Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 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
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (214) 634-1110
Not Applicable
(Former name, former address, and formal fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions 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
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 November 4, 2016
Common Stock ($0.01 par value)
 
358,338,399 shares





INDEX
 

 
 
 
Item 1. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2. 
Item 3. 
Item 4. 
Item 1. 
Item 1A. 
Item 2. 
Item 3.
Item 4.
Item 5.
Item 6. 
 


2



Unless otherwise specified or the context otherwise requires, the use herein of the terms “ we,” “our,” “us,” “SC,” and the “Company” refer to Santander Consumer USA Holdings Inc. and its consolidated subsidiaries.
Cautionary Note Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements about our 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 we believe that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties which are subject to change based on various important factors, some of which are beyond our control. For more information regarding these risks and uncertainties as well as certain additional risks that we face, refer to the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K/A for the year ended December 31, 2015, as well as factors more fully described in Part I, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, including the exhibits hereto, and subsequent reports and registration statements filed from time to time with the SEC. Among the factors that could cause our actual results to differ materially from those suggested by the forward-looking statements are:

we operate in a highly regulated industry and continually changing federal, state, and local laws and regulations could materially adversely affect our business, cash flows, liquidity, financial condition and/or results of operations;
our 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 our cash flows, liquidity, financial condition and/or results of operations;
our business could suffer if our access to funding is reduced;
we face significant risks implementing our growth strategy, some of which are outside our control;
we may incur unexpected costs and delays in connection with exiting our personal lending business;
our agreement with FCA may not result in anticipated levels of growth and is subject to performance conditions that could result in termination of the agreement;
our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships;
our business, financial condition, liquidity, and results of operations depend on the credit performance of our loans;
loss of our key management or other personnel, or an inability to attract such management and personnel, could negatively impact our business;
we are directly and indirectly, through our relationship with Santander Holdings USA, Inc., subject to certain bank regulations, including oversight by the OCC, the CFPB, the European Central Bank, and the Federal Reserve, which oversight and regulation may limit certain of our activities, including the timing and amount of dividends and other limitations on our business; and
future changes in our relationship with Santander could adversely affect our operations.

If one or more of the factors affecting our forward-looking information and statements proves incorrect, its actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Therefore, we caution the reader not to place undue reliance on any forward-looking information or statements. The effect of these factors is difficult to predict. Factors other than these also could adversely affect our 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 our 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 we undertake 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 us are expressly qualified by these cautionary statements.

Glossary

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

3



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
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
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
DCA
Discounted Cash Flow Analysis
Dealer Loan
A floorplan line of credit, real estate loan, working capital loan, or other credit extended to an automobile dealer
Dodd-Frank Act
Comprehensive financial regulatory reform legislation enacted by the U.S. Congress on July 21, 2010
DOJ
U.S. Department of Justice
DRIVE
Drive Auto Receivables Trust, a securitization platform
ECOA
Equal Credit Opportunity Act
Employment Agreement
The amended and restated employment agreement, executed as of December 31, 2011, by and among SC, Banco Santander, S.A. and Thomas G. Dundon
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
FCA
Fiat Chrysler Automobiles US LLC, formerly Chrysler Group LLC
FICO®
A common credit score created by Fair Isaac Corporation that is used on the credit reports that lenders use to assess an applicant’s credit risk. FICO® is computed using mathematical models that take into account five factors: payment history, current level of indebtedness, types of credit used, length of credit history, and new credit
FIRREA
Financial Institutions Reform, Recovery and Enforcement Act of 1989
Floorplan Loan
A revolving line of credit that finances inventory until sold
FRB
Federal Reserve Bank of Boston
FTC
Federal Trade Commission
GAP
Guaranteed Auto Protection
IPO
SC's Initial Public Offering
ISDA
International Swaps and Derivative Association
LendingClub
LendingClub Corporation, a peer-to-peer personal lending platform company from which SC acquired loans under terms of flow agreements
MSA
Master Service Agreement
Nonaccretable Difference
The difference between the undiscounted contractual cash flows and the undiscounted expected cash flows of a portfolio acquired with deteriorated credit quality
OCC
Office of the Comptroller of the Currency

4



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
RSU
Restricted stock unit
Santander
Banco Santander, S.A.
SBNA
Santander Bank, N.A., a wholly-owned subsidiary of SHUSA. Formerly Sovereign Bank, N.A.
SC
Santander Consumer USA Holdings Inc., a Delaware corporation, and its consolidated subsidiaries
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
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
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: FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Dollars in thousands, except per share amounts)
 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
Cash and cash equivalents - $26,320 and zero held at affiliates, respectively
$
75,873

 
$
18,893

Finance receivables held for sale, net
2,572,429

 
2,859,575

Finance receivables held for investment, net
23,686,391

 
23,367,788

Restricted cash - $14,048 and $39,436 held at affiliates, respectively
2,696,500

 
2,236,329

Accrued interest receivable
369,543

 
395,387

Leased vehicles, net
8,467,129

 
6,497,310

Furniture and equipment, net of accumulated depreciation of $43,932 and $50,409, respectively
62,378

 
58,007

Federal, state and other income taxes receivable
101,284

 
267,636

Related party taxes receivable
85

 
71

Goodwill
74,056

 
74,056

Intangible assets, net of amortization of $34,580 and $28,422, respectively
33,028

