SANTANDER CONSUMER USA HOLDINGS INC. FINANCIAL AND BUSINESS RESULTS MANAGEMENT DISCUSSION AND ANALYSIS (Form 10-Q)

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

Background and overview

The Company was formed in 2013 as a corporation in the state of Delaware and is
the holding company for SC Illinois, a full-service, technology-driven consumer
finance company focused on vehicle finance and third-party servicing. The
Company is majority-owned (as of October 25, 2021, approximately 80.2%) by
SHUSA, a wholly-owned subsidiary of Santander. Refer to Note 1 - "Description of
Business" to the accompanying condensed consolidated financial statements for
the details regarding the definitive agreement entered into between SHUSA and
the Company for SHUSA to acquire all of the outstanding shares of the Company's
stock that is does not yet own.

The Company is managed through a single reporting segment, Consumer Finance,
which includes vehicle financial products and services, including retail
installment contracts, vehicle leases, and financial products and services
related to recreational and marine vehicles, and other consumer finance
products.
Since May 2013, under the MPLFA with Stellantis, the Company has operated as
Stellantis's preferred provider for consumer loans, leases and dealer loans and
provides services to Stellantis customers and dealers under the CCAP brand. The
Company's average penetration rate under the MPLFA for the third quarter ended
September 30, 2021 was 27%, a decrease from 33% for the same period in 2020.

The Company has dedicated financing facilities in place for its CCAP business
and has pursued a strategy of working collaboratively with Stellantis to
strengthen their relationship and to create value within the CCAP program.
During the nine months ended September 30, 2021, the Company originated $11.1
billion in CCAP loans which represented 53% of total retail installment contract
originations (unpaid principal balance), as well as $5.8 billion in CCAP leases.
Additionally, all of the leases originated by the Company during the nine months
ended September 30, 2021 were under the MPLFA.
Economic and Business Environment

The unemployment rate is 4.80% as of that Labor Statistics Office
to the September 30, 2021, and the federal funds rate ranged from 0.00% to 0.25% am September 30, 2021.

Additionally, the Company is exposed to geographic customer concentration risk,
which could have an adverse effect on the Company's business, financial
position, results of operations or cash flow. Refer to Note 2 - "Finance
Receivables" to the accompanying condensed consolidated financial statements for
the details on the Company's retail installment contracts by state
concentration.
Regulatory Matters
The U.S. lending industry is highly regulated under various U.S. federal laws,
including the Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting,
Fair Debt Collection Practices, SCRA, and Unfair, Deceptive, or Abusive Acts or
Practices, Credit CARD, Bank Secrecy Act, Telephone Consumer Protection, FIRREA,
and Gramm-Leach-Bliley Acts, as well as various state laws. The Company is
subject to inspections, examinations, supervision, and regulation by the SEC,
the CFPB, the FTC, and the DOJ and by regulatory agencies in each state in which
the Company is licensed. In addition, the Company is directly and indirectly,
through its relationship with SHUSA, subject to certain bank regulations,
including oversight by the OCC, the European Central Bank, and the Federal
Reserve, which have the ability to limit certain of the Company's activities,
such as share repurchase program, the timing and amount of dividends and certain
transactions that the Company might otherwise desire to enter into, such as
merger and acquisition opportunities, or to impose other limitations on the
Company's growth.
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The March 5, 2021, announcement by the U.K.'s Financial Conduct Authority (FCA)
confirmed unavailability of USD LIBOR rates beyond June 30, 2023 and cessation
of one-week and two-month USD LIBOR by December 31, 2021. ISDA announced these
statements are an "Index Cessation Event" under the IBOR Fallbacks Supplement
and the ISDA 2020 IBOR Fallbacks Protocol, which in turn triggers a "Spread
Adjustment Fixing Date" under the Bloomberg IBOR Fallback Rate Adjustments Rule
Book. As a result, when USD LIBOR tenors cease and the fallback rates apply,
fallbacks for derivatives under ISDA's documentation shift to forms of the
Secured Overnight Financing Rate (SOFR) plus the fixed spread adjustment.

The regulators also confirmed that the March 5, 2021 Announcements constitute a “benchmark transition event” with respect to any LIBOR setting.

The Company holds debt, derivatives, and other financial instruments that use
USD LIBOR as a reference rate and that will be impacted by the demise of LIBOR.
Transition away from LIBOR to new reference rates presents legal, financial,
reputational, and operational risks to the Company as well as to other
participants in the market. As of September 30, 2021, the Company has
approximately $3 billion of liabilities with LIBOR exposure. The Company also
had approximately $16 billion in notional amounts of derivative contracts with
LIBOR exposure.
Additional legal and regulatory matters affecting the Company's activities are
further discussed in Part I, Item 1A - Risk Factors of the 2020 Annual Report on
Form 10-K and this Quarterly Report on Form 10-Q.
How the Company Assesses its Business Performance

Net income and the associated return on assets and equity are the primary metrics that society uses to assess the performance of its business. Accordingly, the company closely monitors the main drivers of net profit:

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

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

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

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

Because volume and portfolio size determine the magnitude of the impact of each
of the above factors on the Company's earnings, the Company also closely
monitors origination and sales volume along with APR and discounts (including
subvention and net of dealer participation).
Recent Developments and Other Factors Affecting The Company's Results of
Operations
COVID-19 Summary
Beginning in March 2020, the novel strain of coronavirus, or COVID-19, had
materially impacted our business. Similar to many other financial institutions,
we took measures to mitigate our customers' COVID-19 related economic
challenges. We experienced an increase in requests for extensions and
modifications related to COVID-19 nationwide and a significant number of such
extensions and modifications have been granted.
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Further details on COVID-19 can be found in Part II, Item 7 – Management’s Discussion and Analysis of the Financial Position and Results of Operations of the 2020 Annual Report on Form 10-K.

Takeover by SHUSA

On July 2, 2021 the Company announced that it received a non-binding proposal
(the "Proposal") from SHUSA to acquire all of the outstanding shares of the
Company's common stock that are not currently owned by SHUSA, subject to the
conditions set forth in the Proposal. The Board formed an independent special
committee (the "Special Committee"), composed of William Rainer, William Muir,
and Robert McCarthy and elected William Rainer as its chairperson, to consider
the Proposal. The Special Committee engaged independent financial and legal
advisors to assist in its evaluation of the Proposal.

