UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2016~~March 31, 2017

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-06155

SPRINGLEAF FINANCE CORPORATION

(Exact name of registrant as specified in its charter)



Indiana		35-0416090
(State of Incorporation)		(I.R.S. Employer Identification No.)

601 N.W. Second Street, Evansville, IN		47708
(Address of principal executive offices)		(Zip Code)

(812) 424-8031

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

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



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o	Emerging growth company o
		(Do not check if a smaller reporting company)

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

At ~~August~~May 1, ~~2016,~~2017, there were 10,160,021 shares of the registrant’s common stock, $0.50 par value, outstanding.

Table of Contents

TABLE OF CONTENTS



GLOSSARY		3

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	36
	Condensed Consolidated Statements of Operations	47
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	58
	Condensed Consolidated Statements of Shareholder’s Equity	69
	Condensed Consolidated Statements of Cash Flows	710
	Notes to Condensed Consolidated Financial Statements	811
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5740
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8158
Item 4.	Controls and Procedures	8158

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	8259
Item 1A.	Risk Factors	8259
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8259
Item 3.	Defaults Upon Senior Securities	8259
Item 4.	Mine Safety Disclosures	8259
Item 5.	Other Information	8259
Item 6.	Exhibits	8259

SIGNATURE		8360

GLOSSARY

Terms and abbreviations used in this report are defined below.



Term or Abbreviation		Definition

1999 Indenture		Indenture dated as of May 1, 1999 between SFC and Wilmington
2014-A Notes		asset-backed notes issued in March 2014 by the Springleaf Funding Trust 2014-A
2016 Annual Report on Form 10-K		Annual Report on Form 10-K for the fiscal year ended December 31, 2016
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 and guaranteed by OMH
8.25% SFC Notes		$1.0 billion of 8.25% Senior Notes due 2020 issued by SFC and guaranteed by OMH
ABS		asset-backed securities
Adjusted pretax income		a non-GAAP financial measure; income before income taxes on a Segment Accounting Basis and excludes net gain on sale of SpringCastle interests, SpringCastle transaction costs, and losses resulting from repurchases and repayments of debt
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
Average debt		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 2) in the period
Blackstone		collectively, BTO Willow Holdings II, L.P. and Blackstone Family Tactical Opportunities Investment Partnership—NQ—ESC L.P.
Cash Services Note		new intercompany demand note issued to CSI in exchange for the Independence Demand Note in connection with the Note Assignment
CDO		collateralized debt obligations
CFPB		Consumer Financial Protection Bureau
CMBS		commercial mortgage-backed securities
CSI		Springleaf Financial Cash Services, Inc.
Dodd-Frank Act		the Dodd-Frank Wall Street Reform and Consumer Protection Act
Exchange Act		Securities Exchange Act of 1934, as amended
FA Loans		purchased credit impaired finance receivables related to the Fortress Acquisition
FASB		Financial Accounting Standards Board
FHLB		Federal Home Loan Bank
FICO score		a credit score created by Fair Isaac Corporation
Fixed charge ratio		earnings less income taxes, interest expense, extraordinary items, goodwill impairment, and any amounts related to discontinued operations, divided by the sum of interest expense and any preferred dividends
Fortress		Fortress Investment Group LLC
Fortress Acquisition		FCFI Acquisition LLC, an affiliate of Fortress, acquired an 80% economic interest for a cash purchase price of $119 million, effective November 30, 2010
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
Independence		Independence Holdings, LLC
Independence Demand Note		a revolving demand note entered into on November 12, 2015 whereby CSI agreed to make advances to Independence from time to time
Indiana DOI		Indiana Department of Insurance
Initial Stockholder		Springleaf Financial Holdings, LLC



