Santander Holdings USA, Inc. - Annual Report: 2019 (Form 10-K)

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the effects of regulation, actions and/or policies of the Federal Reserve, the FDIC, the OCC and the CFPB, and other changes in monetary and fiscal policies and regulations, including policies that affect market interest rates and money supply, as well as in the impact of changes in and interpretations of GAAP, the failure to adhere to which could subject SHUSA and/or its subsidiaries to formal or informal regulatory compliance and enforcement actions and result in fines, penalties, restitution and other costs and expenses, changes in our business practice, and reputational harm;

•	SHUSA’s ability to manage credit risk that may increase to the extent our loans are concentrated by loan type, industry segment, borrower type or location of the borrower or collateral;

•	the slowing or reversal of the current U.S. economic expansion and the strength of the U.S. economy in general and regional and local economies in which SHUSA conducts operations in particular, which may affect, among other things, the level of non-performing assets, charge-offs, and provisions for credit losses;

•	inflation, interest rate, market and monetary fluctuations, including effects from the pending discontinuation of LIBOR as an interest rate benchmark, may, among other things, reduce net interest margins and impact funding sources and the ability to originate and distribute financial products in the primary and secondary markets;

•	the pursuit of protectionist trade or other related policies, including tariffs by the U.S., its global trading partners, and/or other countries, and/or trade disputes generally;

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the ability of certain European member countries to continue to service their debt and the risk that a weakened European economy could negatively affect U.S.-based financial institutions, counterparties with which SHUSA does business, as well as the stability of global financial markets, including economic instability and recessionary conditions in Europe and the eventual exit of the United Kingdom from the European Union;

•	adverse movements and volatility in debt and equity capital markets and adverse changes in the securities markets, including those related to the financial condition of significant issuers in SHUSA’s investment portfolio;

•	SHUSA's ability to grow revenue, manage expenses, attract and retain highly-skilled people and raise capital necessary to achieve its business goals and comply with regulatory requirements;

•	SHUSA’s ability to effectively manage its capital and liquidity, including approval of its capital plans by its regulators and its subsidiaries' ability to continue to pay dividends to it;

•	changes in credit ratings assigned to SHUSA or its subsidiaries;

•	the ability to manage risks inherent in our businesses, including through effective use of systems and controls, insurance, derivatives and capital management;

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SHUSA’s ability to timely develop competitive new products and services in a changing environment that are responsive to the needs of SHUSA's customers and are profitable to SHUSA, the success of our marketing efforts to customers, and the potential for new products and services to impose additional unexpected costs, losses, or other liabilities not anticipated at their initiation, and expose SHUSA to increased operational risk;

•	competitors of SHUSA may have greater financial resources or lower costs, or be subject to different regulatory requirements than SHUSA, may innovate more effectively, or may develop products and technology that enable those competitors to compete more successfully than SHUSA and cause SHUSA to lose business or market share;

•	SC's agreement with FCA may not result in currently anticipated levels of growth, is subject to performance conditions that could result in termination of the agreement, and is also subject to an option giving FCA the right to acquire an equity participation in the Chrysler Capital portion of SC's business;

•	consumers and small businesses may decide not to use banks for their financial transactions, which could impact our net income;

•	changes in customer spending, investment or savings behavior;

•	loss of customer deposits that could increase our funding costs;

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

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

•	changes to tax laws and regulations and the outcome of ongoing tax audits by federal, state and local income tax authorities that may require SHUSA to pay additional taxes or recover fewer overpayments compared to what has been accrued or paid as of period-end;

•	the costs and effects of regulatory or judicial actions or proceedings, including possible business restrictions resulting from such actions or proceedings;

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

•	acts of terrorism or domestic or foreign military conflicts; and acts of God, including pandemics and other significant public health emergencies, and other natural disasters.

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We are vulnerable to disruptions and volatility in the global financial markets. Disruptions and volatility in financial markets can have a material adverse effect on our ability to access capital and liquidity on acceptable financial terms. Negative and fluctuating economic conditions, such as a changing interest rate environment, may cause our lending margins to decrease and reduce customer demand for our higher margin products and services.

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Uncertainty regarding LIBOR may affect our business adversely. We have established an enterprise-wide initiative to identify, asses and monitor risks associated with the anticipated discontinuation of LIBOR. However, there can be no assurance that we and other market participants will be adequately prepared for the potential disruption to financial markets and potential adverse effects to interest rates on our loans, deposits, derivatives and other financial instruments currently tied to LIBOR.

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We are subject to substantial regulation. As a financial institution, we are subject to extensive regulation by government agencies, including limitations on permissible activities, required financial stress tests, required non-objection to certain actions, investigations and other regulatory proceedings. If we are unable to meet the expectations of our regulators fully, we may need to divert significant resources to remedial actions, be unable to take planned capital actions, and/or be subject to fines or other enforcement actions, among other things. These circumstances could affect our revenues and expenses and other aspects of our business and operations adversely.

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We may not be able to detect money laundering or other illegal or improper activities fully or on a timely basis. We work regularly to improve our policies, procedures and capabilities to detect and prevent financial crimes. However, such crimes are evolving continually, and there will be instances in which we may be used by other parties to engage in money laundering or other illegal or improper activities. These instances may result in regulatory fines, sanctions and/or legal enforcement, which could have a material adverse effect on our operating results, financial condition and prospects.

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Credit risk is inherent in our business. Our customers’ and counterparties’ financial condition, repayment abilities, repayment intentions, the value of their collateral, and government economic policies, market interest rates and other factors affect the quality of our loan portfolio. Many of these factors are beyond our control, and there can be no assurance that our current or future loan and lease loss reserves will be sufficient to cover actual losses.

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Liquidity and funding risks are inherent in our business. Changes in market interest rates and our credit spreads occur continuously, may be unpredictable and highly volatile and can significantly increase our cost of funding. We rely primarily on deposits to fund lending activities. However, our ability to maintain or grow deposits depends on factors outside our control, such as general economic conditions and confidence of depositors in the economy and the financial services industry. If deposit withdrawals increase significantly in a short period of time, it could have a material adverse effect on our operating results, financial condition and prospects.

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We are subject to fluctuations in interest rates. Interest rates are highly sensitive to factors beyond our control, such as increased regulation of the financial sector, monetary policies, economic and political conditions, and other factors. Variations in interest rates could impact net interest income, which comprises the majority of our revenue, reducing our growth and potentially resulting in losses.

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We are subject to significant competition. We compete with banks that are larger than us and non-traditional providers of banking services who may not be subject to the same regulatory or legislative requirements to which we are subject. If we are unable to compete successfully with current and new competitors and anticipate changing banking industry trends, our business may be affected adversely.

•	We rely on third parties for important products and services. We rely on third-party vendors for key components of our business infrastructure such as loan and deposit servicing systems, custody and clearing services, internet connections and network access. Cyberattacks and breaches of the systems of those vendors could lead to operational and reputational risk and losses for SHUSA.

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Risks relating to data collection, processing, storage systems and data security. Proper functioning of financial controls, accounting and other data collection and processing systems is critical to our businesses and our ability to compete effectively. Inadequate personnel, inadequate or failed internal control processes or systems, or external events that interrupt normal business operations could each impair our data collection, processing, storage systems and data security and result in losses.

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We and others in our industry face cybersecurity risks. We take protective measures and monitor and develop our systems continuously to protect our technology infrastructure and data from cyberattacks. However, cybersecurity risks continue to increase for our industry, and the proliferation of new technologies and the increased sophistication and activities of the actors behind such attacks present risks for compromised data, theft of funds or theft or destruction of corporate information and assets.

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Disclosure controls and procedures over financial reporting and internal controls over financial reporting may not prevent or detect all errors or acts of fraud. The Company’s system of internal controls over financial reporting may not achieve their intended objectives. There are risks that material misstatements due to error or fraud may not be prevented or detected in all cases, and that information may not be reported on a timely basis.

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•	SC’s financial results could impact our results. SC’s earnings have historically been a significant source of funding for the Company. Factors that could negatively affect SC’s financial results could consequently affect SHUSA’s financial results.

•	Increased regulation of our industry. Compliance with such regulation has increased our costs and may affect the pricing of our products and services and limit our ability to pursue business opportunities.

•	Reduced demand for our products and services.

•	Inability of our borrowers to timely or fully comply with their existing obligations.

•	The process we use to estimate losses inherent in our credit exposure requires complex judgments, including forecasts of economic conditions and how those economic conditions might impair the ability of our borrowers to repay their loans.

•	The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the sufficiency of our loan and lease loss allowances.

•	The value and liquidity of the portfolio of investment securities that we hold may be adversely affected.

•	Any worsening of economic conditions may delay the recovery of the financial industry and impact our financial condition and results of operations.

•	Macroeconomic shocks may impact the household income of our retail customers negatively and adversely affect the recoverability of our retail loans, resulting in increased loan and lease losses.

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•	net interest income;

•	the volume of loans originated;

•	the market value of our securities holdings;

•	the value of our loans and deposits;

•	gains from sales of loans and securities; and

•	gains and losses from derivatives.

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Periods of economic slowdown may result in decreased demand for automobiles as well as declining values of automobiles and other consumer products used as collateral to secure outstanding loans. Higher gasoline prices, the general availability of consumer credit, and other factors which impact consumer confidence could increase loss frequency and decrease consumer demand for automobiles. In addition, during an economic slowdown, servicing costs may increase without a corresponding increase in finance charge income. Changes in the economy may impact the collateral value of repossessed automobiles and repossession, and foreclosure sales may not yield sufficient proceeds to repay the receivables in full and result in losses.

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SC’s growth strategy is subject to significant risks, some of which are outside its control, including general economic conditions, the ability to obtain adequate financing for growth, laws and regulatory environments in the states in which the business seeks to operate, competition in new markets, the ability to attract new customers, the ability to recruit qualified personnel, and the ability to obtain and maintain all required approvals, permits, and licenses on a timely basis

•	SC’s business may be negatively impacted if it is unsuccessful in developing and maintaining relationships with automobile dealerships that correlate to SC’s ability to acquire loans and automotive leases. In addition, economic downturns may result in the closure of dealerships and corresponding decreases in sales and loan volumes.

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SC's business could be negatively impacted if it is unsuccessful in developing and maintaining its serviced for others portfolio. As this is a significant and growing portion of SC's business strategy, if an institution for which SC currently services assets chooses to terminate SC's rights as a servicer or if SC fails to add additional institutions or portfolios to its servicing platform, SC may not achieve the desired revenue or income from this platform.

•	SC has repurchase obligations in its capacity as a servicer in securitizations and whole loan sales. If significant repurchases of assets or other payments are required under its responsibility as a servicer, this could have a material adverse effect on SC’s financial condition, results of operations, and liquidity.

