The Chrysler Agreement has a ten-year term, subject to early termination in certain circumstances, including the failure by either party to comply with certain of their ongoing obligations. These obligations include, for SC, meeting specified escalating penetration rates for the first five years and, for FCA, treating SC in a manner consistent with comparable ("original equipment manufacturers' ("OEMs'")OEMs` treatment of their captive providers, primarily regarding sales support. In addition, FCA may also terminate the agreement if, among other circumstances, (i) a person other than Santander andor its affiliates or its other stockholders owns 20% or more of its common stock and Santander and its affiliates own fewer shares of common stock than such person, (ii) the CompanySC becomes, controls, or becomes controlled by, an OEM that competes with Chrysler, or (iii) if certain of SC's credit facilities become impaired.

In connection with entering into the Chrysler Agreement, SC paid FCA a $150 million upfront, nonrefundable fee on May 1, 2013. This fee is considered payment for future profits generated from the Chrysler Agreement. Accordingly, the Company amortizes the Chrysler Agreement and is being amortized into Other expenses over the expected ten-year term. In addition, in June 2019, in connection with the execution of the sixth amendment to the Chrysler Agreement, the Company paid a $60 million upfront fee to FCA. This fee is being amortized into Other expenses over the remaining term as a component of net finance and other interest income. The Companythe Chrysler Agreement. SC has also executed an equity option agreement with FCA, whereby FCA may elect to purchase, at any time during the term of the Chrysler Agreement, at fair market value, an equity participation of any percentage in the Chrysler Capital portion of SC's business.

ForIn June 2018, SC announced that it was in exploratory discussions with FCA regarding the future of FCA's U.S. finance operations. FCA announced its then intention to establish a periodcaptive U.S. auto finance unit and indicated that acquiring Chrysler Capital is one option it would consider. Subsequently, FCA decided not to establish a captive U.S. auto finance unit, and FCA and the Company entered into the amendment described above as of 20 business days after FCA's deliveryJune 2019. The amendment revised previously established retail and lease share (penetration) expectations and clarified key factors associated with the revenue and risk share guidance referenced in the Chrysler Agreement. Pursuant to the amendment, SC made a one-time payment of $60 million to FCA.

FCA has not delivered a notice of intent to exercise its equity option, and the Company isremains committed to discuss with FCA, in good faith, the structure and valuationsuccess of the proposed equity participation. If the parties are unable to agree on a structure and FCA still intends to exercise its option, SC will be required to create a new company into which the Chrysler Capital assets will be transferredbusiness.

On July 1, 2016, due to both its global and which will own and operate the Chrysler Capital business. If FCA and SC cannot agree on a fair market value during the 20-day negotiation period, each party will engage an investment bank and the appointed banks will mutually appoint a third independent investment bankU.S. non-branch total consolidated asset size, Santander became subject to determine the value, with the costboth of the valuation divided evenly between FCA and SC. Each party has the right to a one-time deferralprovisions of the independent valuation process for up to nine months. FCA will have a period of 90 days after a valuation has been determined, either by negotiation between the parties or by an investment bank, to deliver a binding notice of exercise. Following this notice, FCA's purchase is to be paid and settled within 10 business days, subject to a delay of up to 180 days if necessary to obtain any required consents from governmental authorities.

On October 21, 2019, the Company entered into an agreement to sell the stock of Santander BanCorp (the holding company that owns BSPR) for total consideration of approximately $1.1 billion, subject to adjustment based on the consolidated Santander BanCorp balance sheet at closing. At December 31, 2019, BSPR had 27 branches, approximately 1,000 employees, and total assets of approximately $6.0 billion. Among other conditions precedent to the closing, the transaction requires the Company to transfer all of BSPR's non-performing assets and the equity of SAM to the Company or a third party prior to closing. In addition, the transaction requires review and approval of various regulators, whose input is uncertain. Subject to satisfaction of the closing conditions, the transaction is expected to close in the middle of 2020. Once it becomes apparent that this transfer.transaction is more likely than not to receive regulatory approval, the Company will recognize a deferred tax liability of approximately $50 million for the unremitted earnings of Santander BanCorp. Completion of the transaction is not expected to result in any material gain or loss.

The Company's reportable segments are organized in accordance with its strategic business units. Except for the Company's SC segment, segments are focused principally around the customers the BankCompany serves. In 2019, the Company has identified the following reportable segments:

The Consumer and Business Banking segment is primarily comprised ofincludes the Bank's branch locationsproducts and theservices provided to Bank consumer and business banking customers, including consumer deposit, business banking, residential mortgage, business. The branch locations offerunsecured lending and investment services. This segment provides a wide range of products and services to customers,consumers and attract deposits by offering a variety of deposit instruments,business banking customers, including demand and interest-bearing demand deposit accounts, money market and savings accounts, certificates of deposit ("CDs")CDs and retirement savings products. The branch locationsIt also offer consumer loansprovides lending products such as credit cards, mortgages, home equity loans and lines of credit, as welland business loans such as business bankinglines of credit and small business loans to individuals. The Consumer and Business Banking segment also includescommercial cards. In addition, the Bank provides investment services and providesto its retail customers, including annuities, mutual funds, managed monies, and insurance products,products. Santander Universities, which provides grants and actsscholarships to universities and colleges as an investment brokerage agenta way to foster education through research, innovation and entrepreneurship, is the customerslast component of the Consumer and Business Bankingthis segment.

