UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-16581

SANTANDER HOLDINGS USA, INC.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization)	23-2453088 (I.R.S. Employer Identification No.)
75 State Street, Boston, Massachusetts (Address of principal executive offices)	02109 (Zip Code)

Registrant’s telephone number including area code (800) 493-8219

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Not Applicable	Not Applicable	Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑. No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑. No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Emerging growth company ☐
Non-accelerated Filer ☑	Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐. No ☑.

Number of shares of common stock outstanding at October 31, 2023: 530,391,043 shares

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	4
Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2023 and 2022	5
Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2023 and 2022	6
Condensed Consolidated Statements of Stockholder's Equity for the three months and nine months ended September 30, 2023 and 2022	7
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	8
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	73
Item 3. Quantitative and Qualitative Disclosures About Market Risk	110
Item 4. Controls and Procedures	110
PART II. OTHER INFORMATION	111
Item 1. Legal Proceedings	111
Item 1A. Risk Factors	111
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	111
Item 3. Defaults upon Senior Securities	111
Item 4. Mine Safety Disclosures	111
Item 5. Other Information	112
Item 6. Exhibits	113
SIGNATURES	114
Ex-31.1 Certification
Ex-31.2 Certification
Ex-32.1 Certification
Ex-32.2 Certification
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

SANTANDER HOLDINGS USA, INC., AND SUBSIDIARIES

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements about the Company’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words and phrases such as “may,” “could,” “should,” “will,” “would,” “believes,” “expects,” “anticipates,” “estimate,” “intends,” “plans,” “assume," "goal," "seek," "can," "predicts," "potential," "projects," "continuing," "ongoing," and similar expressions.

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date on which the statements are made, these statements are not guarantees of future performance and involve risks and uncertainties which are subject to change based on various important factors and assumptions, some of which are beyond the Company's control. Among the factors that could cause the Company’s financial performance to differ materially from that suggested by forward-looking statements are:

•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 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 may increase to the extent our loans are concentrated by loan type, industry segment, borrower type or location of the borrower or collateral, and changes in the credit quality of SHUSA's customers and counterparties;

•adverse economic conditions in the United States and worldwide, including the extent of recessionary conditions in the U.S. 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 credit loss expense;

•inflation, interest rate, market and monetary fluctuations may, among other things, reduce net interest margins and impact funding sources, revenue and expenses, the value of assets and obligations, and the ability to originate and distribute financial products in the primary and secondary markets;

•bank failures and similar adverse developments at other banks may lead to decreased customer and investor sentiment regarding the stability and liquidity of banks in general, as well as increased regulation of banks by supervisory authorities as they seek to manage or mitigate such adverse developments;

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

•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;

•risks SHUSA faces implementing its growth strategy, including SHUSA's ability to grow revenue, manage expenses, attract and retain highly-skilled people, successfully complete and integrate mergers and acquisitions, 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;

•Reduction in SHUSA's access to funding or increases in the cost of its funding, such as in connection with changes in credit ratings assigned to SHUSA or its subsidiaries, or a significant reduction in customer deposits;

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

•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 and impact our net income adversely;

•SC's agreement with Stellantis may not result in currently anticipated levels of growth;

•changes in customer spending, investment or savings behavior;

•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 and software SHUSA uses in its business, including as a result of cyberattacks, technological failure, human error, fraud or malice by internal or external parties, and the possibility that SHUSA's controls will prove insufficient, fail or be circumvented;

•changing federal, state, and local tax laws and regulations, which may include tax rates changes, that could materially adversely affect our business, including 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;

•SHUSA’s ability to implement its ESG strategy and appropriately address social, environmental and sustainability matters that may arise from its activities;

•natural or man-made disasters including pandemics and other significant public health emergencies, outbreaks or escalations of hostilities or effects of climate change, and SHUSA's ability to deal with disruptions caused by such disasters and emergencies;

•acts of terrorism or domestic or foreign military conflicts; and

•the other factors that are described in Part I, Item IA - Risk Factors of the Company's Annual Report on Form 10-K for 2022.

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

1

SHUSA provides the following list of abbreviations and acronyms as a tool for the readers that are used in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements.

ABS: Asset-backed securities	Early stage delinquency: loans that are greater than 30 DPD, but less than 90 DPD
ACL: Allowance for credit losses	EFG: Enterprise Financial Group
AFS: Available-for-sale	EIR: Effective interest rate
ALLL: Allowance for loan and lease losses	ERISA: Employee Retirement Security Act of 1974, as amended
AOCI: Accumulated other comprehensive income	ESG: Environmental, Social, and Governance
APS: Amherst Pierpont Securities LLC, now known as Santander US Capital Markets LLC	ETR: Effective tax rate
ASC: Accounting Standards Codification	Evaluation Date: September 30, 2023
ASU: Accounting Standards Update	Exchange Act: Securities Exchange Act of 1934, as amended
ATM: Automated teller machine	Expanded Risk-Based Approach: New approach for calculating risk-weighted assets proposed by the federal banking agencies
BHC: Bank holding company	FASB: Financial Accounting Standards Board
BHCA: Bank Holding Company Act of 1956, as amended	FBO: Foreign banking organization
BOLI: Bank-owned life insurance	FDIA: Federal Deposit Insurance Corporation Improvement Act
Broker-Dealers: SanCap and SSLLC	FDIC: Federal Deposit Insurance Corporation
BSI: Banco Santander International	Federal Reserve: Board of Governors of the Federal Reserve System
BTFP: Bank Term Funding Program	FHLB: Federal Home Loan Bank
C&I: Commercial and Industrial Banking	FHLMC: Federal Home Loan Mortgage Corporation
Capital Proposal: Proposed revisions to capital rules issued by federal banking agencies on July 27, 2023	FICO®: Fair Isaac Corporation credit scoring model
CARES Act: Coronavirus Aid, Relief, and Economic Security Act	FNMA: Federal National Mortgage Association
CBB: Consumer and Business Banking	FOMC: Federal Open Market Committee
CCAP: Chrysler Capital; trade name used in providing services under the MPLFA	FRB: Federal Reserve Bank
CD: Certificate of deposit	FTP: Funds transfer pricing
CECL: Current expected credit losses as defined by FASB ASC Topic 326	FVO: Fair value option
CEO: Chief Executive Officer	GAAP: Accounting principles generally accepted in the United States of America
CET1: Common equity Tier 1	GDP: Gross domestic product
CEVF: Commercial equipment vehicle financing	GNMA: Government National Mortgage Association
CFPB: Consumer Financial Protection Bureau	GSIB: Globally systemically important bank
CFO: Chief Financial Officer	HFI: Held-for-investment
CFTC: Commodity Futures Trading Commission	HFS: Held-for-sale
CIB: Corporate and Investment Banking	HPI: Housing Price Index
CID: Civil investigative demand	HTM: Held-to-maturity
CLTV: Combined loan-to-value	IBOR: Inter-bank offered rate
CME: Chicago Mercantile Exchange	IDI: Insured depository institution
Company: Santander Holdings USA, Inc.	IHC: U.S. intermediate holding company
Covered Fund: a hedge fund or a private equity fund	IRS: Internal Revenue Service
COVID-19: a novel strain of coronavirus declared a pandemic by the World Health Organization in March 2020	ISDA: International Swaps and Derivatives Association, Inc.
CPR: Constant prepayment rate	IT: Information technology
CRA: Community Reinvestment Act	Large Banking Organization: Large banking organizations with assets of $100 billion or more
CRE: Commercial Real Estate	LCR: Liquidity coverage ratio
DCF: Discounted cash flow	LGD: Loss given default
DFA: Dodd-Frank Wall Street Reform and Consumer Protection Act	LHFI: Loans held for investment
DIF: Deposit Insurance Fund	LHFS: Loans held for sale
DOJ: Department of Justice	LIBOR: London Interbank Offered Rate
DPD: Days past due	LIHTC: Low income housing tax credit
DTI: Debt-to-income	LTD: Long-term debt
EAD: Exposure at default	LTV: Loan-to-value

2

MBS: Mortgage-backed securities	SBALT: SBNA Auto Lease Trust
MD&A: Management's Discussion and Analysis of Financial Condition and Results of Operations	SBNA or the Bank: Santander Bank, National Association
MMNA: Mitsubishi Motors North America, Inc.	SC: Santander Consumer USA Holdings Inc. and its subsidiaries
Moody’s: Moody's Investors Service, Inc.	SCARF: Santander Consumer Auto Receivables Funding
MPLFA: Ten-year master private-label financing agreement with Stellantis	SCART: Santander Consumer Auto Receivables Trust
MSR: Mortgage servicing right	SCB: Stress capital buffer
MVE: Market value of equity	SCF: Statement of cash flows
NCI: Non-controlling interest	SCH: Santander Capital Holdings LLC
NCO: Net charge-off	SDART: Santander Drive Auto Receivables Trust
NFA: National Futures Association	SDGT: Specially Designated Global Terrorist
NMDs: Non-maturity deposits	SEC: Securities and Exchange Commission
NMTC: New market tax credits	Securities Act: Securities Act of 1933, as amended
NPL: Non-performing loan	Securities Financing Activities: Resale, repurchase securities borrowed and securities lending agreements
NPR: Notice of proposed rule-making	SHUSA: Santander Holdings USA, Inc.
OCC: Office of the Comptroller of the Currency	SOFR: Secured overnight financing rate
OCI: Other comprehensive income	SPAIN: Santander Private Auto Issuing Note
OEM: Original equipment manufacturer	SPE: Special purpose entity
OIS: Overnight indexed swap	SSLLC: Santander Securities LLC
OREO: Other real estate owned	Stellantis: Fiat Chrysler Automobiles U.S. LLC parent Stellantis N.V. and/or any affiliates
Parent Company: The parent holding company of SBNA and other consolidated subsidiaries	Subvention: Reimbursement of the finance provider by a manufacturer for the difference between a market loan or lease rate and the below-market rate given to a customer.
PCH: Pierpont Capital Holdings LLC, now known as Santander Capital Holdings LLC	TDR: Troubled debt restructuring
PD: Probability of default	TLAC: Total loss-absorbing capacity
RIC: Retail installment contract	TLAC Rule: The Federal Reserve's total loss-absorbing capacity rule
ROU: Right-of-use	Trusts: Securitization trusts
RV: Recreational vehicle	UPB: Unpaid principal balance
RWA: Risk-weighted asset	VIE: Variable interest entity
S&P: Standard & Poor's	VOE: Voting rights entity
SanCap: Santander US Capital Markets, LLC	YTD: Year-to-date
Santander: Banco Santander, S.A.
Santander UK: Santander UK plc

3

PART I. FINANCIAL INFORMATION

ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SANTANDER HOLDINGS USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

unaudited (In thousands)

	September 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	10,705,134	$	10,218,066
Federal funds sold and securities purchased under resale agreements or similar arrangements (1)	9,468,618		12,424,079
Investment securities:
AFS at fair value (amortized cost of $7,109,796 and $7,914,832 as of September 30, 2023 and December 31, 2022, respectively)	6,170,157		7,030,219
Trading securities	8,496,604		5,864,324
HTM (fair value of $7,486,846 and $8,273,285 as of September 30, 2023 and December 31, 2022, respectively)	9,153,367		9,549,218
Other investments	1,478,133		1,116,161
LHFI(2) (6)	95,999,941		97,338,329
ALLL (5)	(6,984,466)		(6,779,999)
Net LHFI	89,015,475		90,558,330
LHFS (3)	435,809		99,555
Premises and equipment, net (3)	938,404		910,477
Operating lease assets, net (6)(7)	13,691,320		14,267,111
Goodwill	2,766,665		2,767,732
Intangible assets, net	296,740		326,633
BOLI	1,979,330		1,969,717
Restricted cash (6)	5,406,821		6,346,248
Other assets (4) (5)	5,650,586		4,746,450
TOTAL ASSETS	$	165,653,163	$	168,194,320
LIABILITIES
Accounts payables and accrued expenses	$	5,490,578	$	6,148,533
Deposits and other customer accounts	77,470,633		79,128,541
Federal funds purchased and securities loaned or sold under repurchase agreements (1)	15,329,760		15,382,819
Trading liabilities	3,089,255		2,871,645
Borrowings and other debt obligations (6)	43,015,347		43,588,273
Advance payments by borrowers for taxes and insurance	188,202		149,133
Deferred tax liabilities, net	214,991		389,043
Other liabilities (6)	2,405,082		2,606,611
TOTAL LIABILITIES	147,203,848		150,264,598
Commitments and contingencies (Note 16)
MEZZANINE EQUITY
Preferred stock (no par value; 7,500,000 shares authorized; 1,500,000 and 500,000 shares outstanding at September 30, 2023 and December 31, 2022, respectively)	1,500,000		500,000
STOCKHOLDER'S EQUITY
Common stock and paid-in capital (no par value; 800,000,000 shares authorized; 530,391,043 shares outstanding at both September 30, 2023 and December 31, 2022, respectively)	17,284,611		17,284,611
Accumulated other comprehensive loss, net of taxes	(1,208,894)		(1,336,023)
Retained earnings	873,598		1,481,134
TOTAL STOCKHOLDER'S EQUITY	16,949,315		17,429,722
TOTAL LIABILITIES, MEZZANINE AND STOCKHOLDER'S EQUITY	$	165,653,163	$	168,194,320

(1) See Note 13 to these Condensed Consolidated Financial Statements for amounts of securities financing activities for which the Company has elected FVO.

(2) LHFI includes $15.4 million and $20.9 million of loans recorded at fair value at September 30, 2023 and December 31, 2022, respectively.

(3) Includes $488.0 thousand and $549.0 thousand of loans recorded at the FVO at September 30, 2023 and December 31, 2022, respectively.

(4) Net of accumulated depreciation of $2.2 billion and $2.1 billion at September 30, 2023 and December 31, 2022, respectively.

(5) Includes MSRs of $104.5 million and $107.4 million at September 30, 2023 and December 31, 2022, respectively, for which the Company has elected the FVO. See Note 13 to these Condensed Consolidated Financial Statements for additional information.

(6) The Company has interests in certain Trusts that are considered VIEs for accounting purposes. At September 30, 2023 and December 31, 2022, LHFI included $26.3 billion and $27.1 billion, Operating leases assets, net included $13.7 billion and $14.3 billion, restricted cash included $982.0 million and $923.5 million, Other assets included $665.4 million and $716.7 million, Borrowings and other debt obligations included $26.4 billion and $31.6 billion, and Other liabilities included $119.3 million and $138.0 million of assets or liabilities that were included within VIEs, respectively. See Note 7 to these Condensed Consolidated Financial Statements for additional information.

(7) Net of accumulated depreciation of $3.6 billion and $3.7 billion at September 30, 2023 and December 31, 2022, respectively.

See accompanying notes to unaudited Condensed Consolidated Financial Statements

4

SANTANDER HOLDINGS USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

unaudited (In thousands)

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
INTEREST INCOME:
Loans	$	2,115,442	$	1,797,322	$	6,149,657	$	5,126,671
Interest-earning deposits	218,925		67,168		572,074		105,912
Interest and fees on federal funds sold and securities purchased under resale agreements or similar arrangements	580,720		230,436		1,797,354		314,168
Investment securities:
AFS	66,773		44,318		199,769		109,648
HTM	46,173		42,967		139,719		113,859
Trading securities	106,921		46,921		282,479		81,248
Other investments	12,172		8,492		30,144		16,020
TOTAL INTEREST INCOME	3,147,126		2,237,624		9,171,196		5,867,526
INTEREST EXPENSE:
Deposits and other customer accounts	440,239		69,171		1,086,496		115,981
Interest expense on federal funds purchased and securities loaned or sold under repurchase agreements	675,050		246,066		2,012,023		331,591
Interest expense on trading liabilities	33,273		21,524		102,964		37,814
Borrowings and other debt obligations	527,883		301,695		1,497,366		769,555
TOTAL INTEREST EXPENSE	1,676,445		638,456		4,698,849		1,254,941
NET INTEREST INCOME	1,470,681		1,599,168		4,472,347		4,612,585
Credit loss expense	856,292		636,406		1,607,543		1,257,416
NET INTEREST INCOME AFTER CREDIT LOSS EXPENSE	614,389		962,762		2,864,804		3,355,169
NON-INTEREST INCOME:
Consumer and commercial fees	79,440		111,006		258,271		308,830
Capital markets and foreign exchange income	103,675		32,986		217,561		142,062
Lease income	617,962		663,123		1,866,968		2,012,982
Miscellaneous income, net(1)	83,316		126,995		283,705		376,177
TOTAL FEES AND OTHER INCOME	884,393		934,110		2,626,505		2,840,051
Net gain / (loss) on sale of investment securities	37,048		(18,594)		108,556		6,121
TOTAL NON-INTEREST INCOME	921,441		915,516		2,735,061		2,846,172
GENERAL, ADMINISTRATIVE AND OTHER EXPENSES:
Compensation and benefits	528,465		507,155		1,519,614		1,500,086
Occupancy and equipment expenses	160,608		170,755		505,226		472,893
Technology, outside service, and marketing expense	184,168		161,705		523,190		476,027
Loan expense	86,729		88,185		276,420		218,786
Lease expense	479,991		530,349		1,455,820		1,527,265
Other expenses	123,883		116,075		383,861		378,929
TOTAL GENERAL, ADMINISTRATIVE AND OTHER EXPENSES	1,563,844		1,574,224		4,664,131		4,573,986
INCOME / (LOSS) BEFORE INCOME TAX	(28,014)		304,054		935,734		1,627,355
Income tax (benefit) / provision	(147,767)		76,227		(54,937)		344,888
NET INCOME	$	119,753	$	227,827	$	990,671	$	1,282,467

(1) Includes equity investment income/(expense), net.

See accompanying notes to unaudited Condensed Consolidated Financial Statements

5

SANTANDER HOLDINGS USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

unaudited (In thousands)

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
NET INCOME	$	119,753	$	227,827	$	990,671	$	1,282,467
OTHER COMPREHENSIVE INCOME / (LOSS), NET OF TAX
Net unrealized changes in cash flow hedge derivative financial instruments, net of tax	52,935		(146,787)		175,104		(474,896)
Net unrealized (losses) on AFS investment securities, net of tax	(39,640)		(152,972)		(49,472)		(680,547)
Pension and post-retirement actuarial gains, net of tax	506		1,037		1,497		2,176
TOTAL OTHER COMPREHENSIVE INCOME / (LOSS), NET OF TAX	13,801		(298,722)		127,129		(1,153,267)
COMPREHENSIVE INCOME / (LOSS)	$	133,554	$	(70,895)	$	1,117,800	$	129,200

See accompanying notes to unaudited Condensed Consolidated Financial Statements

6

SANTANDER HOLDINGS USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

unaudited (In thousands)

	Common Shares Outstanding	Common Stock and Paid-in Capital		Accumulated other comprehensive loss, net of taxes		Retained Earnings		Noncontrolling Interest		Total Stockholder's Equity		Preferred Stock Mezzanine
Balance, July 1, 2023	530,391	$	17,284,611	$	(1,222,695)	$	1,039,631	$	—	$	17,101,547	$	1,500,000
Comprehensive income	—	—		13,801		119,753		—		133,554		—
Dividends paid on common stock	—	—		—		(250,000)		—		(250,000)		—
Dividends paid on preferred stock	—	—		—		(35,786)		—		(35,786)		—
Balance, September 30, 2023	530,391	$	17,284,611	$	(1,208,894)	$	873,598	$	—	$	16,949,315	$	1,500,000
	Common Shares Outstanding	Common Stock and Paid-in Capital		Accumulated other comprehensive loss, net of taxes		Retained Earnings		Noncontrolling Interest		Total Stockholder's Equity		Preferred Stock Mezzanine
Balance, July 1, 2022	530,391	$	17,293,611	$	(1,042,655)	$	4,630,767	$	—	$	20,881,723	$	—
Comprehensive (loss)/ income	—	—		(298,722)		227,827		—		(70,895)		—
Dividends paid on common stock	—	—		—		(1,750,000)		—		(1,750,000)		—
Stock repurchase	—	(10,000)		—		—		—		(10,000)		—
Balance, September 30, 2022	530,391	$	17,283,611	$	(1,341,377)	$	3,108,594	$	—	$	19,050,828	$	—

	Common Shares Outstanding	Common Stock and Paid-in Capital		Accumulated Other Comprehensive Loss, Net of Tax		Retained Earnings		Noncontrolling Interest		Total Stockholder's Equity		Preferred Stock Mezzanine
Balance, January 1, 2023	530,391	$	17,284,611	$	(1,336,023)	$	1,481,134	$	—	$	17,429,722	$	500,000
Cumulative-effect adjustment upon adoption of new accounting standards (Note 1)	—	—		—		(41,396)		—		(41,396)		—
Comprehensive income	—	—		127,129		990,671		—		1,117,800		—
Dividends paid on common stock	—	—		—		(1,500,000)		—		(1,500,000)		—
Dividends paid on preferred stock	—	—		—		(56,811)		—		(56,811)		—
Preferred stock offering	—	—		—		—		—		—		1,000,000
Balance, September 30, 2023	530,391	$	17,284,611	$	(1,208,894)	$	873,598	$	—	$	16,949,315	$	1,500,000
	Common Shares Outstanding	Common Stock and Paid-in Capital		Accumulated Other Comprehensive Loss, Net of Tax		Retained Earnings		Noncontrolling Interest		Total Stockholder's Equity		Preferred Stock Mezzanine
Balance, January 1, 2022	530,391	$	17,875,938	$	(188,110)	$	4,826,127	$	1,953,395	$	24,467,350	$	—
Comprehensive (loss) / income	—	—		(1,153,267)		1,282,467		—		129,200		—
Dividends paid on common stock	—	—		—		(3,000,000)		—		(3,000,000)		—
Stock repurchase	—	(592,327)		—		—		(1,953,395)		(2,545,722)		—
Balance, September 30, 2022	530,391	$	17,283,611	$	(1,341,377)	$	3,108,594	$	—	$	19,050,828	$	—

See accompanying notes to unaudited Condensed Consolidated Financial Statements

7

SANTANDER HOLDINGS USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

unaudited (in thousands)

	Nine months ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	990,671	$	1,282,467
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense/(benefit)	1,607,543		1,257,416
Deferred tax (benefit) / expense	(221,033)		102,384
Depreciation, amortization and accretion	1,952,133		2,119,639
Net (gain)/loss on sale or disposal of loans, investment securities, and other assets	(96,138)		(18,961)
Originations of LHFS	—		(195,849)
Proceeds from sales of and collections on LHFS	2,083		363,388
Net change in:
Trading securities and trading liabilities, net	(2,299,994)		(246,292)
Other assets and BOLI	(1,265,613)		(1,381,925)
Other liabilities	(240,852)		456,128
Other operating activities, net	(19,236)		(2,944)
NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES	409,564		3,735,451
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS investment securities	211,171		530,832
Proceeds from prepayments and maturities of AFS investment securities	1,215,255		1,669,869
Purchases of AFS investment securities	(693,525)		(1,943,332)
Proceeds from prepayments and maturities of HTM investment securities	403,973		931,132
Purchases of HTM investment securities	—		(946,375)
Proceeds from sales of equity method and other investments	342,627		421,855
Proceeds from maturities of other investments	100,000		400,000
Purchases of and contributions to equity method and other investments	(940,762)		(1,149,853)
Distributions from equity method investments	3,290		9,439
Net change in federal funds sold and securities purchased under resale agreements	2,955,461		2,453,760
Proceeds from sales of LHFI	352,735		521,337
Proceeds from settlements of BOLI policies	40,961		24,563
Purchases of LHFI	(117,192)		(1,011,077)
Net change in loans other than purchases and sales	(850,140)		(5,612,493)
Purchases and originations of operating leases	(4,380,980)		(4,676,535)
Proceeds from the sale and termination of operating leases	3,465,350		4,130,923
Proceeds from sales of premises and equipment, net	(132,768)		(131,730)
Acquisition of PCH	—		(391,931)
NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES	1,975,456		(4,769,616)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits and other customer accounts	(1,657,908)		(5,750,322)
Net change in short-term borrowings	42,645		1,945,230
Net proceeds from long-term borrowings	22,325,825		33,649,766
Repayments of long-term borrowings	(22,977,140)		(32,122,524)
Net change in federal funds purchased and securities loaned or sold under repurchase agreements	(53,059)		(1,866,986)
Dividends paid on common stock	(1,500,000)		(3,000,000)
Dividends paid on preferred stock	(56,811)		—
Stock repurchase	—		(2,545,722)
Preferred stock offering	1,000,000		—
Other financing activities, net	39,069		21,395
NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES	(2,837,379)		(9,669,163)
NET (DECREASE)/INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(452,359)		(10,703,328)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	16,564,314		25,017,235
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (1)	$	16,111,955	$	14,313,907
NON-CASH TRANSACTIONS
Loans transferred to/(from) OREO	59,192		37,885
Loans transferred from/(to) LHFI (from)/to LHFS, net	713,344		449,966
Unsettled purchases of investment securities	19,649		216,426
AFS investment securities transferred to HTM investment securities	—		2,982,195

(1) The nine months ended September 30, 2023 and 2022 include cash and cash equivalents balances of $10.7 billion, and $9.0 billion respectively, and restricted cash balances of $5.4 billion, and $5.3 billion respectively.

See accompanying notes to unaudited Condensed Consolidated Financial Statements

8

NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND ACCOUNTING POLICIES

SHUSA is the parent holding company of SBNA, a national banking association; SC, a consumer finance company headquartered in Dallas, Texas; BSI, a financial services company headquartered in Miami, Florida that offers a full range of banking services to foreign individuals and corporations based primarily in Latin America; SanCap, an institutional broker-dealer headquartered in New York, which has significant capabilities in market making via an experienced fixed-income sales and trading team and a focus on structuring and advisory services for asset originators in the real estate and specialty finance markets; SSLLC, a broker-dealer headquartered in Boston, Massachusetts; and several other subsidiaries. SHUSA is headquartered in Boston and SBNA's home office is in Wilmington, Delaware. SSLLC is a registered investment adviser with the SEC. SHUSA's two largest subsidiaries by asset size and revenue are SBNA and SC. SHUSA is a wholly-owned subsidiary of Santander.

The Company specializes in consumer financing focused on vehicle finance, servicing of third-party vehicle financing, and delivering service to dealers and customers across the full credit spectrum. This includes indirect origination and servicing of vehicle loans and leases, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers, origination of vehicle loans through a web-based direct lending program, purchases of vehicle loans from other lenders, and servicing of automobile and recreational and marine vehicle portfolios for other lenders. The Company sells consumer vehicle loans and leases through flow agreements and, when market conditions are favorable, it accesses the ABS market through securitizations of consumer vehicle loans and leases.

In addition to specialized consumer finance, the Company also attracts deposits and provides other retail banking services through its network of retail branches with locations in Connecticut, Delaware, Florida, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island and originates small business, middle market, large and global commercial loans, multifamily loans, and other consumer loans and leases throughout the Mid-Atlantic and Northeastern areas of the United States. For large institutional investors, the Company provides structured products, emerging markets credit and U.S. investment grade credit, U.S. rates, short-term fixed-income, debt and equity capital markets, investment banking, exchange traded derivatives, and cash equities, benefiting from a combination of Santander’s global reach and access to financial hubs together with extensive local market knowledge and regional expertise.

Acquisition of PCH

On April 11, 2022, SHUSA acquired 100% ownership of PCH, parent company of APS, an institutional fixed-income broker dealer and a designated primary dealer by the FRB of New York, for approximately $448 million. With the addition of PCH, the Company significantly enhances its infrastructure and capabilities with respect to U.S. fixed-income capital markets. The transaction provides the Company a platform for self-clearing of fixed-income securities, growing its institutional client footprint, and expanding its structuring and advisory capabilities for asset originators. APS had approximately 230 employees serving more than 1,300 active institutional clients from its headquarters in New York and offices in Chicago, San Francisco, Austin, other U.S. locations and Hong Kong.

In February 2023, the Company completed the merger of SIS into APS, with the resulting company renamed SanCap. Following the merger, SanCap, along with SSLLC, now comprise the Broker-Dealers.

9

NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)

Basis of Presentation

These Condensed Consolidated Financial Statements include the accounts of the Company and its consolidated subsidiaries, including certain Trusts that are considered VIEs. The Company generally consolidates VIEs for which it is deemed to be the primary beneficiary and VOEs in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation.

These Condensed Consolidated Financial Statements have been prepared in accordance with GAAP and pursuant to SEC regulations. In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal and recurring nature necessary for a fair statement of the Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Income, Statements of Stockholder's Equity and SCF for the periods indicated, and contain adequate disclosure to make the information presented not misleading.

Certain prior-year amounts have been reclassified to conform to the current year presentation. These reclassifications did not have a material impact on the Company's consolidated financial condition or results of operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates, and those differences may be material. The most significant estimates include the ACL, expected end-of-term lease residual values, and goodwill. These estimates, although based on actual historical trends and modeling, may potentially show significant variances over time.

Recently Adopted Accounting Standards

On January 1, 2023, the Company adopted ASU 2022-02 Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructuring and Vintage Disclosures that removed the specific accounting and disclosure guidance for TDR designations and enhances disclosure requirements related to modifications of receivables made to borrowers experiencing financial difficulty. In addition, the standard requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases. Upon adoption of the standard, the Company recorded an increase in the ACL of approximately $55.2 million, a decrease in retained earnings of approximately $41.4 million and a decrease in deferred tax liabilities of approximately $13.8 million. Refer to Note 3 for additional information on modified loans.

Recently Issued Accounting Standards Not Yet Adopted

On March 29, 2023, the FASB issued ASU 2023-02 Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which permits the use of an accounting policy election to apply the proportional amortization method to all tax equity investments that meet specific criteria. The new accounting guidance is effective for the Company beginning January 1, 2024 and early adoption is permitted. The Company is currently evaluating the standard, but does not expect a material impact on the Company's financial position, or results of operations.

On August 23, 2023, the FASB issued ASU 2023-05 Business Combinations - Joint Venture Formations, Recognition and Initial Measurement requiring most assets and liabilities contributed to a joint venture upon formation to be measured at fair market value. The new guidance is effective prospectively for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted. The Company is currently evaluating the standard but does not expect a material impact on the Company’s financial position or results of operations.

Subsequent Events

The Company evaluated events from the date of these Condensed Consolidated Financial Statements on September 30, 2023 through the issuance of these Condensed Consolidated Financial Statements. Except as noted in Note 9 and Note 17 to these Condensed Consolidated Financial Statements, there were no material events in that period that would require recognition or disclosure in its Condensed Consolidated Financial Statements as of September 30, 2023.

10

NOTE 2. INVESTMENT SECURITIES

Summary of Investments in Debt Securities - AFS and HTM

The following table presents the amortized cost, gross unrealized gains and losses and approximate fair values of investments in debt securities AFS at the dates indicated:

	September 30, 2023								December 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
U.S. Treasury securities	$	31,045	$	3	$	(5)	$	31,043	$	220,920	$	—	$	(2,481)	$	218,439
Corporate debt securities	280,679		—		(279)		280,400		371,458		1		(968)		370,491
ABS	510,409		24		(3,706)		506,727		517,920		58		(13,960)		504,018
MBS:
GNMA - Residential	3,257,264		—		(442,582)		2,814,682		3,484,616		—		(403,594)		3,081,022
GNMA - Commercial	664,226		4		(138,685)		525,545		684,502		267		(104,712)		580,057
FHLMC and FNMA - Residential	2,385,266		—		(461,091)		1,924,175		2,574,516		2		(394,317)		2,180,201
FHLMC and FNMA - Commercial	91,952		—		(4,367)		87,585		100,099		—		(4,108)		95,991
Unallocated fair value hedge basis adjustment(1)	(111,045)		—		111,045		—		(39,199)		—		39,199		—
Total investments in debt securities AFS	$	7,109,796	$	31	$	(939,670)	$	6,170,157	$	7,914,832	$	328	$	(884,941)	$	7,030,219

(1) The Company has entered into fair value hedges of portions of a closed portfolio of AFS debt securities, using the portfolio layer method. Refer to Note 12 for additional information.

The following table presents the amortized cost, gross unrealized gains and losses and approximate fair values of investments in debt securities HTM at the dates indicated:

	September 30, 2023								December 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
ABS	$	34,419	$	—	$	(538)	$	33,881	$	52,201	$	—	$	(967)	$	51,234
MBS:
GNMA - Residential	2,801,190		100		(564,468)		2,236,822		2,968,753		768		(492,643)		2,476,878
GNMA - Commercial	4,872,614		582		(918,371)		3,954,825		4,988,848		1,625		(656,952)		4,333,521
FHLMC and FNMA - Residential	1,445,144		—		(183,826)		1,261,318		1,539,416		243		(128,007)		1,411,652
Total investments in debt securities HTM	$	9,153,367	$	682	$	(1,667,203)	$	7,486,846	$	9,549,218	$	2,636	$	(1,278,569)	$	8,273,285

As of September 30, 2023 and December 31, 2022, the Company had investment securities with an estimated carrying value of $13.5 billion and $5.8 billion, respectively, pledged as collateral, which were comprised of the following: $7.5 billion and $2.7 billion, respectively, were pledged as collateral for the Company's borrowing capacity with the FRB; $3.0 billion and $2.7 billion, respectively, were pledged to secure public fund deposits; $2.5 billion and zero, respectively, were pledged as collateral for the Company's borrowing capacity with the FHLB, $112.1 million and $51.2 million, respectively, were pledged to various independent parties to secure repurchase agreements, support hedging relationships, and for recourse on loan sales; and $393.3 million and $418.0 million, respectively, were pledged to secure the Company's customer overnight sweep product. There were no amounts pledged to secure repurchase agreements in which the secured party has the right to sell or repledge the collateral as of September 30, 2023 or December 31, 2022. The Company also participates in Securities Financing Activities discussed further in Note 11 to these Condensed Consolidated Financial Statements.

At September 30, 2023 and December 31, 2022, the Company had $122.9 million and $80.4 million, respectively, of accrued interest related to investment securities which is included in the Other assets line of the Company's Condensed Consolidated Balance Sheets. No accrued interest related to investment securities was written off during the periods ended September 30, 2023 or December 31, 2022.

11

NOTE 2. INVESTMENT SECURITIES (continued)

Contractual Maturity of Investments in Debt Securities

Contractual maturities of the Company’s investments in debt securities AFS at September 30, 2023 were as follows:

(in thousands)	Amortized Cost(1)		Fair Value
Due within one year	$	215,439	$	215,179
Due after 1 year but within 5 years	197,662		193,930
Due after 5 years but within 10 years	271,489		256,864
Due after 10 years	6,536,251		5,504,184
Total	$	7,220,841	$	6,170,157

(1) Does not include unallocated fair value hedge basis adjustment.

Contractual maturities of the Company’s investments in debt securities HTM at September 30, 2023 were as follows:

(in thousands)	Amortized Cost		Fair Value
Due within one year	$	—	$	—
Due after 1 year but within 5 years	19,350		18,821
Due after 5 years but within 10 years	20,100		19,761
Due after 10 years	9,113,917		7,448,264
Total	$	9,153,367	$	7,486,846

Actual maturities may differ from contractual maturities when there is a right to call or prepay obligations with or without call or prepayment penalties.

Gross Unrealized Loss and Fair Value of Investments in Debt Securities AFS and HTM

The following table presents the aggregate amount of unrealized losses on debt securities in the Company’s AFS investment portfolios classified according to the amount of time those securities have been in a continuous loss position as of the dates indicated:

	September 30, 2023								December 31, 2022
	Less than 12 months				12 months or longer				Less than 12 months				12 months or longer
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	6,939	$	(5)	$	—	$	—	$	212,990	$	(2,481)	$	—	$	—
Corporate debt securities	180,504		(162)		99,896		(117)		365,702		(968)		—		—
ABS	6,913		(172)		495,366		(3,534)		269,158		(7,551)		221,508		(6,409)
MBS:
GNMA - Residential	1		—		2,814,681		(442,582)		1,269,413		(144,616)		1,811,609		(258,978)
GNMA - Commercial	—		—		525,541		(138,685)		149,717		(20,243)		425,711		(84,469)
FHLMC and FNMA - Residential	1,937		(222)		1,922,239		(460,869)		856,047		(82,515)		1,323,972		(311,802)
FHLMC and FNMA - Commercial	—		—		87,586		(4,367)		51,299		(3,099)		44,691		(1,009)
Total investments in debt securities AFS(1)	$	196,294	$	(561)	$	5,945,309	$	(1,050,154)	$	3,174,326	$	(261,473)	$	3,827,491	$	(662,667)

(1) Does not include unallocated fair value hedge basis adjustment.

12

NOTE 2. INVESTMENT SECURITIES (continued)

The following table presents the aggregate amount of unrealized losses on debt securities in the Company’s HTM investment portfolios classified according to the amount of time those securities have been in a continuous loss position as of the dates indicated:

	September 30, 2023								December 31, 2022
	Less than 12 months				12 months or longer				Less than 12 months				12 months or longer
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
ABS	$	25,626	$	(432)	$	8,256	$	(106)	$	37,510	$	(699)	$	13,725	$	(268)
MBS:
GNMA - Residential	117,238		(4,406)		2,116,871		(560,062)		775,414		(86,237)		1,598,422		(406,406)
GNMA - Commercial	70,360		(1,463)		3,861,562		(916,908)		2,208,789		(255,345)		2,052,433		(401,607)
FHLMC and FNMA - Residential	60,602		(534)		1,200,715		(183,292)		1,343,276		(128,007)		—		—
Total investments in debt securities HTM	$	273,826	$	(6,835)	$	7,187,404	$	(1,660,368)	$	4,364,989	$	(470,288)	$	3,664,580	$	(808,281)

Allowance for credit-related losses on AFS and HTM securities

The Company did not record an allowance for credit-related losses on AFS or HTM securities at September 30, 2023 or December 31, 2022. As discussed in Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for 2022, securities for which management expects risk of nonpayment of the amortized cost basis is zero do not have a reserve.