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The obligations associated with being a public company require significant resources and management attention, which increases the costs of SC's operations and may divert focus from business operations. As a result of its IPO, SC is now required to remain in compliance with the reporting requirements of the SEC and the NYSE, maintain corporate infrastructure required of a public company, and incur significant legal and financial compliance costs, which may divert SC management’s attention and resources from implementing its growth strategy.

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The market price of SC Common Stock may be volatile, which could cause the value of an investment in SC Common Stock to decline. Conditions affecting the market price of SC Common Stock may be beyond SC’s control and include general market conditions, economic factors, actual or anticipated fluctuations in quarterly operating results, changes in or failure to meet publicly disclosed expectations related to future financial performance, analysts’ estimates of SC’s financial performance or lack of research or reports by industry analysts, changes in market valuations of similar companies, future sales of SC Common Stock, or additions or departures of its key personnel.

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SC's business and results of operations could be negatively impacted if it fails to manage and complete divestitures. SC regularly evaluates its portfolio in order to determine whether an asset or business may no longer be aligned with its strategic objectives. For example, in October 2015, SC disclosed a decision to exit the personal lending business and to explore strategic alternatives for its existing personal lending assets. Of its two primary lending relationships, SC completed the sale of substantially all of its loans associated with the LendingClub relationship in February 2016. SC continues to classify loans from its other primary lending relationship, Bluestem, as held-for-sale. SC remains a party to agreements with Bluestem that obligate it to purchase new advances originated by Bluestem, along with existing balances on accounts with new advances, for an initial term ending in April 2020 and which is renewable through April 2022 at Bluestem's option. Both parties have the right to terminate this agreement upon written notice if certain events were to occur, including if there is a material adverse change in the financial reporting condition of either party. Although SC is seeking a third party willing and able to take on this obligation, it may not be successful in finding such a party, and Bluestem may not agree to the substitution. SC has recorded significant lower-of-cost-or-market adjustments on this portfolio and may continue to do so as long as the portfolio is held, particularly due to the new volume it is committed to purchase. Until SC finds a third party to assume this obligation, there is a risk that material changes to its relationship with Bluestem, or the loss or discontinuance of Bluestem’s business, would materially and adversely affect SC’s business, financial condition and results of operations. On March 9, 2020, Bluestem Brands, Inc., together with certain of its affiliates, filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.

•	SC's business could be negatively impacted if access to funding is reduced. Adverse changes in SC's ABS program or in the ABS market generally could materially adversely affect its ability to securitize loans on a timely basis or upon terms acceptable to SC. This could increase its cost of funding, reduce its margins, or cause it to hold assets until investor demand improves.

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As with SHUSA, adverse outcomes to current and future litigation against SC may negatively impact its financial position, results of operations, and liquidity. SC is party to various litigation claims and legal proceedings. In particular, as a consumer finance company, it is subject to various consumer claims and litigation seeking damages and statutory penalties. Some litigation against it could take the form of class action complaints by consumers. As the assignee of loans originated by automotive dealers, it also may be named as a co-defendant in lawsuits filed by consumers principally against automotive dealers.

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(1)

On July 1, 2016, ownership of several Santander subsidiaries, including Santander BanCorp, BSI, SIS and SSLLC, were transferred to the Company. As these entities were and are solely owned and controlled by Santander prior to and after July 1, 2016, in accordance with Accounting Standards Codification ("ASC") 805, the transaction has been accounted for under the common control guidance, which requires the Company to recognize the assets and liabilities transferred at their historical cost of the transferring entity at the date of the transfer. Additionally, as this transaction represents a change in reporting entity, the guidance requires retrospective combination of the entities for all periods presented in these financial statements as if the combination had been in effect since inception of common control. On July 1, 2017, an additional Santander subsidiary, SFS, a finance company located in Puerto Rico, was transferred to the Company. On July 2, 2018, an additional Santander subsidiary, SAM, an investment adviser located in Puerto Rico, was transferred to the Company. SFS and SAM are entities under common control of Santander; however, their results of operations, financial condition, and cash flows are immaterial to the historical financial results of the Company on both an individual and aggregate basis. As a result, the Company has reported the results of SFS on a prospective basis beginning July 1, 2017 and the results of SAM on a prospective basis beginning July 1, 2018.

(2)	The increase in total investments from 2018 to 2019 was due to the purchase of additional AFS treasury securities. The decreases in Total investments and corresponding decreases in Borrowings and other debt obligations from 2016 to 2017 and 2015 to 2016 were primarily driven by the use of proceeds from the sales of investment securities to repurchase and pay off its outstanding borrowings.

(3)	The increase in Borrowings and other debt obligations from 2018 to 2019 was primarily a result of the Company funding the growth of the loan portfolio and operating lease portfolio.

(4)

The decrease in the Provision for credit losses from 2017 to 2018 was primarily due to lower net charge-offs on the RIC portfolio, accompanied by a recovery on the purchased RIC portfolio and lower provision on the originated RIC portfolio and the commercial loan portfolio. The decrease from 2015 to 2016 was primarily due to significantly lower provision on the purchased RIC portfolio, accompanied by slightly lower net charge-offs across the total loan portfolio.

(5)	The increase in Non-interest income from 2018 to 2019 and 2017 to 2018 is primarily attributable to an increase in lease income corresponding to the growth of the operating lease portfolio.

(6)	General, administrative, and other expenses increased annually between 2016 and 2019, primarily due to growth in compensation and benefits and lease expense, driven by corresponding growth of the operating lease portfolio. In 2015, this line included a $4.5 billion goodwill impairment charge on SC.

(7)	Refer to Note 15 of the Notes to Consolidated Financial Statements for additional information on the Company's income taxes. The income tax benefit in 2017 was due to the impact of the TCJA, resulting in a tax benefit to the Company. The income tax benefit in 2015 was primarily the result of the release of the deferred tax liability in conjunction with the goodwill impairment charge.

(8)	For the calculation components of these ratios, see the Non-GAAP Financial Measures section of the MD&A.

(9)	Includes net income/(loss) attributable to NCI of $288.6 million, $283.6 million, $405.6 million, $277.9 million, and $(1.7) billion for the years ended December 31, 2019, 2018, 2017, 2016 and 2015, respectively.

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Santander UK holds accounts for two customers, with the first customer holding one savings account and one current account and the second customer holding one savings account. Both of the customers, who are resident in the UK, are currently designated by the U.S. under the SDGT sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2019 were negligible relative to the overall profits of Santander.

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During the period covered by this annual report, Santander UK held one savings account with a balance of £1.24, and one current account with a balance of £1,884.53, for another customer resident in the UK who is currently designated by the U.S. under the SDGT sanctions program. The customer relationship pre-dates the designations of the customer under these sanctions. The United Nations and European Union removed this customer from their equivalent sanctions lists in 2008. Santander UK determined to put a block on these accounts, and the accounts were subsequently closed on 14 January 2019. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2019 were negligible relative to the overall profits of Santander.

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Santander UK holds two frozen current accounts for two UK nationals who are designated by the U.S. under the SDGT sanctions program. The accounts held by each customer have been frozen since their designation and remained frozen through the year ended December 31, 2019. The accounts are in arrears (£1,844.73 in debit combined) and are currently being managed by Santander UK's Collections and Recoveries Department. No revenues or profits were generated by Santander UK on these accounts in the year ended December 31, 2019.

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

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During the period covered by this annual report, Santander Brasil held one current account with a balance of R$100.00 for a customer resident in Brazil who is currently designated by the U.S. under the SDGT sanctions program. The customer relationship pre-dates the designation of the customer under these sanctions. Santander Brasil determined to terminate the account even prior to the customer being formally designated under the SDGT sanctions program on September 10, 2019, and the account was subsequently closed on October 9, 2019. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2019 were negligible relative to the overall profits of Santander.

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•	a prolonged downturn in the business environment in which the reporting units operate;

•	an economic recovery that significantly differs from our assumptions in timing or degree;

•	volatility in equity and debt markets resulting in higher discount rates and unexpected regulatory changes;

•	Specific to the SC reporting unit, a decrease in SC's share price would impact the fair value of the reporting segment.

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(1)	Average balances are based on daily averages when available. When daily averages are unavailable, mid-month averages are substituted.

(2)	Yields calculated using taxable equivalent net interest income.

(3)	Interest on loans includes amortization of premiums and discounts on purchased loan portfolios and amortization of deferred loan fees, net of origination costs. Average loan balances includes non-accrual loans and LHFS.

(4)	Other consumer primarily includes RV and marine loans.

(5)	Refer to Note 4 to the Consolidated Financial Statements for further discussion.

(6)	Other assets primarily includes leases, goodwill and intangibles, premise and equipment, net deferred tax assets, equity method investments, BOLI, accrued interest receivable, derivative assets, miscellaneous receivables, prepaid expenses and MSRs. Refer to Note 9 to the Consolidated Financial Statements for further discussion.

(7)	Refer to Note 11 to the Consolidated Financial Statements for further discussion.

(8)	Other liabilities primarily includes accounts payable and accrued expenses, derivative liabilities, net deferred tax liabilities and the unfunded lending commitments liability.

(9)	Represents the difference between the yield on total earning assets and the cost of total funding liabilities.

(10)	Represents annualized, taxable equivalent net interest income divided by average interest-earning assets.

(11)	Intercompany investment income is eliminated from this line item.

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(1)	The provision for credit losses in the Consolidated Statement of Operations is the sum of the total provision for loan and lease losses and the provision for unfunded lending commitments.

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•	Technology, outside services, and marketing expense increased $66.4 million for the year ended December 31, 2019, compared to 2018. The increase was primarily due to increases in outside service expenses.

•	Lease expense increased $278.6 million for the year ended December 31, 2019 compared to 2018. This increase was primarily due to the continued growth of the Company's leased vehicle portfolio.

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Other expenses increased $78.4 million for the year ended December 31, 2019, compared to the corresponding period in 2018. This increase was primarily attributable to an increase in legal expenses and investments in qualified housing, offset by a decrease in operational risk. FDIC insurance premiums for the year ended December 31, 2019 includes $25.3 million of FDIC insurance premiums that relate to periods from the first quarter 2015 through the fourth quarter of 2018 which was partially offset due to the FDIC surcharges that ended in 2018 as disclosed in Note 17 to the Consolidated Financial Statements.

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•	Net interest income increased $206.3 million for the year ended December 31, 2019compared to 2018. This increase was primarily driven by deposit product margin due to a higher interest rate environment combined with increased auto loan volumes.

•	Non-interest income increased by $49.0 million for the year ended December 31, 2019compared to 2018. This increase was the result of gains on the sale of 14 branches and gains on the sale of conforming mortgage loan portfolios.