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



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Volume

The Company's originations of retail installment contracts and leases, including
revolving loans, average APR, and dealer discount (net of dealer participation)
for the three and nine months ended September 30, 2021 and 2020 were as follows:
                                                            Three Months Ended                                    Nine Months Ended
                                                September 30,
                                                     2021              September 30, 2020           September 30, 2021          September 30, 2020
                                                                                   (Dollar amounts in thousands)
Retained Originations
Retail installment contracts                   $      4,432,175       $           5,344,755       $           14,298,345       $          13,608,298
Average APR                                             14.8  %                      13.7 %                      15.0  %                      13.8 %
Average FICO® (a)                                           606                         637                          603                  631
Premium                                                 (2.4) %                 (1.3)     %                      (2.1) %                 (1.0)     %

Personal loans (b)                             $              -       $             305,039       $                    -       $             923,112
Average APR                                                -  %                      29.4 %                         -  %                      29.4 %

Leased vehicles                                $      1,577,539       $           1,856,166       $            5,799,786       $           4,863,504

Finance lease                                  $          2,816       $               4,087       $                8,147       $               9,016
Total originations retained                    $      6,012,530       $           7,510,047       $           20,106,278       $          19,403,930

Sold Originations
Retail installment contracts                   $         39,325       $              80,144       $              523,862       $             761,323
Average APR                                              4.9  %                       5.2 %                       5.3  %                       4.8 %
Average FICO® (c)                                           730                         738                          720                         734

Personal Loans (d)                             $              -       $            -              $              292,709       $            -
Average APR                                                -  %                    -      %                      29.7  %       $            -

Total Originations Sold                        $         39,325       $              80,144       $              816,571       $             761,323

Total originations (excluding SBNA
Originations Program)                          $      6,051,855       $           7,590,191       $           20,922,849       $          20,165,253


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

Total auto originations (excluding SBNA Origination Program) increased $1.7
billion, or 8.7%, from the nine months ended September 30, 2020 to nine months
ended September 30, 2021. The Company's initiatives to improve our pricing, as
well as, our dealer and customer experience have increased our competitive
position in the market. The Company continues to focus on optimizing the loan
quality of its portfolio with an appropriate balance of volume and risk. CCAP
volume and penetration rates are influenced by strategies implemented by
Stellantis and the Company, including product mix and incentives.

Beginning in 2018, the Company agreed to provide SBNA with origination support
services in connection with the processing, underwriting and purchase of retail
auto loans, primarily from Stellantis dealers. In addition, the Company agreed
to perform the servicing for any loans originated on SBNA's behalf. During the
three and nine months ended September 30, 2021 and 2020
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the company has the purchase of $ 1.5 billion, $ 6.1 billion, $ 1.1 billion
and $ 3.9 billion the retailer installment contacts.

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

                                     September 30, 2021                    September 30, 2020                     September 30, 2021                     September 30, 2020
                                                                                          (Dollar amounts in thousands)
Retail installment contracts
Car                            $       1,537,270       34.4  %       $       1,516,163       27.9  %       $        4,998,645       33.7  %       $        3,926,126       27.3  %
Truck and utility                      2,788,208       62.3  %               3,686,966       68.0  %                9,341,361       63.0  %                9,872,900       68.7  %
Van and other (a)                        146,022        3.3  %                 221,770        4.1  %                  482,201        3.3  %                  570,595        4.0  %
                               $       4,471,500      100.0  %       $       5,424,899      100.0  %       $       14,822,207      100.0  %       $       14,369,621      100.0  %

Leased vehicles
Car                            $          36,489        2.3  %       $          53,985        2.9  %       $          109,199        1.9  %       $          167,432        3.4  %
Truck and utility                      1,517,749       96.2  %               1,769,518       95.3  %                5,593,418       96.4  %                4,593,150       94.5  %
Van and other (a)                         23,301        1.5  %                  32,663        1.8  %                   97,169        1.7  %                  102,922        2.1  %
                               $       1,577,539      100.0  %       $       1,856,166      100.0  %       $        5,799,786      100.0  %       $        4,863,504      100.0  %

Total originations by vehicle
type
Car                            $       1,573,759       26.0  %       $       1,570,148       21.6  %       $        5,107,844       24.8  %       $        4,093,558       21.3  %
Truck and utility                      4,305,957       71.2  %               5,456,484       74.9  %               14,934,779       72.4  %               14,466,050       75.2  %
Van and other (a)                        169,323        2.8  %                 254,433        3.5  %                  579,370        2.8  %                  673,517        3.5  %
                               $       6,049,039      100.0  %       $       7,281,065      100.0  %       $       20,621,993      100.0  %       $       19,233,125      100.0  %

(a) Other consists mainly of commercial vehicles.

The Company's portfolio of retail installment contracts held for investment and
leases by vehicle type as of September 30, 2021 and December 31, 2020 are as
follows:
                                       September 30, 2021                December 31, 2020
                                                  (Dollar amounts in thousands)
Retail installment contracts
Car                              $       11,613,325     35.5  %    $      11,727,343     35.6  %
Truck and utility                        19,741,505     60.3  %           19,939,215     60.5  %
Van and other (a)                         1,387,714      4.2  %            1,270,478      3.9  %
                                 $       32,742,544    100.0  %    $      32,937,036    100.0  %

Leased vehicles
Car                              $          450,467      2.8  %    $         766,451      4.4  %
Truck and utility                        15,339,907     95.2  %           16,052,162     93.0  %
Van and other (a)                           322,042      2.0  %              440,855      2.6  %
                                 $       16,112,416    100.0  %    $      17,259,468    100.0  %

Total by vehicle type
Car                              $       12,063,792     24.7  %    $      12,493,794     24.9  %
Truck and utility                        35,081,412     71.8  %           35,991,377     71.7  %
Van and other (a)                         1,709,756      3.5  %            1,711,333      3.4  %
                                 $       48,854,960    100.0  %    $      50,196,504    100.0  %

(a) Other consists mainly of commercial vehicles.

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The Company's asset sales for the three and nine months ended September 30, 2021
and 2020 were as follows:
                                                           Three Months Ended                                     Nine Months Ended

                                             September 30, 2021          September 30, 2020                2021                      2020
                                                                           

(Dollar amounts in thousands)

Retail installment contracts               $              277,898       $             636,301       $         2,968,467       $         1,148,587
Average APR                                                3.4  %                       4.9 %                  4.2    %                     5.6 %
Average FICO®                                                 737                         735                       737                       715

Personal Loans                             $                    -       $                -          $         1,253,476                         -
Average APR                                                  -  %                           -                 29.7    %                         -

Total Asset Sales                          $              277,898                     636,301       $         4,221,943                 1,148,587

The unpaid principal, average APR, and remaining unrecognized net haircut on the Company’s investment portfolio at the time September 30, 2021 and
December 31, 2020 are as follows:

                                                                 September 30, 2021              December 31, 2020
                                                                            (Dollar amounts in thousands)
Retail installment contracts                                   $           32,742,544       $                32,937,036
Average APR                                                                   15.2  %                           15.2  %
Premium                                                                      (0.96) %                          (0.15) %

Leased vehicles                                                $           16,112,416       $                17,259,468

Finance leases                                                 $               24,508       $                    26,150



The Company records interest income from retail installment contracts and
receivables from dealers in accordance with the terms of the loans, generally
discontinuing and reversing accrued income once a loan becomes more than 60 days
past due, except in the case of revolving personal loans, for which the Company
continues to accrue interest until charge-off, in the month in which the loan
becomes 180 days past due, and receivables from dealers, for which the Company
continues to accrue interest until the loan becomes more than 90 days past due.

