BUSINESS COMBINATIONS

General

On January 28, 2014, the Company obtained a controlling financial interest in SCUSA in connection with the Change in Control. The financial information set forth in these Condensed Consolidated Financial Statements gives effect to the Company’s consolidation of SCUSA as a result of the Change in Control. The following information is presented on a provisional basis based upon all information available to the Company at the present time and is subject to change, and such changes could be material. The Company continues to review the underlying assumptions and valuation techniques utilized to calculate the fair value of certain definite-lived intangibles, financing receivables, leased vehicles, goodwill and deferred income taxes. Additional adjustments may be recorded during the allocation period specified by ASC 805 as additional information becomes known.

NOTE 3. BUSINESS COMBINATIONS (continued)

Consolidated Assets acquired and Liabilities assumed

The Company did not incur any material transaction related expenses related to the Change in Control, and no cash, equity interests, or other forms of consideration were transferred from the Company in connection with the Change in Control. As a result, the Company measured goodwill by reference to the fair value of SCUSA equity as implied by the IPO offering price. The following table summarizes these equity related interests in SCUSA which constitute the purchase price and the identified assets acquired and liabilities assumed:



	January 28, 2014
	(dollars in thousands)
Fair value of noncontrolling interest in SCUSA	$	3,273,265
Fair value of SCUSA employee vested stock options	210,181
Fair value of SHUSA remaining ownership interest in SCUSA	5,063,881
Fair value of equity-related interests in SCUSA	$	8,547,327

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash and cash equivalents	$	11,075
Restricted cash	1,704,906
Loan receivables - held for sale	990,137
Loan receivables - retail installment contracts	19,870,790
Loan receivables from dealers	102,689
Loan receivables - unsecured	1,009,896
Premises and equipment	74,998
Leased vehicles, net	2,518,285
Intangibles	768,750
Miscellaneous receivables and other assets	1,061,351
Deferred tax asset	7,137
Borrowings and other debt obligations	(24,497,607		)
Accounts payable and accrued liabilities	(551,924		)
Total identifiable net assets	3,070,483

Goodwill	$	5,476,844

The fair value of the non-controlling interest of $3.27 billion and the fair value of the Company's remaining ownership interest in SCUSA of $5.06 billion were determined on the basis of the market price of SCUSA's common shares on the Change in Control date.

The Company recognized SCUSA’s stock option awards that were outstanding as of the IPO date at fair value, which in aggregate amounted to $354.3 million. The portion of the total fair value of the stock option awards that is attributable to pre-business combination service amounting to $210.2 million represent non-controlling interest in SCUSA as of the IPO date, while $144.1 million of the total amount pertains to the post-business combination portion which will be recognized as stock compensation expense over the remaining vesting period of the awards in the Company’s post-business combination consolidated financial statements. Of the total $144.1 million, $82.6 million was immediately recognized as stock compensation expense as a result of the acceleration of the vesting of certain of the stock option awards upon the closing of the IPO. The fair value of share option awards were estimated using the Black-Scholes option valuation model.

The fair value of the assets acquired includes finance receivables. SHUSA estimated the fair value of loans acquired from SCUSA by utilizing a methodology in which similar loans were aggregated into pools. Cash flows for each pool were determined by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value based on a market rate for similar loans. There was no carryover of SCUSA's allowance for loan losses associated with the loans SHUSA acquired as the loans were initially recorded at fair value.

NOTE 3. BUSINESS COMBINATIONS (continued)



	January 28, 2014
	(dollars in thousands)
Fair value of loan receivables ⁽¹⁾	$	19,870,790
Gross contractual amount of loan receivables ⁽¹⁾	$	31,410,699
Estimate of contractual cash flows not expected to be collected at acquisition ⁽¹⁾	$	4,301,586

⁽¹⁾ - Fair value of receivables does not include amounts related to the loan receivables - unsecured and loan receivables from dealers due to the short-term and revolving nature of the receivables.

Goodwill recognized in connection with the Change in Control is attributable to SCUSA's workforce as well as the experience, proven track record, and strong capabilities of its senior management team. The goodwill associated with the Change in Control was allocated to our SCUSA segment and is not deductible for tax purposes.



	January 28, 2014
	Fair Value		Weighted Average Amortization Period
	(dollars in thousands)
Intangibles subject to amortization:
Dealer networks	$	580,000	17.5 years (a)
Chrysler relationship	138,750		9.2 years

Intangibles not subject to amortization:
Trade name	50,000		indefinite lived
Total Intangibles	$	768,750

^(a) - The amortization periods of the dealer network range between 7 and 20 years.

Gain on Change in Control

The Company recognized a pre-tax gain of $2.4 billion in connection with the Change in Control in Non-interest income in the Condensed Consolidated Statement of Operations.



	January 28, 2014
	(dollars in thousands)

Gain attributable to SCUSA shares sold	$	137,536
Gain attributable to the remaining equity interest	2,291,003
Total pre-tax gain	$	2,428,539

In connection with the closing of the IPO on January 28, 2014, the Company sold 13,895,243 shares of SCUSA's common stock, which generated a realized gain on sale of $137.5 million.

NOTE 3. BUSINESS COMBINATIONS (continued)

Proforma Financial Information

The results of SCUSA are included in our results beginning January 28, 2014. The following table summarizes the actual unaudited amounts of Total revenue, net of Total interest expense and Net income including Noncontrolling Interest of SCUSA included in our Condensed Consolidated Financial Statements for the three months ended June 30, 2014 and the supplemental pro forma consolidated Total revenue, net of total interest expense and Net income including noncontrolling interest of SHUSA entity for the three months ended June 30, 2014 and 2013, respectively, as if the Change in Control had occurred on January 1, 2013. These results include the impact of amortizing certain purchase accounting adjustments such as intangible assets as well as fair value adjustments to loans and issued debt. These pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual consolidated results of operations of SHUSA that would have been achieved had the Change in Control occurred at January 1, 2013, nor are they intended to represent or be indicative of future results of operations.



	SCUSA Amounts Included in Results for Period Ended June 30, 2014				Supplemental Pro Forma - Combined
	Three-Month Period Ended		Six-Month Period Ended		Three-Month Period Ended June 30,				Six-Month Period Ended June 30,
	June 30, 2014				2014 (b)		2013 (b)		2014 (b)		2013 (b)(c)
	(dollars in thousands)

Total Revenue, Net of Total Interest Expense (a)	$	1,629,613	$	2,681,493	$	2,048,393	$	1,801,679	$	4,020,599	$	5,698,465
Net Income including Noncontrolling Interest	302,013		574,747		224,502		451,179		368,940		2,496,624

(a) - Total Revenue, Net of Total Interest Expense is calculated as the sum of Total Interest Income and Total Non-Interest Income, less Total Interest Expense.
(b) - Includes the impact of recording provision for loan losses necessary to bring the retail installment contracts and personal unsecured loans to their expected carrying values considering the required allowance for loan losses on their recorded investment amounts. See Note 1 for a related discussion of the Company's accounting policy specific to these loans.
(c) - Included within the Supplemental Pro Forma - Combined Total Revenue, Net of Total Interest Expense and Net Income for the six-months ended June 30, 2013 are a non-recurring gains of $2.43 billion and $1.53 billion, respectively, that arose on the remeasurement of SHUSA's equity method investment in SCUSA to fair value.

These amounts have been calculated after applying SHUSA's accounting policies and adjusting the results of SCUSA to reflect additional depreciation and amortization that would have been charged assuming the fair value adjustments to loans, debt, premises and equipment had been applied from January 1, 2013 with the consequential tax effects.