the Company may utilize interest rate derivatives, such as interest rate swap agreements, to manage to the desired risk tolerance. As of December 31, 2016 , the notional value of SC's interest rate swap agreements was $8.9 billion . SC 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, SC may enter into a second interest rate cap (Back-to-Back).  As of December 31, 2016 the notional value of SC’s interest rate cap agreements was $18.9 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 December 31, 2016 , the twelve-month impact of a 100 basis point parallel increase in the interest rate curve would decrease SC's net interest income by $59 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 December 31, 2016 , the impact of a 100 basis point parallel increase in the interest rate curve would decrease SC's MVE by $104 million .
Collateral Risk
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 SC has elected not to purchase residual value insurance at the present time, the Company's residual risk is somewhat mitigated by the residual risk-sharing agreement with FCA. The Company also utilizes industry data, including the ALG benchmark for residual values, and employ a team of individuals experienced in forecasting residual values.

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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 SC's debt is nearly entirely serviced by collections on consumer receivables, the Company's primary liquidity risk relates to the ability to continue to grow the business through the funding of originations. The Company has a robust liquidity policy in place to manage this risk. The liquidity policy establishes the following guidelines:

•	that SC maintains at least eight external credit providers (as of December 31, 2016 , it had fourteen);	
		
•	that SC relies on Santander and affiliates for no more than 30% of its funding (as of December 31, 2016 , Santander and affiliates provided 9.48% of its funding);	
		
•	that no single lender's commitment should comprise more than 33% of the overall committed external lines (as of December 31, 2016 , the highest single lender's commitment was 21.37% (not including repo) );	
		
•	that no more than 35% of SC's debt mature in the next six months and no more than 65% of SC debt mature in the next twelve months (as of December 31, 2016 , only 6.48% and 9.59% , respectively, of its debt is scheduled to mature in these timeframes); and	
		
•	that SC maintains 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 December 31, 2016 , SC had twelve-month rolling unused capacity of $7.1 billion ).	
The Company's liquidity policy also requires that SC'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 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 reduce its reliance on borrowings under funding commitments from Santander and SHUSA. Additionally, SC can reduce originations to significantly lower levels if necessary during times of limited liquidity.
The Company has established a qualified like-kind exchange program to defer tax liability on gains on sale of vehicle assets at lease termination. If SC 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 SC to remain in compliance with the program requirements.
Operational Risk
SC is exposed to operational risk loss arising from failures in the execution of our 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 Third Party Risk Management, Business Continuity Management, Information Risk 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 compliance monitoring 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. SC 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

77

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.
A significant operational error related to distribution of principal on a securitization occurred in 2014. Principal payments that should have been made pro rata to the Class A-2-A and Class A-2-B notes of the SDART 2013-5 transaction instead were made solely to Class A-2-A notes on two consecutive monthly distribution dates. This transaction was the first SC securitization in several years that featured a class of notes with subclasses that were to receive principal payments pro rata. To correct the error, the Company amended the transaction documents to allow for a deposit of approximately $71 million to the securitization trust for distribution to the Class A-2-B noteholders. This action, which had no material impact on SC's consolidated results of operations, brought the respective note balances of the Class A-2-A and Class A-2-B notes into parity and increased overcollateralization on the transaction. Additionally, the Company has implemented enhanced processes and controls to ensure payment distributions accurately reflect the legal documentation and transaction structure going forward.
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 certain judgments and assumptions, on the basis of information available at the time of the financial statements, in determining accounting estimates used in the preparation of these statements. The Company's significant accounting policies are described in Note 1 to the Consolidated Financial Statements; critical accounting estimates are described in this section. An accounting estimate is considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from the Company's judgments and assumptions, then it may have an adverse impact on the results of operations, financial condition, and cash flows. SC's management has discussed the development, selection, and disclosure of these critical accounting estimates with the Audit Committee of the Board, and the Audit Committee has reviewed the Company's disclosure relating to these estimates.
Credit Loss Allowance
The Company maintains a credit loss allowance (the allowance) for SC's held-for-investment portfolio, excluding those loans measured at fair value in accordance with applicable accounting standards. For loans not classified as TDRs, the allowance is maintained at a level estimated to be adequate to absorb losses of recorded investment inherent in the portfolio, based upon a holistic assessment including both quantitative and qualitative considerations. For impaired loans, including those classified as TDRs, the allowance is comprised of impairment measured using a discounted cash flow model.
The quantitative framework is supported by credit models that consider several credit quality indicators including, but not limited to, historical loss experience and current portfolio trends. The credit models utilized differ among the Company's individually acquired retail installment contracts, personal loans, capital leases and receivables from dealers. The credit models are adjusted by management through qualitative reserves to incorporate information reflective of the current business environment.
Management uses the qualitative framework to exercise judgment about matters that are inherently uncertain and that are not considered by the quantitative framework. These adjustments are documented and reviewed through the Company's risk management processes. Furthermore, management reviews, updates, and validates its process and loss assumptions on a periodic basis. This process involves an analysis of data integrity, review of loss and credit trends, a retrospective evaluation of actual loss information to loss forecasts, and other analyses.
Accretion of Discounts and Subvention on Retail Installment Contracts
Finance receivables held for investment consist largely of nonprime automobile finance receivables, which are primarily acquired individually from dealers at a nonrefundable discount from the contractual principal amount. The Company also pays dealer participation on certain receivables. The amortization of discounts, subvention payments from manufacturers, and other origination costs are recognized as adjustments to the yield of the related contracts. The Company applies significant assumptions including prepayment speeds in estimating the accretion rates used to approximate effective yield.

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Valuation of Automotive Lease Assets and Residuals
The Company has significant investments in vehicles in SC's operating lease portfolio. In accounting for operating leases, management must make a determination at the beginning of the lease contract of the estimated realizable value (i.e., residual value) of the vehicle at the end of the lease. Residual value represents an estimate of the market value of the vehicle at the end of the lease term, which typically ranges from two to four years. At contract inception, the Company determines the projected residual value based on an internal evaluation of the expected future value. This evaluation is based on a proprietary model using internally-generated data that is compared against third party, independent data for reasonableness. The customer is obligated to make payments during the term of the lease for the difference between the purchase price and the contract residual value plus a finance charge. However, since the customer is not obligated to purchase the vehicle at the end of the contract, the Company is exposed to a risk of loss to the extent the value of the vehicle is below the residual value estimated at contract inception. Management periodically performs a detailed review of the estimated realizable value of leased vehicles to assess the appropriateness of the carrying value of lease assets.

To account for residual risk, the Company depreciates automotive operating lease assets to estimated realizable value on a straight-line basis over the lease term. The estimated realizable value is initially based on the residual value established at contract inception. Periodically, the Company revises the projected value of the lease vehicle at termination based on current market conditions, and other relevant data points, and adjusts depreciation expense appropriately over the remaining term of the lease. Impairment of the operating lease asset is assessed upon the occurrence of a triggering event. Triggering events are systemic, observed events impacting the used vehicle market, such as shocks to oil and gas prices, that may indicate impairment of the operating lease asset. Impairment is determined to exist if the expected undiscounted cash flows generated from the operating lease assets are less than the carrying value of the operating lease assets. If the operating lease assets are impaired, they are written down to their fair value as estimated by discounted cash flows. The Company has taken no such impairment charges.

The Company's depreciation methodology for operating lease assets considers management's expectation of the value of the vehicles upon lease termination, which is based on numerous assumptions and factors influencing used vehicle values. The critical assumptions underlying the estimated carrying value of automotive lease assets include: (1) estimated market value information obtained and used by management in estimating residual values, (2) proper identification and estimation of business conditions, (3) SC's remarketing abilities, and (4) automotive manufacturer vehicle and marketing programs. Changes in these assumptions could have a significant impact on the value of the lease residuals. Expected residual values include estimates of payments from automotive manufacturers related to residual support and risk-sharing agreements, if any. To the extent an automotive manufacturer is not able to fully honor its obligation relative to these agreements, the Company's depreciation expense would be negatively impacted.
Provision for Income Taxes
In determining taxable income, the Company must make certain estimates and judgments. These estimates and judgments affect the calculation of certain tax liabilities and the determination of the recoverability of certain of the deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense.
The Company's largest deferred tax liability is leased vehicles.  This liability is primarily due to the acceleration of depreciation and the deferral of tax gains through like-kind exchange transactions on the leased auto portfolio.  For years subsequent to 2012, SC has generated a taxable loss also primarily due to accelerated depreciation and deferral of tax gains on the leased auto portfolio.  The tax losses generated in 2013 and 2014 were carried back to offset prior year tax liabilities.  The tax losses generated in 2015 and 2016 are available to offset future taxable income.
Because the volume of the Company's loan sales exceeds the “negligible sales” exception under section 475 of the Internal Revenue Code, the Company is classified as a dealer in securities for tax purposes. Accordingly, the Company must report its finance receivables and loans at fair value in the SC's tax returns. Changes in the fair value of SC's receivables and loans portfolios have a significant impact on the size of deferred tax assets and liabilities. Estimated fair value is dependent on key assumptions including prepayment rates, expected recovery rates, charge off rates and timing, and discount rates.
In evaluating the Company's ability to recover deferred tax assets, the Company considers all available positive and negative evidence including past operating results and the Company's forecast of future taxable income. In estimating future taxable income, the Company develops assumptions including the amount of future pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage SC's underlying businesses.

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Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management records the effect of a tax rate or law change on the Company's deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material effect on the Company's results of operations, financial condition or cash flows.
In addition, the calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in the United States (including Puerto Rico). The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on estimates of whether, and the extent to which, additional taxes will be due in accordance with the authoritative guidance regarding the accounting for uncertain tax positions. The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. If the Company's estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.
For additional information regarding the Company's provision for income taxes, refer to Note 10 to the Consolidated Financial Statements.
Fair Value of Financial Instruments
The Company uses fair value measurements to determine fair value adjustments to certain instruments and fair value disclosures. Refer to Note 15 to the Consolidated Financial Statements for a description of valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models, and significant assumptions utilized. The Company follows the fair value hierarchy set forth in Note 15 to the Consolidated Financial Statements in order to prioritize the inputs utilized to measure fair value. The Company reviews and modifies, as necessary, the fair value hierarchy classifications on a quarterly basis. As such, there may be reclassifications between hierarchy levels due to changes in inputs to the valuation techniques used to measure fair value.
The Company has numerous internal controls in place to ensure the appropriateness of fair value measurements. Additionally, a number of internal controls are in place to ensure the fair value measurements are reasonable, including controls over the inputs into and the outputs from the fair value measurements. Certain valuations will also be benchmarked to market indices when appropriate and available.
Considerable judgment is used in forming conclusions from market observable data used to estimate the Company's Level 2 fair value measurements and in estimating inputs to the Company's internal valuation models used to estimate Level 3 fair value measurements. Level 3 inputs such as interest rate movements, prepayment speeds, credit losses, recovery rates and discount rates are inherently difficult to estimate. Changes to these inputs can have a significant effect on fair value measurements. Accordingly, the Company's estimates of fair value are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
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 “Recent Accounting Pronouncements.”
Market Data
Market data used in this Form 10-K has been obtained from independent industry sources and publications, such as the Federal Reserve Bank of New York; the Federal Reserve Bank of Philadelphia; the Federal Reserve Board; The Conference Board; the CFPB; Equifax Inc.; Experian Automotive; FCA; Fair Isaac Corporation; FICO® Banking Analytics Blog; Polk Automotive; the United States Department of Commerce: Bureau of Economic Analysis; J.D. Power; and Ward’s Automotive Reports. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements in this Form 10-K.
For purposes of this Form 10-K, the Company categorizes the prime segment as borrowers with FICO® scores of 640 and above and the non-prime segment as borrowers with FICO® scores below 640.
Other Information
Further information on risk factors can be found under Part II, Item 1A - “Risk Factors.” 

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ITEM 7(A).	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	
Incorporated by reference from Part II, Item 7 - “Management’s Discussion and Analysis of Financial Conditions and Results of Operations —Risk Management Framework” above.

		
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	
INDEX TO FINANCIAL STATEMENTS

		
	Page	
Reports of Independent Registered Public Accounting Firms	82	
Consolidated Balance Sheets	84	
Consolidated Statements of Income and Comprehensive Income	86	
Consolidated Statements of Equity	87	
Consolidated Statements of Cash Flow	88	
Notes to Consolidated Financial Statements	89	

81

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Santander Consumer USA Holdings Inc.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statement of income and comprehensive income, equity and cash flows present fairly, in all material respects, the financial position of Santander Consumer USA Holdings Inc. and its subsidiaries at December 31, 2016, and the results of their operations and their cash flows for the year ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because of the material weaknesses in internal control over financial reporting related to deficiencies in the Control Environment, Risk Assessment, Control Activities and Monitoring and additional material weaknesses in the Company’s application of effective interest method for accretion; methodology to estimate credit loss allowance;   loans modified as TDRs; development, approval, and monitoring of models used to estimate the credit loss allowance; identification, governance, and monitoring of models used to estimate accretion; the review of new, unusual or significant transactions; the review of financial statement disclosures; and the preparation and review of the consolidated statement of cash flows. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2016 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas
February 28, 2017

82

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Santander Consumer USA Holdings Inc.
Dallas, Texas
 
We have audited the accompanying consolidated balance sheet of Santander Consumer USA Holdings Inc. and subsidiaries (the "Company") as of December 31, 2015, and the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the two years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

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

As discussed in Note 19 to the consolidated financial statements, the accompanying 2015 and 2014 consolidated financial statements have been restated to correct misstatements.

/s/ Deloitte & Touche LLP
 
Dallas, Texas
February 28, 2017 (October 27, 2016 as to the effects of the restatement discussed in Note 19)

83

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)

								
 	December 31,
2016	 	December 31,
2015	
Assets	 	 	 	
Cash and cash equivalents - $98,536 and zero held at affiliates, respectively	$	160,180		 	$	18,893		
Finance receivables held for sale, net	2,123,415		 	2,859,575		
Finance receivables held for investment, net	23,481,001		 	23,367,788		
Restricted cash — $11,629 and $39,436 held at affiliates, respectively	2,757,299		 	2,236,329		
Accrued interest receivable	373,274		 	395,387		
Leased vehicles, net	8,564,628		 	6,497,310		
Furniture and equipment, net of accumulated depreciation of $47,365 and $50,409, respectively	67,509		 	58,007		
Federal, state and other income taxes receivable	87,352		 	267,636		
Related party taxes receivable	1,087		 	71		
Goodwill	74,056		 	74,056		
Intangible assets, net of amortization of $33,652 and $28,422, respectively	32,623		 	33,016		
Due from affiliates	31,270		 	58,599		
Other assets	785,410		 	582,291		
Total assets	$	38,539,104		 	$	36,448,958		
Liabilities and Equity	 	 	 	
Liabilities:	 	 	 	
Notes payable — credit facilities	$	6,739,817		 	$	6,902,779		
Notes payable — secured structured financings	21,608,889		 	20,872,900		
Notes payable — related party	2,975,000		 	2,600,000		
Accrued interest payable	33,346		 	22,544		
Accounts payable and accrued expenses	379,021		 	413,269		
Federal, state and other income taxes payable	—		 	2,462		
Deferred tax liabilities, net	1,278,064		 	881,225		
Due to affiliates	50,620		 	58,148		
Other liabilities	235,728		 	263,082		
Total liabilities	33,300,485		 	32,016,409		
Commitments and contingencies (Notes 6 and 11)		 		
Equity:	 	 	 	
Common stock, $0.01 par value — 1,100,000,000 shares authorized;	 	 	 	
358,987,689 and 358,014,870 shares issued and 358,907,550 and 357,945,865 shares outstanding, respectively	3,589		 	3,579		
Additional paid-in capital	1,657,611		 	1,644,151		
Accumulated other comprehensive income, net	28,259		 	2,125		
Retained earnings	3,549,160		 	2,782,694		
Total stockholders’ equity	5,238,619		 	4,432,549		
Total liabilities and equity	$	38,539,104		 	$	36,448,958		
See notes to audited consolidated financial statements.

84

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)

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

								
 	December 31,
2016	 	December 31,
2015	
Assets	 	 	 	
Restricted cash	$	2,087,177		 	$	1,842,877		
Finance receivables held for sale, net	1,012,277		 	1,539,686		
Finance receivables held for investment, net	22,919,312		 	22,658,626		
Leased vehicles, net	8,564,628		 	6,497,310		
Various other assets	686,253		 	630,017		
Total assets	$	35,269,647		 	$	33,168,516		
Liabilities	 	 	 	
Notes payable	$	31,659,203		 	$	30,611,019		
Various other liabilities	91,234		 	85,844		
Total liabilities	$	31,750,437		 	$	30,696,863		

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

85

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollar amounts in thousands, except per share data)

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Interest on finance receivables and loans	$	5,026,790		 	$	5,031,829		 	$	4,493,413		
Leased vehicle income	1,487,671		 	1,037,793		 	651,590		
Other finance and interest income	15,135		 	18,162		 	8,068		
Total finance and other interest income	6,529,596		 	6,087,784		 	5,153,071		
Interest expense — Including $119,277, $162,353, and $141,381 to affiliates, respectively	807,484		 	628,791		 	523,203		
Leased vehicle expense	995,459		 	726,420		 	476,250		
Net finance and other interest income	4,726,653		 	4,732,573		 	4,153,618		
Provision for credit losses	2,468,200		 	2,785,871		 	2,521,267		
Net finance and other interest income after provision for credit losses	2,258,453		 	1,946,702		 	1,632,351		
Profit sharing	47,816		 	57,484		 	74,925		
Net finance and other interest income after provision for credit losses and profit sharing	2,210,637		 	1,889,218		 	1,557,426		
Investment gains (losses), net — Including $346, ($5,654), and $4,917 from affiliates, respectively	(444,759	)	 	(95,214	)	 	113,147		
Servicing fee income — Including $16,733, $16,453, and $21,930 from affiliates, respectively	156,134		 	131,113		 	72,627		
Fees, commissions, and other — Including $900, $9,331, and $25,985, from affiliates, respectively	382,171		 	385,744		 	374,128		
Total other income	93,546		 	421,643		 	559,902		
Compensation expense	498,224		 	434,041		 	482,637		
Repossession expense	293,355		 	241,522		 	201,017		
Other operating costs — Including $2,480, $9,195, and $829, to affiliates, respectively	351,893		 	345,686		 	312,539		
Total operating expenses	1,143,472		 	1,021,249		 	996,193		
Income before income taxes	1,160,711		 	1,289,612		 	1,121,135		
Income tax expense	394,245		 	465,572		 	395,851		
Net income	$	766,466		 	$	824,040		 	$	725,284		
 	 	 	 	 	 	
Net income	$	766,466		 	$	824,040		 	$	725,284		
Other comprehensive income (loss):	 	 	 	 	 	
Change in unrealized gains (losses) on cash flow hedges, net of tax of $15,647, $872, and $3,814, respectively	26,134		 	(1,428	)	 	6,406		
Comprehensive income	$	792,600		 	$	822,612		 	$	731,690		
Net income per common share (basic)	$	2.14		 	$	2.32		 	$	2.08		
Net income per common share (diluted)	$	2.13		 	$	2.31		 	$	2.04		
Dividends declared per common share	$	—		 	$	—		 	$	0.15		
Weighted average common shares (basic)	358,280,814		 	355,102,742		 	348,723,472		
Weighted average common shares (diluted)	359,078,337		 	356,163,076		 	355,722,363		

See notes to audited consolidated financial statements.

86

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except per share amounts)

																							
 	Common Stock	 	Additional
Paid-In
Capital	 	Accumulated
Other
Comprehensive
Income (Loss), net	 	Retained
Earnings	 	Total
Stockholders’
Equity	
 	Shares	 	Amount	 		 		 		 		
Balance — January 1, 2014	346,760		 	$	3,468		 	$	1,409,463		 	$	(2,853	)	 	$	1,285,686		 	$	2,695,764		
Stock issued in connection with employee incentive compensation plans	2,267		 	22		 	19,331		 	—		 	—		 	19,353		
Purchase of treasury stock	(49	)	 	—		 	(960	)	 	—		 	—		 	(960	)	
Stock-based compensation	—		 	—		 	125,888		 	—		 	—		 	125,888		
Deemed contribution from shareholder	—		 	—		 	6,797		 	—		 	—		 	6,797		
Net income	—		 	—		 	—		 	—		 	725,284		 	725,284		
Other comprehensive income, net of taxes	—		 	—		 	—		 	6,406		 	—		 	6,406		
Dividends declared per common share $0.15	—		 	—		 	—		 	—		 	(52,316	)	 	(52,316	)	
Balance — December 31, 2014	348,978		 	$	3,490		 	$	1,560,519		 	$	3,553		 	$	1,958,654		 	$	3,526,216		
Stock issued in connection with employee incentive compensation plans	8,985		 	89		 	74,139		 	—		 	—		 	74,228		
Purchase of treasury stock	(17	)	 	—		 	(267	)	 	—		 	—		 	(267	)	
Stock based compensation expense	—		 	—		 	10,686		 	—		 	—		 	10,686		
Tax sharing with affiliate	—		 	—		 	(926	)	 	—		 	—		 	(926	)	
Net income	—		 	—		 	—		 	—		 	824,040		 	824,040		
Other comprehensive loss, net of taxes	—		 	—		 	—		 	(1,428	)	 	—		 	(1,428	)	
Balance — December 31, 2015	357,946		 	$	3,579		 	$	1,644,151		 	$	2,125		 	$	2,782,694		 	$	4,432,549		
Stock issued in connection with employee incentive compensation plans	988		 	10		 	5,697		 	—		 	—		 	5,707		
Purchase of treasury stock	(26	)	 	—		 	(350	)	 	—		 	—		 	$	(350	)	
Stock based compensation expense			 			 	9,537		 	—		 	—		 	9,537		
Tax sharing with affiliate	—		 	—		 	(1,424	)	 	—		 	—		 	(1,424	)	
Net income	—		 	—		 	—		 	—		 	766,466		 	766,466		
Other comprehensive income, net of taxes	—		 	—		 	—		 	26,134		 	—		 	26,134		
Balance — December 31, 2016	358,908		 	$	3,589		 	$	1,657,611		 	$	28,259		 	$	3,549,160		 	$	5,238,619		

See notes to audited consolidated financial statements.