The Commercial Real EstateC&I segment primarily offersprovides commercial real estatelines, loans, letters of credit, receivables financing and multifamily loans.

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

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

SC is a specialized consumer finance company focused on vehicle finance and third-party servicing. SC’s primary business is the indirect origination and securitization ofindirectly originating RICs, principally through manufacturer-franchisedOEM-franchised dealers in connection with their sale of new and used vehicles to retail consumers. In conjunction with the Chrysler Agreement, SC offers a full spectrum of auto financing products and services to ChryslerFCA customers and dealers under the Chrysler Capital brand. These products and services include consumer RICs and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit. SC also originates vehicle loans through a web-based direct lending program, purchases vehicle RICs from other lenders, and services automobile, recreational and marine vehicle portfolios for other lenders. Additionally, SC has several other relationships through which it holds personal unsecured consumer loans, private-label credit cards and other consumer finance products. In the third quarter of 2015, SC announced that it wouldmade a strategic decision to exit the personal lending market to focus on its core objectives of expanding the reach and realizing the value of its vehicle finance and servicers for others platforms.

SC continues to hold the Bluestem portfolio, which had a carrying balance of approximately $1.0 billion as of December 31, 2019, and remains a party to agreements with Bluestem that includes obligations, among other things, to purchase new advances originated by Bluestem and existing balances on accounts with new advances, for an initial term ending in April 2020 and renewable through April 2022 at Bluestem’s option. Both parties have the right to terminate this agreement upon written notice if certain events were to occur, including if there is a material adverse change in the financial condition of either party. Although a third party is being sought to assume these obligations, SC may not be successful in finding such assets were accordinglya party, and Bluestem may not agree to the substitution. The Bluestem portfolio continues to be classified as heldheld-for-sale. Significant lower-of-cost-or-market adjustments have been recorded on this portfolio and may continue as long as SC holds the portfolio, particularly due to the purchase commitments. There is a risk that material changes to SC’s relationship with Bluestem, or the loss or discontinuance of Bluestem’s business, would materially and adversely affect SC’s business, financial condition and results of operations. On March 9, 2020, Bluestem Brands, Inc., together with certain of its affiliates, filed voluntary petitions for sale. In February 2016, SC sold substantially allrelief under Chapter 11 of the $869.3 million Lending Club portfolio. The majorityU.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of the remaining personal lending portfolio is being actively marketed.Delaware.

SC has entered into a number of intercompany agreements with the Bank. All intercompany revenue and fees between the Bank and SC are eliminated in the consolidated results of SHUSA.the Company.

The financial results for each of these reportable segments are included in Note 23 of the Notes to Consolidated Financial Statements and are discussed in Item 7, "Line of Business Results" within the Management's Discussion & Analysis of Financial Condition and Results of Operations ("MD&A")&A section of this Form 10-K. These results have been presented based on the Company's management structure and management accounting practices. The structure and accounting practices are specific to the Company and, as a result, the financial results of the Company's reportable segments are not necessarily comparable with similar information for other financial institutions.

The Other category includes certain immaterial subsidiaries that are individually immaterial such as BSI, Banco Santander Puerto Rico,BSPR, SIS, SSLLC, and SSLLC, reporting units that are in run-off,SFS, the Holding company'sunallocated interest expense on the Company's borrowings and other debt obligations as well asand certain unallocated corporate reporting units.income and indirect expenses.

At December 31, 2016,2019, the Company had approximately 16,50016,900 employees among itself and its subsidiaries. No Company employees are represented by a collective bargaining agreement.

The Bank is subject to substantial competition in attracting and retaining deposits and in lending funds. The primary factors in competing for deposits include the ability to offer attractive rates, the convenience of office locations, the availability of alternate channels of distribution, and servicing capabilities. Direct competition for deposits comes primarily from other national, regional, and state banks, thrift institutions, and broker dealers.broker-dealers. Competition for deposits also comes from money market mutual funds, corporate and government securities, and credit unions. The primary factors driving competition for commercial and consumer loans are interest rates, loan origination fees, service levels and the range of products and services offered. Competition for origination oforiginating loans normally comes from thrift institutions, national and state banks, mortgage bankers, mortgage brokers, finance companies, and insurance companies.

SC is also subject to substantial competition, particularly in the automotiveautomobile finance industry. SC competes on the pricing it offersoffered on its loans and leases as well as the customer service SC provides automotiveautomobile dealer customers. Pricing for these loans and leases is transparent because SC, along with its competitors, provides pricing and other terms and conditions for loans and leases through web-based credit application aggregation platforms. When dealers submit applications for consumers acquiring vehicles, they can compare SC's terms and conditions against its competitors’ pricing. Dealer relationships are important in the automotive finance industry. Vehicle finance providers tailor product offerings to meet dealers' needs. SC's primary competitors in the vehicle finance space are national and regional banks, credit unions, independent financial institutions, and the affiliated finance companies of automotive manufacturers.