 
33,016

Due from affiliates
46,333

 
58,599

Other assets
586,607

 
582,291

Total assets
$
38,771,636

 
$
36,448,958

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Notes payable — credit facilities
$
8,299,229

 
$
6,902,779

Notes payable — secured structured financings
21,150,666

 
20,872,900

Notes payable — related party
2,350,000

 
2,600,000

Accrued interest payable
28,796

 
22,544

Accounts payable and accrued expenses
354,864

 
413,269

Federal, state and other income taxes payable
14,038

 
2,462

Deferred tax liabilities, net
1,227,179

 
881,225

Due to affiliates
54,848

 
58,148

Other liabilities
174,359

 
263,082

Total liabilities
33,653,979

 
32,016,409

Commitments and contingencies (Notes 5 and 10)

 

Equity:
 
 
 
Common stock, $0.01 par value — 1,100,000,000 shares authorized;
 
 
 
358,424,633 and 358,014,870 shares issued and 358,355,628 and 357,945,865 shares outstanding, respectively
3,584

 
3,579

Additional paid-in capital
1,652,786

 
1,644,151

Accumulated other comprehensive income (loss), net
(26,598
)
 
2,125

Retained earnings
3,487,885

 
2,782,694

Total stockholders’ equity
5,117,657

 
4,432,549

Total liabilities and equity
$
38,771,636

 
$
36,448,958


See notes to unaudited condensed consolidated financial statements.




6



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

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:

 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
Restricted cash
$
1,992,731

 
$
1,842,877

Finance receivables held for sale, net
1,623,456

 
1,539,686

Finance receivables held for investment, net
22,258,129

 
22,658,626

Leased vehicles, net
8,467,129

 
6,497,310

Various other assets
589,006

 
630,017

Total assets
$
34,930,451

 
$
33,168,516

Liabilities
 
 
 
Notes payable
$
30,892,750

 
$
30,611,019

Various other liabilities
92,128

 
85,844

Total liabilities
$
30,984,878

 
$
30,696,863


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

See notes to unaudited condensed consolidated financial statements.


7



SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited) (Dollars in thousands, except per share amounts)
 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Interest on finance receivables and loans
$
1,246,386

 
$
1,285,085

 
$
3,804,322

 
$
3,761,757

Leased vehicle income
388,501

 
267,211

 
1,086,651

 
742,684

Other finance and interest income
3,638

 
9,334

 
11,440

 
23,413

Total finance and other interest income
1,638,525

 
1,561,630

 
4,902,413

 
4,527,854

Interest expense — Including $28,131, $49,795, $88,814, and $136,261 to affiliates, respectively
207,175

 
171,420

 
590,504

 
470,898

Leased vehicle expense
252,730

 
174,545

 
717,230

 
518,165

Net finance and other interest income
1,178,620

 
1,215,665

 
3,594,679

 
3,538,791

Provision for credit losses
610,398

 
723,922

 
1,782,489

 
1,935,148

Net finance and other interest income after provision for credit losses
568,222

 
491,743

 
1,812,190

 
1,603,643

Profit sharing
6,400

 
11,818

 
35,640

 
46,835

Net finance and other interest income after provision for credit losses and profit sharing
561,822

 
479,925

 
1,776,550

 
1,556,808

Investment gains (losses), net — Including $346, ($5,654), $346, and ($5,654) from affiliates, respectively
(106,050
)
 
22,684

 
(276,415
)
 
133,998

Servicing fee income — Including $4,049, $4,650, $13,180, and $13,665 from affiliates, respectively
36,447

 
35,910

 
123,929

 
88,756

Fees, commissions, and other — Including $225, $225, $675, and $9,106 from affiliates, respectively
96,285

 
95,742

 
294,028

 
296,476

Total other income
26,682

 
154,336

 
141,542

 
519,230

Compensation expense
128,056

 
114,070

 
371,242

 
325,583

Repossession expense
75,920

 
60,770

 
217,816

 
175,066

Other operating costs — Including ($871), $2,199, $3,615, and $7,877 to affiliates, respectively
80,508

 
86,447

 
258,509

 
263,978

Total operating expenses
284,484

 
261,287

 
847,567

 
764,627

Income before income taxes
304,020

 
372,974

 
1,070,525

 
1,311,411

Income tax expense
90,473

 
136,539

 
365,334

 
467,816

Net income
$
213,547

 
$
236,435

 
$
705,191

 
$
843,595

 
 
 
 
 
 
 
 
Net income
$
213,547

 
$
236,435

 
$
705,191

 
$
843,595

Other comprehensive income (loss):
 
 
 
 
 
 
 
Change in unrealized gains (losses) on cash flow hedges, net of tax of ($14,397), $11,066, $17,081, and $16,626
24,168

 
(18,513
)
 
(28,723
)
 
(27,792
)
Comprehensive income
$
237,715

 
$
217,922

 
$
676,468

 
$
815,803

Net income per common share (basic)
$
0.60

 
$
0.66

 
$
1.97

 
$
2.38

Net income per common share (diluted)
$
0.59

 
$
0.66

 
$
1.96

 
$
2.38

Weighted average common shares (basic)
358,343,781

 
357,846,564

 
358,179,618

 
354,150,973

Weighted average common shares (diluted)
360,087,749

 
359,108,197

 
359,635,034

 
354,735,772


See notes to unaudited condensed consolidated financial statements.