87

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Cash flows from operating activities:	 	 	 	 	 	
Net income	$	766,466		 	$	824,040		 	$	725,284		
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	
Derivative mark to market	169		 	(1,650	)	 	(9,685	)	
Provision for credit losses	2,468,200		 	2,785,871		 	2,521,267		
Depreciation and amortization	1,094,774		 	821,782		 	570,989		
Accretion of discount	(355,961	)	 	(362,573	)	 	(416,381	)	
Originations and purchases of receivables held for sale	(4,019,155	)	 	(5,472,995	)	 	(3,936,973	)	
Proceeds from sales of and repayments on receivables originated as held for sale	3,905,622		 	4,662,778		 	4,053,051		
Change in revolving unsecured consumer loans	(317,506	)	 	(107,947	)	 	—		
Investment (gains) losses, net	444,759		 	95,214		 	(113,147	)	
Stock-based compensation	9,537		 	10,686		 	125,888		
Deferred tax expense	379,753		 	427,283		 	617,068		
Changes in assets and liabilities:		 	 	 	 	
Accrued interest receivable	5,358		 	(93,089	)	 	(68,964	)	
Accounts receivable	5,315		 	(8,587	)	 	(9,895	)	
Federal income tax and other taxes	175,075		 	233,313		 	(130,689	)	
Other assets	(55,765	)	 	(20,628	)	 	(1,328	)	
Accrued interest payable	9,559		 	4,204		 	2,482		
Other liabilities	(58,944	)	 	59,736		 	62,970		
Due to/from affiliates	15,861		 	52,268		 	(97,419	)	
Net cash provided by operating activities	4,473,117		 	3,909,706		 	3,894,518		
Cash flows from investing activities:	 		 	 		 	 		
Originations of and disbursements on finance receivables held for investment	(12,901,776	)	 	(16,910,010	)	 	(16,381,530	)	
Collections on finance receivables held for investment	10,295,849		 	10,178,209		 	9,282,673		
Proceeds from sale of loans originated as held for investment	823,877		 	2,187,328		 	2,823,046		
Leased vehicles purchased	(5,596,639	)	 	(5,149,481	)	 	(4,482,921	)	
Manufacturer incentives received	1,210,779		 	979,183		 	895,964		
Proceeds from sale of leased vehicles	1,548,186		 	1,931,957		 	465,481		
Change in revolving personal loans	(93,194	)	 	(438,785	)	 	(560,388	)	
Purchases of furniture and equipment	(23,290	)	 	(18,798	)	 	(19,256	)	
Proceeds from sales of furniture and equipment	1,844		 	511		 	951		
Change in restricted cash	(525,433	)	 	(466,497	)	 	(357,244	)	
Other investing activities	(8,017	)	 	(8,829	)	 	(5,921	)	
Net cash used in investing activities	(5,267,814	)	 	(7,715,212	)	 	(8,339,145	)	
Cash flows from financing activities:	 		 	 		 	 		
Proceeds from notes payable related to secured structured financings — net of debt issuance costs	13,756,342		 	15,232,692		 	11,948,421		
Payments on notes payable related to secured structured financings	(12,941,849	)	 	(11,113,459	)	 	(9,439,255	)	
Proceeds from unsecured notes payable	4,491,153		 	6,150,000		 	5,082,062		
Payments on unsecured notes payable	(4,076,571	)	 	(7,390,631	)	 	(5,322,030	)	
Proceeds from notes payable (including repurchase agreements)	25,256,469		 	27,379,570		 	25,543,242		
Payments on notes payable (including repurchase agreements)	(25,557,686	)	 	(26,554,425	)	 	(23,310,720	)	
Proceeds from stock option exercises, gross	8,126		 	87,762		 	24,809		
Repurchase of stock - employee tax withholding	—		 	(267	)	 	(6,960	)	
Dividends paid	—		 	—		 	(52,316	)	
Net cash provided by financing activities	935,984		 	3,791,242		 	4,467,253		
Net increase (decrease) in cash and cash equivalents	141,287		 	(14,264	)	 	22,626		
Cash — Beginning of year	18,893		 	33,157		 	10,531		
Cash — End of year	$	160,180		 	$	18,893		 	$	33,157		
 	
Noncash investing and financing transactions (Refer to Note 13)	

See notes to audited consolidated financial statements.

88

SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

		
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, and 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. 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.
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 revolving lines and other consumer finance products.
As of December 31, 2016 , the Company was owned approximately 58.8% by Santander Holdings USA, Inc. (SHUSA), a subsidiary of Banco Santander, S.A. (Santander), approximately 31.4% by public shareholders, approximately 9.7% by DDFS LLC, an entity affiliated with Thomas G. Dundon, the Company’s former Chairman and CEO, and approximately 0.1% by other holders, primarily members of senior management. Pursuant to a Separation Agreement with Mr. Dundon, SHUSA was deemed to have delivered, as of July 3, 2015, an irrevocable notice to exercise the call option with respect to all the shares of Company common stock owned by DDFS LLC and consummate the transactions contemplated by the call option notice, subject to required regulatory approvals and any other approvals required by law being obtained (the Call Transaction). Because the Call Transaction was not consummated prior to October 15, 2015 (the Call End Date), DDFS LLC is free to transfer any or all of its shares of Company common stock, subject to the terms and conditions of the Amended and Restated Loan Agreement, dated as of July 16, 2014, between DDFS LLC and Santander. Also, because the Call Transaction was not completed prior to 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 (Note 12).
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, including certain Trusts, which are considered variable interest entities (VIEs). The Company also consolidates other VIEs for which it was deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities, as of the date of the financial statements, and the amount of revenue and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. These estimates include the determination of credit loss allowance, discount accretion, fair value, impairment, expected end-of-term lease residual values, values of repossessed assets, and income taxes. These estimates, although based on actual historical trends and modeling, may potentially show significant variances over time.

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

Finance Receivables
Finance receivables are comprised of retail installment contracts individually acquired, purchased receivables, receivables from dealer, personal loans, and capital lease receivables. Finance receivables are classified as either held for sale or held for investment, depending on the Company’s intent and ability to hold the underlying contract for the foreseeable future or until maturity or payoff. Most of the Company’s retail installment contracts held for investment are pledged under its warehouse facilities or securitization transactions.
Retail Installment Contracts
Retail installment contracts consist largely of nonprime automobile finance receivables, which are acquired individually from dealers at a nonrefundable discount from the contractual principal amount. Retail installment contracts also include receivables originated through a direct lending program and loan portfolios purchased from other lenders. Retail installment contracts acquired individually or originated directly are primarily classified as held for investment and carried at amortized cost, net of allowance for credit losses.
The Company has elected the fair value option for certain non-performing loans acquired through the exercise of a clean-up call (Note 7). Accordingly, changes in the fair value of these finance receivables, which are based upon fair value estimates (Note 15), are reported in investment gains (losses), net, in the consolidated statements of income and comprehensive income.
Interest is accrued when earned in accordance with the terms of the retail installment contract. The accrual of interest is discontinued and reversed once a retail installment contract becomes more than 60 days past due, and is resumed and reinstated if a delinquent account subsequently becomes 60 days or less past due. A Chrysler Capital retail installment contract is considered current if the borrower has made all prior payments in full and at least 90% of the payment currently due, and a non-Chrysler Capital retail installment contract is considered current if the borrower has made all prior payments in full and at least 50% of the payment currently due. Payments generally are applied to interest first, then principal, then fees, regardless of a contract's accrual status.
The amortization of discounts, subvention payments from manufacturers, and other origination costs on retail installment contracts held for investment acquired individually, or through a direct lending program, are recognized as adjustments to the yield of the related contract using the effective interest method. The Company estimates future principal prepayments in the calculation of the constant effective yield.
Purchased Receivables Portfolios  
Receivables portfolios purchased from other lenders or pursuant to a repurchased obligation that are purchased at amounts less than the principal amount of those receivables, resulting in a discount to par, are accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality , if the discount was attributable, at least in part, to the expectation that not all contractual cash flows will be received from borrowers, which did not exist at the origination of the loans. The excess of the estimated undiscounted principal, interest, and other cash flows expected to be collected over the initial investment in the acquired loans, or accretable yield, is accreted to interest income over the expected life of the loans using the effective interest rate method.
The nonaccretable difference is the excess between the contractually required payments and the amount of cash flows, considering the impact of prepayments, expected to be collected. The nonaccretable difference is not accreted into income.
Any deterioration in the performance of the purchased portfolios results in an incremental impairment. Improvements in performance of the purchased pools that significantly increase actual or expected cash flows result in first a reversal of previously recorded impairment and then in a transfer of the excess from nonaccretable difference to accretable yield, which will be recorded as finance income over the remaining life of the receivables.

90

Personal Loans, Net
Personal loans, net, primarily consist of both revolving and amortizing term finance receivables acquired individually under terms of the Company’s agreements with certain third parties who originate and continue to service the loans. Personal loans also include private-label revolving lines of credit originated through the Company’s relationship with a point-of-sale lending technology company. Certain of the revolving receivables were acquired at a discount.
Interest is accrued when earned in accordance with the terms of the contract. The accrual of interest on amortizing term receivables is discontinued and reversed once a receivable becomes past due more than 60 days , and is resumed and reinstated if a delinquent account subsequently becomes 60 days or less past due. The accrual of interest on revolving personal loans continues until the receivable becomes 180 days past due, at which point the principal amount and interest are charged off. The amortization of discounts is recognized on a straight-line basis over the estimated period over which the receivables are expected to be outstanding.
Receivables from Dealers
Receivables from dealers include floorplan loans provided to dealerships to finance new and used vehicles for their inventory. Receivables from dealers also include real estate loans and working capital revolving lines of credit. Interest on these loans is accrued when earned in accordance with the agreement with the dealer. Receivables from dealers the Company does not have the intent and ability to hold for the foreseeable future or until maturity or payoff are classified as held for sale and carried at the lower of cost or market, as determined on an aggregate basis.
Finance Receivables Held for Sale, Net
Finance receivables, which may include any of the receivables described above, that the Company does not have the intent and ability to hold for the foreseeable future or until maturity or payoff, including those previously designated as held for investment and subsequently identified for sale, are classified as held for sale, at origination or at the time a decision to sell is made. Finance receivables designated as held for sale are carried at the lower of cost or market, as determined on an aggregate basis. Cost, or recorded investment, includes deferred net origination fees and costs, premium or discounts, accrued interest, manufacturer subvention (if any) and any direct write-down of the investment. When loans are transferred from held for investment, if the recorded investment of a loan exceeds its market value at the time of initial designation as held for sale, the Company will recognize a direct write-down of the excess of the recorded investment over market as a charge-off against the credit loss allowance. Subsequent to the initial measurement of retail installment contracts held for sale, market declines in the recorded investment, whether due to credit or market risk, are recorded through investment gains (losses), net of lower of cost or market adjustments.
Provision for Credit Losses
Provisions for credit losses are charged to operations in amounts sufficient to support the credit loss allowance in accordance with the Company's estimate. The Company estimates an allowance on individually acquired retail installment contracts and personal loans held for investment not classified as TDRs at a level considered adequate to cover expected net credit losses inherent in the recorded investment of that portfolio. Probable losses are estimated based on contractual delinquency status and historical loss experience, in addition to the Company’s judgment of estimates of the value of the underlying collateral, changes in the used vehicle value index, delinquency status, historical collection rates and other information in order to make the necessary judgments as to probable loan losses. For loans classified as TDRs, impairment is typically measured based on the present value of expected future cash flows discounted at the original effective interest rate. Provisions for credit losses are also charged to operations for impairment on TDRs.
Retail installment contracts acquired individually are charged off against the allowance in the month in which the account becomes greater than 120 days contractually delinquent if the Company has not repossessed the related vehicle. The Company charges off accounts in repossession when the automobile is repossessed and legally available for disposition. A net charge-off represents the difference between the estimated sales proceeds and the Company's recorded investment in the related contract. Costs to sell the vehicle are presented in repossession expense. Accounts in repossession that have been charged off and are pending liquidation are removed from retail installment contracts and the related repossessed automobiles are included in other assets in the Company’s consolidated balance sheets.
Term and revolving personal loans are charged off against the allowance in the month in which the accounts become 120 days and 180 days contractually delinquent, respectively.
In addition to maintaining a general allowance based on risk ratings, receivables from dealers are evaluated individually for impairment with allowances established for receivables determined to be individually impaired.

91

Receivables from dealers are charged off against these allowances at the time that the credit is considered uncollectable and of such little value that it does not warrant consideration as an active asset.
Troubled Debt Restructurings
A modification of finance receivable terms is considered a troubled debt restructuring (TDR) if the Company grants a concession it would not otherwise have considered to a borrower for economic or legal reasons related to the debtor's financial difficulties. The Company considers TDRs to include all individually acquired retail installment contracts or personal revolving loans that have been modified at least once, deferred for a period of 90 days or more, or deferred at least twice. Additionally, restructurings through bankruptcy proceedings are deemed to be TDRs. The purchased receivables portfolio and operating and capital leases are excluded from the scope of the applicable guidance, and none of the Company's personal term loans or dealer loans have been modified or deferred.
For TDRs, impairment is typically measured based on the difference between the recorded investment of the loan and the present value of the expected future cash flows of the loan. The loan may also be measured for impairment based on the fair value of the underlying collateral less costs to sell for loans that are collateral dependent. TDRs are evaluated for impairment individually or in aggregate for those loans with similar risk characteristics.
Leased Vehicles, Net
Most vehicles for which the Company is the lessor are classified as operating leases, as they do not meet the accounting requirements to be classified as a capital lease. The net capitalized cost of each lease is recorded as an asset and depreciated on a straight-line basis over the contractual term of the lease to the expected residual value. The expected residual value and, accordingly, the monthly depreciation expense may change throughout the term of the lease. The Company estimates expected residual values using independent data sources and internal statistical models that take into consideration economic conditions, current auction results, the Company’s remarketing abilities, and manufacturer vehicle and marketing programs. Over the life of the lease, the Company evaluates the adequacy of the estimate of the residual value and may make adjustments to the depreciation rates to the extent the expected value of the vehicle at lease termination changes.
Lease payments due from customers are recorded as income until and unless a customer becomes more than 60 days delinquent, at which time the accrual of revenue is discontinued and reversed. The accrual is resumed and reinstated if a delinquent account subsequently becomes 60 days or less past due. Subvention payments from the manufacturer, down payments from the customer, and initial direct costs incurred in connection with originating the lease are treated as a reduction to the cost basis of the underlying lease asset and are amortized on a straight-line basis over the contractual term of the lease. The amortization of manufacturer subvention payments is reflected as a reduction to depreciation expense over the life of the contract. The Company periodically evaluates its investment in operating leases for impairment if circumstances, such as a general decline in used vehicle values, indicate that an impairment may exist.
Capital Lease Receivables, net
Leases classified as capital leases are accounted for as direct financing leases. Minimum lease payments plus the estimated residual value of the leased vehicle are recorded as the gross investment. The difference between the gross investment and the cost of the leased vehicle is recorded as unearned income. Direct financing leases are reported at the aggregate of gross investments, net of unearned income and allowance for lease losses. Income for direct financing leases is recognized using the effective interest method, which provides a constant periodic rate of return on the outstanding investment on the lease.
Fees, commissions, and other
Fees, commissions, and other primarily include late fee, miscellaneous, and other income, generally recorded when there is no doubt as to the collectability of the related receivable.
Repossessed Vehicles and Repossession Expense
Repossessed vehicles represent vehicles the Company has repossessed due to the borrowers’ default on the payment terms of the retail installment contracts, loans or leases. The Company generally begins repossession activity once a customer has reached 60 days past due. The customer has an opportunity to redeem the repossessed vehicle by paying all outstanding balances, including finance charges and fees. Any vehicles not redeemed are sold at auction. The Company records the vehicles currently in its inventory at the lower of cost or estimated fair value, net of estimated costs to sell (See Notes 9 and 15.)

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Repossession expense includes the costs to repossess and sell vehicles obtained due to borrower default. These costs include transportation, storage, rekeying, condition reports, legal fees, the fees paid to repossession agents and auction fees.
Sales of Finance Receivables and Leases  
The Company transfers retail installment contracts into newly formed Trusts, which then issue one or more classes of notes payable backed by the retail installment contracts.
The Company’s continuing involvement with the credit facilities and Trusts are in the form of servicing loans held by the special purpose entities (SPEs) and, generally, through holding a residual interest in the SPE. These transactions are structured without recourse. The Trusts are considered VIEs under U.S. GAAP and are consolidated when the Company has: (a) power over the significant activities of the entity and (b) an obligation to absorb losses or the right to receive benefits from the VIE which are potentially significant to the VIE.
The Company has power over the significant activities of those Trusts as servicer of the financial assets held in the Trust. Servicing fees are not considered significant variable interests in the Trusts; however, when the Company also retains a residual interest in the Trust, either in the form of a debt security or equity interest, the Company has an obligation to absorb losses or the right to receive benefits that are potentially significant to the SPE. Accordingly, these Trusts are consolidated within the consolidated financial statements, and the associated retail installment contracts, borrowings under credit facilities and securitization notes payable remain on the consolidated balance sheets. Securitizations involving Trusts in which the Company does not retain a residual interest or any other debt or equity interests are treated as sales of the associated retail installment contracts.
While these Trusts are included in the consolidated financial statements, these Trusts are separate legal entities; thus, the finance receivables and other assets sold to these Trusts are legally owned by these Trusts, are available only to satisfy the notes payable related to the securitized retail installment contracts, and are not available to the Company's creditors or other subsidiaries.
The Company also sells retail installment contracts and leases to VIEs or directly to third parties, which the Company may determine meet sale accounting treatment in accordance with the applicable guidance. Due to the nature, purpose, and activity of these transactions, the Company either does not hold potentially significant variable interests or is not the primary beneficiary as a result of the Company's limited further involvement with the financial assets. The transferred financial assets are removed from the Company's consolidated balance sheets at the time the sale is completed. The Company generally remains the servicer of the financial assets and receives servicing fees. The Company also recognizes a gain or loss for the difference between the fair value, as measured based on sales proceeds plus (or minus) the value of any servicing asset (or liability) retained and carrying value of the assets sold.
Cash and Cash Equivalents  
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company has maintained balances in various operating and money market accounts in excess of federally insured limits.
Restricted Cash
Cash deposited to support securitization transactions, lockbox collections, and the related required reserve accounts is recorded in the Company’s consolidated balance sheet as restricted cash. Excess cash flows generated by the securitization trusts are added to the restricted cash reserve account, creating additional over-collateralization until the contractual securitization requirement has been reached. Once the targeted reserve requirement is satisfied, additional excess cash flows generated by the Trusts are released to the Company as distributions from the Trusts. Lockbox collections are added to restricted cash and released when transferred to the appropriate warehouse facility or Trust.
The Company has several limited guarantees with Santander that provide explicit performance guarantees on certain servicer obligations related to the Company’s warehouse facilities and certain securitizations. As a result of those guarantees, the Company was permitted to commingle funds received on contracts that have been included in the securitizations and certain warehouse facilities, and retain and remit cash to the respective collection accounts once a month prior to the distribution dates. However, due to downgrades in Santander’s credit ratings during a prior reporting period, the commingling rights were lost. No funds were commingled as of December 31, 2016 .