The activities of the Company and the Bank are subject to regulation under various U.S. federal laws, including the Bank Holding Company ("BHC") Act, the Federal Reserve Act, the National Bank Act, the Federal Deposit Insurance Act (the "FDIA"), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "DFA"), the Truth-in-Lending Act (which governs disclosures of credit terms to consumer borrowers), the Truth-in-Savings Act, the Equal Credit Opportunity Act ("the ECOA") (which prohibits creditors from discriminating against applicants on the basis of race, color, religion or other factors), the Fair Credit Reporting Act (which governs the provision of consumer information to credit reporting agencies and the use of consumer information), the Fair Debt Collection Practices Act (which governs the manner in which consumer debts may be collected by collection agencies), the Home Mortgage Disclosure Act (which requires financial institutions to provide certain information about home mortgage and refinanced loans), the Servicemembers Civil Relief Act (the “SCRA") (which provides certain protections for individuals on active duty in the military), Section 5 of the Federal Trade Commission Act (which prohibits unfair or deceptive acts or practices in or affecting commerce), the Real Estate Settlement Procedures Act (which contains certain requirements relatingSHUSA is a BHC pursuant to the mortgage settlement process), the Expedited Funds Availability Act (which establishes the maximum permissible hold periods for checks and other deposits and the disclosure requirements for funds availability), the Credit Card Accountability, Responsibility and Disclosure Act (which establishes fair practices relating to the extension of credit under open-end consumer credit plans) and the Electronic Funds Transfer Act (which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of, debit cards, automated teller machines ("ATMs") and other electronic banking services), as well as other federal and state laws.

The Company and the Bank arewould be required to conduct semi-annual and annual stress tests, respectively, reporting results toobtain approval from the Federal Reserve andif the OfficeCompany were to acquire shares of any depository institution or any holding company of a depository institution, or any financial entity that is not a depository institution, such as a lending company.

Under the Durbin AmendmentChange in Bank Control Act, individuals, corporations or other entities acquiring SHUSA's common stock may, alone or together with other investors, be deemed to control the DFA, in June 2011Company and thereby the Bank. Ownership of more than 10% of SHUSA’s capital stock may be deemed to constitute “control” if certain other control factors are present. If deemed to control the Company, those persons or groups would be required to obtain the Federal Reserve issuedReserve's approval to acquire the final rule implementing debit card interchange feeCompany’s common stock and routing regulation. The final rule establishes standardscould be subject to certain ongoing reporting procedures and restrictions under federal law and regulations.

The DFA establishedfederal banking agencies adopted certain operational and managerial standards for depository institutions, including internal audit system components, loan documentation requirements, asset growth parameters, information technology and data security practices, and compensation standards for officers, directors and employees.

The Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC. The Bank's and BSPR's deposits are insured up to applicable limits by the FDIC. The FDIC assesses deposit insurance premiums and is authorized to conduct examinations of, and require reporting by, FDIC-insured institutions like the Bank and BSPR. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the Deposit Insurance Fund. The FDIC also has broad powersthe authority to setinitiate enforcement actions against banking institutions and may terminate an institution’s deposit insurance if it determines that the requirementsinstitution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

FDIC insurance premium expenses were $60.5 million for the terms and conditions of consumer financial products. This has resulted in and is expected to continue to result in increased compliance costs and reduced revenue.year ended December 31, 2019.

Under the CFPB issuedFDIA, insured depository institutions must be classified in one of five defined tiers (well-capitalized, adequately-capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized). Under OCC regulations, an institution is considered “well-capitalized” if it (i) has a bulletin recommending that indirect vehicle lenders,total risk-based capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital ratio of 8% or greater, (iii) has a CET1 capital ratio of 6.5% or greater, (iv) has a Tier 1 leverage ratio of 5% or greater and (v) is not subject to any order or written directive to meet and maintain a specific capital level. As of December 31, 2019, the Bank met the criteria to be classified as “well capitalized.”

If capital levels fall to significantly or critically undercapitalized levels, further material restrictions can be imposed, including SC, take stepsrestrictions on interest payable on accounts, dismissal of management and, in critically undercapitalized situations, appointment of a receiver or conservator. Critically undercapitalized institutions generally may not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on their subordinated debt. All but well-capitalized institutions are prohibited from accepting brokered deposits without prior regulatory approval. Pursuant to monitorthe FDIA and impose controls over vehicle dealer "mark-up" policies underOCC regulations, institutions which dealers impose higherare not categorized as well-capitalized or adequately-capitalized are restricted from making capital distributions, which include cash dividends, stock redemptions and repurchases, cash-out mergers, interest ratespayments on certain consumers, withconvertible debt and other transactions charged to the mark up shared between the dealer and the lender. In accordance with SC's policy, dealers were allowed to mark-up interest rates by a maximum of 2.00%, but in October 2013 SC reduced the maximum compensation (participation from 2.00% (industry practice) to 1.75%). SC plans to continue to evaluate this policy for effectiveness and may make further changes to strengthen oversight of dealers and mark-up rates.institution’s capital account.

On July 31, 2015,Federal banking laws, regulations and policies limit the CFPB notified SC that it had referredBank’s ability to pay dividends and make other distributions to the DepartmentCompany. The Bank 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 the Company within that calendar year would exceed 100% of Justice (the "DOJ") certain alleged violationsits net income during the year plus retained net income for the prior two years; (2) the Bank would not meet capital levels imposed by SC of the ECOA regarding (i) statistical disparitiesOCC in mark-ups charged by automobile dealersconnection with any order, or (3) the Bank is not adequately capitalized at the time. In addition, the OCC's prior approval is required if the OCC deems it to protected groups on loans originated by those dealers and purchased by SC and (ii) the treatment of certain types of incomebe in SC's underwriting process. On September 25, 2015, the DOJ notified SC that it had initiated an investigation under the ECOA of SC's pricing of automobile loans based on the referral from the CFPB.troubled condition or a problem institution.

