UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q
(Mark One)
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2019


OR


oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period fromto
Commission file number 001-36129
ONEMAIN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware27-3379612
(State of Incorporation)(I.R.S. Employer Identification No.)
601 N.W. Second Street, Evansville, IN47708
(Address of principal executive offices)(Zip Code)
(812)
601 N.W. Second Street, Evansville, IN47708
(Address of principal executive offices) (Zip code)
(812) 424-8031
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $0.01 per shareOMFNew York Stock Exchange
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 þ No o


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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 þNo o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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
þ
Accelerated filer o
 
AcceleratedNon-accelerated filer o
 
Non-accelerated filer o
Smaller reporting company
 
Smaller reporting company o
Emerging growth companyo


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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareOMFNew York Stock Exchange LLC
At April 30,July 31, 2019, there were 136,093,799136,092,753 shares of the registrant’s common stock, $0.01 par value, outstanding.
 





TABLE OF CONTENTS
 
   
 
   
 
 
 
 
 
 
 
   
 
   
   




2



Table of Contents



GLOSSARY
Terms and abbreviations used in this report are defined below.
Term or Abbreviation Definition
   
2018 Annual Report on Form
10-K
 Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 15, 2019
30-89 Delinquency ratio net finance receivables 30-89 days past due as a percentage of net finance receivables
5.25% SFC Notes $700 million of 5.25% Senior Notes due 2019 issued by SFC on December 3, 2014 and guaranteed by OMH
6.00% SFC Notes due 2020$300 million of 6.00% Senior Notes due 2020 issued by SFC on May 29, 2013 and guaranteed by OMH
6.125% SFC Notes due 2024 $1.0 billion of 6.125% Senior Notes due 2024 issued by SFC on February 22, 2019 and guaranteed by OMH
6.625% SFC Notes due 2028$800 million of 6.625% Senior Notes due 2028 issued by SFC on May 9, 2019 and guaranteed by OMH
ABS asset-backed securities
Accretable yield the excess of the cash flows expected to be collected on the purchased credit impaired finance receivables over the discounted cash flows
Adjusted pretax income (loss) a non-GAAP financial measure used by management as a key performance measure of our segments
AHL American Health and Life Insurance Company, an insurance subsidiary of OMFH
AIG AIG Capital Corporation, a subsidiary of American International Group, Inc.
AIG Share Sale Transaction sale by SFH of 4,179,678 shares of OMH common stock pursuant to an Underwriting Agreement entered into February 21, 2018 among OMH, SFH and Morgan Stanley & Co. LLC
AOCI Accumulated other comprehensive income (loss)
Apollo Apollo Global Management, LLC and its consolidated subsidiaries
Apollo-Värde Group an investor group led by funds managed by Apollo and Värde
Apollo-Värde Transaction the purchase by the Apollo-Värde Group of 54,937,500 shares of OMH common stock from SFH pursuant to the Share Purchase Agreement for an aggregate purchase price of approximately $1.4 billion in cash on June 25, 2018
ASC Accounting Standards Codification
ASU Accounting Standards Update
Average daily debt balance average of debt for each day in the period
Average net receivables average of monthly average net finance receivables (net finance receivables at the beginning and end of each month divided by two) in the period
Blackstonecollectively, BTO Willow Holdings II, L.P. and Blackstone Family Tactical Opportunities Investment Partnership—NQ—ESC L.P.
BPSbasis points
CDO collateralized debt obligations
CitigroupCitiFinancial Credit Company
CMBS commercial mortgage-backed securities
Contribution On June 22, 2018, SFC entered into a Contribution Agreement with SFI, a wholly-owned subsidiary of OMH. Pursuant to the Contribution Agreement, Independence was contributed by SFI to SFC.
Exchange Act Securities Exchange Act of 1934, as amended
FASB Financial Accounting Standards Board
February 2019 Real Estate Loan Sale SFC and certain of its subsidiaries sold a portfolio of real estate loans with a carrying value of $16 million, classified in finance receivables held for sale, for aggregate cash proceeds of $19 million on February 5, 2019.
FICO score a credit score created by Fair Isaac Corporation
Fortress Fortress Investment Group LLC
Fortress Acquisition transaction by which FCFI Acquisition LLC, an affiliate of Fortress, acquired an 80% economic interest of the sole stockholder of SFC for a cash purchase price of $119 million, effective November 30, 2010
Fortress Transactionthe distributions by SFH to Fortress resulting from the Apollo-Värde Transaction
GAAP generally accepted accounting principles in the United States of America
Gross charge-off ratio annualized gross charge-offs as a percentage of average net receivables
Indenture the SFC Base Indenture, together with all subsequent Supplemental Indentures
Independence Independence Holdings, LLC
Indiana DOIIRS Indiana Department of Insurance
Investment Company ActInvestment Company Act of 1940Internal Revenue Service


3



Table of Contents



Term or Abbreviation Definition
   
IRSInternal Revenue Service
Junior Subordinated Debenture $350 million aggregate principal amount of 60-year junior subordinated debt issued by SFC under an indenture dated January 22, 2007, by and between SFC and Deutsche Bank Trust Company, as trustee, and guaranteed by OMH
LIBOR London Interbank Offered Rate
Merit Merit Life Insurance Co., an insurance subsidiary of SFC
Net charge-off ratio annualized net charge-offs as a percentage of average net receivables
Net interest income interest income less interest expense
ODART OneMain Direct Auto Receivables Trust
OMFIT OneMain Financial Issuance Trust
OMH OneMain Holdings, Inc.
OneMain OneMain Financial Holdings, LLC, collectively with its subsidiaries
OneMain Acquisition Acquisition of OneMain from CitiFinancial Credit Company, effective November 1, 2015
Other securities securities for which the fair value option was elected and equity securities. Other Securities recognize unrealized gains and losses in investment revenues
Other SFC Notes collectively, SFC’s 8.25% Senior Notes due 2023, and 7.75% Senior Notes due 2021, and 6.00% Senior Notes due 2020, on a senior unsecured basis, and the Junior Subordinated Debenture, on a junior subordinated basis, issued by SFC and guaranteed by OMH
PRSUsperformance-based RSUs
Recovery ratio annualized recoveries on net charge-offs as a percentage of average net receivables
Retail sales finance portfolio collectively, retail sales finance contracts and revolving retail accounts
RMBS residential mortgage-backed securities
RSAs restricted stock awards
RSUs restricted stock units
SEC U.S. Securities and Exchange Commission
Securities Act Securities Act of 1933, as amended
Segment Accounting Basis a basis used to report the operating results of our segments, which reflects our allocation methodologies for certain costs and excludes the impact of applying purchase accounting
Settlement Agreement a Settlement Agreement with the U.S. Department of Justice entered into by OMH and certain of its subsidiaries on November 13, 2015, in connection with the OneMain Acquisition
SFC Springleaf Finance Corporation
SFC Base Indenture Indenture, dated as of December 3, 2014
SFC Eighth Supplemental IndentureEighth Supplemental Indenture, dated as of May 9, 2019, to the SFC Base Indenture
SFC Guaranty Agreements agreements entered into on December 30, 2013 by OMH whereby it agreed to fully and unconditionally guarantee the payments of principal, premium (if any) and interest on the Other SFC Notes and the 6.00% Senior Notes due 2020, which were redeemed on April 15, 2019.
SFC Senior Notes Indentures


 the SFC Base Indenture as supplemented by the SFC First Supplemental Indenture, the SFC Second Supplemental Indenture, the SFC Third Supplemental Indenture, the SFC Fourth Supplemental Indenture, the SFC Fifth Supplemental Indenture, the SFC Sixth Supplemental Indenture, the SFC Seventh Supplemental Indenture, and the SFC SixthEighth Supplemental Indenture
SFC Seventh Supplemental Indenture Seventh Supplemental Indenture, dated as of February 22, 2019, to the SFC Base Indenture
SFH Springleaf Financial Holdings, LLC, an entity owned primarily by a private equity fund managed by an affiliate of Fortress that sold 54,937,500 shares of OMH’s common stock to the Apollo-Värde Group in the Apollo-Värde Transaction
SFI Springleaf Finance, Inc.
Share Purchase Agreement a share purchase agreement entered into on January 3, 2018, among the Apollo-Värde Group, SFH and the Company to acquire from SFH 54,937,500 shares of our common stock that was issued and outstanding as of such date, representing the entire holdings of our stock beneficially owned by Fortress
SLFT Springleaf Funding Trust
SpringCastle Interests Salethe March 31, 2016 sale by SpringCastle Holdings, LLC and Springleaf Acquisition Corporation of the equity interest in the SpringCastle Joint Venture
SpringCastle Joint Venture joint venture among SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC, and SpringCastle Acquisition LLC in which SpringCastle Holdings, LLC previously owned a 47% equity interest in each of SpringCastle America, LLC, SpringCastle Credit, LLC and SpringCastle Finance, LLC and Springleaf Acquisition Corporation previously owned a 47% equity interest in SpringCastle Acquisition LLC

4


Table of Contents


Term or AbbreviationDefinition
SpringCastle Portfolio loans acquired through the SpringCastle Joint Venture
Tax Act Public Law 115-97 amending the Internal Revenue Code of 1986

4


Table of Contents

Term or AbbreviationDefinition
TDR finance receivables 
troubled debt restructured finance receivables.Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower’s financial difficulties.
Triton Triton Insurance Company, an insurance subsidiary of OMFH
UPB unpaid principal balance for interest bearing accounts and the gross remaining contractual payments less the unaccreted balance of unearned finance charges for precompute accounts
Värde Värde Partners, Inc.
VIEs variable interest entities
Weighted average interest rate annualized interest expense as a percentage of average debt
Yield annualized finance charges as a percentage of average net receivables



5



Table of Contents


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.

ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
        
(dollars in millions, except par value amount) March 31,
2019
 December 31,
2018
 June 30,
2019
 December 31,
2018
        
Assets  
  
  
  
Cash and cash equivalents $1,709
 $679
 $786
 $679
Investment securities 1,743
 1,694
 1,721
 1,694
Net finance receivables (includes loans of consolidated VIEs of $9.1 billion in 2019 and $8.5 billion in 2018) 16,136
 16,164
Net finance receivables (includes loans of consolidated VIEs of $8.0 billion in 2019 and $8.5 billion in 2018) 16,980
 16,164
Unearned insurance premium and claim reserves (668) (662) (720) (662)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $430 million in 2019 and $444 million in 2018) (733) (731)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $369 million in 2019 and $444 million in 2018) (744) (731)
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses 14,735
 14,771
 15,516
 14,771
Finance receivables held for sale 78
 103
 74
 103
Restricted cash and restricted cash equivalents (include restricted cash and restricted cash equivalents of consolidated VIEs of $558 million in 2019 and $479 million in 2018) 575
 499
Restricted cash and restricted cash equivalents (include restricted cash and restricted cash equivalents of consolidated VIEs of $409 million in 2019 and $479 million in 2018) 420
 499
Goodwill 1,422
 1,422
 1,422
 1,422
Other intangible assets 372
 388
 362
 388
Other assets 724
 534
 716
 534
Total assets $21,358
 $20,090
 $21,017
 $20,090
Liabilities and Shareholders’ Equity  
  
  
  
Long-term debt (includes debt of consolidated VIEs of $8.1 billion in 2019 and $7.5 billion in 2018) $16,117
 $15,178
Long-term debt (includes debt of consolidated VIEs of $7.1 billion in 2019 and $7.5 billion in 2018) $15,551
 $15,178
Insurance claims and policyholder liabilities 642
 685
 648
 685
Deferred and accrued taxes 81
 45
 34
 45
Other liabilities (includes other liabilities of consolidated VIEs of $16 million in 2019 and $14 million in 2018) 568
 383
Other liabilities (includes other liabilities of consolidated VIEs of $13 million in 2019 and $14 million in 2018) 643
 383
Total liabilities 17,408
 16,291
 16,876
 16,291
Commitments and contingent liabilities (Note 13) 

 
 


 

        
Shareholders’ equity:  
  
  
  
Common stock, par value $.01 per share; 2,000,000,000 shares authorized, 136,082,463 and 135,832,278 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively 1
 1
Common stock, par value $.01 per share; 2,000,000,000 shares authorized, 136,089,417 and 135,832,278 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively 1
 1
Additional paid-in capital 1,682
 1,681
 1,683
 1,681
Accumulated other comprehensive loss (2) (34)
Accumulated other comprehensive income (loss) 28
 (34)
Retained earnings 2,269
 2,151
 2,429
 2,151
Total shareholders’ equity 3,950
 3,799
 4,141
 3,799
Total liabilities and shareholders’ equity $21,358
 $20,090
 $21,017
 $20,090


See Notes to the Condensed Consolidated Financial Statements.Statements (Unaudited).


6



Table of Contents



ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)

 Three Months Ended March 31, Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2019 2018 2019 2018 2019 2018
   
   
   
Interest income:            
Finance charges $953
 $859
 $998
 $902
 $1,950
 $1,761
Finance receivables held for sale 3
 3
 2
 3
 5
 6
Total interest income 956
 862
 1,000
 905
 1,955
 1,767
            
Interest expense 236
 200
 238
 220
 473
 420
            
Net interest income 720
 662
 762
 685
 1,482
 1,347
            
Provision for finance receivable losses 286
 254
 268
 260
 554
 514
            
Net interest income after provision for finance receivable losses 434
 408
 494
 425
 928
 833
            
Other revenues:  
  
  
  
  
  
Insurance 110
 105
 114
 107
 224
 212
Investment 26
 13
 24
 19
 50
 32
Net loss on repurchases and repayments of debt (21) (1) (12) (7) (33) (8)
Net gain on sale of real estate loans 3
 
 
 
 3
 
Other 30
 20
 30
 21
 60
 41
Total other revenues 148
 137
 156
 140
 304
 277
            
Other expenses:  
  
  
  
  
  
Salaries and benefits 199
 199
 204
 312
 404
 510
Other operating expenses 136
 133
 140
 159
 276
 293
Insurance policy benefits and claims 45
 45
 50
 51
 94
 96
Total other expenses 380
 377
 394
 522
 774
 899
            
Income before income taxes 202
 168
 256
 43
 458
 211
            
Income taxes 50
 44
 62
 36
 112
 80
            
Net income $152
 $124
 $194
 $7
 $346
 $131
            
Share Data:  
  
  
  
  
  
Weighted average number of shares outstanding:  
  
  
  
  
  
Basic 136,001,996
 135,596,279
 136,083,993
 135,678,914
 136,043,221
 135,637,825
Diluted 136,191,283
 135,897,296
 136,248,813
 135,969,045
 136,220,274
 135,933,399
Earnings per share:  
  
  
  
  
  
Basic $1.12
 $0.91
 $1.43
 $0.05
 $2.54
 $0.96
Diluted $1.11
 $0.91
 $1.42
 $0.05
 $2.54
 $0.96


See Notes to the Condensed Consolidated Financial Statements.Statements (Unaudited).


7



Table of Contents



ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)


 Three Months Ended March 31, Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018 2019 2018
            
Net income $152
 $124
 $194
 $7
 $346
 $131
            
Other comprehensive income (loss):  
  
  
  
  
  
Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities 39
 (24) 36
 (13) 75
 (37)
Foreign currency translation adjustments 2
 (3) 2
 (2) 5
 (5)
Income tax effect:  
  
  
  
  
  
Net unrealized gains (losses) on non-credit impaired available-for-sale securities (9) 4
 (8) 3
 (17) 7
Retirement plan liability adjustments 
 2
 
 2
Foreign currency translation adjustments 
 (1) (1) (1)
Other comprehensive income (loss), net of tax 32
 (23) 30
 (11) 62
 (34)
            
Comprehensive income $184
 $101
Comprehensive income (loss) $224
 $(4) $408
 $97


See Notes to the Condensed Consolidated Financial Statements.Statements (Unaudited).




8



Table of Contents



ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(dollars in millions) 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other Comprehensive
Income (Loss)
 
Retained
Earnings
 Total Shareholders’ Equity 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other Comprehensive
Income (Loss)
 
Retained
Earnings
 Total Shareholders’ Equity
          
Balance, April 1, 2019 $1
 $1,682
 $(2) $2,269
 $3,950
Share-based compensation expense, net of forfeitures 
 1
 
 
 1
Other comprehensive income 
 
 30
 
 30
Cash dividends * 
 
 
 (34) (34)
Net income 
 
 
 194
 194
Balance, June 30, 2019 $1
 $1,683
 $28
 $2,429
 $4,141
          
Balance, April 1, 2018 $1
 $1,563
 $(12) $1,830
 $3,382
Non-cash incentive compensation from SFH 
 106
 
 
 106
Share-based compensation expense, net of forfeitures 
 8
 
 
 8
Withholding tax on share-based compensation 
 (3) 
 
 (3)
Other comprehensive loss 
 
 (11) 
 (11)
Impact of AOCI reclassification due to the Tax Act 
 
 2
 (2) 
Net income 
 
 
 7
 7
Balance, June 30, 2018 $1
 $1,674
 $(21) $1,835
 $3,489
                    
Balance, January 1, 2019 $1
 $1,681
 $(34) $2,151
 $3,799
 $1
 $1,681
 $(34) $2,151
 $3,799
Share-based compensation expense, net of forfeitures 
 6
 
 
 6
 
 7
 
 
 7
Withholding tax on share-based compensation 
 (5) 
 
 (5) 
 (5) 
 
 (5)
Other comprehensive income 
 
 32
 
 32
 
 
 62
 
 62
Cash Dividends * 
 
 
 (34) (34)
Cash dividends * 
 
 
 (68) (68)
Net income 
 
 
 152
 152
 
 
 
 346
 346
Balance, March 31, 2019 $1
 $1,682
 $(2) $2,269
 $3,950
Balance, June 30, 2019 $1
 $1,683
 $28
 $2,429
 $4,141
                    
Balance, January 1, 2018 $1
 $1,560
 $11
 $1,706
 $3,278
 $1
 $1,560
 $11
 $1,706
 $3,278
Non-cash incentive compensation from SFH 
 4
 
 
 4
 
 110
 
 
 110
Share-based compensation expense, net of forfeitures 
 5
 
 
 5
 
 13
 
 
 13
Withholding tax on share-based compensation 
 (6) 
 
 (6) 
 (9) 
 
 (9)
Other comprehensive loss 
 
 (23) 
 (23) 
 
 (34) 
 (34)
Impact of AOCI reclassification due to the Tax Act 
 
 2
 (2) 
Net income 
 
 
 124
 124
 
 
 
 131
 131
Balance, March 31, 2018 $1
 $1,563
 $(12) $1,830
 $3,382
Balance, June 30, 2018 $1
 $1,674
 $(21) $1,835
 $3,489
                                      
* Cash dividends declared and paid were $0.25 per share in the first quarterand second quarters of 2019 and no dividends were declared in 2018.2019.