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Income Taxes
Income tax expense consists of income taxes currently payable and deferred income taxes computed using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The deferred tax asset is subject to reduction by a valuation allowance in certain circumstances. This valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax asset will not be realized based on a review of available evidence. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is classified as a dealer in securities for tax purposes, and reports its financial receivables and loans at fair value in its tax returns.
The Company records the benefit of uncertain tax positions in the consolidated financial statements when such positions (1) meet a more-likely-than-not threshold, (2) are settled through negotiation or litigation, or (3) the statute of limitations for the taxing authority to examine the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more-likely-than-not recognition threshold is no longer satisfied.
Furniture and Equipment  
Furniture and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the improvements. Depreciation and amortization on furniture and equipment for the years ended December 31, 2016 , 2015 , and 2014 totaled $16,357 , $16,111 , and $13,069 , respectively. Expenditures for major renewals and betterments are capitalized. Repairs and maintenance expenditures are charged to operations as incurred.
Goodwill and Intangibles
Goodwill represents the excess of consideration paid over fair value of net assets acquired in business combinations. Intangibles represent intangible assets purchased or acquired through business combinations, including trade names and software development costs. Intangibles are amortized over their estimated useful lives. The Company tests goodwill for impairment annually in accordance with the provisions of ASC 350, Intangibles-Goodwill and Other .
Derivative Financial Instruments
Derivative financial instruments are recognized as either assets or liabilities in the consolidated balance sheets at fair value. The accounting for changes in the fair value of each derivative financial instrument depends on whether it has been designated and qualifies as a hedge for accounting purposes, as well as the type of hedging relationship identified. The Company does not use derivative instruments for trading or speculative purposes.
Interest Rate Swap Agreements — The Company uses interest rate swaps to hedge the variability of cash flows on securities issued by securitization Trusts and borrowings under the Company’s warehouse facilities. Certain interest rate swap agreements are designated and qualify as cash flow hedges, and are highly effective in reducing exposure to interest rate risk from both an accounting and an economic perspective.
At hedge inception and at least quarterly, the interest rate swap agreements designated as accounting hedges are assessed to determine their effectiveness in offsetting changes in the cash flows of the hedged items and whether those interest rate swap agreements may be expected to remain highly effective in future periods.
The Company uses change in variable cash flows to assess hedge effectiveness of cash flow hedges on a prospective and retrospective basis. At December 31, 2016 , all of the Company’s interest rate swap agreements designated as cash flow hedges are deemed to be effective hedges for accounting purposes. The Company uses the hypothetical derivative method to measure the amount of ineffectiveness and a net earnings impact occurs when the cumulative change in the value of a derivative, as adjusted, differs from the cumulative change in value of the perfect hypothetical derivative. The excess change in value (the ineffectiveness) is recognized in earnings.
The effective portion of the changes in the fair value of the interest rate swaps qualifying as cash flow hedges is included as a component of other comprehensive loss, net of estimated income taxes, as an unrealized gain or loss on cash flow hedges. These unrealized gains or losses are recognized as adjustments to income over the same period in

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which cash flows from the related hedged item affect earnings. Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts are recognized in interest expense on the consolidated statements of income and comprehensive income. The Company discontinues hedge accounting prospectively when it is determined that an interest rate swap agreement has ceased to be effective as an accounting hedge or if the underlying hedged cash flow is no longer probable of occurring.
The Company has also entered into interest rate swap agreements related to its securitization trusts and warehouse facilities that are not designated as hedges. These agreements are intended to reduce the risk of interest rate fluctuations. For the interest rate swap agreements not designated as hedges, any gains or losses are included in the Company’s earnings as a component of operating expense.
Interest Rate Cap Agreements — The Company purchases interest rate cap agreements to limit floating rate exposures on securities issued in credit facilities. As part of the interest rate risk management strategy, and when economically feasible, the Company may simultaneously sell a corresponding written option to offset the premium paid to purchase the interest rate cap agreement and thus retain the interest rate risk. Because these instruments entered into directly by the Company or through SPEs are not designated for hedge accounting, changes in the fair value of interest rate cap agreements purchased by the SPEs and written option sold by the Company are recorded in interest expense on the consolidated statements of income and comprehensive income.
Warrants — The Company is the holder of a warrant that gives it the right, if certain vesting conditions are satisfied, to purchase additional shares in a company in which it has a cost method investment. This warrant would allow SC to increase its ownership to approximately 22% in the investee company.

Total Return Settlement — The Company is obligated to make purchase price holdback payments to a third party originator of auto loans that the Company has purchased, when losses are lower than originally expected. The Company also is obligated to make total return settlement payments to this third-party originator in 2017 if returns on the purchased loans are greater than originally expected. These purchase price holdback payments and total return settlement payments are considered to be derivatives, collectively referred to herein as “total return settlement,” and accordingly are marked to fair value each reporting period.
Stock-Based Compensation
The Company measures the compensation cost of stock-based awards using the estimated fair value of those awards on the grant date, and recognizes the cost as expense over the vesting period of the awards (see Note 16).
Earnings per Share
Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and restricted stock grants. Because the Company has issued participating securities in the form of unvested restricted stock that has dividend rights, the Company applies the two-class method when computing earnings per share.
Change in Accounting Principle
During the second quarter of fiscal year 2016, the Company changed the date of its annual goodwill impairment test from December 31 to October 1. This new testing date is preferable under the circumstances in order to align the Company’s policy with that of SHUSA. The Company has prospectively applied the change and confirmed the change in the annual impairment testing date did not delay, accelerate, or avoid an impairment charge.
Recently Adopted Accounting Standards
In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period . This standard affects entities that issue share-based payments when the terms of an award stipulate that a performance target could be achieved after an employee completes the requisite service period. This guidance became effective for the Company January 1, 2016 and implementation of this guidance did not have a significant impact on the Company’s financial position, results of operations, or cash flows

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On August 27, 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. This guidance became effective for the Company December 31, 2016 and implementation of this guidance did not have a significant impact on the Company’s financial position, results of operations, or cash flows.

In January 2015, the FASB issued ASU 2015-01, Income Statement - Extraordinary and Unusual Items . This standard simplifies income statement classification by removing the concept of extraordinary items from U.S. GAAP, and as a result, items that are both unusual and infrequent no longer will be separately reported net of tax after continuing operations. This guidance became effective for the Company January 1, 2016 and implementation of this guidance did not have a significant impact on the Company’s financial position, results of operations, or cash flows.

In February 2015, the FASB issued ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis . This ASU changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance became effective for the Company January 1, 2016 and implementation of this guidance did not have a significant impact on the Company’s financial position, results of operations, or cash flows.

In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU clarifies when fees paid in a cloud computing arrangement pertain to the acquisition of a software license, services, or both. This guidance became effective for the Company January 1, 2016 and implementation of this guidance did not have a significant impact on the Company’s financial position, results of operations, or cash flows.
Recent 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 the ASU 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 securities 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 to determine the effect on certain non-interest income items presented in the Consolidated Statements of Operations and on the presentation and disclosures.

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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 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 FVO 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. While the Company is still in the process of evaluating the impacts of the adoption of this ASU, we don’t expect the impact to be significant to our financial position and results of operations.

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. We continue to evaluate the impact of the new guidance to our 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 March 2016, the FASB issued 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. This new guidance will be effective for the Company for the first reporting period beginning after December 15, 2016, with earlier adoption permitted. Adoption of this new guidance can be applied on a modified retrospective or prospective basis. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations or cash flows.

In March 2016, the FASB issued 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 new guidance will be effective for the Company for the first reporting period beginning after December 15, 2016, with earlier adoption permitted. The new guidance is required to be adopted on a modified retrospective basis to all existing and future debt instruments. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations or cash flows.

In March 2016, the FASB issued 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

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provides specific guidance for available-for-sale securities that become eligible for the equity method of accounting. In those cases, any unrealized gain 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. This new guidance will be effective for the Company for the first reporting period beginning after December 15, 2016, with earlier adoption permitted. Adoption of this new guidance can be applied only a prospective basis for investments those qualify for the equity method of accounting after the effective date. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations or cash flows.

In March 2016, the FASB issued 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. This new guidance will be effective for the Company for the first reporting period beginning after December 15, 2016, with earlier adoption permitted. Certain of the amendments related to timing of the recognition of tax benefits and tax withholding requirements should be applied using a modified retrospective transition method. Amendments related to the presentation of the SCF should be applied retrospectively. All other provisions may be applied on a prospective or modified retrospective basis. For further information regarding the impact of the adoption of this ASU see Note 10.

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 perform 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 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 statement of cash flows. 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. The Company is in the process of evaluating the impacts of the adoption of this ASU.

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. The Company is in the process of evaluating the impacts of the adoption of this ASU.

In October 2016, the FASB issued 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 guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations or cash flows.

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

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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 or results of operations and expects the impact to be disclosure only.

In January 2017, the FASB issued ASU 2017-1, 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 is in the process of evaluating the impacts of the adoption of this ASU.

On January 26, 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 for calendar year-end SEC filers in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company is in the process of evaluating the impacts of the adoption of this ASU.
		
2.	Finance Receivables	
Held For Investment
Finance receivables held for investment, net is comprised of the following at December 31, 2016 and 2015 :

								
 	December 31, 2016	 	December 31, 2015	
Retail installment contracts acquired individually	$	23,219,724		 	$	23,004,065		
Purchased receivables	158,264		 	239,551		
Receivables from dealers	68,707		 	76,025		
Personal loans	12,272		 	941		
Capital lease receivables (Note 3)	22,034		 	47,206		
 	$	23,481,001		 	$	23,367,788		

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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 December 31, 2016 and 2015 :

												
 	December 31, 2016	
 	Retail Installment Contracts
Acquired
Individually	 	Receivables from
Dealers	 	Personal Loans (a)	
Unpaid principal balance	$	27,127,973		 	$	69,431		 	$	19,361		
Credit loss allowance - specific	(1,611,295	)	 	—		 	—		
Credit loss allowance - collective	(1,799,760	)	 	(724	)	 	—		
Discount	(559,116	)	 	—		 	(7,721	)	
Capitalized origination costs and fees	61,922		 	—		 	632		
Net carrying balance	$	23,219,724		 	$	68,707		 	$	12,272		
(a) As of December 31, 2016, there were lower of cost or market adjustments of $7,521 included in the discount on personal loans.

	
												
 	December 31, 2015	
 	Retail Installment Contracts
Acquired
Individually	 	Receivables from
Dealers	 	Personal Loans	
Unpaid principal balance	$	26,863,946		 	$	76,941		 	$	941		
Credit loss allowance - specific	(1,363,023	)	 	—		 	—		
Credit loss allowance - collective	(1,834,391	)	 	(916	)	 	—		
Discount	(722,701	)	 	—		 	—		
Capitalized origination costs	60,234		 	—		 	—		
Net carrying balance	$	23,004,065		 	$	76,025		 	$	941		
Retail installment contracts are collateralized by vehicle titles, and the Company has the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract. Most of the Company’s retail installment contracts held for investment are pledged against warehouse facilities or securitization bonds (Note 6). Most of the borrowers on the Company’s retail installment contracts are retail consumers; however, $848,918 and $1,087,024 of the unpaid principal balance represented fleet contracts with commercial borrowers as of December 31, 2016 and 2015 , respectively.
As of December 31, 2016 , borrowers on the Company’s retail installment contracts held for investment are located in Texas ( 17% ), Florida ( 13% ), California ( 10% ), Georgia ( 5% ) and other states each individually representing less than 5% of the Company’s total.
During the year ended December 31, 2016 , the Company originated more than $8.0 billion in Chrysler Capital loans which represented 49% of total retail installment contract originations, as well as more than $5.5 billion in Chrysler Capital leases. As of December 31, 2016, SC's auto retail installment contract portfolio consisted of $7.4 billion of Chrysler Capital loans which represents 32% of SC's auto retail installment contract portfolio.

Purchased receivables portfolios, which were acquired with deteriorated credit quality, were comprised of the following at December 31, 2016 and 2015 :

								
 	December 31, 2016	 	December 31, 2015	
Outstanding balance	$	231,360		 	$	362,212		
Outstanding recorded investment, net of impairment	$	159,451		 	$	239,551		

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Changes in accretable yield on the Company’s purchased receivables portfolios for the periods indicated were as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Balance — beginning of year	$	178,582		 	$	268,927		 	$	407,490		
Accretion of accretable yield	(69,701	)	 	(91,157	)	 	(199,151	)	
Reclassifications from nonaccretable difference	(1,840	)	 	812		 	60,588		
Balance — end of year	$	107,041		 	$	178,582		 	$	268,927		
During the years ended December 31, 2016 and 2015 , the Company recognized certain retail installment loans with an unpaid principal balance of $466,050 and $95,596 , respectively, which were previously held by non-consolidated securitization Trusts, under an optional clean-up call (Note 7). 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 the re-recognition date), for which it was probable that not all contractually required payments would be collected (Note 15).
Receivables from dealers held for investment includes 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 and 2015 , and the unpaid principal balance of the facility was $50,000 at each of those dates. The term loan will mature on December 31, 2018. The Company had accrued interest on this term loan of $165 and $156 at December 31, 2016 and 2015 , respectively.

The remaining receivables from dealers held for investment are all Chrysler Agreement-related. As of December 31, 2016 , borrowers on these dealer receivables are located in Virginia ( 53% ), New York ( 24% ), Mississippi ( 13% ), Missouri ( 9% ) and Wisconsin ( 1% ).

As of September 30, 2015, the Company determined that it no longer had the intent to hold its personal loans for investment and that classification of all personal loans as held for sale was appropriate as of that date. In connection with the reclassification to held for sale, the Company transferred the personal loan portfolio at the lower of cost or market with the lower of cost or market adjustment being charged off against the credit loss allowance. Loan originations and purchases under the Company’s personal lending platform subsequent to September 30, 2015, also are classified as held for sale. Following the reclassification of personal loans to held for sale, further adjustments to the recorded investment in personal loans held for sale, whether due to customer default or declines in market value, are recorded in investment gains (losses), net in the consolidated statement of income and comprehensive income (Note 18). On February 1, 2016, the Company sold personal loans with an unpaid principal balance of $869,349 to a third party for an immaterial gain.

At December 31, 2015, the Company determined that its intent to sell certain non-performing personal 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 $539 and $941 as of December 31, 2016 and 2015 , respectively.
 
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 $11,733 at December 31, 2016 .

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Held For Sale
The carrying value of the Company's finance receivables held for sale was comprised of the following at December 31, 2016 and 2015 :

								
 	December 31, 2016	 	December 31, 2015	
Retail installment contracts acquired individually	$	1,045,815		 	$	905,161		
Personal loans	1,077,600		 	1,954,414		
Total assets held for sale	$	2,123,415		 	$	2,859,575		
Sales of retail installment contracts to third parties and proceeds from sales of charged-off assets for the years ended December 31, 2016 , 2015 , and 2014 were as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Sales of retail installment contracts to third parties	$	3,694,019		 	$	7,862,520		 	$	6,620,620		
Proceeds from sales of charged-off assets	64,847		 	122,436		 	26,674		

The Company retains servicing of retail installment contracts sold to third parties. Total contracts sold to unrelated third parties and serviced as of December 31, 2016 and 2015 were as follows:

								
 	December 31, 2016	 	December 31, 2015	
Serviced balance of retail installment contracts and leases sold to third parties	$	10,116,788		 	$	12,155,844		
3.    Leases

The Company has both operating and capital leases, which are separately accounted for and recorded on the Company's 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 December 31, 2016 and 2015 :

								
 	December 31,
2016	 	December 31,
2015	
Leased vehicles	$	11,939,295		 	$	8,836,710		
Less: accumulated depreciation	(2,326,342	)	 	(1,510,414	)	
Depreciated net capitalized cost	9,612,953		 	7,326,296		
Manufacturer subvention payments, net of accretion	(1,066,531	)	 	(845,142	)	
Origination fees and other costs	18,206		 	16,156		
Net book value	$	8,564,628		 	$	6,497,310		

During the year ended December 31, 2015, the Company executed bulk sales of Chrysler Capital leases with an aggregate depreciated net capitalized cost of $1,316,958 and a net book value of $1,155,171 to a third party. The bulk sales agreements included certain provisions whereby the Company agreed to share in residual losses for lease terminations with losses over a specific percentage threshold (Note 11). The Company retained servicing on the sold leases. Due to the accelerated depreciation permitted for tax purposes, these sales generated taxable gains of $784,365 that the Company deferred through a qualified like-kind exchange program. Taxable gains of $327 that did not qualify for deferral was recognized upon expiration of the reinvestment period. No such bulk sales occurred during the year ended December 31, 2016 .

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The following summarizes the future minimum rental payments due to the Company as lessor under operating leases as of December 31, 2016 :

				
2017	$	1,448,022		
2018	895,461		
2019	268,156		
2020	12,552		
2021	—		
Thereafter	—		
Total	$	2,624,191		

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 December 31, 2016 and 2015 :

								
 	December 31,
2016	 	December 31,
2015	
Gross investment in capital leases	$	39,417		 	$	91,393		
Origination fees and other	150		 	155		
Less unearned income	(7,545	)	 	(24,464	)	
   Net investment in capital leases before allowance	32,022		 	67,084		
Less: allowance for lease losses	(9,988	)	 	(19,878	)	
   Net investment in capital leases	$	22,034		 	$	47,206		

The following summarizes the future minimum lease payments due to the Company as lessor under capital leases as of December 31, 2016 :

				
2017	$	15,236		
2018	14,420		
2019	6,514		
2020	2,280		
2021	967		
Thereafter	—		
Total	$	39,417		
4.    Credit Loss Allowance and Credit Quality

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 measured based on the present value of expected future cash flows discounted at the original effective interest rate.

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. The credit loss allowance for receivables from

103

dealers is comprised entirely of general allowances as none of these receivables have been determined to be individually impaired.
The activity in the credit loss allowance for individually acquired loans for the years ended December 31, 2016 , 2015 , and 2014 were as follows:

								
 	Year Ended December 31, 2016	
 	Retail Installment
Contracts
Acquired
Individually	 	Receivables
from Dealers Held
for Investment	
Balance — beginning of year	$	3,197,414		 	$	916		
Provision for credit losses	2,471,490		 	201		
Charge-offs	(4,723,649	)	 	(393	)	
Recoveries	2,465,800		 	—		
Balance — end of year	$	3,411,055		 	$	724		

												
 	Year Ended December 31, 2015	
 	Retail Installment
Contracts
Acquired
Individually	 	Receivables
from Dealers Held
for Investment	 	Personal Loans	
Balance — beginning of year	$	2,586,685		 	$	674		 	$	348,660		
Provision for credit losses	2,433,617		 	242		 	324,634		
Charge-offs (a)	(3,897,480	)	 	—		 	(695,918	)	
Recoveries	2,101,709		 	—		 	22,624		
Impact of loans transferred to held for sale	(27,117	)	 	—		 	—		
Balance — end of year	$	3,197,414		 	$	916		 	$	—		
		
(a)	Charge-offs of retail installment contracts acquired individually and personal loans include lower of cost or market adjustments of $73,388 and $377,598 , respectively, which were charged off against the credit loss allowance.	

												
 	Year Ended December 31, 2014	
 	Retail Installment
Contracts
Acquired
Individually	 	Receivables
from Dealers Held
for Investment	 	Personal Loans	
Balance — beginning of year	$	1,949,048		 	$	1,090		 	$	179,350		
Provision for credit losses	2,101,744		 	(416	)	 	434,030		
Charge-offs	(3,187,803	)	 	—		 	(286,331	)	
Recoveries	1,723,696		 	—		 	21,611		
Balance — end of year	$	2,586,685		 	$	674		 	$	348,660		
The impairment activity related to purchased receivables portfolios for the years ended December 31, 2016 , 2015 , and 2014 was as follows:     

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Balance — beginning of year	$	172,308		 	$	186,126		 	$	210,208		
Incremental provisions for purchased receivables portfolios	805		 	475		 	19,448		
Incremental reversal of provisions for purchased receivables portfolios	(3,790	)	 	(14,293	)	 	(43,530	)	
Balance — end of year	$	169,323		 	$	172,308		 	$	186,126		

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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 years ended December 31, 2016 , 2015 , and 2014 was as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Balance — beginning of year	$	19,878		 	$	9,589		 	$	—		
Provision for credit losses	(506	)	 	41,196		 	9,991		
Charge-offs	(33,476	)	 	(64,209	)	 	(804	)	
Recoveries	24,092		 	33,302		 	402		
Balance — end of year	$	9,988		 	$	19,878		 	$	9,589		
Delinquencies
Retail installment contracts and personal amortizing term loans are classified as non-performing when they are greater than 60 days past due as to contractual principal or interest payments. Dealer receivables are classified as non-performing when they are greater than 90 days past due. At the time a loan is placed in non-performing 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 accrual of interest on revolving personal loans continues until the loan is charged off. The unpaid principal balance on revolving personal loans 90 days past due and still accruing totaled $129,974 and $110,972 as of December 31, 2016 and 2015, respectively.
A summary of delinquencies as of December 31, 2016 and 2015 is as follows:

												
 	December 31, 2016	
 	Retail Installment Contracts Held for Investment	
 	Loans
Acquired
Individually	 	Purchased
Receivables
Portfolios	 	Total	
Principal, 31-60 days past due	$	2,735,577		 	$	13,570		 	$	2,749,147		
Delinquent principal over 60 days	1,386,218		 	6,571		 	1,392,789		
Total delinquent principal	$	4,121,795		 	$	20,141		 	$	4,141,936		

												
 	December 31, 2015	
 	Retail Installment Contracts Held for Investment	
 	Loans
Acquired
Individually	 	Purchased
Receivables
Portfolios	 	Total	
Principal, 31-60 days past due	$	2,454,986		 	$	30,442		 	$	2,485,428		
Delinquent principal over 60 days	1,191,567		 	17,297		 	1,208,864		
Total delinquent principal	$	3,646,553		 	$	47,739		 	$	3,694,292		

The balances in the above tables reflect total unpaid principal balance rather than net investment before allowance. As of December 31, 2016 and 2015 , there were no receivables from dealers that were 31 days or more delinquent. As of December 31, 2016 and 2015 , there were $33,886 and zero , respectively, of retail installment contracts held for sale that were 31 days or more delinquent.
FICO® Distribution - A summary of the credit risk profile of the Company's consumer loans by FICO® distribution, determined at origination, as of December 31, 2016 and 2015 was as follows:

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FICO ®  Band	 	December 31, 2016	 	December 31, 2015	
Commercial (a)	 	3.1%	 	4.0%	
No-FICOs	 	12.2%	 	12.2%	
<540	 	22.1%	 	23.4%	
540-599	 	31.4%	 	30.9%	
600-639	 	17.4%	 	17.3%	
>640	 	13.8%	 	12.2%	
		
(a)	No FICO score is obtained on loans to commercial borrowers.	