The Company generally does not acquire receivables from dealers at a discount.
The Company amortizes discounts, subvention payments from manufacturers, and
origination costs as adjustments to income from retail installment contracts
using the effective yield method. The Company estimates future principal
prepayments specific to pools of homogeneous loans based on the vintage, credit
quality at origination and term of the loan. Prepayments in our portfolio are
sensitive to credit quality, with higher credit quality loans generally
experiencing higher voluntary prepayment rates than lower credit quality loans.
The impact of defaults is not considered in the prepayment rate, and the
prepayment rate only considers voluntary prepayments. The resulting prepayment
rate specific to each pool is based on historical experience, and is used as an
input in the calculation of the constant effective yield. Our estimated weighted
average prepayment rates ranged from 11.2% to 15.9% as of September 30, 2021,
and 5.1% to 10.7% as of September 30, 2020.

During the three and nine months ended September 30, 2021 and 2020 the Company
recognized certain retail installment contracts with an unpaid principal balance
of $42,264, $42,264, zero and $76,878, 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 ACL. 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. For the Company's existing purchased
receivables portfolios - credit deteriorated, which were acquired at a discount
partially attributable to credit deterioration since origination, the Company
estimates the expected yield on each portfolio at acquisition and records
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.

The Company classifies most of its vehicle leases as operating leases. The
Company records the net capitalized cost of each lease as an asset, which is
depreciated on a straight-line basis over the contractual term of the lease to
the expected residual value. The Company 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.
The Company resumes and reinstates the
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accrual of revenue if a delinquent account subsequently becomes 60 days or less
past due. The Company amortizes subvention payments from the manufacturer, down
payments from the customer, and initial direct costs incurred in connection with
originating the lease on a straight-line basis over the contractual term of the
lease.

Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months
Ended September 30, 2020
Interest on Finance Receivables and Loans
                                                     Three Months Ended                                                                Nine Months Ended
                                    September 30,                         Increase (Decrease)                         September 30,                        Increase (Decrease)
                              2021                 2020               Amount              Percent               2021                 2020               Amount             Percent
                                                                                        (Dollar amounts in thousands)

Income from retail installment contracts $ 1,214,783 $ 1,220,703 $ (5,920)

                  -  %       $ 3,659,757          $ 3,552,193          $  107,564                  3  %
Income from purchased
receivables portfolios -
credit deteriorated              338                  649                (311)                (48) %             1,247                2,164                (917)               (42) %
Income from receivables
from dealers                       -                  (17)                 17                (100) %                 -                   48                 (48)              (100) %
Income from personal
loans                              -               79,359             (79,359)               (100) %            88,260              256,708            (168,448)               (66) %
Total interest on
finance receivables and
loans                    $ 1,215,121          $ 1,300,694          $  (85,573)                 (7) %       $ 3,749,264          $ 3,811,113          $  (61,849)              (1.6) %



Income from retail installment contracts remained relatively flat from the third
quarter of 2020 to the third quarter of 2021, and increased $108 million or 3%
from the nine months ended September 30, 2020 to the nine months ended September
30, 2021, primarily due to an increase in average outstanding balance of the
Company's portfolio, offset by sale of gross retail installment contracts to
third party investors in off-balance sheet securitizations.
Income from personal loans On March 31, 2021, the Company completed the sale of
the $1.3 billion Bluestem personal lending portfolio BB Allium LLC. Refer to
Note 1 - "Description of Business, Basis of Presentation, and Accounting
Principles" to the condensed consolidated financial statements, for additional
information regarding the sale.
Leased Vehicle Income and Expense
                                                    Three Months Ended                                                             Nine Months Ended
                                   September 30,                      Increase (Decrease)                         September 30,                        Increase (Decrease)
                              2021               2020              Amount             Percent               2021                 2020               Amount             Percent
                                                                                       (Dollar amounts in thousands)

Income from leasing vehicles $ 670,334 $ 725,156 $ (54,822)

                (8) %       $ 2,115,134          $ 2,210,684          $  (95,550)                (4) %
Leased vehicle expense      325,259            467,172            (141,913)               (30) %         1,043,774            1,630,945            (587,171)               (36) %
Leased vehicle income,
net                       $ 345,075          $ 257,984          $   87,091                 34  %       $ 1,071,360          $   579,739          $  491,621                 85  %



Leased vehicle income, net increased $87 million or 34% from the third quarter
of 2020 to the third quarter of 2021 and increased $492 million or 85% from the
nine months ended September 30, 2020 to the nine months ended September 30,
2021, primarily driven by an increase in residual value of liquidated units.
Through the MPLFA, 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
                                                  Three Months Ended                                                            Nine Months Ended
                                 September 30,                      Increase (Decrease)                       September 30,                       Increase (Decrease)
                            2021               2020              Amount             Percent              2021               2020               Amount             Percent
                                                                                   (Dollar amounts in thousands)
Interest expense on
notes payable           $ 210,072          $ 283,202          $  (73,130)               (26) %       $ 686,923          $ 902,081          $  (215,158)               (24) %
Interest expense on
derivatives                 8,675              8,916                (241)                (3) %          22,556             27,853               (5,297)               (19) %

Total interest expense $ 218,747 $ 292,118 $ (73,371)

            (25) %       $ 709,479          $ 929,934          $  (220,455)               (24) %


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Total interest expense decreased $73.4 million or 25% from the third quarter of
2020 to the third quarter of 2021 and decreased $220 million or 24% from the
nine months ended September 30, 2020 to the nine months ended September 30,
2021, primarily due to a lower interest rate environment and lower debt
balances.
Credit Loss Expense (benefit)
                                                      Three Months Ended                                                              Nine Months Ended
                                    September 30,                       Increase (Decrease)                        September 30,                         Increase (Decrease)
                               2021               2020               Amount             Percent              2021                2020                 Amount               Percent
                                                                                          (Dollar amounts in thousands)

Credit loss expense         $ 42,058          $ 340,548          $  (298,490)               (88) %       $ (85,484)         $ 2,110,331          $  (2,195,815)               (104) %


Credit loss expense (benefit) decreased $0.3 billion or 88% from the third
quarter of 2020 to the third quarter of 2021 and decreased $2.2 billion or 104%
from the nine months ended September 30, 2020 to the nine months ended September
30, 2021, primarily driven by the additional reserve to address credit risk
associated with the COVID-19 outbreak and associated economic recession during
2020.
Profit Sharing
                                                Three Months Ended                                                          Nine Months Ended
                               September 30,                     Increase (Decrease)                      September 30,                       Increase (Decrease)
                          2021              2020              Amount             Percent              2021              2020              Amount              Percent
                                                                                 (Dollar amounts in thousands)
Profit sharing         $ 41,009          $ 30,414          $   10,595                 35  %       $ 158,888          $ 56,239          $  102,649                 183  %



Profit sharing expense consists of revenue sharing related to the MPLFA and
profit sharing on personal loans originated pursuant to the agreements with
Bluestem during the first quarter of 2021. Profit sharing expense increased from
the third quarter of 2020 to the third quarter of 2021 and increased from the
nine months ended September 30, 2020 to the nine months ended September 30,
2021, primarily due to an increase in lease portfolio income resulting from an
increase in revenue share with Stellantis, and Bluestem credit improvements,
during the first quarter of 2021, prior to sale of the personal lending
portfolio on March 31, 2021. Refer to Note 1 - "Description of Business, Basis
of Presentation, and Accounting Principles" to the accompanying condensed
consolidated financial statements, for additional information regarding the
sale.