8



SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited) (In thousands)
 
 
Common Stock
 
Additional
Paid-In
 
Accumulated
Other
Comprehensive
 
Retained
 
Total
Stockholders’
 
Shares
 
Amount
 
Capital
 
Income (Loss)
 
Earnings
 
Equity
Balance — January 1, 2015
348,978

 
$
3,490

 
$
1,560,519

 
$
3,553

 
$
1,958,654

 
$
3,526,216

Stock issued in connection with employee incentive compensation plans
8,924

 
89

 
99,966

 

 

 
100,055

Stock-based compensation expense

 

 
11,047

 

 

 
11,047

 Tax sharing with affiliate

 

 
(1,137
)
 

 

 
(1,137
)
 Net income

 

 

 

 
843,595

 
843,595

Other comprehensive income (loss), net of taxes

 

 

 
(27,792
)
 

 
(27,792
)
Balance — September 30, 2015
357,902

 
$
3,579

 
$
1,670,395

 
$
(24,239
)
 
$
2,802,249

 
$
4,451,984

 
 
 
 
 
 
 
 
 
 
 
 
Balance — January 1, 2016
357,946

 
$
3,579

 
$
1,644,151

 
$
2,125

 
$
2,782,694

 
$
4,432,549

Stock issued in connection with employee incentive compensation plans
410

 
5

 
2,014

 

 

 
2,019

 Stock-based compensation expense

 

 
7,013

 

 

 
7,013

 Tax sharing with affiliate

 

 
(392
)
 

 

 
(392
)
 Net income

 

 

 

 
705,191

 
705,191

Other comprehensive income (loss), net of taxes

 

 

 
(28,723
)
 

 
(28,723
)
Balance — September 30, 2016
358,356

 
$
3,584

 
$
1,652,786

 
$
(26,598
)
 
$
3,487,885

 
$
5,117,657

 
See notes to unaudited condensed consolidated financial statements.

9



SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Dollars in thousands)
 
For the Nine Months Ended 
 September 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income
$
705,191

 
$
843,595

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Derivative mark to market
4,653

 
9,519

Provision for credit losses
1,782,489

 
1,935,148

Depreciation and amortization
788,084

 
589,172

Accretion of discount
(281,295
)
 
(250,057
)
Originations and purchases of receivables held for sale
(3,018,287
)
 
(3,810,662
)
Proceeds from sales of and collections on receivables held for sale
2,460,399

 
3,019,253

Change in revolving personal loans
(471,061
)
 

Investment losses (gains), net
276,415

 
(133,998
)
Stock-based compensation
7,013

 
11,047

Deferred tax expense
363,036

 
250,021

Changes in assets and liabilities:

 
 
Accrued interest receivable
13,591

 
(59,538
)
Accounts receivable
7,161

 
(8,832
)
Federal income tax and other taxes
176,978

 
260,512

Other assets
(31,572
)
 
(21,182
)
Accrued interest payable
6,657

 
1,515

Other liabilities
(106,879
)
 
41,930

Due to/from affiliates
(6,440
)
 
6,793

Net cash provided by operating activities
2,676,133

 
2,684,236

Cash flows from investing activities:
 
 
 
Originations of and disbursements on finance receivables held for investment
(9,769,563
)
 
(13,695,695
)
Purchases of portfolios of finance receivables held for investment
(427,384
)
 

Collections on finance receivables held for investment
7,875,592

 
7,764,374

Proceeds from sale of loans held for investment
823,877

 
1,950,276

Leased vehicles purchased
(4,624,096
)
 
(4,138,748
)
Manufacturer incentives received
1,081,399

 
799,252

Proceeds from sale of leased vehicles
1,135,723

 
1,724,836

Change in revolving personal loans
362,671

 
(197,448
)
Purchases of furniture and equipment
(19,971
)
 
(15,584
)
Sales of furniture and equipment
1,985

 
310

Change in restricted cash
(460,749
)
 
(467,165
)
Other investing activities
(6,165
)
 
(9,434
)
Net cash used in investing activities
(4,026,681
)
 
(6,285,026
)
Cash flows from financing activities:
 
 
 
Proceeds from notes payable related to secured structured financings — net of debt issuance costs
9,637,933

 
11,816,224

Payments on notes payable related to secured structured financings
(9,130,280
)
 
(8,343,736
)
Proceeds from unsecured notes payable
6,718,900

 
5,470,000

Payments on unsecured notes payable
(6,968,900
)
 
(5,635,000
)
Proceeds from notes payable
15,885,951

 
20,648,451

Payments on notes payable
(14,738,924
)
 
(20,396,595
)
Proceeds from stock option exercises, gross
2,848

 
87,714

Excess tax benefit on stock option exercises

 
26,390

Repurchase of stock - employee tax withholding

 
(1,263
)
Net cash provided by financing activities
1,407,528

 
3,672,185

Net increase in cash and cash equivalents
56,980

 
71,395

Cash — Beginning of period
18,893

 
33,157

Cash — End of period
$
75,873

 
$
104,552


See notes to unaudited condensed consolidated financial statements.