Commercial Lending Credit Quality Indicators  — The credit quality of receivables from dealers, which are considered commercial loans, is summarized according to standard regulatory classifications as follows:
Pass — Asset is well-protected by the current net worth and paying capacity of the obligor or guarantors, if any, or by the fair value less costs to sell any underlying collateral in a timely manner.
Special Mention — Asset has potential weaknesses that deserve management’s close attention, which, if left uncorrected, may result in deterioration of the repayment prospects for an asset at some future date. Special Mention assets are not adversely classified.
Substandard — Asset is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. A well-defined weakness or weaknesses exist that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected.
Doubtful — Exhibits the inherent weaknesses of a substandard credit. Additional characteristics exist that make collection or liquidation in full highly questionable and improbable, on the basis of currently known facts, conditions and values. Possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to the advantage and strengthening of the credit, an estimated loss cannot yet be determined.
Loss — Credit is considered uncollectable and of such little value that it does not warrant consideration as an active asset. There may be some recovery or salvage value, but there is doubt as to whether, how much or when the recovery would occur.
The Company's risk department performs a commercial analysis and classifies certain loans over an internal threshold based on the classifications above. Fleet loan credit quality indicators for retail installment contracts held for
investment with commercial borrowers as of December 31, 2016 and 2015 were as follows:  

								
 	December 31,
2016	 	December 31,
2015	
Pass	$	17,585		 	$	39,270		
Special Mention	2,790		 	5,466		
Substandard	1,488		 	—		
Doubtful	—		 	—		
Loss	—		 	—		
Unpaid principal balance
	$	21,863		 	$	44,736		

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Commercial loan credit quality indicators for receivables from dealers held for investment as of December 31, 2016 and 2015 were as follows:  

								
 	December 31,
2016	 	December 31,
2015	
Pass	$	67,681		 	$	68,873		
Special Mention	—		 	8,068		
Substandard	1,750		 	—		
Doubtful	—		 	—		
Loss	—		 	—		
Unpaid principal balance
	$	69,431		 	$	76,941		
Troubled Debt Restructurings
In certain circumstances, the Company modifies the terms of its finance receivables to troubled borrowers. Modifications may include a reduction in interest rate, an extension of the maturity date, rescheduling of future cash flows, or a combination thereof. A modification of finance receivable terms is considered a TDR if the Company grants a concession to a borrower for economic or legal reasons related to the debtor’s financial difficulties that would not otherwise have been considered. 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 and operating and capital leases are excluded from the scope of the applicable guidance. The Company's TDR balance as of December 31, 2016 and 2015 primarily consisted of loans that had been deferred or modified to receive a temporary reduction in monthly payment. As of December 31, 2016 and 2015 , 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 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.
The table below presents the Company’s loans modified in TDRs as of December 31, 2016 and 2015 :

								
 	December 31, 2016	 	December 31, 2015	
 	Retail Installment Contracts	
Outstanding recorded investment	$	5,637,792		 	$	4,601,502		
Impairment	(1,611,295	)	 	(1,363,023	)	
Outstanding recorded investment, net of impairment	$	4,026,497		 	$	3,238,479		
A summary of the Company’s delinquent TDRs at December 31, 2016 and 2015 , is as follows:

								
 	December 31, 2016	 	December 31, 2015	
 	Retail Installment Contracts	
Principal, 31-60 days past due	$	1,194,819		 	$	942,021		
Delinquent principal over 60 days	665,068		 	510,015		
Total delinquent TDR principal	$	1,859,887		 	$	1,452,036		

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A loan that has been classified as a TDR remains so until the loan is liquidated through payoff or charge-off. Consistent with other of the Company’s retail installment contracts, TDRs are placed on nonaccrual status when the account becomes past due more than 60 days, and returns to accrual status when the account is 60 days or less past due. Average recorded investment and income recognized on TDR loans are as follows:

																				
 	For the Year Ended	
 	December 31, 2016	 	December 31, 2015	 	December 31, 2014	
 	Retail Installment Contracts	 	Retail Installment Contracts	 	Personal Loans	 	Retail Installment Contracts	 	Personal Loans	
Average outstanding recorded investment in TDRs	$	5,079,782		 	$	4,361,962		 	$	17,150		 	$	3,153,280		 	$	14,061		
Interest income recognized	802,048		 	716,054		 	2,220		 	509,004		 	1,679		
The following table summarizes the financial effects, excluding impacts related to credit loss allowance and impairment, of TDRs that occurred for the years ended December 31, 2016 , 2015 , and 2014 :

																				
 	For the Year Ended	
 	December 31, 2016	 	December 31, 2015	 	December 31, 2014	
 	Retail Installment Contracts	 	Retail Installment Contracts	 	Personal Loans	 	Retail Installment Contracts	 	Personal Loans	
Outstanding recorded investment before TDR	$	3,394,308		 	$	3,417,884		 	$	15,418		 	$	2,866,340		 	$	18,443		
Outstanding recorded investment after TDR	$	3,419,990		 	$	3,445,103		 	$	15,340		 	$	2,894,964		 	$	18,359		
Number of contracts (not in thousands)	191,385		 	198,325		 	12,501		 	171,167		 	16,614		
A TDR is considered to have subsequently defaulted upon charge off, which for retail installment contracts is at the earlier of the date of repossession or 120 days past due and for revolving personal loans is generally the month in which the receivable becomes 180 days past due. Loan restructurings accounted for as TDRs within the previous twelve months that subsequently defaulted for the years ended December 31, 2016 , 2015 , and 2014 are summarized in the following table:

																				
 	For the Year Ended	
 	December 31, 2016	 	December 31, 2015	 	December 31, 2014	
 	Retail Installment Contracts	 	Retail Installment Contracts	 	Personal Loans	 	Retail Installment Contracts	 	Personal Loans	
Recorded investment in TDRs that subsequently defaulted	$	788,933		 	$	788,297		 	$	5,346		 	$	516,349		 	$	3,437		
Number of contracts (not in thousands)	44,972		 	45,840		 	4,919		 	32,221		 	3,401		
		
5.	Goodwill and Intangibles	

The Company has identified one operating segment which is also the reporting unit, Consumer Finance. Management uses a two-step method to test goodwill for impairment annually and in interim, if an event or circumstance occurs that would “more likely than not” reduce the fair value of the reporting unit to an amount below its carrying value. For the first step, the Company determines if impairment exists by estimating the fair value of the Consumer Finance reporting unit using the market capitalization method at the measurement date and comparing it to the carrying value. If the fair value is greater than the carrying value, then no goodwill impairment has occurred. If the carrying value is greater than fair value, then impairment has occurred the amount is measured in step two. Step two measures the impairment by comparing the implied fair value of the reporting unit’s goodwill to its carrying value. In the second step, fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The Company completed its test of goodwill for impairment during the fourth quarter of 2016 and concluded that goodwill was not impaired. The carrying amount of goodwill for the years ended December 31, 2016 , 2015 , and 2014 , was unchanged at $74,056 . For each of the years ended December 31, 2016 , 2015 , and 2014 , goodwill amortization of $5,463 was deductible for tax purposes.

108

The components of intangible assets at December 31, 2016 and 2015 were as follows:

														
 	December 31, 2016	
 	Useful Life	 	Gross Carrying Amount	 	Accumulated Amortization	 	Net Carrying Value	
Amortized intangible assets:	 	 	 	 	 	 	 	
Customer relationships	10 years	 	12,400		 	(10,643	)	 	$	1,757		
Software and technology	3 years	 	33,528		 	(19,762	)	 	13,766		
Trademarks	3 - 15 years	 	20,347		 	(3,247	)	 	17,100		
Total	 	 	$	66,275		 	$	(33,652	)	 	$	32,623		

														
 	December 31, 2015	
 	Useful Life	 	Gross Carrying Amount	 	Accumulated Amortization	 	Net Carrying Value	
Amortized intangible assets:	 	 	 	 	 	 	 	
Customer relationships	10 years	 	$	12,400		 	$	(9,403	)	 	$	2,997		
Software and technology	3 years	 	28,691		 	(16,672	)	 	12,019		
Trademarks	3 years	 	2,347		 	(2,347	)	 	—		
Intangible assets not subject to amortization - trademarks	 	 	18,000		 	—		 	18,000		
Total	 	 	$	61,438		 	$	(28,422	)	 	$	33,016		
Effective April 1, 2016, the Company changed its estimate of the useful life of its trademark intangible to better reflect the estimated periods during which the asset is expected to generate cash flows. The estimated remaining useful life of the intangible asset that previously was considered indefinite was reduced to 15 years . The effect of this change in estimate was to increase amortization expense by $900 for the period ended December 31, 2016 .
The Company recognized impairment on intangible assets of zero , $3,500 , and $16,800 during the years ended December 31, 2016 , 2015 , and 2014 , respectively. Amortization expense on the assets was $8,411 , $6,742 , and $6,902 for the years ended December 31, 2016 , 2015 , and 2014 , respectively. Estimated future amortization expense is as follows:

				
2017	$	8,994		
2018	6,592		
2019	3,537		
2020	1,200		
2021	1,200		
Thereafter	11,100		
Total	$	32,623		
The weighted average remaining useful life for the Company's amortizing intangible assets was 8.5 years, 2.9 years, and 3.1 years at December 31, 2016 , 2015 , and 2014 , respectively.

109

		
6.	Debt	
Revolving Credit Facilities
The following table presents information regarding credit facilities as of December 31, 2016 and 2015 :

																				
 	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 (a)	 	462,085		 	1,250,000		 	2.52%	 	653,014		 	14,916		
Warehouse line (b)	August 2018	 	534,220		 	780,000		 	1.98%	 	608,025		 	24,520		
Warehouse line (c)	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 (d)	December 2017	 	507,800		 	507,800		 	2.83%	 	—		 	22,613		
Repurchase facility (d)	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		
Lines of credit with Santander and related subsidiaries (e):	 	 	 	 	 	 	 	 	 	 	 	
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		

(a)	Half of the outstanding balance on this facility matures in March 2017 and half matures in March 2018.	
		
(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)	The repurchase facilities are collateralized by securitization notes payable retained by the Company. These facilities have rolling maturities of up to one year .	
		
(e)	These lines are also collateralized by securitization notes payable and residuals retained by the Company. As of December 31, 2016 and December 31, 2015 , $1,316,568 and $1,420,584 , respectively, of the aggregate outstanding balances on these facilities were unsecured.	

110

	
																				
 	December 31, 2015	
 	Maturity Date(s)	 	Utilized Balance	 	Committed Amount	 	Effective Rate	 	Assets Pledged	 	Restricted Cash Pledged	
Facilities with third parties:
	 	 	 	 	 	 	 	 	 	 	 	
Warehouse line	June 2016	 	$	378,301		 	$	500,000		 	1.48%	 	$	535,737		 	$	—		
Warehouse line	Various	 	808,135		 	1,250,000		 	1.29%	 	1,137,257		 	24,942		
Warehouse line	July 2017	 	682,720		 	1,260,000		 	1.35%	 	809,185		 	20,852		
Warehouse line	July 2017	 	2,247,443		 	2,940,000		 	1.41%	 	3,412,321		 	48,589		
Warehouse line	December 2017	 	944,877		 	2,000,000		 	1.56%	 	1,345,051		 	32,038		
Repurchase facility	December 2016	 	850,904		 	850,904		 	2.07%	 	—		 	34,166		
Warehouse line	September 2017	 	565,399		 	1,000,000		 	1.20%	 	824,327		 	15,759		
Warehouse line	November 2016	 	175,000		 	175,000		 	1.90%	 	—		 	—		
Warehouse line	November 2016	 	250,000		 	250,000		 	1.90%	 	—		 	2,501		
Total facilities with third parties	 	 	6,902,779		 	10,225,904		 	 	 	8,063,878		 	178,847		
Lines of credit with Santander and related subsidiaries:	 	 	 	 	 	 	 	 	 	 	 	
Line of credit	December 2016	 	500,000		 	500,000		 	2.65%	 	—		 	—		
Line of credit	December 2018	 	—		 	500,000		 	3.48%	 	—		 	—		
Line of credit	December 2016	 	1,000,000		 	1,750,000		 	2.61%	 	—		 	—		
Line of credit	December 2018	 	800,000		 	1,750,000		 	2.84%	 	—		 	—		
Line of credit	March 2017	 	300,000		 	300,000		 	1.88%	 	—		 	—		
Total facilities with Santander and related subsidiaries	 	 	2,600,000		 	4,800,000		 	 	 	—		 	—		
Total revolving credit facilities	 	 	$	9,502,779		 	$	15,025,904		 	 	 	$	8,063,878		 	$	178,847		

Facilities with Third Parties
The warehouse lines and repurchase facility 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.
Lines of Credit with Santander and Related Subsidiaries
Through its New York branch, Santander provides the Company with $3,000,000 of long-term committed revolving credit facilities. Through SHUSA, Santander provides the Company with an additional $3,300,000 of committed revolving credit, $300,000 of which is collateralized by residuals retained on its own securitizations, and $3,000,000 of committed revolving credit that can be drawn on an unsecured basis.
These facilities offered through the New York branch are structured as three and five -year floating rate facilities, with current commitment termination dates of December 2017 and 2018 . These facilities currently permit unsecured borrowings but generally are collateralized by retail installment contracts and retained residuals. Any balances outstanding under the facility at the time of its commitment termination date will amortize to match the maturities and expected cash flows of the corresponding collateral.

111

Secured Structured Financings
 
The following table presents information regarding secured structured financings as of December 31, 2016 and 2015 :

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

	
																				
 	December 31, 2015	
 	Original Estimated Maturity Date(s)	 	Balance	 	Initial Note Amounts Issued	 	Initial Weighted Average Interest Rate	 	Collateral	 	Restricted Cash	
2012 Securitizations	September 2018	 	$	433,771		 	$	2,525,540		 	0.92%-1.23%	 	$	580,581		 	$	84,231		
2013 Securitizations	January 2019 - January 2021	 	2,000,915		 	6,689,700		 	0.89%-1.59%	 	2,577,552		 	267,623		
2014 Securitizations	February 2020 - January 2021	 	2,956,273		 	6,391,020		 	1.16%-1.72%	 	3,894,365		 	313,356		
2015 Securitizations	September 2019 - January 2023	 	7,269,037		 	9,317,032		 	1.33%-2.29%	 	9,203,569		 	577,647		
Public securitizations	 	 	12,659,996		 	24,923,292		 	 	 	16,256,067		 	1,242,857		
2010 Private issuances	June 2011	 	108,201		 	516,000		 	1.29%	 	240,026		 	6,855		
2011 Private issuances	December 2018	 	708,884		 	1,700,000		 	1.46%	 	1,142,853		 	50,432		
2013 Private issuances	September 2018-September 2020	 	2,836,420		 	2,693,754		 	1.13%-1.38%	 	4,311,481		 	143,450		
2014 Private issuances	March 2018 - December 2021	 	1,541,970		 	3,271,175		 	1.05%-1.40%	 	2,192,495		 	95,325		
2015 Private issuances	November 2016 - May 2020	 	3,017,429		 	3,548,242		 	 0.88%-2.81%	 	3,608,497		 	161,778		
Privately issued amortizing notes	 	 	8,212,904		 	11,729,171		 	 	 	11,495,352		 	457,840		
Total secured structured financings	 	 	$	20,872,900		 	$	36,652,463		 	 	 	$	27,751,419		 	$	1,700,697		

112

Notes Payable — Secured Structured Financings
The principal and interest on secured structured financings are paid using the cash flows from the underlying retail installment contracts, loans and leases, which serve as collateral for the notes. Accordingly, the timing of the principal payments on these notes is dependent on the payments received on the underlying retail installment contracts, which back the notes. The final contractual maturity and weighted average interest rate by year on these notes at December 31, 2016 , were as follows:

				
2017, .76%	$	1,878,808		
2018, 2.19%	418,091		
2019, 1.82%	4,600,486		
2020, 2.27%	5,122,732		
2021, 2.79%	4,659,967		
Thereafter, 3.09%	4,972,792		
 	$	21,652,876		
Less: unamortized costs	(43,987	)	
Notes payable - secured structured financings	$	21,608,889		

The Company’s secured structured financings consist of both public, SEC-registered securitizations, as well as private securitizations under Rule 144A of the Securities Act and privately issued amortizing notes. 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 December 31, 2016 and 2015 , the Company had private issuances of notes backed by vehicle leases totaling $3,862,274 and $3,228,240 , respectively.

Unamortized debt issuance costs are amortized as interest expense over the terms of the related notes payable using a method that approximates the effective interest method and are classified as a discount to the related recorded debt balance. Amortized debt issuance costs were $27,111 , $23,338 , and $14,599 for the years ended December 31, 2016, 2015, and 2014, 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 a method that approximates the effective interest method over the estimated remaining life of the acquired notes. Total interest expense on secured structured financings for the years ended December 31, 2016 , 2015 , and 2014 was $420,153 , $291,247 , and $238,394 , respectively.
7.    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. These transactions are structured without recourse. The Trusts are considered VIEs under U.S. GAAP and, when the Company holds the residual interest, are consolidated because the Company has: (a) power over the significant activities of each entity as servicer of its financial assets and (b) through the residual interest and in some cases debt securities held by the Company, an obligation to absorb losses or the right to receive benefits from each VIE that are potentially significant to the VIE. When the Company does not retain any debt or equity interests in its securitizations or subsequently sells such interests it records these transactions as sales of the associated retail installment contracts.
The collateral, borrowings under credit facilities and securitization notes payable of the Company's consolidated VIEs remain on the consolidated balance sheets. The Company recognizes finance charges, fee income, and provision for credit losses on the retail installment contracts, and leased vehicles and interest expense on the debt. All of the Trusts are separate legal entities and the collateral and other assets held by these subsidiaries are legally owned by them and are not available to other creditors.
Revolving credit facilities generally also utilize entities that are considered VIEs which are included on the consolidated balance sheets.

113

The Company also uses a titling trust to originate and hold its leased vehicles and the associated leases, in order to facilitate the pledging of leases to financing facilities or the sale of leases to other parties without incurring the costs and administrative burden of retitling the leased vehicles. This titling trust is considered a VIE.
On-balance sheet variable interest entities
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 December 31, 2016 and 2015 , the Company was servicing $27,802,971 and $27,995,907 , 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 for the years ended December 31, 2016 , 2015 , and 2014 , is as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Assets securitized	$	15,828,921		 	$	18,516,641		 	$	14,251,258		
 	 	 	 	 	 	
Net proceeds from new securitizations (a)	$	13,319,530		 	$	15,232,692		 	$	11,948,421		
Net proceeds from sale of retained bonds	436,812		 	—		 	—		
Cash received for servicing fees (b)	787,778		 	700,156		 	632,957		
Net distributions from Trusts (b)	1,748,013		 	1,960,418		 	1,829,754		
Total cash received from Trusts	$	16,292,133		 	$	17,893,266		 	$	14,411,132		
		
(a)	Includes additional advances on existing securitizations.	
		
(b)	These amounts are not reflected in the accompanying consolidated statements of cash flows because the cash flows are between the VIEs and other entities included in the consolidation.	
Off-balance sheet variable interest entities
The Company has completed sales to VIEs that met sale accounting treatment in accordance with the applicable guidance. Due to the nature, purpose, and activity of the transactions, the Company determined for consolidation purposes that it either does not hold potentially significant variable interests or is not the primary beneficiary as a result of the Company's limited further involvement with the financial assets. For such transactions, the transferred financial assets are removed from the Company's consolidated balance sheets. In certain situations, the Company remains the servicer of the financial assets and receives servicing fees that represent adequate compensation. The Company also recognizes a gain or loss for the difference between the cash proceeds and carrying value of the assets sold.
During the years ended December 31, 2016 , 2015 , and 2014 the Company sold $886,288 , $1,557,099 , and $1,802,461 , respectively, of gross retail installment contracts to VIEs in off-balance sheet securitizations for a gain (loss) of $(10,511) , $59,983 , and $72,443 , respectively, recorded in investment gains (losses), net, in the accompanying consolidated statements of income. As of December 31, 2016 and 2015 , the Company was servicing $2,741,101 and $2,663,494 , respectively, of gross retail installment contracts that have been sold in these and other off-balance sheet Chrysler Capital securitizations. 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.

114

A summary of the cash flows received from these off-balance sheet securitization trusts for the years ended December 31, 2016 , 2015 , and 2014 , is as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Receivables securitized (a)	$	904,108		 	$	1,557,099		 	$	1,802,461		
 	 	 	 	 	 	
Net proceeds from new securitizations	$	876,592		 	$	1,578,320		 	$	1,894,052		
Cash received for servicing fees	47,804		 	23,848		 	17,000		
Total cash received from securitization trusts	$	924,396		 	$	1,602,168		 	$	1,911,052		
		
(a)	Represents the unpaid principal balance at the time of original securitization.	

During the year ended December 31, 2015, the Company settled transactions to sell residual interests in certain Trusts and certain retained bonds in those Trusts to an unrelated third party. The Company received cash proceeds of $661,675 for the year ended December 31, 2015 related to the sale of these residual interests and retained bonds.

Each of these Trusts was previously determined to be a VIE. Prior to the sale of these residual interests, the associated Trusts were consolidated by the Company because the Company held a variable interest in each VIE and had determined that it was the primary beneficiary of the VIEs. The Company will continue to service the loans of these Trusts and may reacquire certain retail installment loans from the Trusts through the exercise of an optional clean-up call, as permitted through the respective servicing agreements. Although the Company will continue to service the loans in the associated Trusts and, therefore, will have the power to direct the activities that most significantly impact the economic performance of the trust, the Company concluded that it was no longer the primary beneficiary of the Trusts upon the sale of the Company's residual interests. As a result, the Company deconsolidated the assets and liabilities of the corresponding trusts upon their sale.