For securities that do not qualify for the zero credit loss expectation exception, management has concluded that the unrealized losses are not credit-related since (1) they are not related to the underlying credit quality of the issuers, (2) the entire contractual principal and interest due on these securities is currently expected to be recoverable, (3) the Company does not intend to sell these investments at a loss and (4) it is more likely than not that the Company will not be required to sell the investments before recovery of the amortized cost basis, which for the Company's debt securities may be at maturity.

Gains (Losses) and Proceeds on Sales of Investment Securities

Proceeds from sales of investment securities and the realized gross gains and losses from those sales were as follows for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Proceeds from the sales of AFS securities	$	—	$	333,584	$	211,171	$	530,832
AFS debt and other securities:
Gross realized gains	$	—	$	—	$	192	$	—
Gross realized losses	—		(27,038)		(4,809)		(27,038)
Net realized gains/(losses) on AFS and other securities	$	—	$	(27,038)	$	(4,617)	$	(27,038)
Total trading securities gains/(losses)	37,048		8,444		113,173		20,679
Total equity securities gains/(losses)	—		—		—		12,480
Total realized gains/(losses) in income from investments	$	37,048	$	(18,594)	$	108,556	$	6,121

The Company uses the specific identification method to determine the cost of the securities sold and the gain or loss recognized.

Trading Securities

The Company held $8.5 billion of trading securities as of September 30, 2023, compared to $5.9 billion held at December 31, 2022. Gains and losses on trading securities are recorded within Net gain on sale of investment securities on the Company's Condensed Consolidated Statements of Operations. At September 30, 2023, the Company had $7.8 billion of assets classified as trading securities pledged as collateral to counterparties that have the right to repledge these securities.

13

NOTE 2. INVESTMENT SECURITIES (continued)

Other Investments

Other investments consisted of the following as of the dates indicated:

(in thousands)	September 30, 2023		December 31, 2022
FHLB of Pittsburgh and FRB stock	$	646,685	$	519,294
LIHTC investments	570,453		492,706
Equity securities not held for trading (1)	60,995		104,161
Interest-bearing deposits with an affiliate bank	200,000		—
Total	$	1,478,133	$	1,116,161

(1)    Includes $2.6 million and $2.4 million of equity certificates related to an off-balance sheet securitization as of September 30, 2023 and December 31, 2022, respectively.

Other investments primarily include the Company's investment in the stock of the FHLB of Pittsburgh and the FRB. These stocks do not have readily determinable fair values because their ownership is restricted and there is no market for their sale. The stocks can be sold back only at their par value of $100 per share, and FHLB stock can be sold back only to the FHLB or to another member institution. Accordingly, these stocks are carried at cost. During the three months and nine months ended September 30, 2023, the Company purchased $0.3 million and $424.5 million of FHLB stock at par, and redeemed $65.5 million and $304.5 million of FHLB stock at par. The Company purchased $2.9 million and $7.4 million of FRB stock at par, and redeemed no FRB stock at par during the three months and nine months ended September 30, 2023. There was no gain or loss associated with these redemptions.

The Company's LIHTC investments are accounted for using the proportional amortization method. Equity securities are measured at fair value with changes in fair value recognized in net income, and consist primarily of CRA mutual fund investments.

Interest-bearing deposits include deposits maturing in more than 90 days with Santander affiliates that are not consolidated.

With the exception of equity and trading securities, which are measured at fair value, the Company evaluates these other investments for impairment based on the ultimate recoverability of the carrying value, rather than by recognizing temporary declines in value. The Company held an immaterial amount of equity securities without readily determinable fair values at the reporting date.

14

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES

Overall

The Company's LHFI are generally reported at their outstanding principal balances net of any cumulative charge-offs, unamortized deferred fees and costs and unamortized premiums or discounts. Certain LHFI are accounted for at fair value under the FVO. Certain loans are pledged as collateral for borrowings, securitizations, or SPEs. These loans totaled $62.2 billion at September 30, 2023 and $50.0 billion at December 31, 2022.

Loans that the Company intends to sell are classified as LHFS. The LHFS portfolio balance at September 30, 2023 was $435.8 million, compared to $99.6 million at December 31, 2022. For a discussion on the valuation of LHFS at fair value, see Note 13 to these Condensed Consolidated Financial Statements. During the period ended September 30, 2023, the Company reclassified approximately $317.8 million of Commercial auto loans to HFS, resulting in an immaterial loss recorded in non-interest income.

Interest on loans is credited to income as it is earned. Loan origination fees and certain direct loan origination costs are deferred and recognized as adjustments to interest income in the Condensed Consolidated Statements of Operations generally over the contractual life of the loan utilizing the interest method. Loan origination costs and fees and premiums and discounts on RICs are deferred and recognized in interest income over their estimated lives using estimated prepayment speeds, which are updated on a monthly basis. At September 30, 2023 and December 31, 2022, accrued interest receivable on the Company's loans was $612.0 million and $566.8 million, respectively.

Loan and Lease Portfolio Composition

The following presents the composition of loans and leases HFI by portfolio and by rate type as of the dates indicated:

	September 30, 2023				December 31, 2022
(dollars in thousands)	Amount		Percent		Amount		Percent
Commercial LHFI:
CRE loans	$	8,586,705	8.9	%	$	7,971,299	8.2	%
C&I loans	12,337,891		12.9	%	14,811,074		15.2	%
Multifamily loans	10,832,680		11.3	%	9,629,423		9.9	%
Other commercial(2)	7,381,924		7.7	%	7,982,107		8.2	%
Total commercial LHFI	$	39,139,200	40.8	%	$	40,393,903	41.5	%
Consumer loans secured by real estate:
Residential mortgages	4,908,746		5.1	%	5,202,862		5.3	%
Home equity loans and lines of credit	2,556,814		2.7	%	3,002,804		3.1	%
Total consumer loans secured by real estate	$	7,465,560	7.8	%	$	8,205,666	8.4	%
Consumer loans not secured by real estate:
RICs and auto loans	44,897,647		46.7	%	44,577,186		45.8	%
Personal unsecured loans	4,430,676		4.6	%	4,068,848		4.2	%
Other consumer(3)	66,858		0.1	%	92,726		0.1	%
Total consumer loans	$	56,860,741	59.2	%	$	56,944,426	58.5	%
Total LHFI(1)	$	95,999,941	100.0	%	$	97,338,329	100.0	%
Total LHFI:
Fixed rate	$	67,341,300	70.1	%	$	67,693,444	69.5	%
Variable rate	28,658,641		29.9	%	29,644,885		30.5	%
Total LHFI(1)	$	95,999,941	100.0	%	$	97,338,329	100.0	%

(1)Total LHFI includes unamortized deferred loan fees, net of deferred origination costs; unamortized purchase premiums, net of discounts; unamortized participation fees; accretable subvention; as well as purchase accounting adjustments. These items resulted in a net adjustment to the loan balances of $488.8 million and $286.7 million as of September 30, 2023 and December 31, 2022, respectively.

(2)Other commercial includes CEVF leveraged leases and loans.

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

15

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Portfolio segments and classes

The Company discloses information about the credit quality of its financing receivables at disaggregated levels, specifically defined as “portfolio segments” and “classes,” based on management’s systematic methodology for determining the ACL. The Company utilizes similar categorization compared to the financial statement categorization of loans to model and calculate the ACL and track the credit quality, delinquency and impairment status of the underlying loan populations. In disaggregating its financing receivables portfolio, the Company’s methodology begins with the commercial and consumer segments.

The commercial segmentation reflects line of business distinctions. The CRE line of business includes C&I owner-occupied real estate and specialized lending for investment real estate. C&I includes non-real estate-related commercial loans. "Multifamily" represents loans for multifamily residential housing units. “Other commercial” includes loans to global customer relationships in Latin America which are not defined as commercial or consumer for regulatory purposes. The remainder of the portfolio primarily represents the CEVF portfolio.

The Company's portfolio classes are substantially the same as its financial statement categorization of loans for consumer loan populations. “Residential mortgages” includes mortgages on residential property, including single family and 1-4 family units. "Home equity loans and lines of credit" include all organic home equity contracts and purchased home equity portfolios. "RICs and auto loans" includes the Company's direct automobile loan portfolios, but excludes RV and marine RICs. "Personal unsecured loans" includes personal revolving loans and credit cards. “Other consumer” includes an acquired portfolio of marine RICs and RV contracts.

ACL Rollforward by Portfolio Segment

The ACL is comprised of the ALLL and the reserve for unfunded lending commitments. The activity in the ACL by portfolio segment was as follows for the periods indicated:

	Three months ended September 30, 2023
(in thousands)	Commercial		Consumer		Total
ALLL, beginning of period	$	580,242	$	6,152,709	$	6,732,951
Credit loss expense	50,955		818,206		869,161
Charge-offs	(23,450)		(1,214,639)		(1,238,089)
Recoveries	14,781		605,662		620,443
Charge-offs, net of recoveries	$	(8,669)	$	(608,977)	$	(617,646)
ALLL, end of period	$	622,528	$	6,361,938	$	6,984,466
Reserve for unfunded lending commitments, beginning of period	$	78,446	$	7,281	$	85,727
Credit loss (benefit) on unfunded lending commitments	(11,645)		(1,224)		(12,869)
Reserve for unfunded lending commitments, end of period	$	66,801	$	6,057	$	72,858
Total ACL, end of period	$	689,329	$	6,367,995	$	7,057,324
	Three months ended September 30, 2022
(in thousands)	Commercial		Consumer		Total
ALLL, beginning of period	$	568,906	$	5,986,343	$	6,555,249
Credit loss expense	34,872		605,329		640,201
Charge-offs	(35,108)		(1,094,742)		(1,129,850)
Recoveries	11,136		598,374		609,510
Charge-offs, net of recoveries	$	(23,972)	$	(496,368)	$	(520,340)
ALLL, end of period	$	579,806	$	6,095,304	$	6,675,110
Reserve for unfunded lending commitments, beginning of period	$	75,712	$	10,461	$	86,173
Credit loss (benefit) on unfunded lending commitments	(2,609)		(1,186)		(3,795)
Reserve for unfunded lending commitments, end of period	$	73,103	$	9,275	$	82,378
Total ACL, end of period	$	652,909	$	6,104,579	$	6,757,488

16

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

	Nine months ended September 30, 2023
(in thousands)	Commercial		Consumer		Total
ALLL, beginning of period	$	562,216	$	6,217,783	$	6,779,999
Day 1: Adjustment to allowance for adoption of ASU 2022-02	4,986		50,254		55,240
Credit loss expense	79,974		1,540,293		1,620,267
Charge-offs	(71,539)		(3,380,617)		(3,452,156)
Recoveries	46,891		1,934,225		1,981,116
Charge-offs, net of recoveries	$	(24,648)	$	(1,446,392)	$	(1,471,040)
ALLL, end of period	$	622,528	$	6,361,938	$	6,984,466
Reserve for unfunded lending commitments, beginning of period	$	77,709	$	7,873	$	85,582
Credit loss (benefit) on unfunded lending commitments	(10,908)		(1,816)		(12,724)
Reserve for unfunded lending commitments, end of period	$	66,801	$	6,057	$	72,858
Total ACL, end of period	$	689,329	$	6,367,995	$	7,057,324
	Nine months ended September 30, 2022
(in thousands)	Commercial		Consumer		Total
ALLL, beginning of period	$	567,309	$	5,894,101	$	6,461,410
Credit loss expense	35,276		1,243,856		1,279,132
Charge-offs	(65,728)		(2,795,839)		(2,861,567)
Recoveries	42,949		1,753,186		1,796,135
Charge-offs, net of recoveries	$	(22,779)	$	(1,042,653)	$	(1,065,432)
ALLL, end of period	$	579,806	$	6,095,304	$	6,675,110
Reserve for unfunded lending commitments, beginning of period	$	91,191	$	12,903	$	104,094
Credit loss (benefit) on unfunded lending commitments	(18,088)		(3,628)		(21,716)
Reserve for unfunded lending commitments, end of period	$	73,103	$	9,275	$	82,378
Total ACL, end of period	$	652,909	$	6,104,579	$	6,757,488

17

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

The credit risk in the Company’s loan portfolios is driven by credit and collateral quality, and is affected by borrower-specific and economy-wide factors. In general, there is an inverse relationship between the credit quality of loans and projections of impairment losses so that loans with better credit quality require a lower expected loss reserve. The Company manages this risk through its underwriting, pricing strategies, credit policy standards, and servicing guidelines and practices, as well as the application of geographic and other concentration limits.

The Company estimates CECL based on prospective information as well as account-level models based on historical data. Unemployment, HPI, CRE price index and used vehicle index growth rates, along with loan level characteristics, are the key inputs used in the models for prediction of the likelihood that the borrower will default in the forecasted period (the PD) and the loss in the event of default (the LGD). GDP is also a key input used in the models for the prediction of the likelihood that a borrower will default.

The Company has determined the reasonable and supportable period to be three years, at which time the economic forecasts generally tend to revert to historical averages. The Company also utilizes qualitative adjustments to capture any additional risks that may not be captured in either the economic forecasts or in the historical data, including consideration of several factors such as the interpretation of economic trends and uncertainties, changes in the nature and volume of loan portfolios, trends in delinquency and collateral values, and concentration risk.

The Company generally uses a third-party vendor's consensus baseline macroeconomic scenario for the quantitative estimate and additional positive and negative macroeconomic scenarios to make qualitative adjustments for macroeconomic uncertainty and considers adjustments to macroeconomic inputs and outputs based on market volatility. The baseline scenario was based on the latest consensus forecasts available which showed an improvement in key variables in the current quarter, including an expected improvement in unemployment rates (which is a key driver to losses) and the GDP growth rate, offset by expected worsening of the commercial real estate outlook, indicating that there may be challenges ahead. The unemployment rate and used vehicle price index, which is a measure of wholesale used car price trends, are considered the most significant variables. Using the weighted-average of a range of economic forecast scenarios, we estimated at September 30, 2023 that the unemployment rate is expected to be approximately 4.2%, better than our previous estimate of 5.1% at December 31, 2022. Additionally, the weighted used vehicle index, where a higher number corresponds to a higher used car price at auction, is estimated at September 30, 2023 to be approximately 208 at the end of 2023 compared to our estimate at December 31, 2022 of approximately 183 for that period. While the economy saw significant recovery in 2022 and into 2023, there is still considerable uncertainty regarding overall lifetime loss estimates due to inflation and high interest rates.

The Company's ACL was $7.1 billion at September 30, 2023, an increase of $191.7 million from December 31, 2022. The increase in the ACL was primarily driven by a deterioration in the personal unsecured lending and CRE (including multifamily) portfolio, partially offset by improvement in the macroeconomic outlook for certain macro variables such as unemployment rate and used vehicle price index. The ACL for the consumer segment increased by $142.3 million, and the ACL for the commercial segment increased $49.4 million, for the period ended September 30, 2023 compared to December 31, 2022.

18

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Non-accrual loans by Class of Financing Receivable

The amortized cost basis of financing receivables that are non-accrual and other non-performing assets disaggregated by class of financing receivables (as well as the amount of non-accrual loans for which no related allowance is recorded) are as follows at the dates indicated:

	Non-accrual loans and other non-performing assets as of:(1)				Non-accrual loans with no related allowance
(in thousands)	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Non-accrual loans:
Commercial:
CRE	$	92,107	$	62,093	$	24,866	$	19,694
C&I	143,147		94,299		43,406		11,257
Multifamily	44,136		18,476		—		18,214
Other commercial	4,935		5,180		—		674
Total commercial loans	$	284,325	$	180,048	$	68,272	$	49,839
Consumer:
Residential mortgages	59,247		75,666		5,957		30,337
Home equity loans and lines of credit	88,927		82,664		16,107		37,755
RICs and auto loans	1,961,943		1,986,748		166,361		179,319
Personal unsecured loans	20,950		10,397		149		—
Other consumer	12,190		5,332		112		129
Total consumer loans	$	2,143,257	$	2,160,807	$	188,686	$	247,540
Total non-accrual loans	$	2,427,582	$	2,340,855	$	256,958	$	297,379
OREO	24,716		4,437		—		—
Repossessed vehicles	268,790		229,531		—		—
Foreclosed and other repossessed assets	2,169		1,128		—		—
Total OREO and other repossessed assets	$	295,675	$	235,096	$	—	$	—
Total non-performing assets	$	2,723,257	$	2,575,951	$	256,958	$	297,379
(1) Interest income recognized on a cash basis on nonaccrual loans was $54.8 million and $146.3 million for the three months and nine months ended September 30, 2023, respectively, and $45.1 million and $117.0 million for the three months and nine months ended September 30, 2022, respectively.

19

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Age Analysis of Past Due Loans

The Company generally considers an account delinquent when an obligor fails to pay substantially all (defined as 90%) of the scheduled payment by the due date. When an account is deferred, the loan is returned to accrual status during the deferral period and accrued interest related to the loan is evaluated for collectability.

The amortized cost of past due loans and accruing loans 90 days or greater past due disaggregated by class of financing receivables is summarized as follows at the dates indicated:

As of:	September 30, 2023
(in thousands)	30-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Total Financing Receivables		Amortized Cost > 90 Days and Accruing
Commercial:
CRE(2)	$	65,927	$	3,340	$	69,267	$	8,517,438	$	8,586,705	$	—
C&I(1)	76,166		36,276		112,442		12,660,769		12,773,211		—
Multifamily	8,335		42,493		50,828		10,781,852		10,832,680		—
Other commercial	73,635		2,519		76,154		7,305,770		7,381,924		—
Consumer:
Residential mortgages(3)	85,136		51,379		136,515		4,772,719		4,909,234		—
Home equity loans and lines of credit	30,837		73,616		104,453		2,452,361		2,556,814		—
RICs and auto loans	4,811,324		382,095		5,193,419		39,704,228		44,897,647		—
Personal unsecured loans	77,333		37,431		114,764		4,315,912		4,430,676		5,513
Other consumer	2,153		367		2,520		64,339		66,859		—
Total	$	5,230,846	$	629,516	$	5,860,362	$	90,575,388	$	96,435,750	$	5,513

(1) C&I loans includes $435.3 million of LHFS at September 30, 2023.

(2) CRE loans includes no LHFS at September 30, 2023.

(3) Residential mortgages includes $488 thousand of LHFS at September 30, 2023.

As of:	December 31, 2022
(in thousands)	30-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Commercial:
CRE(2)	$	6,971	$	3,972	$	10,943	$	7,971,986	$	7,982,929	$	—
C&I (1)	48,763		21,884		70,647		14,827,803		14,898,450		—
Multifamily	21,423		—		21,423		9,608,000		9,629,423		—
Other commercial	34,071		2,506		36,577		7,945,530		7,982,107		—
Consumer:
Residential mortgages(3)	76,167		68,237		144,404		5,059,007		5,203,411		—
Home equity loans and lines of credit	37,192		64,107		101,299		2,901,505		3,002,804		—
RICs and auto loans	4,581,952		345,316		4,927,268		39,649,918		44,577,186		—
Personal unsecured loans	42,691		18,620		61,311		4,007,537		4,068,848		3,719
Other consumer	3,752		386		4,138		88,588		92,726		—
Total	$	4,852,982	$	525,028	$	5,378,010	$	92,059,874	$	97,437,884	$	3,719

(1)C&I loans included $87.4 million of LHFS at December 31, 2022.

(2)CRE loans includes $11.6 million of LHFS at December 31, 2022.

(3) Residential mortgages included $549 thousand of LHFS at December 31, 2022.

20

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Commercial Lending Asset Quality Indicators

The Company's Risk Department performs a credit analysis and classifies certain loans over an internal threshold based on the commercial lending classifications described below:

PASS. Asset is well-protected by the current net worth and paying capacity of the obligor or guarantors, if any, or by the fair value less costs to acquire and sell any underlying collateral in a timely manner.

SPECIAL MENTION. Asset has potential weaknesses that deserve management’s close attention, which, if left uncorrected, may result in deterioration of the repayment prospects for an asset at some future date. Special mention assets are not adversely classified.

SUBSTANDARD. Asset is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. A well-defined weakness or weaknesses exist that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected.

DOUBTFUL. Exhibits the inherent weaknesses of a substandard credit. Additional characteristics exist that make collection or liquidation in full highly questionable and improbable, on the basis of currently known facts, conditions and values. Possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to the advantage and strengthening of the credit, an estimated loss cannot yet be determined.

LOSS. Credit is considered uncollectible and of such little value that it does not warrant consideration as an active asset. There may be some recovery or salvage value, but there is doubt as to whether, how much or when the recovery would occur.

21

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Each commercial loan is evaluated to determine its risk rating at least annually. The indicators represent the rating for loans as of the date presented based on the most recent assessment performed. Amortized cost basis of loans in the commercial portfolio segment by credit quality indicator, class of financing receivable, and year of origination are summarized as follows:

September 30, 2023	Commercial Loan Portfolio (2)
(dollars in thousands)	Amortized Cost by Origination Year
Regulatory Rating:	2023(1)		2022		2021		2020		2019		Prior		Total (3)
CRE
Pass	$	287,255	$	1,738,952	$	1,814,006	$	1,185,729	$	868,773	$	1,533,774	$	7,428,489
Special mention	—		153,954		57,197		60,724		99,636		65,321		436,832
Substandard	—		—		186,598		107,450		112,372		265,628		672,048
Doubtful	—		—		—		—		49,336		—		49,336
Total CRE	$	287,255	$	1,892,906	$	2,057,801	$	1,353,903	$	1,130,117	$	1,864,723	$	8,586,705
Current period gross write-offs - CRE	$	—	$	—	$	627	$	—	$	8,168	$	1,126	$	9,921
C&I(2)
Pass	$	939,826	$	3,375,309	$	1,948,873	$	1,327,250	$	1,020,996	$	2,384,350	$	10,996,604
Special mention	3,027		78,886		18,543		2,804		42,798		112,060		258,118
Substandard	—		11,880		94,607		64,695		10,498		293,470		475,150
N/A	235,486		459,571		215,780		75,586		48,171		8,745		1,043,339
Total C&I	$	1,178,339	$	3,925,646	$	2,277,803	$	1,470,335	$	1,122,463	$	2,798,625	$	12,773,211
Current period gross write-offs - C&I	$	2,071	$	16,621	$	10,603	$	3,937	$	6,045	$	16,911	$	56,188
Multifamily
Pass	$	1,239,569	$	3,154,637	$	1,453,801	$	1,039,354	$	1,452,268	$	1,318,897	$	9,658,526
Special mention	—		47,869		123,430		9,726		118,172		121,923		421,120
Substandard	—		207,755		79,048		61,372		161,574		243,285		753,034
Total multifamily	$	1,239,569	$	3,410,261	$	1,656,279	$	1,110,452	$	1,732,014	$	1,684,105	$	10,832,680
Current period gross write-offs - Multifamily	$	—	$	—	$	—	$	—	$	—	$	1,422	$	1,422
Remaining commercial
Pass	$	2,397,482	$	1,850,713	$	1,310,227	$	589,256	$	283,304	$	934,032	$	7,365,014
Special mention	—		226		4,484		—		—		3,825		8,535
Substandard	14		1,047		1,223		912		898		4,281		8,375
Total remaining commercial	$	2,397,496	$	1,851,986	$	1,315,934	$	590,168	$	284,202	$	942,138	$	7,381,924
Current period gross write-offs - Remaining commercial	$	205	$	—	$	—	$	—	$	—	$	3,803	$	4,008
Total commercial loans
Pass	$	4,864,132	$	10,119,611	$	6,526,907	$	4,141,589	$	3,625,341	$	6,171,053	$	35,448,633
Special mention	3,027		280,935		203,654		73,254		260,606		303,129		1,124,605
Substandard	14		220,682		361,476		234,429		285,342		806,664		1,908,607
Doubtful	—		—		—		—		49,336		—		49,336
N/A	235,486		459,571		215,780		75,586		48,171		8,745		1,043,339
Total commercial loans	$	5,102,659	$	11,080,799	$	7,307,817	$	4,524,858	$	4,268,796	$	7,289,591	$	39,574,520
Current period gross write-offs - Total commercial	$	2,276	$	16,621	$	11,230	$	3,937	$	14,213	$	23,262	$	71,539

(1)Loans originated during the nine months ended September 30, 2023.

(2)Includes $435.3 million of LHFS at September 30, 2023.

(3)Includes $177.2 million revolving loans converted to term loans.

22

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

December 31, 2022	Commercial Loan Portfolio (2)
(dollars in thousands)	Amortized Cost by Origination Year
Regulatory Rating:	2022(1)		2021		2020		2019		2018		Prior		Total (3)
CRE
Pass	$	1,155,364	$	1,699,342	$	1,607,481	$	1,053,514	$	678,388	$	1,130,533	$	7,324,622
Special mention	—		—		8,898		87,698		87,446		45,745		229,787
Substandard	—		47,337		45,843		91,346		100,372		143,622		428,520
Total CRE	$	1,155,364	$	1,746,679	$	1,662,222	$	1,232,558	$	866,206	$	1,319,900	$	7,982,929
C&I(2)
Pass	$	3,775,592	$	2,350,233	$	1,947,040	$	1,409,378	$	1,463,998	$	2,032,455	$	12,978,696
Special mention	96,074		16,032		65,864		46,573		8,542		77,027		310,112
Substandard	16,344		112,366		34,765		8,189		94,882		147,716		414,262
N/A	627,338		324,260		136,426		87,095		17,355		2,906		1,195,380
Total C&I	$	4,515,348	$	2,802,891	$	2,184,095	$	1,551,235	$	1,584,777	$	2,260,104	$	14,898,450
Multifamily
Pass	$	3,389,302	$	1,491,469	$	826,887	$	1,520,926	$	673,355	$	889,352	$	8,791,291
Special mention	—		70,869		25,560		52,534		42,430		113,535		304,928
Substandard	—		12,962		64,562		110,378		212,726		132,576		533,204
Total multifamily	$	3,389,302	$	1,575,300	$	917,009	$	1,683,838	$	928,511	$	1,135,463	$	9,629,423
Remaining commercial
Pass	$	3,488,006	$	1,853,056	$	982,849	$	580,025	$	248,510	$	823,200	$	7,975,646
Special mention	—		1,279		—		—		—		—		1,279
Substandard	235		814		1,052		971		984		1,126		5,182
Total remaining commercial	$	3,488,241	$	1,855,149	$	983,901	$	580,996	$	249,494	$	824,326	$	7,982,107
Total commercial loans
Pass	$	11,808,264	$	7,394,100	$	5,364,257	$	4,563,843	$	3,064,251	$	4,875,540	$	37,070,255
Special mention	96,074		88,180		100,322		186,805		138,418		236,307		846,106
Substandard	16,579		173,479		146,222		210,884		408,964		425,040		1,381,168
N/A	627,338		324,260		136,426		87,095		17,355		2,906		1,195,380
Total commercial loans	$	12,548,255	$	7,980,019	$	5,747,227	$	5,048,627	$	3,628,988	$	5,539,793	$	40,492,909

(1)Loans originated during the year ended December 31, 2022.

(2)Includes $99.0 million of LHFS at December 31, 2022.

(3)Includes $224.2 million revolving loans converted to term loans.

23

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Consumer Lending Asset Quality Indicators-Credit Score

Consumer financing receivables for which either an internal or external credit score is a core component of the allowance model are summarized by credit score determined at origination as follows:

As of September 30, 2023	RICs and auto loans
(dollars in thousands)	Amortized Cost by Origination Year(3)
Credit Score Range	2023(1)		2022		2021		2020		2019		Prior		Total		Percent
No FICO(2)	$	1,014,539	$	919,854	$	508,430	$	249,932	$	144,650	$	84,806	$	2,922,211	6.5	%
<600	4,428,390		4,680,559		3,137,394		1,429,398		912,410		589,354		15,177,505		33.8	%
600-639	2,823,985		2,808,325		1,496,933		590,344		359,524		182,536		8,261,647		18.4	%
>=640	5,589,656		6,068,335		4,049,187		1,703,705		874,467		250,934		18,536,284		41.3	%
Total	$	13,856,570	$	14,477,073	$	9,191,944	$	3,973,379	$	2,291,051	$	1,107,630	$	44,897,647	100.0	%
Current period gross write-offs - RICs and auto loans	$	182,827	$	1,518,763	$	834,770	$	291,775	$	194,420	$	156,947	$	3,179,502

(1)    Loans originated during the nine months ended September 30, 2023.

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

(3)    Excludes LHFS.

As of December 31, 2022	RICs and auto loans
(dollars in thousands)	Amortized Cost by Origination Year(3)
Credit Score Range	2022(1)		2021		2020		2019		2018		Prior		Total		Percent
No FICO(2)	$	1,390,093	$	773,434	$	385,534	$	236,876	$	120,243	$	81,560	$	2,987,740	6.7	%
<600	6,427,169		4,479,653		2,120,477		1,418,891		757,190		399,144		15,602,524		35.0	%
600-639	3,801,538		2,142,540		878,099		570,636		264,720		102,409		7,759,942		17.4	%
>=640	8,192,528		5,633,422		2,497,563		1,445,413		356,267		101,787		18,226,980		40.9	%
Total	$	19,811,328	$	13,029,049	$	5,881,673	$	3,671,816	$	1,498,420	$	684,900	$	44,577,186	100.0	%

(1)    Loans originated during the year ended December 31, 2022.

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

(3)    Excludes LHFS.

As of September 30, 2023	Personal Unsecured loans
(dollars in thousands)	Amortized Cost by Origination Year
Credit Score Range	2023(1)		2022		2021		2020		2019		Prior		Total		Percent
No FICO(2)	$	8,684	$	—	$	—	$	—	$	—	$	55	$	8,739	0.2	%
<600	—		9		35		7		—		1,513		1,564		—	%
600-639	8,263		12,638		1,126		361		444		4,076		26,908		0.6	%
>=640	1,715,862		1,856,773		645,675		50,590		22,491		102,074		4,393,465		99.2	%
Total	$	1,732,809	$	1,869,420	$	646,836	$	50,958	$	22,935	$	107,718	$	4,430,676	100.0	%
Current period gross write-offs - Personal unsecured loans	$	7,416	$	108,581	$	51,297	$	3,351	$	1,501	$	3,921	$	176,067

(1)    Loans originated during the nine months ended September 30, 2023.

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

As of December 31, 2022	Personal Unsecured loans
(dollars in thousands)	Amortized Cost by Origination Year
Credit Score Range	2022(1)		2021		2020		2019		2018		Prior		Total		Percent
No FICO(2)	$	9,044	$	—	$	—	$	—	$	—	$	73	$	9,117	0.2	%
<600	33		8		22		19		43		1,605		1,730		—	%
600-639	18,430		1,745		629		790		383		4,164		26,141		0.6	%
>=640	2,663,981		1,085,026		93,544		38,661		41,062		109,586		4,031,860		99.2	%
Total	$	2,691,488	$	1,086,779	$	94,195	$	39,470	$	41,488	$	115,428	$	4,068,848	100.0	%

(1)    Loans originated during the year ended December 31, 2022.

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

24

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Consumer Lending Asset Quality Indicators-FICO and LTV Ratio

For both residential and home equity loans, loss severity assumptions are incorporated in the loan and lease loss reserve models to estimate loan balances that will ultimately charge off. These assumptions are based on recent loss experience within various current LTV bands within these portfolios. LTVs are refreshed quarterly by applying Federal Housing Finance Agency Home price index changes at a state-by-state level to the last known appraised value of the property to estimate the current LTV. The Company's CECL loss calculation incorporates the refreshed LTV information to update the distribution of defaulted loans by LTV as well as the associated LGD for each LTV band. Reappraisals on a recurring basis at the individual property level are not considered cost-effective or necessary; however, reappraisals are performed on certain higher risk accounts to support line management activities, default servicing decisions, or when other situations arise for which the Company believes the additional expense is warranted.

FICO scores are refreshed quarterly, where possible. The indicators disclosed represent the credit scores for loans as of the date presented based on the most recent assessment performed.

Residential mortgage and home equity financing receivables by LTV and FICO range are summarized as follows:

As of September 30, 2023	Amortized Cost by Origination Year (4)
(dollars in thousands)
Residential mortgages	2023(1)		2022		2021		2020		2019		Prior		Grand Total		Revolving Loans
LTV Ratios (3)
No LTV available (2)	$	—	$	—	$	—	$	—	$	—	$	1,892	$	1,892	$	—
<= 70%	—		184,765		1,015,117		894,176		603,408		2,028,642		4,726,108		—
70.01% - 110%	—		91,684		82,202		—		275		6,207		180,368		—
Greater than 110%	—		—		—		—		—		378		378		—
Total residential mortgages	$	—	$	276,449	$	1,097,319	$	894,176	$	603,683	$	2,037,119	$	4,908,746	$	—
FICO Scores
No FICO score available	$	—	$	—	$	—	$	—	$	—	$	2,663	$	2,663	$	—
<600	—		7,774		16,019		11,633		26,720		111,624		173,770		—
600-679	—		24,290		46,575		33,023		49,534		186,720		340,142		—
680-759	—		76,319		255,748		213,194		173,447		546,338		1,265,046		—
>=760	—		168,066		778,977		636,326		353,982		1,189,774		3,127,125		—
Total residential mortgages	$	—	$	276,449	$	1,097,319	$	894,176	$	603,683	$	2,037,119	$	4,908,746	$	—
Current period gross write-offs - Residential mortgages	$	—	$	33	$	—	$	—	$	16	$	62	$	111
Home equity
LTV Ratios
No LTV available (2)	$	—	$	1,731	$	3,586	$	3,063	$	3,700	$	55,597	$	67,677	$	42,626
<= 70%	—		40,109		173,248		186,655		234,893		1,823,528		2,458,433		2,380,662
70.01% - 110%	—		8,744		2,708		349		23		16,067		27,891		26,605
Greater than 110%	—		667		331		—		—		1,815		2,813		2,813
Total home equity	$	—	$	51,251	$	179,873	$	190,067	$	238,616	$	1,897,007	$	2,556,814	$	2,452,706
FICO Scores
No FICO score available	$	—	$	713	$	2,502	$	2,644	$	3,319	$	53,810	$	62,988	$	37,951
<600	—		381		2,334		3,778		6,073		125,786		138,352		122,068
600-679	—		3,650		8,233		10,488		22,143		231,539		276,053		256,165
680-759	—		17,773		62,160		63,735		74,276		608,536		826,480		809,298
>=760	—		28,734		104,644		109,422		132,805		877,336		1,252,941		1,227,224
Total home equity	$	—	$	51,251	$	179,873	$	190,067	$	238,616	$	1,897,007	$	2,556,814	$	2,452,706
Current period gross write-offs - Home equity	$	—	$	—	$	—	$	12	$	11	$	666	$	689

(1) Loans originated during the nine months ended September 30, 2023. The Company ceased origination of new residential mortgage and home equity loans in 2022.

(2) Balances in the "No LTV available" or "No FICO score available" ranges primarily represent loans serviced by others, in run-off portfolios or for which a current LTV or FICO score is unavailable.

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

(4) Excludes LHFS

25

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

As of December 31, 2022	Amortized Cost by Origination Year (4)
(dollars in thousands)
Residential mortgages	2022(1)		2021		2020		2019		2018		Prior		Grand Total		Revolving Loans
LTV Ratios (3)
No LTV available (2)	$	3,643	$	—	$	—	$	—	$	—	$	2,452	$	6,095	$	—
<= 70%	152,701		1,002,042		909,631		632,589		301,007		1,894,872		4,892,842		—
70.01% - 110%	124,348		138,416		26,284		1,109		133		12,117		302,407		—
Greater than 110%	—		—		—		—		—		1,518		1,518		—
Total residential mortgages	$	280,692	$	1,140,458	$	935,915	$	633,698	$	301,140	$	1,910,959	$	5,202,862	$	—
FICO Scores
No FICO score available	$	—	$	—	$	—	$	—	$	—	$	3,797	$	3,797	$	—
<600	4,142		11,386		10,011		26,269		19,036		99,192		170,036		—
600-679	31,150		38,784		39,880		55,183		34,099		187,788		386,884		—
680-759	78,838		270,703		234,685		180,914		104,859		516,661		1,386,660		—
>=760	166,562		819,585		651,339		371,332		143,146		1,103,521		3,255,485		—
Total residential mortgages	$	280,692	$	1,140,458	$	935,915	$	633,698	$	301,140	$	1,910,959	$	5,202,862	$	—
Home equity
LTV Ratios
No LTV available (2)	$	1,732	$	2,761	$	3,097	$	3,501	$	4,620	$	58,329	$	74,040	$	46,632
<= 70%	40,187		181,790		210,585		266,668		342,939		1,826,910		2,869,079		2,786,266
70.01% - 110%	10,626		16,561		490		73		24		27,879		55,653		53,482
Greater than 110%	1,066		667		—		—		—		2,299		4,032		4,032
Total home equity	$	53,611	$	201,779	$	214,172	$	270,242	$	347,583	$	1,915,417	$	3,002,804	$	2,890,412
FICO Scores
No FICO score available	$	686	$	2,582	$	2,764	$	3,458	$	4,497	$	55,902	$	69,889	$	42,490
<600	150		1,900		2,384		5,037		14,119		118,276		141,866		123,744
600-679	1,715		7,591		11,629		22,646		34,051		244,795		322,427		302,644
680-759	17,796		68,756		69,834		85,248		112,138		612,141		965,913		942,837
>=760	33,264		120,950		127,561		153,853		182,778		884,303		1,502,709		1,478,697
Total home equity	$	53,611	$	201,779	$	214,172	$	270,242	$	347,583	$	1,915,417	$	3,002,804	$	2,890,412

(1) Loans originated during the year ended December 31, 2022.