10



SANTANDER CONSUMER USA HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)

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 its subsidiaries, a specialized consumer finance company focused on vehicle finance and third-party servicing. The Company’s primary business is the indirect origination and securitization of retail installment contracts principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers.
In conjunction with a ten-year private label financing agreement (the Chrysler Agreement) with Fiat Chrysler Automobiles US LLC (FCA) that became effective May 1, 2013, the Company offers a full spectrum of auto financing products and services to FCA customers and dealers under the Chrysler Capital brand. These products and services include consumer retail installment contracts and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit.
The Company also originates vehicle loans through a Web-based direct lending program, purchases vehicle retail installment contracts from other lenders, and services automobile and recreational and marine vehicle portfolios for other lenders. Additionally, the Company has several relationships through which it provides personal loans, private-label credit cards and other consumer finance products.
As of September 30, 2016, the Company was owned approximately 58.9% by Santander Holdings USA, Inc. (SHUSA), a subsidiary of Banco Santander, S.A. (Santander), approximately 31.3% by public shareholders, approximately 9.8% 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 bank regulatory approvals and any other approvals required by law being obtained (the Call Transaction). Pursuant to the Separation Agreement, 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 (Note 11).
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries, including certain Trusts, which are considered VIEs. The Company also consolidates other VIEs for which it was deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying condensed consolidated financial statements as of September 30, 2016 and December 31, 2015, and for the three and nine months ended September 30, 2016 and 2015, have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the financial position, results of operations and cash flows for the periods indicated. Results of operations for the periods presented herein are not necessarily indicative of results of operations for the entire year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2015.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities, as of the date of the financial statements and the amount of revenue and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. These estimates include the determination of credit loss allowance, discount accretion, impairment, fair value, expected end-of-term lease residual values, values of repossessed assets, and income taxes. These estimates, although based on actual historical trends and modeling, may potentially show significant variances over time.

11




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
There have been no material changes in the Company's accounting policies from those disclosed in Part II, Item 8 - Financial Statements and Supplementary Data in the Annual Report on Form 10-K/A for the year ended December 31, 2015 except as follows:
Retail Installment Contracts
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 fees first, then interest, then principal, 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.
Change in Accounting Principle
The Company tests goodwill for impairment annually in accordance with the provisions of ASC 350, Intangibles-Goodwill and Other. During the second quarter of fiscal year 2016, the Company changed the date of its annual 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.
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

12



implementation of this guidance did not have a significant impact on the Company’s financial position, results of operations, or cash flows.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance on a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The effective date for this ASU, which was deferred by ASU 2015-14 issued in August 2015, is for fiscal years beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, an amendment to the guidance in ASU 2014-09 that 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). Also, in May 2016, the FASB issued ASU 2016-12, which provides clarifying guidance in a few narrow areas and adds some practical expedient to the guidance. The amendments are expected to reduce the degree of judgment necessary to comply with the revenue recognition topic.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. Early adoption of the guidance is not permitted. The Company is currently evaluating the impact of adopting ASU 2014-09 and the related updates on its financial position, results of operations and disclosures.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The guidance will be effective for the fiscal year beginning after December 15, 2017, including interim periods within that year. The Company is in the process of evaluating the impacts of the adoption of this ASU.
In February 2016, the FASB issued ASU 2016-02, Leases, which will, among other impacts, change the criteria under which leases are identified and accounted for as on- or off-balance sheet. The guidance will be effective for the fiscal year beginning after December 15, 2018, including interim periods within that year. Once effective, the new guidance must be applied for all periods presented. The Company is in the process of evaluating the impacts of the adoption of this ASU.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year. The Company is in the process of evaluating the impacts of the adoption of this ASU.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses, which changes the criteria under which credit losses are measured. The amendment 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 is in the process of evaluating the impacts of the adoption of this ASU.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows-Classification of Certain Cash Receipts and Cash Payments, which provides guidance on several specific cash flow issues. The guidance will be effective for the fiscal year beginning after December 15, 2017, including interim periods within that year. 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: Interest Held Through Related Parties That Are Under Common Control, which will change the evaluation of whether a reporting entity is the primary beneficiary of a VIE by changing how a reporting entity that is a single decision maker of a VIE treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year. The Company is in the process of evaluating the impacts of the adoption of this ASU.
2.
Finance Receivables
Held For Investment

13



Finance receivables held for investment, net is comprised of the following at September 30, 2016 and December 31, 2015:
 
September 30,
2016
 
December 31, 2015
Retail installment contracts acquired individually
$
23,404,055

 
$
23,004,065

Purchased receivables
174,702

 
239,551

Receivables from dealers
69,718

 
76,025

Personal loans
11,537

 
941

Capital lease receivables (Note 3)
26,379

 
47,206

 
$
23,686,391

 
$
23,367,788

The Company's held for investment portfolio of retail installment contracts acquired individually, receivables from dealers, and personal loans was comprised of the following at September 30, 2016 and December 31, 2015:
 
September 30, 2016
 
Retail Installment Contracts
Acquired
Individually
 
Receivables from
Dealers
 
Personal Loans
Unpaid principal balance
$
27,370,995

 
$
70,366

 
$
11,682

Credit loss allowance (Note 4)
(3,401,285
)
 
(648
)
 

Discount
(622,833
)
 

 
(2,577
)
Capitalized origination costs and fees
57,178

 

 
2,432

Net carrying balance
$
23,404,055

 
$
69,718

 
$
11,537

 
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 (Note 4)
(3,197,414
)
 
(916
)
 

Discount
(722,701
)
 

 

Capitalized origination costs and fees
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 5). Most of the borrowers on the Company’s retail installment contracts held for investment are retail consumers; however, $911,062 and $1,087,024 of the unpaid principal balance represented fleet contracts with commercial borrowers as of September 30, 2016 and December 31, 2015, respectively.
As of September 30, 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.