Other Income
                                                      Three Months Ended                                                                     Nine Months Ended
                                    September 30,                           Increase (Decrease)                           September 30,                           Increase (Decrease)
                             2021                  2020                 Amount               Percent               2021                  2020                 Amount               Percent
                                                                                            (Dollar amounts in thousands)
Investment gains
(losses), net           $      5,241          $    (68,989)         $     74,230                (108) %       $     (7,057)         $   (279,997)         $    272,940                  (97) %
Servicing fee income          19,975                18,574                 1,401                   8  %             61,481                56,797                 4,684                    8  %
Fees, commissions, and
other                         48,867                78,924               (30,057)                (38) %            200,242               256,123               (55,881)                 (22) %
Total other income      $     74,083          $     28,509          $     45,574                 160  %       $    254,666          $     32,923          $    221,743                  674  %

Average serviced for
others portfolio        $ 14,956,054          $ 11,365,610          $  3,590,444                  32  %       $ 14,029,336          $ 10,862,178          $  3,167,158                   29  %


Investment gains (losses), net increased $74 million from the third quarter of
2020 to the third quarter of 2021 and increased $273 million from the nine
months ended September 30, 2020 to the nine months ended September 30, 2021,
primarily due to the sale of the personal lending portfolio.
Servicing fee income remained relatively flat in the third quarter of 2021 as
compared to the third quarter of 2020 and from the nine months ended September
30, 2020 to the nine months ended September 30, 2021. The Company records
servicing fee income on loans that it services but does not own and does not
report on its balance sheet. The serviced for others portfolio as
                                       54
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from September 30, 2021 and 2020 was as follows:

                                                                                    September 30,
                                                                             2021                      2020
                                                                            (Dollar amounts in thousands)
SBNA and Santander retail installment contracts                     $     11,742,348              $  9,528,349
SBNA leases                                                                  243,531                        65
Total serviced for related parties                                  $     11,985,879              $  9,528,414
CCAP securitizations                                                               -                   103,579
SCART securitizations                                                      2,067,156                 1,032,639
Other third parties                                                        1,097,933                   846,178
Total serviced for third parties                                    $      3,165,089              $  1,982,396
Total serviced for others portfolio                                 $     15,150,968              $ 11,510,810



Fees, commissions, and other primarily includes late fees, miscellaneous, and
other income and decreased primarily due to the sale of Bluestem personal
lending portfolio BB Allium LLC. Refer to Note 1 - "Description of Business,
Basis of Presentation, and Accounting Principles" to the condensed consolidated
financial statements, for additional information regarding the sale.
Total Operating Expenses
                                                         Three Months Ended                                                            Nine Months Ended
                                        September 30,                      Increase (Decrease)                       September 30,                       Increase (Decrease)
                                   2021               2020              Amount             Percent              2021               2020              Amount              Percent
                                                                                          (Dollar amounts in thousands)
Compensation expense           $ 149,669          $ 127,991          $   21,678                 17  %       $ 460,014          $ 388,960          $   71,054                  18  %
Repossession expense              33,349             35,910              (2,561)                (7) %         117,540            115,861               1,679                   1  %
Other operating costs            179,147             99,761              79,386                 80  %         382,313            308,193              74,120                  24  %

Business expense $ 362,165 $ 263,662 $ 98,503

                 37  %       $ 959,867          $ 813,014          $  146,853                  18  %


Compensation expenses increased $22 million or 17% from the third quarter of
2020 to the third quarter of 2021 and increased $71 million or 18% from the nine
months ended September 30, 2020 to the nine months ended September 30, 2021,
primarily due to an increase in employee headcount resulting in a higher bonus
accrual and an increase in medical claims reserve, offset by a prior year
pandemic adjustment.
Repossession expense remained relatively flat from the third quarter of 2020 to
the third quarter of 2021 and from the nine months ended September 30, 2020 to
the nine months ended September 30, 2021.
Other operating costs increased $79 million or 80% from the third quarter of
2020 to the third quarter of 2021 and increased $74 million or 24% from the nine
months ended September 30, 2020 to the nine months ended September 30, 2021,
primarily due to $50 million donation to the SC Foundation, and $11.5 million
impairment of Roadloans trade name which has been replaced with a Platform
Development and License Agreement ("PDLA") with Autofi Inc. for the design and
operation of a digital software platform for the sale and financing of
automobiles.
Income Tax Expense
                                                 Three Months Ended                                                                Nine Months Ended
                               September 30,                         Increase (Decrease)                         September 30,                         Increase (Decrease)
                         2021                2020                Amount               Percent               2021                2020               Amount              Percent
                                                                                    (Dollar amounts in thousands)
Income tax expense   $  208,607          $     172,476       $     36,131                    21%       $      775,484       $     137,161       $  638,323                 465  %
Income before income
taxes                   971,931                662,591            309,340                    47%            3,338,665             526,611        2,812,054                 534  %
Effective tax rate         21.5  %           26.0    %                                                       23.2   %           26.0    %



The effective tax rate decreased from 26.0% for the third quarter of 2020 to
21.5% for third quarter of 2021 and decreased from 26.0% for the nine months
ended September 30, 2020 to 23.2% for the nine months ended September 30, 2021,
primarily due to pre-tax income during 2021 compared to discrete tax adjustments
that increased the tax benefit recorded on the pre-tax loss in the first half of
2020.

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Other total income (loss)

                                                   Three Months Ended                                                          Nine Months Ended
                                  September 30,                     Increase (Decrease)                      September 30,                       Increase (Decrease)
                              2021             2020             Amount              Percent             2021               2020              Amount              Percent
                                                                                    (Dollar amounts in thousands)

Change in unrealized gains
(losses) on cash flow
hedges and
available-for-sale
securities, net of tax     $ 5,661          $ 6,823          $   (1,162)                (17) %       $ 19,372          $ (30,189)         $   49,561                (164) %



The change in unrealized gains (losses) for the three and nine months ended
September 30, 2021 as compared to three and nine months ended September 30,
2020, was primarily driven by decrease of notional and forward curve rates for
the cash flow hedge portfolio related to mark-to-market valuation, as shown in
Note 9 "Derivative Financial Instruments" to the accompanying condensed
consolidated financial statements.
Credit Quality
Loans and Other Finance Receivables
Allowance for Credit losses
Non-prime loans comprise 80% of the Company's portfolio as of September 30,
2021. The Company records an ACL at a level considered adequate to cover current
expected credit losses in the Company's retail installment contracts and other
loans and receivables held for investment, based upon a holistic assessment
including both quantitative and qualitative considerations. Refer to Note 2 -
"Finance Receivables" and Note 3 - "Credit Loss Allowance and Credit Quality" to
the accompanying condensed consolidated financial statements for the details on
the Company's held for investment portfolio of retail installment contracts as
of September 30, 2021 and December 31, 2020.
Credit risk profile