(2) Balances in the "No LTV available" or "No FICO score available" ranges primarily represent loans serviced by others, in run-off portfolios or for which a current LTV or FICO score is unavailable.

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

(4) Excludes LHFS.

During the nine months ended September 30, 2023, the Company reported $24.2 million in gross charge-offs related to other consumer portfolios.

26

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Loan Modifications

Occasionally the Company modifies loans to customers in financial difficulty by providing term extensions, payment deferrals, and interest rate reductions. When a loan is modified, the related unamortized net fees and costs and any prepayment penalties are carried forward and any fees received, and direct loan origination costs associated with the refinancing or restructuring are deferred. Additionally, the EIR is recalculated based upon the amortized cost basis of the modified loan and its revised contractual cash flows. If the modification results in a new loan, unamortized fees and costs from the original loan are recognized into income.

All of the Company’s commercial loan modifications are based on the circumstances of the individual customer, including specific customers' complete relationship with the Company. Loan terms are modified to meet each borrower’s specific circumstances at a point in time and may allow for modifications such as term extensions, covenant waivers, payment holidays and interest rate reductions. Commercial loan modifications are generally restructured to allow for an upgraded risk rating and return to accrual status after a sustained period of payment performance has been achieved (typically 12 months for monthly payment schedules).

The primary modification program for the Company’s residential mortgage and home equity portfolios is a proprietary program designed to keep customers in their homes and, when appropriate, prevent them from entering into foreclosure. The program is available to all customers facing a financial hardship regardless of their delinquency status. The main goal of the modification program is to review the customer’s entire financial condition to ensure that the proposed modified payment solution is affordable according to a specific DTI ratio range. The main modification benefits of the program allow for term extensions, interest rate reductions, and/or deferment of principal. The Company reviews each customer on a case-by-case basis to determine which benefit or combination of benefits will be offered to achieve the target DTI range.

For RICs and auto loans, the Company at times offers deferrals under which the consumer is allowed to defer a maximum of three payments per event to the end of the loan. We limit the frequency of each new deferral that may be granted to one deferral after completion of at least eight payments from origination and eight payments between each extension. The maximum number of months extended for the life of the loan for all automobile RICs is eight for non-natural disaster extensions and twelve for natural disaster extensions. Some marine and RV contracts also have a maximum of twelve months extension to reflect their longer terms. Additionally, we generally limit the granting of deferrals on new accounts until a requisite number of payments has been received. During the deferral period, we continue to accrue and collect interest on the loan in accordance with the terms of the deferral agreement. Some auto loan modifications include a reduction of the interest rate and may include an extension of term to eligible borrowers at risk of default and repossession of the financed vehicle.

When estimating the ACL, the Company uses a statistical methodology based on an expected credit loss approach that focuses on forecasting the expected credit loss components (i.e., PD, payoff, LGD and EAD) on a loan level basis to estimate the expected future lifetime losses. This methodology generally does not change when loans are modified. However, the Company monitors credit quality indicators and delinquency, and adjusts the allowance as those factors change. The Company generally uses a DCF approach for large impaired commercial loans. For all collateral-dependent loans, the Company measures the ACL as the difference between the asset’s amortized cost basis and the fair value of the underlying collateral as of the reporting date, adjusted for expected costs to sell. Refer to Note 1 of our Annual Report on Form 10-K for 2022 for more information on the ACL.

The following table shows the amortized cost basis at the end of the reporting period for loans modified during the reporting period to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of modification granted. Short-term modifications (three months or less) are not included in these tables.

27

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

	Payment Deferral Only
	Three months ended				Nine months ended
	September 30, 2023				September 30, 2023
(dollars in thousands)	Amortized Cost		% of Total Class of Financing Receivable		Amortized Cost		% of Total Class of Financing Receivable
Commercial:
CRE	$	64,427	0.75	%	$	64,600	0.75	%
C&I	23,758		0.19	%	71,824		0.56	%
Multifamily	59,521		0.55	%	62,342		0.58	%
Consumer:
RICs and auto loans	261,306		0.58	%	608,640		1.36	%
Total	$	409,012	0.42	%	$	807,406	0.84	%

	All Other Modifications
	Three months ended				Nine months ended
	September 30, 2023				September 30, 2023
(dollars in thousands)	Amortized Cost		% of Total Class of Financing Receivable		Amortized Cost		% of Total Class of Financing Receivable
Commercial:
C&I	$	36,933	0.29	%	$	38,446	0.30	%
Other commercial	—		—	%	23		—	%
Consumer:
Residential mortgages	1,890		0.04	%	3,757		0.08	%
Home equity loans and lines of credit	1,167		0.05	%	3,865		0.15	%
RICs and auto loans	90,928		0.20	%	331,107		0.74	%
Total	$	130,918	0.14	%	$	377,198	0.39	%

28

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table describes the financial effects of the modifications made to borrowers experiencing financial difficulty:

Loan Type	Modification Type	Financial Effect
RICs and auto loans	Payment deferral	Provide payment deferrals to borrowers through our deferral program, which allows a customer to defer payments for a maximum of up to eight months over the life of the loan. The deferred payments are added to the end of the original loan term.
Commercial loans	Payment deferral	Provide payment deferrals to commercial borrowers through our deferral program. The deferred payments are added to the end of the original loan term.
Consumer secured by real estate	All other modification types	Provide modifications consisting of a combination of term extension, interest rate reduction, and/or deferment of principal on a case-by-case basis to determine which benefit or combination of benefits will be offered to achieve the target DTI range.
RICs and auto loans	All other modification types	Provides reduction in interest rate and maturity date extension of up to 36 months beyond current maturity date resulting in reduction to monthly payment.

29

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

Performance of Modified Loans

The Company monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the current period:

	Amortized Cost
	As of September 30, 2023
(dollars in thousands)	Current		30-89 DPD		90+ DPD
Commercial:
CRE	$	64,600	$	—	$	—
C&I	82,602		27,378		290
Multifamily	56,627		—		5,715
Other commercial	23		—		—
Consumer:
Residential mortgages	3,202		555		—
Home equity loans and lines of credit	3,613		40		212
RICs and auto loans	649,146		266,772		23,829
Total	$	859,813	$	294,745	$	30,046

Payment Defaults Which Have Had a Prior Modification

A modified loan is generally considered to have subsequently defaulted if, after modification, the loan becomes 90 DPD. For RICs, a modified loan is considered to have subsequently defaulted after modification at the earlier of the date of repossession or 120 DPD. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Refer to Note 1 of our Annual Report on Form 10-K for 2022 for more information on the Company's charge-off policy. The following table provides the amortized cost basis of financing receivables that had a payment default during the period and were modified in the period before default due to the borrower's financial difficulty:

	Amortized Cost				Amortized Cost
	Three months ended				Year ended
	September 30, 2023				September 30, 2023
	Payment deferral		All other modification types		Payment deferral		All other modification types
Commercial:
C&I	$	391	$	93	$	548	$	118
Consumer:
RICs and auto loans	21,327		14,145		28,514		18,207
Total	$	21,718	$	14,238	$	29,062	$	18,325

30

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

TDR Loans

Prior to the adoption of ASU 2022-02 (as discussed in Note 1), the Company followed the TDR guidance effective at the time. The following table summarizes the Company’s performing and non-performing TDRs at the date indicated:

(in thousands)	December 31, 2022
Performing	$	2,694,007
Non-performing	478,431
Total (1)	$	3,172,438

(1) Excludes LHFS.

TDR Activity by Class of Financing Receivable

The Company's modifications consist primarily of term extensions. The following tables detail the activity of TDRs for period indicated:

	Three months ended September 30, 2022
	Number of Contracts	Pre-TDR Recorded Investment(1)		Post-TDR Recorded Investment(2)
	(dollars in thousands)
Commercial:
C&I	35	$	5,076	$	5,082
Other commercial	3	1		1
Consumer:
Residential mortgages(3)	3	1,264		1,262
Home equity loans and lines of credit	9	953		1,026
RICs and auto loans	13,392	247,175		247,048
Total	13,442	$	254,469	$	254,419
	Nine months ended September 30, 2022
(dollars in thousands)	Number of Contracts	Pre-TDR Recorded Investment(1)		Post-TDR Recorded Investment(2)
Commercial:
CRE	45	$	7,465	$	7,465
C&I	269	12,184		12,192
Multi-family	17	7,168		7,168
Other commercial	15	228		228
Consumer:
Residential mortgages(3)	22	6,234		6,232
Home equity loans and lines of credit	73	9,409		9,786
RICs and auto loans	31,042	555,347		554,822
Personal unsecured loans	2	23		23
Other consumer	1	1,250		1,250
Total	31,486	$	599,308	$	599,166

(1) Pre-TDR modification amount is the month-end balance prior to the month in which the modification occurred.

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

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

31

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

TDRs Which Have Subsequently Defaulted

A TDR is generally considered to have subsequently defaulted if, after modification, the loan becomes 90 DPD. For RICs, a TDR is considered to have subsequently defaulted after modification at the earlier of the date of repossession or 120 DPD. The following table details period-end amortized cost balances of TDRs that became TDRs during the past twelve-month period and have subsequently defaulted during the period presented.

	Three months ended September 30,				Nine months ended September 30,
		2022			2022
(dollars in thousands)		Number of Contracts	Recorded Investment(1)		Number of Contracts	Recorded Investment(1)
Commercial
Other commercial		—	$	—	1	$	11
Consumer:
Residential mortgages		2	296		82	$	28,945
Home equity loans and lines of credit		4	321		39	5,268
RICs and auto loans		1,240	25,382		4,143	78,390
Personal unsecured loans		—	—		14	196
Other consumer		—	—		2	57
Total		1,246	$	25,999	4,281	$	112,867

(1)Represents the period-end balance.

32

NOTE 4. OPERATING LEASE ASSETS, NET

The Company has operating leases, including leased vehicles and commercial equipment vehicles and aircraft, which are included in the Company's Condensed Consolidated Balance Sheets as Operating lease assets, net.

Operating lease assets, net consisted of the following as of the periods indicated:

(in thousands)	September 30, 2023		December 31, 2022
Leased vehicles	$	17,591,391	$	18,241,836
Less: accumulated depreciation	(3,634,754)		(3,699,350)
Depreciated net capitalized cost	$	13,956,637	$	14,542,486
Manufacturer subvention payments, net of accretion	(545,781)		(447,009)
Origination fees and other costs	280,464		170,435
Leased vehicles, net	$	13,691,320	$	14,265,912
Commercial equipment vehicles and aircraft, gross	$	—	$	2,221
Less: accumulated depreciation	—		(1,022)
Commercial equipment vehicles and aircraft, net	$	—	$	1,199
Total operating lease assets, net	$	13,691,320	$	14,267,111

The following summarizes the future minimum rental payments due to the Company as lessor under operating leases as of September 30, 2023 (in thousands):

2023	$	599,881
2024	1,801,566
2025	1,044,025
2026	334,779
2027	4,683
Total	$	3,784,934

During the three months and nine months ended September 30, 2023, the Company recognized $12.9 million and $55.3 million, respectively, of net gains on the sale of operating lease assets that had been returned to the Company at the end of the lease term, compared to $19.7 million and $66.0 million recognized during the three months and nine months ended September 30, 2022, respectively. These amounts are recorded within Miscellaneous income, net in the Company's Condensed Consolidated Statements of Operations.

NOTE 5. GOODWILL AND OTHER INTANGIBLES

Goodwill

Goodwill is assigned to reporting units, which are operating segments or one level below an operating segment, as of the acquisition date. The following table presents the roll-forward of the Company's goodwill by its reporting units for the periods indicated:

(in thousands)	Auto		CBB		C&I		CRE		CIB		Total
Goodwill at December 31, 2022	$	1,238,676	$	159,026	$	52,198	$	1,015,131	$	302,701	$	2,767,732
Deferred tax acquisition adjustment	—		—		—		—		(1,067)		(1,067)
Goodwill at September 30, 2023	$	1,238,676	$	159,026	$	52,198	$	1,015,131	$	301,634	$	2,766,665

During the first quarter of 2023, there was an immaterial adjustment to the value of goodwill acquired in connection with the 2022 acquisition of PCH. During the three months and nine months ended September 30, 2023, there were no other additions, re-allocations, impairments, or disposals of goodwill.

33

NOTE 5. GOODWILL AND OTHER INTANGIBLES (continued)

The Company evaluates goodwill for impairment at the reporting unit level. The Company completes its annual goodwill impairment test as of October 1 of each year. The Company conducted its last annual goodwill impairment tests as of October 1, 2022 using generally accepted valuation methods. As a result of that impairment test, no goodwill impairment was identified.

Other Intangible Assets

The following table details amounts related to the Company's intangible assets subject to amortization for the dates indicated.

	September 30, 2023				December 31, 2022
(in thousands)	Net Carrying Amount		Accumulated Amortization		Net Carrying Amount		Accumulated Amortization
Intangibles subject to amortization:
Dealer networks	$	242,833	$	(227,167)	$	260,458	$	(209,542)
Stellantis relationship	6,357		(132,393)		10,261		(128,489)
Other intangibles	47,550		(44,754)		55,914		(66,695)
Total intangibles subject to amortization	$	296,740	$	(404,314)	$	326,633	$	(404,726)

At September 30, 2023 and December 31, 2022, the Company did not have any intangibles, other than goodwill, that were not subject to amortization.

Amortization expense on intangible assets was $9.3 million and $29.9 million and $11.0 million and $36.0 million for the three months and nine months ended September 30, 2023 and 2022, respectively.

The estimated aggregate amortization expense related to intangibles, excluding any impairment charges, for each of the five succeeding calendar years ending December 31 is:

Year	Calendar Year Amount		Recorded To Date		Remaining Amount To Record
	(in thousands)
2023	$	39,110	$	29,896	$	9,214
2024	37,954		—		37,954
2025	34,693		—		34,693
2026	32,496		—		32,496
2027	28,650		—		28,650
Thereafter	153,733		—		153,733

34

NOTE 6. OTHER ASSETS

The following is a detail of items that comprised Other assets at the periods indicated:

(in thousands)	September 30, 2023		December 31, 2022
Operating lease ROU assets	$	446,008	$	532,667
Deferred tax assets	212,478		221,602
Accrued interest receivable	844,757		685,229
Derivative assets at fair value	1,755,704		1,390,218
Other real estate owned and other repossessed assets	295,675		235,096
Equity method investments	307,584		265,392
MSRs	104,523		107,383
Income tax receivables	379,118		400,063
Prepaid expense	520,996		223,815
Miscellaneous assets and receivables	783,743		684,985
Total Other assets	$	5,650,586	$	4,746,450

Operating lease ROU assets

We have operating leases for real estate and non-real estate assets. Real estate leases relate to office space and bank/lending retail branches. Non-real estate leases include disaster recovery centers, data centers, ATMs, vehicles and certain equipment leases. Real estate leases may include one or more options to renew, with renewal terms that can extend the lease term generally from one to five years. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

For the three months and nine months ended September 30, 2023, operating lease expenses were $34.5 million and $122.7 million, respectively, compared to $38.4 million and $100.6 million for the corresponding periods in 2022. Sublease income was $1.1 million and $3.0 million, respectively, for the three months and nine months ended September 30, 2023, compared to $1.1 million and $3.0 million for the corresponding periods in 2022. These are reported within Occupancy and equipment expenses in the Company’s Condensed Consolidated Statements of Operations.

35

NOTE 6. OTHER ASSETS (continued)

Supplemental balance sheet information related to leases was as follows:

Maturity of Lease Liabilities at September 30, 2023	Total Operating leases
	(in thousands)
2023	$	36,181
2024	138,238
2025	114,096
2026	85,047
2027	72,865
Thereafter	126,472
Total lease liabilities	$	572,899
Less: Interest	(45,811)
Present value of lease liabilities	$	527,088

Supplemental Balance Sheet Information	September 30, 2023	December 31, 2022
Operating lease ROU assets	$446,008	$532,667
Other liabilities	$527,088	$607,432
Weighted-average remaining lease term (years)	5.7	6.0
Weighted-average discount rate	3.0%	3.0%

	Nine months ended September 30,
Other Information	2023		2022
	(in thousands)
Operating cash flows from operating leases(1)	$	(115,681)	$	(116,159)
Leased assets obtained in exchange for new operating lease liabilities	$	27,958	$	127,958

(1) Activity is included within the net change in other liabilities on the SCF.

The remainder of Other assets is comprised of:

•Deferred tax asset, net - Refer to Note 15 of these Condensed 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 12 to these Condensed 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 13.

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

•OREO and other repossessed assets includes property and vehicles recovered through foreclosure and repossession.

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

36

NOTE 7. VIEs

The Company transfers RICs and vehicle leases into newly-formed securitization Trusts that then issue one or more classes of notes payable backed by the collateral. The Company’s continuing involvement with these Trusts is in the form of servicing the assets and, generally, through holding residual interests in the Trusts. The Trusts are considered VIEs under GAAP, and the Company may or may not consolidate these VIEs on its Condensed Consolidated Balance Sheets.

The collateral and borrowings under credit facilities and securitization notes payable of the Company’s consolidated VIEs remain on the Condensed Consolidated Balance Sheets. The Company recognizes finance charges, fee income, and provision for credit losses on the RICs, and leased vehicles and interest expense on the debt. Revolving credit facilities generally also utilize entities that are considered VIEs which are included on the Condensed Consolidated Balance Sheets.

The Company also uses a titling trust to originate and hold its leased vehicles and the associated leases, for administrative efficiency and also to facilitate the pledging of leases to financing facilities or the sale of leases to other parties, without incurring the costs and administrative burden of retitling the leased vehicles. In this process, the leases may be transferred to separate legal units within the titling trust to segregate them for ownership purposes, including for securitizations. This does not result in any changes to the accounting for the leases. This titling trust is considered a VIE. Refer to Note 4 to these Condensed Consolidated Financial Statements for further information on the Company's leased vehicles.

On-balance sheet VIEs

The assets of consolidated VIEs are presented based upon the legal transfer of the underlying assets in order to reflect legal ownership. Certain of these assets can be used only to settle obligations of the consolidated VIEs and the liabilities of those entities for which creditors (or beneficial interest holders) do not have recourse to the Company's general credit.

The assets and liabilities of consolidated VIEs included the following at the dates indicated:

(in thousands)	September 30, 2023		December 31, 2022
Assets
Restricted cash	$	982,009	$	923,485
LHFI	26,300,656		27,138,450
Operating lease assets, net (1)	13,691,320		14,267,111
Various other assets	665,425		716,707
Total Assets	$	41,639,410	$	43,045,753
Liabilities
Notes payable	$	26,363,198	$	31,582,685
Various other liabilities	119,261		137,989
Total Liabilities	$	26,482,459	$	31,720,674

(1) As noted above, all leased vehicles are originated through a titling trust. At September 30, 2023 and December 31, 2022, $7.7 billion and $4.8 billion of leased vehicle assets included in this amount were in a titling trust, but not in a securitization trust.

The Company retains servicing rights for receivables transferred to the Trusts and receives a monthly servicing fee on the outstanding principal balance. Supplemental fees, such as late charges, for servicing the receivables are reflected in Miscellaneous income, net.

As of September 30, 2023 and December 31, 2022, the Company was servicing $29.7 billion and $31.9 billion, respectively, of gross RICs that have been transferred to consolidated Trusts. Certain amounts shown above are greater than the amounts shown in the corresponding line items in the accompanying Condensed Consolidated Balance Sheets due to intercompany eliminations between the VIEs and other entities consolidated by the Company. For example, for most of its securitizations, the Company retains one or more of the lowest tranches of bonds. Rather than showing investment in bonds as an asset and the associated debt as a liability, these amounts are eliminated in consolidation as required by GAAP.

37

NOTE 7. VIEs (continued)

A summary of the cash flows received from the consolidated Trusts for the respective periods is as follows for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Assets securitized	$	3,055,760	$	9,376,437	$	8,967,889	$	18,033,866
Net proceeds from new securitizations (1)	$	2,093,050	$	6,594,664	$	5,813,928	$	12,736,284
Net proceeds on retained bonds	339,690		912,632		935,479		1,942,378
Cash received for servicing fees (2)	231,757		229,978		701,264		691,407
Net distributions from Trusts (2)	734,192		893,756		2,156,206		3,100,654
Total cash received from Trusts	$	3,398,689	$	8,631,030	$	9,606,877	$	18,470,723

(1) Includes additional advances on existing securitizations.

(2) These amounts are not reflected in the SCF because the cash flows are between the VIEs and other entities included in the consolidation.

Off-balance sheet VIEs

During the three months and nine months ended September 30, 2023, the Company sold no gross RICs to third-party investors in off-balance sheet securitizations and recorded no gain or loss on securitization. During the three months and nine months ended September 30, 2022, the Company sold no gross RICs to third-party investors in off-balance sheet securitizations and recorded no gain or loss on securitization. Gains and losses on securitizations are recorded in Miscellaneous income, net, in the accompanying Condensed Consolidated Statements of Operations.

The Company was servicing gross RICs that have been sold in off-balance sheet securitizations and were subject to an optional clean-up call as follows at the dates indicated:

(in thousands)	September 30, 2023		December 31, 2022
Related party SPAIN securitizations	$	—	$	200,320
Third-party SCART serviced securitizations	736,497		1,088,580
Total serviced for other portfolio	$	736,497	$	1,288,900

Other than repurchases of sold assets due to claims against standard representations and warranties, the Company's exposure to loss as a result of its involvement with these VIEs includes the portion of securitizations retained by the Company. The carrying value of this exposure at September 30, 2023 was $34.0 million and $3.0 million of debt and equity investments, respectively, compared to $52.0 million and $2.0 million at December 31, 2022. These amounts are reported in debt securities HTM and other investments, respectively, in Note 2 to these Condensed Consolidated Financial Statements.

A summary of cash flows received from Trusts for the respective periods were as follows for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Cash received for servicing fees	$	2,109	$	5,023	$	6,666	$	16,061

38

NOTE 8. DEPOSITS AND OTHER CUSTOMER ACCOUNTS

Deposits and other customer accounts are summarized as follows at the dates indicated:

	September 30, 2023				December 31, 2022
(dollars in thousands)	Balance		Percent of total deposits		Balance		Percent of total deposits
Interest-bearing demand deposits	$	11,614,182	15.0	%	$	12,950,737	16.4	%
Non-interest-bearing demand deposits	15,916,975		20.5	%	18,082,061		22.9	%
Savings	4,792,578		6.2	%	5,282,259		6.7	%
Customer repurchase accounts	284,222		0.4	%	338,421		0.4	%
Money market	25,639,976		33.1	%	29,369,827		37.0	%
CDs	19,222,700		24.8	%	13,105,236		16.6	%
Total deposits (1)	$	77,470,633	100.0	%	$	79,128,541	100.0	%

(1) Includes foreign deposits, as defined by the FRB, of $5.1 billion and $5.9 billion at September 30, 2023 and December 31, 2022, respectively.

Demand deposit overdrafts that have been reclassified as loan balances were $116.8 million and $150.0 million at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023 and December 31, 2022, the Company had $4.9 billion and $2.9 billion, respectively, of CDs greater than $250 thousand.

The Company's subsidiaries had outstanding irrevocable letters of credit totaling $40.0 million from the FHLB of Pittsburgh at September 30, 2023 used to secure uninsured deposits placed with the Bank by state and local governments and their political subdivisions.

39

NOTE 9. BORROWINGS

Total borrowings and other debt obligations at September 30, 2023 were $43.0 billion, compared to $43.6 billion at December 31, 2022. The Company's debt agreements impose certain limitations on dividend payments and other transactions. The Company is currently in compliance with these limitations.

During the nine months ended September 30, 2023, the Company completed the public offering and sale of $1.0 billion in aggregate principal amount of its 6.50% fixed-to-floating rate senior notes due March 2029, and $500 million in aggregate principal amount of its 6.57% fixed-to-floating rate senior notes due June 2029. Additionally, the Bank issued $131.6 million of credit-linked notes due February 2052, and $115.5 million of credit-linked notes due June 2033. The notes contain a financial guarantee on a reference pool of mortgage loans and auto loans, respectively, owned by the Company. The Company also completed on-balance sheet securitization transactions of $4.7 billion on its SDART platform, of which it retained approximately $518.2 million and issued $2.1 billion of amortizing notes on its SCARF platform.

Periodically, as part of the Company's wholesale funding management, it opportunistically repurchases outstanding borrowings in the open market and subsequently retires the obligations. During the three months and nine months ended September 30, 2023, the Company paid approximately $85.5 million and $137.5 million to purchase some of its debt related to on-balance sheet securitizations, resulting in a gain of $5.3 million and $7.5 million which is reported as Other miscellaneous income within Miscellaneous income, net.

Subsequent to September 30, 2023, in October 2023, the Bank entered into a fixed rate loan agreement with Santander in the amount of $2.0 billion. Also, In October 2023, our auto business completed an on-balance sheet securitization transaction of $1.1 billion on its SDART platform, of which it retained approximately $100.8 million, and completed its first on-balance sheet securitization on its SBALT platform in the amount of approximately $1.2 billion, of which it retained approximately $161.5 million.

40

NOTE 9. BORROWINGS (continued)

Parent Company and other Subsidiary Borrowings and Debt Obligations

The following table presents information regarding the Parent Company and its subsidiaries' borrowings and other debt obligations at the dates indicated:

	September 30, 2023				December 31, 2022
(dollars in thousands)	Balance		Effective Rate		Balance		Effective Rate
Parent Company
2.88% senior notes due January 2024 (1)	$	—	—	%	$	750,000	2.88	%
3.50% senior notes due June 2024	999,308		3.50	%	998,567		3.60	%
3.45% senior notes due June 2025	998,026		3.45	%	997,135		3.58	%
4.26% senior notes due June 2025	499,429		4.43	%	498,826		4.36	%
4.50% senior notes due July 2025	1,098,772		4.50	%	1,098,287		4.56	%
Senior notes due April 2026 (2)	433,436		5.97	%	433,396		3.63	%
5.81% senior notes due September 2026	498,953		5.92	%	498,697		5.90	%
3.24% senior notes due October 2026	929,226		3.24	%	924,692		3.97	%
6.89% senior notes due June 2027 (1)	750,000		6.89	%	—		—	%
4.40% senior notes due July 2027	1,049,631		4.40	%	1,049,601		4.40	%
2.49% senior notes due January 2028	997,390		2.57	%	996,691		2.56	%
6.50% senior notes due March 2029	996,404		6.59	%	—		—	%
6.57% senior notes due June 2029	497,940		6.67	%	—		—	%
2.88% subordinated notes due November 2031 (1)	500,000		2.88	%	500,000		2.88	%
7.18% subordinated notes due December 2032 (1)	500,000		7.18	%	500,000		7.18	%
Total Parent Company borrowings	10,748,515				9,245,892
Subsidiaries
Short-term borrowing due within one year, maturing thru January 2023	$	—	—	%	$	234,581	3.05	%
Short-term borrowing due within one year, maturing thru January 2024	277,227		4.66	%	—		—	%
FHLB advances, maturing through April 2027	7,017,702		5.02	%	4,000,000		4.65	%
Credit-linked notes due December 2031 (3)	107,079		3.29	%	170,563		2.84	%
Credit-linked notes due May 2032 (4)	251,285		7.01	%	383,485		6.51	%
Credit-linked notes due August 2032 (5)	219,050		8.73	%	329,774		7.93	%
Credit-linked notes due December 2032 (6)	276,392		9.87	%	385,279		9.19	%
Credit-linked notes due June 2033 (7)	100,082		9.95	%	—		—	%
Credit-linked notes due February 2052 (8) (11)	121,259		11.87	%	—		—	%
Warehouse lines maturing through July 2025(9) (10)	3,729,078		7.77	%	3,953,800		5.88	%
Secured structured financings maturing through December 2031	20,167,678		0.48% -5.96%		24,884,899		0.48% - 5.72%
Total subsidiary borrowings and other debt obligations	32,266,832				34,342,381
Total Parent Company and subsidiaries' borrowings and other debt obligations	$	43,015,347			$	43,588,273

(1) These notes are payable to SHUSA's parent company, Santander.

(2) These notes bear interest at a rate equal to the SOFR index rate plus 135 basis points per year.

(3) Issued in December 2021 in the amount of $298 million. Notes are tied to the performance of a $2 billion original reference pool of SBNA prime auto loans. The contractual residual amount is $36 million.

(4) Issued in June 2022 in the amount of $521.5 million. Notes are tied to the performance of a $3.5 billion original reference pool of SBNA prime auto loans. The contractual residual amount is $63 million.

(5) Issued in September 2022 in the amount of $374.5 million. Notes are tied to the performance of a $3.5 billion original reference pool of SBNA prime auto loans. The contractual residual amount is $63 million.

(6) Issued in December 2022 in the amount of $388.4 million. Notes are tied to the performance of a $3.6 billion original reference pool of SBNA prime auto loans. The contractual residual amount is $65.3 million.

(7) Issued in June 2023 in the amount of $115.50 million. Notes are tied to the performance of a $1.1 billion original reference pool of SBNA prime auto loans. The contractual residual amount is $22.0 million.

(8) Issued in February 2023 in the amount of $131.6 million. Notes are tied to the performance of a $2.5 billion original reference pool of SBNA residential mortgage loans. The contractual residual amount is $5.1 million.

(9) Refer to further information on amounts committed, pledged, and restricted below.

(10) Benchmark rates used included commercial paper, daily simple SOFR, one-month term SOFR, and three-month term SOFR.

(11) Variable rate notes issued in tranches that bear interest at a rate equal to SOFR index plus varying spreads ranging from 4.15% to 13.90% and reset monthly.

41

NOTE 9. BORROWINGS (continued)

Credit-Linked Notes

Credit-linked notes transfer credit risk on a reference pool of loans to the purchaser of the notes. In the event of credit losses on the reference pool in excess of the contractual residual amount, the principal balance of the notes will be reduced to the extent of such loss up to the amount of notes issued and recognized as a debt extinguishment gain within Miscellaneous income, net. The Company has the option to redeem the notes once the UPB of the reference pool is less than or equal to 10% of the initial principal balance.

In connection with certain of its credit linked notes, the Company is required to maintain a letter of credit, as well as a collateral account with a third-party financial institution, with the amount equal to at least the outstanding balances of the transaction’s credit-linked notes. This is reported as restricted cash in the Condensed Consolidated Financial Statements.

Warehouse Lines

The following tables present information regarding the Company's warehouse lines at the dates indicated:

	September 30, 2023
(dollars in thousands)	Balance		Committed Amount		Effective Rate		Assets Pledged		Restricted Cash Pledged
Warehouse line due October 2024	$	1,063,600	$	2,600,000	8.82	%	$	1,460,769	$	64
Warehouse line due November 2024	118,600		500,000		8.30	%	184,026		—
Warehouse line due January 2025	277,178		500,000		6.62	%	383,840		537
Warehouse line due January 2025	965,400		1,000,000		8.75	%	1,351,291		2,532
Warehouse line due April 2025	509,300		1,000,000		5.98	%	776,067		1
Warehouse line due July 2025	729,400		1,000,000		6.57	%	874,739		2,579
Warehouse line due July 2025	65,600		500,000		7.39	%	95,652		—
Total credit facilities	$	3,729,078	$	7,100,000	7.77	%	$	5,126,384	$	5,713

The warehouse lines and repurchase facilities are fully collateralized by a designated portion of the Company's RICs, leased vehicles, securitization notes payable and residuals retained by the Company.

Secured Structured Financings

The following tables present information regarding the Company's secured structured financings at the dates indicated:

	September 30, 2023
(dollars in thousands)	Balance		Initial Note Amounts Issued(3)		Initial Weighted Average Interest Rate Range	Collateral(2)		Restricted Cash
Public securitizations maturing on various dates through December 2031(1)	$	15,817,557	$	46,179,575	0.48% - 5.96%	$	24,601,480	$	970,153
Privately issued amortizing notes maturing on various dates through August 2030 (3)	4,350,121		10,350,027		2.17% - 6.73%	7,009,208		6,144
Total secured structured financings	$	20,167,678	$	56,529,602	0.48% - 6.73%	$	31,610,688	$	976,297

(1) Securitizations executed under Rule 144A of the Securities Act are included within this balance.

(2) Secured structured financings may be collateralized by collateral overages of other issuances.

(3) Excludes securitizations which no longer have outstanding debt and excludes any incremental borrowings.

Most of the Company's secured structured financings are in the form of public, SEC-registered securitizations. The Company also executes private securitizations under Rule 144A of the Securities Act, and periodically issues private term amortizing notes, which are structured similarly to securitizations but are acquired by banks and conduits. The Company's securitizations and private issuances are collateralized by vehicle RICs and loans or leases.

42

NOTE 10. ACCUMULATED OTHER COMPREHENSIVE INCOME / (LOSS)

The following table presents the components of AOCI / (Loss), net of related tax, for the periods indicated.

	Total Other Comprehensive Income/(Loss)						Total Accumulated Other Comprehensive Income/(Loss)
	Three months ended September 30, 2023						June 30, 2023				September 30, 2023
(in thousands)	Pretax Activity		Tax Effect		Net Activity		Beginning Balance		Net Activity		Ending Balance
Change in AOCI on cash flow hedge derivative financial instruments	$	63,730	$	(13,491)	$	50,239
Reclassification adjustment for net (gains)/losses on cash flow hedge derivative financial instruments(1)	3,640		(944)		2,696
Net unrealized gains/(losses) on cash flow hedge derivative financial instruments	67,370		(14,435)		52,935		$	(393,495)	$	52,935	$	(340,560)
Change in unrealized (losses) on investments in debt securities AFS	(88,733)		21,656		(67,077)
Reclassification adjustment for (gains)/losses included in net income/(expense) on debt securities AFS (2)	37,049		(9,612)		27,437
Net unrealized (losses) / gains on investments in debt securities AFS	(51,684)		12,044		(39,640)		(806,404)		(39,640)		(846,044)
Pension and post-retirement actuarial (loss)/gain(3)	683		(177)		506		(22,796)		506		(22,290)
As of September 30, 2023	$	16,369	$	(2,568)	$	13,801	$	(1,222,695)	$	13,801	$	(1,208,894)
(1) Net gains/(losses) reclassified into Interest on borrowings and other debt obligations in the Condensed 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 Condensed Consolidated Statements of Operations for the sale of debt securities. (3) Included in the computation of net periodic pension costs.

	Total Other Comprehensive Income/(Loss)						Total Accumulated Other Comprehensive Income/(Loss)
	Three months ended September 30, 2022						June 30, 2022				September 30, 2022
(in thousands)	Pretax Activity		Tax Effect		Net Activity		Beginning Balance		Net Activity		Ending Balance
Change in AOCI on cash flow hedge derivative financial instruments	$	(207,888)	$	57,465	$	(150,423)
Reclassification adjustment for net (gains)/losses on cash flow hedge derivative financial instruments(1)	4,590		(954)		3,636
Net unrealized gains/(losses) on cash flow hedge derivative financial instruments	(203,298)		56,511		(146,787)		$	(408,126)	$	(146,787)	$	(554,913)
Change in unrealized gains/(losses) on investment securities	(186,805)		47,681		(139,124)
Reclassification adjustment for net (gains)/losses included in net income/(expense) on debt securities AFS(2)	(18,594)		4,746		(13,848)
Net unrealized (losses) on investment securities AFS	(205,399)		52,427		(152,972)		(607,480)		(152,972)		(760,452)
Pension and post-retirement actuarial gain(3)	757		280		1,037		(27,049)		1,037		(26,012)
As of September 30, 2022	$	(407,940)	$	109,218	$	(298,722)	$	(1,042,655)	$	(298,722)	$	(1,341,377)
(1)- (3) Refer to the corresponding explanations in the table above.