See Notes to the Condensed Consolidated Financial Statements.Statements (Unaudited).




9



Table of Contents



ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollars in millions) Three Months Ended March 31, Six Months Ended June 30,
2019 2018 2019 2018
        
Cash flows from operating activities  
  
  
  
Net income $152
 $124
 $346
 $131
Reconciling adjustments:  
  
  
  
Provision for finance receivable losses 286
 254
 554
 514
Depreciation and amortization 68
 67
 138
 131
Deferred income tax charge (benefit) 9
 11
Deferred income tax charge 21
 7
Net loss on repurchases and repayments of debt 21
 1
 33
 8
Non-cash incentive compensation from SFH 
 4
 
 110
Share-based compensation expense, net of forfeitures 6
 5
 7
 13
Other (11) 6
 (10) 8
Cash flows due to changes in other assets and other liabilities 17
 83
 56
 22
Net cash provided by operating activities 548
 555
 1,145
 944
        
Cash flows from investing activities  
  
  
  
Net principal originations of finance receivables held for investment and held for sale (290) (333) (1,400) (1,116)
Proceeds on sales of finance receivables held for sale originated as held for investment 19
 
 19
 
Available-for-sale securities purchased (154) (197) (317) (394)
Available-for-sale securities called, sold, and matured 103
 156
 336
 280
Trading and other securities called, sold, and matured 5
 8
Other securities purchased (5) (6)
Other securities called, sold, and matured 15
 20
Other, net 12
 (15) 5
 (24)
Net cash used for investing activities (305) (381) (1,347) (1,240)
        
Cash flows from financing activities  
  
  
  
Proceeds from issuance of long-term debt, net of commissions 2,327
 2,805
 3,159
 3,739
Repayment of long-term debt (1,425) (1,972) (2,856) (3,776)
Dividends (34) 
 (68) 
Withholding tax on share-based compensation (5) (6) (5) (9)
Net cash provided by financing activities 863
 827
Net cash provided by (used for) financing activities 230
 (46)
        
Net change in cash and cash equivalents and restricted cash and restricted cash equivalents 1,106
 1,001
 28
 (342)
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period 1,178
 1,485
 1,178
 1,485
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period $2,284
 $2,486
 $1,206
 $1,143
        
Supplemental cash flow information        
Cash and cash equivalents $1,709
 $1,807
 $786
 $556
Restricted cash and restricted cash equivalents 575
 679
 420
 587
Total cash and cash equivalents and restricted cash and restricted cash equivalents $2,284
 $2,486
 $1,206
 $1,143
        
Cash paid for amounts included in the measurement of operating lease liabilities $15
 $
 $29
 $
Supplemental non-cash activities        
Transfer of finance receivables to real estate owned $2
 $3
Right-of-use assets obtained in exchange for operating lease obligations $173
 $
 177
 
Net unsettled investment security purchases (2) (5) (20) (1)


Restricted cash and restricted cash equivalents primarily represent funds required to be used for future debt payments relating to our securitization transactions and escrow deposits.


See Notes to the Condensed Consolidated Financial Statements.Statements (Unaudited).


10



Table of Contents



ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
March 31,June 30, 2019
1. Business and Basis of Presentation


OneMain Holdings, Inc. is referred to in this report as “OMH” or, collectively with its subsidiaries, whether directly or indirectly owned, the “Company,” “we,” “us,” or “our.” OMH is a Delaware corporation.


OMH is a financial services holding company whose principal subsidiary is Springleaf Finance, Inc. (“SFI”). SFI’s principal subsidiary is Springleaf Finance Corporation (“SFC”). On June 22, 2018, SFI entered into a contribution agreement with OMH, whereby OMH contributed all of the common interests of whose principal subsidiary is Independence Holdings, LLC (“Independence”) to SFI. Immediately thereafter, SFI entered into a separate contribution agreement with SFC, pursuant to which SFI contributed all of the common interests of Independence to SFC. As a result of the contribution from SFI to SFC, Independence became a wholly owned direct subsidiary of SFC on June 22, 2018.. Independence, through its wholly owned subsidiary OneMain Financial Holdings, LLC (“OMFH”) and OMFH’s subsidiaries, and SFC engage in the consumer finance and insurance businesses.


At June 30, 2019, the Apollo-Värde Transaction

On January 3, 2018, an investor group led by funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) and Värde Partners, Inc. (“Värde” and together with Apollo, collectively, the “Apollo-Värde Group”) entered into a Share Purchase Agreement with SFH and the Company to acquire from SFH 54,937,500 sharesGroup owned approximately 40.4% of OMH’s common stock, par value $0.01 per share, at a purchase price per sharestock.

2018 Share Sale Transactions

As disclosed in Note 21 of $26.00, representing the entire holdingsNotes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K, certain executives of our stock beneficially owned by a private equity fund managed by an affiliatethe Company had previously been granted incentive units that only provided benefits (in the form of Fortress Investment Group LLC (“Fortress”). This transaction closed on June 25, 2018 for an aggregate purchase pricedistributions) if SFH made distributions to one or more of approximately $1.4 billion in cash (the “Apollo-Värde Transaction”).its common members that exceeded specified threshold amounts. In connection with the distributions by SFH to Fortress (the “Fortress Transaction”) resulting from  the Apollo-Värde Transaction described in Note 2 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K, certain executive officers who arewere holders of SFH incentive units received a distribution of approximately $106 million in the aggregate from SFH in the second quarter of 2018 as a result of their ownership interests in SFH. Although the distribution was not made by the Company or its subsidiaries, in accordance with ASC Topic 710, Compensation-General, we recorded non-cash incentive compensation expense of approximately $106 million, with an equal and offsetting increase to additional paid-in-capital. The impact to the Company was non-cash, equity neutral and not tax deductible.


AIG Share Sale Transaction

On February 21, 2018, the Company, SFH and Morgan Stanley & Co. LLC as underwriter entered into an underwriting agreementIn addition, in connection with the saledistributions by SFH to AIG resulting from the AIG Transaction described in Note 2 of 4,179,678 shares ofthe Notes to the Consolidated Financial Statements in Part II - Item 8 included in our common stock. These shares were beneficially owned by AIG Capital Corporation (“AIG”), a subsidiary of American International Group, Inc., and represented the entire holdings of our stock beneficially owned by AIG. In connection with this sale of our common stock by SFH, certain2018 Annual Report on Form 10-K, these same executive officers who held SFHholding the incentive units as described above, received a distribution of approximately $4 million in the first quarteraggregate from SFH in respect of 2018.their incentive interests in SFH. Consistent with the accounting for the distribution from the Apollo-VärdeFortress Transaction, described above, the Company recognizedwe recorded non-cash incentive compensation expense of approximately $4 million, with an equal and offsetting increase to additional paid-in-capital. Again, the impact to the Company was non-cash, equity neutral, and not tax deductible.

At March 31, 2019, the Apollo-Värde Group owned approximately 40.4% of OMH’s common stock.


BASIS OF PRESENTATION


We prepared our condensed consolidated financial statements using GAAP.generally accepted accounting principles in the United States of America (“GAAP”). These statements are unaudited. The year-end condensed balance sheet data was derived from our audited financial statements but does not include all disclosures required by GAAP. The statements include the accounts of OMH, its subsidiaries (all of which are wholly owned), and VIEs in which we hold a controlling financial interest and for which we are considered to be the primary beneficiary as of the financial statement date.


We eliminated all material intercompany accounts and transactions. We made judgments, estimates, and assumptions that affect amounts reported in our condensed consolidated financial statements and disclosures of contingent assets and liabilities. In management’s opinion, the condensed consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of results. Actual results could differ from our estimates. We evaluated the effects of and the need to disclose events that occurred subsequent to the balance sheet date. To conform to the 2019 presentation, we have reclassified certain items in prior periods of our condensed consolidated financial statements.

11


Table of Contents



The condensed consolidated financial statements in this report should be read in conjunction with the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K. We follow the same significant accounting policies for our interim reporting, except for the new accounting pronouncements subsequently adopted and disclosed in Note 2 below.

11


Table of Contents


2. Recent Accounting Pronouncements


ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED


Leases


In February of 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize a right-of-use asset and a liability for the obligation to make payments on leases with terms greater than 12 months and to disclose information related to the amount, timing and uncertainty of cash flows arising from leases, including various qualitative and quantitative requirements. Management has reviewed this update and other ASUs that were subsequently issued to further clarify the implementation guidance outlined in ASU 2016-02. We adopted the amendments of these ASUs as of January 1, 2019. See Note 13 for additional information on the adoption of ASU 2016-02.


ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED


Financial Instruments - Credit Losses


In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which significantly changes the way that entities will be required to measure credit losses. The new standard requires that the estimated credit loss be based upon an “expected credit loss” approach rather than the “incurred loss” approach currently required. The new approach will require entities to measure all expected credit losses for financial assets over their expected lives based on historical experience, current conditions, and reasonable forecasts of collectability. It is anticipated that the expected credit loss model will require earlier recognition of credit losses than the incurred loss approach. Therefore, weWe would expect ongoing changes in the allowance for finance receivable losses will be driven primarily by the nature and growth of the Company’s loan portfolio and the economic environment at that time.

The ASU requires that credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination and that are measured at amortized cost basis bedetermined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price of the financial asset rather than being reported as a credit loss expense. Subsequent changes in the allowance for credit losses are recorded in earnings. Interest income should be recognized based on the effective rate, excluding the discount embedded in the purchase price attributable to expected credit losses at acquisition.


The ASU also requiresmodifies the other-than-temporary impairment model for available-for-sale debt securities by requiring companies to record allowancesan allowance for held-to-maturity and available-for-sale debt securitiescredit impairment rather than write-downs of such assets.


In addition, the ASU requires qualitative and quantitative disclosures that provide information about the allowance and the significant factors that influenced management’s estimate of the allowance.


The ASU will become effective for the Company for fiscal years beginning January 1, 2020. Early adoption is permitted for fiscal years beginning January 1, 2019.

The Company’s cross-functional implementation team continues to make progress in line with the established project plan to ensure we comply with all updates from this ASU at the time of adoption. The Company has performed limited parallel testing and expects to perform more comprehensive testing in the third quarter of 2019. We continue to refine the development of an acceptableour model to estimate the expected credit losses as well as develop the necessary changes to our processes and internal controls in accordanceorder to comply with this ASU. As we finalize the impact on our model governance policies. The Company has started the parallel testing phase in 2019. The Companyconsolidated financial statements and related disclosures, we will provide further disclosure regarding the estimated impact on our allowance for finance receivable losseslosses. The Company’s implementation team has also been working with our investment advisor to develop a new process to comply with this ASU as the parallel testing phase is enhanced with additional levels of governance and review. In additionit relates to the development of the model, we are assessing the additional disclosure requirements from this updateavailable-for-sale debt securities and the impact the adoption may have on any available-for-sale securities held by the Company. related disclosure requirements.

We believe the adoption of this ASU will have a material effect on our consolidated financial statements through an increase to the allowance for finance receivable losses, an increase to deferred tax assets, and a corresponding one-time cumulative reduction to retained earnings, net of tax, in the consolidated balance sheet as of the beginning of the year of adoption. The actual impact will depend on the characteristics of our finance receivables, current economic conditions, as well as our economic and loss forecasts at the time of adoption.




12



Table of Contents



Insurance


In August of 2018, the FASB issued ASU 2018-12, Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, which provides targeted improvements to Topic 944 for the assumptions used to measure the liability for future policy benefits for nonparticipating traditional and limited-payment contracts; measurement of market risk benefits; amortization of deferred acquisition costs; and enhanced disclosures. The amendments in this ASU become effective for fiscal years beginning January 1, 2021. In July of 2019, the FASB announced the proposal of a one-year deferral of this ASU to become effective for fiscal years beginning January 1, 2022. We have established a cross-functional implementation team and a project plan to ensure we comply with all the amendments in this ASU at the time of adoption. We are currentlycontinue to make progress in evaluating the potential impact of the adoption of the ASU on our consolidated financial statements.


We do not believe that any other accounting pronouncements issued during the threesix months ended March 31,June 30, 2019, but not yet effective, would have a material impact on our consolidated financial statements or disclosures, if adopted.

3. Finance Receivables


Our finance receivables consist of personal loans, which are non-revolving, with a fixed-rate, a fixed term of three to six years, and are secured by automobiles, other titled collateral, or are unsecured. Prior to September 30, 2018, our finance receivables also included other receivables, which consist of our liquidating loan portfolios: real estate loans, retail sales finance contracts, and revolving retail accounts. We continue to service or sub-service liquidating real estate loans and retail sales finance contracts. Effective September 30, 2018, our real estate loans were transferred from held for investment to held for sale. See Notes 5, 6 and 7 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for more information about Other Receivables.
 
Net finance receivables consist of our total portfolio of personal loans. Components of our personal loans were as follows:
(dollars in millions) March 31,
2019
 December 31,
2018
 June 30,
2019
 December 31,
2018
        
Gross receivables * $15,968
 $15,978
 $16,808
 $15,978
Unearned points and fees (202) (201) (218) (201)
Accrued finance charges 240
 253
 254
 253
Deferred origination costs 130
 134
 136
 134
Total $16,136
 $16,164
 $16,980
 $16,164
                                      
*Gross receivables equal the UPB except for the following:
Finance receivables purchased as a performing receivable — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase to reflect the finance receivable balance at its initial fair value; and
Purchased credit impaired finance receivables — gross receivables equal the remaining estimated cash flows less the current balance of accretable yield on the purchased credit impaired accounts.
Finance receivables purchased as a performing receivable — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase to reflect the finance receivable balance at its initial fair value; and
Purchased credit impaired finance receivables — gross receivables equal the remaining estimated cash flows less the current balance of accretable yield on the purchased credit impaired accounts.


At March 31,June 30, 2019 and December 31, 2018, unused lines of credit extended to customers by the Company were immaterial.


CREDIT QUALITY INDICATOR


We consider the value of the collateral, the concentration of secured loans, and the delinquency status of our finance receivables as our primary credit quality indicators. At March 31,June 30, 2019 and December 31, 2018, 49%50% and 48% of our personal loans were secured by titled collateral, respectively. We monitor delinquency trends to manage our exposure to credit risk. When finance receivables are 60 days contractually past due, we consider these accounts to be at an increased risk for loss and we transfer collection of these accounts to our centralized operations. At 90 days or more contractually past due, we consider our finance receivables to be nonperforming.



13



Table of Contents



The following is a summary of our personal loans held for investment by number of days delinquent:
(dollars in millions) June 30,
2019
 December 31,
2018
     
Performing    
Current $16,325
 $15,411
30-59 days past due 220
 229
60-89 days past due 144
 161
Total performing 16,689
 15,801
Nonperforming    
90-179 days past due 284
 355
180 days or more past due 7
 8
Total nonperforming 291
 363
Total $16,980
 $16,164

(dollars in millions) March 31,
2019
 December 31,
2018
     
Performing    
Current $15,489
 $15,411
30-59 days past due 179
 229
60-89 days past due 133
 161
Total performing 15,801
 15,801
Nonperforming    
90-179 days past due 327
 355
180 days or more past due 8
 8
Total nonperforming 335
 363
Total $16,136
 $16,164


PURCHASED CREDIT IMPAIRED FINANCE RECEIVABLES


Our purchased credit impaired finance receivables consist of personal loans held for investment and real estate loans held for sale purchased in connection with the OneMain Acquisition and the Fortress Acquisition, respectively.


We report the carrying amount of our purchased credit impaired personal loans in net finance receivables, less allowance for finance receivable losses, and our purchased credit impaired real estate loans in finance receivables held for sale as discussed below.


At March 31,June 30, 2019 and December 31, 2018, finance receivables held for sale totaled $78$74 million and $103 million, respectively, which include purchased credit impaired real estate loans, as well as TDR real estate loans. See Note 5 for further information on our finance receivables held for sale.


Information regarding our purchased credit impaired finance receivables were as follows:
(dollars in millions) March 31,
2019
 December 31,
2018
 June 30,
2019
 December 31,
2018
        
Personal Loans        
Carrying amount, net of allowance $73
 $89
 $58
 $89
Outstanding balance (a) 116
 135
 100
 135
Allowance for purchased credit impaired finance receivable losses (b) 
 
 
 
        
Real Estate Loans - Held for Sale        
Carrying amount $22
 $28
 $21
 $28
Outstanding balance (a) 39
 48
 38
 48
                                      
(a)Outstanding balance is defined as UPB of the loans with a net carrying amount.
(b)The allowance for purchased credit impaired finance receivable losses reflects the carrying value of the purchased credit impaired loans held for investment exceeding the present value of the expected cash flows. As indicated above, no allowance was required as of March 31,June 30, 2019 or December 31, 2018.




14



Table of Contents



Changes in accretable yield for purchased credit impaired finance receivables were as follows:
 Three Months Ended March 31, Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018 2019 2018
            
Personal Loans            
Balance at beginning of period $39
 $47
 $34
 $49
 $39
 $47
Accretion (5) (6) (4) (8) (9) (14)
Reclassifications from nonaccretable difference (a) 
 8
Reclassifications from nonaccretable difference * 16
 11
 16
 19
Balance at end of period $34
 $49
 $46
 $52
 $46
 $52
            
Real Estate Loans - Held for Sale            
Balance at beginning of period $27
 $53
 $23
 $52
 $27
 $53
Accretion (1) (1) 
 (1) (1) (2)
Transfer due to finance receivables sold (3) 
 
 
 (3) 
Balance at end of period $23
 $52
 $23
 $51
 $23
 $51
                               
(a)*Reclassifications from nonaccretable difference represents the increases in accretable yield resulting from higher estimated undiscounted cash flows.