TheAny dividends declared and paid have the effect of reducing the Bank’s Tier 1 capital to average consolidated assets and risk-based capital ratios. During 2019, 2018, and 2017, the Company routinely executes interest rate swaps forpaid cash dividends of $400.0 million, $410.0 million and $10.0 million, respectively. During 2019, 2018 and 2017, the managementCompany paid cash dividends to preferred shareholders of zero, $11.0 million and $14.6 million, respectively. During the third quarter of 2018, SHUSA redeemed all of its asset/liability mix, and also executes such swaps with its borrower clients. outstanding preferred stock.

Under the DFA,Federal Reserve regulations, the Bank is required to post collateral with certain ofmaintain a reserve against its counterpartiestransaction accounts (primarily interest-bearing and clearing exchanges. While clearing these financial instruments offers some benefits and additional transparencynon-interest-bearing checking accounts). Because reserves must generally be maintained in valuation,cash or in low-interest-bearing accounts, the system requirements for clearing execution add operational complexities to the business and accordingly increase operational risk exposure.

The DFAamount of total reserve requirements at December 31, 2019 and certain other legislation2018 were $534.6 million and regulations impose various restrictions on compensation of certain executive officers. The Company's ability to attract and/or retain talented personnel may be adversely affected by$429.0 million, respectively. At December 31, 2019 and 2018, the Company complied with these restrictions.reserve requirements.

The FHLB system was created in 1932 and consists of 11 regional FHLBs. FHLBs are federally-chartered but privately owned institutions created by Congress. The Federal Housing Finance Agency is an agency of the DFA include increases infederal government that is charged with overseeing the amount of deposit insurance assessments the Company's bank subsidiaries must pay; changes to the nature and levels of fees charged to consumers, which are negatively affecting the Company's bank subsidiaries' income; banning banking organizations from engaging in proprietary trading and restricting their sponsorship of, or investing in, hedge funds and private equity funds, subject to limited exceptions; and increasing regulationFHLBs. Each FHLB is owned by its member institutions. The primary purpose of the derivatives markets through measures that broaden the derivative instruments subjectFHLBs is to regulation and requiring clearing and exchange tradingprovide funding to their members for making housing loans as well as imposing additional capitalfor affordable housing and margin requirementscommunity development lending. FHLBs are generally able to make advances to their member institutions at interest rates that are lower than could otherwise be obtained by such institutions. As a member, the Bank is required to make minimum investments in FHLB stock based on its level of borrowings from the FHLB. The Bank is a member of and held investments in the FHLB of Pittsburgh which totaled $316.4 million as of December 31, 2019, compared to $230.1 million at December 31, 2018. The Bank utilizes advances from the FHLB to fund balance sheet growth, provide liquidity and for derivatives market participants, which will increaseasset and liability management purposes. The Bank had access to advances with the costFHLB of conducting this business.

The DFA added new section 13Bank received $16.6 million and $6.6 million in dividends on its stock in the FHLB of Pittsburgh in 2019 and 2018, respectively.

Several federal laws, including the Bank Secrecy Act, the Money Laundering Control Act, and the USA Patriot Act require all financial institutions to, among other things, implement policies and procedures relating to anti-money laundering, compliance, suspicious activities, currency transaction reporting and due diligence on customers. The USA Patriot Act substantially broadened existing anti-money laundering legislation and the BHC Act, which is commonly referred to as the “Volcker Rule.” The Volcker Rule prohibits a “banking entity” from engaging in “proprietary trading” or engaging in anyextraterritorial jurisdiction of the following activitiesU.S., imposed compliance and due diligence obligations, created criminal penalties, compelled the production of documents located both inside and outside the U.S., including those of non-U.S. institutions that have a correspondent relationship in the U.S., and clarified the safe harbor from civil liability to clients. The U.S. Treasury has issued a number of regulations that further clarify the USA Patriot Act’s requirements and provide more specific guidance on their application.

Under the GLBA, financial institutions are required to disclose to their retail customers their policies and practices with respect to a hedge fund or a private equity fund (together, a “Covered Fund”): (i) acquiring or retaining any equity, partnership or other ownership interest insharing nonpublic customer information with their affiliates and non-affiliates, how they maintain customer confidentiality, and how they secure customer information. Customers are required under the Covered Fund; (ii) controlling the Covered Fund; or (iii) engaging in certain transactionsGLBA to be provided with the fund if the banking entity or any affiliate is an investment adviser or sponsoropportunity to the Covered Fund. These prohibitions are“opt out” of information sharing with non-affiliates, subject to certain exemptions for permitted activities.exceptions.