43

NOTE 10. ACCUMULATED OTHER COMPREHENSIVE INCOME / (LOSS) (continued)

	Total Other Comprehensive Income/(Loss)						Total Accumulated Other Comprehensive Income/(Loss)
	Nine months ended September 30, 2023						December 31, 2022				September 30, 2023
(in thousands)	Pre-tax Activity		Tax Effect		Net Activity		Beginning Balance		Net Activity		Ending Balance
Change in AOCI on cash flow hedge derivative financial instruments	$	224,400	$	(57,629)	$	166,771
Reclassification adjustment for net losses/(gains) on cash flow hedge derivative financial instruments(1)	11,252		(2,919)		8,333
Net unrealized (losses)/gains on cash flow hedge derivative financial instruments	235,652		(60,548)		175,104		$	(515,664)	$	175,104	$	(340,560)
Change in unrealized (losses)/gains on investments in debt securities	(151,605)		21,742		(129,863)
Reclassification adjustment for net losses/(gains) included in net income/(expense) on debt securities (2)	108,556		(28,165)		80,391
Net unrealized (losses)/gains on investments in debt securities	(43,049)		(6,423)		(49,472)		(796,572)		(49,472)		(846,044)
Pension and post-retirement actuarial gain / (loss)(3)	2,022		(525)		1,497		(23,787)		1,497		(22,290)
As of September 30, 2023	$	194,625	$	(67,496)	$	127,129	$	(1,336,023)	$	127,129	$	(1,208,894)

(1)    Net gains/(losses) reclassified into Interest on borrowings and other debt obligations in the Condensed 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 Condensed Consolidated Statements of Operations for the sale of debt securities.

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

	Total Other Comprehensive Income/(Loss)						Total Accumulated Other Comprehensive Income/(Loss)
	Nine months ended September 30, 2022						December 31, 2021				September 30, 2022
(in thousands)	Pre-tax Activity		Tax Effect		Net Activity		Beginning Balance		Net Activity		Ending Balance
Change in AOCI on cash flow hedge derivative financial instruments	$	(666,264)	$	178,401	$	(487,863)
Reclassification adjustment for net (gains)/losses on cash flow hedge derivative financial instruments(1)	16,370		(3,403)		12,967
Net unrealized gains/(losses) on cash flow hedge derivative financial instruments	(649,894)		174,998		(474,896)		$	(80,017)	$	(474,896)	$	(554,913)
Change in unrealized (losses)/gains on investments in debt securities	(924,765)		239,369		(685,396)
Reclassification adjustment for net (gains)/losses included in net income/(expense) on debt securities AFS (2)	6,121		(1,272)		4,849
Net unrealized gains/(losses) on investments in debt securities	(918,644)		238,097		(680,547)		(79,905)		(680,547)		(760,452)
Pension and post-retirement actuarial gain / (loss)(3)	2,267		(91)		2,176		(28,188)		2,176		(26,012)
As of September 30, 2022	$	(1,566,271)	$	413,004	$	(1,153,267)	$	(188,110)	$	(1,153,267)	$	(1,341,377)

(1)- (3) Refer to the corresponding explanations in the table above.

44

NOTE 11. SECURITIES FINANCING ACTIVITIES

The Company may enter into Securities Financing Activities primarily to deploy the Company’s excess cash and investment positions. Securities Financing Activities are treated as collateralized financings and are included in "Federal funds sold and securities purchased under resale agreements or similar arrangements" and "Federal funds purchased and securities loaned or sold under repurchase agreements" on the Company’s Condensed Consolidated Balance Sheets. Refer to Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for 2022 for further discussion of accounting for and the offsetting of securities financing assets and liabilities.

The Company has elected the FVO for certain of its Securities Financing Activities. Refer to Note 13 to these Condensed Consolidated Financial Statements for the amounts recorded at FVO.

Securities borrowed and purchased under agreements to resell, at their respective carrying values, consisted of the following at the dates indicated:

(in thousands)	September 30, 2023		December 31, 2022
Securities purchased under agreements to resell	$	8,034,089	$	10,064,717
Securities borrowed	1,434,529		2,359,362
Total	$	9,468,618	$	12,424,079

Securities loaned or sold under agreements to repurchase, at their respective carrying values, consisted of the following at the dates indicated:

(in thousands)	September 30, 2023		December 31, 2022
Securities sold under agreements to repurchase	$	15,283,490	$	15,382,819
Securities lending	46,270		—
Total	$	15,329,760	$	15,382,819

Securities Financing Activities are generally executed under standard industry agreements, including master agreements that create a single contract under which all transactions between two counterparties are executed, allowing for trade aggregation of receivables and payables into a single net payment or settlement. The amounts of securities financing assets or liabilities qualified for offset in the Condensed Consolidated Balance Sheets were as follows for the dates indicated.

	September 30, 2023
(in thousands)	Gross amounts of recognized assets		Gross amounts offset on the Condensed Consolidated Balance Sheets(1)		Net amounts of assets included on the Condensed Consolidated Balance Sheets
Securities purchased under agreements to resell	$	44,873,056	$	(36,838,967)	$	8,034,089
Securities borrowed	1,434,529		—		1,434,529
Total	$	46,307,585	$	(36,838,967)	$	9,468,618
	September 30, 2023
(in thousands)	Gross amounts of recognized liabilities		Gross amounts offset on the Condensed Consolidated Balance Sheets(1)		Net amounts of liabilities included on the Condensed Consolidated Balance Sheets
Securities sold under agreements to repurchase	$	52,122,457	$	(36,838,967)	$	15,283,490
Securities lending	46,270		—		46,270
Total	$	52,168,727	$	(36,838,967)	$	15,329,760
(1) Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45.

45

NOTE 11. SECURITIES FINANCING ACTIVITIES (continued)

	December 31, 2022
(in thousands)	Gross amounts of recognized assets		Gross amounts offset on the Condensed Consolidated Balance Sheets(1)		Net amounts of assets included on the Condensed Consolidated Balance Sheets
Securities purchased under agreements to resell	$	32,015,292	$	(21,950,575)	$	10,064,717
Securities borrowed	2,359,362		—		2,359,362
Total	$	34,374,654	$	(21,950,575)	$	12,424,079
	December 31, 2022
(in thousands)	Gross amounts of recognized liabilities		Gross amounts offset on the Condensed Consolidated Balance Sheets(1)		Net amounts of liabilities included on the Condensed Consolidated Balance Sheets
Securities sold under agreements to repurchase	$	37,333,394	$	(21,950,575)	$	15,382,819
(1) Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45.

The following tables present the gross amounts of liabilities associated with Securities Financing Activities by remaining contractual maturity as of the date indicated:

	September 30, 2023
(in thousands)	Open and overnight		Up to 30 days		31-90 days		Greater than 90 days		Total
Securities sold under agreements to repurchase	$	24,174,546	$	7,373,654	$	11,261,845	$	9,312,412	$	52,122,457
Securities lending	46,270		—		—		—		46,270
Total	$	24,220,816	$	7,373,654	$	11,261,845	$	9,312,412	$	52,168,727

The following tables present the gross amounts of liabilities associated with Securities Financing Activities by class of underlying collateral as of the dates indicated:

	September 30, 2023						December 31, 2022
(in thousands)	Repurchase agreements		Securities lending		Total		Repurchase agreements
U.S. Treasury	$	32,078,737	$	—	$	32,078,737	$	22,477,916
Residential agency MBS	18,026,592		—		18,026,592		13,223,958
Corporate and other securities	2,017,128		46,270		2,063,398		1,631,520
Total	$	52,122,457	$	46,270	$	52,168,727	$	37,333,394

46

NOTE 12. DERIVATIVES

General

Derivatives represent contracts between parties that usually require little or no initial net investment and result in one or both parties delivering cash or another type of asset to the other party based on a notional amount and an underlying asset, index, interest rate or future purchase commitment or option as specified in the contract. Derivative transactions are often measured in terms of notional amount, but this amount is generally not exchanged, is not recorded on the balance sheet, and does not represent the Company`s exposure to credit loss. The notional amount is the basis on which the financial obligation of each party to the derivative contract is calculated to determine required payments under the contract. The Company controls the credit risk of its derivative contracts through credit approvals, limits and monitoring procedures. The underlying variable is typically a referenced interest rate (commonly the OIS rate or a SOFR-based rate), security, credit spread or index.

The Company’s capital markets and mortgage banking activities are subject to price risk. The Company employs various tools to measure and manage price risk in its portfolios. In addition, the Board of Directors has established certain limits relative to positions and activities. The level of price risk exposure at any given time depends on the market environment and expectations of future price and market movements and will vary from period to period.

See Note 13 to these Condensed Consolidated Financial Statements for discussion of the valuation methodology for derivative instruments.

Credit Risk Contingent Features

The Company has entered into certain derivative contracts that require the posting of collateral to counterparties when those contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to the Company's long-term senior unsecured credit ratings. In a limited number of instances, counterparties also have the right to terminate their ISDA Master Agreements if the Company's ratings fall below a specified level, typically investment grade. As of September 30, 2023, derivatives in this category had a fair value of $127.0 thousand. The credit ratings of the Company and SBNA are currently considered investment grade. As of September 30, 2023, no additional collateral would be required if there were a further 1- or 2- notch downgrade by either S&P or Moody's.

As of September 30, 2023 and December 31, 2022, the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on the Company's ratings) that were in a net liability position totaled $13.6 million and $14.6 million, respectively. The Company had $70.6 million and $7.3 million in cash and securities collateral posted to cover those positions as of September 30, 2023 and December 31, 2022, respectively.

Hedge Accounting

Management uses derivative instruments designated as hedges to mitigate the impact of interest rate and foreign exchange rate movements on the fair value of certain assets and liabilities and on highly probable forecasted cash flows. These instruments primarily include interest rate swaps that have underlying interest rates based on key benchmark indices. The nature and volume of the derivative instruments used to manage interest rate risk depend on the level and type of assets and liabilities on the balance sheet and the risk management strategies for the current and anticipated interest rate environment.

Interest rate swaps are generally used to convert fixed-rate assets and liabilities to variable rate assets and liabilities and vice versa. The Company utilizes interest rate swaps that have a high degree of correlation to the related financial instrument.

Fair Value Hedges

The Company enters into derivatives to hedge the risk of changes in fair value of a portion of its AFS debt securities portfolio. These derivatives are designated as fair value hedges at inception. The gains/(losses) from changes in the fair value of the hedging derivative and the offsetting gains/(losses) from changes in the fair value of the related underlying hedged items due to the hedged risk are reporting in the same line item in the Condensed Consolidated Statements of Operations as earnings from the hedged items. The cumulative fair value hedge basis adjustments included in the carrying amount of hedged assets is reversed through earnings in future periods as an adjustment to yield. The Company includes gains/(losses) on the hedging derivatives and the related hedged items in the assessment of hedge effectiveness. All of these swaps have been deemed highly effective fair value hedges. The last of the hedges is scheduled to expire in February 2030. The Company has entered into fair value hedges of portions of a closed portfolio of approximately $3.0 billion of AFS debt securities, using the portfolio layer method.

47

NOTE 12. DERIVATIVES (continued)

The carrying amount and fair value hedge adjustment of hedged assets at the dates indicated was:

	Carrying Amount of Hedged Assets				Amount of Fair Value Hedge Adjustment Included in the Carrying Amount
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Debt securities AFS (Note 2)	$	2,432,322	$	2,500,000	$	67,678	$	39,199

Cash Flow Hedges

The Company has outstanding interest rate swap agreements designed to hedge a portion of the Company’s floating-rate assets and liabilities (including its borrowed funds). All of these swaps have been deemed highly effective cash flow hedges. The gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same Condensed Consolidated Statements of Operations line item as the earnings effect of the hedged item.

The last of the hedges is scheduled to expire in March 2027. The Company includes all components of each derivative's gain or loss in the assessment of hedge effectiveness. As of September 30, 2023, the Company estimated that approximately $75.2 million of unrealized losses included in AOCI would be reclassified to earnings during the subsequent twelve months as the future cash flows occur.

Derivatives Designated in Hedge Relationships – Notional and Fair Values

Derivatives designated as accounting hedges included the following as of the dates indicated:

(dollars in thousands)	Notional Amount		Asset		Liability		Weighted Average Receive Rate		Weighted Average Pay Rate		Weighted Average Life (Years)
September 30, 2023
Fair value hedges:
Cross-currency swaps	$	18,766	$	417	$	1,606	5.82	%	9.90	%	4.08
Interest rate swaps - debt securities AFS	4,650,000		105,830		—		2.73	%	3.37	%	3.29
Cash flow hedges:
Pay fixed — receive variable interest rate swaps	$	3,471,700	$	69,237	$	—	5.31	%	3.82	%	3.1
Pay variable - receive fixed interest rate swaps	12,475,000		—		534,061		1.77	%	1.45	%	1.43
Interest rate floor	700,000		—		—		—	%	—	%	0.22
Total	$	21,315,466	$	175,484	$	535,667	2.50	%	2.22	%	2.07
December 31, 2022
Fair value hedges:
Cross-currency swaps	$	50,214	$	534	$	905	5.28	%	8.37	%	2.19
Interest rate swaps - debt securities AFS	2,500,000		43,814		4,615		3.66	%	1.85	%	2.74
Cash flow hedges:
Pay fixed — receive variable interest rate swaps	$	250,000	$	1,361	$	—	4.30	%	3.92	%	3.00
Pay variable - receive fixed interest rate swaps	13,075,000		1,315		685,733		1.35	%	3.56	%	1.80
Interest rate floor	800,000		1		—		—	%	—	%	0.91
Total	$	16,675,214	$	47,025	$	691,253	1.69	%	3.16	%	1.92

During 2018, 2019, and 2020, the Company entered into interest rate swap agreements with an aggregate notional amount of $2.2 billion. The interest rate swaps were to be used to hedge against variable rate debt and had maturity dates ranging from two to five years. In 2021, the Company de-designated the hedge relationships and terminated the swaps, resulting in a fair value adjustment of $6.5 million recorded as a reduction to interest expense. Amounts previously recorded in AOCI related to these interest rate swaps, totaling $50.6 million, are being reclassified into earnings over the term as the previously hedged cash flow impacts earnings. For the terminated swaps, SC reclassified $3.6 million and $11.3 million previously recorded in AOCI into interest expense during the three months and nine months ended September 30, 2023, respectively.

48

NOTE 12. DERIVATIVES (continued)

Other Derivative Activities

The Company also enters into derivatives that are not designated as accounting hedges under GAAP. Although these derivatives are used to hedge risk and are considered economic hedges, they are not designated as accounting hedges because the contracts they are hedging are often carried at fair value on the balance sheet, resulting in generally symmetrical accounting treatment for the hedging instrument and the hedged item.

Customer-related derivatives

The Company offers derivatives to its customers in connection with their risk management requirements related to foreign exchange and lending arrangements. These derivatives primarily consist of interest rate swaps, caps, floors and foreign exchange contracts. Risk exposure from customer positions is managed through offsetting transactions with other dealers, including Santander.

Broker dealer activities

The Company uses exchange-traded options and futures, credit default swaps, and forward-settling securities trades as part of its trading business, as well as to actively manage risk exposures that arise from its trading in cash instruments.

Structured financing activities

In certain circumstances, the Company is required to hedge its interest rate risk on revolving credit and term borrowings related to its secured structured financings. The Company uses interest rate caps to satisfy these requirements, and enters into offsetting option contracts.

Foreign exchange activities

The Company uses foreign exchange contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities. Foreign exchange contracts, which include spot and forward contracts as well as cross-currency swaps, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date and may or may not be physically settled depending on the Company’s needs. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate.

AFS securities

The Company uses swaptions to economically hedge changes in the fair value of certain AFS debt securities. Swaptions are agreements that give the Company the option to enter into swap agreements at a specified interest rate at a predetermined date.

Mortgage Banking Derivatives

The Company typically retains the servicing rights related to residential mortgage loans that are sold. Most of the Company`s residential MSRs are accounted for at fair value. As deemed appropriate, the Company economically hedges MSRs using interest rate swaps and forward contracts to purchase MBS.

Other derivative activities

Other derivative instruments primarily include forward contracts related to certain investment securities sales, an OIS, and a total return swap on Visa, Inc. Class B common shares.

49

NOTE 12. DERIVATIVES (continued)

Derivatives Not Designated in Hedge Relationships – Notional and Fair Values

Other derivative activities included the following as of the dates indicated:

	Notional				Asset derivatives Fair value				Liability derivatives Fair value
(in thousands)	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Mortgage banking derivatives:
Mortgage servicing interest rate swaps	$	662,000	$	682,000	$	22,403	$	19,479	$	45,170	$	38,408
Total mortgage banking risk management	662,000		682,000		22,403		19,479		45,170		38,408
Customer-related derivatives:
Swaps receive fixed	15,151,109		14,372,637		—		4,111		1,077,609		939,118
Swaps pay fixed	15,128,507		14,465,930		1,113,562		970,795		1,441		8,687
Other	9,069,092		7,394,081		78,056		91,724		80,120		89,139
Total customer-related derivatives	39,348,708		36,232,648		1,191,618		1,066,630		1,159,170		1,036,944
Other derivative activities:
Foreign exchange contracts	10,399,977		6,552,782		57,529		69,423		55,033		70,583
Interest rate swap agreements	2,700,100		1,100,100		—		4,454		2		—
Interest rate cap agreements	2,562,241		3,071,578		116,164		143,197		—		—
Options for interest rate cap agreements	2,562,241		3,071,578		—		—		116,164		143,197
Interest rate swaptions	2,500,000		—		84,038		—		—		—
Other	58,656,744		43,519,111		113,127		61,736		46,809		65,614
Total	$	119,392,011	$	94,229,797	$	1,584,879	$	1,364,919	$	1,422,348	$	1,354,746

50

NOTE 12. DERIVATIVES (continued)

Gains (Losses) on All Derivatives

The following Condensed Consolidated Statements of Operations line items were impacted by the Company’s derivative activities for the periods indicated:

(in thousands)		Three months ended September 30,				Nine months ended September 30,
	Line Item	2023		2022		2023		2022
Fair value hedges:
Cross-currency swaps	Net interest income	$	727	$	(57)	$	(577)	$	(1,078)
Interest rate swaps	Net interest income	8,249		7,509		21,411		17,554
Derivative Activity(1)
Cash flow hedges:
Pay fixed-receive variable interest rate swaps	Interest expense on borrowings	8,764		(4,590)		7,696		(16,663)
Pay variable receive-fixed interest rate swap	Interest income on loans	(116,685)		(40,007)		(336,023)		(12,218)
Interest rate floors	Interest income on loans	(351)		(312)		(436)		(289)
Other derivative activities:
Mortgage banking derivatives	Miscellaneous income, net	(5,904)		(10,334)		(8,415)		(40,522)
Customer-related derivatives	Miscellaneous income, net	(6,788)		42,691		(6,719)		8,133
Foreign exchange	Miscellaneous income, net	17,214		(35,094)		30,648		16,218
Interest rate swaps, caps, and options	Miscellaneous income, net	(2,809)		(1,821)		(5,909)		3,316
Other	Miscellaneous income, net	231,411		127,748		201,280		154,823

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

The net amount of change recognized in OCI for cash flow hedge derivatives were gains of $50.2 million and $166.8 million, and losses of $150.4 million and $487.9 million, net of tax, for the three months and nine months ended September 30, 2023, and 2022, respectively.

The net amount of changes reclassified from OCI into earnings for cash flow hedge derivatives were losses of $2.7 million and $8.3 million, and losses of $3.6 million and $13.0 million, net of tax, for the three months and nine months ended September 30, 2023, and 2022, respectively.

Disclosures about Offsetting Assets and Liabilities

The Company enters into legally enforceable master netting agreements which reduce risk by permitting netting of transactions with the same counterparty on the occurrence of certain events. A master netting agreement allows two counterparties the ability to net-settle amounts under all contracts, including any related collateral posted, through a single payment and in a single currency. The right to offset and certain terms regarding the collateral process, such as valuation, credit events and settlement, are contained in the applicable master agreement. The Company's financial instruments, including resell and repurchase agreements, securities lending arrangements, derivatives and cash collateral, may be eligible for offset on its Condensed Consolidated Balance Sheets.

The Company has elected to present derivative balances on a gross basis even if the derivative is subject to a legally enforceable nettable ISDA Master Agreement for all trades executed after April 1, 2013. Collateral that is received or pledged for these transactions is disclosed within the “Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets” section of the tables below.

51

NOTE 12. DERIVATIVES (continued)

Information about financial assets and liabilities that are eligible for offset on the Condensed Consolidated Balance Sheets was as follows for the dates indicated:

	Offsetting of Financial Assets
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheets		Collateral Received (2)		Net Amount
September 30, 2023
Fair value hedges	$	106,247	$	—	$	106,247	$	(43,485)	$	62,762
Cash flow hedges	69,237		—		69,237		(69,237)		—
Other derivative activities(1)	1,584,879		(4,659)		1,580,220		(493,327)		1,086,893
Total Derivative Assets	$	1,760,363	$	(4,659)	$	1,755,704	$	(606,049)	$	1,149,655
December 31, 2022
Fair value hedges	$	44,348	$	—	$	44,348	$	—	$	44,348
Cash flow hedges	2,677		—		2,677		—		2,677
Other derivative activities(1)	1,364,919		(21,726)		1,343,193		(259,734)		1,083,459
Total Derivative Assets	$	1,411,944	$	(21,726)	$	1,390,218	$	(259,734)	$	1,130,484

(1)Includes customer-related and other derivatives.

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

52

NOTE 12. DERIVATIVES (continued)

	Offsetting of Financial Liabilities
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheets		Collateral Pledged (2)		Net Amount
September 30, 2023
Fair value hedges	$	1,606	$	—	$	1,606	$	—	$	1,606
Cash flow hedges	534,061		—		534,061		(200,622)		333,439
Other derivative activities(1)	1,422,348		(4,609)		1,417,739		(118,509)		1,299,230
Total Derivative Liabilities	$	1,958,015	$	(4,609)	$	1,953,406	$	(319,131)	$	1,634,275
December 31, 2022
Fair value hedges	$	5,520	$	—	$	5,520	—		$	5,520
Cash flow hedges	685,733		—		685,733		$	(302,935)	382,798
Other derivative activities(1)	1,354,746		(21,726)		1,333,020		(149,381)		1,183,639
Total Derivative Liabilities	$	2,045,999	$	(21,726)	$	2,024,273	$	(452,316)	$	1,571,957

(1)Includes customer-related and other derivatives.

(2)Cash collateral pledged and financial instruments pledged is reported in Other assets in the Condensed 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.

NOTE 13. FAIR VALUE

The Company estimates the fair value of certain assets and liabilities for both measurement and disclosure purposes. The fair value hierarchy categorizes the underlying assumptions and inputs to valuation techniques that are used to measure fair value into three levels as follows:

•Level 1 inputs are quoted prices in active markets for identical assets or liabilities that can be accessed as of the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 inputs are those other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3 inputs are those that are unobservable or not readily observable for the asset or liability and are used to measure fair value to the extent relevant observable inputs are not available.

Assets and liabilities measured at fair value, by their nature, result in a higher degree of financial statement volatility. See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for a broad discussion of fair value measurement techniques. When available, the Company uses quoted market prices or matrix pricing in active markets to determine fair value and classifies such items as Level 1 or Level 2 assets or liabilities. If quoted market prices in active markets are not available, fair value is determined using third-party broker quotes and/or DCF models incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using broker quotes and/or DCF models are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation.

53

NOTE 13. FAIR VALUE (continued)

The Company values assets and liabilities based on the principal market in which each would be sold (in the case of assets) or transferred (in the case of liabilities). The principal market is the forum with the greatest volume and level of activity. In the absence of a principal market, the valuation is based on the most advantageous market. In the absence of observable market transactions, the Company considers liquidity valuation adjustments to reflect the uncertainty in pricing the instruments. The fair value of a financial asset is measured on a stand-alone basis and cannot be measured as a group, with the exception of certain financial instruments held and managed on a net portfolio basis. In measuring the fair value of a nonfinancial asset, the Company assumes the highest and best use of the asset by a market participant, not just the intended use, to maximize the value of the asset. The Company also considers whether any credit valuation adjustments are necessary based on the counterparty's credit quality. Any models used to determine fair values or validate dealer quotes based on the descriptions below are subject to review and testing as part of the Company's model validation and internal control testing processes.

The Company's Market Risk Department approves the methodologies used in the estimations of fair value, including the Company's Level 3 assets and liabilities. Price validation procedures are performed and the results are reviewed for Level 3 assets and liabilities by the Market Risk Department. Price validation procedures performed for these assets and liabilities can include comparing current prices to historical pricing trends by collateral type and vintage, comparing prices by product type to indicative pricing grids published by market makers, and obtaining corroborating dealer prices for significant securities.

The Company reviews the assumptions utilized to determine fair value on a quarterly basis. Any changes in methodologies or significant inputs used in determining fair values are further reviewed to determine if a change in fair value level hierarchy has occurred.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the assets and liabilities that are measured at fair value on a recurring basis by major product category and fair value hierarchy as of the dates indicated:

(in thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2023		Level 1		Level 2		Level 3		Balance at December 31, 2022
Financial assets:
U.S. Treasury securities	$	31,043	$	—	$	—	$	31,043	$	218,439	$	—	$	—	$	218,439
Corporate debt	—		280,400		—		280,400		—		370,491		—		370,491
ABS	—		506,727		—		506,727		—		504,018		—		504,018
MBS	—		5,351,987		—		5,351,987		—		5,937,271		—		5,937,271
Investment in debt securities AFS(2)	$	31,043	$	6,139,114	$	—	$	6,170,157	$	218,439	$	6,811,780	$	—	$	7,030,219
Trading securities	1,704,832		6,789,198		2,574		8,496,604		1,229,279		4,634,676		369		5,864,324
Federal funds sold and securities purchased under resale agreements or similar arrangements	—		1,400,766		—		1,400,766		—		234,169		—		234,169
RICs HFI(3)	—		—		15,437		15,437		—		—		20,924		20,924
LHFS (1)(4)	—		488		—		488		—		549		—		549
MSRs	—		—		104,523		104,523		—		—		107,383		107,383
Other assets - derivatives (2)	1,572		1,754,115		17		1,755,704		602		1,389,593		22		1,390,217
Total financial assets (5)	$	1,737,447	$	16,083,681	$	122,551	$	17,943,679	$	1,448,320	$	13,070,767	$	128,698	$	14,647,785
Financial liabilities:
Federal funds purchased and securities loaned or sold under repurchase agreements	$	—	$	364,284	$	—	$	364,284	$	—	$	245,149	$	—	$	245,149
Trading liabilities	2,770,142		318,887		226		3,089,255		2,557,495		313,920		230		2,871,645
Other liabilities - derivatives (2)	1,125		1,951,146		1,135		1,953,406		448		2,021,593		2,232		2,024,273
Total financial liabilities	$	2,771,267	$	2,634,317	$	1,361	$	5,406,945	$	2,557,943	$	2,580,662	$	2,462	$	5,141,067

(1)    LHFS disclosed on the Condensed 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)    Refer to Note 2 for the fair value of investment securities and to Note 12 for the fair values of derivative assets and liabilities on a further disaggregated basis.

(3) RICs collateralized by vehicle titles at SC and RV/marine loans at SBNA.

(4) Residential mortgage loans.

(5) Approximately $122.6 million of these financial assets were measured using model-based techniques, or Level 3 inputs, and represented approximately 0.7% of total assets measured at fair value on a recurring basis and approximately 0.1% of total consolidated assets.

54

NOTE 13. FAIR VALUE (continued)

Valuation Processes and Techniques - Recurring Fair Value Assets and Liabilities

The following is a description of the valuation techniques used for instruments measured at fair value on a recurring basis:

Investments in debt securities AFS

Investments in debt securities AFS are accounted for at fair value. The Company utilizes a third-party pricing service to value its investment securities portfolios on a global basis. Its primary pricing service has consistently proved to be a high quality third-party pricing provider. For those investments not valued by pricing vendors, other trusted market sources are utilized. The Company monitors and validates the reliability of vendor pricing on an ongoing basis, which can include pricing methodology reviews, performing detailed reviews of the assumptions and inputs used by the vendor to price individual securities, and price validation testing. Price validation testing is performed independently of the risk-taking function and can include corroborating the prices received from third-party vendors with prices from another third-party source, reviewing valuations of comparable instruments, comparison to internal valuations, or by reference to recent sales of similar securities.

The classification of securities within the fair value hierarchy is based upon the activity level in the market for the security type and the observability of the inputs used to determine their fair values. Actively traded quoted market prices for debt securities AFS, such as government agency securities, corporate debt, state and municipal securities, and MBS, are not readily available. The Company's principal markets for its investment securities are the secondary institutional markets with an exit price that is predominantly reflective of bid-level pricing in these markets. These investment securities are priced by third-party pricing vendors. The third-party vendors use a variety of methods when pricing these securities that incorporate relevant observable market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. These investment securities are, therefore, considered Level 2.

Certain ABS are valued using DCF models. The DCF models are obtained from a third-party pricing vendor which uses observable market data and therefore are classified as Level 2. Other ABS that could not be valued using a third-party pricing service are valued using an internally-developed DCF model and are classified as Level 3.

Securities Financing Activities

No quoted prices exist for Securities Financing Activities, so fair value is determined using a DCF technique. Cash flows are estimated based on the terms of the contract. These cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of the underlying collateral. Securities Financing Activities are classified as Level 2.

LHFI

For certain RICs reported in LHFI, net, the Company has elected the FVO. The estimated fair value of all RICs HFI is estimated using a DCF model and is classified as Level 3.

55

NOTE 13. FAIR VALUE (continued)

MSRs

The Company maintains an MSR asset accounted for at fair value for sold residential real estate loans serviced for others. At September 30, 2023 and December 31, 2022, the balance of these loans serviced for others was $8.7 billion and $9.2 billion, respectively. Changes in fair value of the MSR are recorded through Miscellaneous income, net on the Condensed Consolidated Statements of Operations.

The Company has elected to measure its residential MSRs at fair value to be consistent with the risk management strategy to hedge changes in the fair value of these assets. The fair value of residential MSRs is estimated by using a cash flow valuation model which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates (reflective of a market participant’s return on an investment for similar assets), servicing costs, and other economic factors which are determined based on current market conditions. Historically, servicing costs and discount rates have been less volatile than prepayment rates, which are directly correlated with changes in market interest rates. Increases in prepayment rates, discount rates and servicing costs result in lower valuations of MSRs. Decreases in the anticipated earnings rate on escrow and similar balances result in lower valuations of MSRs. Assumptions incorporated into the residential MSR valuation model reflect management's best estimate of factors that a market participant would use in valuing the residential MSRs, as well as future expectations. Although sales of residential MSRs do occur, residential MSRs do not trade in an active market with readily observable prices. As deemed appropriate, the Company economically hedges MSRs using interest rate swaps and forward contracts to purchase MBS. See further discussion on these derivative activities in Note 12 to these Condensed Consolidated Financial Statements.

As a benchmark for the reasonableness of the residential MSRs' fair value, opinions of value from brokers are obtained. Brokers provide a range of values based upon their own DCF calculations of our portfolio that reflect conditions in the secondary market and any recently executed servicing transactions. Management compares the internally-developed residential MSR values to the ranges of values received from brokers. If the residential MSRs fair value falls outside of the brokers' ranges, management will assess whether a valuation adjustment is warranted. The residential MSRs value is considered to represent a reasonable estimate of fair value. MSR’s are classified as Level 3.

Gains and losses on MSRs are recognized on the Condensed Consolidated Statements of Operations through Miscellaneous income, net.

Significant assumptions used in the valuation of residential MSRs include CPRs and the discount rate. Other important valuation assumptions include market-based servicing costs and the anticipated earnings on escrow and similar balances held by the Company in the normal course of mortgage servicing activities. Below is a sensitivity analysis of the most significant inputs utilized by the Company in the evaluation of residential MSRs:

• A 10% and 20% increase in the CPR speed would decrease the fair value of the residential servicing asset by $3.0 million and $5.9 million, respectively, at September 30, 2023.

•A 10% and 20% increase in the discount rate would decrease the fair value of the residential servicing asset by $4.0 million and $7.7 million, respectively, at September 30, 2023.

Significant increases/(decreases) in any of those inputs in isolation would result in significantly (lower)/higher fair value measurements, respectively. These sensitivity calculations are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. Prepayment estimates generally increase when market interest rates decline and decrease when market interest rates rise. Discount rates typically increase when market interest rates increase and/or credit and liquidity risks increase, and decrease when market interest rates decline and/or credit and liquidity conditions improve.

Derivatives

The valuation of these instruments is determined using commonly accepted valuation techniques, including DCF analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable and unobservable market-based inputs. The fair value represents the estimated amount the Company would receive or pay to terminate the contract or agreement, taking into account current interest rates, foreign exchange rates, equity prices and, when appropriate, the current creditworthiness of the counterparties.

56

NOTE 13. FAIR VALUE (continued)

The Company incorporates credit valuation adjustments in the fair value measurement of its derivatives to reflect the counterparty's nonperformance risk, except for those derivative contracts with associated credit support annexes which provide credit enhancements, such as collateral postings and guarantees. The Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. Certain of the Company's derivatives utilize Level 3 inputs, which are primarily related to mortgage banking derivatives-interest rate lock commitments and total return settlement derivative contracts.

The DCF model is utilized to determine the fair value of the mortgage banking derivatives-interest rate lock commitments and the total return settlement derivative contracts. The significant unobservable inputs for mortgage banking derivatives used in the fair value measurement of the Company's loan commitments are "pull through" percentage and the MSR value that is inherent in the underlying loan value. The pull through percentage is an estimate of loan commitments that will result in closed loans. The significant unobservable inputs for total return settlement derivative contracts used in the fair value measurement of the Company's liabilities are discount percentages, which are based on comparable financial instruments. See Note 12 to these Consolidated Financial Statements for a discussion of derivatives activity.

Trading liabilities

The sales and trading of financial instruments are recorded on the trade date. Trading liabilities includes amounts payable for securities transactions that have not reached their contractual settlement date. Financial instruments owned and securities sold, not yet purchased, are carried at fair value.

Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present the changes in Level 3 balances for those assets and liabilities measured at fair value on a recurring basis for the periods indicated.

	Three months ended September 30, 2023											Three months ended September 30, 2022
(in thousands)		RICs HFI		MSRs		Derivatives, net		Other		Total			RICs HFI		MSRs		Derivatives, net		Other		Total
Balances, beginning of period		$	16,983	$	105,241	$	(1,368)	$	2,352	$	123,208		$	26,172	$	104,411	$	(1,364)	$	1,403	$	130,622
Gains/(losses) in earnings		—		2,215		250		(4)		2,461			—		9,721		(133)		—		9,588
Additions/Issuances		—		—		—		—		—			—		—		—		(1,092)		(1,092)
Settlements(1)		(1,546)		(2,933)		—		—		(4,479)			(2,889)		(3,721)		—		(163)		(6,773)
Balances, end of period		$	15,437	$	104,523	$	(1,118)	$	2,348	$	121,190		$	23,283	$	110,411	$	(1,497)	$	148	$	132,345
Changes in unrealized gains (losses) included in earnings related to balances still held at end of period		$	—	$	2,215	$	250	$	(4)	$	2,461		$	—	$	9,721	$	(133)	$	—	$	9,588
	Nine months ended September 30, 2023											Nine months ended September 30, 2022
(in thousands)		RICs HFI		MSRs		Derivatives, net		Other		Total			RICs HFI		MSRs		Derivatives, net		Other		Total
Balances, beginning of period		$	20,924	$	107,383	$	(2,210)	$	139	$	126,236		$	33,529	$	79,107	$	526	$	—	$	113,162
Gains/(losses) in earnings		—		4,963		1,092		(11)		6,044			—		41,274		(2,023)		—		39,251
Additions/Issuances		—		—		—		—		—			47		3,383		—		311		3,741
Transfer from Level 2		—		—		—		2,220		2,220			—		—		—				—
Settlements(1)		(5,487)		(7,823)		—		—		(13,310)			(10,293)		(13,353)		—		(163)		(23,809)
Balances, end of period		$	15,437	$	104,523	$	(1,118)	$	2,348	$	121,190		$	23,283	$	110,411	$	(1,497)	$	148	$	132,345
Changes in unrealized gains (losses) included in earnings related to balances still held at end of period		$	—	$	4,963	$	1,092	$	(11)	$	6,044		$	—	$	41,274	$	829	$	—	$	42,103

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

57

NOTE 13. FAIR VALUE (continued)

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company may be required to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP from time to time. These adjustments to fair value usually result from application of lower-of-cost-or-fair value accounting or certain impairment measures. Assets measured at fair value on a nonrecurring basis that were still held on the balance sheet were as follows at the dates indicated:

(in thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2023		Level 1		Level 2		Level 3		Balance at December 31, 2022
Impaired commercial LHFI	$	—	$	56,170	$	110,874	$	167,044	$	—	$	33,133	$	51,794	$	84,927
Foreclosed assets	—		38,640		—		38,640		—		4,108		—		4,108
Vehicle inventory	—		299,115		—		299,115		—		246,970		—		246,970
LHFS	—		—		435,321		435,321		—		—		99,006		99,006
Auto loans impaired due to bankruptcy	—		167,106		—		167,106		—		212,866		—		212,866
Goodwill	—		—		2,766,665		2,766,665		—		—		2,767,732		2,767,732

Valuation Processes and Techniques - Nonrecurring Fair Value Assets and Liabilities

Impaired commercial LHFI in the table above represents the recorded investment of impaired commercial loans for which the Company measures impairment during the period based on the fair value of the underlying collateral supporting the loan. Written offers to purchase a specific impaired loan are considered observable market inputs, which are considered Level 1 inputs. Appraisals are obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and are considered Level 2 inputs. Loans for which the value of the underlying collateral is determined using a combination of real estate appraisals, field examinations and internal calculations are classified as Level 3. The inputs in the internal calculations may include the loan balance, estimation of the collectability of the underlying receivables held by the customer used as collateral, sale and liquidation value of the inventory held by the customer used as collateral and historical loss-given-default parameters. In cases in which the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized.