Upon settlement of these transactions, the Company derecognized $1,919,171 in assets and $1,183,792 in notes payable and other liabilities of the trust. For the year ended December 31, 2015 the sale of these interests resulted in a net decrease to provision for credit losses of $112,804 , after giving effect to lower of cost or market adjustments of $73,388 .
8.    Derivative Financial Instruments
The Company manages its exposure to changing interest rates using derivative financial instruments. In certain circumstances, the Company is required to hedge its interest rate risk on its secured structured financings and the borrowings under its revolving credit facilities. The Company uses both interest rate swaps and interest rate caps to satisfy these requirements and to hedge the variability of cash flows on securities issued by securitization Trusts and borrowings under the Company's warehouse facilities. Certain of the Company’s interest rate swap agreements are designated as cash flow hedges for accounting purposes. Changes in the fair value of derivatives designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (AOCI), to the extent that the hedge relationships are effective, and amounts are reclassified from AOCI to earnings as the forecasted transactions impact earnings. Ineffectiveness, if any, associated with changes in the fair value of derivatives designated as cash flow hedges is recorded currently in earnings.
The Company’s remaining interest rate swap agreements, as well as its interest rate cap agreements, the corresponding options written to offset the interest rate cap agreements, total return swaps and a total return settlement agreement were not designated as hedges for accounting purposes. Changes in the fair value and settlements of derivative instruments not designated as hedges for accounting purposes are reflected in earnings as a component of interest expense.

115

The underlying notional amounts and aggregate fair values of these agreements at December 31, 2016 and 2015 , were as follows:

	
																
 	December 31, 2016	 	December 31, 2015	
 	Notional	 	Fair Value	 	Notional	 	Fair Value	
Interest rate swap agreements designated as cash flow hedges	$	7,854,700		 	$	44,618		 	$	9,150,000		 	$	1,706		
Interest rate swap agreements not designated as hedges	1,019,900		 	1,939		 	2,399,000		 	(1,306	)	
Interest rate cap agreements	9,463,935		 	76,269		 	10,013,912		 	32,951		
Options for interest rate cap agreements	9,463,935		 	(76,281	)	 	10,013,912		 	(32,977	)	
Total return settlement	658,471		 	(30,618	)	 	1,404,726		 	(53,432	)	

The aggregate fair value of the interest rate swap agreements was included on the Company’s consolidated balance sheets in other assets and other liabilities, as appropriate. The interest rate cap agreements were included in other assets and the related options in other liabilities on the Company’s consolidated balance sheets. The fair value of the total return swap was included in other liabilities on the Company's consolidated balance sheets. See Note 15 for additional disclosure of fair value and balance sheet location of the Company's derivative financial instruments.

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 December 31, 2016 and 2015 .
The Company is 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 is 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. As of December 31, 2016, all purchase price payments and all total return settlement payments due in 2016 have been made. These purchase price holdback payments and total return settlement payments are considered to be derivatives, collectively referred to herein as “total return settlement,” and accordingly are marked to fair value each reporting period.
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.

116

Information on the offsetting of derivative assets and derivative liabilities due to the right of offset was as follows, as of December 31, 2016 and 2015 :

																								
 	Offsetting of Financial Assets	
 	 	 	 	 	 	 	Gross Amounts Not Offset in the
Consolidated Balance Sheet	
 	Gross
Amounts of
Recognized
Assets	 	Gross Amounts
Offset in the
Consolidated
Balance Sheet	 	Net Amounts of Assets Presented
in the
Consolidated
Balance Sheet	 	Financial
Instruments	 	Cash
Collateral
Received (a)	 	Net
Amount	
December 31, 2016	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps - Santander & affiliates	$	5,372		 	$	—		 	$	5,372		 	$	—		 	$	—		 	$	5,372		
Interest rate swaps - third party	42,254		 	—		 	42,254		 	—		 	(22,100	)	 	20,154		
Interest rate caps - Santander & affiliates	7,593		 	—		 	7,593		 	—		 	—		 	7,593		
Interest rate caps - third party	68,676		 	—		 	68,676		 	—		 	—		 	68,676		
Total derivatives subject to a master netting arrangement or similar arrangement	123,895		 	—		 	123,895		 	—		 	(22,100	)	 	101,795		
Total derivatives not subject to a master netting arrangement or similar arrangement	—		 	—		 	—		 	—		 	—		 	—		
Total derivative assets	$	123,895		 	$	—		 	$	123,895		 	$	—		 	$	(22,100	)	 	$	101,795		
Total financial assets	$	123,895		 	$	—		 	$	123,895		 	$	—		 	$	(22,100	)	 	$	101,795		
 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2015	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps - Santander & affiliates	$	4,607		 	$	—		 	$	4,607		 	$	—		 	$	—		 	$	4,607		
Interest rate swaps - third party	3,863		 	—		 	3,863		 	—		 	—		 	3,863		
Interest rate caps - Santander & affiliates	12,724		 	—		 	12,724		 	—		 	—		 	12,724		
Interest rate caps - third party	20,227		 	—		 	20,227		 	—		 	—		 	20,227		
Total derivatives subject to a master netting arrangement or similar arrangement	41,421		 	—		 	41,421		 	—		 	—		 	41,421		
Total derivatives not subject to a master netting arrangement or similar arrangement	—		 	—		 	—		 	—		 	—		 	—		
Total derivative assets	$	41,421		 	$	—		 	$	41,421		 	$	—		 	$	—		 	$	41,421		
Total financial assets	$	41,421		 	$	—		 	$	41,421		 	$	—		 	$	—		 	$	41,421		
		
(a)	Cash collateral received is reported in Other liabilities or Due to affiliate, as applicable, in the consolidated balance sheet.	

117

	
																								
 	Offsetting of Financial Liabilities	
 	 	 	 	 	 	 	Gross Amounts Not Offset in the
Consolidated Balance Sheet	
 	Gross
Amounts of
Recognized
Liabilities	 	Gross Amounts
Offset in the
Consolidated
Balance Sheet	 	Net Amounts of Liabilities Presented
in the
Consolidated
Balance Sheet	 	Financial
Instruments	 	Cash
Collateral
Pledged (a)	 	Net
Amount	
December 31, 2016	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps - Santander & affiliates	$	546		 	$	—		 	$	546		 	$	—		 	$	(546	)	 	$	—		
Interest rate swaps - third party	524		 	—		 	524		 	—		 	(524	)	 	—		
Back to back - Santander & affiliates	7,593		 	—		 	7,593		 	—		 	(7,593	)	 	—		
Back to back - third party	68,688		 	—		 	68,688		 	—		 	(68,688	)	 	—		
Total derivatives subject to a master netting arrangement or similar arrangement	77,351		 	—		 	77,351		 	—		 	(77,351	)	 	—		
Total return settlement	30,618		 	—		 	30,618		 	—		 	—		 	30,618		
Total derivatives not subject to a master netting arrangement or similar arrangement	30,618		 	—		 	30,618		 	—		 	—		 	30,618		
Total derivative liabilities	$	107,969		 	$	—		 	$	107,969		 	$	—		 	$	(77,351	)	 	$	30,618		
Total financial liabilities	$	107,969		 	$	—		 	$	107,969		 	$	—		 	$	(77,351	)	 	$	30,618		
 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2015	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps - Santander & affiliates	$	4,977		 	$	—		 	$	4,977		 	$	—		 	$	(3,430	)	 	$	1,547		
Interest rate swaps - third party	3,093		 	—		 	3,093		 	—		 	(3,093	)	 	—		
Back to back - Santander & affiliates	12,724		 	—		 	12,724		 	—		 	(12,270	)	 	454		
Back to back - third party	20,253		 	—		 	20,253		 	—		 	(20,253	)	 	—		
Total derivatives subject to a master netting arrangement or similar arrangement	41,047		 	—		 	41,047		 	—		 	(39,046	)	 	2,001		
Total return settlement	53,432		 	—		 	53,432		 	—		 	—		 	53,432		
Total derivatives not subject to a master netting arrangement or similar arrangement	53,432		 	—		 	53,432		 	—		 	—		 	53,432		
Total derivative liabilities	$	94,479		 	$	—		 	$	94,479		 	$	—		 	$	(39,046	)	 	$	55,433		
Total financial liabilities	$	94,479		 	$	—		 	$	94,479		 	$	—		 	$	(39,046	)	 	$	55,433		
		
(a)	Cash collateral pledged is reported in Other assets or Due from affiliate, as applicable, in the 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 such, 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 to net income, and gains (losses) recognized in net income, are included as components of interest expense. The Company’s derivative instruments had effects on its consolidated statements of income and comprehensive income for the years ended December 31, 2016 , 2015 , and 2014 as follows:

												
 	December 31, 2016	
 	Gains (Losses) Recognized in Interest Expense	 	Gross Gains (Losses) Recognized in Accumulated Other Comprehensive Income	 	Gross Gains (Losses) Reclassified From Accumulated Other Comprehensive Income To Interest Expense	
Interest rate swap agreements designated as cash flow hedges	$	1,131		 	$	(2,118	)	 	$	(43,898	)	
 	 	 	 	 	 	
Derivative instruments not designated as hedges:	 	 	 	 	 	
Gains (losses) recognized in operating expense	$	(1,593	)	 	 	 	 	

118

	
												
 	December 31, 2015	
 	Gains (Losses) Recognized in Interest Expense	 	Gross Gains (Losses) Recognized in Accumulated Other Comprehensive Income	 	Gross Gains (Losses) Reclassified From Accumulated Other Comprehensive Income To Interest Expense	
Interest rate swap agreements designated as cash flow hedges	$	223		 	$	(53,160	)	 	$	(50,860	)	
 	 	 	 	 	 	
Derivative instruments not designated as hedges:	 	 	 	 	 	
Gains (losses) recognized in interest expense	$	(11,880	)	 	 	 	 	
Gains (losses) recognized in operating expenses	$	(10,973	)	 	 	 	 	

	
												
 	December 31, 2014	
 	Gains (Losses) Recognized in Interest Expense	 	Gross Gains (Losses) Recognized in Accumulated Other Comprehensive Income	 	Gross Gains (Losses) Reclassified From Accumulated Other Comprehensive Income To Interest Expense	
Interest rate swap agreements designated as cash flow hedges	$	(708	)	 	$	(23,015	)	 	$	(33,235	)	
 	 	 	 	 	 	
Derivative instruments not designated as hedges:	 	 	 	 	 	
Gains (losses) recognized in interest expense	$	19,278		 	 	 	 	
Gains (losses) recognized in operating expenses	$	(7,856	)	 	 	 	 	

The ineffectiveness related to the interest rate swap agreements designated as cash flow hedges was insignificant for the years ended December 31, 2016 , 2015 , and 2014 . The Company estimates that approximately $6,000 of unrealized losses included in accumulated other comprehensive income will be reclassified to interest expense within the next twelve months.
9.    Other Assets
Other assets were comprised as follows:

								
 	December 31,
2016	 	December 31,
2015	
Upfront fee (a)	$	95,000		 	$	110,000		
Vehicles (b)	257,382		 	203,906		
Manufacturer subvention payments receivable (a)	161,447		 	132,856		
Accounts receivable	22,480		 	27,028		
Prepaids	46,177		 	33,183		
Derivative assets (Note 8)	186,019		 	59,022		
Other	16,905		 	16,296		
Total	$	785,410		 	$	582,291		

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

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10.	Income Taxes	
The components of the provision for income taxes for the years ended December 31, 2016 , 2015 , and 2014 , were as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Income before income taxes:	 	 	 	 	 	
Domestic	$	942,436		 	$	1,289,612		 	$	1,121,135		
Foreign	218,275		 	—		 	—		
Total	$	1,160,711		 	$	1,289,612		 	$	1,121,135		
Current income tax expense (benefit):	 	 		 	 	
Federal	$	2,481		 	$	33,798		 	$	(252,856	)	
State	3,273		 	4,491		 	31,639		
Foreign	$	8,738		 	$	—		 	$	—		
Total current income tax expense (benefit)	14,492		 	38,289		 	(221,217	)	
Deferred income tax expense (benefit):	 	 	 	 	 	
Federal	343,816		 	387,686		 	598,065		
State	35,944		 	39,597		 	19,003		
Foreign	(7	)	 	—		 	—		
Total deferred income tax expense	379,753		 	427,283		 	617,068		
Total income tax expense	$	394,245		 	$	465,572		 	$	395,851		
In December 2015, the Company formed a wholly-owned foreign subsidiary that is licensed in Puerto Rico as an IFE ("International Financial Entity") under the Government approved Act Number 273. This classification results in the granting of a tax decree securing a 4% fixed income tax rate and a number of non income tax benefits for an initial period of fifteen (15) years.
The Company provides U.S. income taxes on earnings of foreign subsidiaries unless the subsidiaries' earnings are considered indefinitely reinvested outside of the United States. As of December 31, 2016 and 2015, the Company has no earnings which are considered indefinitely reinvested outside of the United States.
The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rates for the years ended December 31, 2016 , 2015 , and 2014 , is as follows:

									
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Federal statutory rate	35.0	%	 	35.0	%	 	35.0	%	
State and local income taxes — net of federal income tax benefit	2.5		 	2.3		 	1.6		
Valuation allowance	(2.2	)	 	(0.2	)	 	0.6		
Electric vehicle credit	(2.3	)	 	(1.8	)	 	(1.8	)	
Other	1.0		 	0.8		 	(0.1	)	
Effective income tax rate	34.0	%	 	36.1	%	 	35.3	%	
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. Under the hypothetical separate company method, SC recorded a deemed contribution from affiliates in the amount of $1,424 , which is included in additional paid-in capital section in the accompanying consolidated balance sheets. At December 31, 2016 and 2015 , the Company had a net receivable from affiliates under the tax sharing agreement of $1,087 and $71 , respectively, which was included in Related party taxes receivable in the consolidated balance sheet.

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The tax effects of temporary differences between the financial reporting and income tax basis of assets and liabilities at December 31, 2016 and 2015 , are as follows:

								
 	December 31,
2016	 	December 31,
2015	
Deferred tax assets:	 	 		
Debt issuance costs	$	5,001		 	$	3,502		
Receivables	474,366		 	598,346		
Capital loss carryforwards	—		 	27,013		
Net operating loss carryforwards	603,136		 	196,172		
Equity-based compensation	23,042		 	18,766		
Credit carryforwards	127,933		 	79,037		
Other	34,257		 	37,070		
Total gross deferred tax assets	1,267,735		 	959,906		
Deferred tax liabilities:	 	 	 	
Capitalized origination costs	(10,804	)	 	(18,752	)	
Goodwill	(15,375	)	 	(13,198	)	
Leased vehicles	(2,421,114	)	 	(1,760,918	)	
Furniture and equipment	(9,638	)	 	(13,212	)	
Derivatives	(17,635	)	 	(768	)	
Unremitted foreign earnings	(67,720	)	 	—		
Other	(1,012	)	 	(3,794	)	
Total gross deferred tax liabilities	(2,543,298	)	 	(1,810,642	)	
Valuation allowance	(2,501	)	 	(30,489	)	
Net deferred tax asset (liability)	$	(1,278,064	)	 	$	(881,225	)	

At December 31, 2016 and 2015 , the Company’s largest deferred tax liability was leased vehicles of $2,421,114 and $1,760,918 , respectively. The increase in this liability is due to accelerated depreciation taken for tax purposes.
The Company has a like-kind exchange program for the leased auto portfolio. Pursuant to the program, the Company disposes of vehicles and acquires replacement vehicles in a form whereby tax gains on disposal of eligible vehicles are deferred. To qualify for like-kind exchange treatment, the Company exchanges through a qualified intermediary eligible vehicles being disposed of with vehicles being acquired, allowing SC to generally carryover the tax basis of the vehicles sold (“like-kind exchanges”). The program results in a material deferral of federal and state income taxes, and a decrease in cash taxes in periods when the Company is not in a net operating loss (NOL) position. As part of the program, the proceeds from the sale of eligible vehicles are restricted for the acquisition of replacement vehicles and other specified applications.
The Company began generating qualified plug-in electric vehicle credits in 2013; the credit carryforwards will begin expiring in 2034 .
In addition to the net operating losses included in deferred income tax assets in the above table, the Company had $70,929 of income tax deductions related to share-based payments that are in excess of the amount recognized in the accompanying financial statements as of December 31, 2016 .
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting effective for annual periods beginning after December 15, 2016 for public entities. 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 will be recognized through an adjustment in beginning retained earnings, which at current income tax rates would approximate $26,467 .
    
At December 31, 2016, the Company has federal net operating loss carryforwards of $1,725,112 , which may be offset against future taxable income. If not utilized in future years, these will expire in varying amounts through 2036. The

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Company has state net operating loss carryforwards of $521,898 , which may be used against future taxable income. If not utilized in future years, these will expire in varying amounts through 2036.
As of December 31, 2016 , the Company had recorded a valuation allowance for state tax net operating loss carryforwards for which it does not have a tax-planning strategy in place. During 2016, we determined that previously recorded valuation allowances for capital loss carryforwards were no longer required; and, accordingly, we reversed such allowances resulting in a tax benefit for that period. A rollforward of the valuation allowance for the years ended December 31, 2016 , 2015 , and 2014 is as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Valuation allowance, beginning of year	$	30,489		 	$	32,901		 	$	26,879		
Provision (release)	(27,988	)	 	(2,412	)	 	6,022		
Valuation allowance, end of year	$	2,501		 	$	30,489		 	$	32,901		
A reconciliation of the beginning and ending balances of gross unrecognized tax benefits for each of the years ended December 31, 2016 , 2015 , and 2014 is as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Gross unrecognized tax benefits balance, January 1	$	225		 	$	166		 	$	1,487		
Additions for tax positions taken in the current year	16,606		 			 			
Additions for tax positions of prior years	—		 	70		 	5,472		
Reductions for tax positions of prior years	(34	)	 	(11	)	 	(3,783	)	
Reductions as a result of a lapse of the applicable statute of limitations	—		 	—		 	(2,473	)	
Settlements	(61	)	 	—		 	(537	)	
Gross unrecognized tax benefits balance, December 31	$	16,736		 	$	225		 	$	166		

At December 31, 2016 , 2015 , and 2014 , there were $16,606 , $95 and $26 , respectively, of net unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Accrued interest and penalties associated with uncertain tax positions are recognized as a component of the income tax provision. Accrued interest and penalties of $1,551 , $85 , and $55 are included with the related tax liability line in the accompanying consolidated balance sheets as of December 31, 2016 , 2015 , 2014 , respectively.
At December 31, 2016 , the Company believes that it is reasonably possible that a portion of the balance of the gross unrecognized tax benefits could decrease to zero in the next twelve months due to ongoing activities with various taxing jurisdictions that the Company expects may give rise to settlements or the expiration of statute of limitations. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law, and new authoritative rulings.
The Company is subject to examination by federal and state taxing authorities. Periods subsequent to December 31, 2010 are open for audit by the IRS. The SHUSA consolidated return, of which the Company is a part through December 31, 2011, is currently under IRS examination for 2011. The Company's separate returns for 2012, 2013, and 2014 are also under IRS examination. Periods subsequent to December 31, 2008, are open for audit by various state taxing authorities.

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11.    Commitments and Contingencies

The following table summarizes liabilities recorded for commitments and contingencies as of December 31, 2016 and 2015 , all of which are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets:

													
Agreement or Legal Matter	 	Commitment or Contingency	 	December 31, 2016	 	December 31, 2015	
Chrysler Agreement	 	Revenue-sharing and gain-sharing payments	 	$	10,134		 	$	12,054		
Agreement with Bank of America	 	Servicer performance fee	 	9,797		 	6,331		
Agreement with CBP	 	Loss-sharing payments	 	4,563		 	3,375		
Chrysler Capital leases agreement	 	Payments to purchaser sharing residual losses	 	—		 	2,893		
Legal and regulatory proceedings	 	Aggregate legal and regulatory liabilities	 	39,200		 	26,950		

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 also must make gain-sharing payments to FCA when residual gains on leased vehicles exceed a specified threshold. The amount accrued for these payments at December 31, 2016 is $10,134 .
The Chrysler Agreement requires, among other things, that SC bears the risk of loss on loans originated pursuant to the agreement, but also that FCA shares in any residual gains and losses from consumer leases. The agreement also requires that SC maintains 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. We have not met these penetration rates at December 31, 2016. 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 is committed to sell up to a specified amount of eligible loans to the bank each month. On July 27, 2016, the Company and Bank of America amended the flow agreement to reduce the maximum commitment to sell eligible loans each month to $300,000 . On October 27, 2016, Bank of America notified the Company that it was terminating the flow agreement effective January 31, 2017, and accordingly, the flow agreement is terminated. The Company retains servicing on all sold loans and may receive or pay a servicer performance payment based on an agreed-upon formula if performance on the sold loans is better or worse, respectively, than expected performance at time of sale. Servicer performance payments are due six years from the cut-off date of each loan sale.
Agreement with CBP
The Company has sold loans to CBP under terms of a flow agreement and predecessor sale agreements. The Company retains 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. On June 25, 2015, the Company executed an amendment to the servicing agreement with CBP, which increased the servicing fee the Company receives. The Company and CBP also amended the flow agreement which reduced, effective from and after August 1, 2015, CBP's committed purchases of Chrysler Capital prime loans from a maximum of $600,000 and a minimum of $250,000 per quarter to a maximum of $200,000 and a minimum of $50,000 per quarter, as may be adjusted according to the agreement. In January 2016, the Company executed an amendment to the servicing agreement with CBP which decreased the servicing fee the Company receives on loans sold to CBP by the Company under the flow agreement. On February 13, 2017, the Company and CBP entered into a mutual agreement to terminate the flow agreement effective May 1, 2017.

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Chrysler Capital leases agreement
In connection with the bulk sales of Chrysler Capital leases to a third party (Note 3), the Company is obligated to make quarterly payments to the purchaser sharing residual losses for lease terminations with losses over a specific percentage threshold.
Legal and regulatory proceedings
Periodically, the Company is party to, or otherwise involved in, various lawsuits, regulatory matters 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 or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether the matter presents a material loss contingency that is probable and estimable. If a determination is made during a given quarter that a material loss contingency is probable and estimable, an accrued liability is established during such quarter with respect to such loss contingency. The Company continues to monitor the matter for further developments that could affect the amount of the accrued liability previously established.