•	The provision for credit losses increased $56.4 million for the year ended December 31, 2019 compared to 2018. This increase was due to reserve builds for the large growth of the auto portfolio in 2019.

•	Total assets increased $2.9 billion for the year ended December 31, 2019 compared to 2018. This increase was primarily driven by an increase in auto loans.

•	The provision for credit losses increased $66.9 million for the year ended December 31, 2019 compared to 2018. This increase was primarily due to release of reserves in 2018 related to the strategic exits of middle market, asset-based lending, and legacy oil and gas portfolios.

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•	Total expenses increased $35.3 million for the year ended December 31, 2019 compared to 2018, due to higher compensation related to higher headcount.

•	Total assets increased $1.4 billion for the year ended December 31, 2019 compared to 2018, primarily driven by an increase in loan balances in the global transaction banking portfolio as a result of generating business with new customers.

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•	Net interest income decreased $167.6 million for the year ended December 31, 2019 compared to 2018, due to higher interest rates.

•	The provision for credit losses decreased $31.6 million for the year ended December 31, 2019 compared to 2018, due to the release of reserves related to the sale of loan portfolios at BSPR, and loan portfolios that were in run-off.

•	Total non-interest income increased $462.9 million for the year ended December 31, 2019 compared to 2018, due to increasing operating lease income from the continued growth in the operating lease vehicle portfolio.

•	The provision of credit losses decreased $111.8 million for the year ended December 31, 2019 compared to 2018, due to lower TDR balances and better recovery rates.

•	Total expenses increased $426.2 million for the year ended December 31, 2019 compared to 2018, due to increasing lease expense from the continued growth in the operating lease vehicle portfolio.

•	Total assets increased $5.0 billion for the year ended December 31, 2019 compared to 2018, due to continued growth in RICs and operating lease receivables. This growth was driven by increased originations.

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(1)	Includes LHFS.

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(1)	New TDRs includes drawdowns on lines of credit that have previously been classified as TDRs.

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(1)	Other securities primarily include corporate debt securities and ABS.

(2)	HTM securities are measured and presented at amortized cost.

(1)	Includes U.S. government agency MBS.

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(1)	As defined by Federal Reserve regulations. The Company's ratios are presented under a Basel III phasing-in basis.

(2)	As defined by OCC regulations. The Bank's ratios are presented on a Basel III phasing-in basis.

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•	securitizations on its SDART platform for approximately $3.2 billion;

•	securitizations on its DRIVE, deeper subprime platform, for approximately $4.5 billion;

•	lease securitizations on its SRT platform for approximately $3.7 billion;

•	lease securitization on its PSRT platform for approximately $1.2 billion;

•	private amortizing lease facilities for approximately $4.6 billion;

•	securitization on its SREV platform for approximately $0.9 billion;

•	issuance of retained bonds on its SDART platform for approximately $129.8 million; and

•	issuance of a retained bond on its SRT platform for approximately $60.4 million.

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•	The Bank declared and paid $250.0 million in dividends to SHUSA.

•	BSI declared and paid $25.0 million in dividends to SHUSA.

•	Santander BanCorp declared and paid $1.25 million in dividends to SHUSA.

•	SHUSA contributed $110.0 million to SSLLC.

•	SHUSA contributed $105.0 million to SFS.

(1)	Includes interest on both fixed and variable rate obligations. The interest associated with variable rate obligations is based on interest rates in effect at December 31, 2019. The contractual amounts to be paid on variable rate obligations are affected by changes in market interest rates. Future changes in market interest rates could materially affect the contractual amounts to be paid.

(2)	Includes all carrying value adjustments, such as unamortized premiums and discounts and hedge basis adjustments.

(3)	Does not include future expected sublease income or interest of $82.9 million.

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(1)	CET1 is calculated under Basel III regulations required as of January 1, 2015.

(2)

Under the banking agencies' risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together with the measure for market risk, resulting in the Company's and the Bank's total RWAs.

(3)	Represents the impact of NCI, transitional and other intangible adjustments for regulatory capital.

(4)	Represents non-GAAP measures

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•	an increase in total fees and other income of $132.5 million, primarily comprised of the mark to market on the personal unsecured portfolio HFS included in miscellaneous income, net.

•	a decrease in the income tax provision of $25.2 million primarily due to lower income before taxes.

•	an increase in interest expense of $58.0 million, due to higher deposit volume and rates.

•	a decrease in the provision for credit losses of $123.6 million as a result of lower TDR balances and better recovery rates

•	an increase in general and administrative and other expenses of $157.0 million, including an increase in lease expense of $78.0 million, resulting from the increasing leased vehicle portfolio, and an increase in compensation and benefits expense of $45.7 million as a result of increased headcount.

•	an increase in income tax provision of $36.0 million as a result of higher income before taxes.

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ASU 2016-02, Leases (Topic 842). The Company adopted this standard as of January 1, 2019, resulting in the recognition of a ROU asset ($664.1 million) and lease liability ($705.7 million) in the Consolidated Balance Sheet for all operating leases with a term greater than 12 months. The Company adopted this ASU using the modified retrospective approach, with application at the adoption date and a cumulative-effect adjustment to the opening balance of retained earnings. Under this approach, comparative periods were not adjusted. We elected the package of practical expedients permitted under transition guidance, which allowed us to carry forward the historical lease classification. We also elected not to recognize a lease liability and associated ROU asset for short-term leases. We did not elect (1) the hindsight practical expedient when determining the lease term and (2) the practical expedient to not separate non-lease components from lease components. The ASU required the Company to accelerate the recognition of $18.7 million of previously deferred gains on sale-leaseback transactions, with such impact recorded to the opening balance of Retained earnings.

•	ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.

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ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.

•	ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.

•	ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

•	ASU 2018-16, Derivatives and Hedging (Topic 815), Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes.

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•	Origination costs.

•	Dealer discounts - dealer discounts to the principal balance of the loan generally occur in circumstances in which the contractual interest rate on the loan is not sufficient to compensate for the credit risk of the borrower.

•	Participation - participation fees, or premiums, paid to the dealer as a form of profit-sharing, rewarding the dealer for originating loans that perform.

•	Subvention - payments received from the vehicle manufacturer as compensation (yield enhancement) for the cost of below-market interest rates offered to consumers.

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•	Lending (interest income and loan fees)

•	Investment securities

•	Loan sales and servicing

•	Finance leases

•	BOLI

•	Depository services

•	Commissions and trailer fees

•	Interchange income, net.

•	Underwriting service Fees

•	Asset and wealth management fees

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(1)	The maturities above do not represent the effective duration of the Company's portfolio, since the amounts above are based on contractual maturities and do not contemplate anticipated prepayments.

(2)	Yields on tax-exempt securities are calculated on a tax equivalent basis and are based on the statutory federal tax rate.

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(1)	Includes net realized gain/(losses) on trading securities of (0.8) million, $(1.4) million and $(4.2) million for the years ended December 31, 2019, 2018 and 2017, respectively.

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(1)	Consists of loans in TDR status.

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(1)	Consists of loans in TDR status.

(2)	Contains LHFS of $1.3 billion for the year ended December 31, 2018.

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(1)	Residential mortgages included $214.5 million of LHFS at December 31, 2018.

(2)	Personal unsecured loans included $1.1 billion of LHFS at December 31, 2018.

(1)	Recorded investment includes deferred loan fees, net of deferred origination costs and unamortized purchase premiums, and net of discounts.

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(1)	Recorded investment includes deferred loan fees, net of deferred origination costs and unamortized purchase premiums, and net of discounts.

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(1)	Financing receivables include LHFS.

(2)	Consists of loans that have not been assigned a regulatory rating.

(1)	Financing receivables include LHFS.

(2)	Consists of loans that have not been assigned a regulatory rating.

(1)	Consists primarily of loans for which credit scores are not considered in the ALLL model.

(2)	FICO score at origination.

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(2)	Home equity loans and lines of credit in the "N/A" range for LTV or FICO score primarily represent the balance on loans serviced by others, in run-off portfolios or for which a current LTV or FICO score is unavailable.

(3)	ALLL model considers LTV for financing receivables in first lien position for the Company and CLTV for financing receivables in second lien position for the Company.

(1)	Excludes LHFS.

(2)	Residential mortgages in the "N/A" range for LTV or FICO score primarily represent the balance on loans serviced by others, in run-off portfolios or for which a current LTV or FICO score is unavailable.

(3)	ALLL model considers LTV for financing receivables in first lien position for the Company and CLTV for financing receivables in second lien position for the Company.

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(1)	Home equity loans and lines of credit in the "N/A" range for LTV or FICO score primarily represent the balance on loans serviced by others, in run-off portfolios or for which a current LTV or FICO score is unavailable.

(2)	Allowance model considers LTV for financing receivables in first lien position for the Company and CLTV for financing receivables in second lien position for the Company.

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(2)	Post-TDR modification outstanding recorded investment amount is the month-end balance for the month in which the modification occurred.

(3)	The post-TDR modification outstanding recorded investment amounts for residential mortgages exclude interest reserves.

(2)	Post-TDR modification outstanding recorded investment amount is the month-end balance for the month in which the modification occurred.

(3)	The post-TDR modification outstanding recorded investment amounts for residential mortgages exclude interest reserves.

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(1)	The recorded investment represents the period-end balance. Does not include Chapter 7 bankruptcy TDRs.

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•	Deferred tax asset, net - Refer to Note 15 of these Consolidated Financial Statements for more information on tax-related activities.

•	Derivative assets at fair value - Refer to the "Offsetting of Financial Assets" table in Note 14 to these Consolidated Financial Statements for the detail of these amounts.

•

Equity method investments - The Company makes certain equity investments in various limited partnerships, some of which are considered VIEs, that invest in and lend to qualified community development entities, such as renewable energy investments, through the NMTC and CRA programs. The Company acts only in a limited partner capacity in connection with these partnerships, so the Company has determined that it is not the primary beneficiary of the partnerships because it does not have the power to direct the activities of the partnerships that most significantly impact the partnerships' economic performance.

•	MSRs - See further discussion on the valuation of the MSRs in Note 16.

•	Income tax receivables - Refer to Note 15 of these Consolidated Financial Statements for more information on tax-related activities.

•	Prepaid Expenses increased $153.4 million from 2018 to 2019. This increase includes the $60 million upfront payment SC made to FCA in connection with SC's execution of the sixth amendment to the Chrysler agreement in June 2019.

•	Miscellaneous assets and receivables includes subvention receivables in connection with the agreement with Chrysler, investment and capital market receivables, derivatives trading receivables, and unapplied payments.