Foreclosed assets represent the recorded investment in assets taken during the period presented in foreclosure of defaulted loans, and are primarily comprised of commercial and residential real properties and generally measured at fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of market value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace.

The Company estimates the fair value of its vehicles, which are obtained either through repossession or lease termination, using historical auction rates and current market values of used cars.

The Company had LHFS portfolios of $435.3 million and $99.0 million at September 30, 2023 and December 31, 2022, respectively that are measured at fair value on a nonrecurring basis primarily consisting of commercial loans and RICs. The estimated fair value of these LHFS is calculated based on a combination of estimated market rates for similar loans with similar credit risks and a DCF analysis in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect voluntary prepayments, prepayment rates, discount rates reflective of the cost of funding, and credit loss expectations.

For loans that are considered collateral-dependent, such as certain bankruptcy loans, impairment is measured based on the fair value of the collateral less its estimated cost to sell. For the underlying collateral, the estimated fair value is obtained using historical auction rates and current market levels of the collateral securing the loans.

58

NOTE 13. FAIR VALUE (continued)

The estimated fair value of goodwill is valued using unobservable inputs and is classified as Level 3. Goodwill is written down to fair value when, as a result of an annual or interim goodwill impairment test, an impairment is identified and recognized. Fair value is calculated using widely-accepted valuation techniques, such as the guideline public company market approach (earnings and price-to-tangible book value multiples of comparable public companies) and the income approach (the DCF method). The Company uses a combination of these accepted methodologies to determine the fair valuation of reporting units. Several factors are taken into account, including actual operating results, future business plans, economic projections, and market data. On a quarterly basis, the Company assesses whether or not impairment indicators are present. For information on the Company's goodwill impairment test and the results of the most recent goodwill impairment test, see Note 5 for a description of the Company's goodwill valuation methodology.

Fair Value Adjustments

The following table presents the increases and decreases in value of certain assets that are measured at fair value on a nonrecurring basis for which a fair value adjustment has been included in the Condensed Consolidated Statements of Operations relating to assets held at period-end:

		Three months ended September 30,				Nine months ended September 30,
(in thousands)	Statement of Operations Location	2023		2022		2023		2022
Impaired LHFI	Credit loss expense / (benefit) (1)	$	9,097	$	34,184	$	21,415	$	43,752
Foreclosed assets	Miscellaneous income, net (1)	(290)		(22)		(298)		(22)
LHFS	Credit loss expense / (benefit) (1)	—		—		(3,614)		(77)
LHFS	Miscellaneous income	(18,571)		(3,909)		(24,801)		(11,356)
Auto loans impaired due to bankruptcy	Credit loss expense	(4,125)		—		(5,840)		—

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

(2) Refer to Note 5 for further information on the review of goodwill for impairment.

Level 3 Inputs - Significant Recurring and Nonrecurring Fair Value Assets and Liabilities

The following table presents quantitative information about the significant unobservable inputs within significant Level 3 recurring and nonrecurring assets and liabilities at the dates indicated:

(dollars in thousands)	Fair Value at September 30, 2023 (3)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Financial Assets:
MSRs	$	104,523	DCF	CPR (1)	0.00% - 100.00% (7.45%)
				Discount rate (2)	9.80	%

(1)    Average CPR projected from collateral stratified by loan type and note rate. Weighted average amount was developed by weighting the associated relative UPB.

(2)    Average discount rate from collateral stratified by loan type and note rate. Weighted average amount was developed by weighting the associated relative UPB.

(3) Excluded insignificant Level 3 assets and liabilities.

59

NOTE 13. FAIR VALUE (continued)

(dollars in thousands)	Fair Value at December 31, 2022 (3)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
MSRs	$	107,383	DCF	CPR (2)	0.00% - 100.00% (7.56%)
				Discount rate (3)	9.54	%

(1), (2), (3) - See corresponding footnotes to the September 30, 2023 Level 3 significant inputs table above.

Fair Value of Financial Instruments

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company's financial instruments are as follows as of the dates indicated:

	September 30, 2023										December 31, 2022
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	10,705,134	$	10,705,134	$	10,705,134	$	—	$	—	$	10,218,066	$	10,218,066	$	10,218,066	$	—	$	—
Federal funds sold and securities purchased under resale agreements or similar arrangements	9,468,618		9,461,813		—		9,461,813		—		12,424,079		12,399,815		—		12,399,815		—
Investments in debt securities AFS	6,170,157		6,170,157		31,043		6,139,114		—		7,030,219		7,030,219		218,439		6,811,780		—
Investments in debt securities HTM	9,153,367		7,486,846		—		7,486,846		—		9,549,218		8,273,285		—		8,273,285		—
Trading securities and other investments(2)	8,696,604		8,696,853		1,704,832		6,989,447		2,574		5,864,324		5,864,324		1,229,279		4,634,676		369
LHFI, net	89,015,475		91,152,556		—		56,170		91,096,386		90,558,330		92,466,522		—		33,133		92,433,389
LHFS	435,809		435,809		—		488		435,321		99,555		99,555		—		549		99,006
Restricted cash	5,406,821		5,406,821		5,406,821		—		—		6,346,248		6,346,248		6,346,248		—		—
MSRs	104,523		104,523		—		—		104,523		107,383		107,383		—		—		107,383
Derivatives	1,755,704		1,755,704		1,572		1,754,115		17		1,390,217		1,390,217		602		1,389,593		22
Financial liabilities:
Deposits (1)	19,222,700		19,302,669		—		19,302,669		—		13,105,236		13,095,685		—		13,095,685		—
Federal funds purchased and securities loaned or sold under repurchase agreements	15,329,760		15,322,701		—		15,322,701		—		15,382,819		15,406,457		—		15,406,457		—
Trading liabilities	3,089,255		3,089,255		2,770,142		318,887		226		2,871,645		2,871,645		2,557,495		313,920		230
Borrowings and other debt obligations	43,015,347		42,542,651		—		33,598,901		8,943,750		43,588,273		42,837,678		—		34,092,868		8,744,810
Derivatives	1,953,406		1,953,406		1,125		1,951,146		1,135		2,024,273		2,024,273		448		2,021,593		2,232

(1) This line item excludes deposit liabilities with no defined or contractual maturities in accordance with ASU 2016-01.

(2) This line item includes CDs with a maturity greater than 90 days and investments in trading securities.

Valuation Processes and Techniques - Financial Instruments

The preceding tables present disclosures about the fair value of the Company's financial instruments. Those fair values for certain instruments are presented based upon subjective estimates of relevant market conditions at a specific point in time and information about each financial instrument. In cases in which quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties resulting in variability in estimates affected by changes in assumptions and risks of the financial instruments at a certain point in time. Therefore, the derived fair value estimates presented above for certain instruments cannot be substantiated by comparison to independent markets. In addition, the fair values do not reflect any premium or discount that could result from offering for sale at one time an entity’s entire holding of a particular financial instrument, nor do they reflect potential taxes and the expenses that would be incurred in an actual sale or settlement. Accordingly, the aggregate fair value amounts presented above do not represent the underlying value of the Company.

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NOTE 13. FAIR VALUE (continued)

The following methods and assumptions were used to estimate the fair value of each class of financial instruments not measured at fair value on the Condensed Consolidated Balance Sheets:

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash and due from depository institutions, interest-bearing deposits in other banks, federal funds sold, and securities purchased under agreements to resell. The related fair value measurements have been classified as Level 1, since their carrying value approximates fair value due to the short-term nature of the asset.

Restricted cash is related to cash restricted for investment purposes, cash posted for collateral purposes, cash advanced for loan purchases, and lockbox collections. Cash and cash equivalents, including restricted cash, have maturities of three months or less and, accordingly, the carrying amount of these instruments is deemed to be a reasonable estimate of fair value.

Securities Financing Activities

No quoted prices exist for Securities Financing Activities, so fair value is determined using a DCF technique. Cash flows are estimated based on the terms of the contract. These cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of the underlying collateral. Securities Financing Activities are classified as Level 2. At September 30, 2023, the fair value of the underlying collateral was $52.3 billion before netting of $36.8 billion, all of which was sold or re-pledged.

Investments in debt securities HTM

Investments in debt securities HTM are recorded at amortized cost and are priced by third-party pricing vendors. The third-party vendors use a variety of methods when pricing these securities that incorporate relevant observable market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. These investment securities are, therefore, considered Level 2.

LHFI, net

The fair values of loans are estimated based on groupings of similar loans, including but not limited to stratification by type, interest rate, maturity, and borrower creditworthiness. Discounted future cash flow analyses are performed for these loans incorporating assumptions of current and projected voluntary prepayment speeds. Discount rates are determined using the Company's current origination rates on similar loans, adjusted for changes in current liquidity and credit spreads (if necessary). Because the current liquidity spreads are generally not observable in the market and the expected loss assumptions are based on the Company's experience, these are Level 3 valuations. Impaired loans are valued at fair value on a nonrecurring basis. See further discussion under the section captioned "Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis" above.

LHFS

The Company has LHFS portfolios that are accounted for at the lower of cost or market. Estimated fair value for these portfolios is generally based on prices obtained from agreements to sell the specific assets, if available, recent market transactions or prices expected to be obtained in the subsequent sales for similar assets.

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NOTE 13. FAIR VALUE (continued)

Deposits

For deposits with no stated maturity, such as non-interest-bearing and interest-bearing demand deposit accounts, savings accounts and certain money market accounts, the carrying value approximates fair values. The fair value of fixed-maturity deposits is estimated by discounting cash flows using currently offered rates for deposits of similar remaining maturities and have been classified as Level 2.

Borrowings and other debt obligations

Fair value is estimated by discounting cash flows using rates currently available to the Company for other borrowings with similar terms and remaining maturities. Certain other debt obligation instruments are valued using available market quotes for similar instruments, which contemplates issuer default risk. The related fair value measurements have generally been classified as Level 2. A certain portion of debt relating to revolving credit facilities is classified as Level 3. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements and, therefore, they are considered to be Level 3.

FVO for Financial Assets and Financial Liabilities

RICs HFI

To reduce accounting and operational complexity, the Company elected the FVO for certain of its RICs HFI. These loans consisted primarily of NPLs acquired by the Company under optional clean-up calls from its non-consolidated Trusts.

Securities Financing Activities

The Company has elected the FVO for certain of its Securities Financing Activities, primarily to align the accounting with the derivatives that are used to economically hedge changes in fair value of the assets and liabilities. Changes in fair value for Securities Financing Activities under an FVO are recording in non-interest income.

The following table summarizes the differences between the fair value and the principal balance of financial instruments measured at fair value on a recurring basis as of the dates indicated:

	September 30, 2023						December 31, 2022
(in thousands)	Fair Value		Principal Balance		Difference		Fair Value		Principal Balance		Difference
RICs HFI	$	15,437	$	15,437	$	—	$	20,924	$	21,358	$	(434)
Nonaccrual loans	125		125		—		295		308		(13)
Securities Financing Activities
Federal funds sold and securities purchased under resale agreements or similar arrangements	1,400,766		1,401,838		(1,072)		$	234,169	$	237,000	$	(2,831)
Federal funds purchased and securities loaned or sold under repurchase agreements	364,284		364,520		(236)		245,149		250,000		(4,851)

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NOTE 14. NON-INTEREST INCOME AND OTHER EXPENSES

The following table presents the details of the Company's non-interest income for the following periods:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Non-interest income:
Consumer and commercial fees	$	79,440	$	111,006	$	258,271	$	308,830
Lease income	617,962		663,123		1,866,968		2,012,982
Capital market revenue	103,675		32,986		217,561		142,062
Miscellaneous income, net
Mortgage banking income, net	784		3,802		9,624		21,119
BOLI	19,389		14,674		49,485		44,631
Net gain on sale of operating leases	12,922		19,740		55,296		66,002
Asset and wealth management fees	62,523		62,986		185,844		196,544
(Loss) /Gain on non-mortgage loans	2,058		(3,936)		(8,147)		(10,485)
Other miscellaneous income, net	(14,360)		29,729		(8,397)		58,366
Net gain / (loss) on sale of investment securities	37,048		(18,594)		108,556		6,121
Total Non-interest income	$	921,441	$	915,516	$	2,735,061	$	2,846,172

Disaggregation of Revenue from Contracts with Customers

The following table presents the Company's non-interest income disaggregated by revenue source:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Non-interest income:
In-scope of revenue from contracts with customers:
Depository services(1)	$	28,110	$	43,693	$	92,081	$	125,001
Commission and trailer fees(2)	56,942		56,385		171,442		176,170
Interchange income, net(2)	18,798		19,025		53,321		55,590
Underwriting service fees(2)	38,147		13,668		107,624		68,048
Asset and wealth management fees(2)	26,520		37,132		87,135		115,776
Other revenue from contracts with customers(2)	7,594		11,991		24,518		37,385
Total in-scope of revenue from contracts with customers	176,111		181,894		536,121		577,970
Out-of-scope of revenue from contracts with customers:
Consumer and commercial fees(3)	34,601		50,142		115,571		132,870
Lease income	617,962		663,123		1,866,968		2,012,982
Other miscellaneous income, net (3)	55,719		38,951		107,845		116,229
Net gain / (loss) on sale of investment securities	37,048		(18,594)		108,556		6,121
Total out-of-scope of revenue from contracts with customers	745,330		733,622		2,198,940		2,268,202
Total non-interest income	$	921,441	$	915,516	$	2,735,061	$	2,846,172

(1) Primarily recorded in the Company's Consolidated Statements of Operations within Consumer and commercial fees.

(2) Primarily recorded in the Company's Consolidated Statements of Operations within Miscellaneous income, net.

(3) The balance presented excludes certain revenue streams that are considered in-scope and presented above.

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NOTE 14. NON-INTEREST INCOME AND OTHER EXPENSES (continued)

Other Expenses

The following table presents the Company's other expenses for the following periods:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Other expenses:
Amortization of intangibles	$	9,301	$	10,986	$	29,896	$	35,952
Deposit insurance premiums and other expenses	16,175		11,334		58,774		32,348
Loss on debt extinguishment	$	—	$	67	$	—	$	67
Other administrative expenses	91,759		85,626		275,203		272,116
Other miscellaneous expenses	6,648		8,062		19,988		38,446
Total Other expenses	$	123,883	$	116,075	$	383,861	$	378,929

NOTE 15. INCOME TAXES

Income tax benefit of $147.8 million and $54.9 million was recorded for the three months and nine months ended September 30, 2023, respectively, compared to Income tax expense of $76.2 million and $344.9 million for the corresponding periods in 2022. This resulted in an ETR of 527.5% and (5.9)% for three months and nine months ended September 30, 2023, respectively, compared to 25.1% and 21.2% for the corresponding periods in 2022.

The income tax benefit recorded (and related ETR) for the three months and nine months ended September 30, 2023 was directly impacted by a reduction in the Company’s full-year forecasted ETR from 9.93% as of June 30, 2023 to (5.76)% as of September 30, 2023. This reduction was primarily the result of (i) a decrease in 2023 full-year forecasted pre-tax income and (ii) a significant increase in forecasted electric vehicle tax credits expected to be generated in 2023 related to new preferred lease and lending agreements entered into with several auto OEMs after August 2023.

The Company is subject to the income tax laws of the U.S., its states and municipalities and certain foreign countries. These tax laws are complex and are potentially subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about the application of these inherently complex tax laws.

Actual income taxes paid may vary from estimates depending upon changes in income tax laws, actual results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed. The Company reviews its tax balances quarterly and, as new information becomes available, the balances are adjusted as appropriate. The Company is subject to ongoing tax examinations and assessments in various jurisdictions.

With few exceptions, the Company is no longer subject to federal and non-U.S. income tax examinations by tax authorities for years prior to 2011 and state income tax examinations for years prior to 2006.

The Company applies an aggregate portfolio approach whereby income tax effects from AOCI are released only when an entire portfolio (i.e., all related units of account) of a particular type is liquidated, sold or extinguished. 

The Company had a net deferred tax liability balance of $2.5 million at September 30, 2023 (consisting of a deferred tax asset balance of $212.5 million and a deferred tax liability balance of $215.0 million with respect to jurisdictional netting), compared to a net deferred tax liability balance of $167.4 million at December 31, 2022 (consisting of a deferred tax asset balance of $221.6 million and a deferred tax liability balance of $389.0 million). The $164.9 million change in net deferred tax liability for the period ended September 30, 2023 was primarily due to a decrease in the deferred tax liability related to leasing transactions.

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NOTE 16. COMMITMENTS, CONTINGENCIES, AND GUARANTEES

Off-Balance Sheet Risk - Financial Instruments

In the normal course of business, the Company utilizes a variety of financial instruments with off-balance sheet risk to meet the financing needs of its customers and manage its exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, letters of credit, loans sold with recourse, forward contracts, and interest rate and cross currency swaps, caps and floors. These financial instruments may involve, to varying degrees, elements of credit, liquidity, and interest rate risk in excess of the amount recognized on the Condensed Consolidated Balance Sheets. The contractual or notional amounts of these financial instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, letters of credit and loans sold with recourse is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. For forward contracts and interest rate swaps, caps and floors, the contract or notional amounts do not represent exposure to credit loss. The Company controls the credit risk of its forward contracts and interest rate swaps, caps and floors through credit approvals, limits and monitoring procedures. See Note 12 to these Condensed Consolidated Financial Statements for discussion of all derivative contract commitments.

The following table details the amount of commitments at the dates indicated:

Other Commitments	September 30, 2023		December 31, 2022
	(in thousands)
Commitments to extend credit	$	26,047,201	$	28,964,952
Letters of credit	1,390,028		1,448,459
Recourse exposure on sold loans	19,158		19,836
Total commitments	$	27,456,387	$	30,433,247

Commitments to Extend Credit

Commitments to extend credit generally have fixed expiration dates, are variable rate, and contain provisions that permit the Company to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements.

Included within the reported balances for commitments to extend credit at September 30, 2023 and December 31, 2022 were $3.2 billion and $3.3 billion, respectively, of commitments that can be canceled by the Company without notice.

Commitments to extend credit also include amounts committed by the Company to fund its investments in CRA, LIHTC, and other equity method investments in which it is a limited partner.

Letters of Credit

The Company’s letters of credit meet the definition of a guarantee. Letters of credit commit the Company to make payments on behalf of its customers if specified future events occur. The guarantees are primarily issued to support public and private borrowing arrangements. The weighted average term of these commitments at September 30, 2023 was 14.2 months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. In the event of a requested draw by the beneficiary that complies with the terms of the letter of credit, the Company would be required to honor the commitment. The Company has various forms of collateral for these letters of credit, including real estate assets and other customer business assets. The maximum undiscounted exposure related to these commitments at September 30, 2023 was $1.4 billion. The fees related to letters of credit are deferred and amortized over the lives of the respective commitments, and were immaterial to the Company’s financial statements at September 30, 2023. Management believes that the utilization rate of these letters of credit will continue to be substantially less than the amount of the commitments, as has been the Company’s experience to date. The credit risk associated with letters of credit is monitored using the same risk rating system utilized within the loan and financing lease portfolio. As of September 30, 2023 and December 31, 2022, the liability related to unfunded lending commitments was $72.9 million and $85.6 million, respectively.

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NOTE 16. COMMITMENTS, CONTINGENCIES, AND GUARANTEES (continued)

Unsecured Revolving Lines of Credit

Such commitments arise primarily from agreements with customers for unused lines of credit on unsecured revolving accounts and credit cards, provided there is no violation of conditions in the underlying agreement. These commitments, substantially all of which the Company can terminate at any time and which do not necessarily represent future cash requirements, are reviewed periodically based on account usage, customer creditworthiness and loan qualifications.

Loans Sold with Recourse

The Company has loans sold with recourse that meet the definition of a guaranty. For loans sold with recourse under the terms of its multifamily sales program with the FNMA, the Company retained a portion of the associated credit risk.

Commitments to Sell Loans

The Company enters into forward contracts relating to its mortgage banking business to hedge the exposures from commitments to make new residential mortgage loans with existing customers and from mortgage loans classified as LHFS. These contracts mature in less than one year.

RIC Commitments

The following table summarizes significant liabilities recorded for commitments and contingencies associated with the Company's RIC origination and servicing operations, all of which are included in Accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets at the dates indicated:

Agreement or Legal Matter	Commitment or Contingency	September 30, 2023		December 31, 2022
		(in thousands)
MPLFA	Revenue-sharing and gain/(loss), net-sharing payments	$	10,732	$	14,219
Other contingencies	Consumer arrangements	—		5,000

MPLFA

Under the terms of the MPLFA, SC must make revenue-sharing payments to Stellantis and also must share with Stellantis when residual gains/(losses) on leased vehicles exceed a specified threshold. The MPLFA requires SC to maintain at least $2.5 billion in funding available for floor plan loans and $2.5 billion of financing dedicated to Stellantis retail financing. In turn, Stellantis must provide designated minimum threshold percentages of its Subvention business to SC.

Agreements

In connection with the sale of RICs through securitizations and other sales, SC has made standard representations and warranties customary to the consumer finance industry. Violations of these representations and warranties may require SC to repurchase loans previously sold to on or off-balance sheet Trusts or other third parties. As of September 30, 2023, there were no loans that were the subject of a demand to repurchase or replace for breach of representations and warranties for SC's ABS or other sales. In the opinion of management, the potential exposure of other recourse obligations related to SC’s RIC sale agreements is not expected to have a material adverse effect on the Company's or SC’s business, consolidated financial position, results of operations, or cash flows.

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NOTE 16. COMMITMENTS, CONTINGENCIES, AND GUARANTEES (continued)

Santander has provided guarantees on the covenants, agreements, and obligations of SC under the governing documents of its warehouse facilities and privately issued amortizing notes. These guarantees are limited to the obligations of SC as servicer.

In November 2015, SC executed a forward flow asset sale agreement with a third party under the terms of which SC is committed to sell $350.0 million in charged-off loan receivables in bankruptcy status on a quarterly basis. However, any sale of more than $275.0 million is subject to a market price check. The remaining aggregate commitment as of September 30, 2023 and December 31, 2022 not subject to a market price check was zero.

Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of guarantees under applicable accounting guidance and from other relationships that include items such as indemnifications provided in the ordinary course of business and intercompany guarantees.

Legal and Regulatory Proceedings

The Company, including its subsidiaries, is and in the future periodically expects to be party to, or otherwise involved in, various claims, disputes, lawsuits, investigations, regulatory matters and other legal matters and proceedings that arise in the ordinary course of business. In view of the inherent difficulty of predicting the outcome of any such claim, dispute, lawsuit, investigation, regulatory matter and/or legal proceeding, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict the eventual outcome of the pending matters, the timing of the ultimate resolution of the matters, or the eventual loss, fines or penalties related to the matters, if any. Accordingly, except as provided below, the Company is unable to reasonably estimate a range of its potential exposure, if any, to these claims, disputes, lawsuits, investigations, regulatory matters and other legal proceedings at this time. It is reasonably possible that actual outcomes or losses may differ materially from the Company's current assessments and estimates, and any adverse resolution of any of these matters against it could materially and adversely affect the Company's business, financial position, liquidity, and results of operations.

The Company establishes an accrued liability for legal and regulatory proceedings when those matters present material loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued that are reasonably possible.

As of September 30, 2023 and December 31, 2022, the Company accrued aggregate legal and regulatory liabilities of approximately $12.3 million and $17.0 million, respectively. Further, the Company estimates the aggregate range of reasonably possible losses for legal and regulatory proceedings, in excess of reserves established, of up to approximately $17.5 million as of September 30, 2023 and $9.0 million as of December 31, 2022. Set forth below are descriptions of the significant lawsuits, regulatory matters and other legal proceedings to which the Company is subject.

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NOTE 16. COMMITMENTS, CONTINGENCIES, AND GUARANTEES (continued)

Consumer Lending Cases

The Company and its subsidiaries are also party to various lawsuits pending in federal and state courts alleging violations of state and federal consumer lending laws, including, without limitation, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, Section 5 of the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Truth in Lending Act, wrongful repossession laws, usury laws and laws related to unfair and deceptive acts or practices. In general, these cases seek damages and equitable and/or other relief.

Kelly v. SC. A putative Pennsylvania-only class action pending in the United States District Court for the Eastern District of Pennsylvania captioned Hugh and Christina Kelly v. Santander Consumer USA Holdings Inc., 2:20-cv-03698, alleges that SC violated the Uniform Commercial Code and Pennsylvania Motor Vehicle Sales Finance Act, and that repossessions were not commercially reasonable or done in good faith when the post-repossession notice included a storage fee of $25 that was less than the stated amount. Plaintiffs also allege that SC failed to inform the consumers of a required fee to retrieve their personal affects. Plaintiffs allege that any fee charged by a recovery agent or auction house was impermissible due to SC’s failure to disclose them. On December 16, 2022, the court preliminarily approved a settlement with SC pursuant to which SC will pay a total of $14 million to resolve the litigation. A final settlement approval hearing was held on October 18, 2023. The court has not yet issued an order.

Enterprise Financial Group v. SC. EFG, a former GAP products and services provider to SC, sued SC for breach of contract, alleging that SC placed non-conforming loans in the program, resulting in EFG losses. The case is pending in Texas District Court, Dallas County, and is captioned Enterprise Financial Group v. SC, Case No. 18-08119. SC asserted a counterclaim against EFG seeking approximately $10.5 million in connection with EFG’s refusal to pay claims. A jury trial concluded on November 2, 2022 and the jury awarded EFG $5 million and SC $4.2 million. On May 9, 2023, the court issued a final judgment awarding EFG approximately $10.6 million, and eliminating the jury award of $4.2 million in favor of SC. On July 17, 2023, the court heard arguments on SC’s motion for judgment notwithstanding the verdict, a new trial and remittitur; The court denied SC's motions for judgment notwithstanding the verdict, new trial, or remittitur. SC filed its Notice of Appeal.

Real Legacy Assurance ERISA Litigation. On April 13, 2020, participants of the Real Legacy Assurance Plan, a pension plan, filed an amended complaint adding SSLLC as a defendant to an ERISA putative class action pending against the owner of Real Legacy, Real Legacy Board members, the Plan’s Trustee, actuaries and other defendants. The case is pending in the United States District Court for the District of Puerto Rico and captioned Vega-Ortiz et al v. Cooperativa de Seguros Multiples de Puerto Rico, et al, Civ. No. 3:19-cv-02056. The amended complaint alleges that SSLLC served as an investment manager to the Real Legacy Assurance Plan and breached its fiduciary duties by failing to ensure the Plan was adequately funded. On November 24, 2021, the court denied each of the defendants’ motions to dismiss. SSLLC filed its answer and discovery is ongoing. On April 4, 2023, the court granted the plaintiffs' motion for class certification.

These matters are ongoing and could in the future result in the imposition of damages, fines or other penalties. No assurance can be given that the ultimate outcome of these matters or any resulting proceedings would not materially and adversely affect the Company's business, financial condition and results of operations.

Regulatory Investigations and Proceedings

The Company is party to, or is periodically otherwise involved in, reviews, investigations, examinations and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the FRB of Boston, the CFPB, the DOJ, the SEC, the Federal Trade Commission and various state regulatory and enforcement agencies.

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NOTE 17. RELATED PARTY TRANSACTIONS

In the normal course of business, the Company conducts business with Santander and its subsidiaries. Santander policy requires that these transactions occur at prevailing market rates and terms, and, where applicable, these transactions are compliant with United States banking regulations. All extensions of credit by (and certain credit exposures of) the Bank to other Santander affiliates are legally required to be secured by eligible collateral. The following disclosures below are the more significant related party transactions entered into during 2023:

Debt and derivative activities

The Company and its affiliates have various debt and derivative agreements with Santander. For further details of these agreements, see Note 10 and Note 20 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for 2022.

On October 5, 2023, SBNA entered into a loan agreement with Santander to borrow $2.0 billion at a fixed rate of 6.98%, which will mature on October 16, 2025.

Mezzanine and Stockholder's Equity

On June 15, 2023, the Company issued 1,000,000 shares of a new series of its preferred stock, the 9.380% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series F, without par value and with a liquidation preference of $1,000 per share, to Santander. As of September 30, 2023, Santander was the sole holder of the Series E and F Preferred Stock.

During the nine months ended September 30, 2023, the Company declared and paid dividends to its common shareholder, Santander, in the amount of $1.5 billion. In addition, during the nine months ended September 30, 2023, the Company declared and paid dividends to its preferred shareholder, Santander, in the amount of $56.8 million.

Deposit and checking accounts

Affiliates of Santander that are not consolidated by SHUSA had deposits with SBNA of $125.9 million and $130.4 million as of September 30, 2023 and December 31, 2022, respectively.

Repurchase Agreements and Securities Trading

During the three months and nine months ended September 30, 2023, SanCap entered into intercompany repurchase agreements and securities trading with Santander and its affiliates. The gross principal amount outstanding on these repurchase agreements and securities trading activities, which do not eliminate in consolidation, was $50.0 million and $234.8 million at September 30, 2023, respectively. During the three months and nine months ended September 30, 2023, the amount of income / expense related to these accounts was negligible to the overall results of the Company and Santander.

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NOTE 18. BUSINESS SEGMENT INFORMATION

Business Segment Products and Services

The Company’s reportable segments are focused principally around the customers the Company serves. The Company has identified the following reportable segments: Auto, CBB, C&I, CRE, CIB, and Wealth Management.

•The Auto segment includes the Company's consumer and commercial auto loans and leases and the Company's commercial loans to dealers and dealer floorplan financing products. This includes the Company's specialized consumer finance subsidiary focused on vehicle finance and third-party servicing. The specialized consumer finance 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. The Company offers a full spectrum of auto financing products and services to captive financing companies. 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. The Company 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. All intercompany revenue and fees between consolidated affiliates are eliminated in the consolidated results of the Company.

•The CBB segment includes the products and services provided to consumer and small business banking customers, including consumer deposit, small business banking, 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 unsecured personal loans, credit cards, and small business loans such as business lines of credit. In addition, the Company makes investment services available to its retail customers, including products such as annuities, mutual funds, managed accounts and insurance products through a networking agreement with a consolidated affiliate.

•The C&I segment currently provides commercial lines, loans, letters of credit, receivables financing, commercial credit cards, and cash management and deposit services to lower middle market commercial customers and 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 segment offers CRE loans, CEVF, and multifamily loans, as well as cash management and deposit services to customers. This category also includes community development finance activities, including originating CRA-eligible loans and making CRA-eligible investments.

•The CIB segment serves the needs of global corporate 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 the Company's institutional broker-dealer that provides services in investment banking, sales, trading and equity research reports. CIB's offerings and strategy are based on Santander's local and global capabilities in wholesale banking.

•The Wealth Management segment consists of the Company's international private banking and financial operations Services include the full range of banking and asset management services to foreign individuals and corporations based primarily in Latin America

The Company also offers customer-related derivatives to hedge interest rate risk, and in the C&I, CRE, and CIB business segments and the dealer commercial lending division of the Auto business segment, offers derivatives relating to foreign exchange and lending arrangements. See Note 12 to the Consolidated Financial Statements for additional details.

The Other category includes certain immaterial subsidiaries, the unallocated interest expense on the Company's borrowings and other debt obligations and certain unallocated corporate income and indirect expenses.

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NOTE 18. BUSINESS SEGMENT INFORMATION (continued)

The Company’s segment results are derived from the Company’s business unit profitability reporting system by specifically attributing managed balance sheet assets, deposits and other liabilities and their related interest income or expense to each of the segments. Funds transfer pricing methodologies are utilized to allocate a cost for funds used or a credit for funds provided to business line deposits, loans and selected other assets using a matched funding concept. The methodology includes a liquidity premium adjustment, which considers an appropriate market participant spread for commercial loans and deposits by analyzing the mix of borrowings available to the Company with comparable maturity periods.

Other income and expenses are managed directly by each reportable segment, including fees, service charges, salaries and benefits, and other direct expenses, as well as certain allocated corporate expenses, and are accounted for within each segment’s financial results. Accounting policies for the lines of business are the same as those used in preparation of the Condensed Consolidated Financial Statements with respect to activities specifically attributable to each business line. However, the preparation of business line results requires management to establish methodologies to allocate funding costs and benefits, expenses and other financial elements to each line of business. Where practical, the results are adjusted to present consistent methodologies for the segments.

The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. The implementation of these enhancements to the internal management reporting methodology may materially affect the results disclosed for each segment with no impact on consolidated results. Whenever significant changes to management reporting methodologies take place, prior period information is reclassified wherever practicable.

Results of Segments

The following tables present certain information regarding the Company’s segments.

Three months ended	SHUSA Reportable Segments
	Consumer Activities				Commercial Activities
September 30, 2023	Auto		CBB		C&I		CRE		CIB		Wealth Management		Other(1)		Total
	(in thousands)
Net interest income / (expense)	$	926,581	$	407,358	$	80,426	$	115,389	$	48,677	$	66,736	$	(174,486)	$	1,470,681
Non-interest income	623,850		58,682		10,732		8,033		90,219		66,696		63,229		921,441
Credit loss expense / (benefit)	782,504		31,789		(8,292)		55,865		(5,258)		205		(521)		856,292
Total expenses	815,996		360,685		57,933		33,362		157,583		72,910		65,375		1,563,844
Income/(loss) before income taxes	(48,069)		73,566		41,517		34,195		(13,429)		60,317		(176,111)		(28,014)
(1) Other includes the results of the immaterial entities, earnings from non-strategic assets, the investment portfolio, interest expense on SBNA’s and the Company's borrowings and other debt obligations, amortization of intangible assets and certain unallocated corporate income and indirect expenses.

Three months ended	SHUSA Reportable Segments
	Consumer Activities				Commercial Activities
September 30, 2022	Auto		CBB		C&I		CRE		CIB		Wealth Management		Other(1)		Total
	(in thousands)
Net interest income / (expense)	$	1,020,542	$	368,627	$	80,734	$	92,271	$	50,364	$	53,870	$	(67,240)	$	1,599,168
Non-interest income	695,303		77,131		17,502		10,337		56,674		63,748		(5,179)		915,516
Credit loss expense / (benefit)	521,235		83,451		27,295		6,243		905		—		(2,723)		636,406
Total expenses	855,150		383,597		60,672		31,186		124,832		62,110		56,677		1,574,224
Income/(loss) before income taxes	339,460		(21,290)		10,269		65,179		(18,699)		55,508		(126,373)		304,054
(1) Refer to corresponding notes above

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NOTE 18. BUSINESS SEGMENT INFORMATION (continued)

Nine months ended	SHUSA Reportable Segments
	Consumer Activities				Commercial Activities
September 30, 2023	Auto		CBB		C&I		CRE		CIB		Wealth Management		Other(1)		Total
	(in thousands)
Net interest income / (expense)	$	2,754,863	$	1,219,442	$	242,421	$	333,456	$	170,311	$	210,392	$	(458,538)	$	4,472,347
Non-interest income	1,924,771		188,390		38,439		25,682		268,012		187,203		102,564		2,735,061
Credit loss expense / (benefit)	1,296,120		238,596		(13,348)		111,931		(19,391)		205		(6,570)		1,607,543
Total expenses	2,464,793		1,090,912		178,239		99,830		392,760		208,931		228,666		4,664,131
Income/(loss) before income taxes	918,721		78,324		115,969		147,377		64,954		188,459		(578,070)		935,734
Total assets	62,945,184		12,601,046		5,031,230		22,488,032		27,502,833		7,404,818		27,680,020		165,653,163
(1) Refer to corresponding notes above

Nine months ended	SHUSA Reportable Segments
	Consumer Activities				Commercial Activities
September 30, 2022	Auto		CBB		C&I		CRE		CIB		Wealth Management		Other(1)		Total
	(in thousands)
Net interest income / (expense)	$	3,093,143	$	1,002,016	$	224,191	$	255,453	$	124,613	$	118,239	$	(205,070)	$	4,612,585
Total non-interest income	2,098,169		233,842		44,876		32,402		198,940		203,986		33,957		2,846,172
Credit loss expense / (benefit)	1,075,942		148,794		39,551		(8,544)		4,295		—		(2,622)		1,257,416
Total expenses	2,485,535		1,137,645		193,189		95,236		318,066		183,142		161,173		4,573,986
Income/(loss) before income taxes	1,629,835		(50,581)		36,327		201,163		1,192		139,083		(329,664)		1,627,355
Total assets	62,490,143		13,072,265		6,559,994		19,663,939		30,358,386		7,944,125		26,739,976		166,828,828
(1) Refer to corresponding notes above

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

SHUSA is the parent holding company of SBNA, a national banking association; SC, a consumer finance company headquartered in Dallas, Texas; BSI, a financial services company headquartered in Miami, Florida that offers a full range of banking services to foreign individuals and corporations based primarily in Latin America; SanCap, an institutional broker-dealer headquartered in New York, which has significant capabilities in market making via an experienced fixed-income sales and trading team and a focus on structuring and advisory services for asset originators in the real estate and specialty finance markets; SSLLC, a broker-dealer headquartered in Boston, Massachusetts; and several other subsidiaries. SHUSA is headquartered in Boston and SBNA's home office is in Wilmington, Delaware. SSLLC is a registered investment adviser with the SEC. SHUSA's two largest subsidiaries by asset size and revenue are SBNA and SC. SHUSA is a wholly-owned subsidiary of Santander.