A summary of the credit risk profile of the Company's retail installment
contracts held for investment, by FICO® score, number of trade lines (represents
number of approved credit accounts reported to credit reporting agencies), and
length of credit history, each as determined at origination, as of September 30,
2021 and December 31, 2020 was as follows (dollar amounts in billions, totals
may not sum due to rounding):
                                                    September 30, 2021
Trade Lines                                1                 2                3                4+               Total
     FICO        Months History        $       %         $      %         $      %          $      %          $       %
  No-FICO (a)          <36             $3.2   97  %      $0.1   3  %      $0.0   -  %       $0.0   -  %       $3.3    9  %
                       36+              0.3   38  %       0.2  25  %       0.1  13  %        0.2  25  %        0.8    2  %
     <540              <36              0.1   50  %       0.0   -  %       0.0   -  %        0.1  50  %        0.2    1  %
                       36+              0.1    2  %       0.2   4  %       0.2   4  %        4.2  89  %        4.7   14  %
    540-599            <36              0.3   33  %       0.2  22  %       0.1  11  %        0.3  33  %        0.9    3  %
                       36+              0.1    1  %       0.3   3  %       0.3   3  %        9.8  93  %       10.5   32  %
    600-639            <36              0.4   44  %       0.2  22  %       0.1  11  %        0.2  22  %        0.9    3  %
                       36+              0.1    2  %       0.1   2  %       0.2   3  %        5.6  93  %        6.0   18  %
   >=640 (b)           <36              0.8   53  %       0.3  20  %       0.2  13  %        0.2  13  %        1.5    5  %
                       36+              0.1    2  %       0.1   2  %       0.1   2  %        4.1  93  %        4.4   13  %
            Total (c)                  $5.5   17  %      $1.7   5  %      $1.3   4  %      $24.7  74  %      $33.2  100  %


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                                                      December 31, 2020
Trade Lines                                1                 2                 3                 4+                Total
     FICO       Months History         $       %          $      %          $      %          $       %          $        %
 No-FICO (a)          <36              $3.0   97  %    $ 0.1     3  %    $ 0.0     -  %    $  0.0     -  %    $  3.1      9  %
                      36+               0.3   38  %      0.2    25  %      0.1    13  %       0.2    25  %       0.8      2  %
     <540             <36               0.0    -  %        -     -  %      0.1    50  %       0.1    50  %       0.2      1  %
                      36+               0.1    2  %      0.2     4  %      0.2     4  %       4.3    90  %       4.8     15  %
   540-599            <36               0.3   38  %      0.2    25  %      0.1    13  %       0.2    25  %       0.8      3  %
                      36+               0.2    2  %      0.2     2  %      0.3     3  %       9.0    93  %       9.7     28  %
   600-639            <36               0.4   44  %      0.2    22  %      0.1    11  %       0.2    22  %       0.9      3  %
                      36+               0.1    2  %      0.1     2  %      0.1     2  %       5.0    94  %       5.3     16  %
   >640 (b)           <36               1.0   59  %      0.3    18  %      0.2    12  %       0.2    12  %       1.7      5  %
                      36+               0.1    2  %      0.1     2  %      0.1     2  %       5.5    95  %       5.8     18  %
           Total (c)                $ 5.5     17  %    $ 1.6     5  %    $ 1.3     4  %    $ 24.7    75  %    $ 33.1    100  %


(a) Includes commercial loans
(b) Beginning in 2021, loans with FICO score of 640 are disclosed in the >=640
category. As of December 31, 2020, loans with FICO score of 640 were included in
the 600-639 category.
(c) The amount of accrued interest excluded from the disclosed amortized cost as
of September 30, 2021 and December 31, 2020 is $323 million and $416 million,
respectively.

Delinquencies

The company considers an account in default if a debtor fails to make substantial (defined as 90%) scheduled payment by the due date.

In each case, the period of delinquency is based on the number of days payments
are contractually past due. 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.

Refer to Note 3 - "Credit Loss Allowance and Credit Quality" to the accompanying
condensed consolidated financial statements for the details on the retail
installment contracts held for investment that were placed on nonaccrual status,
as of September 30, 2021 and December 31, 2020.
Credit Loss Experience
The following is a summary of net losses and repossession activity on retail
installment contracts held for investment for the nine months ended September
30, 2021 and 2020.
                                                                                        Nine Months Ended
                                                                       September 30, 2021              September 30, 2020

                                                                                  (Dollar amounts in thousands)
Principal outstanding at period end                                  $            32,742,544       $               33,485,342
Average principal outstanding during the period                      $            32,576,199       $               31,462,524
Number of receivables outstanding at period end                                    1,865,446                        1,971,917
Average number of receivables outstanding during the period                        1,900,412                        1,888,260
Number of repossessions (a)                                                          122,769                          131,522

Number of withdrawals as a percentage of the average number of outstanding receivables

                                                               8.6  %                            9.3 %
Net losses                                                           $               326,795       $                1,100,138

Net losses as a percentage of the average principal outstanding (b)

           1.3  %                            4.7 %


(a) Repossessions are net of redemptions. The number of repossessions includes
repossessions from the outstanding portfolio and from accounts already charged
off. The Company temporarily suspended involuntary repossession activities
nationwide during the onset of COVID-19 and restarted these activities during
the third quarter of 2020.
(b) Decrease is due to a reduction in the number of repossessions (refer to note
(a) above), and an increase in the number of deferrals (explained in detail
under "Deferrals and Troubled Debt Restructurings" below) as it relates to
COVID-19.
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There were no write-offs on the Company’s accounts receivable from dealers for the three and nine months ended September 30, 2021 and 2020. Net write-offs on the receivables portfolio from finance leases, total $ (51) and $ 3,588 for the nine months to end September 30, 2021 and 2020 or deferrals and problematic rescheduling

In accordance with the Company's policies and guidelines, the Company may offer
extensions (deferrals) to customers on its retail installment contracts, whereby
the customer is allowed to defer a maximum of three payments per event to the
end of the loan. The Company's policies and guidelines limit the frequency of
each new deferral to one deferral every six months, regardless of the length of
any prior deferral. Further, the maximum number of lifetime months extended for
all automobile retail installment contracts is eight, while some marine and
recreational vehicle contracts have a maximum of twelve months extended to
reflect their longer term. Additionally, the Company generally limits the
granting of deferrals on new accounts until a requisite number of months have
passed since origination. During the deferral period, the Company continues to
accrue and collect interest on the loan in accordance with the terms of the
deferral agreement.