TDR FINANCE RECEIVABLES


Information regarding TDR finance receivables were as follows:
(dollars in millions) March 31,
2019
 December 31,
2018
 June 30,
2019
 December 31,
2018
    
    
Personal Loans    
    
TDR gross receivables (a) $499
 $450
 $546
 $450
TDR net receivables (b) 502
 453
 549
 453
Allowance for TDR finance receivable losses 196
 170
 227
 170
        
Real Estate Loans - Held for Sale        
TDR gross receivables (a) $58
 $89
 $56
 $89
TDR net receivables (b) 58
 75
 57
 75
(a)
TDR gross receivables — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase if previously purchased as a performing receivable.
(b)
TDR net receivables — TDR gross receivables net of unearned points and fees, accrued finance charges, and deferred origination costs and any impairment for real estate loans held for sale.costs.


As of March 31,June 30, 2019, we had no commitments to lend additional funds on our TDR finance receivables.




15



Table of Contents



TDR average net receivables held for investment and held for sale and finance charges recognized on TDR finance receivables held for investment and held for sale were as follows:
(dollars in millions) 
Personal
Loans
 Other Receivables * Total 
Personal
Loans
 Other Receivables * Total
            
Three Months Ended March 31, 2019      
Three Months Ended June 30, 2019      
TDR average net receivables $477
 $64
 $541
 $527
 $58
 $585
TDR finance charges recognized 12
 1
 13
 12
 1
 13
            
Three Months Ended March 31, 2018      
Three Months Ended June 30, 2018      
TDR average net receivables $337
 $139
 $476
 $367
 $137
 $504
TDR finance charges recognized 11
 2
 13
 11
 2
 13
      
Six Months Ended June 30, 2019      
TDR average net receivables $502
 $61
 $563
TDR finance charges recognized 23
 2
 25
      
Six Months Ended June 30, 2018      
TDR average net receivables $352
 $138
 $490
TDR finance charges recognized 22
 4
 26
                                          
* Other Receivables held for sale included in the table above consist of real estate loans and were as follows:
  Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018
         
TDR average net receivables $58
 $88
 $61
 $89
TDR finance charges recognized 1
 2
 2
 3

  Three Months Ended March 31,
(dollars in millions) 2019 2018
     
TDR average net receivables $64
 $90
TDR finance charges recognized 1
 1


Information regarding the new volume of the TDR finance receivables held for investment, consisting of personal loans, are reflected in the following table. New volume of TDR other receivables are not included in the table below as they were immaterial for the three months ended March 31, 2019 and 2018.
  Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018
         
Personal Loans        
Pre-modification TDR net finance receivables $124
 $84
 $244
 $179
Post-modification TDR net finance receivables:        
Rate reduction $85
 $63
 $170
 $132
Other * 39
 21
 74
 47
Total post-modification TDR net finance receivables $124
 $84
 $244
 $179
Number of TDR accounts 18,307
 12,778
 36,813
 27,508

  Three Months Ended March 31,
(dollars in millions) 2019 2018
     
Personal Loans    
Pre-modification TDR net finance receivables $120
 $94
Post-modification TDR net finance receivables:    
Rate reduction $85
 $70
Other * 35
 24
Total post-modification TDR net finance receivables $120
 $94
Number of TDR accounts 18,506
 14,730
*“Other” modifications primarily include potential principal and interest forgiveness contingent on future payment performance by the
borrower under the modified terms.


New volume of TDR other receivables for the three and six months ended June 30, 2019 and 2018 are not included in the table above as they were immaterial.


16


Table of Contents


Personal loans held for investment that were modified as TDR finance receivables within the previous 12 months and for which there was a default during the period to cause the TDR finance receivables to be considered nonperforming (90 days or more past due) were as follows:are reflected in the following table.
  Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018
         
Personal Loans        
TDR net finance receivables * $21
 $18
 $40
 $35
Number of TDR accounts 3,171
 2,622
 6,096
 5,341
  Three Months Ended March 31,
(dollars in millions) 2019 2018
     
Personal Loans    
TDR net finance receivables * $19
 $18
Number of TDR accounts 2,925
 2,719

                                      
*Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted.


TDR other receivables for the three and six months ended March 31,June 30, 2019 and 2018 that defaulted during the previous 12-month
period were immaterial.


16


Table of Contents

4. Allowance for Finance Receivable Losses


Changes in the allowance for finance receivable losses by finance receivable type were as follows:
(dollars in millions) Personal
Loans
 
Other
Receivables
 Total
       
Three Months Ended June 30, 2019  
  
  
Balance at beginning of period $733
 $
 $733
Provision for finance receivable losses 268
 
 268
Charge-offs (290) 
 (290)
Recoveries 33
 
 33
Balance at end of period $744
 $
 $744
       
Three Months Ended June 30, 2018  
  
  
Balance at beginning of period $665
 $24
 $689
Provision for finance receivable losses 261
 (1) 260
Charge-offs (278) 
 (278)
Recoveries 30
 1
 31
Balance at end of period $678
 $24
 $702
       
Six Months Ended June 30, 2019      
Balance at beginning of period $731
 $
 $731
Provision for finance receivable losses 554
 
 554
Charge-offs (601) 
 (601)
Recoveries 60
 
 60
Balance at end of period $744
 $
 $744
       
Six Months Ended June 30, 2018      
Balance at beginning of period $673
 $24
 $697
Provision for finance receivable losses 515
 (1) 514
Charge-offs (567) (1) (568)
Recoveries 57
 2
 59
Balance at end of period $678
 $24
 $702


17


Table of Contents

(dollars in millions) Personal
Loans
 
Other
Receivables
 Total
       
Three Months Ended March 31, 2019  
  
  
Balance at beginning of period $731
 $
 $731
Provision for finance receivable losses 286
 
 286
Charge-offs (311) 
 (311)
Recoveries 27
 
 27
Balance at end of period $733
 $
 $733
       
Three Months Ended March 31, 2018  
  
  
Balance at beginning of period $673
 $24
 $697
Provision for finance receivable losses 254
 
 254
Charge-offs (289) (1) (290)
Recoveries 27
 1
 28
Balance at end of period $665
 $24
 $689


The allowance for finance receivable losses and net finance receivables by impairment method were as follows:
(dollars in millions) June 30,
2019
 December 31,
2018
     
Allowance for finance receivable losses:    
Collectively evaluated for impairment $517
 $561
Purchased credit impaired finance receivables 
 
TDR finance receivables 227
 170
Total $744
 $731
     
Finance receivables:    
Collectively evaluated for impairment $16,373
 $15,622
Purchased credit impaired finance receivables 58
 89
TDR finance receivables 549
 453
Total $16,980
 $16,164
     
Allowance for finance receivable losses as a percentage of finance receivables 4.38% 4.52%

(dollars in millions) March 31,
2019
 December 31,
2018
     
Allowance for finance receivable losses:    
Collectively evaluated for impairment $537
 $561
Purchased credit impaired finance receivables 
 
TDR finance receivables 196
 170
Total $733
 $731
     
Finance receivables:    
Collectively evaluated for impairment $15,561
 $15,622
Purchased credit impaired finance receivables 73
 89
TDR finance receivables 502
 453
Total $16,136
 $16,164
     
Allowance for finance receivable losses as a percentage of finance receivables 4.54% 4.52%


17


Table of Contents

5. Finance Receivables Held for Sale


We reported finance receivables held for sale of $78$74 million at March 31,June 30, 2019 and $103 million at December 31, 2018, which consist entirely of real estate loans and are carried at the lower of cost or fair value, applied on an aggregate basis.

In February 2019, we sold a portfolio of real estate loans with a carrying value of $16 million for aggregate cash proceeds of $19 million and recorded a net gain in other revenues of $3 million (“February 2019 Real Estate Loan Sale”). After the recognition of the February 2019 Real Estate Loan Sale, the carrying value of the remaining loans classified in finance receivables held for sale exceeded their fair value and, accordingly, we marked the remaining loans to fair value and recorded an impairment in other revenue of $3 million.

At March 31,June 30, 2019, the carrying value of our finance receivables held for sale was not impaired.

We did not have any other material transfers to or from finance receivables held for sale during the three and six months ended March 31,June 30, 2019 and 2018.



18


Table of Contents


6. Investment Securities


AVAILABLE-FOR-SALE SECURITIES


Cost/amortized cost, unrealized gains and losses, and fair value of fixed maturity available-for-sale securities by type were as follows:
(dollars in millions) 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
         
June 30, 2019  
  
  
  
Fixed maturity available-for-sale securities:  
  
  
  
U.S. government and government sponsored entities $10
 $
 $
 $10
Obligations of states, municipalities, and political subdivisions 72
 1
 
 73
Certificates of deposit and commercial paper 73
 
 
 73
Non-U.S. government and government sponsored entities 141
 4
 
 145
Corporate debt 1,029
 32
 (1) 1,060
Mortgage-backed, asset-backed, and collateralized:  
  
  
  
RMBS 118
 2
 
 120
CMBS 67
 
 
 67
CDO/ABS 88
 2
 
 90
Total $1,598
 $41
 $(1) $1,638
         
December 31, 2018  
  
  
  
Fixed maturity available-for-sale securities:  
  
  
  
U.S. government and government sponsored entities $21
 $
 $
 $21
Obligations of states, municipalities, and political subdivisions 91
 
 (1) 90
Certificates of deposit and commercial paper 63
 
 
 63
Non-U.S. government and government sponsored entities 145
 
 (2) 143
Corporate debt 1,027
 2
 (32) 997
Mortgage-backed, asset-backed, and collateralized:  
  
  
  
RMBS 130
 
 (2) 128
CMBS 72
 
 (1) 71
CDO/ABS 94
 1
 (1) 94
Total $1,643
 $3
 $(39) $1,607

(dollars in millions) 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
         
March 31, 2019  
  
  
  
Fixed maturity available-for-sale securities:  
  
  
  
U.S. government and government sponsored entities $17
 $
 $
 $17
Obligations of states, municipalities, and political subdivisions 87
 
 
 87
Certificates of deposit and commercial paper 59
 
 
 59
Non-U.S. government and government sponsored entities 143
 2
 
 145
Corporate debt 1,056
 13
 (10) 1,059
Mortgage-backed, asset-backed, and collateralized:  
  
  
  
RMBS 141
 1
 (1) 141
CMBS 67
 
 (1) 66
CDO/ABS 82
 1
 
 83
Total $1,652
 $17
 $(12) $1,657
         
December 31, 2018  
  
  
  
Fixed maturity available-for-sale securities:  
  
  
  
U.S. government and government sponsored entities $21
 $
 $
 $21
Obligations of states, municipalities, and political subdivisions 91
 
 (1) 90
Certificates of deposit and commercial paper 63
 
 
 63
Non-U.S. government and government sponsored entities 145
 
 (2) 143
Corporate debt 1,027
 2
 (32) 997
Mortgage-backed, asset-backed, and collateralized:  
  
  
  
RMBS 130
 
 (2) 128
CMBS 72
 
 (1) 71
CDO/ABS 94
 1
 (1) 94
Total $1,643
 $3
 $(39) $1,607




1819



Table of Contents



Fair value and unrealized losses on available-for-sale securities by type and length of time in a continuous unrealized loss position were as follows:
  Less Than 12 Months 12 Months or Longer Total
(dollars in millions) 
Fair
Value
 Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
             
June 30, 2019  
  
  
  
  
  
U.S. government and government sponsored entities $
 $
 $3
 $
 $3
 $
Obligations of states, municipalities, and political subdivisions 
 
 9
 
 9
 
Non-U.S. government and government sponsored entities 7
 
 26
 
 33
 
Corporate debt 40
 
 65
 (1) 105
 (1)
Mortgage-backed, asset-backed, and collateralized:            
RMBS 
 
 24
 
 24
 
CMBS 3
 
 19
 
 22
 
CDO/ABS 12
 
 6
 
 18
 
Total $62
 $
 $152
 $(1) $214
 $(1)
             
December 31, 2018  
  
  
  
  
  
U.S. government and government sponsored entities $3
 $
 $16
 $
 $19
 $
Obligations of states, municipalities, and political subdivisions 10
 
 57
 (1) 67
 (1)
Non-U.S. government and government sponsored entities 19
 (1) 97
 (1) 116
 (2)
Corporate debt 377
 (14) 448
 (18) 825
 (32)
Mortgage-backed, asset-backed, and collateralized:            
RMBS 23
 
 78
 (2) 101
 (2)
CMBS 10
 
 54
 (1) 64
 (1)
CDO/ABS 18
 
 33
 (1) 51
 (1)
Total $460
 $(15) $783
 $(24) $1,243
 $(39)

  Less Than 12 Months 12 Months or Longer Total
(dollars in millions) 
Fair
Value
 Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
             
March 31, 2019  
  
  
  
  
  
U.S. government and government sponsored entities $
 $
 $17
 $
 $17
 $
Obligations of states, municipalities, and political subdivisions 5
 
 38
 
 43
 
Non-U.S. government and government sponsored entities 1
 
 45
 
 46
 
Corporate debt 63
 (1) 416
 (9) 479
 (10)
Mortgage-backed, asset-backed, and collateralized:            
RMBS 10
 
 63
 (1) 73
 (1)
CMBS 3
 
 42
 (1) 45
 (1)
CDO/ABS 3
 
 30
 
 33
 
Total $85
 $(1) $651
 $(11) $736
 $(12)
             
December 31, 2018  
  
  
  
  
  
U.S. government and government sponsored entities $3
 $
 $16
 $
 $19
 $
Obligations of states, municipalities, and political subdivisions 10
 
 57
 (1) 67
 (1)
Non-U.S. government and government sponsored entities 19
 (1) 97
 (1) 116
 (2)
Corporate debt 377
 (14) 448
 (18) 825
 (32)
Mortgage-backed, asset-backed, and collateralized:            
RMBS 23
 
 78
 (2) 101
 (2)
CMBS 10
 
 54
 (1) 64
 (1)
CDO/ABS 18
 
 33
 (1) 51
 (1)
Total $460
 $(15) $783
 $(24) $1,243
 $(39)


On a lot basis, we had 1,031469 and 1,767 investment securities in an unrealized loss position at March 31,June 30, 2019 and December 31, 2018, respectively. We do not consider the unrealized losses to be credit-related as these unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase. Additionally, at March 31,June 30, 2019, other-than-temporary impairments on investment securities that we intend to sell were immaterial. We do not have plans to sell any of the remaining investment securities with unrealized losses as of March 31,June 30, 2019, and we believe it is more likely than not that we would not be required to sell such investment securities before recovery of their amortized cost.


We continue to monitor unrealized loss positions for potential impairments. During the three and six months ended March 31,June 30, 2019, and 2018, other-than-temporary impairment credit losses, primarily on corporate debt, in investment revenues were immaterial. During the three months ended June 30, 2018, we did not recognize any other-than-temporary impairment credit losses and during the six months ended June 30, 2018, other-than-temporary impairment credit losses were immaterial.


There were no material additions or reductions in the cumulative amount of credit losses (recognized in earnings) on other-than-temporarily impaired available-for-sale securities during the three and six months ended March 31,June 30, 2019 and 2018.


The proceeds of available-for-sale securities sold or redeemed during the three and six months ended March 31,June 30, 2019 and March 31, 2018 were $29totaled $180 million and $71$209 million, respectively. The proceeds of available-for-sale securities sold or redeemed during the three and six months ended June 30, 2018 totaled $69 million and $140 million, respectively. The realized gains and losses were immaterial during the three and six months ended March 31,June 30, 2019 and 2018.




1920



Table of Contents



Contractual maturities of fixed-maturity available-for-sale securities at March 31,June 30, 2019 were as follows:
(dollars in millions) 
Fair
Value
 
Amortized
Cost
     
Fixed maturities, excluding mortgage-backed, asset-backed, and collateralized securities:  
  
Due in 1 year or less $243
 $243
Due after 1 year through 5 years 530
 520
Due after 5 years through 10 years 445
 427
Due after 10 years 143
 135
Mortgage-backed, asset-backed, and collateralized securities 277
 273
Total $1,638
 $1,598

(dollars in millions) 
Fair
Value
 
Amortized
Cost
     
Fixed maturities, excluding mortgage-backed, asset-backed, and collateralized securities:  
  
Due in 1 year or less $207
 $208
Due after 1 year through 5 years 552
 549
Due after 5 years through 10 years 421
 417
Due after 10 years 187
 188
Mortgage-backed, asset-backed, and collateralized securities 290
 290
Total $1,657
 $1,652


Actual maturities may differ from contractual maturities since issuers and borrowers may have the right to call or prepay obligations. We may sell investment securities before maturity for general corporate and working capital purposes and to achieve certain investment strategies.


The fair value of securities on deposit with third parties totaled $509$525 million and $515 million at March 31,June 30, 2019 and December 31, 2018, respectively.


OTHER SECURITIES


The fair value of other securities by type was as follows:
     
(dollars in millions) June 30,
2019
 December 31,
2018
     
Fixed maturity other securities:  
  
Bonds  
  
Non-U.S. government and government sponsored entities $1
 $1
Corporate debt 34
 43
Mortgage-backed, asset-backed, and collateralized bonds 6
 2
Total bonds 41
 46
Preferred stock (a) 16
 19
Common stock (a) 25
 21
Other long-term investments 1
 1
Total $83
 $87
     
(dollars in millions) March 31,
2019
 December 31,
2018
     
Fixed maturity other securities:  
  
Bonds  
  
Non-U.S. government and government sponsored entities $1
 $1
Corporate debt 38
 43
Mortgage-backed, asset-backed, and collateralized bonds 2
 2
Total bonds 41
 46
Preferred stock (a) 20
 19
Common stock (a) 24
 21
Other long-term investments 1
 1
Total $86
 $87

                                     
(a)The Company employs an income equity strategy targeting investments in stocks with strong current dividend yields. Stocks included have a history of stable or increasing dividend payments.