The Company specializes in consumer financing focused on vehicle finance, servicing of third-party vehicle financing, and delivering service to dealers and customers across the full credit spectrum. This includes indirect origination and servicing of vehicle loans and leases, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers, origination of vehicle loans through a web-based direct lending program, purchases of vehicle loans from other lenders, and servicing of automobile and recreational and marine vehicle portfolios for other lenders. The Company sells consumer vehicle loans and leases through flow agreements and, when market conditions are favorable, it accesses the ABS market through securitizations of consumer vehicle loans and leases.

Since May 2013, under the MPLFA with Stellantis, the Company has operated as Stellantis' preferred provider for consumer loans, leases and dealer loans and provides services to Stellantis customers and dealers under the CCAP brand. In the second quarter of 2022, the Company announced it had reached an agreement with Stellantis to amend and extend the MPLFA through December 2025. In June 2022, the Company launched a preferred lender, full spectrum financing program in partnership with MMNA to provide customer and dealer financing programs that will help MMNA achieve its goal of improving the car-buying experience.

During the second half of 2023, the Company entered into numerous new lending agreements with various auto OEMs. These new agreements reinforce the Company’s leadership in the U.S. auto finance market and the Bank’s commitment to forging deep, multi-geography relationships with automotive manufacturers catering to customers across the credit spectrum. These various OEMs have a diverse product lineup including an increased focus on electric vehicles. In addition, the Company has been chosen by LendingClub to be its primary loan servicer for its auto refinance program.

In addition to specialized consumer finance, the Company also attracts deposits and provides other retail banking services through its network of retail branches with locations in Connecticut, Delaware, Florida, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island and originates small business, middle market, large and global commercial loans, multifamily loans, and other consumer loans and leases throughout the Mid-Atlantic and Northeastern areas of the United States. For large institutional investors, the Company provides structured products, emerging markets credit and U.S. investment grade credit, U.S. rates, short-term fixed-income, debt and equity capital markets, investment banking, exchange traded derivatives, and cash equities, benefiting from a combination of Santander’s global reach and access to financial hubs together with extensive local market knowledge and regional expertise.

The Company uses its deposits, public and private borrowings, as well as other financing sources, to fund its loan and investment portfolios.

In April 2022, SHUSA acquired 100% ownership of PCH, parent company of APS, an institutional fixed-income broker dealer and a designated primary dealer by the FRB of New York In February 2023, the Company completed the merger of SIS into APS, with the resulting company renamed SanCap. Following the merger, SanCap, along with SSLLC, now comprise the Broker-Dealers.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

ECONOMIC AND BUSINESS ENVIRONMENT

Overview

The unemployment rate at September 30, 2023 was 3.8% compared to 3.6% at June 30, 2023 and 3.6% one year ago. According to the U.S. Bureau of Labor Statistics, employment continued to trend up in government, health care, social assistance, and construction.

Market year-to-date returns for the following indices based on closing prices for the period indicated were:

	September 30, 2023
Dow Jones Industrial Average	1.1%
S&P 500	11.7%
NASDAQ Composite	26.3%

At its September 2023 meeting, the FOMC maintained the federal funds rate target range of 5.25% - 5.50%. The FOMC continues to focus its policy making on maximum employment and a 2.0% inflation target rate.

The ten-year Treasury bond rate at September 30, 2023 was 4.57%, up from 3.88% at December 31, 2022.

One of the primary metrics used by the market to monitor the strength of the used car market is the Manheim Used Vehicle Index. The Manheim Used Vehicle Value Index, based on the 1997 Manheim- based index, decreased from 219.3 at December 31, 2022 to 214.3 at September 30, 2023.

Recent Events Affecting the Financial Services Industry

In response to the current interest rate environment and recent events affecting the financial services industry, the Company has enhanced its monitoring of interest rate and liquidity risks. Additional information related to these matters can be found in the sections of this MD&A captioned "Deposits", "Bank Regulatory Capital", "Liquidity and Capital Resources", and "Asset and Liability Management".

The recent failure of several large U.S. banking institutions has led to increased market uncertainty. The Company was not materially impacted by these events during the quarter; however, changing market conditions are considered a significant risk factor to the Company. These factors will likely increase competition and pricing on customer deposits over the short and medium term, heighten market and regulatory focus and reform on liquidity, capital, and interest rate risk and likely result in a special assessment on banks to cover losses to the FDIC’s DIF which we estimate to be approximately $60 million in total and to be paid quarterly over the next two years beginning in the first quarter of 2024. These changing market conditions and uncertainty will likely present challenges in the growth of net interest income, and increased credit risk and associated credit loss expense, and could have an overall impact on the Company's results of operations. It is not possible to quantify the impact of changing market conditions, uncertainty, or regulatory action on the Company's results of operations.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Credit Rating Actions

The following table presents Moody’s, S&P and Fitch credit ratings for SBNA, SHUSA, and Santander senior debt / long-term issuer:

	SANTANDER (1)	SHUSA(3)	SBNA (2)	Overall Outlook
Fitch	A / A-	BBB+	BBB+	Stable
Moody's	A2 / Baa1	Baa2	Baa1	Stable
S&P	A+ / A-	BBB+	A-	Stable

(1) Senior preferred debt / Senior non-preferred rating

(2) Moody's rating represents SBNA long-term issuer rating

(3) SHUSA's senior unsecured rating upgraded by Moody's subsequent to September 30, 2023.

SHUSA funds its operations independently of the other entities owned by Santander, and believes its business is not necessarily closely related to the business or outlook of other entities owned by Santander. Future changes in the credit ratings of its parent, Santander, or the Kingdom of Spain, however, could impact SHUSA's or its subsidiaries' credit ratings, and any other change in the condition of Santander could affect SHUSA.

REGULATORY MATTERS

The activities of the Company and its subsidiaries, including SBNA and SC, are subject to regulation under various U.S. federal laws and regulatory agencies which impose regulations, supervise and conduct examinations, and may affect the operations and management of the Company and its ability to take certain actions, including making distributions to our parent, Santander. The Company is regulated on a consolidated basis by the Federal Reserve, including the FRB of Boston, and the CFPB. The Company's subsidiaries are further supervised by the OCC, the FRB of Atlanta, and the New York Department of Financial Services.

The Federal Reserve tailors its supervisory programs and regulatory requirements by category based on firm-specific characteristics such as total assets, cross-jurisdictional activity, and nonbank asset or off-balance sheet exposure. As of September 30, 2023, SHUSA was designated a Category IV institution under the Federal Reserve's tailoring rule. Institutions that change to a higher category would become subject to the requirements of the new category, as outlined by the Federal Reserve, generally within two quarters of the change in category.

On July 27, 2023 the regulatory agencies issued an NPR to modify the definition of cross-jurisdictional activity, which would expand the scope of exposures included in the measurement of cross-jurisdictional activity. This change in scope has the potential to move certain firms into a higher supervisory category under the Federal Reserve’s tailoring rule.

Payment of Dividends

SHUSA is the parent holding company of SBNA. SHUSA and SBNA are subject to various regulatory restrictions relating to the payment of dividends, including regulatory capital minimums and the requirement to remain "well-capitalized" under prompt corrective action regulations. Refer to the "Liquidity and Capital Resources" section of this MD&A for detail of the capital actions of the Company and its subsidiaries during the period.

Regulatory Capital Requirements

U.S. Basel III regulatory capital rules are applicable to both SHUSA and SBNA.

These rules include prompt corrective action thresholds that require banking organizations, including the Company and SBNA, to maintain a minimum CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total capital ratio of 8.0% and a minimum leverage ratio, calculated as the ratio of Tier 1 capital to average consolidated assets for the quarter, of 4.0%. A further capital conservation buffer of 2.5% above these minimum ratios is required for banking institutions to make capital distributions, including paying dividends.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

As described in Note 1 to these Consolidated Financial Statements, on January 1, 2020, we adopted the CECL standard, which upon adoption resulted in a reduction to our opening retained earnings balance, net of income tax, and an increase to the allowance for loan losses of approximately $2.5 billion. The U.S. banking agencies in December 2018 approved a final rule to address the impact of CECL on regulatory capital by allowing banking organizations, including the Company, the option to phase in the day-one impact of CECL until the first quarter of 2023. On March 26, 2020, the U.S. banking agencies issued an interim final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL’s effect on regulatory capital relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. SHUSA remains in the three-year transition period. This interim rule was subsequently updated with technical amendments in a final rule dated September 30, 2020, which was elected by the Company.

See the "Bank Regulatory Capital" section of this MD&A for the Company's capital ratios under Basel III standards. The implementation of certain regulations and standards relating to regulatory capital could disproportionately affect the Company's regulatory capital position relative to that of its competitors, including those that may not be subject to the same regulatory requirements as the Company.

Material restrictions can be imposed on SBNA, including restrictions on interest payable on accounts, dismissal of management and, in critically undercapitalized situations, appointment of a receiver or conservator. Critically undercapitalized banks generally may not make any payment of principal or interest on their subordinated debt and all, but well-capitalized banks are prohibited from accepting brokered deposits without prior regulatory approval. Pursuant to the FDIA and OCC regulations, institutions which are not categorized as well-capitalized or adequately-capitalized are restricted from making capital distributions, which include cash dividends, stock redemptions or repurchases, cash-out mergers, interest payments on certain convertible debt and other transactions charged to the capital account of the institution. At September 30, 2023, SBNA met the criteria to be classified as “well-capitalized.”

On March 4, 2020, the Federal Reserve adopted a final rule to simplify capital rules for large banks. Under the final rule, firms' supervisory stress test results are now used to establish the size of the SCB requirement. The SCB is calculated as the maximum decline in CET1 in the severely adverse scenario (subject to a 2.5% floor) plus four quarters of dividends. The rule results in new firm-specific regulatory capital expectations which are equal to 4.5% of CET1 plus the SCB, any GSIB surcharge, and any countercyclical capital buffer. The GSIB buffer is applicable only to the largest and most complex firms and does not apply to SHUSA. In the event a firm falls below its new minimums, the rule imposes restrictions on capital distributions and discretionary bonuses. Firms continue to submit a capital plan annually. Supervisory expectations for capital planning processes do not change under the final rule. As of September 30, 2023, SHUSA's CET1 minimum requirement was 8.2% and declined to 7.0% on October 1, 2023.

On July 27, 2023, the federal banking agencies issued the Capital Proposal that would make significant changes to the regulatory capital rules applicable to Large Banking Organizations (including SHUSA and SBNA) and banking organizations with significant trading activity. This proposal would implement the final elements of the Basel III capital framework and make other changes to the regulatory capital rules in response to recent bank failures. The Capital Proposal would establish the Expanded Risk-Based Approach for calculating RWA that would apply to Large Banking Organizations. The Expanded Risk-Based Approach would include a new more risk-sensitive standardized approach for measuring credit risk and operational risk. It would also include new standardized approaches for measuring market risk and credit valuation adjustment risk, but would allow the use of internal models for market risk in certain circumstances with regulatory approval. Under the Capital Proposal, a Large Banking Organization would be required to calculate its risk-based capital ratios under both the expanded risk-based approach and the current standardized approach and would use the lower of the two. All capital buffer requirements, including the stress capital buffer requirement, would apply regardless of whether the Expanded Risk-Based Approach or the existing standardized approach produces the lower ratio.

The expanded total RWA calculation used in the Expanded Risk-Based Approach would be phased in over a three-year period starting on July 1, 2025. The requirement to reflect AOCI in regulatory capital would also be phased in over a three-year period starting on July 1, 2025. All other elements of the calculation of regulatory capital would apply on the effective date of the final rule, which is expected to be on or about July 1, 2025. On October 20, 2023, the federal banking agencies announced that they have extended the comment period on the Capital Proposal from November 30, 2023 until January 16, 2024. In addition to pushing back the comment deadline, the Federal Reserve indicated it would begin collecting data to gather more information from the banks affected by the proposal. That data collection will also end on Jan. 16, 2024. The proposed rules and their impact on SHUSA are under review.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity Rules

The Federal Reserve, the FDIC, and the OCC have established a rule to implement the Basel III LCR for certain internationally active banks and nonbank financial companies, and a modified version of the LCR for certain depository institution holding companies that are not internationally active. The LCR is designed to ensure that a banking entity maintains an adequate level of unencumbered high-quality liquid assets equal to its expected net cash outflow for a 30-day time horizon. Smaller covered companies (but with more than $50 billion in assets) such as the Company are required to calculate the LCR monthly.

Resolution Planning

The DFA requires the Company to prepare and update resolution plans. The 165(d) resolution plan must assume that the covered company is resolved under the U.S. Bankruptcy Code and that no “extraordinary support” is received from the U.S. or any other government. The most recent 165(d) resolution plan was submitted to the Federal Reserve and FDIC in June 2022. In addition, under amended FDIA rules, the IDI resolution plan rule requires that a bank with assets of $50 billion or more develop a plan for its resolution that supports depositors’ rapid access to their insured deposits, maximizes the net present value return from the sale or disposition of its assets, and minimizes the amount of any loss realized by creditors in resolution.

On August 29, 2023 the FDIC issued an NPR that modifies the IDI resolution planning requirement to focus on operational readiness and changes to existing resolution strategy. The proposal tailors the requirements for banks with total assets between $50 billion and $100 billion and those above $100 billion.

Long Term Debt Requirements

On July 28, 2023, the Federal Reserve and FDIC issued an NPR that would require banks with total assets of $100 billion or more to maintain a layer of long-term debt from the holding company to improve financial stability by increasing the resolvability and resiliency of such institutions. By requiring each such large bank to maintain a minimum amount of long-term debt to absorb losses, the proposal would increase the options available to resolve such banks in case of failure. Additionally, by reducing the risk that uninsured depositors would face losses, long-term debt can reduce the speed and severity of bank runs, and limit the risk of contagion when a bank is under stress. The proposal would provide a three-year phase-in period and would also allow certain outstanding long-term debt to count toward the minimum requirements to provide banks with a reasonable period to transition to the required characteristics of eligible long-term debt instruments. Comments on the proposal are due by November 30, 2023. SHUSA remains subject to the TLAC requirements outlined below.

Deposit Insurance and Assessments

On October 18, 2022, the FDIC adopted a final rule, applicable to all IDIs, to increase the initial base deposit insurance assessment rate schedules uniformly by two basis points consistent with the Amended Restoration Plan approved by the FDIC on June 21, 2022. The FDIC indicated that it was taking this action in order to restore the DIF reserve ratio to the required statutory minimum of 1.35% by the statutory deadline of September 30, 2028. The FDIC indicated that the reserve ratio had declined below this level because of the increase in insured deposits since the start of the pandemic and other factors that affect the level of the DIF. Under the final rule, the increase in rates began with the first quarterly assessment period of 2023 and will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2% reserve ratio. The increase in assessment rates applies to SBNA.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The recent failure of several large U.S. banking institutions has led to increased market uncertainty. Under the FDIA, the loss to the DIF arising from the use of the systemic risk exception must be recovered through one or more special assessments on IDIs, depository institution holding companies, or both, as the FDIC determines to be appropriate. On May 11, 2023, the FDIC issued for public comment a proposed rule to impose a special assessment on IDIs to recover the loss to the DIF resulting from the use of the systemic risk exception to protect the uninsured depositors of the failed U.S. banking institutions. Under the proposal, the FDIC would collect a special assessment from IDIs at an annual rate of approximately 12.5 basis points over eight quarterly assessment periods, starting with the first quarterly assessment period of 2024. The assessment base for the proposed special assessment would be equal to an IDI’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits held by the IDI. The special assessment rate could be revised before the proposal is finalized in order to reflect any adjustments to the estimated loss to the DIF from protecting the uninsured depositors of failed institutions, any mergers or failures of IDIs, or any amendments to the reported estimates of uninsured deposits by the covered IDIs. In its proposal, the FDIC indicated that the special assessment would be a tax-deductible operating expense for IDIs, and that it assumed that the effect on income of the entire amount of the special assessment would occur in one quarter for the IDIs subject to the assessment. Comments on the proposal were due by July 21, 2023.

As proposed, the current estimated impact of the special assessment is approximately $60 million, which is expected to be recognized upon the rule’s final issuance. Any change to the amount of the uninsured deposits subject to the rule or the terms of the final rule impacting the determination of uninsured deposits, exclusionary criteria, annual rate, or term of annual rate application would have a direct impact on the estimate of SBNA’s special assessment.

TLAC

The TLAC Rule requires certain U.S. organizations to maintain a minimum amount of loss-absorbing instruments, including a minimum amount of unsecured LTD. The TLAC Rule applies to U.S. GSIBs and to IHCs with $50 billion or more in U.S. non-branch assets that are controlled by a global systemically important FBO. The Company is such an IHC.

Under the TLAC Rule, companies are required to maintain a minimum amount of TLAC, which consists of a minimum amount of LTD and Tier 1 capital. As a result, SHUSA must hold the higher of 18% of its RWAs or 9% of its total consolidated assets in the form of TLAC, of which 6% of its RWAs or 3.5% of total consolidated assets must consist of LTD. In addition, SHUSA must maintain a TLAC buffer composed solely of CET1 capital and will be subject to restrictions on capital distributions and discretionary bonus payments based on the size of the TLAC buffer it maintains.

Volcker Rule

Section 13 of the BHCA, commonly referred to as the “Volcker Rule,” prohibits a “banking entity” from engaging in “proprietary trading” or engaging in any of the following activities with respect to a Covered Fund: (i) acquiring or retaining any equity, partnership or other ownership interest in the Covered Fund; (ii) controlling the Covered Fund; or (iii) engaging in certain transactions with the fund if the banking entity or any affiliate is an investment adviser or sponsor to the Covered Fund. These prohibitions are subject to certain exemptions for permitted activities.

Because the term “banking entity” includes an IDI, a depository institution holding company and any of their affiliates, the Volcker Rule has sweeping worldwide application and covers entities such as Santander, the Company, and certain of the Company’s subsidiaries (including SBNA and SC), as well as other Santander subsidiaries in the United States and abroad.

The Company implemented certain policies and procedures, training programs, recordkeeping, internal controls and other compliance requirements that were necessary to comply with the Volcker Rule. As required by the Volcker Rule, the compliance infrastructure has been tailored to each banking entity based on its size and its level of trading and Covered Fund activities. SHUSA's compliance program includes, among other things, processes for prior approval of new activities and investments permitted under the Volcker Rule, and testing and auditing for compliance.

Risk Retention Rule

The Federal Reserve's final credit risk retention rule generally requires sponsors of ABS to retain at least five percent of the credit risk of the assets collateralizing ABS. SHUSA, primarily through SC, is an active participant in the structured finance markets and complies with these retention requirements.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Market Risk Rule

The market risk rule requires certain national banks to measure and hold risk-based regulatory capital for the market risk of their covered positions. The bank must measure and hold capital for its market risk using its internal risk-based models. The market risk rule outlines quantitative requirements for the bank's internal risk-based models, as well as qualitative requirements for the bank's management of market risk. Banks subject to the market risk rule must also measure and hold market risk regulatory capital for the specific risk associated with certain debt and equity positions.

A bank is subject to the market risk capital rules if its consolidated trading activity, defined as the sum of trading assets and liabilities as reported in its FFIEC 031 and FR Y-9C for the previous quarter, equals the lesser of: (1) 10 percent or more of the bank's total assets as reported in its Call Report and FR Y-9C for the previous quarter, or (2) $1 billion or more. The Bank and the Company are required to comply with the market risk component within RWAs of the risk-based capital ratios, and submit the FFIEC 102 - Market Risk Regulatory Report.

SHUSA is integrating SanCap's products, models and infrastructure into SHUSA’s U.S. market risk rule program, which is scheduled to be completed in 2023. Until the integration is completed and SanCap’s models are in compliance with the U.S. market risk rule, SHUSA is required to include and report market risk RWAs as of September 30, 2023 utilizing the approaches available in the U.S. market risk rule. Assuming a consistent balance of assets, the Company expects market risk RWAs to decrease as the models are fully implemented.

Heightened Standards

OCC guidelines to strengthen the governance and risk management practices of large financial institutions are commonly referred to as “heightened standards.” The heightened standards apply to insured national banks, like SBNA, with $50 billion or more in consolidated assets. The heightened standards require covered institutions to establish and adhere to a written risk governance framework to manage and control their risk-taking activities. The heightened standards also provide minimum standards for the institutions’ boards of directors to oversee the risk governance framework.

Transactions with Affiliates

Depository institutions must remain in compliance with Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve's Regulation W, which governs transactions between SBNA and affiliated companies and individuals. Section 23A imposes limits on certain specified “covered transactions,” which include loans, lines, and letters of credit to affiliated companies or individuals, and investments in affiliated companies, as well as certain other transactions with affiliated companies and individuals.

Section 23B of the Federal Reserve Act prohibits a depository institution from engaging in certain transactions with affiliates unless the transactions are considered arms'-length. As a U.S. domiciled subsidiary of a global parent with significant non-bank affiliates, the Company faces elevated compliance risk in this area.

Regulation AB II

Regulation AB II, among other things, expanded disclosure requirements and modified the offering and shelf registration process for ABS. SC must comply with these rules, which impact all offerings of publicly registered ABS and all reports under the Exchange Act, for outstanding publicly-registered ABS, and affect SC's public securitization platform.

CRA

SBNA is subject to the requirements of the CRA, which requires the appropriate federal financial supervisory agency to assess an institution's record of helping to meet the credit needs of the local communities in which it is located. SBNA’s current CRA rating is "Outstanding." The OCC takes into account SBNA’s CRA rating in considering certain regulatory applications SBNA makes, including applications related to establishing and relocating branches, and the Federal Reserve does the same with respect to certain regulatory applications the Company makes.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Broker-Dealer Regulation

The Broker-Dealers are registered with the SEC and subject to the regulation of the SEC, FINRA, CFTC, CME, and the NFA. These entities are subject to the SEC’s uniform net capital rule, which requires the maintenance of minimum net capital levels. In addition, these entities are required to maintain proper controls over customer funds and securities and ensure that customer assets are not used for the benefit of the Broker-Dealer. These requirements also restrict the Broker-Dealer’s ability to withdraw capital. Prior written notification to and approval from the applicable regulators is required for withdrawals exceeding 30 percent of the Broker-Dealer’s excess net capital and also where the Broker-Dealer’s net capital would be less than 25 percent of deductions from its net worth in computing net capital.

Edge Act Corporation Requirements

Edge Act corporations such as BSI are chartered under Section 25A of the Federal Reserve Act. These entities are subject to specific regulatory requirements under Regulation K. Permissible activities of Edge Act and agreement corporations include those incidental to international or foreign business. Deposit-taking, credit, and fiduciary and investment advisor services are subject to applicable Federal Reserve regulations. Edge Act corporations are also subject to the USA Patriot Act as well as all applicable laws and regulations designed to combat money laundering and the financing of terrorist activities.

Reference Rate Reform

The U.S. dollar LIBOR reference rate panel ceased publication of LIBOR tenors on June 30, 2023. Although 1-, 3-, and 6-month LIBOR settings continue to be published in synthetic form, these rates are not representative of the markets and, as a result, are not generally used unless required by the underlying contract. Under the guidance of our cross-functional LIBOR transition program, the Company offered products linked to alternative reference rates and remediated existing contracts that used LIBOR reference rates. On December 1, 2022, we ceased originations of new LIBOR-referenced products that did not fall under 'approved use' categories.

As of September 30, 2023, the Company had an immaterial amount of loans with LIBOR exposure and no derivative contracts with LIBOR exposure. All remaining LIBOR loans utilize a LIBOR reference rate that was fixed prior to LIBOR cessation and generally will move to alternative rates at the time of their next contractual rate reset. Transition away from LIBOR to new reference rates presents legal, financial, reputational, and operational risks to the Company as well as to other participants in the market.

As of September 30, 2023, the Company has largely completed its LIBOR-to-SOFR transition program.

80

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

CONSOLIDATED AVERAGE BALANCE SHEET / NET INTEREST MARGIN ANALYSIS

CONSOLIDATED AVERAGE BALANCE SHEET / NET INTEREST MARGIN ANALYSIS
	Three months ended September 30, 2023 and 2022
	2023 (1)						2022 (1)						Interest		Change due to
(dollars in thousands)	Average Balance		Interest		Yield/  Rate(2)		Average Balance		Interest		Yield/ Rate(2)		Increase/(Decrease)		Volume		Rate
Interest-earning deposits	$	11,523,253	$	218,925	7.60	%	$	8,617,709	$	67,168	3.12	%	$	151,757	$	28,864	$	122,893
Federal funds sold and securities purchased under resale or similar agreements, gross (3)	48,147,107		580,720		4.82	%	48,595,404		230,436		1.90	%	350,284		(2,102)		352,386
Federal funds sold and securities purchased under resale or similar agreements, netting	(37,774,270)						(34,285,170)
Federal funds sold and securities purchased under resale or similar agreements, net	10,372,837						14,310,234
AFS	6,360,187		66,773		4.20	%	7,693,194		44,318		2.30	%	22,455		(5,960)		28,415
HTM	9,227,351		46,173		2.00	%	9,362,844		42,967		1.84	%	3,206		(640)		3,846
Trading securities	8,846,360		106,921		4.83	%	4,947,678		46,921		3.79	%	60,000		44,502		15,498
Other investments	1,300,741		12,172		3.74	%	1,041,356		8,492		3.26	%	3,680		2,313		1,367
TOTAL SECURITIES FINANCING ACTIVITIES, INVESTMENTS AND INTEREST-EARNING DEPOSITS	$	47,630,729	$	1,031,684	8.66	%	$	45,973,015	$	440,302	3.83	%	$	591,382	$	16,440	$	574,942
LOANS (4):
C&I	13,756,417		125,124		3.64	%	14,592,904		111,811		3.06	%	13,313		(5,771)		19,084
CRE	8,609,794		166,584		7.74	%	7,633,869		91,113		4.77	%	75,471		12,853		62,618
Other commercial loans	7,330,746		88,440		4.83	%	7,920,011		62,609		3.16	%	25,831		(4,234)		30,065
Multifamily	10,794,348		134,236		4.97	%	8,413,635		79,419		3.78	%	54,817		25,950		28,867
Total commercial loans	40,491,305		514,384		5.08	%	38,560,419		344,952		3.58	%	169,432		28,798		140,634
Consumer loans:
Residential mortgages	4,959,907		43,369		3.50	%	5,325,894		44,949		3.38	%	(1,580)		(3,269)		1,689
Home equity loans and lines of credit	2,627,286		51,216		7.80	%	3,223,451		38,449		4.77	%	12,767		(5,243)		18,010
Total consumer loans secured by real estate	7,587,193		94,585		4.99	%	8,549,345		83,398		3.90	%	11,187		(8,512)		19,699
RICs and auto loans	44,695,318		1,373,171		12.29	%	44,279,309		1,277,206		11.54	%	95,965		12,120		83,845
Personal unsecured	4,601,412		132,212		11.49	%	3,567,627		89,960		10.09	%	42,252		28,571		13,681
Other consumer	70,776		1,090		6.16	%	107,340		1,806		6.73	%	(716)		(573)		(143)
Total consumer	56,954,699		1,601,058		11.24	%	56,503,621		1,452,370		10.28	%	148,688		31,606		117,082
Total loans	97,446,004		2,115,442		8.68	%	95,064,040		1,797,322		7.56	%	318,120		60,404		257,716
TOTAL EARNING ASSETS	145,076,733		3,147,126		8.68	%	141,037,055		2,237,624		6.35	%	909,502		76,844		832,658
Non-interest bearing assets (5)	26,032,881						26,057,626
TOTAL ASSETS	$	171,109,614					$	167,094,681
INTEREST BEARING FUNDING LIABILITIES
Deposits and other customer related accounts:
Interest-bearing demand deposits	$	12,470,098	$	44,848	1.44	%	$	13,903,253	$	8,138	0.23	%	$	36,710	$	(734)	$	37,444
Savings	4,959,909		3,223		0.26	%	5,537,110		590		0.04	%	2,633		(51)		2,684
Money market	26,382,035		183,991		2.79	%	31,723,865		51,620		0.65	%	132,371		(7,135)		139,506
CDs	18,164,247		208,177		4.58	%	2,782,961		8,823		1.27	%	199,354		135,481		63,873
TOTAL INTEREST-BEARING DEPOSITS	61,976,289		440,239		2.84	%	53,947,189		69,171		0.51	%	371,068		127,561		243,507
Federal funds purchased and securities sold under agreements to repurchase, gross (3)	50,636,237		675,050		5.33	%	49,038,167		246,066		2.01	%	428,984		8,279		420,705
Federal funds purchased and securities sold under agreements to repurchase, netting	(33,583,913)						(32,879,257)
Federal funds purchased and securities sold under agreements to repurchase, net	17,052,324						16,158,910
Trading liabilities	2,678,681		33,273		4.97	%	2,629,373		21,524		3.27	%	11,749		409		11,340
FHLB advances	7,697,514		98,435		5.12	%	3,951,196		24,774		2.51	%	73,661		35,129		38,532
Other borrowings	37,032,125		429,448		4.64	%	39,431,097		276,921		2.81	%	152,527		(15,710)		168,237
TOTAL SECURITIES FINANCING ACTIVITIES AND BORROWED FUNDS	64,460,644		1,236,206		7.67	%	62,170,576		569,285		3.66	%	666,921		28,107		638,814
TOTAL INTEREST-BEARING FUNDING LIABILITIES	126,436,933		1,676,445		5.30	%	116,117,765		638,456		2.20	%	1,037,989		61,553		976,436
Non-interest bearing liabilities (6)	25,744,838						29,674,029
TOTAL LIABILITIES	152,181,771						145,791,794
Mezzanine equity	1,500,000						—
STOCKHOLDER’S EQUITY	17,427,843						21,302,887
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	171,109,614					$	167,094,681
NET INTEREST SPREAD (7)					3.38	%					4.15	%
NET INTEREST MARGIN (8)					4.05	%					4.54	%
NET INTEREST INCOME			$	1,470,681					$	1,599,168

81

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Nine months ended September 30, 2023 and 2022
	2023 (1)						2022 (1)						Interest		Change due to
(dollars in thousands)	Average Balance		Interest		Yield/ Rate(2)		Average Balance		Interest		Yield/ Rate(2)		Increase/(Decrease)		Volume		Rate
Interest-earning deposits	$	10,409,463	$	572,074	7.33	%	$	11,567,319	$	105,912	1.22	%	$	466,162	$	(9,510)	$	475,672
Federal funds sold and securities purchased under resale or similar agreements, gross (3)	51,623,580		1,797,354		4.64	%	51,634,616		314,168		0.81	%	1,483,186		—		1,483,186
Federal funds sold and securities purchased under resale or similar agreements, netting	(37,456,177)						(36,095,832)
Federal funds sold and securities purchased under resale or similar agreements, net	14,167,403						15,538,784
AFS	6,654,822		199,769		4.00	%	9,043,745		109,648		1.62	%	90,121		(19,755)		109,876
HTM	9,359,202		139,719		1.99	%	8,474,367		113,859		1.79	%	25,860		12,493		13,367
Trading securities	8,371,191		282,479		4.50	%	4,932,518		81,248		2.20	%	201,231		80,513		120,718
Other investments	1,282,981		30,144		3.13	%	961,691		16,020		2.22	%	14,124		6,342		7,782
TOTAL SECURITIES FINANCING ACTIVITIES, INVESTMENTS AND INTEREST-EARNING DEPOSITS	$	50,245,062	$	3,021,539	8.02	%	$	50,518,424	$	740,855	1.96	%	$	2,280,684	$	70,083	$	2,210,601
LOANS (4):
C&I	14,961,759		400,781		3.57	%	14,246,294		338,250		3.17	%	62,531		17,803		44,728
CRE	8,407,974		462,271		7.33	%	7,441,308		206,242		3.70	%	256,029		29,930		226,099
Other commercial loans	7,432,895		255,535		4.58	%	7,966,158		162,778		2.72	%	92,757		(10,064)		102,821
Multifamily	10,553,821		377,417		4.77	%	7,926,611		203,159		3.42	%	174,258		79,531		94,727
Total commercial loans	41,356,449		1,496,004		4.82	%	37,580,371		910,429		3.23	%	585,575		117,200		468,375
Consumer loans:
Residential mortgages	5,064,592		132,225		3.48	%	5,470,993		133,552		3.25	%	(1,327)		(28,055)		26,728
Home equity loans and lines of credit	2,769,320		152,277		7.33	%	3,325,585		92,235		3.70	%	60,042		(12,339)		72,381
Total consumer loans secured by real estate	7,833,912		284,502		4.84	%	8,796,578		225,787		3.42	%	58,715		(40,394)		99,109
RICs and auto loans	44,525,835		3,988,326		11.94	%	43,671,326		3,773,186		11.52	%	215,140		75,148		139,992
Personal unsecured	4,462,604		378,035		11.29	%	2,840,749		214,509		10.07	%	163,526		126,046		37,480
Other consumer	79,181		2,790		4.70	%	120,571		2,760		3.05	%	30		(52)		82
Total consumer	56,901,532		4,653,653		10.90	%	55,429,224		4,216,242		10.14	%	437,411		160,748		276,663
Total loans	98,257,981		6,149,657		8.34	%	93,009,595		5,126,671		7.35	%	1,022,986		277,948		745,038
TOTAL EARNING ASSETS	148,503,043		9,171,196		8.23	%	143,528,019		5,867,526		5.45	%	3,303,670		348,031		2,955,639
Non-interest bearing assets (5)	26,234,627						26,274,879
TOTAL ASSETS	$	174,737,670					$	169,802,898
INTEREST BEARING FUNDING LIABILITIES
Deposits and other customer related accounts:
Interest-bearing demand deposits	$	12,667,901	$	103,584	1.09	%	$	14,321,693	$	13,418	0.12	%	$	90,166	$	(1,307)	$	91,473
Savings	5,067,383		5,890		0.15	%	5,603,233		1,577		0.04	%	4,313		(155)		4,468
Money market	27,027,192		463,852		2.29	%	33,283,516		86,446		0.35	%	377,406		(13,247)		390,653
CDs	16,335,529		513,170		4.19	%	2,455,423		14,540		0.79	%	498,630		283,072		215,558
TOTAL INTEREST-BEARING DEPOSITS	61,098,005		1,086,496		2.37	%	55,663,865		115,981		0.28	%	970,515		268,363		702,152
Federal funds purchased and securities sold under agreements to repurchase, gross (3)	54,135,129		2,012,023		4.96	%	51,912,600		331,591		0.85	%	1,680,432		14,788		1,665,644
Federal funds purchased and securities sold under agreements to repurchase, netting	(34,362,894)						(34,623,357)
Federal funds purchased and securities sold under agreements to repurchase, net	19,772,235						17,289,243
Trading liabilities	3,245,920		102,964		4.23	%	2,711,920		37,814		1.86	%	65,150		8,724		56,426
FHLB advances	7,400,964		279,000		5.03	%	1,746,374		28,638		2.19	%	250,362		178,758		71,604
Other borrowings	37,837,815		1,218,366		4.29	%	40,236,862		740,917		2.46	%	477,449		(41,586)		519,035
TOTAL SECURITIES FINANCING ACTIVITIES AND BORROWED FUNDS	68,256,934		3,612,353		7.06	%	61,984,399		1,138,960		2.45	%	2,473,393		160,684		2,312,709
TOTAL INTEREST-BEARING FUNDING LIABILITIES	129,354,939		4,698,849		4.84	%	117,648,264		1,254,941		1.42	%	3,443,908		429,047		3,014,861
Non-interest bearing liabilities (6)	26,817,620						30,146,885
TOTAL LIABILITIES	156,172,559						147,795,149
Mezzanine equity	895,258						—
STOCKHOLDER’S EQUITY	17,669,853						22,007,749
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	174,737,670					$	169,802,898
NET INTEREST SPREAD (7)					3.39	%					4.03	%
NET INTEREST MARGIN (8)					4.02	%					4.28	%
NET INTEREST INCOME			$	4,472,347					$	4,612,585

(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)Represents the average gross Securities Financing Activities balance, including activity that qualifies for balance sheet netting, as discussed further in Note 11 to these Condensed Consolidated Financial Statements.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

(4)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.

(5)Includes allowance for loan losses and Other assets including 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 6 to the Condensed Consolidated Financial Statements for further discussion.

(6)Includes Non-interest bearing deposits and Other liabilities primarily including accounts payable and accrued expenses, derivative liabilities, net deferred tax liabilities and the unfunded lending commitments liability.

(7)Represents the difference between the yield on total earning assets and the cost of total funding liabilities on a managed basis.

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

.

NET INTEREST INCOME

Net interest income decreased $128.5 million and decreased $140.2 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The most significant factors contributing to these changes were as follows:

•Interest income on loans increased $318.1 million and increased $1.0 billion for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The three month period change is attributed to an increase in average loan volume of $60.4 million and an increase in average rates of $257.7 million. The nine month period change is attributed to an increase in average loan volume of $277.9 million and an increase in average rates of $745.0 million. Refer to the discussion of changes in loan balances in the "Loan Portfolio" section of this MD&A. The increases are also attributed to interest rate increases.

•Interest income on interest-earning deposits increased $151.8 million and increased $466.2 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The three month period change is attributed to an increase in average interest-bearing deposits volume of $28.9 million and an increase in average rates of $122.9 million. The nine month period change is attributed to a decrease in average interest-bearing deposits volume of $9.5 million and an increase in average rates of $475.7 million. These changes are primarily driven by the changing interest rate environment.