Environmentally-related hazards are a source of high risk and potentially significant liability for financial institutions related to their loans. Environmentally contaminated properties owned by an institution’s borrowers may result in a drastic reduction in the term “banking entity” includes an insured depository institution, a depository institution holding company and any affiliatevalue of the collateral securing the institution’s loans to such borrowers, high environmental cleanup costs to the borrower affecting its ability to repay its loans, the subordination of any lien in favor of the foregoing,institution to a state or federal lien securing clean-up costs, and liability to the Volcker Rule has sweeping worldwide application and covers entities such as Santander,institution for cleanup costs if it forecloses on the Company, certain of its subsidiaries and numerous other Santander subsidiariescontaminated property or becomes involved in the United Statesmanagement of the borrower. To minimize this risk, the Bank may require an environmental examination of, and abroad.reports with respect to, the property of any borrower or prospective borrower if circumstances affecting the property indicate a potential for contamination, taking into consideration the potential loss to the institution in relation to the burdens to the borrower. Such examination must be performed by an engineering firm experienced in environmental risk studies and acceptable to the institution, and the costs of such examinations and reports are the responsibility of the borrower. These costs may be substantial and may deter a prospective borrower from entering into a loan transaction with the Bank. The Company is not aware of any borrower which is currently subject to any environmental investigation or clean-up proceeding or any other environmental matter that is likely to have a material adverse effect on the financial condition or results of operations of SHUSA or its subsidiaries.

The FDIA established five capital tiers: well-capitalized, adequately-capitalized, undercapitalized, significantly undercapitalizedCompany conducts its securities and critically undercapitalized. A depository institution’s capital tier dependsinvestment business activities through its subsidiaries SIS and SSLLC. SIS and SSLLC are registered broker-dealers with the SEC and members of FINRA. SIS’s activities include investment banking, institutional sales, trading and offering research reports of Latin American and European equity and fixed income securities. SIS, SSLLC and SAM are also registered investment advisers with the SEC, and BSI conducts certain securities transactions exempt from SEC registration on behalf of its capital levelsclients.

Our loan portfolios are concentrated in the United States. Accordingly, the recoverability of our loan portfolios and our ability to increase the riskamount of its failureloans outstanding and potentially lead to broader systemic stress. In May 2016, the Federal Reserve issued a proposed rule for NSFR applicable to U.S. financial institutions. The proposed rule will become a minimum standard by January 1, 2018. The Company is currently evaluating the impact this proposed rule would have on its financial position,our results of operations and disclosures.financial condition in general are dependent to a significant extent on the level of economic activity in the United States. A return to recessionary conditions in the United States economy would likely have a significant adverse impact on our loan portfolios and, as a result, on our financial condition, results of operations, and cash flows.

The Company, in collaboration with its subsidiaries and affiliates, is engaged in an enterprise-wide initiative to identify, assess and monitor risks associated with the potential discontinuation or unavailability of LIBOR and the transition to use of alternative reference rates such as SOFR. As part of these efforts, the Company has established a LIBOR Transition Steering Committee that includes the Company’s Chief Accounting Officer and Treasurer and representatives of the Company’s significant subsidiaries and business lines. Among other matters, the Company is identifying assets and liabilities tied to LIBOR, the exposure of its subsidiaries to LIBOR, the degree to which fallback language currently exists in the Company’s contracts that reference LIBOR, and monitoring relevant industry developments and publications by market associations and clearing houses.

As a financial institution, the Company is subject to written agreementsextensive regulation, which address stress testingmaterially affects our businesses. The statutes, regulations, and capital adequacy:

TheRegulation of the Company remains subject to the Capital Plan Rule (12 §CFR 225.8) which requiresas a BHC includes limitations on permissible activities. Moreover, the Company and the Bank are required to perform stress tests and submit the resultscapital plans to the Federal Reserve and the OCC on an annual basis.basis, and receive a notice of non-objection to the plans from the Federal Reserve and the OCC before taking capital actions such as paying dividends, implementing common equity repurchase programs, or redeeming or repurchasing capital instruments. The Federal Reserve may also impose substantial fines and other penalties and enforcement actions for violations we may commit, and has the authority to disallow acquisitions we or our subsidiaries may contemplate, which may limit our future growth plans. Such constraints currently applicable to the Company is alsoand its subsidiaries and/or regulatory actions could have an adverse effect on our financial position and results of operations.

The DFA provides for an extensive framework for the regulation of OTC derivatives, including mandatory clearing, exchange trading and transaction reporting of certain OTC derivatives. Entities that are swap dealers, security-based swap dealers, major swap participants or major security-based swap participants are required to submit a mid-year stress test to the Federal Reserve. In addition, togetherregister with the annual stress test submission,SEC, the Company is requiredU.S. CFTC or both, and are or will be subject to submitnew capital, margin, business conduct, record-keeping, clearing, execution, reporting and other requirements. We may register as a proposed capital planswap dealer with the CFTC.

Within the DFA, the Volcker Rule prohibits “banking entities” from engaging in certain forms of proprietary trading and from sponsoring or investing in covered funds, in each case subject to certain exceptions. The Volcker Rule also limits the Federal Reserve. Asability of banking entities and their affiliates to enter into certain transactions with such funds with which they or their affiliates have certain relationships. The final regulations implementing the Volcker Rule contain exclusions and certain exemptions for market-making, hedging, underwriting, and trading in United States government and agency obligations as well as certain foreign government obligations, and trading solely outside the United States, and also permit certain ownership interests in certain types of funds to be retained.