The unrealized gains and losses on other securities were immaterial for the three months ended June 30, 2019 and 2018. We recognized $4$5 million in unrealized gains and $2$3 million in unrealized losses on other securities for the threesix months ended March 31,June 30, 2019 and 2018, respectively. We report these unrealized gains and losses in investment revenues.


Net realized gains and losses on other securities sold or redeemed were immaterial for the three and six months ended March 31,June 30, 2019 and 2018. We report these gains and losses in investment revenues.


Other securities include equity securities and those securities for which the fair value option was elected.




2021



Table of Contents



7. Long-term Debt


Principal maturities of long-term debt (excluding projected repayments on securitizations and revolving conduit facilities by period) by type of debt at March 31,June 30, 2019 were as follows:
 Senior Debt     Senior Debt    
(dollars in millions) Securitizations Unsecured
Notes (a)
 Junior
Subordinated
Debt (a)
 Total Securitizations Unsecured
Notes (a)
 
Junior
Subordinated
Debt (a)
 Total
                
Interest rates (b) 2.16% - 6.94%
 5.63% - 8.25%
 4.54%   2.16% - 6.94%
 5.63% - 8.25%
 4.35%  
                
Remainder of 2019 
 299
 
 299
 
 
 
 
2020 
 1,000
 
 1,000
 
 1,000
 
 1,000
2021 
 646
 
 646
 
 646
 
 646
2022 
 1,000
 
 1,000
 
 1,000
 
 1,000
2023 
 1,175
 
 1,175
 
 1,175
 
 1,175
2024-2067 
 3,849
 350
 4,199
 
 4,649
 350
 4,999
Securitizations (c) 8,155
 
 
 8,155
 7,083
 
 
 7,083
Total principal maturities $8,155
 $7,969
 $350
 $16,474
 $7,083
 $8,470
 $350
 $15,903
                
Total carrying amount $8,125
 $7,820
 $172
 $16,117
 $7,057
 $8,322
 $172
 $15,551
Debt issuance costs (d) $(28) $(69) $
 $(97) $(25) $(76) $
 $(101)
                                      
(a)Pursuant to the SFC Base Indenture, the SFC supplemental indentures and the SFC Guaranty Agreements, OMH agreed to fully and unconditionally guarantee, on a senior unsecured basis, payments of principal, premium and interest on the SFC Unsecured Senior Notes and Junior Subordinated Debenture. The OMH guarantees of SFC’s long-term debt are subject to customary release provisions.


(b)The interest rates shown are the range of contractual rates in effect at March 31,June 30, 2019. The interest rate on the remaining principal balance of the Junior Subordinated Debenture consists of a variable floating rate (determined quarterly) equal to 3-month LIBOR plus 1.75%, or 4.54%4.35% as of March 31,June 30, 2019.


(c)Securitizations have a stated maturity date but are not included in the above maturities by period due to their variable monthly repayments, which may result in pay-off prior to the stated maturity date. At March 31,June 30, 2019, there were no amounts drawn under our revolving conduit facilities. See Note 8 for further information on our long-term debt associated with securitizations and revolving conduit facilities.


(d)
Debt issuance costs are reported as a direct deduction from long-term debt, with the exception of debt issuance costs associated with our revolving conduit facilities, which totaled$2529 million at March 31,June 30, 2019 and are reported in “Other assets”.


SFC’S 6.625% SENIOR NOTES DUE 2028 OFFERING

On May 9, 2019, SFC issued a total of $800 million aggregate principal amount of 6.625% Senior Notes due 2028 (the “6.625% SFC Notes due 2028”) under the SFC Senior Notes Indentures, as supplemented by the SFC Eighth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

SFC’S 6.125% SENIOR NOTES DUE 2024 OFFERINGOFFERINGS


On February 22, 2019, SFC issued a total of $1.0 billion aggregate principal amount of 6.125% Senior Notes due 2024 (the “6.125% SFC Notes due 2024”) under the SFC Senior Notes Indentures, as supplemented by the SFC Seventh Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.


Subsequent to June 30, 2019, SFC issued on July 2, 2019 an additional $300 million aggregate principal amount of the 6.125% SFC Notes due 2024 under the terms of the SFC Senior Notes Indentures, as supplemented by the SFC Seventh Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis. See Note 16 Subsequent Events for further information.


22


Table of Contents



REDEMPTION OF 5.25% SENIOR NOTES DUE 2019


As a result of the February 2019 offering of the 6.125% SFC Notes due 2024 as described above, SFC issued a notice of redemption to redeem all of the outstanding principal amount of its 5.25% Senior Notes due 2019. On March 25, 2019, SFC paid an aggregate amount of $706 million, inclusive of accrued interest and premiums, to complete the redemption. We recognized approximately $21 million of net loss on the repurchases and repayments of debt for the threesix months ended March 31,June 30, 2019.


21


Table of Contents


REDEMPTION OF 6.00% SENIOR NOTES DUE 2020


On March 15, 2019, SFC issued a Noticenotice of Full Redemptionredemption of its 6.00% Senior Notes due 2020. On April 15, 2019, SFC paid an aggregate amount of $317 million, inclusive of accrued interest and premiums, to complete the redemption. In connection with the redemption we will recognizerecognized approximately $11 million of net loss on repurchases and repayments of debt for the three and six months ended June 30, 2019.


8. Variable Interest Entities


CONSOLIDATED VIES


We have transferred finance receivables to VIEs for asset-backed financing transactions and include the assets and liabilities in our consolidated financial statements because we are the primary beneficiary of each VIE. We account for these asset-backed debt obligations as secured borrowings.


See Note 3 and Note 13 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual
Report on Form 10-K for more detail regarding VIEs.


We parenthetically disclose on our consolidated balance sheets the VIE’s assets that can only be used to settle the VIE’s obligations and liabilities if its creditors have no recourse against the primary beneficiary’s general credit. The carrying amounts of consolidated VIE assets and liabilities associated with our securitization trusts and revolving conduit facilities were as follows:
(dollars in millions) June 30,
2019
 December 31,
2018
     
Assets  
  
Cash and cash equivalents $1
 $2
Finance receivables - Personal loans 7,999
 8,480
Allowance for finance receivable losses 369
 444
Restricted cash and restricted cash equivalents 409
 479
Other assets 29
 26
     
Liabilities  
  
Long-term debt $7,057
 $7,510
Other liabilities 14
 14



23


Table of Contents

(dollars in millions) March 31,
2019
 December 31,
2018
     
Assets  
  
Cash and cash equivalents $3
 $2
Finance receivables - Personal loans 9,128
 8,480
Allowance for finance receivable losses 430
 444
Restricted cash and restricted cash equivalents 558
 479
Other assets 26
 26
     
Liabilities  
  
Long-term debt $8,125
 $7,510
Other liabilities 16
 14


Other than the retained subordinate and residual interests in our consolidated VIEs, we are under no further obligation than is otherwise noted herein, either contractually or implicitly, to provide financial support to these entities. Consolidated interest expense related to our VIEs totaled $82 million and $164 million for the three and six months ended March 31,June 30, 2019, compared to $87 million and $173 million for the three and six months ended March 31,June 30, 2018.


SECURITIZED BORROWINGS


Each of our securitizations contains a revolving period ranging from one to five years during which no principal payments are required to be made on the related asset-backed notes. The indentures governing our securitization borrowings contain early amortization events and events of default, that, if triggered, may result in the acceleration of the obligation to pay principal and interest on the related asset-backed notes. Our total securitized borrowings at March 31,June 30, 2019 were $8.1$7.1 billion.


REVOLVING CONDUIT FACILITIES


We had access to 1213 conduit facilities with a total borrowing capacity of $6.2$6.7 billion as of March 31,June 30, 2019. Our conduit facilities’ revolving period end ranges from one to three years. Principal balances of outstanding loans, if any, are due and payable in full ranging from three to eightnine years as of March 31,June 30, 2019. Amounts drawn on these facilities are collateralized by our personal loans.


At March 31,June 30, 2019, no amounts were drawn under these facilities.

22


Table of Contents



9. Insurance


Changes in the reserve for unpaid claims and loss adjustment expenses (not considering reinsurance recoverable):
 At or for the Three Months Ended March 31, At or for the Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018
        
Balance at beginning of period $117
 $154
 $117
 $154
Less reinsurance recoverables (4) (23) (4) (23)
Net balance at beginning of period 113
 131
 113
 131
Additions for losses and loss adjustment expenses incurred to:        
Current year 54
 50
 111
 102
Prior years * (7) (4) (15) (5)
Total 47
 46
 96
 97
Reductions for losses and loss adjustment expenses paid related to:        
Current year (17) (15) (50) (47)
Prior years (33) (35) (48) (51)
Total (50) (50) (98) (98)
Net balance at end of period 110
 127
 111
 130
Plus reinsurance recoverables 4
 23
 3
 4
Transfer of reserves 
 (19)
Balance at end of period $114
 $150
 $114
 $115
                                      
*Reflects (i) a redundancy in the prior years’ net reserves of $7$15 million at March 31,June 30, 2019 primarily due to a favorable development of credit life, disability, and unemployment claims during the year and (ii) a redundancy in the prior years’ net reserves of $4$5 million at March 31,June 30, 2018, primarily due to a favorable development of credit disability and unemployment claims during the year.



2324



Table of Contents



10. Earnings Per Share



The computation of earnings per share was as follows:
  Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share data) 2019 2018 2019 2018
         
Numerator (basic and diluted):  
  
  
  
Net income attributable to OneMain Holdings, Inc. $194
 $7
 $346
 $131
Denominator:  
  
  
  
Weighted average number of shares outstanding (basic) 136,083,993

135,678,914

136,043,221

135,637,825
Effect of dilutive securities * 164,820

290,131

177,053

295,574
Weighted average number of shares outstanding (diluted) 136,248,813

135,969,045

136,220,274

135,933,399
Earnings per share:  
  
  
  
Basic $1.43
 $0.05
 $2.54
 $0.96
Diluted $1.42
 $0.05
 $2.54
 $0.96
  Three Months Ended March 31,
(dollars in millions, except per share data) 2019 2018
     
Numerator (basic and diluted):  
  
Net income attributable to OneMain Holdings, Inc. $152
 $124
Denominator:  
  
Weighted average number of shares outstanding (basic) 136,001,996

135,596,279
Effect of dilutive securities * 189,287

301,017
Weighted average number of shares outstanding (diluted) 136,191,283

135,897,296
Earnings per share:  
  
Basic $1.12
 $0.91
Diluted $1.11
 $0.91

                                      
*    We have excluded the following shares in the diluted earnings per share calculation for three and six months ended March 31,June 30, 2019 and 2018 because these shares would be anti-dilutive, which could impact the earnings per share calculation in the future:
  Three Months Ended June 30, Six Months Ended June 30,
  2019 2018 2019 2018
         
Performance-based shares 195,944
 45,467
 161,563
 71,314
Service-based shares 52,046
 159,698
 191,729
 240,467

  Three Months Ended March 31,
  2019 2018
     
Performance-based shares 127,183
 97,161
Service-based shares 331,411
 321,237


Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during each period. Diluted earnings per share is computed based on the weighted-average number of shares outstanding plus the effect of potentially dilutive shares outstanding during the period using the treasury stock method. The potentially dilutive shares represent outstanding unvested RSUs and RSAs.


2425



Table of Contents



11. Accumulated Other Comprehensive Income (Loss)


Changes, net of tax, in accumulated other comprehensive income (loss) were as follows:
(dollars in millions) 
Unrealized
Gains (Losses)
Available-for-Sale Securities
 
Retirement
Plan Liabilities
Adjustments
 
Foreign
Currency
Translation
Adjustments
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
         
Three Months Ended June 30, 2019  
  
  
  
Balance at beginning of period $2
 $(3) $(1) $(2)
Other comprehensive income before reclassifications 28
 
 2
 30
Balance at end of period $30
 $(3) $1
 $28
         
Three Months Ended June 30, 2018  
  
  
  
Balance at beginning of period $(16) $4
 $
 $(12)
Other comprehensive income (loss) before reclassifications (10) 2
 (3) (11)
Impact of AOCI reclassification due to the Tax Act 2
 (3) 3
 2
Balance at end of period $(24) $3
 $
 $(21)
         
Six Months Ended June 30, 2019  
  
  
  
Balance at beginning of period $(28) $(3) $(3) $(34)
Other comprehensive income before reclassifications 58
 
 4
 62
Balance at end of period $30
 $(3) $1
 $28
         
Six Months Ended June 30, 2018  
  
  
  
Balance at beginning of period $4
 $4
 $3
 $11
Other comprehensive income (loss) before reclassifications (30) 2
 (6) (34)
Impact of AOCI reclassification due to the Tax Act 2
 (3) 3
 2
Balance at end of period $(24) $3
 $
 $(21)

(dollars in millions) 
Unrealized
Gains (Losses)
Available-for-Sale Securities
 
Retirement
Plan Liabilities
Adjustments
 
Foreign
Currency
Translation
Adjustments
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
         
Three Months Ended March 31, 2019  
  
  
  
Balance at beginning of period $(28) $(3) $(3) $(34)
Other comprehensive income before reclassifications 30
 
 2
 32
Balance at end of period $2
 $(3) $(1) $(2)
         
Three Months Ended March 31, 2018  
  
  
  
Balance at beginning of period $4
 $4
 $3
 $11
Other comprehensive loss before reclassifications (20) 
 (3) (23)
Balance at end of period $(16) $4
 $
 $(12)


Reclassification adjustments from accumulated other comprehensive income (loss) to the applicable line item on our condensed consolidated statements of operations were immaterial for the three and six months ended March 31,June 30, 2019 and March 31, 2018.



26


Table of Contents


12. Income Taxes



We had a net deferred tax asset of $109$89 million and $129 million at March 31,June 30, 2019 and December 31, 2018, respectively. The decrease in our net deferred tax asset of $40 million was primarily driven by the change in mark-to-market valuation of our receivables and amortization of tax goodwill.


The effective tax rate for the threesix months ended March 31,June 30, 2019 was 24.8%24.5%, compared to 26.2%38.0% for the same period in 2018. The effective tax ratesrate for the threesix months ended March 31,June 30, 2019 and 2018 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes. The effective tax rate for the six months ended June 30, 2018 differed from the federal statutory rate of 21% primarily due to the effect of discrete tax expense for non-deductible compensation and state income taxes.


We are currently under examination of our U.S. federal tax returnreturns for the years 2014 to 2016 by the IRS. We are also under examination ofby various states for the years 2011 to 2017. Management believes it has adequately provided for taxes for such years.


Our gross unrecognized tax benefits, including related interest and penalties, totaled $14$13 million at March 31,June 30, 2019 and $17 million at December 31, 2018. We accrue interest related to uncertain tax positions in income tax expense. The amount of any change in the balance of uncertain tax liabilities over the next 12 months is not expected to be material to our consolidated financial statements.


13. Leases and Contingencies


LEASES


Our leases primarily consist of leased office space, automobiles, and information technology equipment.


As described in Note 2, we have adopted ASU 2016-02, Leases, as of January 1, 2019. We have adopted the standard on the date of initial application2019, using the optional transition approach. As a result of this election, the prior periods presented have not been adjusted. Additionally, we have elected the practical expedient to treat both the lease component and non-lease component for our leased office space portfolio as a single lease component.


All our leases are classified as operating leases. At inception of an arrangement we determine if a lease exists. Right-of-use 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. At lease commencement date, we recognize right-of-use assets and lease liabilities measured

25


Table of Contents

at the present value of lease payments over the lease term. Since our operating leases do not provide an implicit rate, we utilize the best available information to determine our incremental borrowing rate, which is used to calculate the present value of lease payments. The right-of-use asset also includes any prepaid fixed lease payments and excludes lease incentives. Options to extend or terminate a lease may be included in our lease arrangements. We reflect the renewal or termination option in the right-of-use asset and lease liability when it is reasonably certain that we will exercise those options. Operating lease costs for lease payments are recognized on a straight-line basis over the lease term and are included in “Other operating expenses” in our condensed consolidated statement of operations. The operating lease right-of-use assets are included in “Other assets” and the operating lease liabilities are included in “Other liabilities” in our condensed consolidated balance sheet.


Our operating leases have remaining lease terms of one year to ten years. In the normal course of business, we will renew leases that expire or replace them with leases on other properties. In addition to rent, we pay taxes, insurance, and maintenance expenses under certain leases as variable lease payments. As of March 31,June 30, 2019, our operating right-of-use asset balance was $160$165 million, and our operating lease liability balance was $175$178 million. Our operating lease costs totaled $17$15 million ourand $32 million for three and six months ended June 30, 2019, respectively. Our variable lease costs totaled $4 million and our$8 million for three and six months ended June 30, 2019, respectively. Our sublease income was immaterial for the three and six months ended March 31,June 30, 2019.



27


Table of Contents


As of March 31,June 30, 2019, maturities of lease liabilities, excluding leases on a month-to-month basis, were as follows:
(dollars in millions) Operating Leases
   
2019 (excluding the six months ended June 30, 2019) $31
2020 57
2021 46
2022 32
2023 18
2024 8
Thereafter 7
Total lease payments 199
Imputed interest (21)
Total $178

(dollars in millions) Operating Leases
   
2019 (excluding the three months ended March 31, 2019) $46
2020 52
2021 39
2022 27
2023 13
2024 6
Thereafter 6
Total lease payments 189
Imputed interest (14)
Total $175
Weighted Average Remaining Lease Term 3.83.9 years

Weighted Average Discount Rate 3.743.76%



As of December 31, 2018, under ASC 840, Leases, annual rental commitments for leased office space, automobiles and information technology equipment accounted for as operating leases, excluding leases on a month-to-month basis, were as follows:
(dollars in millions) Lease Commitments
   
2019 $60
2020 50
2021 37
2022 26
2023 12
2024+ 12
Total $197

(dollars in millions) Lease Commitments
   
2019 $60
2020 50
2021 37
2022 26
2023 12
2024+ 12
Total $197


Rental expense totaled $74 million in 2018.