•Interest and fees on federal funds sold and securities purchased under resale agreements or similar arrangements increased $350.3 million and increased $1.5 billion for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The three month period change is attributed to a decrease in average federal funds sold and securities purchased under resale agreements or similar arrangements volume of $2.1 million and an increase in average rates of $352.4 million. The nine month period change is attributed to an increase in average rates of $1.5 billion. These changes are primarily due to increased Securities Financing Activities following the acquisition of PCH during 2022.

•Interest income on investment securities increased $89.3 million and increased $331.3 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The three month period change is attributed to an increase in average investment securities volume of $40.2 million and an increase in average rates of $49.1 million. The nine month period change is attributed to an increase in average investment securities volume of $79.6 million and an increase in average rates of $251.7 million. These changes are primarily driven by an increase in interest rates during the year.

•Interest expense on deposits and related customer accounts increased $371.1 million and increased $970.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The three month period change is attributed to an increase in average interest-bearing deposit volume of $127.6 million and an increase in average rates of $243.5 million. The nine month period change is attributed to an increase in average interest-bearing deposit volume of $268.4 million and an increase in average rates of $702.2 million. The increase in average rates is primarily attributed to money market and CD products.

•Interest expense on Securities Financing Activities and borrowed funds increased $666.9 million and increased $2.5 billion for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The three month period change is attributed to an increase in average Securities Financing Activities and borrowed funds volume of $28.1 million and an increase in average rates of $638.8 million. The nine month period change is attributed to an increase in average Securities Financing Activities and borrowed funds volume of $160.7 million and an increase in average rates of $2.3 billion. Both changes were mostly attributed to an increase in Securities Financing Activities.

83

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

CREDIT LOSS EXPENSE (BENEFIT)

The Company had credit loss expense of $856.3 million and $1.6 billion for the three months and nine months ended September 30, 2023, respectively, compared to a credit loss expense of $636.4 million and $1.3 billion for the corresponding periods in 2022. The credit loss expense during the three months and nine months ended September 30, 2023 was mainly due to RICs charge-offs which continue to normalize and increase in the ACL driven by the deterioration in the personal unsecured lending portfolio.

Credit loss expense on commercial loans increased $16.1 million and increased $44.7 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, primarily driven by deterioration in the CRE and Multifamily portfolio and other factors such as rising interest rates and persistent inflation.

Credit loss expense on consumer loans increased $212.9 million and increased $296.4 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, primarily driven by an increase in RIC charge-offs, and deterioration in personal unsecured lending portfolios. Net charge-offs on the consumer loan portfolios increased $112.6 million and $403.7 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, as current year activity reflects normalization in credit performance as delinquencies have started to return to pre- COVID-19 pandemic levels and repossession activity increased compared to 2022.

The credit loss expense on unfunded credit losses for the three months and nine months ended September 30, 2023 increased $9.1 million and decreased $9.0 million, respectively, compared to the corresponding periods in 2022.

NON-INTEREST INCOME

	Three months ended September 30,				Nine months ended September 30,				QTD Change				YTD Change
(dollars in thousands)	2023		2022		2023		2022		Dollar increase/(decrease)		Percentage		Dollar increase/(decrease)		Percentage
Consumer fees	$	45,294	$	74,144	$	154,515	$	198,964	$	(28,850)	(38.9)	%	$	(44,449)	(22.3)	%
Commercial fees	34,146		36,862		103,756		109,866		(2,716)		(7.4)	%	(6,110)		(5.6)	%
Lease income	617,962		663,123		1,866,968		2,012,982		(45,161)		(6.8)	%	(146,014)		(7.3)	%
Capital market revenue	103,675		32,986		217,561		142,062		70,689		214.3	%	75,499		53.1	%
Miscellaneous income, net	83,316		126,995		283,705		376,177		(43,679)		(34.4)	%	(92,472)		(24.6)	%
Net gains recognized in earnings	37,048		(18,594)		108,556		6,121		55,642		299.2	%	102,435		1,673.5	%
Total non-interest income	$	921,441	$	915,516	$	2,735,061	$	2,846,172	$	5,925	0.6	%	$	(111,111)	(3.9)	%

Total non-interest income increased $5.9 million for the three months and decreased $111.1 million for the nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. These changes were primarily due to:

•an increase in Capital market revenue of $70.7 million and $75.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, primarily due to increases in swaption activity and increases in investment banking activity;

•an increase in Net gains recognized in earnings of $55.6 million and $102.4 million for three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, primarily due to an increase from trading securities gains and gains on the sale of AFS securities during the first quarter of 2023.

•a decrease in Miscellaneous income, net of $43.7 million and $92.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022 discussed further below.

84

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Miscellaneous income

	Three months ended September 30,				Nine months ended September 30,				QTD Change				YTD Change
(dollars in thousands)	2023		2022		2023		2022		Dollar increase/(decrease)		Percentage		Dollar increase/(decrease)		Percentage
Mortgage banking income, net	$	784	$	3,802	$	9,624	$	21,119	$	(3,018)	(79.4)	%	$	(11,495)	(54.4)	%
BOLI	19,389		14,674		49,485		44,631		4,715		32.1	%	4,854		10.9	%
Net gain on sale of operating leases	12,922		19,740		55,296		66,002		(6,818)		(34.5)	%	(10,706)		(16.2)	%
Asset and wealth management fees	62,523		62,986		185,844		196,544		(463)		(0.7)	%	(10,700)		(5.4)	%
Gain/(Loss) on sale of non-mortgage loans	2,058		(3,936)		(8,147)		(10,485)		5,994		152.3	%	2,338		22.3	%
Other miscellaneous income / (loss), net	(14,360)		29,729		(8,397)		58,366		(44,089)		(148.3)	%	(66,763)		(114.4)	%
Total miscellaneous income	$	83,316	$	126,995	$	283,705	$	376,177	$	(43,679)	(34.4)	%	$	(92,472)	(24.6)	%

Miscellaneous income decreased $43.7 million and $92.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The decreases for both periods were primarily due to decreases in mortgage banking income due to the decision to stop mortgage originations, net gain on sale of operating leases due due to a reduction of the lease portfolio, and elevated customer/dealer purchase rate at end of lease life, and other miscellaneous income due to the decrease in securitization transactions.

85

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL, ADMINISTRATIVE AND OTHER EXPENSES

	Three months Ended September 30,				Nine months Ended September 30,				QTD Change				YTD Change
(dollars in thousands)	2023		2022		2023		2022		Dollar increase/(decrease)		Percentage		Dollar increase/(decrease)		Percentage
Compensation and benefits	$	528,465	$	507,155	$	1,519,614	$	1,500,086	$	21,310	4.2	%	$	19,528	1.3	%
Occupancy and equipment expenses	160,608		170,755		505,226		472,893		(10,147)		(5.9)	%	32,333		6.8	%
Technology, outside services, and marketing expense	184,168		161,705		523,190		476,027		22,463		13.9	%	47,163		9.9	%
Loan expense	86,729		88,185		276,420		218,786		(1,456)		(1.7)	%	57,634		26.3	%
Lease expense	479,991		530,349		1,455,820		1,527,265		(50,358)		(9.5)	%	(71,445)		(4.7)	%
Other expenses	123,883		116,075		383,861		378,929		7,808		6.7	%	4,932		1.3	%
Total general, administrative and other expenses	$	1,563,844	$	1,574,224	$	4,664,131	$	4,573,986	$	(10,380)	(0.7)	%	$	90,145	2.0	%

Total general, administrative and other expenses decreased $10.4 million and increased $90.1 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The most significant contributing factors were as follows:

•Loan expense decreased $1.5 million and increased $57.6 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, due to increasing auto loan servicing costs, offset by lower origination costs.

•Lease expense decreased $50.4 million and $71.4 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, due to lower auto lease volumes resulting in lower depreciation expense.

INCOME TAX PROVISION

Income tax benefit of $147.8 million and $54.9 million was recorded for the three months and nine months ended September 30, 2023, respectively, compared to Income tax expense of $76.2 million and $344.9 million for the corresponding periods in 2022. This resulted in an ETR of 527.5% and (5.9)% for three months and nine months ended September 30, 2023, respectively, compared to 25.1% and 21.2% for the corresponding periods in 2022.

The income tax benefit recorded (and related ETR) for the three months and nine months ended September 30, 2023 was directly impacted by a reduction in the Company’s full-year forecasted ETR from 9.93% as of June 30, 2023 to (5.76)% as of September 30, 2023. This reduction was primarily the result of (i) a decrease in 2023 full-year forecasted pre-tax income and (ii) a significant increase in forecasted electric vehicle tax credits expected to be generated in 2023 related to new preferred lease and lending agreements entered into with several auto OEMs after August 2023.

The Company's ETR in future periods will be affected by the results of operations allocated to the various tax jurisdictions in which the Company operates, any change in income tax laws or regulations within those jurisdictions, and interpretations of income tax regulations that differ from the Company's interpretations by tax authorities that examine tax returns filed by the Company or any of its subsidiaries.

86

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

LINE OF BUSINESS RESULTS

The Company manages its business activities by it six reportable segments, Auto, CBB, C&I, CRE, CIB, and Wealth Management. The tables below reflect certain information by reportable segment and includes additional supplementary information related to consumer activities and commercial activities. The supplementary information is deemed to be useful as it represents a view in how we manage the business and also aligns with how our parent, Santander, manages its business from a global perspective.

Consumer Activities

Consumer activities consist of the Company's Auto and CBB reportable segments.

Three months ended	September 30, 2023						September 30, 2022						Total Consumer Activities
	Auto		CBB		Total Consumer activities		Auto		CBB		Total Consumer Activities		Dollar increase/(decrease)		Percentage
Net interest income	$	926,581	$	407,358	$	1,333,939	$	1,020,542	$	368,627	$	1,389,169	$	(55,230)	(4.0)	%
Non-interest income	623,850		58,682		$	682,532	695,303		77,131		$	772,434	$	(89,902)	(11.6)	%
Credit loss expense / (benefit)	782,504		31,789		$	814,293	521,235		83,451		$	604,686	$	209,607	34.7	%
Total expenses	815,996		360,685		$	1,176,681	855,150		383,597		$	1,238,747	$	(62,066)	(5.0)	%
Income/(loss) before income taxes	(48,069)		73,566		$	25,497	339,460		(21,290)		$	318,170	$	(292,673)	(92.0)	%
Total assets	62,945,184		12,601,046		$	75,546,230	62,490,143		13,072,265		$	75,562,408	$	(16,178)	—	%
Nine months ended	September 30, 2023						September 30, 2022						Total Consumer Activities
	Auto		CBB		Total Consumer activities		Auto		CBB		Total Consumer Activities		Dollar increase/(decrease)		Percentage
Net interest income	$	2,754,863	$	1,219,442	$	3,974,305	$	3,093,143	$	1,002,016	$	4,095,159	$	(120,854)	(3.0)	%
Non-interest income	1,924,771		188,390		$	2,113,161	2,098,169		233,842		$	2,332,011	$	(218,850)	(9.4)	%
Credit loss expense / (benefit)	1,296,120		238,596		$	1,534,716	1,075,942		148,794		$	1,224,736	$	309,980	25.3	%
Total expenses	2,464,793		1,090,912		$	3,555,705	2,485,535		1,137,645		$	3,623,180	$	(67,475)	(1.9)	%
Income/(loss) before income taxes	918,721		78,324		$	997,045	1,629,835		(50,581)		$	1,579,254	$	(582,209)	(36.9)	%
Total assets	62,945,184		12,601,046		$	75,546,230	62,490,143		13,072,265		$	75,562,408	$	(16,178)	—	%

The Company reported total income before income taxes related to its Consumer activities of $25.5 million and $997.0 million for the three months and nine months ended September 30, 2023, respectively, compared to income before income taxes of $318.2 million and $1.6 billion for the corresponding periods in 2022. The most significant drivers of these changes were:

•Net interest income for Auto decreased $94.0 million and decreased $338.3 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022. These changes were primarily due to higher interest expense on borrowings partially offset by higher loan volume and slightly higher yields on new originations.

•Non-interest income for Auto decreased $71.5 million and decreased $173.4 million for the three months and nine months ended September 30, 2023, respectively compared to the corresponding periods of 2022. This change was primarily due to a reduction of the lease portfolio and elevated customer/dealer purchase rate at end of lease life.

•Credit loss expense in Auto increased $261.3 million and increased $220.2 million or the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. This increase was driven by the normalization of the net charge-off rate however still lower to pre-pandemic levels.

•Net interest income for CBB increased $38.7 million and increased $217.4 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. These changes were primarily driven by higher rate environment and improved deposit FTP.

•Non-interest income for CBB decreased $18.4 million and decreased $45.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022 as a result of lower customer fees.

87

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

•Credit loss expense for CBB decreased $51.7 million and increased $89.8 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The decrease in the three months ended September 30, 2023, was attributable to lower balances across most consumer portfolios whereas the increase in the nine months ending September 30,2023 was due normalization of the net charge-off rate.

Commercial Activities

Commercial activities consists of the Company's C&I reportable segment and CRE reportable segment.

Three months ended	September 30, 2023						September 30, 2022						Total Commercial Activities
	C&I		CRE		Total Commercial Activities		C&I		CRE		Total Commercial Activities		Dollar increase/(decrease)		Percentage
Net interest income	$	80,426	$	115,389	$	195,815	$	80,734	$	92,271	$	173,005	$	22,810	13.2	%
Non-interest income	10,732		8,033		$	18,765	17,502		10,337		$	27,839	$	(9,074)	(32.6)	%
Credit loss expense / (benefit)	(8,292)		55,865		$	47,573	27,295		6,243		$	33,538	$	14,035	41.8	%
Total expenses	57,933		33,362		$	91,295	60,672		31,186		$	91,858	$	(563)	(0.6)	%
Income/(loss) before income taxes	41,517		34,195		$	75,712	10,269		65,179		$	75,448	$	264	0.3	%
Total assets	5,031,230		22,488,032		$	27,519,262	6,559,994		19,663,939		$	26,223,933	$	1,295,329	4.9	%
Nine months ended	September 30, 2023						September 30, 2022						Total Commercial Activities
	C&I		CRE		Total Commercial Activities		C&I		CRE		Total Commercial Activities		Dollar increase/(decrease)		Percentage
Net interest income	$	242,421	$	333,456	$	575,877	$	224,191	$	255,453	$	479,644	$	96,233	20.1	%
Non-interest income	38,439		25,682		$	64,121	44,876		32,402		$	77,278	$	(13,157)	(17.0)	%
Credit loss expense / (benefit)	(13,348)		111,931		$	98,583	39,551		(8,544)		$	31,007	$	67,576	217.9	%
Total expenses	178,239		99,830		$	278,069	193,189		95,236		$	288,425	$	(10,356)	(3.6)	%
Income/(loss) before income taxes	115,969		147,377		$	263,346	36,327		201,163		$	237,490	$	25,856	10.9	%
Total assets	5,031,230		22,488,032		$	27,519,262	6,559,994		19,663,939		$	26,223,933	$	1,295,329	4.9	%

The Company reported total income before income taxes related to its Commercial activities of $75.7 million and $263.3 million, for the three months and nine months ended September 30, 2023, respectively compared to income before income taxes of $75.4 million and $237.5 million for the corresponding periods in 2022. The most significant drivers of these changes were:

•Credit loss expense in C&I decreased $35.6 million and decreased $52.9 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022. These decreases were due to prior year higher one-time charge-offs.

•Total assets in C&I at September 30, 2023 decreased $1.5 billion compared to the corresponding date of 2022. The decrease were driven by strategic asset sales and lower loan originations.

•Net interest income in CRE increased $23.1 million and increased $78.0 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022. The increase was driven by a higher rate environment and higher average loan balances.

•Credit loss expense in CRE increased $49.6 million and increased $120.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022. These increases were driven by increased reserves due in part to volume growth in the CRE and multifamily businesses and in part due to the deteriorated macroeconomic outlook.

•Total assets in CRE at September 30, 2023 increased $2.8 billion compared to the corresponding date in 2022. This increase was driven by higher originations in multi-family loans and lower prepayments since rates began to rise in the first half of 2022.

88

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

CIB

	Three months ended September 30				Nine months ended September 30				QTD Change				YTD Change
(dollars in thousands)	2023		2022		2023		2022		Dollar increase/(decrease)		Percentage		Dollar increase/(decrease)		Percentage
Net interest income	$	48,677	$	50,364	$	170,311	$	124,613	$	(1,687)	(3.3)	%	$	45,698	36.7	%
Total non-interest income	90,219		56,674		268,012		198,940		33,545		59.2	%	69,072		34.7	%
Credit loss expense / (benefit)	(5,258)		905		(19,391)		4,295		(6,163)		(681.0)	%	(23,686)		(551.5)	%
Total expenses	157,583		124,832		392,760		318,066		32,751		26.2	%	74,694		23.5	%
Income/(Loss) before income taxes	(13,429)		(18,699)		64,954		1,192		5,270		28.2	%	63,762		5,349.2	%
Total assets	27,502,833		30,358,386		27,502,833		30,358,386		(2,855,553)		(9.4)	%	(2,855,553)		(9.4)	%

CIB reported loss before income taxes of $13.4 million and income before income taxes of $65.0 million for the three months and nine months ended September 30, 2023 respectively, compared to loss before income taxes of $18.7 million and income before income taxes $1.2 million for the corresponding periods in 2022. Factors contributing to these changes were:

•Net interest income decreased $1.7 million and increased $45.7 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The year-to-date increase was due in part to the higher interest yields.

•Total non-interest income increased $33.5 million and increased $69.1 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. These increases were due to increased gains on trading activity.

•Credit loss expense/(benefit) decreased $6.2 million and decreased $23.7 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. These decreases were due to lower loan balances.

•Total assets at September 30, 2023 decreased $2.9 billion compared to the corresponding date in 2022. The decrease was primarily driven by lower loan balances.

Wealth Management

	Three months ended September 30				Nine months ended September 30				QTD Change				YTD Change
(dollars in thousands)	2023		2022		2023		2022		Dollar increase/(decrease)		Percentage		Dollar increase/(decrease)		Percentage
Net interest income	$	66,736	$	53,870	$	210,392	$	118,239	$	12,866	23.9	%	$	92,153	77.9	%
Total non-interest income	66,696		63,748		187,203		203,986		2,948		4.6	%	(16,783)		(8.2)	%
Credit loss expense / (benefit)	205		—		205		—		205		100%		205		100%
Total expenses	72,910		62,110		208,931		183,142		10,800		17.4	%	25,789		14.1	%
Income / (Loss) before income taxes	60,317		55,508		188,459		139,083		4,809		8.7	%	49,376		35.5	%
Total assets	7,404,818		7,944,125		7,404,818		7,944,125		(539,307)		(6.8)	%	(539,307)		(6.8)	%

Wealth Management reported income before income taxes of $60.3 million and $188.5 million for the three months and nine months ended September 30, 2023 respectively, compared to income before income taxes of $55.5 million and $139.1 million for the corresponding periods in 2022. The primary factor contributing to these changes was:

•Net interest income increased $12.9 million and increased $92.2 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. These increases were primarily driven by the increase in interest rates driving higher yields.

89

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Other

	Three months ended September 30				Nine months ended September 30				QTD Change				YTD Change
(dollars in thousands)	2023		2022		2023		2022		Dollar increase/(decrease)		Percentage		Dollar increase/(decrease)		Percentage
Net interest income	$	(174,486)	$	(67,240)	$	(458,538)	$	(205,070)	$	(107,246)	(159.5)	%	$	(253,468)	(123.6)	%
Total non-interest income	63,229		(5,179)		102,564		33,957		68,408		1,320.9	%	68,607		202.0	%
Credit loss expense / (benefit)	(521)		(2,723)		(6,570)		(2,622)		2,202		80.9	%	(3,948)		(150.6)	%
Total expenses	65,375		56,677		228,666		161,173		8,698		15.3	%	67,493		41.9	%
Income / (Loss) before income taxes	(176,111)		(126,373)		(578,070)		(329,664)		(49,738)		(39.4)	%	(248,406)		(75.4)	%
Total assets	27,680,020		26,739,976		27,680,020		26,739,976		940,044		3.5	%	940,044		3.5	%

The Other category reported losses before income taxes of $176.1 million and $578.1 million for the three months and nine months ended September 30, 2023 respectively, compared to losses before income taxes of $126.4 million and $329.7 million for the corresponding periods in 2022. The primary factors contributing to these changes were:

•Net interest income decreased $107.2 million and decreased $253.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022. These decreases were mainly due to increased cost of funding from the FHLB and brokered deposits.

•Total non-interest income increased $68.4 million and increased $68.6 million for the three months and nine months ended September 30, 2023 compared to the corresponding periods of 2022. The increase is mainly due to gains in the AFS hedge portfolio in 2023 compared to losses on investments in 2022.

•Total expenses increased $8.7 million and increased $67.5 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022. These increases were a result of one-time restructuring charges as a result of transformation initiatives underway at the Bank.

90

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

FINANCIAL CONDITION

LOAN PORTFOLIO

The Company's LHFI portfolio consisted of the following at the dates indicated:

	September 30, 2023				December 31, 2022				Dollar Increase / (Decrease)		Percent Increase (Decrease)
(dollars in thousands)	Amount		Percent		Amount		Percent
Commercial LHFI:
CRE	$	8,586,705	8.9	%	$	7,971,299	8.2	%	$	615,406	7.7	%
C&I	12,337,891		12.9	%	14,811,074		15.2	%	(2,473,183)		(16.7)	%
Multifamily	10,832,680		11.3	%	9,629,423		9.9	%	1,203,257		12.5	%
Other commercial	7,381,924		7.7	%	7,982,107		8.2	%	(600,183)		(7.5)	%
Total commercial loans (1)	39,139,200		40.8	%	40,393,903		41.5	%	(1,254,703)		(3.1)	%
Consumer loans secured by real estate:
Residential mortgages	4,908,746		5.1	%	5,202,862		5.3	%	(294,116)		(5.7)	%
Home equity loans and lines of credit	2,556,814		2.7	%	3,002,804		3.1	%	(445,990)		(14.9)	%
Total consumer loans secured by real estate	7,465,560		7.8	%	8,205,666		8.4	%	(740,106)		(9.0)	%
Consumer loans not secured by real estate:
RICs and auto loans	44,897,647		46.7	%	44,577,186		45.8	%	320,461		0.7	%
Personal unsecured loans	4,430,676		4.6	%	4,068,848		4.2	%	361,828		8.9	%
Other consumer	66,858		0.1	%	92,726		0.1	%	(25,868)		(27.9)	%
Total consumer loans	56,860,741		59.2	%	56,944,426		58.5	%	(83,685)		(0.1)	%
Total LHFI	$	95,999,941	100.0	%	$	97,338,329	100.0	%	$	(1,338,388)	(1.4)	%
Total LHFI with:
Fixed	$	67,341,300	70.1	%	$	67,693,444	69.5	%	$	(352,144)	(0.5)	%
Variable	28,658,641		29.9	%	29,644,885		30.5	%	(986,244)		(3.3)	%
Total LHFI	$	95,999,941	100.0	%	$	97,338,329	100.0	%	$	(1,338,388)	(1.4)	%

(1) As of September 30, 2023, the Company had $466.7 million of commercial loans that were denominated in a currency other than the U.S. dollar.

91

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Loans by Maturity and Interest Rate Sensitivity

9	At September 30, 2023, Maturing
(in thousands)	In One Year Or Less		One to Five Years		Five to 15 Years		After 15 Years		Total
Fixed Rates:
CRE loans	$	86,616	$	198,169	$	153,674	$	8,083	$	446,542
C&I	708,686		1,547,121		482,522		160		2,738,489
Multifamily loans	430,542		3,730,076		3,439,787		369		7,600,774
Other commercial	892,585		2,279,336		1,038,121		—		4,210,042
Total Commercial	$	2,118,429	$	7,754,702	$	5,114,104	$	8,612	$	14,995,847
Residential mortgages	409		28,372		529,506		3,192,587		3,750,874
Home equity loans and lines of credit	9,903		8,009		37,795		18,697		74,404
RICs and auto loans	559,908		26,588,596		17,749,084		59		44,897,647
Personal unsecured loans	58,081		3,437,164		365,486		931		3,861,662
Other consumer	602		49,772		4,468		4,594		59,436
Total Fixed Rates	$	2,747,332	$	37,866,615	$	23,800,443	$	3,225,480	$	67,639,870
Variable Rates:
CRE loans	$	3,071,486	$	4,312,299	$	634,437	$	121,941	$	8,140,163
C&I	1,906,974		7,376,747		726,724		24,277		10,034,722
Multifamily loans	754,805		1,549,635		925,649		1,817		3,231,906
Other commercial	2,852,886		316,626		2,370		—		3,171,882
Total Commercial	$	8,586,151	$	13,555,307	$	2,289,180	$	148,035	$	24,578,673
Residential mortgages	315		8,222		194,911		954,912		1,158,360
Home equity loans and lines of credit	6,914		3,043		629,449		1,843,004		2,482,410
Personal unsecured loans	8,082		475,219		85,434		279		569,014
Other consumer	—		—		7,423		—		7,423
Total Variable Rates	$	8,601,462	$	14,041,791	$	3,206,397	$	2,946,230	$	28,795,880
Total	$	11,348,794	$	51,908,406	$	27,006,840	$	6,171,710	$	96,435,750

Commercial

Commercial loans decreased approximately $1.3 billion, or 3.1% from December 31, 2022 to September 30, 2023. This decrease was primarily attributed to an increase in Multifamily loans of $1.2 billion and an increase in CRE loans of $0.6 billion offset by a decrease in C&I loans of $2.5 billion. During the period ended September 30, 2023, the Company reclassified approximately $317.8 million of Commercial auto loans to HFS, resulting in an immaterial loss recorded in non-interest income.

Consumer Loans Secured By Real Estate

Consumer loans secured by real estate decreased $740.1 million from December 31, 2022 to September 30, 2023. This decrease primarily resulted from the Company’s decision to stop the origination of new residential mortgage and home equity loans in the first quarter of 2022.

Consumer Loans Not Secured By Real Estate

RICs and auto loans

RICs and auto loans increased $320.5 million from December 31, 2022 to September 30, 2023. RICs are collateralized by vehicle titles, and the lender has the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract. A significant portion of the Company's RICs HFI are pledged against warehouse lines or securitization bonds. Refer to further discussion of these in Note 9 to the Condensed Consolidated Financial Statements.

92

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

As of September 30, 2023, 58.7% of the Company's RIC and auto loan portfolio balance was comprised of nonprime loans (defined by the Company as customers with a FICO score of below 640) with customers who did not qualify for conventional consumer finance products as a result of, among other things, a lack of or adverse credit history, low income levels and/or the inability to provide adequate down payments. This also includes 6.5% of loans for which no FICO score was available. While underwriting guidelines are designed to establish that the customer would be a reasonable credit risk, nonprime loans will nonetheless experience higher default rates than a portfolio of obligations of prime customers. Additionally, higher unemployment rates, higher gasoline prices, unstable real estate values, re-sets of adjustable rate mortgages to higher interest rates, the general availability of consumer credit, and other factors that impact consumer confidence or disposable income could lead to an increase in delinquencies, defaults, and repossessions, as well as decreased consumer demand for used automobiles and other consumer products, weaken collateral values and increase losses in the event of default. Because of the historical focus for such credit has been predominantly on nonprime consumers, the actual rates of delinquencies, defaults, repossessions, and losses on these loans could be more dramatically affected by a general economic downturn.

The Company's automated originations process for these credits reflects a disciplined approach to credit risk management to mitigate the risks of nonprime customers. The Company's robust historical data on both organically originated and acquired loans provides it with the ability to perform advanced loss forecasting. Each applicant is automatically assigned a proprietary custom score using information such as FICO scores, DTI ratios, LTV ratios, and over 30 other predictive factors, placing the applicant in one of 100 pricing tiers. The pricing in each tier is continuously monitored and adjusted to reflect market and risk trends. In addition to the Company's automated process, it maintains a team of underwriters for manual review, consideration of exceptions, and review of deal structures with dealers.

Personal unsecured and other consumer loans

Personal unsecured and other consumer loans HFI increased $336.0 million from December 31, 2022 to September 30, 2023. This increase was primarily attributable to increased originations in the personal unsecured portfolio.

93

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

At September 30, 2023, the CRE and multifamily portfolios included the following:

	As of September 30, 2023
(in thousands)	Balance		Percentage of Total CRE and Multifamily
CRE loans	$	8,586,705	44.2	%
Multifamily loans (1)	$	10,832,680	55.8	%
Total CRE and multifamily loans	$	19,419,385	100.0	%
CRE loans by type
Multifamily construction	$	2,687,013	13.8	%
Office	$	1,977,569	10.2	%
Retail	$	1,239,803	6.4	%
Industrial	$	1,462,750	7.5	%
Other	$	1,219,570	6.3	%
Total	$	8,586,705
(1) Occupied properties

Multifamily lending (occupied and construction) continues to be our focus, representing 70% of the total CRE and multifamily portfolio and 14% of total LHFI. Overall, occupancy across the multifamily loan portfolio and our primary markets such as New York City, continues to be stable. Our construction originations are concentrated to well-established and proven builders and sponsors.

Office CRE loans represent 10.2% of the total CRE and multifamily portfolio and 2% of total LHFI. The Company's office exposure primarily consists of investment grade, single tenants with long leases.

The Company's retail CRE portfolio represents 6.4% of the total CRE and multifamily portfolio and 1% of total LHFI. The retail portfolio is anchored by pharmacies and high-end grocery stores, which have demonstrated recovery following the COVID-19 pandemic.

94

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

NON-PERFORMING ASSETS

The following table presents the composition of non-performing assets at the dates indicated:    

	Period Ended						Change
(dollars in thousands)	September 30, 2023			December 31, 2022			Dollar		Percentage
Non-accrual loans:
Commercial:
CRE	$	92,107		$	62,093		$	30,014	48.3	%
C&I	143,147			94,299			48,848		51.8	%
Multifamily	44,136			18,476			25,660		138.9	%
Other commercial	4,935			5,180			(245)		(4.7)	%
Total commercial loans	284,325			180,048			104,277		57.9	%
Consumer loans secured by real estate:
Residential mortgages	59,247			75,666			(16,419)		(21.7)	%
Home equity loans and lines of credit	88,927			82,664			6,263		7.6	%
Consumer loans not secured by real estate:
RICs and auto loans	1,961,943			1,986,748			(24,805)		(1.2)	%
Personal unsecured loans	20,950			10,397			10,553		101.5	%
Other consumer	12,190			5,332			6,858		128.6	%
Total consumer loans	2,143,257			2,160,807			(17,550)		(0.8)	%
Total non-accrual loans	2,427,582			2,340,855			86,727		3.7	%
OREO	24,716			4,437			20,279		457.0	%
Repossessed vehicles	268,790			229,531			39,259		17.1	%
Other repossessed assets	2,169			1,128			1,041		92.3	%
Total OREO and other repossessed assets	295,675			235,096			60,579		25.8	%
Total non-performing assets	$	2,723,257		$	2,575,951		$	147,306	5.7	%
Past due 90 days or more as to interest or principal and accruing interest	$	5,513		$	3,719		$	1,794	48.2%
Non-performing assets as a percentage of total assets	1.6		%	1.5		%	n/a		n/a

95

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

CREDIT RATIOS

	As of and for the year ended
(dollars in thousands)	September 30, 2023	December 31, 2022	September 30, 2022
ACL to total loan outstanding	7.3%	7.0%	7.0%
ACL	$7,057,324	$6,865,581	$6,757,488
Total loans outstanding	96,435,750	97,437,884	96,936,993
NPL to total loans outstanding	2.5%	2.4%	2.1%
NPL	$2,427,582	$2,340,855	$2,075,643
Total loans outstanding	96,435,750	97,437,884	96,936,993
ACL to NPL	290.7%	293.3%	325.6%
ACL	$7,057,324	$6,865,581	$6,757,488
NPL	2,427,582	2,340,855	2,075,643
Net Charge-offs during the period to average loans outstanding:
Commercial	0.1%	0.2%	0.1%
Net charge-offs / (recoveries) during the period (1)	$24,648	$76,469	$22,779
Average amount outstanding	41,356,449	38,288,899	37,580,371
Consumer	2.5%	2.9%	1.9%
Net charge-offs / (recoveries) during the period (1)	$1,446,392	$1,642,271	$1,042,653
Average amount outstanding	56,901,532	55,886,419	55,429,224

(1) Annualized net loan charge-offs are based on year to date charge-offs.

Commercial net charge-offs during the period to average loans increased from September 30, 2022 to September 30, 2023. The increase in net charge-offs was primarily due to deterioration in the macroeconomic outlook and higher volume in the portfolio. Consumer net charge-offs during the period to average loans increased from September 30, 2022 to September 30, 2023. This increase was primarily due to charge-offs normalizing to pre-COVID periods and an increase in repossession activity compared to 2022.

Commercial

Commercial NPLs increased $104.3 million from December 31, 2022 to September 30, 2023. Commercial NPLs accounted for less than 1% of commercial LHFI at September 30, 2023. The change in commercial NPLs was primarily comprised of an increase of $25.7 million in the multifamily portfolio, an increase of $30.0 million in the CRE portfolio and an increase of $48.8 million in the C&I portfolio. Increases in these portfolios are primarily driven by higher interest rates and deteriorated macroeconomic outlook.

Consumer Loans Secured by Real Estate

NPLs in the residential mortgage portfolio decreased year-over-year primarily resulting from the Company’s decision to stop the origination of new residential mortgage and home equity loans in the first quarter of 2022. Foreclosures on consumer loans secured by real estate were $66.4 million or 44.8% of non-performing consumer loans secured by real estate at September 30, 2023, compared to $75.2 million, or 47.5%, of consumer loans secured by real estate at December 31, 2022.

Consumer Loans Not Secured by Real Estate

RICs

RICs are classified as non-performing when they are more than 60 DPD (i.e., 61 or more DPD) with respect to principal or interest. Except for loans accounted for using the FVO, at the time a loan is placed on non-performing status, previously accrued and uncollected interest is reversed against interest income. When an account is 60 days or less past due, it is returned to performing status and the Company returns to accruing interest on the loan. NPLs in the RIC and auto loan portfolio decreased by $24.8 million from December 31, 2022 to September 30, 2023. Non-performing RICs and auto loans accounted for 4.4% and 4.5% of total RICs and auto loans at September 30, 2023 and December 31, 2022, respectively.

96

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Personal unsecured loans

The accrual of interest on revolving personal loans continues until the loan is charged off. Credit cards are charged off when they are 180 days delinquent or within 60 days after the receipt of notification of the cardholder’s death or bankruptcy. NPLs in the personal unsecured portfolio increased by $10.6 million from December 31, 2022 to September 30, 2023. Non-performing personal unsecured loans accounted for 0.5% and 0.3% of total personal unsecured loans at September 30, 2023 and December 31, 2022, respectively.

Delinquencies

Early stage delinquency in commercial loans totaled approximately $224.1 million and $111.2 million at September 30, 2023 and December 31, 2022, respectively. Early stage delinquency consumer loans amounted to $5.0 billion and $4.7 billion at September 30, 2023 and December 31, 2022, respectively. Management has included these loans in its evaluation of the Company's ACL and reserved for them during the respective periods.

The Company generally considers an account delinquent when an obligor fails to pay substantially all (defined as 90%) of the scheduled payment by the due date.    Overall, total delinquencies increased by $482.4 million from December 31, 2022 to September 30, 2023. The main driver of this is the increase in past due auto loans in early stages of delinquency due to a return to normal seasonality as well as pressure from inflation.

Loan Modifications

Loan modifications occur when a borrower is experiencing financial difficulties and the loan is modified with terms that would otherwise not be granted to the borrower. In these cases, the Company agrees to make certain concessions to both meet the needs of customers and maximize its ultimate recovery on the loans. The types of concessions granted are generally interest rate reductions, limitations on accrued interest charged, term extensions, covenant waivers and deferments of principal.

Modified loans are generally placed on nonaccrual status upon modification, unless the loan was performing immediately prior to modification. For most portfolios, modified loans may return to accrual status after a sustained period of repayment performance, as long as the Company believes the principal and interest of the restructured loan will be paid in full. RIC modifications are placed on nonaccrual status when the Company believes repayment under the revised terms is not reasonably assured and, at the latest, when the account becomes more than 60 DPD. RIC modifications are considered for return to accrual when the account becomes 60 days or less past due. To the extent the modified loan is determined to be collateral-dependent and the source of repayment depends on the operation of the collateral, the loan may be returned to accrual status based on the foregoing parameters. To the extent the modified loan is determined to be collateral-dependent and the source of repayment depends on disposal of the collateral, the loan may not be returned to accrual status.

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

Changes in deferral levels do not have a direct impact on the ultimate amount of consumer finance receivables charged-off. However, the timing of a charge-off may be affected if the previously deferred account ultimately results in a charge-off. To the extent deferrals impact the ultimate timing of when an account is charged-off, historical charge-off ratios, and cash flow forecasts used in the determination of the adequacy of the ALLL for loans classified as modified are also impacted. Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the portfolio and therefore increase the ALLL and related credit loss expense. Changes in these ratios and periods are considered in determining the appropriate level of the ALLL and related credit loss expense.