Term or Abbreviation		Definition

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
Lendmark Sale		the sale of 127 Springleaf branches to Lendmark Financial Service, LLC, effective April 30, 2016
LIBOR		London Interbank Offered Rate
Logan Circle		Logan Circle Partners, L.P.
Merit		Merit Life Insurance Co.
Nationstar		Nationstar Mortgage LLC
Net charge-off ratio		annualized net charge-offs as a percentage of average net receivables
Net interest income		interest income less interest expense
Note Assignment		an assignment of an intercompany demand note entered into on July 19, 2016 whereby CSI sold and assigned to OMFH, and OMFH purchased and assumed from CSI, an interest in and to CSI’s right to receive $150 million principal amount outstanding under the Independence Demand Note
NRZ		New Residential Investment Corp.
OCLI		OneMain Consumer Loan, Inc.
ODART		OneMain Direct Auto Receivables Trust
OMAS		OneMain Assurance Services, LLC
OMFH		OneMain Financial Holdings, LLC
OMFH Note		new intercompany demand note issued to OMFH in exchange for the Independence Demand Note (in addition to the Cash Services Note) in connection with the Note Assignment
OMH		OneMain Holdings, Inc.
OneMain Acquisition		Acquisition of OneMain from CitiFinancial Credit Company, effective November 1, 2015
OneMain Demand Note		a revolving demand note entered into on November 15, 2015 whereby SFC agreed to make advances to OMFH from time to time
Other SFC Notes		collectively, approximately $5.2 billion aggregate principal amount of senior notes, on a senior unsecured basis, and the Junior Subordinated Debenture, on a junior subordinated basis, issued by SFC and guaranteed by OMH
Recovery ratio		annualized recoveries on net charge-offs as a percentage of average net receivables
retail sales finance		collectively, retail sales contracts and revolving retail accounts
RMBS		residential mortgage-backed securities
SCP Loans		purchased credit impaired loans acquired through the SpringCastle Joint Venture
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 First Supplemental Indenture		supplemental indenture dated as of December 3, 2014, 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
SFC Second Supplemental Indenture		supplemental indenture dated as of April 11, 2016, to the SFC Base Indenture
SFC Trust Guaranty Agreement		agreement entered into on December 30, 2013 by OMH whereby it agreed to fully and unconditionally guarantee the related payment obligations under the trust preferred securities in connection with the Junior Subordinated Debenture



Term or Abbreviation		Definition

SFI		Springleaf Finance, Inc.
SFMC		Springleaf Finance Management Corporation
SGSC		Springleaf General Services Corporation
SLFT		Springleaf Funding Trust
SpringCastle Interests Sale		the 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
SpringCastle Portfolio		loans acquired through the SpringCastle Joint Venture
Tangible equity		total equity less accumulated other comprehensive income or loss
Tangible managed assets		total assets less goodwill and other intangible assets
TDR finance receivables		troubled debt restructured finance receivables
Trust preferred securities		capital securities classified as debt for accounting purposes but due to their terms are afforded, at least in part, equity capital treatment in the calculation of effective leverage by rating agencies
UK		United Kingdom
UPB		unpaid principal balance
VFN		variable funding notes
VIEs		variable interest entities
Weighted average interest rate		annualized interest expense as a percentage of average debt
Wilmington		Wilmington Trust, National Association
Yield		annualized finance charges as a percentage of average net receivables
Yosemite		Yosemite Insurance Company

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)


(dollars in millions, except par value amount)	June 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016

Assets
Cash and cash equivalents	$	320		$	321		$	397		$	240
Investment securities	549			604			613			582
Net finance receivables:
Personal loans (includes loans of consolidated VIEs of $2.4 billion in 2016 and $3.6 billion in 2015)	4,663			4,300
SpringCastle Portfolio (includes loans of consolidated VIEs of $1.7 billion in 2015)	—			1,703
Personal loans (includes loans of consolidated VIEs of $2.9 billion in 2017 and 2016)							4,715			4,804
Real estate loans	209			538			139			144
Retail sales finance	16			23			9			11
Net finance receivables	4,888			6,564			4,863			4,959
Unearned insurance premium and claim reserves	(220		)	(250		)	(198		)	(212		)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $85 million in 2016 and $128 million in 2015)	(197		)	(224		)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $85 million in 2017 and $94 million in 2016)							(196		)	(204		)
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses	4,471			6,090			4,469			4,543
Finance receivables held for sale (includes finance receivables held for sale of consolidated VIEs of $435 million in 2015)	420			793
Finance receivables held for sale							148			153
Notes receivable from parent and affiliates	3,683			3,804			3,803			3,723
Restricted cash and cash equivalents (includes restricted cash and cash equivalents of consolidated VIEs of $150 million in 2016 and $282 million in 2015)	159			295
Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $173 million in 2017 and $211 million in 2016)							192			227
Other assets	278			281			244			251

Total assets	$	9,880		$	12,188		$	9,866		$	9,719

Liabilities and Shareholder’s Equity
Long-term debt (includes debt of consolidated VIEs of $2.2 billion in 2016 and $5.5 billion in 2015)	$	6,699		$	9,582
Note payable to affiliate	301			—
Long-term debt (includes debt of consolidated VIEs of $2.6 billion in 2017 and $2.7 billion in 2016)							$	6,823		$	6,837
Insurance claims and policyholder liabilities	252			230			270			248
Deferred and accrued taxes	129			128			100			106
Other liabilities	215			216
Other liabilities (includes other liabilities of consolidated VIEs of $5 million in 2017 and 2016)							302			185
Total liabilities	7,596			10,156			7,495			7,376
Commitments and contingent liabilities (Note 14)