26


Table of Contents


LEGAL CONTINGENCIES


In the normal course of business, we have been named, from time to time, as defendants in various legal actions, including arbitrations, class actions and other litigation arising in connection with our activities. Some of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. While we will continue to evaluate legal actions to determine whether a loss is reasonably possible or probable and is reasonably estimable, there can be no assurance that material losses will not be incurred from pending, threatened or future litigation, investigations, examinations, or other claims.


We contest liability and/or the amount of damages, as appropriate, in each pending matter. Where available information indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and we can reasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income. In many actions, however, it is inherently difficult to determine whether any loss is probable or even reasonably possible, or to estimate the amount of any loss. In addition, even where loss is reasonably possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss.



28


Table of Contents


For certain legal actions, we cannot reasonably estimate such losses, particularly for actions that are in their early stages of development or where plaintiffs seek substantial or indeterminate damages. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the actions in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for any given action.


For certain other legal actions, we can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued, but do not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on our consolidated financial statements as a whole.


Federal Securities Class Action


On February 10, 2017, a putative class action lawsuit, Galestan v. OneMain Holdings, Inc., et al., was filed in the U.S. District Court for the Southern District of New York, naming as defendants the Company and two of its officers. The lawsuit alleges violations of the Exchange Act for allegedly making materially misleading statements and/or omitting material information concerning alleged integration issues after the OneMain Acquisition in November 2015, and was filed on behalf of a putative class of persons who purchased or otherwise acquired the Company’s common stock between February 25, 2016 and November 7, 2016. The complaint seeks an award of unspecified compensatory damages, an award of interest, reasonable attorney’s fees, expert fees and other costs, and equitable relief as the court may deem just and proper. On March 23, 2017, the court appointed a lead plaintiff for the putative class and approved the lead plaintiff’s selection of counsel. The plaintiff filed an amended complaint on June 13, 2017 challenging statements regarding the Company’s projections of future financial performance and certain statements regarding integration after the OneMain Acquisition. On September 29, 2017, pursuant to the Court’s Individual Rules and Practices, we sought permission to file a motion to dismiss the amended complaint and on December 12, 2018, the Court denied that motion. On January 4, 2019, the Company requested permission to reargue the motion to dismiss decision with respect to the challenged statements from February 2016. On April 23, 2019, the parties executed a settlement agreement, which is subject to Court approval. Papers in support of approval ofOn May 1, 2019, the Court entered an order preliminarily approving the settlement have been filed with the Court.and scheduling a final approval hearing on August 9, 2019. The settlement agreement provides for the dismissal of the action with prejudice. The amount incurred by the Company is immaterial and has been properly accrued, including the related insurance proceeds, as of March 31, 2019. The settlement contains no admission of liability by the Company and the other defendants.


29


Table of Contents


14. Benefit Plans

During the three months ended March 31, 2019 and 2018, the components of net periodic benefit cost with respect to our defined benefit pension plans were immaterial. We do not currently fund post-retirement benefits.


27


Table of Contents

15. Segment Information


At March 31,June 30, 2019, our two reportable segments includedwere Consumer and Insurance and Acquisitions and Servicing. The remaining components (which we refer to as “Other”) consist of our non-originating legacy operations, which include our liquidating real estate loans and our liquidating retail sales finance portfolios.


Our segment accounting policies are the same as those disclosed in Note 3 and Note 22 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K. We report the operating results of our segments and Other using the Segment Accounting Basis, which (i) reflects our allocation methodologies for interest expense and operating costs, and (ii) excludes the impact of applying purchase accounting.


The following tables present information about our segments, as well as reconciliations to the consolidated financial statement amounts.
(dollars in millions) 
Consumer
and
Insurance
 
Acquisitions
and
Servicing
 Other 
Segment to
GAAP
Adjustment
 
Consolidated
Total
           
At or for the Three Months Ended March 31, 2019    
  
  
  
Interest income $954
 $
 $3
 $(1) $956
Interest expense 229
 
 2
 5
 236
Provision for finance receivable losses 276
 
 
 10
 286
Net interest income after provision for finance receivable losses 449
 
 1
 (16) 434
Other revenues 146
 7
 1
 (6) 148
Other expenses 363
 7
 5
 5
 380
Income (loss) before income tax expense (benefit) $232
 $

$(3) $(27) $202
           
Assets $19,197
 $
 $95
 $2,066
 $21,358
At or for the Three Months Ended March 31, 2018    
  
  
  
(dollars in millions) 
Consumer
and
Insurance
 
Acquisitions
and
Servicing
 Other 
Segment to
GAAP
Adjustment
 
Consolidated
Total
          
Three Months Ended June 30, 2019    
  
  
  
Interest income $873
 $
 $5
 $(16) $862
 $999
 $
 $2
 $(1) $1,000
Interest expense 194
 
 5
 1
 200
 232
 
 1
 5
 238
Provision for finance receivable losses 258
 
 (2) (2) 254
 263
 
 
 5
 268
Net interest income (loss) after provision for finance receivable losses 421
 
 2
 (15) 408
Net interest income after provision for finance receivable losses 504
 
 1
 (11) 494
Other revenues 106
 9
 (2) 24
 137
 144
 12
 
 
 156
Other expenses 353
 8
 10
 6
 377
 378
 6
 4
 6
 394
Income (loss) before income tax expense (benefit) $174
 $1
 $(10) $3
 $168
 $270
 $6

$(3) $(17) $256
          
Assets $18,033
 $
 $255
 $2,179
 $20,467

Three Months Ended June 30, 2018    
  
  
  
Interest income $911
 $
 $5
 $(11) $905
Interest expense 212
 
 5
 3
 220
Provision for finance receivable losses 261
 
 (3) 2
 260
Net interest income after provision for finance receivable losses 438
 
 3
 (16) 425
Other revenues 106
 8
 
 26
 140
Other expenses 390
 8
 112
 12
 522
Income (loss) before income tax expense (benefit) $154
 $
 $(109) $(2) $43


30


Table of Contents




28
(dollars in millions) 
Consumer
and
Insurance
 
Acquisitions
and
Servicing
 Other 
Segment to
GAAP
Adjustment
 
Consolidated
Total
           
At or for the Six Months Ended June 30, 2019    
  
  
  
Interest income $1,953
 $
 $5
 $(3) $1,955
Interest expense 462
 
 3
 8
 473
Provision for finance receivable losses 539
 
 
 15
 554
Net interest income after provision for finance receivable losses 952
 
 2
 (26) 928
Other revenues 290
 19
 2
 (7) 304
Other expenses 740
 13
 10
 11
 774
Income (loss) before income tax expense (benefit) $502
 $6
 $(6) $(44) $458
           
Assets $18,872
 $
 $87
 $2,058
 $21,017


At or for the Six Months Ended June 30, 2018    
  
  
  
Interest income $1,784
 $
 $9
 $(26) $1,767
Interest expense 406
 
 9
 5
 420
Provision for finance receivable losses 519
 
 (5) 
 514
Net interest income after provision for finance receivable losses 859
 
 5
 (31) 833
Other revenues 211
 17
 (2) 51
 277
Other expenses 743
 16
 122
 18
 899
Income (loss) before income tax expense (benefit) $327
 $1
 $(119) $2
 $211
           
Assets $17,258
 $
 $248
 $2,134
 $19,640


31


Table of Contents



16.15. Fair Value Measurements


The accounting policies of our Fair Value Measurements are the same as those disclosed in Note 3 and Note 23 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K.


The following table presents the carrying amounts and estimated fair values of our financial instruments and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:
  Fair Value Measurements Using Total
Fair
Value
 Total
Carrying
Value
(dollars in millions) Level 1 Level 2 Level 3  
           
June 30, 2019          
Assets          
Cash and cash equivalents $730
 $56
 $
 $786
 $786
Investment securities 38
 1,678
 5
 1,721
 1,721
Net finance receivables, less allowance for finance receivable losses 
 
 17,831
 17,831
 16,236
Finance receivables held for sale 
 
 80
 80
 74
Restricted cash and restricted cash equivalents 420
 
 
 420
 420
Other assets * 
 
 12
 12
 12
           
Liabilities          
Long-term debt $
 $16,570
 $
 $16,570
 $15,551
           
December 31, 2018          
Assets          
Cash and cash equivalents $618
 $61
 $
 $679
 $679
Investment securities 34
 1,655
 5
 1,694
 1,694
Net finance receivables, less allowance for finance receivable losses 
 
 16,734
 16,734
 15,433
Finance receivables held for sale 
 
 103
 103
 103
Restricted cash and restricted cash equivalents 499
 
 
 499
 499
Other assets * 
 1
 15
 16
 16
           
Liabilities        
  
Long-term debt $
 $15,041
 $
 $15,041
 $15,178
  Fair Value Measurements Using Total
Fair
Value
 Total
Carrying
Value
(dollars in millions) Level 1 Level 2 Level 3  
           
March 31, 2019          
Assets          
Cash and cash equivalents $1,666
 $43
 $
 $1,709
 $1,709
Investment securities 37
 1,702
 4
 1,743
 1,743
Net finance receivables, less allowance for finance receivable losses 
 
 16,872
 16,872
 15,403
Finance receivables held for sale 
 
 80
 80
 78
Restricted cash and restricted cash equivalents 575
 
 
 575
 575
Other assets * 
 
 13
 13
 13
           
Liabilities          
Long-term debt $
 $16,681
 $
 $16,681
 $16,117
           
December 31, 2018          
Assets          
Cash and cash equivalents $618
 $61
 $
 $679
 $679
Investment securities 34
 1,655
 5
 1,694
 1,694
Net finance receivables, less allowance for finance receivable losses 
 
 16,734
 16,734
 15,433
Finance receivables held for sale 
 
 103
 103
 103
Restricted cash and restricted cash equivalents 499
 
 
 499
 499
Other assets * 
 1
 15
 16
 16
           
Liabilities        
  
Long-term debt $
 $15,041
 $
 $15,041
 $15,178

                                     
*Other assets at March 31,June 30, 2019 and December 31, 2018 include miscellaneous receivables related to our liquidating loan portfolios.


2932



Table of Contents



FAIR VALUE MEASUREMENTS — RECURRING BASIS


The following tables present information about our assets measured at fair value on a recurring basis and indicates the fair value hierarchy based on the levels of inputs we utilized to determine such fair value:
 Fair Value Measurements Using Total Carried At Fair Value Fair Value Measurements Using Total Carried At Fair Value
(dollars in millions) Level 1 Level 2 Level 3  Level 1 Level 2 Level 3 
                
March 31, 2019  
  
  
  
June 30, 2019  
  
  
  
Assets  
  
  
  
  
  
  
  
Cash equivalents in mutual funds $1,033
 $
 $
 $1,033
 $462
 $
 $
 $462
Cash equivalents in securities 
 43
 
 43
 
 56
 
 56
Investment securities:  
  
  
  
  
  
  
  
Available-for-sale securities  
  
  
  
  
  
  
  
U.S. government and government sponsored entities 
 17
 
 17
 
 10
 
 10
Obligations of states, municipalities, and political subdivisions 
 87
 
 87
 
 73
 
 73
Certificates of deposit and commercial paper 
 59
 
 59
 
 73
 
 73
Non-U.S. government and government sponsored entities 
 145
 
 145
 
 145
 
 145
Corporate debt 
 1,057
 2
 1,059
 
 1,058
 2
 1,060
RMBS 
 141
 
 141
 
 120
 
 120
CMBS 
 66
 
 66
 
 67
 
 67
CDO/ABS 
 83
 
 83
 
 89
 1
 90
Total available-for-sale securities 
 1,655
 2
 1,657
 
 1,635
 3
 1,638
Other securities  
  
  
 

  
  
  
 

Bonds:  
  
  
 

  
  
  
 

Non-U.S. government and government sponsored entities 
 1
 
 1
 
 1
 
 1
Corporate debt 
 37
 1
 38
 
 33
 1
 34
RMBS 
 1
 
 1
 
 1
 
 1
CDO/ABS 
 1
 
 1
 
 5
 
 5
Total bonds 
 40
 1
 41
 
 40
 1
 41
Preferred stock 13
 7
 
 20
 13
 3
 
 16
Common stock 24
 
 
 24
 25
 
 
 25
Other long-term investments 
 
 1
 1
 
 
 1
 1
Total other securities 37
 47
 2
 86
 38
 43
 2
 83
Total investment securities 37
 1,702
 4
 1,743
 38
 1,678
 5
 1,721
Restricted cash in mutual funds 560
 
 
 560
 417
 
 
 417
Total $1,630
 $1,745
 $4
 $3,379
 $917
 $1,734
 $5
 $2,656


3033



Table of Contents



  Fair Value Measurements Using Total Carried At Fair Value
(dollars in millions) Level 1 Level 2 Level 3 
         
December 31, 2018  
  
  
  
Assets  
  
  
  
Cash equivalents in mutual funds $426
 $
 $
 $426
Cash equivalents in securities 
 61
 
 61
Investment securities:  
  
  
  
Available-for-sale securities  
  
  
  
U.S. government and government sponsored entities 
 21
 
 21
Obligations of states, municipalities, and political subdivisions 
 90
 
 90
Certificates of deposit and commercial paper 
 63
 
 63
Non-U.S. government and government sponsored entities 
 143
 
 143
Corporate debt 
 995
 2
 997
RMBS 
 128
 
 128
CMBS 
 71
 
 71
CDO/ABS 
 93
 1
 94
Total available-for-sale securities 
 1,604
 3
 1,607
Other securities  
  
  
  
Bonds:  
  
  
  
Non-U.S. government and government sponsored entities 
 1
 
 1
Corporate debt 
 42
 1
 43
RMBS 
 1
 
 1
CDO/ABS 
 1
 
 1
Total bonds 
 45
 1
 46
Preferred stock 13
 6
 
 19
Common stock 21
 
 
 21
Other long-term investments 
 
 1
 1
Total other securities 34
 51
 2
 87
Total investment securities 34
 1,655
 5
 1,694
Restricted cash in mutual funds 482
 
 
 482
Total $942
 $1,716
 $5
 $2,663

  Fair Value Measurements Using Total Carried At Fair Value
(dollars in millions) Level 1 Level 2 Level 3 
         
December 31, 2018  
  
  
  
Assets  
  
  
  
Cash equivalents in mutual funds $426
 $
 $
 $426
Cash equivalents in securities 
 61
 
 61
Investment securities:  
  
  
  
Available-for-sale securities  
  
  
  
U.S. government and government sponsored entities 
 21
 
 21
Obligations of states, municipalities, and political subdivisions 
 90
 
 90
Certificates of deposit and commercial paper 
 63
 
 63
Non-U.S. government and government sponsored entities 
 143
 
 143
Corporate debt 
 995
 2
 997
RMBS 
 128
 
 128
CMBS 
 71
 
 71
CDO/ABS 
 93
 1
 94
Total available-for-sale securities 
 1,604
 3
 1,607
Other securities  
  
  
  
Bonds:  
  
  
  
Non-U.S. government and government sponsored entities 
 1
 
 1
Corporate debt 
 42
 1
 43
RMBS 
 1
 
 1
CDO/ABS 
 1
 
 1
Total bonds 
 45
 1
 46
Preferred stock 13
 6
 
 19
Common stock 21
 
 
 21
Other long-term investments 
 
 1
 1
Total other securities 34
 51
 2
 87
Total investment securities 34
 1,655
 5
 1,694
Restricted cash in mutual funds 482
 
 
 482
Total $942
 $1,716
 $5
 $2,663


Due to the insignificant activity within the Level 3 assets during the three and six months ended March 31,June 30, 2019 and 2018, period, we have omitted the additional disclosures relating to the changes in Level 3 assets measured at fair value on a recurring basis and the quantitative information about Level 3 unobservable inputs in the tables above.


FAIR VALUE MEASUREMENTS — NON-RECURRING BASIS


We measure the fair value of certain assets on a non-recurring basis when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Net impairment charges recorded on assets measured at fair value on a non-recurring basis were $3 million and immaterial for the three and six months ended March 31,June 30, 2019 and 2018, respectively.2018.


FAIR VALUE MEASUREMENTS — VALUATION METHODOLOGIES AND ASSUMPTIONS


See Note 23 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for information regarding our methods and assumptions used to estimate fair value.


3134



Table of Contents



16. Subsequent Events

Additional Offering of SFC’s 6.125% Senior Notes Due 2024

On July 2, 2019, SFC issued an additional $300 million aggregate principal amount of 6.125% SFC Notes due 2024 under the terms of the SFC Senior Notes Indentures, as supplemented by the SFC Seventh Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

Special Dividend to our Common Stockholders

On July 29, 2019, the Company declared a dividend of $2.25 per share, consisting of the regular quarterly dividend of $0.25 per share and a special dividend of $2.00 per share, payable on September 13, 2019 to record holders of our common stock as of the close of business on August 27, 2019.

OMFIT 2019-A Securitization

On August 1, 2019, we issued $789 million principal amount of notes backed by personal loans (“OMFIT 2019-A”). OMFIT 2019-A has a revolving period of seven years, during which no principal payments are required to be made. We initially retained approximately $39 million of the asset-backed notes, representing at least 5% of the initial note balance, distributed among each class of notes.