As of December 31, 2016 , the Company has accrued aggregate legal and regulatory liabilities of $39,200 .

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

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). On October 6, 2014, another purported securities class action lawsuit was filed in the District Court of Dallas County, State of Texas, captioned Kumar v. Santander Consumer USA Holdings, et al., No. DC-14-11783, which was subsequently removed to the United States District Court, Northern District of Texas, and re-captioned Kumar v. Santander Consumer USA Holdings, et al., No. 3:14-CV-3746 (the Kumar Lawsuit).

Both the Deka Lawsuit and the Kumar Lawsuit were 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 February 2015, the Kumar Lawsuit was voluntarily dismissed with prejudice. 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, and on February 17, 2017, the Company filed an opposition to the plaintiffs' motion to certify the proposed classes.

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

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, the Servicemembers Civil Relief 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.

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

In October 2014, May 2015, and July 2015 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 28 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 and securitization 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

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Attorneys General of the states involved. We believe that it is reasonably possible the Company will suffer a loss related to the Attorneys General, however, any such loss is not currently estimable.

In August and September 2014, the Company also received civil subpoenas and/or CIDs from the Attorneys General of Massachusetts and Delaware under the authority of each state’s consumer protection statutes requesting information and the production of documents related to our underwriting and securitizations of nonprime auto loans. The Company is complying with the requests for information and document preservation and continues to discuss these matters, and potential resolution thereof, with the Massachusetts and Delaware Attorneys General.

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.

On January 10, 2017, 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 and seeks unspecified civil penalties, equitable relief and other relief.

On November 4, 2015, the Company entered into an Assurance of Discontinuance (AOD) with the Office of the Attorney General of the Commonwealth of Massachusetts (the Massachusetts AG). The Massachusetts AG alleged that the Company violated the maximum permissible interest rates allowed under Massachusetts law due to the inclusion of GAP charges in the calculation of finance charges. Among other things, the AOD requires the Company, with respect to any loan that exceeded the maximum rates, to issue refunds of all finance charges paid to date and to waive all future finance charges. The AOD also requires the Company to undertake certain remedial measures, including ensuring that interest rates on its loans do not exceed maximum rates (when GAP charges are included) in the future, and provides that the Company pay $150 to the Massachusetts AG to reimburse its costs of implementing the AOD.

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.
Other commitments and contingencies
The Company is obligated to make purchase price holdback payments to a third party originator of auto loans that the Company has purchased, when losses are lower than originally expected. SC also is obligated to make total return settlement payments to this third-party originator in 2017 if returns on the purchased loans are greater than originally expected. These obligations are accounted for as derivatives (Note 8).
The Company has extended revolving lines of credit to certain auto dealers. Under this arrangement, the Company is committed to lend up to each dealer’s established credit limit. At December 31, 2016 , there was an outstanding balance of $2,529 and a committed amount of $2,920 .
Under terms of agreements with LendingClub, the Company was previously committed to purchase, at a minimum, the lesser of $30,000 per month or 50% of the lending platform company’s aggregate "near-prime" (as that term is defined in the agreements) originations. This commitment could be reduced or canceled with 90 days' notice. On October 9, 2015, the Company sent a notice of termination to LendingClub, and, accordingly, ceased originations on this platform on January 7, 2016.

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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 December 31, 2016 and 2015 , the Company was obligated to purchase $12,634 and $12,486 , respectively, in receivables that had been originated by the retailer but not yet purchased by the Company. 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 original equipment manufacturer (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, comprised of a volume bonus fee and a loss betterment bonus fee. The loss betterment bonus fee will be calculated annually and is based on the amount by which losses on loans originated under the agreement are lower than an established percentage threshold.
The Company also has agreements with SBNA to service recreational and marine vehicle portfolios. These agreements call for a periodic retroactive adjustment, based on cumulative return performance, of the servicing fee rate to inception of the contract. Adjustments for the years ended December 31, 2016 and 2015 totaled a net upward adjustment of $836 and net downward adjustment of $4,192 , respectively.

In connection with the sale of retail installment contracts through securitizations and other sales, the Company has made standard representations and warranties customary to the consumer finance industry. Violations of these representations and warranties may require the Company to repurchase loans previously sold to on- or off-balance sheet Trusts or other third parties. As of December 31, 2016 , 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 facilities and privately issued amortizing notes. These guarantees are limited to the obligations of SC as servicer.
The Company provided SBNA with the first right to review and approve consumer vehicle lease applications, subject to volume constraints, under terms of a flow agreement that was terminated on May 9, 2015. The Company has indemnified SBNA for potential credit and residual losses on $48,226 of leases that had been originated by SBNA under this program but were subsequently determined not to meet SBNA’s underwriting requirements. This indemnification agreement is supported by an equal amount of cash collateral posted by the Company in an SBNA bank account. The collateral account balance is included in restricted cash in the Company's consolidated balance sheets. 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.
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 December 31, 2016 and 2015 , the remaining aggregate commitment was $166,167 and $200,707 , respectively.

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The Company has entered into various operating leases, primarily for office space and computer equipment. Lease expense incurred totaled $11,328 , $8,965 and $9,651 for the years ended December 31, 2016 , 2015 , and 2014 , respectively. The remaining obligations under lease commitments at December 31, 2016 are as follows:

	
				
2017	$	11,992		
2018	12,790		
2019	12,774		
2020	13,035		
2021	12,910		
Thereafter	56,794		
Total	$	120,295		
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 12).
12.    Related-Party Transactions

Related-party transactions not otherwise disclosed in these footnotes to the consolidated financial statements include the following:
Interest expense, including unused fees, for affiliate lines/letters of credit for the years ended December 31, 2016 , 2015 , and 2014 was as follows:

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Line of credit agreement with Santander - New York Branch (Note 6)	$	69,877		 	$	96,753		 	$	92,209		
Line of credit agreement with SHUSA (Note 6)	24,050		 	5,299		 	4,299		
Letter of credit facility with Santander - New York Branch (Note 6)	—		 	—		 	507		
Accrued interest for affiliate lines/letters of credit at December 31, 2016 and 2015 , were comprised as follows:

								
 	December 31, 2016	 	December 31, 2015	
Line of credit agreement with Santander - New York Branch (Note 6)	$	6,297		 	$	6,015		
Line of credit agreement with SHUSA (Note 6)	1,737		 	267		
Letter of credit facility with Santander - New York Branch (Note 6)	—		 	—		

In August 2015, under a new agreement with Santander, the Company agreed to begin 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. The Company recognized guarantee fee expense of $6,402 and $2,282 for the years ended December 31, 2016 and 2015 , respectively. As of December 31, 2016 and 2015 , the Company had $1,620 and $2,282 of fees payable to Santander under this arrangement.
The Company has derivative financial instruments with Santander and affiliates with outstanding notional amounts of $7,259,400 and $13,739,000 at December 31, 2016 and 2015 , respectively (Note 8). The Company had a collateral overage on derivative liabilities with Santander and affiliates of $15,092 and $20,775 at December 31, 2016 and 2015 , respectively. Interest expense on these agreements includes amounts totaling $16,078 , $58,019 , and $44,366 for the years ended December 31, 2016 , 2015 , and 2014 , respectively.
Until October 1, 2014, the Company had an origination and servicing agreement with SBNA whereby the Company provided SBNA with the first right to review and assess Chrysler Capital dealer lending opportunities and, if SBNA elected, to provide the proposed financing. The Company provided servicing on all loans originated under this arrangement and was eligible to receive a servicer performance payment based on performance of the serviced loans.

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The Company also provided servicing on dealer loans sold to SBNA that were not subject to the servicer performance payment. Servicing fee income recognized on receivables from dealers sold to SBNA or originated by SBNA totaled  $4,289  for the year ended December 31, 2014 and the Company received  $4,610  for the year ended December 31, 2014 in servicer performance payments.
Effective October 1, 2014, the origination and servicing agreements were terminated and replaced with revised agreements requiring SC to permit SBNA first right to review and assess Chrysler Capital dealer lending opportunities and requiring SBNA to pay SC 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. As of December 31, 2016 and 2015 , the Company had relationship management fees receivable from SBNA of zero and $419 , respectively. The Company recognized $419 , $6,976 and $11 of relationship management fee income for the years ended December 31, 2016 , 2015 and 2014 , respectively. For the year ended December 31, 2016 , the Company recognized $3,314 and $610 of origination and renewal fee income, respectively. As of December 31, 2016 and 2015 , the Company had origination and renewal fees receivable from SBNA of $552 and zero . These agreements also transferred the servicing of all Chrysler Capital receivables from dealers, including receivables held by SBNA and by SC, from SC to SBNA. Servicing fee expense under this new agreement totaled $110 , $253 and $80 for the years ended December 31, 2016 , 2015 and 2014 , respectively. As of December 31, 2016 and 2015 , the Company had $21 and $37 , 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 December 31, 2016 or 2015 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 $2,761 and $2,737 related to such originations as of December 31, 2016 and 2015 , 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 SC 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 December 31, 2016 and 2015 , the unamortized fee balance was $5,850 and $6,750 , respectively. The Company recognized $900 , $900 , and $900 of income related to the referral fee for the years ended December 31, 2016 , 2015 , and 2014 , 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 $5,154 , $2,500 , and $9,990 for the years ended December 31, 2016 , 2015 , and 2014 , respectively. Other information on the serviced auto loan and retail installment contract portfolios for SBNA as of December 31, 2016 and 2015 is as follows:

								
 	December 31,
2016	 	December 31,
2015	
Total serviced portfolio	$	531,117		 	$	692,291		
Cash collections due to owner	21,427		 	19,302		
Servicing fees receivable	1,123		 	1,476		
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 provides servicing and received an origination fee on all leases originated under this agreement. Pursuant to the Chrysler Agreement, the Company pays FCA on behalf of SBNA for residual gains and losses on the flowed leases. The Company also services leases it sold to SBNA in 2014. Origination fee income recognized under the agreement totaled zero , $8,431 and $24,478 for the years ended December 31, 2016 , 2015 and 2014 , respectively. Servicing fee income recognized on leases serviced for SBNA totaled $7,707 , $6,977 and $3,041 for the years ended December 31, 2016 , 2015 and 2014 , respectively.

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Other information on the consumer vehicle lease portfolio serviced for SBNA as of December 31, 2016 and 2015 is as follows:

								
 	December 31,
2016	 	December 31,
2015	
Total serviced portfolio	$	1,297,317		 	$	2,198,519		
Cash collections due to owner	78		 	132		
Origination and servicing fees receivable	926		 	784		
Revenue share reimbursement receivable	612		 	1,370		
On June 30, 2014, the Company entered into an indemnification agreement with SBNA whereby SC 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, SC 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 SC, in the case of payments and sale proceeds. As of December 31, 2016 and 2015 , the balance in the collateral account was $11,329 and $34,516 , respectively. For the years ended December 31, 2016 , 2015 , and 2014 , the Company recognized indemnification expense of zero , $3,142 , and zero , respectively. As of December 31, 2016 and 2015 , the Company had a recorded liability of $2,691 and $2,691 , respectively, related to the residual losses covered under the agreement.
The Company periodically sells loan and lease contracts to affiliates under certain agreements. Although no such sales occurred during the years ended December 31, 2016 and 2015 , the Company sold leases with a depreciated net capitalized cost of $369,114 and a net book value of $317,275 in Chrysler Capital leases to SBNA. This sale was effected through the transfer of a special unit of beneficial interest (SUBI) in SC's titling trust. Proceeds from the sale were $322,851 for a gain of $4,570 for the year ended December 31, 2014 . SC retained servicing on the sold leases.
On September 16, 2014, the Company sold  $18,227  of receivables from dealers to SBNA, resulting in a gain of $347 . The Company was entitled to additional proceeds on this sale totaling  $694  if certain conditions, including continued existence and performance of the sold loans, are met at the first and second anniversaries of the sale. At the first and second anniversary dates of the sale, which occurred during the years ended December 31, 2015 and 2016 , respectively, the Company received $347 and $347 , respectively, in additional proceeds related to the sale due to the satisfaction of conditions specified at the time of the sale.
In December 2015, the Company formed a new wholly-owned subsidiary, Santander Consumer International Puerto Rico, LLC (SCI), and SCI opened deposit accounts with Banco Santander Puerto Rico, an affiliated entity. As of December 31, 2016 and 2015 , SCI had cash of $98,836 and $4,920 , respectively, on deposit with Banco Santander Puerto Rico.
During 2015, Santander Investment Securities Inc. (SIS), an affiliated entity, purchased a portion of the Class B notes of SDART 2013-3, a consolidated securitization Trust, with a principal balance of $725 . As of December 31, 2016 and 2015 , the unpaid note balance of the Class B notes owned by SIS was zero and $510 , respectively. In addition, SIS 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 years ended December 31, 2016 , 2015 , and 2014 totaled $1,149 , $550 , and $350 , respectively, and are included in debt issuance costs in the accompanying 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 $93 , $161 , and $135 for the years ended December 31, 2016 , 2015 , and 2014 , respectively.
The Company is party to a Master Service Agreement (MSA) with a company in which it has a cost method investment and holds a warrant to increase its ownership if certain vesting conditions are satisfied. The MSA enables SC to review point-of-sale credit applications of retail store customers. Under terms of the MSA, the Company originated personal revolving loans of zero , $23,504 , and $17,357 during the years ended December 31, 2016 , 2015 , and 2014 , respectively. During the year ended December 31, 2015 , the Company fully impaired its cost method investment in this entity and recorded a loss of $6,000 in investment gains (losses), net in the accompanying

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consolidated statement of income and comprehensive income. Effective August 17, 2016, the Company ceased funding new originations from all of the retailers for which it reviews credit applications under this MSA.
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.
Also, in connection with his departure, Mr. Dundon entered into a Separation Agreement with the Company, DDFS LLC, SHUSA and Santander. The Separation Agreement provided, among other things, that Mr. Dundon resign as Chairman of the Board, as CEO of the Company and as an officer and/or director of any of the Company’s subsidiary companies. Mr. Dundon would continue to serve as a Director of the Company's Board, and 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. Also subject to applicable regulatory approvals and law, 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 16), subject to limitations of banking regulators and applicable law.
As of December 31, 2016 , the Company has not made any payments to Mr. Dundon 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 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 our 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 December 31, 2016 and 2015 had an unpaid principal balance of approximately $290,000 and $290,000 , respectively. 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 completed on or before the Call End Date, interest will accrue 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, and Santander has exercised this option. If consummated in full, DDFS LLC would receive $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

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(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.
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.
During the years ended December 31, 2015 and 2014, the Company paid certain expenses incurred by Mr. Dundon in the operation of a private plane in which he owns a partial interest when used for SC business within the contiguous 48 states. Under this practice, payment was based on a set flight time hourly rate, and the amount of reimbursement was not subject to a maximum cap per fiscal year. For the years ended December 31, 2015 and 2014 , the Company paid $404 and $577 , respectively, to Meregrass, Inc., the company managing the plane's operations, with an average rate of $5.8 per hour.
Under an agreement with Mr. Dundon, the Company is provided access to a suite at an event center that is leased by Mr. Dundon, and which the Company uses for business purposes. The Company reimburses Mr. Dundon for the use of this space on a periodic basis. During the years ended December 31, 2016 and 2015 , the Company reimbursed Mr. Dundon $200 and $200 , respectively, for the use of this space.
As of December 31, 2016 , Jason Kulas, a director of the Company and the Company's current CEO, Mr. Dundon, and a Santander employee who was a member of the SC Board until the second quarter of 2015, each had a minority equity investment in a property in which the Company leases approximately 373,000 square feet as its corporate headquarters. During the years ended December 31, 2016 , 2015 , and 2014 , the Company recorded $4,945 , $4,612 and $5,450 , respectively, in lease expenses on this property. Future minimum lease payments over the remainder of the 12 -year term of the lease, which extends through 2026, total $69,023 . The Company subleases approximately 13,000 square feet of its corporate office space to SBNA. For the years ended December 31, 2016 , 2015 , and 2014 , the Company recorded $161 , $204 and $54 , respectively, in sublease revenue on this property.
The Company is party to certain agreements with Bluestem whereby the Company is committed to purchase receivables originated by Bluestem for an initial term ending in April 2020 and renewable through April 2022 at Bluestem's option. Bluestem is owned by Capmark, a company in which affiliates of Centerbridge own an interest. Centerbridge decreased its ownership in SC from approximately 1% as of January 1, 2015, to zero as of September 30, 2015. Further, an individual that was a member of SC's Board until July 15, 2015, is a member of Centerbridge management and also serves on the board of directors of Capmark. During the year ended December 31, 2015, but only through the date these individuals last were considered related parties (July 15, 2015), the Company advanced $442,339 , respectively, to the retailer, and received $575,179 , respectively, in payments on receivables originated under its agreements with the retailer.
During 2016, the Company agreed to pay SBNA a market rate-based fee expense for payments made at SBNA retail branch locations for SC originated/serviced accounts and the costs associated with modifying the Advanced Teller platform to the payments. These transactions in aggregate were $473 for the year ended December 31, 2016 .
At December 31, 2014, the Company had tax indemnification payments receivable of  $5,504  representing reimbursement of tax indemnification payments made to the original equity investors in  two  investment partnerships now owned by the Company. One of the equity investors, Centerbridge, also was an investor in SC until February

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2015, and both investors had representation on SC's board until July 15, 2015. These payments are expected to be recovered through tax refunds passed through to the Company as the original investors recognize tax losses related to the investments. The Company also paid expenses totaling  zero , zero , and $37  for the years ended December 31, 2016, 2015, and 2014, respectively, on behalf of the former managing member of the investment partnerships. The former managing member was an investor in Auto Finance Holdings.
		
13.	Supplemental Cash Flow Information	

Supplemental cash flow information is as follows:

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	For the Year Ended December 31,	
	2016	 	2015	 	2014	
Cash paid (received) during the year for:		 		 		
     Interest	$	796,682		 	$	635,558		 	$	541,705		
     Income taxes	(180,323	)	 	(190,663	)	 	278,210		
Noncash investing and financing transactions:		 		 		
Transfer of revolving credit facilities to secured structured financings	146,864		 	193,180		 	—		
Transfer of personal loans to held for sale	—		 	1,883,251		 	—		

During the year ended December 31, 2015, the Company deconsolidated certain Trusts from the consolidated balance sheet following the sale of its retained interests in the respective Trusts (Note 6). Upon deconsolidation, the Company derecognized $1,919,171 in assets, including $170,144 in restricted cash, and $1,183,792 in notes payable and other liabilities of the Trusts.
		
14.	Computation of Basic and Diluted Earnings per Common Share	

Earnings per common share (EPS) is computed using the two-class method required for participating securities. Restricted stock awards are considered to be participating securities because holders of such shares have non-forfeitable dividend rights in the event of a declaration of a dividend on the Company’s common shares.
 
The calculation of earnings per share excludes 1,387,656 , 926,242 , and 1,406,204 employee stock options and 1,106,187 , zero , and zero RSUs for the years ended December 31, 2016 , 2015 , and 2014 , respectively, as the effect of those securities would be anti-dilutive. The following table represents EPS numbers for the years ended December 31, 2016 , 2015 and 2014 :

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Earnings per common share	 	 	 	 	 	
Net income attributable to Santander Consumer USA Holdings Inc. shareholders	$	766,466		 	$	824,040		 	$	725,284		
Weighted average number of common shares outstanding before restricted participating shares (in thousands)	358,032		 	354,636		 	348,139		
Weighted average number of participating restricted common shares outstanding (in thousands)	249		 	467		 	584		
Weighted average number of common shares outstanding (in thousands)	358,281		 	355,103		 	348,723		
Earnings per common share	$	2.14		 	$	2.32		 	$	2.08		
 	 	 	 	 	 	
Earnings per common share - assuming dilution	 	 	 	 	 	
Net income attributable to Santander Consumer USA Holdings Inc. shareholders	$	766,466		 	$	824,040		 	$	725,284		
Weighted average number of common shares outstanding (in thousands)	358,281		 	355,103		 	348,723		
Effect of employee stock-based awards (in thousands)	797		 	1,060		 	6,999		
Weighted average number of common shares outstanding - assuming dilution (in thousands)	359,078		 	356,163		 	355,722		
Earnings per common share - assuming dilution	$	2.13		 	$	2.31		 	$	2.04		
15.    Fair Value of Financial Instruments

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

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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.

Fair value estimates, methods, and assumptions are as follows:

																	
 	 	December 31, 2016	 	December 31, 2015	
 	Level	Carrying
Value	 	Estimated
Fair Value	 	Carrying
Value	 	Estimated
Fair Value	
Cash and cash equivalents (a)	1	$	160,180		 	$	160,180		 	$	18,893		 	$	18,893		
Finance receivables held for sale, net (b)	3	2,123,415		 	2,123,415		 	2,859,575		 	2,872,354		
Finance receivables held for investment, net (c)	3	23,481,001		 	24,655,094		 	23,367,788		 	24,943,560		
Restricted cash (a)	1	2,757,299		 	2,757,299		 	2,236,329		 	2,236,329		
Notes payable — credit facilities (d)	3	6,739,817		 	6,739,817		 	6,902,779		 	6,902,779		
Notes payable — secured structured financings (e)	2, 3	21,608,889		 	21,712,691		 	20,872,900		 	20,917,733		
Notes payable — related party (f)	3	2,975,000		 	2,975,000		 	2,600,000		 	2,600,000		

(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 sale, net — Finance receivables held for sale, net are comprised of retail installment contracts acquired individually and personal loans and are carried at the lower of cost or market, as determined on an aggregate basis for each type of receivable.	
		
•	Retail installment contracts acquired individually — The estimated fair value is calculated based on a discounted cash flow (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.	
		
•	Personal loans — 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.	
		