Purchased receivables portfolios, which were acquired with deteriorated credit quality, were comprised of the following at September 30, 2016 and December 31, 2015:
 
September 30,
2016
 
December 31, 2015
Outstanding balance
$
254,554

 
$
362,212

Outstanding recorded investment, net of impairment
$
174,702

 
$
239,551


14



Changes in accretable yield on the Company’s purchased receivables portfolios for the periods indicated were as follows:
 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Balance — beginning of period
$
137,747

 
$
284,460

 
$
178,582

 
$
268,927

Accretion of accretable yield
(17,830
)
 
(16,770
)
 
(58,774
)
 
(66,450
)
Reclassifications from (to) nonaccretable difference
(8,627
)
 
(43,297
)
 
(8,518
)
 
21,916

Balance — end of period
$
111,290

 
$
224,393

 
$
111,290

 
$
224,393

During the three and nine months ended September 30, 2016 and 2015, the Company did not acquire any vehicle loan portfolios for which it was probable at acquisition that not all contractually required payments would be collected. However, during the three and nine months ended September 30, 2016, the Company recognized certain retail installment contracts with an unpaid principal balance of $135,772 and $327,443 respectively, held by non-consolidated securitization Trusts, under optional clean-up calls. Following the initial recognition of these loans at fair value, the performing loans in the portfolio are carried at amortized cost, net of allowance for credit losses. The Company elected the fair value option for all non-performing loans acquired (more than 60 days delinquent as of re-recognition date), for which it was probable that not all contractually required payments would be collected (Note 13).
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 September 30, 2016 and December 31, 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 $153 and $156 at September 30, 2016 and December 31, 2015, respectively.
The remaining receivables from dealers held for investment are all Chrysler Agreement-related. As of September 30, 2016, borrowers on these dealer receivables are located in Virginia (51%), New York (24%), Mississippi (15%), Missouri (9%) and other states each individually representing less than 5% of the Company’s total.
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 of its 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 changes in market value, are recorded in investment gains (losses), net, in the condensed consolidated statements of income and comprehensive income (Note 16). On February 1, 2016, the Company sold personal installment loans with an unpaid principal balance of $869,349 to a third party for an immaterial gain to unpaid principal balance.
At December 31, 2015, the Company determined that its intent to sell certain non-performing personal installment 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 $662 and $941 at September 30, 2016 and December 31, 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 of $1,986 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 $10,875 at September 30, 2016.
Held For Sale
The carrying value of the Company's finance receivables held for sale was comprised of the following at September 30, 2016 and December 31, 2015:

15



 
September 30,
2016
 
December 31, 2015
Retail installment contracts acquired individually
$
1,652,106

 
$
905,161

Personal loans
920,323

 
1,954,414

 
$
2,572,429

 
$
2,859,575

Sales of retail installment contracts to third parties and proceeds from sales of charged-off assets for the three and nine months ended September 30, 2016 and 2015 were as follows:
 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Sales of retail installment contracts to third parties
$
793,804

 
$
3,057,654

 
$
2,312,983

 
$
5,993,407

Proceeds from sales of charged-off assets
12,521

 
13,730

 
47,594

 
117,693


The Company retains servicing of retail installment contracts and leases sold to third parties. Total contracts sold to unrelated third parties and serviced as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30,
2016
 
December 31, 2015
Serviced balance of retail installment contracts and leases sold to third parties
$
10,088,086

 
$
12,155,844


3.
Leases
The Company has both operating and capital leases, which are separately accounted for and recorded on the Company's condensed consolidated balance sheets. Operating leases are reported as leased vehicles, net, while capital leases are included in finance receivables held for investment, net.
Operating Leases
Leased vehicles, net, which is comprised of leases originated under the Chrysler Agreement, consisted of the following as of September 30, 2016 and December 31, 2015:
 
September 30,
2016
 
December 31,
2015
Leased vehicles
$
11,696,109

 
$
8,836,710

Less: accumulated depreciation
(2,143,670
)
 
(1,510,414
)
Depreciated net capitalized cost
9,552,439

 
7,326,296

Manufacturer subvention payments, net of accretion
(1,105,366
)
 
(845,142
)
Origination fees and other costs
20,056

 
16,156

Net book value
$
8,467,129

 
$
6,497,310

During the three and nine months ended September 30, 2015, the Company executed bulk sales of Chrysler Capital leases with an aggregate depreciated net capitalized cost of zero and $1,316,958, respectively, and a net book value of zero and $1,155,171, respectively, to a third party. The bulk sale agreements included certain provisions whereby the Company agreed to share in residual losses for lease terminations with losses over a specific percentage threshold (Note 10). The Company retained servicing on the sold leases. Due to the accelerated depreciation permitted for tax purposes, the sales generated large taxable gains that the Company deferred through a qualified like-kind exchange program. An immaterial amount of taxable gain that did not qualify for deferral was recognized upon expiration of the reinvestment period. No such bulk sales occurred during the three and nine months ended September 30, 2016.