In March 2020, the Company began actively working with its borrowers impacted by
COVID-19 and provided loan modification programs in accordance with the
"Interagency Statement on Loan Modifications and Reporting for Financial
Institutions Working with Customers Affected by the Coronavirus" issued by
federal banking agencies and the CARES Act to mitigate the adverse effects of
COVID-19 on modifications. These programs temporarily revised the practices
noted above during 2020 and increased the volume of modifications provided to
our customers. The Company's predominant program offering is a two-month
deferral of payments to the end of the loan term and waiver of late charges.
Effective January 1, 2021, the Company has generally returned to pre-pandemic
servicing practices, with the exception of an increased limit on total months of
extensions allowed. As of September 30, 2021, the overall modification volumes
were consistent with volumes experienced before COVID-19 pandemic, and the
number and dollar amount of active COVID-19 modifications are immaterial.
The following is a summary of all deferrals (amortized cost) on the Company's
retail installment contracts held for investment as of the dates indicated:
                                       September 30, 2021                   December 31, 2020
                                                    (Dollar amounts in thousands)
Never deferred                  $       24,353,207        73.4  %    $      20,824,336        63.0  %
Deferred once                            3,543,563        10.7  %            5,245,471        15.8  %
Deferred twice                           2,022,010         6.1  %            3,083,542         9.3  %
Deferred 3 - 4 times                     2,174,422         6.6  %            2,842,870         8.6  %
Deferred greater than 4 times            1,074,914         3.2  %            1,104,369         3.3  %

Total (a)                       $       33,168,116                   $      33,100,588


(a) The amount of accrued interest excluded from the disclosed amortized cost as
of September 30, 2021 and December 31, 2020 is $323 million and $416 million,
respectively.

At the time a deferral is granted, all delinquent amounts may be deferred or
paid. This may result in the classification of the loan as current and therefore
not considered a delinquent account. However, there are other instances when a
deferral is granted but the loan is not brought completely current, such as when
the account days past due is greater than the deferment period granted. Such
accounts are aged based on the timely payment of future installments in the same
manner as any other account. Historically, the majority of deferrals are
approved for borrowers who are either 31-60 or 61-90 days delinquent and these
borrowers are typically reported as current after deferral. If a customer
receives two or more deferrals over the life of the loan, the loan would
generally advance to a TDR designation.

The Company evaluates the results of deferral strategies based upon the amount
of cash installments that are collected on accounts after they have been
deferred versus the extent to which the collateral underlying the deferred
accounts has depreciated over the same period of time. Based on this evaluation,
the Company believes that payment deferrals granted according to its policies
and guidelines are an effective portfolio management technique and result in
higher ultimate cash collections from the portfolio.

Changes in deferral levels do not have a direct impact on the ultimate amount of
consumer finance receivables charged off. However, the timing of a charge-off
may be affected if the previously deferred account ultimately results in a
charge-off. To the extent that deferrals impact the ultimate timing of when an
account is charged off, historical charge-off ratios, expected life of
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the credit and cash flow projections for loans classified as TDRs used in determining the adequacy of the company’s ACL are also affected.

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.
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 amortized cost (including accrued interest)
balance as of September 30, 2021 and December 31, 2020 of loans that have
received these modifications and concessions;
                                              September 30, 2021       December 31, 2020
                                                     Retail Installment Contracts
                                                     (Dollar amounts in thousands)
Temporary reduction of monthly payment (a)   $           267,880      $          579,187
Bankruptcy-related accounts                               16,805                  23,865
Extension of maturity date                                91,555                  69,613
Interest rate reduction                                   73,456                  76,786
Max buy rate and fair lending (b)                      8,533,585               7,459,761
Other (c)                                                518,022                 391,424
Total modified loans                         $         9,501,303      $        8,600,636


(a) Reduces a customer's payment for a temporary time period (no more than six
months)
(b) Max buy rate modifications comprise loans modified by the Company to adjust
the interest rate quoted in a dealer-arranged financing. The Company reassesses
the contracted APR when changes in the deal structure are made (e.g., higher
down payment and lower vehicle price). If any of the changes result in a lower
APR, the contracted rate is reduced. Substantially all deal structure changes
occur within seven days of the date the contract is signed. These deal structure
changes are made primarily to give the consumer the benefit of a lower rate due
to an improved contracted deal structure compared to the deal structure that was
approved during the underwriting process. Fair Lending modifications comprises
loans modified by the Company related to possible "disparate impact" credit
discrimination in indirect vehicle finance. These modifications are not
considered a TDR event because they do not relate to a concession provided to a
customer experiencing financial difficulty.
(c) Includes various other types of modifications and concessions, such as
hardship modifications that are considered a TDR event.

A loan that has been classified as a TDR remains so until the loan is liquidated
through payoff or charge-off. TDRs are generally placed on nonaccrual status
when the account becomes past due more than 60 days. For loans on nonaccrual
status, interest income is recognized on a cash basis and the accrual of
interest is resumed and reinstated if a delinquent account subsequently becomes
60 days or less past due.

The following table shows the components of the changes in the amortized cost
(including accrued interest) in retail installment contract TDRs for the three
and nine months ended September 30, 2021 and 2020:
                                                Three Months Ended                           Nine Months Ended
                                        September 30,         September 30,         September 30,         September 30,
                                            2021                  2020                  2021                  2020

Balance – start of the period $ 4,210,211 $ 3,981,618

       $  4,011,780          $  3,828,892
New TDRs                                    391,370               336,249             1,824,843             1,418,493
Charge-offs                                (206,111)             (200,352)             (599,083)             (617,536)
Paydowns (a)                               (424,607)             (278,242)           (1,192,995)             (817,069)
Others                                       10,057                 4,197               (63,625)               30,690
Balance - end of period (b)            $  3,980,920          $  3,843,470          $  3,980,920          $  3,843,470

(a) Includes the net discount accrued in interest income for the period. (b) excluding collateral insolvency TDRs

Refer to Note 3 - "Credit Loss Allowance and Credit Quality" to the accompanying
condensed consolidated financial statements for the details on the Company's
amortized cost (including accrued interest) in TDRs and a summary of delinquent
TDRs, as of September 30, 2021 and December 31, 2020.

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Liquidity Management, Funding and Capital Resources
Source of Funding
The Company requires a significant amount of liquidity to originate and acquire
loans and leases and to service debt. The Company funds its operations through
its lending relationships with 13 third-party banks, Santander and SHUSA, and
through securitizations in the ABS market and flow agreements. The Company seeks
to issue debt that appropriately matches the cash flows of the assets that it
originates. The Company has more than $7.9 billion of stockholders' equity that
supports its access to the securitization markets, credit facilities, and flow
agreements.
During the quarter ended September 30, 2021, the Company completed on-balance
sheet funding transactions totaling approximately $6.2 billion, including:
•securitization on the Company's SDART platform for approximately $2.5 billion;
•securitizations on the Company's DRIVE, deeper subprime platform, for
approximately $1.8 billion; and
•lease securitization on our SRT platform for approximately $1.9 billion

The company also has approx. $ 0.3 billion when selling assets to third parties.

For details of the company’s total debt, see Note 7 – “Debt” of the accompanying condensed consolidated financial statements.

Credit Facilities
Third-party Revolving Credit Facilities
Warehouse Lines
The Company has one credit facility with eight banks providing an aggregate
commitment of $3.5 billion for the exclusive use of providing short-term
liquidity needs to support Chrysler Finance lease financing. The facility
requires reduced Advance Rates in the event of delinquency, credit loss, or
residual loss ratios, as well as other metrics exceeding specified thresholds.