(1)	Includes foreign deposits, as defined by the FRB, of $8.9 billion and $8.4 billion at December 31, 2019 and December 31, 2018, respectively.

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•	$27.9 million of its subordinated notes due August 2022.

•	$21.2 million of its REIT preferred debt.

•	$1.0 billion of its 3.50% senior notes due 2024,

•	$720.9 million of its senior floating rate notes due 2022.

•	$750.0 million of its 2.88% senior fixed rate notes due 2024 with Santander, an affiliate.

•	$907.8 million of its 3.244% senior fixed rate notes due 2026.

•	$439.0 million of its senior floating rate notes due 2023.

•	$427.9 million of its senior floating rate notes.

•	$1.0 billion of its 4.45% senior notes due 2021.

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•	$178.7 million of its 2.70% senior notes due May 2019.

•	$388.7 million of its senior floating rate notes, due July 2019.

•	$371.0 million of its senior floating rate notes due September 2019.

•	$592.1 million of its 3.70% senior notes due 2022 through a public debt exchange.

•	$394.0 million of its 4.450% senior notes due 2021 through a public debt exchange.

•	$302.6 million of its senior floating rate notes due January 2020.

•	$40.1 million of 2.00% subordinated debt of a subsidiary of the Company.

•	$244.6 million of its 3.45% senior notes.

•	$821.3 million of its 2.7% senior notes.

•	$154.6 million of its Sovereign Cap Trust IX subordinated debentures and common securities.

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(1)	This line is held exclusively for financing of Chrysler Capital leases.

(2)

The repurchase facilities are collateralized by securitization notes payable retained by SC. As the borrower, SC is exposed to liquidity risk due to changes in the market value of retained securities pledged. In some instances, SC places or receives cash collateral with counterparties under collateral arrangements associated with SC's repurchase agreements. The maturity date for the repurchase facility trade that expired in January 2020, was extended to April 2020.

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(1)	Net gains/(losses) reclassified into Interest on borrowings and other debt obligations in the Consolidated Statements of Operations for settlements of interest rate swap contracts designated as cash flow hedges.

(2)	Net (gains)/losses reclassified into Net gain on sale of investment securities sales in the Consolidated Statements of Operations for the sale of debt securities AFS.

(3)	Included in the computation of net periodic pension costs.

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(1)	Gains are disclosed as positive numbers while losses are shown as a negative number regardless of the line item being affected.

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(1)	Includes customer-related and other derivatives.

(2)	Includes mortgage banking derivatives.

(3)

Collateral received includes cash, cash equivalents, and other financial instruments. Cash collateral received is reported in Other liabilities, as applicable, in the Consolidated Balance Sheets. Financial instruments that are pledged to the Company are not reflected in the accompanying Consolidated Balance Sheets since the Company does not control or have the ability to re-hypothecate these instruments.

(4)	Balance includes $25.3 million of derivative assets due from an affiliate.

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(1)	Includes customer-related and other derivatives.

(2)	Includes mortgage banking derivatives.

(3)

Cash collateral pledged and financial instruments pledged is reported in Other assets, in the Consolidated Balance Sheets. In certain instances, the Company is over-collateralized since the actual amount of collateral pledged exceeds the associated financial liability. As a result, the actual amount of collateral pledged that is reported in Other assets may be greater than the amount shown in the table above.

(4)	Balance includes $25.3 million of derivative liabilities due to an affiliate.

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(1)	LHFS disclosed on the Consolidated Balance Sheets also includes LHFS that are held at the lower of cost or fair value and are not presented within this table.

(2)	The Company had total MSRs of $132.7 million and $152.1 million as of December 31, 2019 and December 31, 2018, respectively. The Company has elected to account for the majority of its MSR balance using the FVO, while the remainder of the MSRs are accounted for using the lower of cost or fair value and are not presented within this table.

(3)	Refer to Note 3 for the fair value of investment securities and to Note 14 for the fair values of derivative assets and liabilities on a further disaggregated basis.

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•	A 10% and 20% increase in the CPR speed would decrease the fair value of the residential servicing asset by $5.6 million and $10.8 million, respectively, at December 31, 2019.

•	A 10% and 20% increase in the discount rate would decrease the fair value of the residential servicing asset by $4.2 million and $8.3 million, respectively, at December 31, 2019.

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(1)	Settlements include charge-offs, prepayments, paydowns and maturities.

(1)	These amounts include $1.0 billion and $1.1 billion of personal LHFS that were impaired as of December 31, 2019 and December 31, 2018, respectively.

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(1)	Gains are disclosed as positive numbers while losses are shown as a negative number regardless of the line item being affected.

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(1)	Based on the applicable term and discount index.

(2)	Consensus pricing refers to fair value estimates that are generally developed using information such as dealer quotes or other third-party valuations or comparable asset prices.

(3)	Based on the nature of the input, a range or weighted average does not exist. The Company owns one sale-leaseback security.

(4)	Based on the analysis of available data from a comparable market securitization of similar assets.

(5)	Based on the cost of funding of debt issuance and recent historical equity yields.

(6)	Based on the average severity utilizing reported severity rates and loss severity utilizing available market data from a comparable securitized pool.

(7)	Average CPR projected from collateral stratified by loan type and note rate.

(8)	Average discount rate from collateral stratified by loan type and note rate.

(9)	Excludes MSR valued on a non-recurring basis for which we do not consider there to be significant unobservable assumptions.

(10)	Excludes non-significant Level 3 LHFS portfolios.

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(1)	The Company has elected to account for the majority of its MSR balance using the FVO, while the remainder of the MSRs are accounted for using the lower of cost or fair value.

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(1)	LHFS disclosed on the Consolidated Balance Sheets also includes LHFS that are held at the lower of cost or fair value that are not presented within this table. There were no nonaccrual loans related to the LHFS measured using the FVO.

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•

SC received a civil subpoena from the DOJ under the Financial Institutions Reform, Recovery and Enforcement Act requesting the production of documents and communications that, among other things, relate to the underwriting and securitization of nonprime vehicle loans. SC has responded to these requests within the deadlines specified in the subpoenas and has otherwise cooperated with the DOJ with respect to this matter.

•

In October 2014, May 2015, July 2015 and February 2017, SC received subpoenas and/or CIDs from the Attorneys General of California, Illinois, Oregon, New Jersey, Maryland and Washington under the authority of each state's consumer protection statutes. These states serve as an executive committee on behalf of a group of 33 state Attorneys General (and the District of Columbia). The subpoenas and/or CIDs from the executive committee states contain broad requests for information and the production of documents related to SC’s underwriting, securitization, servicing and collection of nonprime vehicle loans. SC has responded to these requests within the deadlines specified in the CIDs, and has otherwise cooperated with the Attorneys General with respect to this matter.

•	In August 2017, SC received CIDs from the CFPB. The stated purpose of the CIDs are to determine whether SC has complied with the Fair Credit Reporting Act and related regulations. SC has responded to these requests within the applicable deadlines and has otherwise cooperated with the CFPB with respect to this matter.

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•

NW Services Co., a Santander affiliate doing business as Aquanima, is under contract with the Company to provide procurement services, with fees paid in 2019 in the amount of $10.2 million, $5.4 million in 2018 and $3.7 million in 2017. There were no payables in connection with this agreement for the years ended December 31, 2019 or 2018. The fees related to this agreement are recorded in Technology, outside service, and marketing expense in the Consolidated Statements of Operations.

•

Geoban, S.A., a Santander affiliate, is under contract with the Company to provide administrative services, consulting and professional services, application support and back-office services, including debit card disputes and claims support, and consumer and mortgage loan set-up and review, with total fees paid in 2019 in the amount of $1.7 million, $1.8 million in 2018 and $3.3 million in 2017. The Company had no payables in connection with this agreement in 2019 or 2018. The fees related to this agreement are recorded in Technology, outside service, and marketing expense in the Consolidated Statements of Operations.

•

Santander Back-Offices Globales Mayoristas S.A., a Santander affiliate, is under contract with the Company to provide administrative services and back-office support for the Bank’s derivative, foreign exchange and hedging transactions and programs. Fees in the amounts of $1.4 million were paid to Santander Back-Offices Globales Mayoristas S.A. with respect to this agreement in 2019, and $1.9 million and $1.1 million in 2018 and 2017, respectively. There were no payables in connection with this agreement in 2019 or 2018. The fees related to this agreement are recorded in Technology, outside service, and marketing expense in the Consolidated Statements of Operations.

•

Santander Global Technology S.L. is under contract with the Company to provide information technology development, support and administration, with fees for these services paid in 2019 in the amount of $2.8 million, $38.7 million in 2018 and $77.9 million in 2017. In addition, as of December 31, 2019 and 2018, the Company had payables for these services in the amounts of $0.2 million and $0.8 million, respectively. The fees related to this agreement are capitalized in Premises and equipment, net on the Consolidated Balance Sheets.

•

Santander Global Technology is also under contract with the Company to provide professional services and administration and support of information technology production systems, telecommunications and internal/external applications, with fees for these services paid in 2019 in the amount of $20.9 million, $74.9 million in 2018 and $110.7 million in 2017. In addition, as of December 31, 2019 and 2018, the Company had payables for these services in the amounts of $15.6 million and $18.1 million, respectively. The fees related to this agreement are capitalized in Premises and equipment, net on the Consolidated Balance Sheets.

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In addition, Santander Global Technology is under contract with the Company to provide information technology development, support and administration, with fees paid in the amount of $113.2 million in 2019 and $5.5 million in 2018. As of December 31, 2019 and 2018, the Company had payables with Santander Global Technology in the amounts of $5.6 million and $21.9 million for these services. The fees related to this agreement are capitalized in Premises and equipment, net on the Consolidated Balance Sheets.

•	During the year ended December 31, 2019 and 2018, the Company paid $15.4 million and $17.1 million to Santander for the development and implementation of global projects as part of group expense allocation.

•	During the year ended December 31, 2019, the Company paid $3.9 million in rental payments to Santander, compared to $3.9 million in 2018 and $11.2 million in 2017.

•

As of December 31, 2019, Jason A. Kulas and Thomas Dundon, both former members of SC's Board of Directors and CEOs of SC, each had a minority equity investment in a property in which SC leases approximately 373,000 square feet as its corporate headquarters. During the years ended December 31, 2019, 2018 and 2017, SC recorded $5.3 million, $4.8 million and $5.0 million, respectively, in lease expenses on this property. Future minimum lease payments over the seven-year term of the lease, which extends through 2026, total $48.5 million.

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•	SC's wholly-owned subsidiary, SCI, opened deposit accounts with BSPR, an affiliated entity. As of December 31, 2019 and 2018, SCI had cash (including restricted cash) of $8.1 million and $8.9 million, respectively, on deposit with BSPR. This transaction eliminates in the consolidation of SHUSA.