The following summarizes the future minimum rental payments due to the Company as lessor under operating leases as of September 30, 2016:

16



 
 
Remainder of 2016
$
395,131

2017
1,338,060

2018
772,340

2019
163,867

2020
2,860

Thereafter

Total
$
2,672,258

Capital Leases
Certain leases originated by the Company are accounted for as capital leases, as the contractual residual values are nominal amounts. Capital lease receivables, net consisted of the following as of September 30, 2016 and December 31, 2015:
 
September 30,
2016
 
December 31,
2015
Gross investment in capital leases
$
47,012

 
$
91,393

Origination fees and other
176

 
155

Less: unearned income
(9,765
)
 
(24,464
)
   Net investment in capital leases before allowance
37,423

 
67,084

Less: allowance for lease losses
(11,044
)
 
(19,878
)
   Net investment in capital leases
$
26,379

 
$
47,206


The following summarizes the future minimum lease payments due to the Company as lessor under capital leases as of September 30, 2016:
 
 
Remainder of 2016
$
4,261

2017
16,967

2018
16,194

2019
6,957

2020
1,915

Thereafter
718

Total
$
47,012


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. As of September 30, 2016, the credit loss allowance for receivables from dealers is comprised of a general allowance of $648.

17



The activity in the credit loss allowance for individually acquired, dealer, and personal loans for the three and nine months ended September 30, 2016 and 2015 was as follows:
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2015
 
Retail Installment Contracts Acquired Individually
 
Receivables from Dealers
 
Retail Installment
Contracts
Acquired
Individually
 
Receivables
from Dealers
 
Personal Loans
Balance — beginning of period
$
3,422,736

 
$
837

 
$
2,927,624

 
$
968

 
$
384,735

Provision for credit losses
609,396

 
(189
)
 
619,895

 
(42
)
 
105,813

Charge-offs
(1,246,760
)
 

 
(1,062,598
)
 

 
(499,010
)
Recoveries
615,913

 

 
497,778

 

 
8,462

Balance — end of period
$
3,401,285

 
$
648

 
$
2,982,699

 
$
926

 
$

 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
 
Retail Installment Contracts Acquired Individually
 
Receivables from Dealers
 
Retail Installment
Contracts
Acquired
Individually
 
Receivables
from Dealers
 
Personal Loans
Balance — beginning of period
$
3,197,414

 
$
916

 
$
2,586,685

 
$
674

 
$
348,660

Provision for credit losses
1,787,277

 
(133
)
 
1,607,376

 
252

 
324,634

Charge-offs
(3,429,905
)
 
(135
)
 
(2,753,753
)
 

 
(695,918
)
Recoveries
1,846,499

 

 
1,569,508

 

 
22,624

Transfers to held-for-sale

 

 
(27,117
)
 

 

Balance — end of period
$
3,401,285

 
$
648

 
$
2,982,699

 
$
926

 
$

The impairment activity related to purchased receivables portfolios for the three and nine months ended September 30, 2016 and 2015 was as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Balance — beginning of period
$
168,518

 
$
176,754

 
$
172,308

 
$
186,126

Incremental provisions for purchased receivable portfolios

 
175

 

 
475

Incremental reversal of provisions for purchased receivable portfolios
804

 
(2,675
)
 
(2,986
)
 
(12,347
)
Balance — end of period
$
169,322

 
$
174,254

 
$
169,322

 
$
174,254

The Company estimates lease losses on the capital lease receivable portfolio based on delinquency status and loss experience to date, as well as various economic factors. The activity in the lease loss allowance for capital leases for the three and nine months ended September 30, 2016 and 2015 was as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Balance — beginning of period
$
12,752

 
$
15,570

 
$
19,878

 
$
9,589

Provision for lease losses
387

 
756

 
(1,669
)
 
14,758

Charge-offs
(5,712
)
 
(11,304
)
 
(28,267
)
 
(30,694
)
Recoveries
3,617

 
8,277

 
21,102

 
19,646

Balance — end of period
$
11,044

 
$
13,299

 
$
11,044

 
$
13,299


Delinquencies


18



Retail installment contracts 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.
A summary of delinquencies on our retail installment contracts held for investment portfolio as of September 30, 2016 and December 31, 2015 is as follows:
 
September 30, 2016
 
Retail Installment Contracts Held for Investment
 
Loans
Acquired
Individually
 
Purchased
Receivables
Portfolios
 
Total
Principal, 31-60 days past due
$
2,536,940

 
$
14,879

 
$
2,551,819

Delinquent principal over 60 days
1,260,255

 
7,695

 
1,267,950

Total delinquent principal
$
3,797,195

 
$
22,574

 
$
3,819,769

 
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 recorded investment before allowance.

As of September 30, 2016 and December 31, 2015, there were no receivables from dealers that were 31 days or more delinquent.
FICO® Distribution — A summary of the credit risk profile of the Company’s retail installment contracts held for investment by FICO® distribution, determined at origination, as of September 30, 2016 and December 31, 2015 was as follows:
FICO® Band
 
September 30, 2016
 
December 31, 2015
Commercial (a)
 
3.3%
 
4.0%
No-FICOs
 
12.4%
 
12.2%
<540
 
22.2%
 
23.4%
540-599
 
31.1%
 
30.9%
600-639
 
17.2%
 
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 acquire and 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.