The Company has eight credit facilities with eleven banks providing an aggregate
commitment of $8.3 billion for the exclusive use of providing short-term
liquidity needs to support Core and CCAP Loan financing. As of September 30,
2021 there was an outstanding balance of approximately zero on these facilities
in aggregate. These facilities reduced Advance Rates in the event of
delinquency, credit loss, as well as various other metrics exceeding specific
thresholds.

Repurchase Agreements
The Company obtains financing through investment management or repurchase
agreements whereby the Company pledges retained subordinate bonds on its own
securitizations as collateral for repurchase agreements with various borrowers
and at renewable terms ranging up to one year. As of September 30, 2021, there
is no outstanding balance under any repurchase agreements.

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Lines of Credit with Santander and Affiliates Santander and some of its subsidiaries, such as SHUSA, have historically and continue to provide substantial funding assistance to the company in the form of committed credit facilities. The company’s debts to these affiliated companies are made up as follows:

                                                                 As of 

September 30, 2021 (Amounts in thousands)

                                                                                                                 Average                Maximum
                                                                                                               Outstanding            Outstanding
                                Counterparty             Utilized Balance           Committed Amount             Balance                Balance
Promissory Note              SHUSA                     $         250,000          $         250,000          $     250,000          $     250,000
Promissory Note              SHUSA                               250,000                    250,000                250,000                250,000
Promissory Note              SHUSA                               250,000                    250,000                250,000                250,000
Promissory Note              SHUSA                               250,000                    250,000                250,000                250,000

Promissory Note              SHUSA                               350,000                    350,000                350,000                350,000
Promissory Note              SHUSA                               400,000                    400,000                400,000                400,000
Promissory Note              SHUSA                               450,000                    450,000                450,000                450,000
Promissory Note              SHUSA                               500,000                    500,000                500,000                500,000

Promissory Note              SHUSA                               500,000                    500,000                500,000                500,000
Promissory Note              SHUSA                               650,000                    650,000                650,000                650,000
Promissory Note              SHUSA                               750,000                    750,000                750,000                750,000
Promissory Note              SHUSA                             1,000,000                  1,000,000              1,000,000              1,000,000
Promissory Note              Santander                         2,000,000                  2,000,000              2,000,000              2,000,000
Promissory Note              Santander                         2,000,000                  2,000,000              2,000,000              2,000,000
Line of Credit               SHUSA                                     -                    500,000                 82,271                480,000
Line of Credit               SHUSA                                     -                  2,500,000                      -                      -
                                                       $       9,600,000          $      12,600,000


SHUSA provides the Company with $0.5 billion of committed revolving credit and
$2.5 billion of contingent liquidity that can be drawn on an unsecured basis.
SHUSA also provides the Company with $5.6 billion of term promissory notes with
maturities ranging from December 2021 to May 2025. Santander provides the
Company with $4 billion of unsecured promissory notes with maturities ranging
from June 2022 and September 2022.
Secured Structured Financings
The Company's secured structured financings primarily consist of public,
SEC-registered securitizations. The Company also executes private
securitizations under Rule 144A of the Securities Act and privately issues
amortizing notes. The Company has on-balance sheet securitizations outstanding
in the market with a cumulative ABS balance of approximately $29 billion.
Deficiency and Debt Forward Flow Agreement

In addition to the Company's credit facilities and secured structured
financings, the Company has a flow agreement in place with a third party for
charged off assets. Loans and leases sold under these flow agreements are not on
the Company's balance sheet but provide a stable stream of servicing fee income
and may also provide a gain or loss on sale.

Off-balance sheet financing

Beginning in 2017, the Company had the option to sell a contractually determined
amount of eligible prime loans to Santander, through securitization platforms.
As all of the notes and residual interests in the securitizations were issued to
Santander, the Company recorded these transactions as true sales of the retail
installment contracts securitized, and removed the sold assets from the
Company's consolidated balance sheets. Beginning in 2018, this program has been
replaced with a new program with SBNA, whereby the Company has agreed to provide
SBNA with origination support services in connection with the processing,
underwriting and purchasing of retail loans, primarily from Stellantis dealers,
all of which are serviced by the Company.

The Company also continues to periodically execute securitizations under Rule
144A of the Securities Act. After retaining the required credit risk retention
via a 5% vertical interest, the Company transfers all remaining notes and
residual interests in these securitizations to third parties. The Company
subsequently records these transactions as true sales of the retail installment
contracts securitized, and removes the sold assets from the Company's
consolidated balance sheet.
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Cash Flow Comparison
The Company has historically produced positive net cash from operating
activities. The Company's investing activities primarily consist of
originations, acquisitions, and collections from retail installment contracts.
SC's financing activities primarily consist of borrowing, repayments of debt,
share repurchases, and payment of dividends.
                                                                    Nine Months Ended September 30,
                                                                       2021                    2020
                                                                     (Dollar amounts in thousands)
Net cash provided by operating activities                      $       5,131,575          $  3,251,942
Net cash provided by (used in) investing activities                      (89,496)           (4,205,861)
Net cash provided by (used in) financing activities                   (3,017,154)            1,165,602


Net Cash Provided by Operating Activities
Net cash provided by operating activities increased by $1.9 billion from the
nine months ended September 30, 2020 to the nine months ended September 30,
2021, primarily due to the sale of the personal loan portfolio and an increase
in proceeds on receivables held for sale.
Net Cash Provided by Investing Activities
Net cash provided by investing activities increased by $4.1 billion from the
nine months ended September 30, 2020 to the nine months ended September 30,
2021, primarily due to an increase in collections and proceeds on sale of held
for investment.
Net Cash Used in Financing Activities
Net cash used in financing activities decreased by $4.2 billion from the nine
months ended September 30, 2020 to the nine months ended September 30, 2021,
primarily due to a decrease in proceeds from notes payable.

Contingent liabilities and off-balance sheet agreements Information on the Company’s contingent liabilities and off-balance sheet agreements can be found in Note 6 – “Variable Interest Entities” and Note 14 – “Obligations and Contingent Liabilities” in the accompanying condensed consolidated financial statements.


Contractual Obligations
The Company leases its headquarters in Dallas, Texas, its servicing centers in
Texas, Colorado, Arizona, and Puerto Rico, and operations facilities in
California, Texas and Colorado under non-cancelable operating leases that expire
at various dates through 2027. The Company also has various debt obligations
entered into in the normal course of business as a source of funds.
The following table summarizes the Company's contractual obligations as of
September 30, 2021:
                                                                     1-3                   3-5               More than
                                      Less than 1 year              years                 years               5 years                Total
                                                                                  (In thousands)
Operating lease obligations         $           4,078          $     31,752

$ 28,710 $ 18,029 $ 82,569
Promissory Note Loans – Credit Facilities and Related Parties

                           5,400,000             3,200,000             1,000,000                    -             9,600,000
Notes payable - secured structured
financings (a)                                978,330            11,918,520            11,008,316            5,014,104            28,919,270
Contractual interest on debt                  589,396               545,982               140,437               45,506             1,321,321
Total                               $       6,971,804          $ 15,696,254          $ 12,177,463          $ 5,077,639          $ 39,923,160

(a) Adjusted for unamortized costs of $ 87 million.