•	SC has certain deposit and checking accounts with SBNA. As of December 31, 2019 and 2018, SC had a balance of $33.7 million and $92.8 million, respectively, in these accounts. These transactions eliminate in the consolidation of SHUSA.

•

BSI enters into transactions with affiliated entities in the ordinary course of business. As of December 31, 2019, BSI had short-term borrowings from unconsolidated affiliates of $1.8 million, compared to $59.9 million as of December 31, 2018. BSI had cash and cash equivalents deposited with affiliates of $6.8 million and $46.2 million as of December 31, 2019 and December 31, 2018, respectively. BSI had foreign exchange rate forward contracts with affiliates as counterparties with notional amounts of approximately $1.9 billion and $1.5 billion as of December 31, 2019 and December 31, 2018, respectively. BSI held deposits from unconsolidated affiliates of $118.4 million and $55.7 million as of December 31, 2019 and December 31, 2018, respectively. At December 31, 2019 and 2018, loan participations of $714.2 million and $195.8 million, respectively, were sold to Santander without recourse.

•	SIS enters into transactions with affiliated entities in the ordinary course of business. SIS executes, clears and custodies certain of its securities transactions through various affiliates in Latin America and Europe. The balance of payables to customers due to Santander at December 31, 2019 was $1.9 billion, compared to $1.0 billion at December 31, 2018.

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(1)	Represents transitional ratios under Basel III.

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•

The Consumer and Business Banking segment includes the products and services provided to Bank consumer and business banking customers, including consumer deposit, business banking, residential mortgage, unsecured lending and investment services. This segment offers a wide range of products and services to consumers and business banking customers, including demand and interest-bearing demand deposit accounts, money market and savings accounts, CDs and retirement savings products. It also offers lending products such as credit cards, mortgages, home equity lines of credit, and business loans such as business lines of credit and commercial cards. In addition, the Bank provides investment services to its retail customers, including annuities, mutual funds, and insurance products. Santander Universities, which provides grants and scholarships to universities and colleges as a way to foster education through research, innovation and entrepreneurship, is the last component of this segment.

•	The C&I segment currently provides commercial lines, loans, letters of credit, receivables financing and deposits to medium- and large-sized commercial customers, as well as financing and deposits for government entities. This segment also provides niche product financing for specific industries.

•	The CRE & VF segment offers CRE loans and multifamily loans to customers. This segment also offers commercial loans to dealers and financing for commercial equipment and vehicles.

•

The CIB segment serves the needs of global commercial and institutional customers by leveraging the international footprint of Santander to provide financing and banking services to corporations with over $500 million in annual revenues. CIB also includes SIS, a registered broker-dealer located in New York that provides services in investment banking, institutional sales, and trading and offering research reports of Latin American and European equity and fixed-income securities. CIB's offerings and strategy are based on Santander's local and global capabilities in wholesale banking.

•

SC is a specialized consumer finance company focused on vehicle finance and third-party servicing. SC’s primary business is the indirect origination of RICs, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers. In conjunction with the Chrysler agreement, SC offers a full spectrum of auto financing products and services to FCA customers and dealers under the Chrysler Capital brand. These products and services include consumer RICs and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit. SC also originates vehicle loans through a web-based direct lending program, purchases vehicle RICs from other lenders, and services automobile, recreational and marine vehicle portfolios for other lenders. During 2015, SC announced its intention to exit the personal lending business. SC has entered into a number of intercompany agreements with the Bank as described above as part of the Other segment. All intercompany revenue and fees between the Bank and SC are eliminated in the consolidated results of the Company.

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(1)	Intersegment revenue/(expense) represents charges or credits for funds used or provided by each of the segments and is included in net interest income.

(2)	Other includes the results of the entities transferred to the IHC, earnings from non-strategic assets, the investment portfolio, interest expense on the Bank’s and the Company's borrowings and other debt obligations, amortization of intangible assets and certain unallocated corporate income and indirect expenses.

(3)	Management of SHUSA manages SC by analyzing the pre-Change in Control results of SC, which are presented in this column.

(4)	SC Purchase Price Adjustments represents the impact that SC purchase marks had on the results of SC included within the consolidated operations of SHUSA, while eliminations eliminate intercompany transactions.

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(1)	Intersegment revenue/(expense) represents charges or credits for funds used or provided by each of the segments and is included in net interest income.

(2)	Other includes the results of the entities transferred to the IHC, earnings from non-strategic assets, the investment portfolio, interest expense on the Bank’s and the Company's borrowings and other debt obligations, amortization of intangible assets and certain unallocated corporate income and indirect expenses.

(3)	Management of SHUSA manages SC by analyzing the pre-Change in Control results of SC, which are presented in this column.

(4)	SC Purchase Price Adjustments represents the impact that SC purchase marks had on the results of SC included within the consolidated operations of SHUSA, while eliminations eliminate intercompany transactions.

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•	Established regular working group meetings, with appropriate oversight by management, to review and challenge complex accounting matters and strengthen accountability for performance of internal control over financial reporting responsibilities and prioritization of corrective actions.

•	Appointed a Head of Internal Controls with significant public company financial reporting experience and the requisite skillsets in areas important to financial reporting.

•	Developed a plan to enhance its risk assessment processes, control procedures and documentation, including the implementation of a Company-wide comprehensive risk assessment to identify the processes and financial statement areas with higher risks of misstatement.

•	Established policies and procedures for the oversight of subsidiaries that includes accountability for each subsidiary for maintenance of accounting policies, evaluation of significant and unusual transactions, material estimates, and regular reporting and review of changes in the control environment and related accounting processes.

•	Reallocated additional Company resources to improve the oversight of subsidiary operations and to ensure sufficient staffing to conduct enhanced financial reporting reviews.

•	Collaborated with other departments, such as Accounting Policy and Legal, to ensure entity information/data is shared and reviewed accordingly.

•	Management did not effectively execute a strategy to hire and retain a sufficient complement of personnel with an appropriate level of knowledge, experience, and training in certain areas important to financial reporting.

•	The tone at the top was insufficient to ensure there were adequate mechanisms and oversight to ensure accountability for the performance of internal control over financial reporting responsibilities and to ensure corrective actions were appropriately prioritized and implemented in a timely manner.

•	There was not adequate management oversight of accounting and financial reporting activities in implementing certain accounting practices to conform to the Company’s policies and GAAP.

•	There was not an adequate assessment of changes in risks by management that could significantly impact internal control over financial reporting or an adequate determination and prioritization of how those risks should be managed.

•	There was not adequate management oversight and identification of models, spreadsheets and completeness and accuracy of data material to financial reporting.

•	There were insufficiently documented Company accounting policies and insufficiently detailed Company procedures to put policies into effective action.

•	There was a lack of appropriate tone at the top in establishing an effective control owner for the risk and controls self-assessment process, which contributed to a lack of clarity about ownership of risk assessments and control design and effectiveness.

•	There was insufficient governance, oversight and monitoring of the credit loss allowance and accretion processes and a lack of defined roles and responsibilities in monitoring functions.

•	Appointed an additional independent director to the Audit Committee of the SC Board with extensive experience as a financial expert in SC's industry to provide further experience on the committee.

•	Established regular working group meetings, with appropriate oversight by management of both the Company and SC, to strengthen accountability for performance of internal control over financial reporting responsibilities and prioritization of corrective actions.

•	Hired a Chief Accounting Officer and other key personnel with significant public company financial reporting experience and the requisite skillsets in areas important to financial reporting.

•	Developed and implemented a plan to enhance its risk assessment processes, control procedures and documentation.

•	Reallocated additional Company resources to improve the oversight for certain financial models.

•	Increased accounting resources with qualified permanent resources to ensure sufficient staffing to conduct enhanced financial reporting procedures and to continue the remediation efforts.

•	Improved management documentation, review controls and oversight of accounting and financial reporting activities to ensure accounting practices conform to the Company’s policies and GAAP.

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•	Increased accounting participation in critical governance activities to ensure an adequate assessment of risk activities which may impact financial reporting or the related internal controls.

•	Completed a comprehensive review and update of all accounting policies, process descriptions and control activities.

•	Developed and implemented additional documentation, controls and governance for the credit loss allowance and accretion processes.

•	Conducted internal training courses over Sarbanes-Oxley regulations and the Company’s internal control over financial reporting program for Company personnel that take part and assist in the execution of the program.

•	Improved the review controls over financial statements and the related disclosures to include a more comprehensive disclosure checklist and improved review procedures from certain members of the management.

•	Designed and implemented additional controls over the preparation and the review of the SCF and Notes to the Consolidated Financial Statements.

•	Strengthened the review controls, reconciliations and supporting documentation related to the classification of cash flows between operating activities and investing activities in the SCF.

•	Enhanced the risk assessment process to identify higher risk data provisioning processes.

•	Implemented additional completeness and accuracy reviews at a detailed level at the statement preparation and data provider levels.

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•	Timothy Wennes, our current President and CEO;

•	Scott Powell, our former President and CEO;

•	Juan Carlos Alvarez de Soto, our current CFO and Principal Financial Officer;

•	Madhukar Dayal, our former CFO and Principal Financial Officer;

•	Daniel Griffiths, our Chief Technology Officer;

•	Michael Lipsitz, our Chief Legal Officer;

•	William Wolf, our Chief Human Resources Officer; and

•	Mahesh Aditya, our former Chief Risk Officer.

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•	Mr. Powell resigned from his SHUSA and SC President and CEO, and Santander's U.S. Country Head roles as of December 2, 2019;

•	Mr. Wennes, who was hired as the President and CEO of SBNA as of September 16, 2019, was appointed President and CEO of SHUSA and Santander's U.S. Country Head as of December 2, 2019; he retained his SBNA positions;

•	Mr. Aditya was appointed President and CEO of SC as of December 2, 2019, and no longer has any SHUSA responsibilities;

•	Mr. Dayal transferred to Santander UK to serve as that country’s CFO as of September 16, 2019; and

•	Mr. Alvarez assumed his current role as of September 16, 2019; he previously served as SC’s CFO since 2017.

•	the general philosophy and objectives underlying their compensation,

•	our and Santander`s respective roles and involvement in the analysis and decisions regarding their compensation,

•	the general process of determining their compensation, and

•	each component of their compensation.

•	attract, motivate, and retain highly skilled executives with the business experience and acumen necessary for achieving our short-term and long-term business objectives;

•	link pay and performance, while appropriately balancing risk and financial results and complying with regulatory requirements;

•	align, to an appropriate extent, the interests of management with those of Santander and its shareholders; and

•	leverage our compensation practices to support our core values and strategic mission and vision.