(c)	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 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 and capital lease receivables are carried at amortized cost, net of credit loss allowance and gross investments, net of unearned income and allowance for lease losses, respectively. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements.	
		
(d)	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.	
		
(e)	Notes payable — secured structured financings  — The estimated fair value of notes payable related to public securitizations is calculated based on market observable prices and spreads for the Company’s publicly traded debt and market observed prices of similar notes issued by the Company, or recent market transactions involving similar debt with similar credit risks, which are considered level 2 inputs. The estimated fair value of notes payable related to privately issued amortizing notes is calculated based on a combination of discounted cash flow analysis and market observable spreads for similar liabilities in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect prepayment rates, discount rates reflective of the cost of funding, and credit loss expectations, which are considered level 3 inputs.	

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(f)	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.	
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2016 and 2015 , and are categorized using the fair value hierarchy:

																
 	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)	30,618		 	—		 	—		 	30,618		
Retail installment contracts acquired individually (b)	24,495		 	—		 	—		 	24,495		

	
																
 	Fair Value Measurements at December 31, 2015	
 	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)	$	20,227		 	$	—		 	$	20,227		 	$	—		
Due from affiliates — trading interest rate caps (a)	12,724		 	—		 	12,724		 	—		
Other assets — cash flow hedging interest rate swaps (a)	3,863		 	—		 	3,863		 	—		
Due from affiliates — cash flow hedging interest rate swaps (a)	3,431		 	—		 	3,431		 	—		
Due from affiliates — trading interest rate swaps (a)	1,176		 	—		 	1,176		 	—		
Other liabilities — trading options for interest rate caps (a)	20,253		 	—		 	20,253		 	—		
Due to affiliates — trading options for interest rate caps (a)	12,724		 	—		 	12,724		 	—		
Other liabilities — cash flow hedging interest rate swaps (a)	3,093		 	—		 	3,093		 	—		
Due to affiliates — cash flow hedging interest rate swaps (a)	2,496		 	—		 	2,496		 	—		
Due to affiliates — trading interest rate swaps (a)	2,481		 	—		 	2,481		 	—		
Other liabilities — total return settlement (a)	53,432		 	—		 	—		 	53,432		
Retail installment contracts acquired individually (b)	6,770		 	—		 	—		 	6,770		

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

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

								
 	Year Ended	
 	December 31, 2016	 	December 31, 2015	
Fair value, beginning of year	$	6,770		 	$	—		
Net collection activities	(18,850	)	 	—		
Loans sold	(48	)	 	—		
Additions	36,623		 	6,770		
Fair value, end of year	$	24,495		 	$	6,770		
The following table presents the changes in the total return settlement balance, which is classified as Level 3, for the years ended December 31, 2016 , 2015 , and 2014 :

												
 	Year Ended	
 	December 31, 2016	 	December 31, 2015	 	December 31, 2014	
Fair value, beginning of year	$	53,432		 	$	48,893		 	$	50,385		
Losses recognized in earnings	4,365		 	10,973		 	7,856		
Settlements	(27,179	)	 	(6,434	)	 	(9,348	)	
Fair value, end of year	$	30,618		 	$	53,432		 	$	48,893		
The following table presents the Company’s assets and liabilities that are measured at fair value on a nonrecurring basis at December 31, 2016 and 2015 , and are categorized using the fair value hierarchy:

																				
 	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 (c)	
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	$	1,045,815		 	$	—		 	$	—		 	$	1,045,815			$	8,913		

	
																				
 	Fair Value Measurements at December 31, 2015	
 	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 (c)	
Other assets — vehicles (a)	$	203,906		 	$	—		 	$	203,906		 	$	—		 	$	—		
Personal loans held for sale (b)	$	1,954,414		 	$	—		 	$	—		 	$	1,954,414		 	$	613,994		
( 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 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.

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(c) The lower of cost or fair value expense 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.
16.    Employee Benefit Plans
SC Compensation Plans — Beginning in 2011, the Company granted stock options to certain executives, other employees, and independent directors under the 2011 Management Equity Plan (the MEP). The MEP is administered by the Board. It enabled the Company to make stock awards up to a total of approximately 29 million common shares. The MEP expired on January 31, 2015 and, accordingly, no further awards will be made under this plan. In December 2013, the Board established the Omnibus Incentive Plan (the Omnibus Plan), which was amended and restated as of June 2016. The Omnibus Plan enables the Company to grant awards of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units (RSUs), 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.
Stock options granted have an exercise price based on the fair market value of the Company’s common stock on the grant date. The stock options expire after ten years and include both time vesting options and performance vesting options. The fair value of the stock options is amortized into income over the vesting period as time and performance vesting conditions are met. Under the Management Shareholders Agreement entered into by certain employees, no shares obtained through exercise of stock options under the MEP could be transferred until the later of December 31, 2016, and the Company’s execution of an IPO (the later date of which is referred to as the Lapse Date). Until the Lapse Date, if an employee were to leave the Company, the Company would have the right to repurchase any or all of the stock obtained by the employee through option exercise. If the employee were terminated for cause (as defined in the MEP) or voluntarily left the Company without good reason (as defined in the Plan), in each case, prior to the Lapse Date the repurchase price would be the lower of the strike price or fair market value at the date of repurchase. If the employee were terminated without cause or voluntarily left the Company with good reason, in each case, prior to the Lapse Date the repurchase price is the fair market value at the date of repurchase. Management believes the Company’s repurchase right caused the IPO event to constitute an implicit vesting condition and therefore did not record any stock compensation expense until the date of the IPO.
On December 28, 2013, the Board approved certain changes to the MEP and the Management Shareholders Agreement, including acceleration of vesting for certain employees, removal of transfer restrictions for shares underlying a portion of the options outstanding under the Plan, and addition of transfer restrictions for shares

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underlying another portion of the outstanding options. All of the changes were contingent on, and effective upon, the Company’s execution of an IPO and, as such, became effective upon pricing of the IPO on January 22, 2014. Also, on December 28, 2013, the Company granted 583,890 shares of restricted stock to certain executives under terms of the Omnibus Plan. Compensation expense related to this restricted stock is recognized over a five -year vesting period, with $725 , $8,851 , and $2,471 recorded for the years ended December 31, 2016 , 2015 , and 2014 , respectively.
On January 23, 2014, the Company executed an IPO, in which selling stockholders offered and sold to the public 85,242,042 shares of common stock at a price of $24.00 per share. Stock-based compensation expense totaling $117,770 related to vested options was recognized upon the IPO, including expense related to accelerated vesting for certain executives of $33,845 . Also, in connection with the IPO, the Company granted additional stock options under the MEP to certain executives, other employees, and an independent director with an estimated compensation cost of $10,216 , which is being recognized over the awards' vesting period of five years for the employees and three years for the director. Additional stock option grants have been made to employees under the Omnibus Plan during the year ended December 31, 2016 to employees. The estimated compensation cost associated with these additional grants is $727 and will be recognized over the vesting periods of the awards.
A summary of the Company’s stock options and related activity as of and for the year ended December 31, 2016 is as follows:

													
 	Shares	 	Weighted
Average
Exercise
Price	 	Weighted
Average
Remaining
Contractual
Term (Years)	 	Aggregate
Intrinsic
Value	
Options outstanding at January 1, 2016	5,675,327		 	$	12.30		 	6.5	 	$	20,151		
Granted	456,662		 	10.84		 		 		
Exercised	(868,332	)	 	9.49		 		 	3,028		
Expired	(560,523	)	 	11.32		 		 		
Forfeited	(407,304	)	 	13.76		 		 		
Options outstanding at December 31, 2016	4,295,830		 	$	12.70		 	5.6	 	$	12,982		
Options exercisable at December 31, 2016	3,144,763		 	$	10.90		 	5.3	 	$	11,348		
Options expected to vest at December 31, 2016	995,104		 	$	17.97		 	6.7	 			
In connection with compensation restrictions imposed on certain executive officers and other employees by the European Central Bank under the Capital Requirements Directive IV (CRD IV) prudential rules, which require a portion of such officers' and employees' variable compensation to be paid in the form of equity, the Company granted RSUs in February and April 2015. Pursuant to the applicable award agreements under the Omnibus Plan, a portion of the RSUs vested immediately upon grant, and a portion will vest annually over the first  three anniversaries of the grant date. In June 2015, as part of a separate grant under the Omnibus Incentive Plan, the Company granted certain officers RSUs that vest over a  three -year period, with vesting dependent on Santander performance over that time. After vesting, stock obtained by employees and officers through RSUs must be held for  one year. In October 2015, the Company granted, under the Omnibus Plan, certain directors RSUs that vest upon the earlier of the first anniversary of the grant date or the first annual meeting following the grant date. In December 2015, the Company granted a new officer RSUs that will vest in equal portions on each of the first three anniversaries of the grant date.
In February, June and November 2016, the Company granted certain new employees RSUs that will vest annually over a three -year period. In March, April and November 2016, RSUs that vest annually over a three -year period were granted to certain officers and employees as retention awards. The RSUs granted as retention awards to officers and employees whose variable compensation is subject to the provisions of CRD IV must be held for one year after vesting. In accordance with the provisions of CRD IV, in April 2016, the Company granted RSUs to certain officers and employees, a portion of which vested immediately upon grant and a portion that vest annually over a three -year period, and all of which must be held for one year after vesting. In November 2016, the Company granted certain officers RSUs that vest over a  three -year period, with vesting dependent on Santander performance over that time and which must be held for one year after vesting. In November and December 2016, the Company granted certain directors RSUs that vest upon the earlier of the first anniversary of the grant date or the first annual meeting following the grant date. All RSU grants during the year ended December 31, 2016 were made under the Omnibus Plan.
On July 2, 2015, Mr. Dundon exercised a right under his 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

139

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.

140

A summary of the status and changes of the Company's nonvested stock options as of and for the year ended December 31, 2016 , is presented below:

							
 	Shares	 	Weighted Average Grant Date Fair Value	
Non-vested at January 1, 2016	2,902,766		 	$	6.68		
Granted	456,662		 	10.18		
Vested	(1,240,534	)	 	7.88		
Forfeited or expired	(967,827	)	 	6.48		
Non-vested at December 31, 2016	1,151,067		 	$	7.02		
At December 31, 2016 , total unrecognized compensation expense for restricted stock awards and RSUs granted was $ 4,114 , which is expected to be recognized over a weighted average period of 2.6 years.
The following summarizes the assumptions used for estimating the fair value of stock options granted to employees for the years ended December 31, 2016 , 2015 , and 2014 .

						
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Assumption	 	 	 	 	 	
Risk-free interest rate	1.79%	 	1.64% - 1.97%	 	 1.94% - 2.12%	
Expected life (in years)	6.5	 	6.0 - 6.5	 	6.0 - 6.5	
Expected volatility	33%	 	32% - 48%	 	49% - 51%	
Dividend yield	3.69%	 	1.6% - 2.7%	 	2.3% - 4.2%	
Weighted average grant date fair value	$3.14	 	$6.92 - $9.67	 	 $7.54 - $8.38	

Defined Contribution Plan — The Company sponsors a defined contribution plan offered to qualifying employees. Employees participating in the plan may contribute up to 75% of their base salary, subject to federal limitations on absolute amounts contributed. The Company will match up to 6% of their base salary, with matching contributions of 100% of employee contributions. The total amount contributed by the Company in 2016 , 2015 , and 2014 , was $11,805 , $9,498 , and $7,923 , respectively.
17.    Shareholders' Equity
Treasury Stock
The Company had 94,595 and 69,005 shares of treasury stock outstanding with a cost of $1,600 and $1,250 as of December 31, 2016 and 2015 , respectively. Prior to the IPO, the Company repurchased 3,154 shares as a result of an employee leaving the company. Additionally, 91,441 shares were withheld to cover income taxes related to stock issued in connection with employee incentive compensation plans, including 25,590 and 16,864 shares withheld during the years ended December 31, 2016 and 2015 , respectively. The value of the treasury stock is immaterial and included within additional paid-in-capital.

141

Accumulated Other Comprehensive Income (Loss)
A summary of changes in accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2016 , 2015 , and 2014 is as follows:

				
 	Unrealized gains (losses) on cash flow hedges	
Balance - January 1, 2014	$	(2,853	)	
Other comprehensive income (loss) before reclassifications	(14,636	)	
Amounts reclassified out of accumulated other comprehensive income (loss)	21,042		
Balance - December 31, 2014	3,553		
Other comprehensive income (loss) before reclassifications	(34,182	)	
Amounts reclassified out of accumulated other comprehensive income (loss)	32,754		
Balance - December 31, 2015	2,125		
Other comprehensive income (loss) before reclassifications	(1,324	)	
Amounts reclassified out of accumulated other comprehensive income (loss)	27,458		
Balance - December 31, 2016	$	28,259		

Amounts reclassified out of accumulated other comprehensive income (loss) consist of the following:

	
																		
 	Year Ended December 31, 2016	 	Year Ended December 31, 2015	 	Year Ended December 31, 2014	
Reclassification	Amount reclassified	 	Income statement line item	 	Amount reclassified	 	Income statement line item	 	Amount reclassified	 	Income statement line item	
Cash flow hedges:	 	 	 	 	 	 	 	 	 	 	 	
Settlements of derivatives	$	43,898		 	Interest Expense	 	$	50,860		 	Interest Expense	 	$	33,235		 	Interest Expense	
Tax expense (benefit)	(16,440	)	 	 	 	(18,106	)	 	 	 	(12,193	)	 	 	
Net of tax	$	27,458		 	 	 	$	32,754		 	 	 	$	21,042		 	 	
Dividend Restrictions
The Dodd-Frank Act requires certain banks and bank holding companies, including SHUSA, to perform stress testing and submit a capital plan to the Federal Reserve Board on an annual basis. On June 29, 2016, the FRBB informed SHUSA that, based on qualitative concerns, the FRBB objected to SHUSA’s capital plan pursuant to CCAR that SHUSA had previously submitted to the FRBB. This objection followed the FRBB's objections to the capital plans submitted in 2014 and 2015. On September 15, 2014, SHUSA also entered into a written agreement with the FRBB memorializing discussions under which, among other things, SHUSA is prohibited from allowing its non-wholly-owned nonbank subsidiaries, including the Company, to declare or pay any dividend, or to make any capital distribution, until such time as SHUSA has submitted to the FRBB a capital plan and the FRBB has issued a written non-objection to the plan, or the FRBB otherwise issues its written non-objection to the proposed capital action. The Company will not pay any future dividends until such time as the FRBB issues a written non-objection to a capital plan submitted by SHUSA or the FRBB otherwise issues its written non-objection to the payment of a dividend by the Company.

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18.    Investment Gains (Losses), Net
When the Company sells retail installment contracts acquired individually, personal loans or leases to unrelated third parties or to VIEs and determines that such sale meets the applicable criteria for sale accounting, the Company recognizes a gain or loss for the difference between the cash proceeds and carrying value of the assets sold. The gain or loss is recorded in investment gains (losses), net. Lower of cost or market adjustments on the recorded investment of finance receivables held for sale are also recorded in investment gains (losses), net.
Investment gains (losses), net was comprised of the following for the years ended December 31, 2016 , 2015 , and 2014 :

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Gain (loss) on sale of loans and leases	$	(11,549	)	 	$	155,408		 	$	113,147		
Lower of cost or market adjustments	(423,616	)	 	(236,396	)	 	—		
Other losses and impairments	(9,594	)	 	(14,226	)	 	—		
 	$	(444,759	)	 	$	(95,214	)	 	$	113,147		

Lower of cost or market adjustments for the year ended December 31, 2016  included  $429,106 in customer default activity and net favorable adjustments of  $14,403 related to net changes in the unpaid principal balance on the personal lending portfolio, most of which has been classified as held for sale since September 30, 2015. Additionally, the Company had net unfavorable lower of cost or market adjustments on individually acquired retail installment contracts of  $8,913  during the year ended December 31, 2016 .
		
19.	Correction of Errors	

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

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

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

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

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

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

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

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20.    Quarterly Financial Data (unaudited)
The following is a summary of quarterly financial results:

																
 	First Quarter	 	Second Quarter	 	Third Quarter	 	Fourth Quarter	
Year Ended December 31, 2016	 	 	 	 	 	 	 	
Total finance and other interest income	$	1,619,899		 	$	1,643,989		 	$	1,638,525		 	$	1,627,183		
Net finance and other interest income	1,213,804		 	1,202,255		 	1,178,620		 	1,131,974		
Provision for credit losses	660,170		 	511,921		 	610,398		 	685,711		
Income before income taxes	328,942		 	437,563		 	304,020		 	90,186		
Net income	208,299		 	283,345		 	213,547		 	61,275		
Net income per common share (basic)	$	0.58		 	$	0.79		 	$	0.60		 	$	0.17		
Net income per common share (diluted)	$	0.58		 	$	0.79		 	$	0.59		 	$	0.17		
 	 	 	 	 	 	 	 	
Allowance for credit losses	$	3,337,490		 	$	3,436,325		 	$	3,412,977		 	$	3,421,767		
Finance receivables held for investment, net	23,961,903		 	23,477,426		 	23,686,391		 	23,481,001		
Total assets	37,768,959		 	38,490,611		 	38,771,636		 	38,539,104		
Total equity	4,604,739		 	4,876,712		 	5,117,657		 	5,238,619		
 	 	 	 	 	 	 	 	
Year Ended December 31, 2015	 	 	 	 	 	 	 	
Total finance and other interest income	$	1,431,978		 	$	1,534,246		 	$	1,561,630		 	$	1,559,930		
Net finance and other interest income	1,108,269		 	1,214,857		 	1,215,665		 	1,193,782		
Provision for credit losses	631,847		 	579,379		 	723,922		 	850,723		
Income (loss) before income taxes	365,268		 	573,169		 	372,974		 	(21,799	)	
Net income (loss)	242,445		 	364,715		 	236,435		 	(19,555	)	
Net income (loss) per common share (basic)	$	0.69		 	$	1.03		 	$	0.66		 	$	(0.05	)	
Net income (loss) per common share (diluted)	$	0.68		 	$	1.02		 	$	0.66		 	$	(0.05	)	
 	 	 	 	 	 	 	 	
Allowance for credit losses	$	3,117,716		 	$	3,328,897		 	$	2,996,924		 	$	3,218,208		
Finance receivables held for investment, net	24,547,674		 	24,800,991		 	23,478,376		 	23,367,788		
Total assets	34,581,338		 	36,079,510		 	36,035,625		 	36,448,958		
Total equity	3,771,543		 	4,245,763		 	4,451,984		 	4,432,549		

144

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

None.

		
ITEM 9A.	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 Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2016, 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 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 generally accepted accounting principles (“GAAP”).

Management's Annual Report on Internal Control over Financial Reporting

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

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

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

As of December 31, 2016, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (the 2013 framework).

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

Based on the assessment, management determined that the Company did not maintain effective internal control over financial reporting as of December 31, 2016 as a result of material weaknesses in the following areas:

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

145

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 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 risk assessments and control design and effectiveness. There was insufficient governance, oversight and monitoring of the credit loss allowance and accretion processes and a lack of defined roles and responsibilities in monitoring functions.	

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

2. Application of Effective Interest Method for Accretion

The Company’s policies and controls related to the methodology used for applying the effective interest rate method in accordance with 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 GAAP and did not sufficiently review supporting methodologies and practices to identify variances from the Company’s policy and 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 18 - 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 GAAP, specifically as it relates to the calculation of impairment for troubled debt restructurings (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 GAAP and did not sufficiently review supporting methodologies and practices to identify variances from the Company’s policy and 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.

146

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.	
		
•	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 governance processes over models that aggregated to a material weakness. The following controls did not operate effectively:

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

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

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 GAAP did not operate effectively in that management failed to detect as part of the review procedures that regulatory approval was prerequisite to recording the transaction and that approval had not been obtained prior to recording the transaction and therefore should have not been recorded.

147

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 17 - Shareholders' Equity.

8. Review of Financial Statement Disclosures

Management identified errors relating to financial statement disclosures. Specifically, the Company's controls over the preparation, 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 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.

PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016, as stated in their report which appears herein.

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 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 a plan to enhance its risk assessment processes, control procedures and documentation.	
		
•	Reallocated additional Company resources to improve the oversight for certain financial models.	
		
•	Augmented accounting resources with qualified consulting resources to ensure sufficient staffing to conduct enhanced financial reporting procedures and to begin the remediation efforts.	

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:

•	Automating 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.	
		
•	Implementing comprehensive review controls over data, inputs and assumptions used in the models.	
		
•	Strengthening review controls and change management procedures over the models used to estimate accretion.	

148

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 GAAP and produce a repeatable process.	
		
•	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.	

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:

•	Increasing 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 GAAP.	
		
•	Improving 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.	
		
•	Strengthening 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 December 31, 2016, 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 December 31, 2016.

Changes in Internal Control over Financial Reporting

Except for the appointment of an additional director to the Audit Committee, hiring of key personnel and enhancements to documentation described above, 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 fourth quarter ended December 31, 2016 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.

149

	
		
ITEM 9B.	OTHER INFORMATION	
None.
PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to the Company's Proxy Statement for its 2017 Annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2016 .

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the Company's Proxy Statement for its 2017 Annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2016 .

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

The information required by this Item is incorporated by reference to the Company's Proxy Statement for its 2017 Annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2016 .

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

The information required by this Item is incorporated by reference to the Company's Proxy Statement for its 2017 Annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2016 .