35


Table of Contents

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


An index to our management’s discussion and analysis follows:


Topic Page
   
 
 
 
 
 
 
 


Forward-Looking Statements


This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent only management’s current beliefs regarding future events. By their nature, forward-looking statements are subject to risks, uncertainties, assumptions, and other important factors that may cause actual results, performance or achievements to differ materially from those expressed in or implied by such forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, thatwhich speak only as of the date they were made. We do not undertake any obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise,
except as required by law. Forward-looking statements include, without limitation, statements concerning future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Statements preceded by, followed by or that otherwise include the words “anticipates,” “appears,” “are likely,” “believes,” “estimates,” “expects,” “foresees,” “intends,” “plans,” “projects”“projects,” and similar expressions or future or conditional verbs such as “would,” “should,” “could,” “may,” or “will,”“will” are intended to identify forward-looking statements. Important factors that could cause actual results, performance, or achievements to differ materially from those expressed in or implied by forward-looking statements include, without limitation, the following:


adverse changes in general economic conditions, including the interest rate environment and the financial markets;


risks related to the acquisition or sale of assets or businesses or the formation, termination, or operation of joint ventures or other strategic alliances, including increased loan delinquencies or net charge-offs, integration or migration issues, increased costs of servicing, incomplete records, and retention of customers;


our estimates of the allowance for finance receivable losses may not be adequate to absorb actual losses, causing our provision for finance receivable losses to increase, which would adversely affect our results of operations;


increased levels of unemployment and personal bankruptcies;


our strategy of increasing the proportion of secured loans may lead to declines in or slower growth in our personal loan receivables and portfolio yield;


adverse changes in the rate at which we can collect or potentially sell our finance receivables portfolio;




3236



Table of Contents


our decentralized branch loan approval process could expose us to greater than historical delinquencies and charge-offs;


natural or accidental events such as earthquakes, hurricanes, tornadoes, fires, or floods affecting our customers, collateral, or our branches or other operating facilities;


war, acts of terrorism, riots, civil disruption, pandemics, disruptions in the operation of our information systems, or other events disrupting business or commerce;


a failure in or breach of our operational or security systems or infrastructure or those of third parties, including as a result of cyber-attacks, or other cyber-related incidents involving the loss, theft or unauthorized disclosure of personally identifiable information, or “PII,” of our present or former customers;
a failure in or breach of our operational or security systems or infrastructure or those of third parties, including as a result of cyber-attacks; or other cyber-related incidents involving the loss, theft or unauthorized disclosure of personally identifiable information, or “PII,” of our present or former customers;


our credit risk scoring models may be inadequate to properly assess the risk of customer unwillingness or lack of capacity to repay;


adverse changes in our ability to attract and retain employees or key executives to support our businesses;


increased competition, lack of customer responsiveness to our distribution channels, an inability to make technological improvements, and the ability of our competitors to offer a more attractive range of personal loan products than we offer;


changes in federal, state, or local laws, regulations, or regulatory policies and practices that adversely affect our ability to conduct business or the manner in which we are permitted to conduct business, such as licensing requirements, pricing limitations or restrictions on the method of offering products, as well as changes that may result from increased regulatory scrutiny of the sub-prime lending industry, our use of third party vendors and real estate loan servicing, or changes in corporate or individual income tax laws or regulations, including effects of the Tax Act;


risks associated with our insurance operations, including insurance claims that exceed our expectations or insurance losses that exceed our reserves;


we may be unableour inability to successfully implement our growth strategy for our consumer lending business or successfully acquire portfolios of personal loans;


declines in collateral values or increases in actual or projected delinquencies or net charge-offs;


potential liability relating to finance receivables which we have sold or securitized or may sell or securitize in the future if it is determined that there was a non-curable breach of a representation or warranty made in connection with such transactions;


the costs and effects of any actual or alleged violations of any federal, state, or local laws, rules or regulations, including any litigation associated therewith;litigation;


the costs and effects of any fines, penalties, judgments, decrees, orders, inquiries, investigations, subpoenas, or enforcement or other proceedings of any governmental or quasi-governmental agency or authority and any litigation associated therewith;litigation;


our continued ability to access the capital markets or the sufficiency of ourand maintain adequate current sources of funds to satisfy our cash flow requirements;


our ability to comply with our debt covenants;


our ability to generate sufficient cash to service all of our indebtedness;


any material impairment or write-down of the value of our assets;


the ownership of our common stock continues to be highly concentrated, which may prevent other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest;




3337



Table of Contents


the effects of any downgrade of our debt ratings by credit rating agencies, which could have a negative impact on our cost of and/or access to capital;


our substantial indebtedness, which could prevent us from meeting our obligations under our debt instruments and limit our ability to react to changes in the economy or our industry or our ability to incur additional borrowings;


our ability to maintain sufficient capital levels in our regulated and unregulated subsidiaries;


changes in accounting standards or tax policies and practices and the application of such new standards, policies and practices;


management estimates and assumptions, including estimates and assumptions about future events, may prove to be incorrect;


any failure to achieve the SpringCastle Portfolio performance requirements, which could, among other things, cause us to lose our loan servicing rights over the SpringCastle Portfolio; and


various risks relating to continued compliance with the Settlement Agreement with the U.S. Department of Justice.


We also direct readers to the other risks and uncertainties discussed in other documents we filed with the SEC.


If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. You should specifically consider the factors identified in this report and in the documents we filed with the SEC, including our 2018 Annual Report on Form 10-K, that could cause actual results to differ before making an investment decision to purchase our common stock securities and should not place undue reliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.




3438



Table of Contents



Overview


We are a leading provider of responsible personal loan products, primarily to non-prime customers. Our network of approximately 1,600 branch offices in 44 states is staffed with expert personnel and is complemented by our online origination capabilities and centralized operations, which allows us to reach customers located outside our branch network. Our digital platform provides current and prospective customers the option of obtaining a personal loan via our website, www.omf.com. The information on our website is not incorporated by reference into this report. In connection with our personal loan business, our insurance subsidiaries offer our customers optional credit and non-credit insurance products.


In addition to our loan originations and insurance sales activities, we service loans owned by us and service loans owned by third parties; pursue strategic acquisitions and dispositions of assets and businesses, including loan portfolios or other financial assets; and may establish joint ventures or enter into other strategic alliances.


OUR PRODUCTS


Our product offerings include:


Personal Loans — We offer personal loans through our branch network, centralized operations, and our website, www.omf.com, to customers who generally need timely access to cash. Our personal loans are non-revolving, with a fixed-rate, a fixed term of three to six years, and are secured by automobiles, other titled collateral, or are unsecured. At June 30, 2019, we had approximately 2.4 million personal loans, representing $17.0 billion of net finance receivables, compared to approximately 2.4 million personal loans totaling $16.2 billion at December 31, 2018.

Insurance Products — We offer our customers optional credit insurance products (life insurance, disability insurance, and involuntary unemployment insurance) and optional non-credit insurance products through both our branch network and our centralized operations. Credit insurance and non-credit insurance products are provided by our affiliated insurance companies. We also offer optional home and auto membership plans of an unaffiliated company.
Personal Loans — We offer personal loans through our branch network, centralized operations, and our website, www.omf.com, to customers who generally need timely access to cash. Our personal loans are non-revolving, with a fixed-rate, a fixed term of three to six years, and are secured by automobiles, other titled collateral or are unsecured. At March 31, 2019, we had approximately 2.3 million personal loans, representing $16.1 billion of net finance receivables, compared to approximately 2.4 million personal loans totaling $16.2 billion at December 31, 2018.

Insurance Products — We offer our customers optional credit insurance products (life insurance, disability insurance, and involuntary unemployment insurance) and optional non-credit insurance products through both our branch network and our centralized operations. Credit insurance and non-credit insurance products are provided by our affiliated insurance companies. We also offer optional home and auto membership plans of an unaffiliated company.


Our non-originating legacy products include:


Other Receivables —We ceased originating real estate loans in 2012 and purchasing retail sales finance contracts and revolving retail accounts in 2013. We continue to service or sub-service liquidating real estate loans and retail sales finance contracts. Effective September 30, 2018, our real estate loans were transferred from held for investment to held for sale. See Notes 5, 6 and 7 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for more information about Other Receivables.
Other Receivables —We ceased originating real estate loans in 2012 and purchasing retail sales finance contracts and revolving retail accounts in 2013. We continue to service or sub-service liquidating real estate loans and retail sales finance contracts. Effective September 30, 2018, our real estate loans were transferred from held for investment to held for sale. See Notes 5, 6 and 7 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for more information about Other Receivables.


OUR SEGMENTS


At March 31,June 30, 2019, we had two operating segments:


Consumer and Insurance; and
Acquisitions and Servicing.


The remaining components (which we refer to as “Other”) consist of our non-originating legacy operations, which primarily include our liquidating real estate loan portfolio and our liquidating retail sales finance portfolio.

See Note 1514 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our segments.



3539



Table of Contents



Recent Developments and Outlook


RECENT DEVELOPMENTS    


Cash Dividends to our Common Stockholders


On February 11, 2019 and on April 29, 2019 the Company announced an initialdeclared quarterly dividenddividends of $0.25 per share and paid $34 million on March 15, 2019 and on June 14, 2019.

On July 29, 2019, the Company declared a dividend of $2.25 per share, consisting of the regular quarterly dividend of $0.25 per share and a special dividend of $2.00 per share, payable on September 13, 2019 to record holders of our common stock as of the close of business on February 26, 2019. On April 29, 2019, the Company announced a quarterly dividend of $0.25 per share, payable on June 14, 2019 to record holders of our common stock as of the close of business on May 29,August 27, 2019.


IssuanceIssuances of 6.125% Senior Notes Due 2024 and 6.625% Senior Notes Due 2028 and Redemptions of 5.25% Senior Notes due 2019 and 6.00% Senior Notes Due 2020


For information regarding such notes issuancethe issuances and redemptions see Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this report.


Additional Offering of SFC’s 6.125% Senior Notes Due 2024 and OMFIT 2019-A Securitization

For information regarding the issuances see Note 16 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Appointment of New Executive Vice President and Chief Operating Officer (“COO”) of OMH

On June 24, 2019, our Board of Directors appointed Rajive Chadha as Executive Vice President and COO, effective on his first day of employment, July 15, 2019. Mr. Chadha replaces Robert A. Hurzeler, who resigned as Executive Vice President and COO on May 1, 2019 and departed the Company on May 31, 2019.

Departure of OMH’s Chief Financial Officer (“CFO”) and Appointment of CFO of OMH


On April 25, 2019, our Board of Directors appointed Micah R. Conrad as CFO. Mr. Conrad replacesreplaced Scott T. Parker, who resigned as Executive Vice President and CFO on March 26, 2019 and departed the Company on April 4, 2019. Mr. Parker’s departure was not due to any disagreement between Mr. Parker and the Company relating to the Company’s financial reporting or condition, policies or practices. Mr. Conrad has served as the Company’s Acting CFO from March 26, 2019 until his appointment as CFO.CFO of OMH.


Synergies from the OneMain Acquisition - Sale of Merit Life Insurance Co.


As part of our continuing integration efforts from the OneMain Acquisition, on March 7, 2019, we entered into a Share Purchase Agreement with a third-party insurance holding company to sell all of the issued and outstanding shares of Merit, a wholly owned subsidiary of SFC. The transaction is expected to close in the secondthird quarter of 2019 and is subject to regulatory approval and other customary closing conditions. The assets and liabilities of Merit that are subject to sale, are classified as held for sale as of March 31,June 30, 2019, and are reflected in “Other assets” and “Other liabilities”liabilities,” respectively, in our condensed consolidated balance sheet. Based on the estimated purchase price, there is no indication of impairment of net assets held for sale as of March 31,June 30, 2019.


OUTLOOK


With our experienced management team, long track record of successfully accessing the capital markets, and strong demand for consumer credit, we believe we are well positioned to execute on our strategic priorities to strengthen our capital base. We further describe our key initiatives and strategies under “Recent Developments and Outlook” of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our 2018 Annual Report on Form 10-K.


3640



Table of Contents



Results of Operations


CONSOLIDATED RESULTS


See the table below for our consolidated operating results and selected financial statistics. A further discussion of our operating results for each of our operating segments is provided under “Segment Results” below.

 At or for the
Three Months Ended March 31,
 At or for the
Three Months Ended June 30,
 At or for the
Six Months Ended June 30,
(dollars in millions, except per share amounts) 2019 2018 2019 2018 2019 2018
            
Interest income $956
 $862
 $1,000
 $905
 $1,955
 $1,767
Interest expense 236
 200
 238
 220
 473
 420
Provision for finance receivable losses 286
 254
 268
 260
 554
 514
Net interest income after provision for finance receivable losses 434
 408
 494
 425
 928
 833
Other revenues 148
 137
 156
 140
 304
 277
Other expenses 380
 377
 394
 522
 774
 899
Income before income taxes 202
 168
 256
 43
 458
 211
Income taxes 50
 44
 62
 36
 112
 80
Net income $152
 $124
 $194
 $7
 $346
 $131
            
Share Data:          
  
Earnings per share:          
  
Diluted $1.11
 $0.91
 $1.42
 $0.05
 $2.54
 $0.96
            
Selected Financial Statistics *          
  
Finance receivables held for investment:            
Net finance receivables $16,136
 $14,987
 $16,980
 $15,508
 $16,980
 $15,508
Number of accounts 2,326,835
 2,348,676
 2,356,975
 2,373,671
 2,356,975
 2,373,671
Finance receivables held for sale:            
Net finance receivables $78
 $126
 $74
 $123
 $74
 $123
Number of accounts 2,357
 2,345
 2,228
 2,277
 2,228
 2,277
Finance receivables held for investment and held for sale:            
Average net receivables $16,146
 $14,986
 $16,538
 $15,239
 $16,342
 $15,113
Average daily debt balance $15,839
 $14,947
 $15,974
 $15,569
 $15,906
 $15,258
Yield 23.92 % 23.25 % 24.19 % 23.74 % 24.06 % 23.50 %
Gross charge-off ratio
7.82 % 7.85 %
7.03 % 7.32 % 7.42 %
7.58 %
Recovery ratio
(0.70)% (0.75)%
(0.80)% (0.82)% (0.75)%
(0.79)%
Net charge-off ratio 7.12 % 7.10 % 6.23 % 6.50 % 6.67 % 6.79 %
30-89 Delinquency ratio 1.93 % 2.11 % 2.14 % 2.18 % 2.14 % 2.18 %
Origination volume $2,582
 $2,540
 $3,879
 $3,216
 $6,462
 $5,756
Number of accounts originated 276,329
 324,730
 410,347
 393,561
 686,677
 718,291
                                     
*See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.


3741



Table of Contents





Comparison of Consolidated Results for Three and Six Months Ended March 31,June 30, 2019 and 2018


Interest income increased $94$95 million or 10% and $188 million or 11% for the three and six months ended March 31,June 30, 2019, respectively, when compared to the same periodperiods in 2018 primarily due to continued growth in our loan portfolio andalong with higher yield, which was primarily driven by lower amortization of purchase premium on non-credit impaired finance receivables.receivables and improvement in late stage delinquencies.


Interest expense increased $36$18 million or 18%8% and $53 million or 13% for the three and six months ended March 31,June 30, 2019, respectively, when compared to the same periodperiods in 2018 primarily due to the increase in average debt, consistent with the growth in our loan portfolio, and our strategic actions to increase unsecured debt, which tends to have higher interest rates than secured debt, in order to achieve a more proportional mix of secured and unsecured funding.

See Notes 7 and 8 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions and our conduit facilities.


Provision for finance receivable losses increased $32$8 million or 13%3% and $40 million or 8% for the three and six months ended March 31,June 30, 2019, respectively, when compared to the same periodperiods in 2018 primarily driven by the growth in our loan portfolio offset by lower required provision due to the continued change in portfolio mix to more secured personal loans. As a result of the transfer of the remaining real estate loans to held for sale, the level ofportfolio. The allowance for finance receivable losses as a percentage of net finance receivables has decreased from prior periods due to the same periodshift in portfolio mix to more secured personal loans, improvement in the effectiveness of our collections, and the transfer of the remaining real estate loans to held for sale in the third quarter of 2018.


Other revenues increased $11$16 million or 8%11% for the three months ended March 31,June 30, 2019 when compared to the same period in 2018 primarily due to (i) a $13$7 million increase in insurance premiums due to the increase in insurance products sold, (ii) a $7 million increase due to the additional net gain on the sale of the SpringCastle interests, and (iii) a $5 million increase in investment revenue primarily driven by an increase in interest income due to higher yield and a larger average balance on our cash and cash equivalents. The increase was partially offset by $5 million of higher net losses on repurchases and repayments of debt.

Other revenues increased $27 million or 10% for the six months ended June 30, 2019 when compared to the same period in 2018 primarily due to (i) a $18 million increase in investment revenue primarily driven by an increase in interest income due to higher yield and a larger average balance on our cash and cash equivalents and unrealized gains on equity investment securities, and an(ii) a $12 million increase in interest income on our cash and cash equivalents, (ii)insurance premiums due to the increase in insurance products sold, (iii) an $11 million net gain on sale of a cost method investment, and (iii)(iv) a $5$7 million increase in insurance premiums due to the increase in insurance products sold.additional net gain on the sale of the SpringCastle interests. The increase was partially offset by $20$25 million of higher net losses on repurchases and repayments of debt.


Other expenses increased $3 decreased $128 million or less than 1%25% and $125 million or 14% for the three and six months ended March 31,June 30, 2019, respectively, when compared to the same periodperiods in 2018 reflecting our strategyprimarily due to reinvest$106 million of non-cash incentive compensation expense related to the Fortress Transaction and $14 million of impairment loss on the sale of Yosemite in our business.the second quarter of 2018.


Income taxes totaled $50$62 million and $112 million for the three and six months ended March 31,June 30, 2019, respectively, compared to $44$36 million and $80 million for the same period in 2018.three and six months ended June 30, 2018, respectively. The increase isincreases are primarily due to higher pre-tax income in the current periodperiods compared to the same periodperiods in 2018. The effective tax rate for the three months ended March 31, 2019 was 24.8% compared to 26.2% for the same period in 2018.

The effective tax rates of 24.3% and 24.5% for the three and six months ended March 31,June 30, 2019, and 2018respectively, differed from the federal statutory rate of 21% primarily due to the effect of state income taxes.


The effective tax rates of 83.7% and 38.0% for the three and six months ended June 30, 2018, respectively, differed from the federal statutory rate of 21% primarily due to the effect of discrete tax expense for non-deductible compensation and state income taxes.

3842



Table of Contents



NON-GAAP FINANCIAL MEASURES


Adjusted Pretax Income (Loss)


Management uses adjusted pretax income (loss), a non-GAAP financial measure, as a key performance measure of our segments. Adjusted pretax income (loss) represents income (loss) before income taxes on a Segment Accounting Basis and excludes net losses resulting from repurchases and repayments of debt, net gain on sale of cost method investment, acquisition-related transaction and integration expenses, restructuring charges, additional net gain on sale of SpringCastle interests, net loss on sale of real estate loans, and non-cash incentive compensation expense related to the Fortress Transaction. Management believes adjusted pretax income (loss) is useful in assessing the profitability of our segments,segment and uses adjusted pretax income (loss) in evaluating our operating performance and as a performance goal under the Company’sour executive compensation programs. We describe our adjusted pretax income (loss) under “Results of Operations” of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our 2018 Annual Report on Form 10-K.