Under the revised capital plan rule, the Company is considered a large and non-complex BHC andregulations issued by the Federal Reserve may objectand the FDIC, and as required by Section 165(d) of the DFA, we and Santander must provide to the Company’s capital plan if the Federal Reserve and the FDIC a Section 165(d) Resolution Plan. The purpose of this DFA provision is to provide regulators with plans that would enable them to resolve failing financial companies that pose a significant risk to the financial stability of the United States in a manner that mitigates such risk. The most recently filed Section 165(d) Resolution Plan by Santander, dated as of December 31, 2018, provides a roadmap for the orderly resolution of the material U.S. operations of Santander under hypothetical stress scenarios and the failure of one or more of its U.S. MEs. Material entities are defined as subsidiaries or foreign offices of Santander that are significant to the activities of a critical operation or core business line. The U.S. MEs identified in the 2018 Resolution Plan include, among other entities, the Company, the Bank and SC.

Title II of the DFA created a new resolution regime known as the “orderly liquidation authority” to which financial companies, including U.S. IHC of FBOs with assets of $50 billion or more, such as the Company, can be subjected. Under the orderly liquidation authority, the FDIC may be appointed as receiver to liquidate a financial company if, upon the recommendation of applicable regulators, the United States Secretary of the Treasury determines that the entity is in severe financial distress, the entity’s failure would have serious adverse effects on the U.S. financial system, and resolution under the orderly liquidation authority would avoid or mitigate those effects, among other things. Absent such determinations, the Company has not demonstrated an ability to maintain capital above each minimum regulatory capital ratio on a pro forma basis under expected and stressful conditions throughout the planning horizon. Large and non-complex BHC are no longerwould remain subject to the qualitative objection criteriaU.S. Bankruptcy Code.

If the FDIC were appointed as receiver under the orderly liquidation authority, then the orderly liquidation authority, rather than the U.S. Bankruptcy Code, would determine the powers of the capital plan rule whichreceiver and the rights and obligations of creditors and other parties who have transacted with the Company. There are appliedsubstantial differences between the rights available to larger banks which fall outsidecreditors under the largeorderly liquidation authority and non-complex BHC definition.under the U.S. Bankruptcy Code. For example, under the orderly liquidation authority, the FDIC may disregard the strict priority of creditor claims in some circumstances (which would otherwise be respected under the U.S. Bankruptcy Code), and an administrative claims procedures is used to determine creditors’ claims (as opposed to the judicial procedure utilized in bankruptcy proceedings). Under the orderly liquidation authority, in certain circumstances, the FDIC could elevate the priority of claims if it determines that doing so is necessary to facilitate a smooth and orderly liquidation without the need to obtain the consent of other creditors or prior court review. Furthermore, the FDIC has the right to transfer assets or liabilities of the failed company to a third party or “bridge” entity under the orderly liquidation authority.

Regardless of what resolution strategy Santander might prefer for resolving its U.S. operations, the FDIC could determine that it is a desirable strategy to resolve the Company in a manner that would, among other things, impose losses on the Company’s shareholder, unsecured debtholders (including holders of our LTD) and other creditors, while permitting the Company’s subsidiaries to continue to operate. It is likely that the application of such an entry strategy in which the Company would be the only legal entity in the U.S. to enter resolution proceedings would result in greater losses to holders of our LTD and other debt securities than the losses that would result from the application of a bankruptcy proceeding or a different resolution strategy for the Company. Assuming the Company entered resolution proceedings and support from the Company to its subsidiaries was sufficient to enable the subsidiaries to remain solvent, losses at the subsidiary level could be transferred to the Company and ultimately borne by the Company’s securityholders (including holders of our LTD and other debt securities), with the result that third-party creditors of the Company’s subsidiaries would receive full recoveries on their claims, while the Company’s securityholders (including holders of our LTD) and other unsecured creditors could face significant losses. In Juneaddition, in a resolution under the orderly liquidation authority, holders of our LTD and other debt securities of the Company could face losses ahead of our other similarly situated creditors if the FDIC exercised its right, to disregard the strict priority of creditor claims described above.

As noted above, our business and operations are subject to increasingly significant rules and regulations relating to the banking and financial services business. These apply to business operations, affect financial returns, include reserve and reporting requirements, and the conduct of our business. These requirements are established by the Company.relevant central banks and regulatory authorities that authorize, regulate and supervise us in the jurisdictions in which we operate. The relationship between the Company and its customers is also regulated extensively under federal and state consumer protection laws. Among other things, these prohibit unfair, deceptive and abusive trading practices, require disclosures of the cost of credit, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, and restrict our ability to raise interest rates.

We are subject to civil and tax claims and party to certain legal proceedings incidental to the normal course of our business from time to time, including in connection with lending activities, relationships with our employees and other commercial or tax matters. In view of the inherent difficulty of predicting the outcome of legal matters, particularly when the claimants seek very large or indeterminate damages, or when the cases present novel legal theories, involve a large number of parties or are in the early stages of investigation or discovery, we cannot state with confidence what the eventual outcome of these pending matters will be or what the eventual loss, fines or penalties related to each pending matter may be. We believe that we have established adequate reserves related to the costs anticipated to be incurred in connection with these various claims and legal proceedings. However, the amount of these provisions is substantially less than the total amount of the claims asserted against us and, in light of the uncertainties involved in such claims and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves we have currently accrued. As a result, the outcome of a particular matter may materially and adversely affect our financial condition and results of operations for a particular period, depending upon, among other factors, the size of the loss or liability imposed and our level of income for that period.