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•	at least annually, reviewing and approving the terms of our compensation programs, including the Executive Incentive Plan, in which our named executive officers participate, in accordance with all applicable guidelines that Santander establishes with respect to variable compensation;

•	reviewing and approving the annual corporate goals and objectives of the President and CEO, evaluating the President and CEO’s performance in light of these corporate goals, and approving the base and variable compensation of our President and CEO, as proposed by the Santander Executive Chairman and CEO and validated by the Santander Remuneration Committee;

•	monitoring the performance and regularly approving the design and function of the incentive compensation programs, including the Executive Incentive Plan, to assess whether the overall design and performance of such programs are consistent with Santander guidelines, are safe and sound, and do not encourage employees, including our named executive officers, to take excessive risk;

•	approving amounts paid under the Executive Incentive Plan according to Santander guidelines;

•	evaluating the applicability of any malus and clawback provisions to our senior executive officers, including the named executive officers;

•	reviewing and recommending any changes to our outside director compensation program;

•	reviewing and discussing with management the Compensation Discussion and Analysis required to be included in this Annual Report on Form 10-K; and

•	reviewing and recommending to our Board the BCTMC Report for inclusion in this Annual Report on Form 10-K.

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•	Santander’s Remuneration Committee engaged Ernst & Young to provide advice on the general policies and approaches with respect to the compensation of Santander’s worldwide employees, and Willis Towers Watson provided competitive market compensation ranges for global leadership roles.

•	At the request of our BCTMC, we engaged McLagan Partners, Inc. to provide competitive market compensation ranges for our senior executive officers, including the named executive officers.

•	As discussed under "Benchmarking" below, we also engaged Pay Governance to assist the BCTMC in setting 2018 and 2019 compensation targets for Mr. Powell.

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•	We increased Mr. Alvarez's annual base salary from $1,100,000 to $1,500,000 to better align his compensation with market practices for his scope of responsibilities.

•	We increased Mr. Griffiths's annual base salary from $1,100,000 to $1,200,000 to compensate him for his increased role in North America. He now serves as the Head of Technology for North America. As part of his expanded duties in this role, a portion of his compensation will now be allocated to Santander Mexico.

•

Because prior to his resignation Mr. Powell provided services to both us and to SC, our BCTMC, and SC's BCTMC”), agreed to allocate Mr. Powell's 2019 total compensation at 36% to us and 64% to SC. We jointly decided on these allocations to reflect the percentage of time that Mr. Powell spent working for and with respect to each organization based on time allocation tracking. The Summary Compensation Table shows the entire amount of the salary payments to Mr. Powell for 2019 regardless of this allocation.

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•	defers a portion of a participant’s award over a three- or five-year period, depending on the participant’s position within our organization and variable compensation target, subject to the non-occurrence of certain events;

•	links a portion of such deferred amount to Santander performance over a multi-year period; and

•	pays a portion of such award in cash and a portion in equity, in accordance with the rules and standards referenced above and set forth in more detail below.

•	The total SHUSA scorecard result was 109.4%, which equals the SHUSA Quantitative Score (101.2%) and SHUSA Qualitative Score (8.2%) set forth below.

•	The total Santander scorecard result was 113%.

•	70% of the SHUSA scorecard and 30% of the Santander scorecard equals 110.45%.

•	There was no discretionary adjustments to this amount in 2019 so the final funding remained at 110.45%.

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•	Customers (weighted 20%): the goals set for net promoter score / customer satisfaction and loyalty were met with a result of 105.2% and 101.3% respectively.

•	Risks (weighted 10%): the quantitative results obtained from the evaluated metrics, cost of credit and NPL ratio provided a result of 106.2% and 108.0% respectively.

•	Capital (weighted 20%): Santander exceeded the capital targets set for the year, providing a result of 147.5%.

•	Profitability (weighted 50%): Ordinary net profit and the ROTE results were 97.6% and 96.0% respectively.

•	Santander considered five qualitative factors relating to risk, capital sustainability and executive of capital plan, financial results and costs, and certain financial benchmarks.

•

Santander’s Board Remuneration Committee approved a +3.8% adjustment, which was comprised of two items: +12% qualitative adjustment to the quantitative score based on its assessment of progress against these qualitative factors, and a -8.2% exceptional adjustment proposed by management and supported by the Remuneration Committee and Santander’s Board of Directors to better align variable compensation with a challenging market environment and subsequent attributable profit and shareholder returns.

•	Mr. Wennes’s target incentive opportunity was increased from $3,400,000 to $3,850,000 to reflect his new roles as SHUSA CEO and U.S. Country Head.

•	Mr. Alvarez’s target incentive opportunity was increased from $1,000,000 to $1,500,000 to better align his compensation with market practices for his scope of responsibilities.

•	Mr. Griffiths’s target incentive opportunity was increased from $1,660,500 to $1,800,000 to compensate him for his increased role in North America as described above.

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•	Deliver budget financials, with a focus on capital generation, net profit, and return on tangible equity, which are all common financial measures in the banking industry.

•	Pursue cross business collaboration, both within the U.S. and abroad, to drive incremental revenue.

•	Complete risk framework implementation.

•	Accelerate progress on outstanding regulatory and control issues, and ensure sustainability of progress made.

•	Define longer-term digital strategy, and launch priority initiatives to digitize customer experience and operations, with a focus on SC and SBNA.

•	Continue to implement a culture of risk management and compliance, and ensure Santander values (including, Simple, Personal and Fair) are embedded.

•	Improve engagement scores.

•	Deliver 2019 budget financials.

•	Deliver capital contribution targets.

•	Partner with business leadership to support key strategies.

•	Assist in defining longer-term digital strategy and support initiatives to digitize customer experience and operations.

•	Improve compliance and operational risk management.

•	Improve employee engagement and ensure engagement within our communities.

•	Deliver 2019 budget financials and meet capital generation targets.

•	Optimize balance sheet to enhance capital, liquidity, and profitability.

•	Continue to build and enhance the profitability and capital allocation framework.

•	Complete Risk Framework implementation.

•	Continue progress on outstanding regulatory and control issues.

•	Execute year two of Santander U.S. integration to improve effectiveness, controls and efficiency.

•	Improve employee engagement and ensure engagement within our communities.

•	Ensure integration with Santander global strategic initiatives and other key Santander initiatives.

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•	Deliver the 2019 budget financials.

•	Ensure 80% of the IT components related to book of work projects are delivered on time, on budget.

•	Continue migration to the Enterprise Data Warehouse and decommission legacy warehouses.

•	Ensure consistency of information security, data, architecture, and infrastructure strategies/tools across the U.S.

•	Meet regulatory and compliance commitments and ensure closure of audit and regulatory actions by commitment dates.

•	Improve employee engagement and ensure engagement within our communities.

•	Ensure integration with Santander global strategic initiatives and other key Santander initiatives.

•	Ensure proactive, engaged and effective support for business initiatives, relationships, and strategic transactions.

•	Support all strategic regulatory initiatives, including continued progress on outstanding regulatory and control issues.

•	Maintain/enhance compliance functions across U.S. entities.

•	Maintain constructive and effective regulatory relations.

•	Assist with completion of Risk Framework implementation.

•	Support Group initiatives.

•	Deliver 2019 budget financials.

•	Evolve employee communications.

•	Continue roll out of compensation and benefits strategy.

•	Complete roll out of employee networks.

•	Transform learning function.

•	Improve employee engagement scores.

•	Clarify culture principles and continue to implement on a U.S. wide basis.

•	Ensure integration with Santander Group and Group initiatives/CHRO objectives.

•	Deliver on the Risk Control Framework across the U.S.

•	Continue to upgrade the quality of the Risk organization; promote from within and attract top talent from outside the company.

•	Actively participate in cross border initiatives.

•	Develop excellence in the Risk function across all U.S. entities in collaboration with Santander.

•	Improve engagement scores and senior management diversity.

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•	Mr. Wennes to be a "Category 1" executive, and therefore 60% of his overall bonus award is deferred for five years, and

•	Mr. Dayal to be a "Category 2" executive, and therefore 50% of his overall bonus award is deferred for five years, and

•	Messrs. Alvarez, Griffiths, Lipsitz, Wolf and Aditya to be "Category 3" executives and therefore 40% of their respective overall incentive awards are deferred for three years.

a)	Achievement of consolidated EPS growth target of Santander for 2021 versus 2018.

b)	Relative performance of TSR, as we define below of Santander for the 2019-2021 period compared to the weighted TSRs of a peer group of nine financial institutions, which we set forth below.

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c)	Achievement of the fully-loaded CET1 target ratio of Santander Group for the financial year 2021

•	The purpose of the SRIP is to strengthen the alignment between pay and the annual achievement of critical U.S. regulatory priorities.

•	We establish the SRIP measures for each period to ensure that payouts align to critical regulatory milestones, which differ for each period, and to ensure our adherence to CRD-IV pay ratio requirements.

•	SRIP eligibility is directed to select leadership roles responsible for achieving these goals and will provide meaningful compensation over time in order to reinforce accountability and assist with retention.

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•

The following directors served as members of our BCTMC in 2019: T. Timothy Ryan, Jr., Stephen A. Ferriss, Juan Guitard, Edith Holiday, Richard Spillenkothen, Henri-Paul Rousseau and Victor Matarranz. Mr. Guitard is the Head of Internal Audit at Santander and Mr. Matarranz is the Head of Santander’s Wealth Management Division. With these exceptions, no member of the BCTMC (i) was during the 2019 fiscal year, or had previously been, an officer or employee of SHUSA or its subsidiaries nor (ii) had any direct or indirect material interest in a transaction of SHUSA or a business relationship with SHUSA, in each case that would require disclosure under the applicable SEC rules.

•

None of our executive officers is a member of the compensation committee or board of directors of another entity whose executive officers have served on our Board of Directors or the BCTMC, except that Mr. Powell served as our and SC's director, President and CEO and Mr. Aditya served as our Chief Risk Officer and a director of SC. Neither Mr. Powell nor Mr. Aditya serve on our or the SC BCTMC. Effective as of December 2, 2019, Mr. Alvarez serves as our CFO and a director of SC.

•	the median of the annual total compensation of all our employees (other than Mr. Powell) was $56,583; and

•	the 2019 total compensation of our CEO, based on the combined compensation of Messrs. Powell and Wennes in their roles as our CEO during 2019 and as described further below, was $5,825,869.

1.

We determined that, as of October 1, 2017, our employee population consisted of approximately 16,963 individuals. This population consisted of our full-time, part-time, and temporary employees employed with us as of the determination date. This number differs from the number of employees that we disclose elsewhere in this Form 10-K because, for purposes of the CEO pay ratio disclosure, we do not calculate the number of employees as of the end of our fiscal year.