19



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 uncollectible and of such little value that it does not warrant consideration as an active asset. There may be some reco    very 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 September 30, 2016 and December 31, 2015 were as follows:
 
September 30,
2016
 
December 31,
2015
Pass
$
44,905

 
$
39,270

Special Mention
15,655

 
5,466

Substandard
990

 

Doubtful

 

Loss
139

 

Total (a)
$
61,689

 
$
44,736

(a)
Fleet loans of $849,373 and $1,042,288 as of September 30, 2016 and December 31, 2015, respectively, were excluded from the commercial analysis as these loans did not meet the internal threshold for review.
Commercial loan credit quality indicators for receivables from dealers held for investment as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30,
2016
 
December 31,
2015
Pass
$
68,305

 
$
68,873

Special Mention

 
8,068

Substandard
2,061

 

Doubtful

 

Loss

 

Unpaid principal balance
$
70,366

 
$
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, operating and capital leases, and loans held for sale, including personal loans, are excluded from the scope of the applicable guidance. As of September 30, 2016 and December 31, 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

20



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 TDRs as of September 30, 2016 and December 31, 2015:
 
September 30,
2016
 
December 31, 2015
 
Retail Installment Contracts
Outstanding recorded investment
$
5,364,656

 
$
4,601,502

Impairment
(1,588,028
)
 
(1,363,023
)
Outstanding recorded investment, net of impairment
$
3,776,628

 
$
3,238,479

 
A summary of the Company’s delinquent TDRs at September 30, 2016 and December 31, 2015, is as follows:
 
September 30,
2016
 
December 31, 2015
 
Retail Installment Contracts
Principal, 31-60 days past due
$
1,089,212

 
$
942,021

Delinquent principal over 60 days
593,713

 
510,015

Total delinquent TDR principal
$
1,682,925

 
$
1,452,036

 
A loan that has been classified as a TDR remains so until the loan is liquidated through payoff or charge-off. Consistent with the Company’s other 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:
 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
Retail Installment Contracts
 
Retail Installment Contracts
 
Personal Loans
Average outstanding recorded investment in TDRs
$
5,213,132

 
$
4,380,037

 
$
16,991

Interest income recognized
$
207,115

 
$
211,354

 
$
1,002

 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
Retail Installment Contracts
 
Retail Installment Contracts
 
Personal Loans
Average outstanding recorded investment in TDRs
$
4,940,280

 
$
4,302,078

 
$
17,150

Interest income recognized
$
576,682

 
$
542,679

 
$
2,220


The following table summarizes the financial effects of TDRs that occurred during the three and nine months ended September 30, 2016 and 2015:
 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
Retail Installment Contracts
 
Retail Installment Contracts
 
Personal Loans
Outstanding recorded investment before TDR
$
929,871

 
$
845,057

 
$
5,270

Outstanding recorded investment after TDR
$
932,472

 
$
852,415

 
$
5,241

Number of contracts (not in thousands)
52,780

 
48,883

 
4,416


21



 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
Retail Installment Contracts
 
Retail Installment Contracts
 
Personal Loans
Outstanding recorded investment before TDR
$
2,463,409

 
$
2,606,384

 
$
15,048

Outstanding recorded investment after TDR
$
2,478,035

 
$
2,627,451

 
$
14,961

Number of contracts (not in thousands)
139,524

 
151,625

 
12,555


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 the month in which the loan becomes greater than 120 days past due and for revolving personal loans is generally the month in which the receivable becomes greater than 180 days past due. Loan restructurings accounted for as TDRs within the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2016 and 2015 are summarized in the following table:
 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
Retail Installment Contracts
 
Retail Installment Contracts
 
Personal Loans
Recorded investment in TDRs that subsequently defaulted
$
206,247

 
$
213,945

 
$
2,145

Number of contracts (not in thousands)
11,745

 
12,360

 
1,905

 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
Retail Installment Contracts
 
Retail Installment Contracts
 
Personal Loans
Recorded investment in TDRs that subsequently defaulted
$
565,724

 
$
567,213

 
$
5,346

Number of contracts (not in thousands)
32,256

 
33,097

 
4,919



22



5.    Debt
Revolving Credit Facilities
The following table presents information regarding credit facilities as of September 30, 2016 and December 31, 2015:
 
September 30, 2016
 
Maturity Date(s)
 
Utilized Balance
 
Committed Amount
 
Effective Rate
 
Assets Pledged
 
Restricted Cash Pledged
Warehouse line
January 2018
 
$
293,084

 
$
500,000

 
2.13%
 
$
414,103

 
$

Warehouse line (a)
Various
 
800,385

 
1,250,000

 
1.84%
 
1,087,050

 
36,383

Warehouse line (b)
July 2017
 
963,120

 
1,260,000

 
1.96%
 
1,097,091

 
47,186

Warehouse line (c)
July 2017
 
2,695,143

 
2,940,000

 
1.96%
 
4,097,792

 
70,008

Warehouse line (d)
December 2017
 
1,044,377

 
1,800,000

 
1.84%
 
1,448,568

 
27,601

Repurchase facility (e)
December 2016
 
762,440

 
762,440

 
2.65%
 

 
32,344

Repurchase facility (e)
April 2017
 
235,509

 
235,509

 
1.84%
 

 