97

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Effective January 1, 2023, the Company adopted ASU 2022-02. This guidance removes the specific accounting and disclosure guidance for TDR designations and enhances disclosure requirements related to modifications of receivables made to borrowers experiencing financial difficulty. The Company adopted the new guidance on January 1, 2023 on a modified retrospective basis with a cumulative effect adjustment to retained earnings. The effect of this implementation was an increase in the ACL of approximately $55.2 million, a decrease in retained earnings of approximately $41.4 million and a decrease in deferred tax liabilities of approximately $13.8 million. Refer to Note 3 to the Condensed Consolidated Financial Statements for additional information on modified loans.

CREDIT RISK

The risk inherent in the Company’s loan and lease portfolios is driven by credit and collateral quality, and is affected by borrower-specific and economy-wide factors such as changes in unemployment, GDP, HPI, CRE price index, used vehicle index, and other factors. In general, there is an inverse relationship between credit quality of transactions and projections of impairment losses so that transactions with better credit quality require a lower expected loss. The Company manages this risk through its underwriting, pricing and credit approval guidelines and servicing policies and practices, as well as geographic and other concentration limits.

The Company's ACL is principally based on various models subject to the Company's Model Risk Management Framework. New models are approved by the Company's Model Risk Management Committee. Models, inputs and documentation are further reviewed and validated at least annually, and the Company completes a detailed variance analysis of historical model projections against actual observed results on a quarterly basis. Required actions resulting from the Company's analysis, if necessary, are governed by its ACL Committee.

Management uses the qualitative framework to exercise judgment about matters that are inherently uncertain and that are not considered by the quantitative framework. These adjustments are documented and reviewed through the Company’s risk management processes. Furthermore, management reviews, updates, and validates its process and loss assumptions on a periodic basis. This process involves an analysis of data integrity, review of loss and credit trends, a retrospective evaluation of actual loss information to loss forecasts, and other analyses.

ACL levels are collectively reviewed for adequacy and approved quarterly. Required actions resulting from the Company's analysis, if necessary, are governed by its ACL Committee. The ACL levels are approved by the Board-level committees quarterly.

ACL

The Company's ACL was $7.1 billion at September 30, 2023, an increase of $191.7 million from December 31, 2022. The increase in the ACL was primarily driven by a deterioration in the personal unsecured lending and CRE (including multifamily) portfolio, partially offset by improvement in the macroeconomic outlook for certain macro variables such as unemployment rate and used vehicle price index. The ACL for the consumer segment increased by $142.3 million, and the ACL for the commercial segment increased $49.4 million for the period ended September 30, 2023 compared to December 31, 2022. Refer to the rollforward of the ACL in Note 3 to the Condensed Consolidated Financial Statements.

Reserve for Unfunded Lending Commitments

The reserve for unfunded lending commitments decreased from $85.6 million at December 31, 2022 to $72.9 million at September 30, 2023.

98

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

INVESTMENT SECURITIES

The following table presents the Company's investment portfolio at the dates indicated:

(in thousands)	September 30, 2023		December 31, 2022
Investment securities AFS:
U.S. Treasury securities and government agencies	$	3,371,270	$	3,879,518
FNMA and FHLMC securities	2,011,760		2,276,192
Other securities (1)	787,127		874,509
Total investment securities AFS	6,170,157		7,030,219
Investment securities HTM:
U.S. government agencies	7,708,223		8,009,802
FNMA and FHLMC securities	1,445,144		1,539,416
Total investment securities HTM	9,153,367		9,549,218
Trading securities	8,496,604		5,864,324
Other investments	1,478,133		1,116,161
Total investment portfolio	$	25,298,261	$	23,559,922

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

The Company’s AFS investment strategy is to purchase liquid fixed-rate and floating-rate investments to manage the Company's liquidity position and interest rate risk adequately. The Company's AFS investment portfolio consisted of the following at the dates indicated:

	September 30, 2023		December 31, 2022		Change		Percent
(in thousands)	Fair Value		Fair Value
U.S. Treasury securities	$	31,043	$	218,439	$	(187,396)	(85.8)	%
Corporate debt securities	280,400		370,491		(90,091)		(24.3)	%
ABS	506,727		504,018		2,709		0.5	%
MBS:
GNMA - Residential	2,814,682		3,081,022		(266,340)		(8.6)	%
GNMA - Commercial	525,545		580,057		(54,512)		(9.4)	%
FHLMC and FNMA - Residential	1,924,175		2,180,201		(256,026)		(11.7)	%
FHLMC and FNMA - Commercial	87,585		95,991		(8,406)		(8.8)	%
Total investments in debt securities AFS	$	6,170,157	$	7,030,219	$	(860,062)	(12.2)	%

The Company’s MBS are either guaranteed as to principal and interest by the issuer or have ratings of “AAA” by S&P and Moody’s at the date of issuance.

The unrealized gain / (loss) position of the AFS investment portfolio

(in thousands)	September 30, 2023		December 31, 2022		Change in unrealized gain/(loss)		Percent
Total unrealized loss	$	(939,670)	$	(884,941)	$	(54,729)	6.2	%
Total unrealized gain	31		328		(297)		(90.5)	%
Total unrealized gain/(loss) position	$	(939,639)	$	(884,613)	$	(55,026)	6.2	%

The average life of the AFS investment portfolio (excluding certain ABS) at September 30, 2023 was approximately 6.62 years. The average effective duration of the investment portfolio (excluding certain ABS) at September 30, 2023 was approximately 5.11 years. The actual maturities of MBS AFS will differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties.

HTM securities are reported at cost and adjusted for amortization of premium and accretion of discount. The Company had 350 investment securities classified as HTM as of September 30, 2023.

99

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table presents the securities of single issuers (other than obligations of the United States and its political subdivisions, agencies, and corporations) having an aggregate book value in excess of 10% of the Company's stockholder's equity that were held by the Company at September 30, 2023:

	September 30, 2023
(in thousands)	Amortized Cost		Fair Value
FNMA	$	1,798,483	$	1,515,687
FHLMC	2,123,879		1,757,391
GNMA (1)	11,595,294		9,531,874
Total	$	15,517,656	$	12,804,952

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

GOODWILL

At September 30, 2023, goodwill totaled $2.8 billion and represented 1.7% of total assets and 16.3% of total stockholder's equity. The Company conducted its most recent annual goodwill impairment tests as of October 1, 2022 using generally accepted valuation methods and noted no impairment.

The Company completes a quarterly review for impairment indicators over each of its reporting units, which includes consideration of economic and organizational factors that could impact the fair value of the Company's reporting units. As of the most recent review completed at the end of the third quarter of 2023, the Company did not identify any indicators which resulted in the Company's conclusion that an interim impairment test would be required to be completed.

DEFERRED TAXES AND OTHER TAX ACTIVITY

The Company had a net deferred tax liability balance of $2.5 million at September 30, 2023 (consisting of a deferred tax asset balance of $212.5 million and a deferred tax liability balance of $215.0 million with respect to jurisdictional netting), compared to a net deferred tax liability balance of $167.4 million at December 31, 2022 (consisting of a deferred tax asset balance of $221.6 million and a deferred tax liability balance of $389.0 million. Refer to Note 15 to the Condensed Consolidated Financial Statements for further discussion of the change in deferred tax balances.

100

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

BANK REGULATORY CAPITAL

The Company's capital priorities are to support client growth and business investment while maintaining appropriate capital for a range of macroeconomic outcomes.

The Company is subject to the regulations of certain federal, state, and foreign agencies and undergoes periodic examinations by those regulatory authorities. At September 30, 2023 and 2022, based on SBNA’s capital calculations, SBNA was considered well-capitalized under the applicable capital framework. In addition, the Company's capital levels as of September 30, 2023 and 2022, based on the Company’s capital calculations, exceeded the required capital ratios for BHCs.

For a discussion of U.S. Basel III, including the standardized approach and related future changes to the minimum U.S. regulatory capital ratios, see the section captioned "Regulatory Matters" in this MD&A.

Federal banking laws, regulations and policies also limit SBNA's ability to pay dividends and make other distributions to the Company. SBNA must obtain prior OCC approval to declare a dividend or make any other capital distribution if, after such dividend or distribution: (1) the Bank's total distributions to SHUSA within that calendar year would exceed 100% of its net income during the year plus retained net income for the prior two years, (2) the Bank would not meet capital levels imposed by the OCC in connection with any order, (3) the Bank has negative retained earnings, or (4) the Bank is not adequately capitalized at the time. The OCC's prior approval would also be required if SBNA were notified by the OCC that it is a problem institution or in troubled condition.

Any dividend declared and paid or return of capital has the effect of reducing capital ratios. Refer to the section captioned "Liquidity and Capital Resources" in this MD&A for discussion of the Company's dividends.

The following schedule summarizes the actual capital ratios of SHUSA and SBNA at September 30, 2023:

	SHUSA
	September 30, 2023		Well-capitalized Requirement		Minimum Requirement
CET1 capital ratio	12.82	%	6.50	%	4.50	%
Tier 1 capital ratio	14.23	%	8.00	%	6.00	%
Total capital ratio	16.26	%	10.00	%	8.00	%
Leverage ratio	10.33	%	5.00	%	4.00	%

	SBNA
	September 30, 2023		Well-capitalized Requirement		Minimum Requirement
CET1 capital ratio	14.80	%	6.50	%	4.50	%
Tier 1 capital ratio	14.80	%	8.00	%	6.00	%
Total capital ratio	16.06	%	10.00	%	8.00	%
Leverage ratio	11.36	%	5.00	%	4.00	%

The Company utilizes fair value hedging strategies to mitigate the risk of unrealized losses in its investments in debt securities - AFS. As of December 31, 2022, the Company had $2.5 billion of notional in fair value hedges which increased to $4.7 billion at September 30, 2023. Refer to the notional and fair value of these hedging instruments in Note 12 to these Condensed Consolidated Financial Statements.

101

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

DEPOSITS

The Company reported deposits of $77.5 billion and $79.1 billion at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023, SBNA had $74.8 billion of U.S.-based deposits, including $2.6 billion of deposits from SHUSA affiliates that eliminate in consolidation. Uninsured U.S.-based deposits were $26.2 billion and $27.9 billion at September 30, 2023 and December 31, 2022, respectively, and represented approximately 35% of all U.S. deposits at both September 30, 2023 and December 31, 2022.

SBNA attracts deposits primarily through its retail branch network located within the Mid-Atlantic and Northeastern areas of the United States, focused throughout Pennsylvania, New Jersey, New York, New Hampshire, Massachusetts, Connecticut, Rhode Island, and Delaware. Many of these deposit customers have more than one bank product including small business loans, middle market, large and global commercial loans, multi-family loans, and auto and other consumer loans. In addition, SBNA obtains deposits through third-party brokerage firms.

The following shows the Company's deposits by business as of September 30, 2023:

	Consumer (1)		Commercial (2)		CIB		Wealth Management		Other and eliminations (3)		Total
(dollars in thousands)	Balance
Interest-bearing demand deposits	$	37,637,579	$	9,329,517	$	3,881,415	$	2,629,260	$	8,075,887	$	61,553,658
Non-interest-bearing demand deposits	9,642,085		3,506,199		104,742		2,657,476		6,473		15,916,975
Total deposits (1)	$	47,279,664	$	12,835,716	$	3,986,157	$	5,286,736	$	8,082,360	$	77,470,633

(1) Consumer consists of deposits related to the Company's Auto and CBB reportable segments.

(2) Commercial consists of deposits related to the Company's C&I and CRE reportable segments.

(3) Other consists of deposits related to certain of the Company's immaterial subsidiaries and corporate treasury deposits.

During the third quarter of 2023, deposits have remained stable across our consumer and commercial businesses with changes to overall deposit balances being primarily driven by strategic deposits in CIB.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

LIQUIDITY AND CAPITAL RESOURCES

Overall

The Company continues to maintain strong liquidity. Liquidity represents the ability of the Company to obtain cost-effective funding to meet the needs of customers as well as the Company's financial obligations. Factors that impact the liquidity position of the Company include loan origination volumes, loan prepayment rates, the maturity structure of existing loans, core deposit growth levels, CD maturity structure and retention, the Company's credit ratings, investment portfolio cash flows, the maturity structure of the Company's wholesale funding, and other factors. These risks are monitored and managed centrally. The Company's Asset/Liability Committee reviews and approves the Company's liquidity policy and guidelines on a regular basis. This process includes reviewing all available wholesale liquidity sources. The Company also forecasts future liquidity needs and develops strategies to ensure adequate liquidity is available at all times. SHUSA conducts monthly liquidity stress test analyses to manage its liquidity under a variety of scenarios, all of which demonstrate that the Company has ample liquidity to meet its short-term and long-term cash requirements.

Enhanced Monitoring of Liquidity

In addition to its normal monitoring of liquidity, SBNA has enhanced monitoring of its liquidity position since the recent financial system market disruption that began in March 2023 and the ensuing market volatility. Additionally, SBNA continues to improve and optimize contingent sources of liquidity. Some of these actions in the second quarter of 2023 include the pledge of additional loans to the FRB discount window, the transfer of securities from the discount window to the BTFP and the transfer of loans from the discount window to the FHLB in order to receive more favorable haircuts. Overall, the available capacity from the FRB and FHLB remained stable from the second quarter.

Impact of Changes to Credit Rating on Liquidity and Capital Resources

Changes to the credit ratings of SHUSA, Santander and its affiliates or the Kingdom of Spain could have a material adverse effect on SHUSA's business, including its liquidity and capital resources. The credit ratings of SHUSA have changed in the past and may change in the future, which could impact its cost of and access to sources of financing and liquidity. Any reductions in the long-term or short-term credit ratings of SHUSA would increase its borrowing costs and require it to replace funding lost due to the downgrade, which may include the loss of customer deposits, limit its access to capital and money markets and trigger additional collateral requirements in derivatives contracts and other secured funding arrangements. See further discussion on the impacts of credit ratings actions in the "Economic and Business Environment" section of this MD&A.

Sources of Liquidity

The Company has several sources of funding to meet liquidity requirements, including the core deposit base, liquid investment securities portfolio, ability to acquire large deposits, FHLB borrowings, wholesale deposit purchases, and federal funds purchased, as well as through securitizations in the ABS market and committed credit lines from third-party banks and Santander. In addition, the Company has other sources of funding to meet its liquidity requirements such as dividends and returns of investments from its subsidiaries, short-term investments held by non-bank affiliates, and access to the capital markets.

The specialized consumer financing of RICs requires a significant amount of liquidity to originate and acquire loans and leases and to service debt. The Company funds these operations through its lending relationships with third-party banks, Santander and affiliates, and through securitizations in the ABS market. The Company seeks to issue debt that appropriately matches the cash flows of the assets that it originates. The Company uses liquidity for debt service and repayment of borrowings, as well as for funding loan commitments.

During the nine months ended September 30, 2023, the Company's subsidiaries completed on-balance sheet funding transactions totaling approximately $6.1 billion, including:

•securitization on its SDART platform for approximately $4.0 billion; and

•lease securitizations on its SCARF platform for approximately $2.1 billion.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition, during the nine months ended September 30, 2023, the Company's subsidiaries issued $131.6 million of credit-linked notes due February 2052 and $115.5 million of credit-linked notes due June 2033 The notes contain a financial guarantee on a reference pool of mortgage loans and auto loans, respectively, owned by the Company. For information regarding the Company's and its subsidiaries' debt, see Note 9 to the Condensed Consolidated Financial Statements.

Intercompany Borrowings with SHUSA affiliates

SanCap has a revolving subordinated loan agreement with SHUSA to provide additional capital to SanCap for its capital markets program. Given additional liquidity needs from the program that now includes billing and delivery services for debt and equity issuances, the subordinated line with SanCap is $750.0 million with an additional liquidity line of $4.0 billion. At September 30, 2023, there were no outstanding balances on the subordinated loan or the liquidity line. In addition, SanCap has entered into a loan agreement with SHUSA to provide an additional liquidity buffer.

During the third quarter, the Bank entered into a loan agreement with the Company to borrow $500.0 million at a fixed rate of 6.98% maturing in September 2026. This loan eliminates in consolidation.

Available Liquidity

As of the periods indicated, the Company and its subsidiaries had the following available liquidity:

	September 30, 2023						June 30, 2023
	Total Capacity		Used		Available		Total Capacity		Used		Available
Cash on deposit at FRB					$	8,312,372					$	10,420,155
Liquidity from released government deposit collateral (1)	2,989,973		—		2,989,973		3,194,478		—		3,194,478
Liquidity from unencumbered securities	812,426		—		812,426		700,000		—		700,000
FHLB	$	15,713,286	$	7,057,702	8,655,584		$	15,653,689	$	8,695,247	6,958,442
FRB:
Discount window	9,164,841		—		9,164,841		8,741,785		—		8,741,785
BTFP	7,402,356		—		7,402,356		7,827,037		—		7,827,037
Total FRB	$	16,567,197	—		$	16,567,197	$	16,568,822	—		$	16,568,822
Total available liquidity					$	37,337,552					$	37,841,897

(1) Includes high quality liquid assets that are encumbered as collateral for uninsured government deposits.

At September 30, 2023, unencumbered highly liquid assets (cash and cash equivalents and investments in debt securities AFS exclusive of securities pledged as collateral) totaled approximately $19.8 billion. This amount represented 25.6% of total deposits at September 30, 2023. Management believes that the Company has ample liquidity to fund its operations under business-as-usual and stress conditions.

Cash, cash equivalents, and restricted cash

	Nine months ended September 30,				YTD Change
(in thousands)	2023		2022		Increase/(Decrease)
Net cash flows from operating activities	$	409,564	$	3,735,451	$	(3,325,887)
Net cash flows from investing activities	1,975,456		(4,769,616)		6,745,072
Net cash flows from financing activities	(2,837,379)		(9,669,163)		6,831,784

Cash flows from operating activities

Net cash flow from operating activities decreased by $3.3 billion from the nine months ended September 30, 2022 to the nine months ended September 30, 2023, primarily due to the change in net trading activity during the nine months ended September 30, 2023, resulting from the acquisition of PCH in the second quarter of 2022.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cash flows from investing activities

Net cash flow from investing activities increased by $6.7 billion from the nine months ended September 30, 2022 to the nine months ended September 30, 2023, primarily due to lower AFS investments purchase activity and lower LHFI purchase activity, as well as a decrease in originations of LHFI.

Cash flows from financing activities

Net cash flow from financing activities increased by $6.8 billion from the nine months ended September 30, 2022 to the nine months ended September 30, 2023, primarily driven by net change in deposits, as well as cash outflows during the nine months ended September 30, 2022 related to the repurchase of the remaining outstanding shares of SC.

See the SCF for further details on the Company's sources and uses of cash.

Credit Facilities

Third-Party Revolving Credit Facilities

Warehouse Lines

The Company's subsidiaries have a credit facility with several banks providing an aggregate commitment of $500.0 million for the exclusive use of providing short-term liquidity needs to support preferred auto lessor financing. As of September 30, 2023, there was an outstanding balance of $277.2 million on this facility. The facility requires reduced advance rates in the event of delinquency, credit loss, or residual loss ratios, as well as other metrics exceeding specified thresholds.

In addition, the Company's subsidiaries have credit facilities with several banks providing an aggregate commitment of $6.6 billion for the exclusive use of providing short-term liquidity to support core and preferred lender financing. As of September 30, 2023, there was an outstanding balance of $3.5 billion on these facilities in the aggregate. These facilities reduced advance rates in the event of delinquency, credit loss, as well as various other metrics exceeding specific thresholds.

Securities Financing Activities

The Company may enter into Securities Financing Activities primarily to deploy the Company’s excess cash and investment positions. Securities Financing Activities are treated as collateralized financings and are included in "Federal funds sold and securities purchased under resale agreements or similar arrangements" and "Federal funds purchased and securities loaned or sold under repurchase agreements" on the Company’s Condensed Consolidated Balance Sheets. Refer to Note 11 to the Condensed Consolidated Financial Statements for additional information about the Company's Securities Financing Activities.

Related Party Credit Facilities

The Company provides SC with $0.5 billion of committed revolving credit and $2.5 billion of contingent liquidity that can be drawn on an unsecured basis. The Company also provides SC with $3.8 billion of term financing with maturities ranging from December 2023 to April 2028. These loans eliminate in the consolidation of SHUSA.

Secured Structured Financings

The Company's subsidiaries' secured structured financings primarily consist of both public, SEC-registered securitizations, as well as private securitizations under Rule 144A of the Securities Act, and privately issued amortizing notes. As of September 30, 2023, there were on-balance sheet securitizations outstanding in the market with a cumulative balance of approximately $20.0 billion.

Deficiency and Debt Forward Flow Agreement

In addition to SC's credit facilities and secured structured financings, SC has a flow agreement in place with a third party for charged-off assets. Loans and leases sold under these flow agreements are not on SC's balance sheet.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Off-Balance Sheet Financing

SC agreed to provide SBNA with origination support services in connection with the processing, underwriting, and purchasing of retail loans and leases, all of which are serviced by SC. These loans and leases are on the balance sheet of SBNA.

Uses of Liquidity

The Company uses liquidity for debt service and repayment of borrowings. In addition, our subsidiaries use liquidity for funding loan commitments, satisfying deposit withdrawal requests, supporting underwriting transactions and meeting customer liquidity requirements.

At September 30, 2023, the Company's liquidity to meet debt payments, debt service and debt maturities was in excess of 12 months.

Contractual Obligations and Other Commitments

The Company enters into contractual obligations in the normal course of business as a source of funds for its asset growth and asset/liability management and to meet required capital needs. These obligations require the Company to make cash payments over time.

As of September 30, 2023, the Company had total contractual cash obligations of $84.3 billion, which included FHLB advances, notes payable, other debt obligations, CDs, repurchase agreements, non-qualified pension and post-retirement benefits, and operating leases. Of this amount, approximately $51.3 billion of the total contractual cash obligations is due within one year. In addition, the Company had other commitments of $25.1 billion which consisted of commitments to extend credit and letters of credit. Of this amount, approximately $6.0 billion of the other commitments is due within one year.

The Company is a party to financial instruments and other arrangements with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and manage its exposure to fluctuations in interest rates. See further discussion on these risks in Note 12 and Note 16 to the Condensed Consolidated Financial Statements.

Dividends, Contributions and Stock Issuances

As of September 30, 2023, the Company had 530,391,043 shares of common stock outstanding.

On December 21, 2022, the Company issued 500,000 shares of the Series E Preferred Stock. Dividends on the Series E Preferred Stock are payable when, as and if authorized by the Company’s Board of Directors or a duly authorized committee thereof. From and including December 21, 2022 to but excluding December 21, 2027, dividends accrue on a non-cumulative basis a rate of 8.41% per annum, payable quarterly in arrears. From and including December 21, 2027, dividends on the Series E Preferred Stock will accrue on a non-cumulative basis at the five-year U.S. Treasury rate as of the most recent re-set dividend determination date plus 4.74% for each dividend re-set period, payable quarterly in arrears. The Company may redeem the Series E Preferred Stock on, among others, any dividend payment date on or after December 31, 2027.

On June 15, 2023, the Company issued 1,000,000 shares of a new series of its preferred stock, the 9.380% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series F, without par value and with a liquidation preference of $1,000 per share, to Santander. As of September 30, 2023, Santander was the sole holder of the Series E and F Preferred Stock.

During the nine months ended September 30, 2023, the Company declared and paid dividends to its common shareholder, Santander, in the amount of $1.5 billion. In addition, during the nine months ended September 30, 2023, the Company declared and paid dividends to its preferred shareholder, Santander, in the amount of $56.8 million.

During the nine months ended September 30, 2023, SHUSA's subsidiaries had the following capital activity which eliminates in consolidation:

•SC declared and paid $1.0 billion in dividends to SHUSA.

•BSI declared and paid $20.0 million in dividends to SHUSA.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

ASSET AND LIABILITY MANAGEMENT

Interest Rate Risk

Interest rate risk arises primarily through the Company’s traditional business activities of extending loans and accepting deposits. Many factors, including economic and financial conditions, movements in market interest rates, and consumer preferences, affect the spread between interest earned on assets and interest paid on liabilities. Interest rate risk is managed by the Company's Treasury group and measured by its Market Risk Department, with oversight by the Asset/Liability Committee. In managing interest rate risk, the Company seeks to minimize the variability of net interest income across various likely scenarios, while at the same time maximizing net interest income and the net interest margin. To achieve these objectives, the Treasury group works closely with each business line in the Company. The Treasury group also uses various other tools to manage interest rate risk, including wholesale funding maturity targeting, investment portfolio purchase strategies, asset securitizations/sales, and financial derivatives.

Interest rate risk focuses on managing four elements of risk associated with interest rates: basis risk, repricing risk, yield curve risk and option risk. Basis risk stems from rate index timing differences with rate changes, such as differences in the extent of changes in Federal funds rates compared with the three-month term SOFR. Repricing risk stems from the different timing of contractual repricing, such as one-month versus three-month reset dates, as well as the related maturities. Yield curve risk stems from the impact on earnings and market value resulting from different shapes and levels of yield curves. Option risk stems from prepayment or early withdrawal risk embedded in various products. These four elements of risk are analyzed through a combination of net interest income and balance sheet valuation simulations, shocks to those simulations, and scenario and market value analyses, and the subsequent results are reviewed by management. Several assumptions and models are used to produce these analyses, including assumptions about new business volumes, loan and investment prepayment rates, deposit flows, interest rate curves, economic conditions, and competitor pricing. Certain models use historical data analyses to estimate future customer behavior, such as deposit re-pricing and attrition. Estimates from these models can differ from actual behavior, depending on various factors such as macroeconomic conditions, competitor response, etc.

107

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Net Interest Income Simulation Analysis

The Company utilizes a variety of measurement techniques to evaluate the impact of interest rate risk, including simulating the impact of changing interest rates on expected future interest income and interest expense, to estimate the Company's net interest income sensitivity. This simulation is run monthly and includes various scenarios that help management understand the potential risks in the Company's net interest income sensitivity. These various scenarios include parallel, non-parallel, gradual parallel and gradual non-parallel rate shocks applied relative to the implied market-based forward curve, as well as other scenarios that are consistent with quantifying the four measures of risk described above. The shocks below are extended using the parallel scenario and are applied instantaneously to the implied forward curve as of the stated month-end. The down 200 basis point shock has been added as market rates have increased. This set of shocks represents a range of plausible rate shocks, as an instantaneous shock down 200 basis points can be analogous to a gradual ramp-down of 400 basis points over one year. This information is used to develop proactive strategies to ensure that the Company’s risk position remains within SHUSA Board of Directors-approved limits so that future earnings are not significantly adversely affected by future interest rates.

The table below reflects the estimated sensitivity to the Company’s net interest income based on interest rate changes at September 30, 2023 and December 31, 2022:

	The following estimated percentage increase/(decrease) to net interest income would result
If interest rates changed in parallel by the amounts below	September 30, 2023		December 31, 2022
Down 200 basis points	(3.24)	%	(4.99)	%
Down 100 basis points	(1.55)	%	(2.38)	%
Up 100 basis points	1.51	%	2.32	%
Up 200 basis points	2.99	%	4.60	%

MVE Analysis

The Company also evaluates the impact of interest rate risk by utilizing MVE modeling. This analysis measures the present value of all estimated future cash flows of the Company over the estimated remaining life of the balance sheet. MVE is calculated as the difference between the market value of assets and liabilities. The MVE calculation utilizes only the current balance sheet, and therefore does not factor in any future changes in balance sheet size, balance sheet mix, yield curve relationships or product spreads, which may mitigate the impact of any interest rate changes.

Management examines the effect of interest rate changes on MVE. The sensitivity of MVE to changes in interest rates is a measure of longer-term interest rate risk, and highlights the potential capital at risk due to adverse changes in market interest rates. The following table discloses the estimated sensitivity to the Company’s MVE at September 30, 2023 and December 31, 2022.

	The following estimated percentage increase/(decrease) to MVE would result
If interest rates changed in parallel by the amounts below	September 30, 2023		December 31, 2022
Down 200 basis points	8.12	%	4.52	%
Down 100 basis points	4.40	%	3.09	%
Up 100 basis points	(4.15)	%	(3.70)	%
Up 200 basis points	(8.03)	%	(7.40)	%

As of September 30, 2023, the Company’s profile reflected an increase of MVE of 4.40% for downward parallel interest rate shocks of 100 basis points and a decrease of 4.15% for upward parallel interest rate shocks of 100 basis points. The asymmetrical sensitivity between a 100 basis point increase and a 100 basis point decrease is due to the negative convexity as a result of the prepayment option embedded in mortgage-related products, the impact of which is not fully offset by the behavior of the funding base (largely NMDs).

In downward parallel interest rate shocks, mortgage-related products’ prepayments increase, their duration decreases and their market value appreciation is therefore limited. At the same time, with deposit rates remaining at comparatively low levels, the Company cannot effectively transfer interest rate declines to its NMD customers. For upward parallel interest rate shocks, extension risk weighs on a sizable portion of the Company’s mortgage-related products, which are predominantly long-term and fixed-rate; and for larger shocks, the loss in market value is not offset by the change in NMDs.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Limitations of Interest Rate Risk Analyses

Since the assumptions used are inherently uncertain, the Company cannot predict precisely the effect of higher or lower interest rates on net interest income or MVE. Actual results will differ from simulated results due to the timing, magnitude and frequency of interest rate changes, the difference between actual experience and the assumed volume, characteristics of new business, behavior of existing positions, and changes in market conditions and management strategies, among other factors.

Uses of Derivatives to Manage Interest Rate and Other Risks

To mitigate interest rate risk and, to a lesser extent, foreign exchange, equity and credit risks, the Company uses derivative financial instruments to reduce the effects that changes in interest rates may have on net income, the fair value of assets and liabilities, and cash flows.

The Company is subject to price risk through its capital markets and mortgage banking activities. The Company employs various tools to measure and manage price risk in its portfolios. In addition, SHUSA's Board of Directors has established certain limits relative to positions and activities. The level of price risk exposure at any point in time depends on the market environment and expectations of future price and market movements, and will vary from period to period.

Management uses derivative instruments to mitigate the impact of interest rate movements on the fair value of certain liabilities, assets and highly probable forecasted cash flows. These instruments primarily include interest rate swaps that have underlying interest rates based on key benchmark indices and forward sale or purchase commitments. The nature and volume of the derivative instruments used to manage interest rate risk depend on the level and type of assets and liabilities on the balance sheet and the risk management strategies for the current and anticipated interest rate environments.

The Company's derivatives portfolio includes mortgage banking interest rate lock commitments, forward sale commitments and interest rate swaps.

The Company typically retains the servicing rights related to residential mortgage loans that are sold. The majority of the Company's residential MSRs are accounted for at fair value. As deemed appropriate, the Company economically hedges MSRs, using interest rate swaps and forward contracts to purchase MBS. For additional information on MSRs, see Note 13 to the Condensed Consolidated Financial Statements.

The Company uses foreign exchange contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities. Foreign exchange contracts, which include spot and forward contracts, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate. The Company also utilizes forward contracts to manage market risk associated with certain expected investment securities sales.

For additional information on foreign exchange contracts, derivatives and hedging activities, see Note 12 to the Condensed Consolidated Financial Statements.

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Incorporated by reference from Part I, Item 2, MD&A — "Asset and Liability Management" above.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act, as of September 30, 2023 (the "Evaluation Date"). Based on this evaluation, our CEO and CFO have concluded that as of the Evaluation Date, due to the material weakness in internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. In light of this material weakness, management completed additional procedures and analysis to validate the accuracy and completeness of the reported financial results within the Condensed Consolidated Statements of Cash Flows (“SCF”). In addition, management engaged the Audit Committee directly, in detail, to discuss the procedures and analysis performed to ensure the reliability of the Company’s financial reporting. Based on the additional analysis and other procedures performed, management concluded that the Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q present fairly, in all material respects our financial position, results of operations, capital position, and cash flows for the periods presented, in conformity with generally accepted accounting principles (“GAAP”).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified a material weakness in our internal control over financial reporting related to the lack of designing and maintaining effective controls to verify the proper classification of loan and lease transfer activities within the SCF. This material weakness resulted in material misstatements to the classification of cash flows associated with LHFS and LHFI within the SCF which resulted in the restatement of the Consolidated Financial Statements as of and for the period ending March 31, June 30 and September 30, 2021. Additionally, immaterial errors were identified related to the classification of cash flows associated with loan and lease transfer activities in prior periods. This material weakness could result in further misstatements of the classification of cash flows for loan and lease transfer activities that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Status of Reported Material Weakness

The Company has taken the following measures during the quarter ended September 30, 2023 to remediate the material weakness described above, including:

•enhanced the process around identification and tracking of the classification of loans at origination;

•enhanced the review controls, and supporting documentation related to the nature and classification of LHFS and LHFI cash flows between operating activities and investing activities in the SCF;

•enhanced procedures around loan and lease transfer activities that may have an impact on reporting the operating and investing sections of the SCF;

•enhanced the controls pertaining to manual entries as they relate to their impact on loan and lease transfer activities within the SCF.

While progress has been made to remediate the above-referenced material weakness, including the development and implementation of enhanced processes, procedures and controls as noted above, we are still in the process of testing the operating effectiveness of the new and enhanced controls. We believe our actions will be effective in remediating the material weakness, and we continue to devote significant time and attention to these efforts. However, the material weakness will not be considered remediated until the applicable remedial processes and procedures have been in place for a sufficient period of time and management has concluded, through testing, that these controls are effective. Accordingly, the material weakness is not remediated as of September 30, 2023.

110

Changes in Internal Control over Financial Reporting

As described in the Remediation Status of Reported Material Weakness, there were changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Refer to Note 16 to the Condensed Consolidated Financial Statements for SHUSA’s litigation disclosures, which are incorporated herein by reference.

ITEM 1A - RISK FACTORS

The Company is subject to a number of risks potentially impacting its business, financial condition, results of operations, and cash flows. There have been no material changes from the risk factors set forth under Part I, Item 1A, Risk Factors, in the Company's Annual Report on Form 10-K for 2022.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 - MINE SAFETY DISCLOSURES

None.

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ITEM 5 - OTHER INFORMATION

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

(Amounts presented as actuals)

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Exchange Act, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.

The following activities are disclosed in response to Section 13(r) with respect to Santander and its affiliates. During the period covered by this report:

•Santander UK holds seven blocked accounts for five customers that are currently designated by the U.S. under the SDGT sanctions program. Revenues and profits generated by Santander UK on these accounts in the nine months ended September 30, 2023, were negligible relative to the overall profits of Santander.

•Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the U.S. under the SDGT sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch on these accounts in the nine months ended, September 30, 2023.

•Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the U.S. under the SDGT sanctions program. Revenues and profits generated by Santander Brasil on these accounts in the nine months ended September 30, 2023, were negligible relative to the overall profits of Santander.

•Santander, also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the U.S. under the SDGT sanctions program (standby letters of credit to guarantee the obligations, either under tender documents or under contracting agreements, of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.

In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the nine months ended September 30, 2023, which were negligible relative to the overall revenues and profits of Santander. Santander has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit-taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. Santander is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, Santander intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.

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ITEM 6 - EXHIBITS

(3.1)	Amended and Restated Articles of Incorporation of Santander Holdings USA, Inc. (Incorporated by reference to Exhibit 3.1 to Santander Holdings USA, Inc.’s Current Report on Form 8-K filed December 21, 2022) (Commission File Number 001-16581)
(3.2)	Articles of Amendment to the Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 of Santander Holdings USA, Inc.’s Current Report on Form 8-K filed June 15, 2023) (Commission File Number 001-16581)
(3.3)	Bylaws of Santander Holdings USA, Inc. as amended on May 23, 2019 (Incorporated by reference to Exhibit 3.1 of Santander Holdings USA, Inc.’s Current Report on Form 8-K filed May 23, 2019) (Commission File Number 001-16581)
(4.1)	Santander Holdings USA, Inc. has certain debt obligations outstanding. None of the instruments evidencing such debt authorizes an amount of securities in excess of 10% of the total assets of Santander Holdings USA, Inc. and its subsidiaries on a consolidated basis; therefore, copies of such instruments are not included as exhibits to this Quarterly Report on Form 10-Q. Santander Holdings USA, Inc. agrees to furnish copies to the SEC on request.
(31.1)	Chief Executive Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
(31.2)	Chief Financial Officer certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
(32.1)	Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
(32.2)	Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
(101.INS)	Inline XBRL Instance Document (Filed herewith)
(101.SCH)	Inline XBRL Taxonomy Extension Schema (Filed herewith)
(101.CAL)	Inline XBRL Taxonomy Extension Calculation Linkbase (Filed herewith)
(101.DEF)	Inline XBRL Taxonomy Extension Definition Linkbase (Filed herewith)
(101.LAB)	Inline XBRL Taxonomy Extension Label Linkbase (Filed herewith)
(101.PRE)	Inline XBRL Taxonomy Extension Presentation Linkbase (Filed herewith)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SANTANDER HOLDINGS USA, INC. (Registrant)
Date:	November 3, 2023	/s/ Juan Carlos Alvarez de Soto
		Juan Carlos Alvarez de Soto
		Chief Financial Officer and Senior Executive Vice President
Date:	November 3, 2023	/s/ David L. Cornish
		David L. Cornish
		Chief Accounting Officer, Corporate Controller and Executive Vice President

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