2.

To identify the "median employee" from our employee population, we used the amount of "gross wages" for the identified employees as reflected in our payroll records for the nine-month period beginning January 1, 2017 and ending October 1, 2017. For gross wages, we generally used the total amount of compensation the employees were paid before any taxes, deductions, insurance premiums, or other payroll withholding. We did not use any statistical sampling techniques.

3.	For the annual total compensation of our median employee, we identified and calculated the elements of that employee’s compensation for 2019 in accordance with the requirements of Item 402(c)(2)(x) of SEC Regulation S-K, resulting in annual total compensation of $56,583.

4.

In accordance with SEC rules, because we had two individuals serve as our CEO during 2019, the annual total compensation of our CEO is determined as the aggregate of the annual total compensation of Mr. Powell and Mr. Wennes, the two individuals who served as our CEO during 2019, attributable to their service as our CEO. For the annual total compensation of Mr. Powell, we used the amount reported in the "Total" column of our 2019 Summary Compensation Table included in this Form 10-K since all of his 2019 compensation was attributable to his CEO role. The 2019 total compensation of Mr. Wennes, as reported in the Summary Compensation Table included elsewhere in this Form 10-K, was $2,427,034. For purposes of this CEO Pay Ratio Disclosure, given Mr. Wennes’s appointment as our President and CEO on December 2, 2019, we used $345,513 as his annual compensation, which represents his base salary for December 2, 2019 to December 31, 2019 and one-twelfth (1/12th) of the cash portion of his Executive Incentive Plan award. The sum of these amounts for Mr. Powell and Mr. Wennes is $5,825,869.

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(1)	Mr. Wennes was hired as the President and CEO of SBNA as of September 16, 2019, was appointed as President and CEO of SHUSA and Santander U.S. Country Head as of December 2, 2019. Therefore, no historical information is presented.

(2)

Mr. Powell served as the President and CEO of SHUSA and SC during 2019 until his resignation on December 2, 2019. Mr. Powell also served as a director of us, SBNA, and SC through that date. Mr. Powell received no compensation for that service as a director. Amounts for 2017, 2018 and 2019 include aggregate compensation that we and SC paid Mr. Powell for his services for our respective companies. For information about the allocation of these amounts, see ""Components of Executive Compensation, Base Salary.""

(3)	Mr. Alvarez was appointed as the Chief Financial Officer of SHUSA on September 16, 2019 and is being reported in this disclosure for the first time. Therefore, no historical information is presented.

(4)	Mr. Lipsitz was not a named executive officer of SHUSA for 2017 or 2018 and therefore no historical information is presented.

(5)	Mr. Wolf became a named executive officer of SHUSA the first time for 2018 and therefore no historical information prior to 2018 is presented.

(6)	Reflects actual base salary paid through the end of the applicable fiscal year. For Mr. Aditya, the 2019 amount in this column includes base salary received from SC in December 2019.

(7)

The amounts in this column for 2019 reflect the cash portion of the bonus awards for performance in 2019 under the Executive Incentive Plan, both immediate and deferred amounts that vest in future years based on fulfillment of time and performance conditions. See "Total Results for 2019 Executive Incentive Plan" in the Compensation Discussion and Analysis above for details on these amounts. The amounts in this column also include any sign-on bonus or equity buy-out amount paid during the year. For 2019, the following named executive officers received equity buy-out amounts under their employment letters as follows: Mr. Wolf, $420,000; Mr. Griffiths, $666,000; and Mr. Aditya, $325,000.

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(8)

The amounts in this column for 2019 reflect the grant date fair value of equity-based awards granted in 2019 under the 2018 Executive Incentive Plan determined in accordance with ASC Topic 718 as further detailed in the Grants of Plan-Based Awards Table below. The Company recognizes compensation expense related to stock awards based upon the fair value of the awards on the date of the grant. For Santander ADRs (both vested and deferred), the grant date fair value is based on EUR market purchase price as of the grant date converted to USD using the EUR to USD exchange rate as published on the day prior to the grant, ignoring any risk of forfeiture. In 2017, Santander authorized the application of inflationary adjustments to be applied to deferred cash outstanding on and after December 31, 2017, to maintain our competitive positioning relative to non-regulated companies treatment of deferred compensation. The inflationary adjustments received by the NEOs in each of the reported years are not reflected here. For SC shares and RSUs, see Note 1 and ("Description of Business, Basis of Presentation, and Significant Accounting Policies and Practices-Stock Based Compensation") and Note 16 ("Employee Benefit Plans") of the SC consolidated financial statements filed with the SEC on Form 10-K for the fiscal year ended December 31, 2019. The related expense is charged to earnings over the requisite service period.

(9)	Includes the following amounts that we paid to or on behalf of the named executive officers in the 2019 fiscal year with respect to service for us:

(*)	Includes amounts paid to gross up for tax purposes certain perquisites and tax payments in accordance with an applicable employment or letter agreement or other arrangement.

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(1)	Reflects the number of immediately vested SC shares granted in 2019 to the applicable named executive officer under the 2018 Executive Incentive Plan, subject to one-year retention.

(4)

Reflects the number of Santander ADRs awarded on February 21, 2019 under the 2018 Executive Incentive Plan. These were scheduled to vest on February 21 of each year over a five-year period in equal installments, with first vesting occurring in 2020 and the final vesting occurring in 2024. The shares vesting in the last three years were subject to performance conditions. Mr. Powell forfeited these Santander ADRs as a result of his departure from SHUSA during 2019.

(5)	Reflects the number of SC RSUs awarded on March 1, 2019 under the 2018 Executive Incentive Plan. These vest on March 1 of each year over a three-year period, in equal installments, with first vesting occurring in 2020 and the final vesting occurring in 2022. The shares vesting in the last year are subject to performance conditions.

(6)	Reflects the number of Santander deferred ADRs awarded on February 21, 2019 under the 2018 Executive Incentive Plan. These vest within 30 days of the initial grant date of each year over a five-year period in equal installments, with first vesting occurring in 2020 and the final vesting occurring in 2024. The shares vesting in the last three years are subject to performance conditions.

(7)	Reflects the number of Santander deferred ADRs awarded on February 21, 2019 under the 2018 Executive Incentive Plan. These vest within 30 days of the initial grant date of each year over a three-year period in equal installments, with the first vesting occurring in 2020 and the final vesting occurring in 2022. The shares vesting in the last year are subject to performance conditions.

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(1)	Mr. Powell resigned on December 2, 2019 and as a result forfeited all unvested equity outstanding as of that date.

(2)	SC awarded these RSUs on March 1, 2019 under the 2018 Executive Incentive Plan. They vest on March 1 of each year over a three-year period, in equal installments, with the first vesting in 2020 and the last vesting in 2022. The shares vesting in the last year are subject to performance conditions.

(3)	SC awarded these RSUs on March 1, 2018 under the 2017 Executive Incentive Plan and SRIP. One-third of these shares vested on March 1, 2019, and the remainder will vest within 30 days of the initial grant date, in equal installments, in each year from 2020 through 2021.

(4)	Santander awarded these deferred Santander ADRs on February 21, 2019 under the 2018 Executive Incentive Plan. These vest within 30 days of the initial grant date of each year over a three-year period in equal installments, with the first vesting occurring in 2020 and the final vesting occurring in 2022. The shares vesting in the last year are subject to performance conditions.

(5)

Santander awarded these deferred Santander ADRs on September 26, 2017 as additional shares for all outstanding deferred awards granted prior to December 31, 2017 that vest in 2018 and beyond to account for share dilution resulting from Santander's purchase of Banco Popular in June 2017. The share numbers reflect the 1.49% upward adjustment of all the outstanding deferred shares granted prior to December 31, 2017 that vest in 2018 and beyond, as shown in this table, and follow the vesting schedule applicable to each grant. One-third of these shares vested on February 21, 2018, one-third vested on February 21, 2019 and the remainder will vest within 30 days of the initial grant date in 2020. The shares vesting in the last year are subject to performance conditions, except for the shares listed for Mr. Alvarez, and the number of shares delivered in 2020 depend on the achievement of performance criteria. The performance period for this plan has been completed and the awards were adjusted to 76.3% of initial targeted value, vesting in March 2020.

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(6)

Santander awarded these deferred Santander ADRs on February 21, 2017 under the 2016 Executive Incentive Plan. One-third of these shares vested on February 21, 2018, one-third vested on February 21, 2019 and the remainder will vest within 30 days of the initial grant date in 2020. The shares vesting in the last year are subject to performance conditions, except for the shares listed for Mr. Alvarez, and the number of shares delivered in 2020 depend on the achievement of performance criteria. The performance period for this plan has been completed and the awards were adjusted to 76.3% of initial targeted value, vesting in March 2020.

(7)	Santander awarded these deferred Santander ADRs on February 21, 2019 under the 2018 Executive Incentive Plan. These vest within 30 days of the initial grant date of each year over a five-year period in equal installments, with the first vesting occurring in 2020 and the final vesting occurring in 2024. The shares vesting in the last three years are subject to performance conditions.

(8)	Santander awarded these deferred Santander ADRs on February 21, 2018 under the 2017 Executive Incentive Plan and SRIP. One-fifth of these shares vested on February 21, 2019, and the remainder will vest within 30 days of the initial grant date, in equal installments, in each year from 2020 through 2023. The shares vesting in the last three years are subject to performance conditions.

(9)	Santander awarded these deferred Santander ADRs on February 21, 2018 under the 2017 Executive Incentive Plan and SRIP. One-third of these shares vested on February 21, 2019, and the remainder will vest within 30 days of the initial grant date, in equal installments, in each year from 2020 through 2021. The shares vesting in the last year are subject to performance conditions.

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•	52 weeks of base salary, paid in a lump sum;

•	Continued vesting of deferred bonus awards;

•	Continued payment of any remaining equity buy out payments; and

•	No repayment of his sign on bonus or relocation benefits.

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(1)

Amounts shown for the Executive Incentive Plan are the value of deferred cash and Santander ADRs under the Executive Incentive Plan and/or SRIP as of December 31, 2019 (based on the NYSE closing price of SAN ADRs on that date). As noted above, payment of deferred amounts is made in accordance with the original vesting schedule and subject to all performance conditions, as if employment had not been terminated.

(2)

Amounts shown for the SC RSUs are the value of unvested SC RSUs as of December 31, 2019 (based on the closing price of the SC common stock on that date).  As noted above, payment of the RSUs is made in accordance with the original vesting schedule and subject to all performance conditions, as if employment had not been terminated.  The "Change in Control" column shows amounts payable in the event of a change in control of SC (if the RSUs are not assumed, converted or replaced in the transaction) or upon a termination of employment without cause or with good reason within two years after a change in control of SC (if the RSUs are assumed, converted or replaced in the transaction).