Warehouse line
March 2018
 
669,399

 
1,000,000

 
1.42%
 
939,409

 
28,150

Warehouse line (f)
November 2016
 
175,000

 
175,000

 
2.08%
 

 

Warehouse line (f)
November 2016
 
250,000

 
250,000

 
2.08%
 

 
2,503

Warehouse line
June 2017
 
219,372

 
250,000

 
2.83%
 
417,953

 
38,791

Warehouse line
January 2018
 
191,400

 
400,000

 
2.06%
 
265,416

 
5,505

Total facilities with third parties
 
 
8,299,229

 
10,822,949

 
 
 
9,767,382

 
288,471

Lines of credit with Santander and related subsidiaries (g):
 
 
 
 
 
 
 
 
 
 

Line of credit
December 2016
 
500,000

 
500,000

 
2.83%
 

 

Line of credit
December 2018
 

 
500,000

 
3.48%
 

 

Line of credit
December 2016
 
1,000,000

 
1,000,000

 
2.83%
 

 

Line of credit
December 2018
 
550,000

 
1,000,000

 
2.89%
 

 

Line of credit
March 2017
 
300,000

 
300,000

 
2.07%
 

 

Line of credit (h)
March 2019
 

 
1,500,000

 
3.53%
 

 

Total facilities with Santander and related subsidiaries
 
 
2,350,000

 
4,800,000

 
 
 

 

Total revolving credit facilities
 
 
$
10,649,229

 
$
15,622,949

 
 
 
$
9,767,382

 
$
288,471


(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)
On November 4, 2016, the maturity date of this facility was extended to October 2018.
(e)
These repurchase facilities are collateralized by securitization notes payable retained by the Company. These facilities have rolling maturities of up to one year.
(f)
These lines are collateralized by residuals retained by the Company.
(g)
These lines generally are also collateralized by securitization notes payable and residuals retained by the Company. As of September 30, 2016 and December 31, 2015, $1,800,000 and $1,420,584 of the aggregate outstanding balances on these facilities were unsecured.
(h)
On November 1, 2016, this facility was amended to increase the committed amount to $3,000,000.

23



 
December 31, 2015
 
Maturity Date(s)
 
Utilized Balance
 
Committed Amount
 
Effective Rate
 
Assets Pledged
 
Restricted Cash Pledged
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 $300,000 of committed revolving credit, collateralized by residuals retained on the Company's own securitizations, and $1,500,000 of committed revolving credit that can be drawn on an unsecured basis.

The facilities offered through the New York branch are structured as three- and five-year floating rate facilities, with current maturity dates of December 31, 2016 and December 31, 2018, respectively. These facilities currently permit unsecured borrowing but generally are collateralized by retail installment contracts and retained residuals. Any secured balances outstanding under the facilities at the time of their maturity will amortize to match the maturities and expected cash flows of the corresponding collateral.

Secured Structured Financings
 
The following table presents information regarding secured structured financings as of September 30, 2016 and December 31, 2015:

24



 
September 30, 2016
 
Original Estimated Maturity Date(s)
 
Balance
 
Initial Note Amounts Issued
 
Initial Weighted Average Interest Rate
 
Collateral
 
Restricted Cash
2012 Securitizations
September 2018
 
$
247,325

 
$
2,525,540

 
0.92%-1.23%
 
$
368,558

 
$
77,598

2013 Securitizations
January 2019 - March 2021
 
1,375,371

 
6,689,700

 
0.89%-1.59%
 
1,712,149

 
237,995

2014 Securitizations
February 2020 - January 2021
 
1,903,310

 
6,391,020

 
1.16%-1.72%
 
2,674,446

 
269,996

2015 Securitizations
September 2019 - January 2023
 
4,855,706

 
9,317,032

 
1.33%-2.29%
 
6,476,951

 
514,289

2016 Securitizations
April 2022 - August 2023
 
3,982,411

 
4,942,980

 
1.72%-2.46%
 
5,100,728

 
281,603

Securitizations (a)
 
 
12,364,123

 
29,866,272

 
 
 
16,332,832

 
1,381,481

2010 Private issuances (b)
June 2011
 
128,476

 
516,000

 
1.29%
 
228,386

 
6,867

2011 Private issuances
December 2018
 
457,608

 
1,700,000

 
1.46%
 
727,553

 
37,493

2013 Private issuances
September 2018-September 2020
 
2,859,166

 
2,693,754

 
1.13%-1.38%
 
4,766,571

 
160,560

2014 Private issuances
March 2018 - December 2021
 
842,840

 
3,271,175

 
1.05%-1.40%
 
1,375,245

 
69,345

2015 Private issuances
December 2016 - July 2019
 
2,043,306

 
2,605,062

 
 0.88%-2.81%
 
1,983,380

 
114,398

2016 Private issuances
May 2020 - June 2023
 
2,455,147

 
2,750,000

 
 1.55%-2.86%
 
3,383,824

 
74,441

Privately issued amortizing notes
 
 
8,786,543

 
13,535,991

 
 
 
12,464,959

 
463,104

Total secured structured financings
 
 
$
21,150,666

 
$
43,402,263

 
 
 
$
28,797,791

 
$
1,844,585

(a)
Securitizations executed under Rule 144A of the Securities Act are included within this balance.
(b)
Securitization was subsequently amended to extend the maturity date to June 2017.

 
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%
 
$