In addition, from time to time, the Company is, permittedor may become, the subject of governmental and self-regulatory agency information-gathering requests, reviews, investigations and proceedings and other forms of regulatory inquiry, including by the SEC and law enforcement authorities.

We face substantial competition in all parts of our business from numerous banks and non-bank providers of financial services, including in originating loans and attracting deposits, providing customer service, the quality and range of products and services, technology, interest rates and overall reputation, and we expect competitive conditions to continue to intensify. Our competition comes principally from other domestic and foreign banks, mortgage banking companies, consumer finance companies, insurance companies and other lenders and purchasers of loans.

There has been a trend towards consolidation in the banking industry, which has created larger and stronger banks with which we must now compete. Some of our competitors are substantially larger than we are, which may give those competitors advantages such as a more diversified product and customer base, the ability to reach more customers and potential customers, operational efficiencies, lower-cost funding and larger branch networks. Many competitors are also focused on cross-selling their products, which could affect our ability to maintain or grow existing customer relationships or require us to offer lower interest rates or fees on our lending products or higher interest rates on deposits. There can be no assurance that increased competition will not adversely affect our growth prospects and therefore our operations. We also face competition from non-bank competitors such as brokerage companies, department stores (for some credit products), leasing and factoring companies, mutual fund and pension fund management companies and insurance companies.

New competitors may enter the market or existing competitors may adjust their services with unique product or service offerings or approaches to providing banking services. If we are unable to compete successfully with current and new competitors, or if we are unable to anticipate and adapt our offerings to changing banking industry trends, including technological changes, our business may be adversely affected. In addition, our failure to anticipate or adapt to emerging technologies or changes in customer behavior effectively, including among younger customers, could delay or prevent our access to new digital-based markets, which would in turn have an adverse effect on our competitive position and business. Furthermore, the widespread adoption of new technologies, including cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services as we continue to grow our internet and mobile banking capabilities. Our customers may choose to conduct business or offer products in areas that may be considered speculative or risky. Such new technologies and the rise in customer use of dividendsinternet and mobile banking platforms in recent years could negatively impact our investments in bank premises, equipment and personnel for our branch network. The persistence or acceleration of this shift in demand towards internet and mobile banking may necessitate changes to our retail distribution strategy, which may include closing and/or selling certain branches and restructuring our remaining branches and workforce. These actions could lead to losses on these assets and increased expenditures to renovate, reconfigure or close a number of our remaining branches or otherwise reform our retail distribution channel. Furthermore, our failure to keep pace with innovation or to swiftly and effectively implement such changes to our distribution strategy could have an adverse effect on our competitive position.

In February 2013, SC entered into the Chrysler Agreement with FCA through which SC launched the Chrysler Capital brand on May 1, 2013. Through the Chrysler Capital brand, SC originates private-label loans and leases to facilitate the purchase of FCA vehicles by consumers and FCA-franchised automotive dealers. The financing services SC provides under the Chrysler Agreement include providing (1) credit lines to finance FCA-franchised dealers’ acquisitions of vehicles and other products FCA sells or distributes, (2) automotive loans and leases to finance consumer acquisitions of new and used vehicles at FCA-franchised dealerships, (3) financing for commercial and fleet customers, and (4) ancillary services. In addition, SC may facilitate, for an affiliate, offerings to dealers for dealer loan financing, construction loans, real estate loans, working capital plan rule,loans, and revolving lines of credit. On June 28, 2019, the Company remainsentered into an amendment of the Chrysler Agreement which modified the Chrysler Agreement to, among other things, adjust certain performance metrics, exclusivity commitments and payment provisions. This amendment also terminated a previously disclosed tolling agreement, dated July 11, 2018, between SC and FCA.

As part of the Chrysler Agreement, SC received limited exclusivity rights to participate in specified minimum percentages of certain of FCA's financing incentive programs, which include loan rate subvention and automotive lease residual support subvention. Among other covenants, SC has committed to certain revenue sharing arrangements. SC bears the risk of loss on loans originated pursuant to the Chrysler Agreement, while FCA shares in any residual gains and losses in respect of automotive leases, subject to specific provisions in the written agreements describedChrysler Agreement, including limitations on SC’s participation in such gains and losses.

The majority of these eleven Company properties identified above are utilized for general corporate purposes. The remaining 749 properties consist primarily of bank branches and lending offices. Of the total number of buildings, the Bank has 588 retail branches, and BSPR has 27 retail branches.

The activities of the Company and its subsidiaries, including the Bank and SC, are subject to regulation under various U.S. federal laws and regulatory agencies which impose regulations, supervise and conduct examinations, and may not make, or permit any subsidiary to make, any capital distribution, withoutaffect the prior written approvaloperations and management of the Company and its ability to take certain actions, including making distributions to our parent. The Company is regulated on a consolidated basis by the Federal Reserve.Reserve, including the FRB of Boston, and the CFPB. The Company's banking and bank holding company subsidiaries are further supervised by the FDIC and the OCC. As a subsidiary of the Company, SC is also subject to regulatory oversight by the Federal Reserve as well as the CFPB. Santander BanCorp and BSPR also are supervised by the Puerto Rico Office of the Commissioner of Financial Institutions.