Adjusted pretax income (loss) is a non-GAAP financial measure and should be considered supplemental to, but not as a substitute for or superior to, income (loss) before income taxes, net income, or other measures of financial performance prepared in accordance with GAAP.


The reconciliations of income (loss) before income tax expense (benefit) on a Segment Accounting Basis to adjusted pretax income (loss) (non-GAAP) by segmentsegments were as follows:

 Three Months Ended March 31, Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018 2019 2018
            
Consumer and Insurance            
Income before income taxes - Segment Accounting Basis $232
 $174
 $270
 $154
 $502
 $327
Adjustments:            
Net loss on repurchases and repayments of debt 16
 27
 12
 35
 28
 62
Acquisition-related transaction and integration expenses 8
 22
 14
 32
Net gain on sale of cost method investment (11) 
 
 
 (11) 
Acquisition-related transaction and integration expenses 6
 10
Restructuring charges 3
 
 1
 
 4
 
Adjusted pretax income (non-GAAP) $246
 $211
 $291

$211
 $537
 $421
            
Acquisitions and Servicing            
Income before income taxes - Segment Accounting Basis $
 $1
 $6
 $
 $6
 $1
Adjustments 
 
Adjusted pretax income (non-GAAP) $
 $1
Adjustment:        
Additional net gain on sale of SpringCastle interests (7) 
 (7) 
Adjusted pretax income (loss) (non-GAAP) $(1) $
 $(1) $1
            
Other            
Loss before income tax benefit - Segment Accounting Basis $(3) $(10) $(3) $(109) $(6) $(119)
Adjustments:        
Non-cash incentive compensation expense 
 106
 
 106
Net loss on sale of real estate loans * 1
 
 
 
 1
 
Adjusted pretax loss (non-GAAP) $(2) $(10) $(3) $(3) $(5) $(13)
                                     
*During the six months ended June 30, 2019, the resulting impairment on finance receivables held for sale remaining after the February 2019 Real Estate Loan Sale has been combined with the gain on the sale.
* During the three months ended March 31, 2019, the resulting impairment on finance receivables held for sale remaining after the February 2019 Real Estate Loan Sale has been combined with the gain on the sale.


We describe our acquisition-related transaction and integration expenses under “Results of Operations” of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our 2018 Annual Report on Form 10-K.



3943



Table of Contents



Segment Results


See Note 22 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for a description of our segments and methodologies used to allocate revenues and expenses to each segment. See Note 1514 of the Notes to the Condensed Consolidated Financial Statements included in this report for reconciliations of segment totals to condensed consolidated financial statement amounts.


CONSUMER AND INSURANCE


Adjusted pretax income and selected financial statistics for Consumer and Insurance (which are reported on an adjusted Segment Accounting Basis) were as follows:

 At or for the
Three Months Ended March 31,
 At or for the
Three Months Ended June 30,
 At or for the
Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018 2019 2018
            
Interest income $954
 $873
 $999
 $911
 $1,953
 $1,784
Interest expense 229
 194
 232
 212
 462
 406
Provision for finance receivable losses 276
 258
 263
 261
 539
 519
Net interest income after provision for finance receivable losses 449
 421
 504
 438
 952
 859
Other revenues 151
 133
 156
 141
 307
 273
Other expenses 354
 343
 369
 368
 722
 711
Adjusted pretax income (non-GAAP) $246
 $211
 $291
 $211
 $537
 $421
            
Selected Financial Statistics *  
  
  
  
  
  
Finance receivables held for investment:            
Net finance receivables $16,170
 $14,870
 $17,016
 $15,406
 $17,016
 $15,406
Number of accounts 2,326,835
 2,344,236
 2,356,975
 2,369,661
 2,356,975
 2,369,661
Finance receivables held for investment and held for sale:            
Average net receivables $16,179
 $14,860
 $16,573
 $15,130
 $16,376
 $14,995
Yield 23.92 % 23.83 % 24.17 % 24.14 % 24.05 % 23.99 %
Gross charge-off ratio 7.92 % 8.10 % 7.11 % 7.56 % 7.51 % 7.82 %
Recovery ratio (0.81)% (0.89)% (0.91)% (0.94)% (0.86)% (0.91)%
Net charge-off ratio 7.11 % 7.21 % 6.20 % 6.62 % 6.65 % 6.91 %
30-89 Delinquency ratio 1.94 % 2.08 % 2.15 % 2.13 % 2.15 % 2.13 %
Origination volume $2,582
 $2,540
 $3,879
 $3,216
 $6,462
 $5,756
Number of accounts originated 276,329
 324,730
 410,347
 393,561
 686,677
 718,291
                                     
*See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.




4044



Table of Contents



Comparison of Adjusted Pretax Income for Three and Six Months Ended March 31,June 30, 2019 and 2018


Interest income increased $81$88 million or 10% and $169 million or 9% for the three and six months ended March 31,June 30, 2019, respectively, when compared to the same periodperiods in 2018 primarily due to continued growth in our loan portfolio.portfolio along with higher yield, which was primarily driven by improvement in late stage delinquencies.


Interest expense increased$3520 million or 18%9% and $56 million or 14% for the three and six months ended March 31,June 30, 2019, respectively, when compared to the same periodperiods in 2018 primarily due to the increase in average debt, consistent with the growth in our loan portfolio, and our strategic actions to increase unsecured debt, which tends to have higher interest rates than secured debt, in order to achieve a more proportional mix of secured and unsecured funding.


See Notes 7 and 8 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions and our conduit facilities.


Provision for finance receivable losses increased $18$2 million or 7%1% and $20 million or 4% for the three and six months ended March 31,June 30, 2019, respectively, when compared to the same periodperiods in 2018 primarily driven by the growth in our loan portfolio offset by lower required provision due to the continued change in portfolio mix to more secured personal loans. As a result of this change in mix as well as improvement in the effectiveness of our collections, the level ofportfolio. The allowance for finance receivable losses as a percentage of net finance receivables has decreased from prior periods due to the same periodshift in 2018.portfolio mix to more secured personal loans and the improvement in the effectiveness of collections.


Other revenues increased $18$15 million or 14%11% for the three months ended March 31,June 30, 2019 when compared to the same period in 2018 primarily due to a $7 million increase in insurance premiums due to the increase in insurance products sold, and a $4 million increase in investment revenue primarily driven by an increase in interest income due to higher yield and a larger average balance on our cash and cash equivalents.

Other revenues increased $34 million or 12% for the six months ended June 30, 2019 when compared to the same period in 2018 primarily due to (i) a $13$16 million increase in investment revenue primarily driven by an increase in interest income due to higher yield and a larger average balance on our cash and cash equivalents and unrealized gains on equity investment securities, and an increase in interest income on our cash and cash equivalents and (ii) a $5$12 million increase in insurance premiums due to the increase in insurance products sold.


Other expenses increased $1 million or less than 1% and $11 million or 3%2% for the three and six months ended June 30, 2019, respectively, when compared to the same periodperiods in 2018 reflecting our strategy to reinvestcontinued reinvestment in our business.business operations while achieving operating leverage.


ACQUISITIONS AND SERVICING


Adjusted pretax income (loss) for Acquisition and Servicing (which is reported on an adjusted Segment Accounting Basis) was as follows:
 Three Months Ended March 31, Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018 2019 2018
            
Other revenues $7
 $9
 $5
 $8
 $12
 $17
Other expenses 7
 8
 6
 8
 13
 16
Adjusted pretax income (non-GAAP) $
 $1
Adjusted pretax income (loss) (non-GAAP) $(1) $
 $(1) $1



4145



Table of Contents



OTHER


“Other” consists of our non-originating legacy operations which include other receivables consisting of our liquidating real estate loan and retail sales finance portfolios.


Adjusted pretax loss of the Other components (which is reported on an adjusted Segment Accounting Basis) was as follows:
 Three Months Ended March 31, Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2019 2018 2019 2018 2019 2018
            
Interest income $3
 $5
 $2
 $5
 $5
 $9
Interest expense 2
 5
 1
 5
 3
 9
Provision for finance receivable losses 
 (2) 
 (3) 
 (5)
Net interest income after provision for finance receivable losses 1
 2
 1
 3
 2
 5
Other revenues 2
 (2) 
 
 3
 (2)
Other expenses * 5
 10
 4
 6
 10
 16
Adjusted pretax loss (non-GAAP) $(2) $(10) $(3) $(3) $(5) $(13)
                                     
*
Other expenses for the threesix months ended March 31,June 30, 2018 include $4 million of non-cash incentive compensation expense related to the rights of certain executives to a portion of the cash proceeds from the sale of ourOMH’s common stock by SFH.


Net finance receivables of the Other components (which are reported on a Segment Accounting Basis) were as follows:
 March 31, June 30,
(dollars in millions) 2019 2018 2019 2018
        
Net finance receivables        
Other receivables * $
 $136
 $
 $131
        
Net finance receivables held for sale:        
Other receivables * $79
 $133
 $75
 $130
                                     
*On September 30, 2018, we transferred our real estate loans previously classified as Other Receivables from held for investment to held for sale. See Notes 5 and 7 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for further information.





4246



Table of Contents



Credit Quality


FINANCE RECEIVABLES


Our net finance receivables, consisting of personal loans, were $16.1$17.0 billion at March 31,June 30, 2019 and $16.2 billion at December 31, 2018. Our personal loans are non-revolving, with a fixed-rate, a fixed term of three to six years, and are secured by automobiles, other titled collateral, or are unsecured. We consider the value of the collateral, the concentration of secured loans, and the delinquency status of our finance receivables as the primary indicators of credit quality. At March 31,June 30, 2019 and December 31, 2018, 49%50% and 48%, respectively, of our personal loans, on a consolidated basis, were secured by titled collateral.


Distribution of Finance Receivables by FICO Score


There are many different categorizations used in the consumer lending industry to describe the creditworthiness of a borrower, including prime, near prime, and sub-prime.


We group FICO scores into the following credit strength categories:


Prime: FICO score of 660 or higher
Near prime: FICO score of 620-659
Sub-prime: FICO score of 619 or below


Our customers are described as prime at one end of the credit spectrum and non-prime at the other. Our customers’ demographics are in many respects near the national median but may vary from national norms in terms of credit and repayment histories. Many of our customers have experienced some level of prior financial difficulty or have limited credit experience and require higher levels of servicing and support from our branch network.


Our personal loans are grouped into the following categories based on borrower FICO credit scores as of the most recently refreshed date or as of the origination or purchase date:
(dollars in millions) March 31, 2019 December 31, 2018 June 30,
2019
 December 31, 2018
        
FICO scores        
660 or higher $3,785
 $3,906
 $4,093
 $3,906
620-659 4,220
 4,251
 4,597
 4,251
619 or below 8,131
 8,007
 8,290
 8,007
Total $16,136
 $16,164
 $16,980
 $16,164


DELINQUENCY


We monitor delinquency trends to evaluate the risk of future credit losses and employ advanced analytical tools to manage our exposure. Our branch team members work with customers through occasional periods of financial difficulty and offer a variety of borrower assistance programs to help customers continue to make payments. Team members also actively engage in collection activities throughout the early stages of delinquency. We closely track and report the percentage of receivables that are contractually 30-89 days past due as a benchmark of portfolio quality, collections effectiveness, and as a strong indicator of losses in coming quarters.


When finance receivables are contractually 60 days past due, we consider these accounts to be at an increased risk for loss and we transfer collection of these accounts to our centralized operations. Use of our centralized operations teams for managing late stage delinquency allows us to apply more advanced collection technologies and tools and drives operating efficiencies in servicing. At 90 days contractually past due, we consider our finance receivables to be nonperforming.




4347



Table of Contents



The delinquency information for net finance receivables is as follows:
(dollars in millions) Consumer
and
Insurance
 
Segment to
GAAP
Adjustment
 
GAAP
 Basis
 Consumer
and
Insurance
 
Segment to
GAAP
Adjustment
 
GAAP
 Basis
            
March 31, 2019      
June 30, 2019      
Current $15,520
 $(31) $15,489
 $16,357
 $(32) $16,325
30-59 days past due 180
 (1) 179
 221
 (1) 220
Delinquent (60-89 days past due) 133
 
 133
 145
 (1) 144
Performing 15,833
 (32) 15,801
 16,723
 (34) 16,689
            
Nonperforming (90+ days past due) 337
 (2) 335
 293
 (2) 291
Total net finance receivables $16,170
 $(34) $16,136
 $17,016
 $(36) $16,980
            
Delinquency ratio            
30-89 days past due 1.94% *
 1.93% 2.15% *
 2.14%
30+ days past due 4.02% *
 4.01% 3.87% *
 3.86%
60+ days past due 2.91% *
 2.90% 2.58% *
 2.57%
90+ days past due 2.08% *
 2.08% 1.72% *
 1.72%
            
December 31, 2018            
Current $15,437
 $(26) $15,411
 $15,437
 $(26) $15,411
30-59 days past due 231
 (2) 229
 231
 (2) 229
Delinquent (60-89 days past due) 162
 (1) 161
 162
 (1) 161
Performing 15,830
 (29) 15,801
 15,830
 (29) 15,801
            
Nonperforming (90+ days past due) 365
 (2) 363
 365
 (2) 363
Total net finance receivables $16,195
 $(31) $16,164
 $16,195
 $(31) $16,164
            
Delinquency ratio            
30-89 days past due 2.43% *
 2.42% 2.43% *
 2.42%
30+ days past due 4.68% *
 4.66% 4.68% *
 4.66%
60+ days past due 3.26% *
 3.25% 3.26% *
 3.25%
90+ days past due 2.25% *
 2.25% 2.25% *
 2.25%
                                      
*Not applicable.




4448



Table of Contents



ALLOWANCE FOR FINANCE RECEIVABLE LOSSES


We record an allowance for finance receivable losses to cover estimated incurred losses on our finance receivables. Our allowance for finance receivable losses may fluctuate based upon our continual review of the growth, credit quality, and collateral mix of the finance receivable portfolio and changes in economic conditions.


Changes in the allowance for finance receivable losses were as follows:
(dollars in millions) 
Consumer
and
Insurance
 Other (a) 
Segment to
GAAP
Adjustment
 
Consolidated
Total
 
Consumer
and
Insurance
 Other (a) 
Segment to
GAAP
Adjustment
 
Consolidated
Total
                
March 31, 2019        
Three Months Ended June 30, 2019        
Balance at beginning of period $765
 $
 $(32) $733
Provision for finance receivable losses 263
 
 5
 268
Charge-offs (294) 
 4
 (290)
Recoveries 38
 
 (5) 33
Balance at end of period $772
 $
 $(28) $744
        
Three Months Ended June 30, 2018        
Balance at beginning of period $718
 $32
 $(61) $689
Provision for finance receivable losses 261
 (3) 2
 260
Charge-offs (285) 
 7
 (278)
Recoveries 35
 1
 (5) 31
Balance at end of period $729
 $30
 $(57) $702
        
Six Months Ended June 30, 2019        
Balance at beginning of period $773
 $
 $(42) $731
 $773
 $
 $(42) $731
Provision for finance receivable losses 276
 
 10
 286
 539
 
 15
 554
Charge-offs (316) 
 5
 (311) (610) 
 9
 (601)
Recoveries 32
 
 (5) 27
 70
 
 (10) 60
Balance at end of period $765
 $
 $(32) $733
 $772
 $
 $(28) $744
                
Allowance ratio 4.73% (b)
 (b)
 4.54% 4.54% (b)
 (b)
 4.38%
                
March 31, 2018        
Six Months Ended June 30, 2018        
Balance at beginning of period $724
 $35
 $(62) $697
 $724
 $35
 $(62) $697
Provision for finance receivable losses 258
 (2) (2) 254
 519
 (5) 
 514
Charge-offs (297) (2) 9
 (290) (582) (2) 16
 (568)
Recoveries 33
 1
 (6) 28
 68
 2
 (11) 59
Balance at end of period $718
 $32
 $(61) $689
 $729
 $30
 $(57) $702
                
Allowance ratio 4.83% 23.19% (b)
 4.60% 4.73% 22.76% (b)
 4.53%
                                      
(a)Due to the transfer of our real estate loans from held for investment to held for sale on September 30, 2018, there are no longer finance receivable losses associated in Other. See Note 5 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for further information.


(b)Not applicable.



49


Table of Contents


The current delinquency status of our finance receivable portfolio, inclusive of recent borrower performance, the underlying collateral, volume of our TDR activity, and the level and recoverability of collateral securing our finance receivable portfolio are the primary drivers that can cause fluctuations in our allowance for finance receivable losses from period to period. We monitor the allowance ratio to ensure we have a sufficient level of allowance for finance receivable losses to cover estimated incurred losses in our finance receivable portfolio. The level of allowance for finance receivable losses as a percentage of net finance receivables has decreased from prior periods due to the continued changeshift in portfolio mix to more secured personal loans and improvement in the effectiveness of our collections.


See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about the changes in the allowance for finance receivable losses.


TDR FINANCE RECEIVABLES


We make modifications to our finance receivables to assist borrowers during times ofexperiencing financial difficulties. When we modify a loan’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and grant a concession that we would not otherwise consider, we classify that loan as a TDR finance receivable.