(3)

Amounts shown are as follows: (i) for Mr. Wennes, in accordance with his employment letter described above, 52 months of base salary, plus payment of his 2019 guaranteed bonus in the amount of $3.4 million (in cash and equity paid in accordance with the applicable deferral vesting schedule and subject to all performance conditions, as if employment had not been terminated), plus the estimated value of three months of COBRA premiums and six months of outplacement services; and (ii) for each of the other named executive officers, in accordance with the Enterprise Severance Policy as described above, 26 weeks of salary plus the estimated value of three months of COBRA premiums and six months of outplacement services.

•	attracting and retaining directors who were independent, interested, diligent, and actively involved in overseeing our affairs and who satisfy the standards of Santander, the sole shareholder of our common stock; and

•	providing a reasonable, competitive, and effective approach that compensates our directors for the responsibilities and demands of the role of director.

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•	a $150,000 cash retainer annually; plus

•	a $20,000 supplement as an additional cash retainer annually, if the director also serves as a director of SBNA or of SC; plus

•	$70,000 in cash annually, if the director serves as chair of our Risk Committee, Audit Committee or BCTMC; plus

•	$35,000 in cash annually if the director serves as chair of SBNA’s or SC’s Risk Committee, Audit Committee or BCTMC; plus

•	$20,000 in cash annually if the director serves as a non-chair member of our Nominations Committee, Risk Committee, Audit Committee, or BCTMC; plus

•	$5,000 in cash annually if the director also serves as a non-chair member of SBNA’s or SC’s Risk Committee, Audit Committee or BCTMC or SBNA’s Nominations and Executive Committee or SC’s Executive Committee.

(1)	Reflects amounts earned in 2019.

(2)

Reflects awards of RSUs payable in shares of SC Common Stock granted for service on the Board of SC. The RSUs will vest on the earlier of (i) the first anniversary of the grant date, and (ii) SC’s first annual shareholders' meeting following the grant date. Reflects the aggregate grant date fair value computed in accordance with ASC Topic 718, based on the closing price of SC Common Stock on the applicable grant date. Refer to Note 18 of the Consolidated Financial Statements contained in this Form 10-K for a discussion of the relevant assumptions used to account for these awards.

(3)

Mr. Ferriss received $100,000 for service as the Chair of Santander BanCorp, which amount is included in the above table. The table also includes cash compensation of $230,000 and $55,000 that Mr. Ferriss earned for service on the Boards of SC and BSI, respectively. As of December 31, 2019, Mr. Ferriss held 2,129 of outstanding, unvested SC RSUs and 5,207 of outstanding, vested options to purchase shares of SC Common Stock.

(4)	Includes cash compensation of $180,000 and $100,000 that Mr. Fishman earned for service on the Board of SBNA and as the Chair of SIS, respectively.

(5)	Includes cash compensation of $95,000 that Mr. Johnson earned for service on the SBNA Board.

(6)	Includes cash compensation of $179,583 that Mr. Rousseau earned for service on the SBNA Board.

(7)	Includes cash compensation of $450,000 and $100,000 that Mr. Ryan earned as Chair of the Boards of SBNA and BSI, respectively.

(8)	Mr. Spillenkothen retired from our Board and the SBNA Board on May 10, 2019. Includes cash compensation of $45,833 that Mr. Spillenkothen earned for service on SBNA’s Board.

(9)	Ms. Holiday was appointed to our Board on December 11, 2019. Includes cash compensation of $190,000 that Ms. Holiday earned for service on the Board of SC. As of December 31, 2019, Ms. Holiday held 2,129 of outstanding, unvested SC RSUs.

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•

NW Services Co., a Santander affiliate doing business as Aquanima, is under contract with the Company to provide procurement services, with fees paid in 2019 in the amount of $10.2 million, $5.4 million in 2018 and $3.7 million in 2017. There were no payables in connection with this agreement for the years ended December 31, 2019 or 2018. The fees related to this agreement are recorded in Technology, outside service, and marketing expense in the Consolidated Statements of Operations.

•

Geoban, S.A., a Santander affiliate, is under contract with the Company to provide administrative services, consulting and professional services, application support and back-office services, including debit card disputes and claims support, and consumer and mortgage loan set-up and review, with total fees paid in 2019 in the amount of $1.7 million, $1.8 million in 2018 and $3.3 million in 2017. The Company had no payables in connection with this agreement in 2019 or 2018. The fees related to this agreement are recorded in Technology, outside service, and marketing expense in the Consolidated Statements of Operations.

•

Santander Back-Offices Globales Mayoristas S.A., a Santander affiliate, is under contract with the Company to provide administrative services and back-office support for the Bank’s derivative, foreign exchange and hedging transactions and programs. Fees in the amounts of $1.4 million were paid to Santander Back-Offices Globales Mayoristas S.A. with respect to this agreement in 2019, and $1.9 million and $1.1 million in 2018 and 2017, respectively. There were no payables in connection with this agreement in 2019 or 2018. The fees related to this agreement are recorded in Technology, outside service, and marketing expense in the Consolidated Statements of Operations.

•

Santander Global Technology S.L. is under contract with the Company to provide information technology development, support and administration, with fees for these services paid in 2019 in the amount of $2.8 million, $38.7 million in 2018 and $77.9 million in 2017. In addition, as of December 31, 2019 and 2018, the Company had payables for these services in the amounts of $0.2 million and $0.8 million, respectively. The fees related to this agreement are capitalized in Premises and equipment, net on the Consolidated Balance Sheets.

•

Santander Global Technology is also under contract with the Company to provide professional services and administration and support of information technology production systems, telecommunications and internal/external applications, with fees for these services paid in 2019 in the amount of $20.9 million, $74.9 million in 2018 and $110.7 million in 2017. In addition, as of December 31, 2019 and 2018, the Company had payables for these services in the amounts of $15.6 million and $18.1 million, respectively. The fees related to this agreement are capitalized in Premises and equipment, net on the Consolidated Balance Sheets.

•

In addition, Santander Global Technology is under contract with the Company to provide information technology development, support and administration, with fees paid in the amount of $113.2 million in 2019 and $5.5 million in 2018. As of December 31, 2019 and 2018, the Company had payables with Santander Global Technology in the amounts of $5.6 million and $21.9 million for these services. The fees related to this agreement are capitalized in Premises and equipment, net on the Consolidated Balance Sheets.

•	During the year ended December 31, 2019 and 2018, the Company paid $15.4 million and $17.1 million to Santander for the development and implementation of global projects as part of group expense allocation.

•	During the year ended December 31, 2019, the Company paid $3.9 million in rental payments to Santander, compared to $3.9 million in 2018 and $11.2 million in 2017.

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As of December 31, 2019, Jason A. Kulas and Thomas Dundon, both former members of SC's Board of Directors and CEOs of SC, each had a minority equity investment in a property in which SC leases approximately 373,000 square feet as its corporate headquarters. During the years ended December 31, 2019, 2018 and 2017 SC recorded $5.3 million, $4.8 million and $5.0 million, respectively, in lease expenses on this property. Future minimum lease payments over the seven-year term of the lease, which extends through 2026, total $48.5 million.

•	SC's wholly-owned subsidiary SCI, opened deposit accounts with BSPR, an affiliated entity. As of December 31, 2019 and 2018, SCI had cash (including restricted cash) of $8.1 million and $8.9 million, respectively, on deposit with BSPR. This transaction eliminates in the consolidation of SHUSA.

•	SC has certain deposit and checking accounts with SBNA. As of December 31, 2019 and 2018, SC had a balance of $33.7 million and $92.8 million, respectively, in these accounts. This transaction eliminates in the consolidation of SHUSA.

•

BSI enters into transactions with affiliated entities in the ordinary course of business. As of December 31, 2019, BSI had short-term borrowings from unconsolidated affiliates of $1.8 million, compared to $59.9 million as of December 31, 2018. BSI had cash and cash equivalents deposited with affiliates of $6.8 million and $46.2 million as of December 31, 2019 and December 31, 2018, respectively. BSI had foreign exchange rate forward contracts with affiliates as counterparties with notional amounts of approximately $1.9 billion and $1.5 billion as of December 31, 2019 and December 31, 2018, respectively. BSI held deposits from unconsolidated affiliates of $118.4 million and $55.7 million as of December 31, 2019 and December 31, 2018, respectively. At December 31, 2019 and 2018, loan participations of $714.2 million and $195.8 million, respectively, were sold to BSSA without recourse.

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•	SIS enters into transactions with affiliated entities in the ordinary course of business. SIS executes, clears and custodies certain of its securities transactions through various affiliates in Latin America and Europe. The balance of payables to customers due to Santander at December 31, 2019 was $1.9 billion, compared to $1.0 billion at December 31, 2018.

•

An adjustable rate first mortgage loan to Federico Papa, a former executive officer of the Bank, in the original principal amount $995,000. The current interest rate on this loan was 2.00%. For 2019, the highest outstanding balance was $472,284, and the balance outstanding at December 31, 2019 was zero. Mr. Papa paid $472,284 in principal and $13,284 in interest on this loan in 2019. For 2018, the highest outstanding balance was $488,014, and the balance outstanding at December 31, 2018 was $472,284. Mr. Papa paid $15,730 in principal and $9,617 in interest on this loan in 2018. For 2017, the highest outstanding balance was $503,432, and the balance outstanding at December 31, 2018 was $488,014. Mr. Papa paid $15,418 in principal and $9,928 in interest on this loan in 2017.

•

A fixed-rate first mortgage loan to Kenneth Goldman, a former executive officer, in the original principal amount of $824,000. The interest rate on this loan was 2.875%. For 2019, the highest outstanding balance was $703,742, and the balance outstanding at December 31, 2019 was zero. Mr. Goldman paid $703,742 in principal and $11,933 in interest on this loan in 2019. For 2018, the highest outstanding balance was $725,893, and the balance outstanding at December 31, 2018 was $703,742. Mr. Goldman paid $22,151 in principal and $22,292 in interest on this loan in 2018. For 2017, the highest outstanding balance was $745,738, and the balance outstanding at December 31, 2017.

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An adjustable rate first mortgage loan to Cameron Letters, a former executive officer of the Bank, in the original principal amount of $950,000. The interest rate on this loan was 3.00%. For 2018, the highest outstanding balance was $814,262, and the balance outstanding at December 31, 2018 was zero. Mr. Letters paid $814,262 in principal and $18,256 in interest on this loan in 2018. For 2017, the highest outstanding balance was $839,768, and the balance outstanding at December 31, 2017 was $814,262. Mr. Letters paid $25,507 in principal and $16,189 in interest on this loan in 2017.

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