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference to the Company's Proxy Statement for its 2017 Annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2016 .
PART IV

		
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	

1. The following Consolidated Financial Statements as set forth in Part II, Item 8 of this report are filed herein:

Consolidated Financial Statements

Consolidated Balance Sheets
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Equity
Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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

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

150

	
		
ITEM 16.	FORM 10-K SUMMARY	
Not applicable

151

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/ Jason A. Kulas 	
 	 	Name:  Jason A. Kulas	
 	 	Title: President and Chief Executive Officer	

152

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/ Jason A. Kulas	 	 
Chief Executive Officer & Director	 	February 28, 2017	
Jason A. Kulas	 	(Principal Executive Officer)	 	 	
  /s/ Ismail Dawood	 	 
Chief Financial Officer	 	February 28, 2017	
Ismail Dawood	 	(Principal Financial and Accounting Officer)	 	 	
 /s/ William Rainer	 	Chairman of the Board	 	February 28, 2017	
William Rainer	 	 	 	 	
 /s/ José Doncel	 	Director	 	February 28, 2017	
José Doncel	 	 	 	 	
 /s/ Stephen A. Ferriss	 	Director	 	February 28, 2017	
Stephen A. Ferriss	 	 	 	 	
 /s/ Brian Gunn	 	Director	 	February 28, 2017	
Brian Gunn	 	 	 	 	
 /s/ Victor Hill	 	Director	 	February 28, 2017	
Victor Hill	 	 	 	 	
 /s/ Edith E. Holiday	 	Director	 	February 28, 2017	
Edith E. Holiday
	 	 	 	 	
  /s/ Mark P. Hurley	 	Director	 	February 28, 2017	
Mark P. Hurley	 	 	 	 	
 /s/ Javier Maldonado	 	Director	 	February 28, 2017	
Javier Maldonado	 	 	 	 	
 /s/ Robert J. McCarthy	 	Director	 	February 28, 2017	
Robert J. McCarthy	 	 	 	 	
 /s/ William F. Muir	 	Director	 	February 28, 2017	
William F. Muir
	 	 	 	 	
 /s/ Scott Powell	 	Director	 	February 28, 2017	
Scott Powell	 	 	 	 	
 /s/ Wolfgang Schoellkopf	 	Director	 	February 28, 2017	
Wolfgang Schoellkopf	 	 	 	 	

153

	
			
Exhibit
Number	 	Description	
2.1	 	Agreement and Plan of Merger, dated as of January 15, 2014, by and between Santander Consumer USA Holdings Inc., Santander Consumer USA Inc. and SC Merger Sub Inc. (incorporated by reference to Exhibit 2.1 of Santander Consumer USA Holdings Inc.’s Amendment No. 6 to the Registration Statement on Form S-1/A filed on January 17, 2014, File No. 333-189807)	
3.1	 	Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed on January 17, 2014, File No. 001-36270)	
3.2	 	Third Amended and Restated Bylaws of Santander Consumer USA Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 27, 2015, File No. 001-36270)	
4.1	 	Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A filed on January 7, 2014, File No. 333-189807)	
4.2	 	Form of Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A. (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1/A filed on January 17, 2014, File No. 333-189807)	
4.3	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Eldridge Burns (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.4	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Matt Fitzgerald (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.5	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and James Fugitt (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.6	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Jason Grubb (incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.7	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Rich Morrin (incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.8	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Michelle Whatley (incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.9	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Steve Zemaitis (incorporated by reference to Exhibit 4.9 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.10	 	Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc. and Jason Kulas (incorporated by reference to Exhibit 4.10 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807)  #	
4.11	 	Form of Shareholders Agreement between Santander Consumer USA Inc. and Management Equity Plan Participant (incorporated by reference to Exhibit 4.11 to the Company’s Registration Statement on Form S-1/A filed on December 31, 2013, File No. 333-189807)  #	
4.12	 	Santander Consumer USA Holdings Inc. has certain debt obligations outstanding. None of the instruments evidencing such debt authorizes an amount of securities in excess of 10% of the total assets of Santander Holdings USA, Inc. and its subsidiaries on a consolidated basis. Santander Consumer USA Holdings Inc. agrees to furnish copies to the SEC on request.	
4.13	 	Form of Amendment No. 1 to Shareholders Agreement, dated as of December 31, 2011, between Santander Consumer USA Inc., Santander Consumer USA Holdings Inc. and Management Equity Plan Participant (incorporated by reference to Exhibit 4.13 to the Company’s Registration Statement on Form S-1/A filed on January 17, 2014, File No. 333-189807)  #	
4.14	 	First Amendment, dated May 20, 2015, to the Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K on May 27, 2015, File No. 001-36270)	
4.15	 	Second Amendment, dated July 2, 2015, to the Shareholders Agreement, by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G. Dundon, Sponsor Auto Finance Holdings Series LP and Banco Santander, S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 2, 2015, File No. 001-36270)	
4.16	 	Third Amendment, dated as of August 31, 2016, to the Shareholders Agreement, dated as of January 28, 2014,
by and among Santander Consumer USA Holdings Inc., Santander Holdings USA, Inc., DDFS LLC, Thomas G.
Dundon, Sponsor Auto Finance Holdings Series LP, and, solely for the certain sections set forth therein, Banco
Santander, S.A. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed
on September 7, 2016, File No. 001-36270)

154

	
			
10.1	 	Investment Agreement, by and between Santander Consumer USA Inc. and Dundon DFS LLC, dated as of October 20, 2011 (incorporated by reference to Exhibit 10.1 of Santander Holdings USA, Inc.’s Annual Report filed on Form 10-K filed on March 16, 2012, File No. 001-36270)	
10.2	 	Investment agreement, by and among Santander Consumer USA Inc., Santander Holdings USA, Inc. and Sponsor Auto Financing Holdings Series LP, dated as of October 20, 2011 (incorporated by reference to Exhibit 10.2 of Santander Holdings USA, Inc.’s Annual Report on Form 10-K filed on March 16, 2012, File No. 001-36270)	
10.3	 	Confidential Employment Agreement, dated May 1, 2009, by and between Santander Consumer USA Inc. and Jason A. Kulas (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807  #	
10.4	 	Confidential Employment Agreement, dated August 24, 2011, by and between Santander Consumer USA Inc. and Richard Morrin (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 filed on July 3, 2013, File No. 333-189807)  #	
10.5	 	Amended and Restated Employment Agreement, executed as of December 31, 2011, by and among Santander Consumer USA Inc., Banco Santander, S.A. and Thomas G. Dundon (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed on July 3, 2013, File No. 333-189807)  #	
10.6	 	Santander Consumer USA Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 filed on July 3, 2013, File No. 333-189807)  #	
10.7	 	Form of Option Award Agreement under the Santander Consumer USA Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement filed on Form S-1 on July 3, 2013, File No. 333-189807)  #	
10.8	 	Master Private Label Financing Agreement, dated as of February 6, 2013, by and between Santander Consumer USA Inc. and Chrysler Group LLC (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1/A filed on November 22, 2013, File No. 333-189807) †	
10.9	 	Form of Restricted Stock Award Agreement (for Management) under the Santander Consumer USA Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1/A filed on January 9, 2014, File No. 333-189807)  #	
10.10	 	Amendment No. 1 to Santander Consumer USA Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1/A on January 9, 2014, File No. 333-189807)  #	
10.11	 	Form of Amendment No.1 to Form of Option Award Agreement under the Santander Consumer USA Inc. 2011 Management Equity Plan with each of Thomas G. Dundon, Jason A. Kulas, and Jason W. Grubb (incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1/A filed on January 9, 2014, File No. 333-189807)  #	
10.12	 	Form of Amendment No. 1 to Form of Option Award Agreement under the Santander Consumer USA Inc. 2011 Management Equity Plan (Optionees other than Thomas G. Dundon and Jason W, Grubb) (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1/A filed on January 9, 2014, File No. 333-189807) #	
10.13	 	Santander Consumer USA Holdings Inc. Senior Executive Annual Bonus Plan (incorporated by reference on Exhibit 10.16 to the Company’s Registration Statement on Form S-1/A filed on January 17, 2014, File No. 333-189807)  #	
10.14	 	Form of Non-Employee Independent Director Option Award Agreement under the Santander Consumer USA Holdings Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement filed on Form S-1/A on January 22, 2014, File No. 333-189807)  #	
10.15	 	Form of Time- and Performance-based Option Award Agreement (Series 3) under the Santander Consumer USA Holdings Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement filed on Form S-1/A on January 22, 2014, File No. 333-189807)  #	
10.16	 	Form of Time-Based Option Agreement (Series 2) under the Santander Consumer USA Holdings Inc. 2011 Management Equity Plan (incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-1/A on January 22, 2014, File No. 333-189807)  #	
10.17	 	Form of Restricted Stock Unit Award Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed on March 2, 2015, File No. 001-36270) #	
10.18	 	Form of Long-Term Cash Award Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on March 2, 2015, File No. 001-36270) #	
10.19	 	Form of Non-qualified Stock Option Agreement under the Santander Consumer USA Holdings Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on March 2, 2015, File No. 001-36270) #	
10.20	 	Separation Agreement, dated July 2, 2015, by and among Santander Consumer USA Holdings Inc., Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC and Thomas G. Dundon (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K on July 2, 2015, File No. 001-36270) #	
10.21*	 	First Amendment, dated July 20, 2015, to the Separation Agreement dated July 2, 2015 by and among Santander Consumer USA Holdings Inc., Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC and Thomas G. Dundon #	
10.22	 	Form of Restricted Stock Unit Award Agreement (for Directors) under the Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on October 29, 2015, File No. 001-36270) #	

155

	
			
10.23	 	Letter Agreement, dated December 1, 2015, by and between Santander Consumer USA Holdings Inc. and Ismail Dawood (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K on December 7, 2015, File No. 001-36270) #	
10.24	 	Letter Agreement, by and between Santander Consumer USA Holdings Inc., Santander Consumer USA Inc. and Kalyan Seshan, dated June 22, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 23, 2016, File No. 001-36270) #	
10.25	 	Santander Consumer USA Holdings Inc. Omnibus Incentive Plan, as amended and restated effective as of June 16, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 17, 2016, File No. 001-36270) #	
10.26	 	Form of Confidentiality and Restrictive Covenant Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on October 27, 2016, File No. 001-36270) #	
10.27	 	Second Amendment, dated as of August 31, 2016, to the Separation Agreement, dated as of July 2, 2015, by and among Santander Consumer USA Holdings Inc., Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC and Thomas G. Dundon (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on September 7, 2016, File No. 001-36270) #	
10.28	 	Separation Agreement, dated September 15, 2016, by and among Jennifer Davis, Santander Consumer USA
Holdings Inc. and Santander Consumer USA Inc. (incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on September 16, 2016, File No. 001-36270) #	
10.29	 	Amended and Restated Letter Agreement, by and between Santander Consumer USA Holdings Inc. and Santander Consumer USA Inc. and Ismail Dawood, dated December 1, 2016 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 5, 2016, File No. 001-36270) #	
16.1	 	Letter of Deloitte & Touche LLP, dated December 15, 2015 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report filed on Form 8-K on December 15, 2015, File No. 001-36270)	
21.1*	 	Subsidiaries of Santander Consumer USA Holdings Inc.	
23.1*	 	Consent of PricewaterhouseCoopers LLP	
23.2*	 	Consent of Deloitte & Touche LLP	
31.1*	 	Chief Executive Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
31.2*	 	Chief Financial Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
32.1*	 	Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
32.2*	 	Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
101.INS*	 	XBRL Instance Document	
101.SCH*	 	XBRL Taxonomy Extension Schema	
101.CAL*	 	XBRL Taxonomy Extension Calculation Linkbase	
101.DEF*	 	XBRL Taxonomy Extension Definition Linkbase	
101.LAB*	 	XBRL Taxonomy Extension Label Linkbase	
101.PRE*	 	XBRL Taxonomy Extension Presentation Linkbase	

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

156

Exhibit 10.21

FIRST AMENDMENT TO SEPARATION AGREEMENT

This FIRST AMENDMENT, dated and effective as of July 20, 2015 (this “ Amendment ”), to that certain Separation Agreement, dated July 2, 2015, by and among Santander Consumer USA Holdings, Inc. (“ SCUSA ”), Santander Consumer USA Inc., Banco Santander, S.A., Santander Holdings USA, Inc., DDFS LLC, and Thomas G. Dundon (the “ Separation Agreement ”), is entered into by and among the parties set forth on the signature pages to this Amendment. All capitalized terms that are not otherwise defined herein shall have the meaning set forth in the Separation Agreement.
WHEREAS , Section 7(b) of the Separation Agreement provides that the provisions of the Separation Agreement may be amended by a writing signed by the parties thereto;
WHEREAS, the parties to the Separation Agreement desire to make certain amendments as set forth herein; and
NOW THEREFORE , in consideration of the mutual covenants, representations, warranties and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

1.	Amendment to Section 2(b)(ii) . Section 2(b)(ii) is amended by deleting “September 30, 2015” and substituting, in lieu thereof, “July 3, 2015”.	
		
2.	Governing Law . This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entire within such state, without regard to the conflicts of law principles of such state.	
		
3.	Counterparts . This Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The parties hereto hereby acknowledge and agree that signatures delivered by facsimile or electronic means (including by “pdf”) shall be deemed effective for all purposes.	
		
4.	No Other Amendment . Except as expressly amended hereby, the Separation Agreement shall remain in full force and effect in all respects.	

[Signature Page Follows]

[Signature Page to First Amendment to Separation Agreement]

IN WITNESS WHEREOF , the parties have duly executed this Amendment as of the date first written above.

SANTANDER CONSUMER USA
HOLDINGS INC.

By: /s/ Eldridge Burns
Name: Eldridge Burns
Title: Chief Legal Officer

SANTANDER CONSUMER USA INC.

By: /s/ Eldridge Burns
Name: Eldridge Burns
Title: Chief Legal Officer

BANCO SANTANDER, S.A.

By: /s/ Javier Maldonado
Name: Javier Maldonado
Title: Senior Executive Vice President

SANTANDER HOLDINGS USA, INC.

By: /s/ Gerald Chamberlain
Name: Gerald Chamberlain
Title: Senior Vice President

THOMAS G. DUNDON

/s/ Thomas G. Dundon
Thomas G. Dundon

DDFS LLC

By: DDFS Partnership LP,
its Sole Member

By: Dundon Management Company, LLC,
its General Partner

By: /s/ Thomas G. Dundon
Name: Thomas G. Dundon
Title: President

/s/ Thomas G. Dundon
Thomas G. Dundon

Exhibit 21.1
SANTANDER CONSUMER USA HOLDINGS INC.
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 2016

	
		
Subsidiary Name	Jurisdiction	
Santander Consumer USA Inc.	Illinois	
CCAP Auto Lease Ltd	Delaware	
Chrysler Capital Auto Funding I LLC	Delaware	
Chrysler Capital Auto Funding II LLC	Delaware	
Chrysler Capital Auto Receivables LLC	Delaware	
Chrysler Capital Auto Receivables Trust 2013-A	Delaware	
Chrysler Capital Auto Receivables Trust 2013-B	Delaware	
Chrysler Capital Auto Receivables Trust 2014-A	Delaware	
Chrysler Capital Auto Receivables Trust 2014-B	Delaware	
Chrysler Capital Auto Receivables Trust 2015-A	Delaware	
Chrysler Capital Auto Receivables Trust 2015-B	Delaware	
Chrysler Capital Auto Receivables Trust 2016-A	Delaware	
Chrysler Capital Auto Receivables Trust 2016-B	Delaware	
Chrysler Capital Master Auto Receivables Funding 2 LLC	Delaware	
Chrysler Capital Master Auto Receivables Funding LLC	Delaware	
Consumer Lending Receivables LLC	Delaware	
Consumer Lending Receivables Trust 2016-A	Delaware	
Consumer Lending Receivables Trust 2016-B	Delaware	
Drive Auto Receivables Trust 2015-A	Delaware	
Drive Auto Receivables Trust 2015-B	Delaware	
Drive Auto Receivables Trust 2015-C	Delaware	
Drive Auto Receivables Trust 2015-D	Delaware	
Drive Auto Receivables Trust 2016-A	Delaware	
Drive Auto Receivables Trust 2016-B	Delaware	
Drive Auto Receivables Trust 2016-C	Delaware	
Drive Auto Receivables Trust 2017-A	Delaware	
Santander Consumer ABS Funding 2 LLC	Delaware	
Santander Consumer ABS Funding 3 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2011-A LLC	Delaware	
Santander Consumer Auto Receivables Funding 2013-B2 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2013-B3 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2013-L1 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2014-B1 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2014-B2 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2014-B3 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2014-B4 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2014-B5 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2014-L1 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2015-L1 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2015-L2 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2015-L3 LLC	Delaware	

	
		
Santander Consumer Auto Receivables Funding 2015-L4 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-B1 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-B2 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-B3 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-B4 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-L1 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-L2 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-L3 LLC	Delaware	
Santander Consumer Auto Receivables Funding 2016-L4 LLC	Delaware	
Santander Consumer Auto Specialty Trust 2015-A	Delaware	
Santander Consumer Captive Auto Funding LLC	Delaware	
Santander Consumer Captive Auto Funding 5 LLC	Delaware	
Santander Consumer Funding 3 LLC	Delaware	
Santander Consumer Funding 5 LLC	Delaware	
Santander Consumer International Puerto Rico LLC	Puerto Rico	
Santander Consumer Receivables 10 LLC	Delaware	
Santander Consumer Receivables 11 LLC	Delaware	
Santander Consumer Receivables 12 LLC	Delaware	
Santander Consumer Receivables 3 LLC	Delaware	
Santander Consumer Receivables 7 LLC	Delaware	
Santander Consumer Receivables 9 LLC	Delaware	
Santander Consumer Receivables Funding LLC	Delaware	
Santander Drive Auto Receivables LLC	Delaware	
Santander Drive Auto Receivables Trust 2012-4	Delaware	
Santander Drive Auto Receivables Trust 2012-5	Delaware	
Santander Drive Auto Receivables Trust 2012-6	Delaware	
Santander Drive Auto Receivables Trust 2012-A	Delaware	
Santander Drive Auto Receivables Trust 2013-1	Delaware	
Santander Drive Auto Receivables Trust 2013-2	Delaware	
Santander Drive Auto Receivables Trust 2013-3	Delaware	
Santander Drive Auto Receivables Trust 2013-4	Delaware	
Santander Drive Auto Receivables Trust 2013-5	Delaware	
Santander Drive Auto Receivables Trust 2013-A	Delaware	
Santander Drive Auto Receivables Trust 2014-1	Delaware	
Santander Drive Auto Receivables Trust 2014-2	Delaware	
Santander Drive Auto Receivables Trust 2014-3	Delaware	
Santander Drive Auto Receivables Trust 2014-4	Delaware	
Santander Drive Auto Receivables Trust 2014-5	Delaware	
Santander Drive Auto Receivables Trust 2014-S6	Delaware	
Santander Drive Auto Receivables Trust 2015-1	Delaware	
Santander Drive Auto Receivables Trust 2015-2	Delaware	
Santander Drive Auto Receivables Trust 2015-3	Delaware	
Santander Drive Auto Receivables Trust 2015-4	Delaware	
Santander Drive Auto Receivables Trust 2015-5	Delaware	
Santander Drive Auto Receivables Trust 2015-S1	Delaware	
Santander Drive Auto Receivables Trust 2015-S2	Delaware	

	
		
Santander Drive Auto Receivables Trust 2015-S3	Delaware	
Santander Drive Auto Receivables Trust 2015-S4	Delaware	
Santander Drive Auto Receivables Trust 2015-S5	Delaware	
Santander Drive Auto Receivables Trust 2015-S6	Delaware	
Santander Drive Auto Receivables Trust 2015-S7	Delaware	
Santander Drive Auto Receivables Trust 2016-1	Delaware	
Santander Drive Auto Receivables Trust 2016-2	Delaware	
Santander Drive Auto Receivables Trust 2016-3	Delaware	
Santander Revolving Asset Funding 1 LLC	Delaware	
Santander RSPE 10 LLC	Delaware	
Santander RSPE 11 LLC	Delaware	
SIAF LLC	Delaware	

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S‑3 (No. 333-202449) and Form S‑8 (No. 333-193534) of Santander Consumer USA Holdings Inc. of our report dated February 28, 2017 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10‑K.

/s/ PricewaterhouseCoopers LLP
Dallas, Texas
February 28, 2017

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-193534 on Form S-8 and Registration Statement No. 333-202449 on Form S-3 of our report relating to the consolidated financial statements of Santander Consumer USA Holdings Inc. and subsidiaries (the “Company”) dated March 30, 2016, October 27, 2016 as to the effects of the restatement discussed in Note 19 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement discussed in Note 19), appearing in this Annual Report on Form 10-K of Santander Consumer USA Holdings Inc. for the year ended December 31, 2016.

/s/ Deloitte & Touche LLP
Dallas, Texas
February 28, 2017

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, Jason A. Kulas, President and Chief Executive Officer of Santander Consumer USA Holdings Inc., certify that:
		
1.	I have reviewed this Annual Report on Form 10-K/A 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/ Jason A. Kulas
Name: Jason A. Kulas
Title: President and Chief Executive Officer

February 28, 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, Ismail Dawood, Chief Financial Officer of Santander Consumer USA Holdings Inc., certify that:
		
1.	I have reviewed this Annual Report on Form 10-K/A 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/ Ismail Dawood
Name: Ismail Dawood
Title: Chief Financial Officer

February 28, 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 Annual Report on Form 10-K/A for the period ended December 31, 2016 of Santander Consumer USA Holdings Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jason A. Kulas, 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/ Jason A. Kulas  
Name: Jason A. Kulas
Title: President and Chief Executive Officer

February 28, 2017

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 Annual Report on Form 10-K/A for the period ended December 31, 2016 of Santander Consumer USA Holdings Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ismail Dawood, 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/ Ismail Dawood
Name: Ismail Dawood
Title: Chief Financial Officer

February 28, 2017