45


Table of Contents


Information regarding TDR net finance receivables is as follows:
(dollars in millions) Consumer
and
Insurance
 Segment to
GAAP
Adjustment
 
GAAP
 Basis
 Consumer
and
Insurance
 Segment to
GAAP
Adjustment
 
GAAP
 Basis
            
March 31, 2019      
June 30, 2019      
TDR net finance receivables $591
 $(89) $502
 $628
 $(79) $549
Allowance for TDR finance receivable losses 226
 (30) 196
 254
 (27) 227
            
December 31, 2018            
TDR net finance receivables $555
 $(102) $453
 $555
 $(102) $453
Allowance for TDR finance receivable losses 210
 (40) 170
 210
 (40) 170



50


Table of Contents


Liquidity and Capital Resources


SOURCES AND USES OF FUNDS


We finance the majority of our operating liquidity and capital needs through a combination of cash flows from operations, securitization debt, borrowings from revolving conduit facilities, unsecured debt and equity, and may also utilize other corporate debt facilities in the future. As a holding company, all of the funds generated from our operations are earned by our operating subsidiaries. Our operating subsidiaries’ primary cash needs relate to funding our lending activities, our debt service obligations, our operating expenses, payment of insurance claims and, to a lesser extent, expenditures relating to upgrading and monitoring our technology platform, risk systems, and branch locations.


We have previously purchased portions of our unsecured indebtedness, and we may elect to purchase additional portions of our unsecured indebtedness in the future. Future purchases may be made through the open market, privately negotiated transactions with third parties, or pursuant to one or more tender or exchange offers, all of which are subject to terms, prices, and consideration we may determine in our discretion.


During the threesix months ended March 31,June 30, 2019, we generated net income of $152$346 million. Our net cash inflowoutflow from operating and investing activities totaled $243$202 million infor the six months ended June 30, 2019. At March 31,June 30, 2019, our scheduled principal and interest payments for 2019 on our existing debt (excluding securitizations) totaled $695$280 million. As of March 31,June 30, 2019, we had $6.9$8.9 billion UPB of unencumbered personal loans and $136$131 million UPB of unencumbered real estate loans. These real estate loans are included in held for sale.


Based on our estimates and taking into account the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our businesses and repay our obligations as they become due for at least the next 12 months.


SFC’s Issuances and Redemptions

During the six months ended June 30, 2019, SFC completed the following issuances and redemptions:

SFC’s 6.625% Senior Notes Due 2028 Offering
On May 9, 2019, SFC issued a total of $800 million aggregate principal amount of 6.625% Senior Notes due 2028.

SFC’s 6.125% Senior Notes Due 2024 Offering

On February 22, 2019, SFC issued $1.0 billion aggregate principal amount of 6.125% Senior Notes due 2024 (the “6.125% SFC Notes due 2024”) under the SFC Senior Notes Indentures, as supplemented by the SFC Seventh Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis..


Redemption of 5.25% Senior Notes dueDue 2019

As a result of the February 2019 offering of the 6.125% SFC Notes due 2024, as described above, SFC issued a notice of redemption to redeem all of the outstanding principal amount of its 5.25% Senior Notes due 2019. On March 25, 2019, SFC paid an aggregate amount of $706 million, inclusive of accrued interest and premiums, to complete the redemption. We recognized approximately $21 million of net loss on the repurchases and repayments of debt for the three months ended March 31, 2019.


46


Table of Contents


Redemption of 6.00% Senior Notes Due 2020

On March 15, 2019, SFC issued a Noticenotice of Full Redemptionredemption of its 6.00% Senior Notes due 2020. On April 15, 2019, SFC paid an aggregate amount of $317 million, inclusive of accrued interest and premiums, to complete the redemption. In connection with the redemption, we will recognize approximately $11 million of net loss on repurchases and repayments of debt for the three and six months ended

Subsequent to June 30, 2019.2019, we completed the following transaction:


Additional Offering of SFC’s 6.125% Senior Notes Due 2024
On July 2, 2019, SFC issued an additional $300 million aggregate principal amount of the 6.125% SFC Notes due 2024.

For further information regarding the issuances and redemptions, see Notes 7 and 16 of the Notes to the Condensed Consolidated Financial Statements included in this report.


51


Table of Contents


Securitizations and Borrowings from Revolving Conduit Facilities


During the threesix months ended March 31,June 30, 2019, (i) we completed two personal loan securitizations (OMFIT 2019-1 and ODART 2019-1 see “Securitized Borrowings” below), and (ii) redeemed two securitizations (SLFT 2015-A and OMFIT 2015-2). At March 31,June 30, 2019, we had approximately $9.1$7.9 billion in UPB of finance receivables pledged as collateral for our securitization transactions.


During the threesix months ended March 31,June 30, 2019, we entered into onetwo new revolving conduit facility.facilities.


Subsequent to June 30, 2019, we completed the following securitization transaction:

OMFIT 2019-A
On August 1, 2019, we issued $789 million principal amount of notes backed by personal loans (“OMFIT 2019-A”). OMFIT 2019-A has a revolving period of seven years, during which no principal payments are required to be made. We initially retained approximately $39 million of the asset-backed notes, representing at least 5% of the initial note balance, distributed among each class of notes.

See Notes 7, 8 and 816 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, loan securitization transactions and conduit facilities.


Cash Dividends to our Common Stockholders


On February 11, 2019 we announced an initialand on April 29, 2019, the Company declared quarterly dividenddividends of $0.25 per share and paid $34 million on March 15, 2019 and on June 14, 2019.

On July 29, 2019, the Company declared a dividend of $2.25 per share, consisting of the regular quarterly dividend of $0.25 per share and a special dividend of $2.00 per share, payable on September 13, 2019 to record holders of our common stock as of the close of business on February 26, 2019. On April 29, 2019, the Company announced a quarterly dividend of $0.25 per share, payable on June 14, 2019 to record holders of our common stock as of the close of business on May 29,August 27, 2019.


While we intend to pay regular quarterly dividends for the foreseeable future, all subsequent dividends will be reviewed quarterly and declared at the discretion of our boardBoard of directorsDirectors and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends, and other considerations that our boardBoard of directorsDirectors deems relevant. Our dividend payments may change from time to time, and weour Board of Directors may not continue to declare dividends in the future.


LIQUIDITY


Operating Activities


Net cash provided by operations of $548 million$1.1 billion for the threesix months ended March 31,June 30, 2019 reflected net income of $152$346 million and the impact of non-cash items. Net cash provided by operations of $555$944 million for the threesix months ended March 31,June 30, 2018 reflected net income of $124$131 million and the impact of non-cash items.


Investing Activities


Net cash used for investing activities of $305 million$1.3 billion for the threesix months ended March 31,June 30, 2019 and $381 million$1.2 billion for the threesix months ended March 31,June 30, 2018 were primarily due to net principal originations of finance receivables held for investment and held for sale and net purchases of available-for-sale securities, partially offset by calls, and maturities of available-for-sale securities.


Financing Activities


Net cash provided by financing activities of $863$230 million and $46 million for the threesix months ended March 31,June 30, 2019 and $827 million for the three months ended March 31, 2018, respectively, were primarily due to net issuance of long-term debt.


Cash and Investments


At March 31,June 30, 2019, we had $1.7 billion$786 million of cash and cash equivalents, which included $312$420 million of cash and cash equivalents held at our regulated insurance subsidiaries or for other operating activities that is unavailable for general corporate purposes.



52


Table of Contents


At March 31,June 30, 2019, we had $1.7 billion of investment securities, which are all held as part of our insurance operations and are unavailable for general corporate purposes.


47


Table of Contents


Liquidity Risks and Strategies


SFC’s credit ratings are non-investment grade, which has a significant impact on our cost and access to capital. This, in turn, can negatively affect our ability to manage our liquidity and our ability or cost to refinance our indebtedness.

There are numerous risks to our financial results, liquidity, capital raising, and debt refinancing plans, some of which may not be quantified in our current liquidity forecasts. These risks are further described in our “Liquidity and Capital Resources” of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our 2018 Annual Report on Form 10-K.


Principal factors that could decrease our liquidity are customer delinquencies and defaults, a decline in customer prepayments, and a prolonged inability to adequately access capital market funding. We intend to support our liquidity position by utilizing strategies that are further described in our “Liquidity and Capital Resources” of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our 2018 Annual Report on Form 10-K.


However, it is possible that the actual outcome of one or more of our plans could be materially different than expected or that one or more of our significant judgments or estimates could prove to be materially incorrect.


OUR INSURANCE SUBSIDIARIES


Our insurance subsidiaries are subject to state regulations that limit their ability to pay dividends. See Note 14 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for more information on these restrictions. Merit, AHL and Triton did not pay any dividends during the threesix months ended March 31,June 30, 2019 and 2018.


OUR DEBT AGREEMENTS


The debt agreements to which SFC and its subsidiaries are a party include customary terms and conditions, including covenants and representations and warranties. See Note 12 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for more information on the restrictive covenants under SFC’s debt agreements, as well as the guarantees of SFC’s long-term debt.




4853



Table of Contents



Securitized Borrowings

We execute private securitizations under Rule 144A of the Securities Act of 1933. As of March 31,June 30, 2019, our structured financings consisted of the following:
(dollars in millions) Issue Amount (a) Initial Collateral Balance Current
Note Amounts
Outstanding (a)
 
Current Collateral Balance
(b)
 
Current
Weighted Average
Interest Rate
 
Original
Revolving
Period
 Issue Amount (a) Initial Collateral Balance Current
Note Amounts
Outstanding (a)
 
Current Collateral Balance
(b)
 
Current
Weighted Average
Interest Rate
 
Original
Revolving
Period
                      
SLFT 2015-A $1,163
 $1,250
 $348
 $400
 4.19% 3 years
SLFT 2015-B 314
 336
 314
 336
 3.78% 5 years $314
 $336
 $314
 $336
 3.78%  5 years
SLFT 2016-A 532
 559
 396
 425
 3.15% 2 years 532
 559
 302
 335
 3.23%  2 years
SLFT 2017-A 652
 685
 619
 685
 2.98% 3 years 652
 685
 619
 685
 2.98%  3 years
OMFIT 2015-1 1,229
 1,397
 387
 510
 4.94% 3 years 1,229
 1,397
 279
 409
 5.50%  3 years
OMFIT 2015-2 1,250
 1,346
 207
 280
 5.09% 2 years
OMFIT 2015-3 293
 329
 293
 325
 4.21% 5 years 293
 329
 293
 325
 4.21%  5 years
OMFIT 2016-1 500
 570
 390
 455
 4.07% 3 years 500
 570
 296
 367
 4.20%  3 years
OMFIT 2016-2 890
 1,007
 256
 408
 5.39% 2 years 890
 1,007
 166
 326
 5.81%  2 years
OMFIT 2016-3 350
 397
 317
 391
 4.33% 5 years 350
 397
 317
 391
 4.33%  5 years
OMFIT 2017-1 947
 988
 900
 988
 2.79% 2 years 947
 988
 900
 988
 2.78%  2 years
OMFIT 2018-1 632
 650
 600
 651
 3.60% 3 years 632
 650
 600
 651
 3.60%  3 years
OMFIT 2018-2 368
 381
 350
 381
 3.87% 5 years 368
 381
 350
 381
 3.87%  5 years
OMFIT 2019-1 632
 654
 600
 654
 3.79% 2 years 632
 654
 600
 654
 3.79%  2 years
ODART 2017-1 300
 300
 94
 118
 3.43% 1 year 300
 300
 71
 93
 3.85%  1 year
ODART 2017-2 605
 624
 484
 512
 2.69% 1 year 605
 624
 376
 417
 2.80%  1 year
ODART 2018-1 947
 964
 900
 964
 3.56% 2 years 947
 964
 900
 964
 3.56%  2 years
ODART 2019-1 737
 750
 700
 750
 3.79% 5 years 737
 750
 700
 750
 3.79%  5 years
Total securitizations $12,341
 $13,187
 $8,155
 $9,233
    $9,928
 $10,591
 $7,083
 $8,072
   
                                      
(a)Issue Amount includes the retained interest amounts as applicable and the Current Note Amounts Outstanding balances reflect pay-downs subsequent to note issuance and exclude retained interest amounts.
(b)Inclusive of in-process replenishments of collateral for securitized borrowings, in a revolving status.




4954



Table of Contents



Revolving Conduit Facilities

In addition to the structured financings, we had access to 1213 conduit facilities with a total borrowing capacity of $6.2$6.7 billion as of March 31,June 30, 2019:
(dollar in millions) Advance Maximum Balance Amount
Drawn
 Revolving
Period End
 Due and Payable Advance Maximum Balance Amount
Drawn
 Revolving
Period End
 Due and Payable
          
Rocky River Funding, LLC $400
 $
 June 2020 July 2021 $400
 $
 April 2022 May 2023
Thur River Funding, LLC 350
 
 June 2020 February 2027 350
 
 June 2020 February 2027
OneMain Financial Funding IX, LLC 600
 
 June 2020 July 2021 650
 
 June 2022 July 2023
Mystic River Funding, LLC 850
 
 September 2020 October 2023 850
 
 September 2020 October 2023
Fourth Avenue Auto Funding, LLC 250
 
 September 2020 October 2021
Fourth Avenue Auto Funding, LLC * 200
 
 June 2022 July 2023
OneMain Financial Funding VIII, LLC 650
 
 August 2021 September 2023 650
 
 August 2021 September 2023
OneMain Financial Auto Funding I, LLC 850
 
 June 2021 July 2028 850
 
 June 2021 July 2028
OneMain Financial Funding VII, LLC 850
 
 June 2021 July 2023 850
 
 June 2021 July 2023
Thayer Brook Funding, LLC 250
 
 July 2021 August 2022 250
 
 July 2021 August 2022
Hubbard River Funding, LLC 250
 
 September 2021 October 2023 250
 
 September 2021 October 2023
Seine River Funding, LLC 650
 
 October 2021 November 2024 650
 
 October 2021 November 2024
New River Funding LLC 250
 
 March 2022 April 2027 250
 
 March 2022 April 2027
Hudson River Funding LLC 500
 
 June 2022 July 2025
Total $6,200
 $
  $6,700
 $
 

*On June 28, 2019, we entered into an agreement to amend the loan and security agreement with Fourth Avenue Auto Funding, LLC to, among other things, extend the revolving period ending September 2020 to June 2022 thereby extending the final maturity to July 2023.

See “Liquidity and Capital Resources - Sources and Uses of Funds - Securitizations and Borrowings from Revolving Conduit Facilities” above for information on the securitization and conduit transactionstransaction completed subsequent to March 31,June 30, 2019.


Off-Balance Sheet Arrangements


We have no material off-balance sheet arrangements as defined by SEC rules. We had no off-balance sheet exposure to losses associated with unconsolidated VIEs at March 31,June 30, 2019 or December 31, 2018, other than certain representations and warranties associated with the sales of the mortgage-backed retained certificates during 2014. As of March 31,June 30, 2019, we had no repurchase activity related to these sales.


Critical Accounting Policies and Estimates


We describe our significant accounting policies used in the preparation of our consolidated financial statements in Note 3 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K. We consider the following policies to be our most critical accounting policies because they involve critical accounting estimates and a significant degree of management judgment:


allowance for finance receivable losses;
TDR finance receivables;
fair value measurements; and
goodwill and other intangible assets.


There have been no material changes to our critical accounting policies or to our methodologies for deriving critical accounting estimates during the threesix months ended March 31,June 30, 2019.



55


Table of Contents


Recent Accounting Pronouncements


See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this report for discussion of recently issued accounting pronouncements.



50


Table of Contents

Seasonality


Our personal loan volume is generally highest during the second and fourth quarters of the year, primarily due to marketing efforts and seasonality of demand. Demand for our personal loans is usually lower in January and February after the holiday season and as a result of tax refunds. Delinquencies on our personal loans are generally lowestlower in the first quarterand second quarters and tend to rise throughout the remainder of the year. These seasonal trends contribute to fluctuations in our operating results and cash needs throughout the year.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.


There have been no material changes to our market risk previously disclosed in Part II - Item 7A included in our 2018 Annual Report on Form 10-K.
 
Item 4. Controls and Procedures.


Evaluation of Disclosure Controls and Procedures


Disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in reports that we file or submit 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 Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.


As of March 31,June 30, 2019, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This evaluation was conducted under the supervision of, and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based on our evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31,June 30, 2019 to provide the reasonable assurance described above.


Changes in Internal Control over Financial Reporting


There were no changes in our internal control over financial reporting during the firstsecond quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



56


Table of Contents

PART II — OTHER INFORMATION


Item 1. Legal Proceedings.


See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in this report.


Item 1A. Risk Factors.


There have been no material changes to our risk factors included in Part I, Item 1A of our 2018 Annual Report on Form 10-K.
 

51


Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNone.

Share repurchase activity for the three months ended March 31, 2019 was as follows:
Period 
Total Number
of Shares Purchased *
 
Average Price
Paid per Share
 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
         
January 1, 2019 - January 31, 2019 
 $
 
 
February 1, 2019 - February 28, 2019 8,246
 34.60
 
 
March 1, 2019 - March 31, 2019 
 
 
 
Total 8,246
      
*Represents the surrender of shares to OMH in an amount equal to the amount of tax withheld in satisfaction of the withholding obligations of certain employees in connection with the vesting of restricted shares. As of the date of this report, OMH has no publicly announced plans or programs to repurchase OMH common stock.


Item 3. Defaults Upon Senior Securities.


None.


Item 4. Mine Safety Disclosures.


Not applicable.


Item 5. Other Information.


On May 1, 2019, Robert Hurzeler, the Company’s Executive Vice President and Chief Operating Officer, indicated to the Company that he intends to resign. His last day of employment will be May 31, 2019.None.



52


Table of Contents

Item 6. Exhibits.Exhibit Index.
Exhibit Number Description
   
 
   
 
   
 
   
 
   
101 
Interactive data files pursuant to Rule 405 of Regulation S-T:
   (i) Condensed Consolidated Balance Sheets,
   (ii) Condensed Consolidated Statements of Operations,
   (iii) Condensed Consolidated Statements of Comprehensive Income (Loss),
   (iv) Condensed Consolidated Statements of Shareholders’Shareholder’s Equity,
   (v) Condensed Consolidated Statements of Cash Flows, and
   (vi) Notes to the Condensed Consolidated Financial Statements.

* Management contract or compensatory plan or arrangement.


5357



Table of Contents


Signature


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.


   ONEMAIN HOLDINGS, INC.
   (Registrant)
    
Date:May 3,August 2, 2019 By:/s/ Micah R. Conrad
    Micah R. Conrad
    Executive Vice President and Chief Financial Officer
    (Duly Authorized Officer and Principal Financial Officer)






5458