The Parent Company is the parent holding company of SBNAfederal banking agencies adopted certain operational and other consolidated subsidiariesmanagerial standards for depository institutions, including internal audit system components, loan documentation requirements, asset growth parameters, information technology and is a legal entity separatedata security practices, and distinct from its subsidiaries. SHUSAcompensation standards for officers, directors 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. As a consolidated subsidiary of the Company, SC is included in various regulatory restrictions relating to payment of dividends described in the “Stress Tests and Capital Adequacy” discussion above.employees.

The Federal Reserve adoptedBank is a rulemember of the Deposit Insurance Fund, which is administered by the FDIC. The Bank's and BSPR's deposits are insured up to applicable limits by the FDIC. The FDIC assesses deposit insurance premiums and is authorized to conduct examinations of, and require reporting by, FDIC-insured institutions like the Bank and BSPR. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the Deposit Insurance Fund. The FDIC also has the authority to initiate enforcement actions against banking institutions and may terminate an institution’s deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

Under the FDIA, insured depository institutions must be classified in one of five defined tiers (well-capitalized, adequately-capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized). Under OCC regulations, an institution is considered “well-capitalized” if it (i) has a total risk-based capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital ratio of 8% or greater, (iii) has a CET1 capital ratio of 6.5% or greater, (iv) has a Tier 1 leverage ratio of 5% or greater and (v) is not subject to any order or written directive to meet and maintain a minimum amountspecific capital level. As of loss-absorbing instruments,December 31, 2019, the Bank met the criteria to be classified as “well capitalized.”

If capital levels fall to significantly or critically undercapitalized levels, further material restrictions can be imposed, including restrictions on interest payable on accounts, dismissal of management and, in critically undercapitalized situations, appointment of a minimum amountreceiver or conservator. Critically undercapitalized institutions generally may not, beginning 60 days after becoming critically undercapitalized, make any payment of unsecured long-termprincipal or interest on their subordinated debt. All but well-capitalized institutions 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 and repurchases, cash-out mergers, interest payments on certain convertible debt (the “TLAC Rule”). The TLAC Rule appliesand other transactions charged to U.S. global systemically important banks and to IHCs with $50 billion or more in U.S. non-branch assets that are controlled by a global systemically important foreign banking organization ("FBO"); the Company is such an IHC.institution’s capital account.

Federal Deposit Insurance Corporation Surcharge Assessmentbanking laws, regulations and policies limit the Bank’s ability to pay dividends and make other distributions to the Company. The Bank 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 the Company 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, or (3) the Bank is not adequately capitalized at the time. In addition, the OCC's prior approval is required if the OCC deems it to be in troubled condition or a problem institution.

In March 2016,Any dividends declared and paid have the FDIC finalizedeffect of reducing the ruleBank’s Tier 1 capital to implement Section 334average consolidated assets and risk-based capital ratios. During 2019, 2018, and 2017, the Company paid cash dividends of $400.0 million, $410.0 million and $10.0 million, respectively. During 2019, 2018 and 2017, the DFACompany paid cash dividends to provide for a surcharge assessment at an annual ratepreferred shareholders of 4.5 basis points on banks with over $10 billion in assets to increase the FDIC insurance fund. The FDIC commenced the surcharge inzero, $11.0 million and $14.6 million, respectively. During the third quarter of 2016, and will continue for eight consecutive quarters. After the eight quarters, the FDIC may charge a shortfall assessment.

Under Federal laws restrictReserve regulations, the typesBank is required to maintain a reserve against its transaction accounts (primarily interest-bearing and non-interest-bearing checking accounts). Because reserves must generally be maintained in cash or in low-interest-bearing accounts, the effect of activitiesthe reserve requirements is to reduce an institution’s asset yields.

The FHLB system was created in which BHCs may engage,1932 and subject themconsists of 11 regional FHLBs. FHLBs are federally-chartered but privately owned institutions created by Congress. The Federal Housing Finance Agency is an agency of the federal government that is charged with overseeing the FHLBs. Each FHLB is owned by its member institutions. The primary purpose of the FHLBs is to a range of supervisory requirements, including regulatory enforcement actionsprovide funding to their members for violations of laws and policies. BHCs may engage in the business of banking and managing and controlling banks,making housing loans as well as closely-related activities.for affordable housing and community development lending. FHLBs are generally able to make advances to their member institutions at interest rates that are lower than could otherwise be obtained by such institutions. As a member, the Bank is required to make minimum investments in FHLB stock based on its level of borrowings from the FHLB. The Bank is a member of and held investments in the FHLB of Pittsburgh which totaled $316.4 million as of December 31, 2019, compared to $230.1 million at December 31, 2018. The Bank utilizes advances from the FHLB to fund balance sheet growth, provide liquidity and for asset and liability management purposes. The Bank had access to advances with the FHLB of up to $17.3 billion at December 31, 2019, and had outstanding advances of $7.0 billion or 41% of total availability at that date. The level of borrowing capacity the Bank has with the FHLB of Pittsburgh is contingent upon the level of qualified collateral the Bank holds at a given time.

The Company would be required to obtain approvalconducts its securities and investment business activities through its subsidiaries SIS and SSLLC. SIS and SSLLC are registered broker-dealers with the SEC and members of FINRA. SIS’s activities include investment banking, institutional sales, trading and offering research reports of Latin American and European equity and fixed income securities. SIS, SSLLC and SAM are also registered investment advisers with the SEC, and BSI conducts certain securities transactions exempt from SEC registration on behalf of its clients.