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Risk Management Framework

The Company's risk management framework is overseen by its Board, the RC, its
management committees, its executive management team, an independent risk
management function, an internal audit function and all of its associates. The
RC, along with the Company's full Board, is responsible for establishing the
governance over the risk management process, providing oversight in managing the
aggregate risk position and reporting on the comprehensive portfolio of risk
categories and the potential impact these risks can have on the Company's risk
profile. The Company's primary risks include, but are not limited to, credit
risk, market risk, liquidity risk, operational risk and model risk. For more
information regarding the Company's risk management framework, please refer to
the Risk Management Framework section of the 2020 Annual Report on Form 10-K.

Credit risk

The Company applies a 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.

The ACL levels are jointly reviewed for appropriateness and approved quarterly. Necessary actions resulting from the company’s analysis will, if necessary, be regulated by its Credit Loss Committee. The ACL levels are approved quarterly by the board-level committees.

Part II, Item 8 - Financial Statements and Supplementary Data (Note 1) in the
2020 Annual Report on Form 10-K described the methodology used to determine the
ACL and reserve for unfunded lending commitments in the Consolidated Balance
Sheets.

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 the Company's customers. The Company's gross
interest rate spread, which is the difference between the income earned through
the interest and finance charges on the Company's finance receivables and lease
contracts and the interest paid on the Company's funding, will be negatively
affected if the expense incurred on the Company's borrowings increases at a
faster pace than the income generated by the Company's assets.

The Company has policies in place designed to measure, monitor and manage the
potential volatility in earnings stemming from changes in interest rates. The
Company generates finance receivables which are predominantly fixed rate and
borrow with a mix of fixed and variable rate funding. To the extent that the
Company's asset and liability re-pricing characteristics are not effectively
matched, the Company may utilize interest rate derivatives, such as interest
rate swap agreements, to mitigate against interest rate risk. As of September
30, 2021, the notional value of the Company's interest rate swap agreements was
$0.3 billion. The Company also enters into Interest Rate Cap agreements as
required under certain lending agreements. In order to mitigate any interest
rate risk assumed in the Cap agreement required under the lending agreement, the
Company may enter into a second interest rate cap (Back-to-Back). As of
September 30, 2021 the notional value of the Company's interest rate cap
agreements was $15.3 billion, under which, all notional was executed
Back-to-Back.

The Company monitors its interest rate exposure by conducting interest rate
sensitivity analysis. For purposes of reflecting a possible impact to earnings,
the twelve-month net interest income impact of an instantaneous 100 basis point
parallel shift in prevailing interest rates is measured. As of September 30,
2021, the twelve-month impact of a 100 basis point parallel increase in the
interest rate curve would increase the Company's net interest income by $14
million. In addition to the sensitivity analysis on net interest income, the
Company also measures Market Value of Equity (MVE) to view the interest rate
risk position. MVE measures the change in value of Balance Sheet instruments in
response to an instantaneous 100 basis point parallel increase, including and
beyond the net interest income twelve-month horizon. As of September 30, 2021,
the impact of a 100 basis point parallel increase in the interest rate curve
would decrease the Company's MVE by $12 million.



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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 the Company 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 Stellantis. Under
the agreement, the Company is responsible for incurring the first portion of any
residual value gains or losses up to the first 8%. The Company and Stellantis
then equally share the next 4% of any residual value gains or losses (i.e.,
those gains or losses that exceed 8% but are less than 12%). Finally, Stellantis
is responsible for residual value gains or losses over 12%, capped at a certain
limit, after which the Company incurs any remaining gains or losses. From the
inception of the agreement with Stellantis through the third quarter of 2021,
approximately 92% of full-term leases have not exceeded the first and second
portions of any residual losses under the agreement. The Company also utilizes
industry data, including the ALG benchmark for residual values, and employs a
team of individuals experienced in forecasting residual values.

Similarly, lower used vehicle prices also reduce the amount that can be
recovered when remarketing repossessed vehicles that serve as collateral
underlying loans. The Company manages this risk through loan-to-value limits on
originations, monitoring of new and used vehicle values using standard industry
guides, and active, targeted management of the repossession process.

Liquidity risk

The Company views liquidity as integral to other key elements such as capital
adequacy, asset quality and profitability. The Company's primary liquidity risk
relates to the ability to finance new originations through the Bank and ABS
securitization markets. The Company has a robust liquidity policy that is
intended to manage this risk. The liquidity risk policy establishes the
following guidelines:

•that the Company maintain at least eight external credit providers (as of
September 30, 2021, it had thirteen);
•that the Company relies on Santander and affiliates for no more than 30% of its
funding (as of September 30, 2021, Santander and affiliates provided 25% of its
funding);
•that no single lender's commitment should comprise more than 33% of the overall
committed external lines (as of September 30, 2021, the highest single lender's
commitment was 16%); and
•that no more than 35% and 65% of the Company's warehouse facilities mature in
the next six months and twelve months respectively (as of September 30, 2021,
one of the Company's warehouse facilities is scheduled to mature in the next six
or twelve months).

The Company's liquidity risk policy also requires that the Company's Asset
Liability Committee monitor many indicators, both market-wide and
company-specific, to determine if action may be necessary to maintain the
Company's liquidity position. The Company's liquidity management tools include
daily, monthly and twelve-month rolling cash requirements forecasts, long term
strategic planning forecasts, monthly funding usage and availability reports,
daily sources and uses reporting, structural liquidity risk exercises, key risk
indicators, and the establishment of liquidity contingency plans. The Company
also performs monthly 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, lending covenant
breaches, lower dealer discount rates, and higher credit losses.

The Company generally seeks funding from the most efficient and cost-effective
source of liquidity from the ABS markets, third-party facilities, and Santander
and SHUSA. Additionally, the Company can reduce originations to significantly
lower levels, if necessary, during times of limited liquidity.

The Company had established a qualified like-kind exchange program to defer tax
liability on gains on sale of vehicle assets at lease termination. If the
Company does not meet the safe harbor requirements of IRS Revenue Procedure
2003-39, the Company may be subject to large, unexpected tax liabilities,
thereby generating immediate liquidity needs. The Company believes that its
compliance monitoring policies and procedures are adequate to enable the Company
to remain in compliance with the program requirements. The Tax Cuts and Jobs Act
permanently eliminated the ability to exchange personal property after January
1, 2018, which resulted in the like-kind exchange program being discontinued in
2018.

Operational Risk

The company is exposed to the risk of operational loss resulting from errors in the conduct of our business. These relate to failures that can be traced back to inappropriate or failed processes, failures of its employees or systems or to external events. The company’s operational risk management program includes third party risk management, business continuity management, and information

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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 applicable
regulations, internal control documentation and review of processes, and
internal audits. The Company also utilizes internal and external legal counsel
for expertise when needed. Upon hire and annually, all associates receive
comprehensive mandatory regulatory compliance training. In addition, the Board
receives annual regulatory and compliance training. The Company uses
industry-leading call mining that assists the Company in analyzing potential
breaches of regulatory requirements and customer service.
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.

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