Shareholder’s equity:
Common stock, par value $.50 per share; 25,000,000 shares authorized, 10,160,021 and 10,160,020 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	5			5
Common stock, par value $.50 per share; 25,000,000 shares authorized, 10,160,021 shares issued and outstanding at March 31, 2017 and December 31, 2016							5			5
Additional paid-in capital	800			789			799			799
Accumulated other comprehensive loss	(11		)	(24		)	(6		)	(7		)
Retained earnings	1,490			1,341			1,573			1,546
Springleaf Finance Corporation shareholder’s equity	2,284			2,111
Non-controlling interests	—			(79		)
Total shareholder’s equity	2,284			2,032			2,371			2,343

Total liabilities and shareholder’s equity	$	9,880		$	12,188		$	9,866		$	9,719

See Notes to Condensed Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)


(dollars in millions)	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended March 31,
	2016			2015		2016			2015			2017		2016

Interest income:
Finance charges	$	295		$	402	$	680		$	797		$	294	$	385
Finance receivables held for sale originated as held for investment	18			4		64			8			3		46
Total interest income	313			406		744			805			297		431

Interest expense	138			171		294			329			127		156

Net interest income	175			235		450			476			170		275

Provision for finance receivable losses	85			73		176			152			71		91

Net interest income after provision for finance receivable losses	90			162		274			324			99		184

Other revenues:
Insurance	40			40		79			76			37		39
Investment	8			15		14			32			6		6
Interest income on notes receivable from parent and affiliates	51			4		102			6			59		51
Net loss on repurchases and repayments of debt	(13		)	—		(16		)	—
Net gain on sale of personal loans	22			—		22			—
Net gain on sale of SpringCastle interests	—			—		167			—			—		167
Other	(2		)	—		(6		)	(1		)	4		(7		)
Total other revenues	106			59		362			113			106		256

Other expenses:
Operating expenses:
Salaries and benefits	85			98		182			178			79		97
Other operating expenses	77			68		154			141			67		77
Insurance policy benefits and claims	15			20		32			36			16		17
Total other expenses	177			186		368			355			162		191

Income before provision for income taxes	19			35		268			82
Income before income taxes												43		249

Provision for income taxes	6			—		91			9
Income taxes												16		85

Net income	13			35		177			73			27		164

Net income attributable to non-controlling interests	—			33		28			66			—		28

Net income attributable to Springleaf Finance Corporation	$	13		$	2	$	149		$	7		$	27	$	136

See Notes to Condensed Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


(dollars in millions)	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2016			2015			2016			2015			2017			2016

Net income	$	13		$	35		$	177		$	73		$	27		$	164

Other comprehensive income (loss):
Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities	12			(10		)	24			(5		)
Foreign currency translation adjustments	—			(1		)	—			—
Other comprehensive income:
Net change in unrealized gains on non-credit impaired available-for-sale securities													3			12
Income tax effect:
Net unrealized (gains) losses on non-credit impaired available-for-sale securities	(5		)	4			(9		)	2
Other comprehensive income (loss), net of tax, before reclassification adjustments	7			(7		)	15			(3		)
Net unrealized gains on non-credit impaired available-for-sale securities													(1		)	(4		)
Other comprehensive income, net of tax, before reclassification adjustments													2			8
Reclassification adjustments included in net income:
Net realized gains on available-for-sale securities	(2		)	(4		)	(3		)	(10		)	(2		)	(1		)
Income tax effect:
Net realized gains on available-for-sale securities	1			1			1			3			1			—
Reclassification adjustments included in net income, net of tax	(1		)	(3		)	(2		)	(7		)	(1		)	(1		)
Other comprehensive income (loss), net of tax	6			(10		)	13			(10		)
Other comprehensive income, net of tax													1			7

Comprehensive income	19			25			190			63			28			171

Comprehensive income attributable to non-controlling interests	—			33			28			66			—			28

Comprehensive income (loss) attributable to Springleaf Finance Corporation	$	19		$	(8	)	$	162		$	(3	)
Comprehensive income attributable to Springleaf Finance Corporation													$	28		$	143

See Notes to Condensed Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholder’s Equity (Unaudited)


	Springleaf Finance Corporation Shareholder’s Equity																			Springleaf Finance Corporation Shareholder’s Equity
(dollars in millions)	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Springleaf Finance Corporation Shareholder’s Equity			Non-controlling Interests			Total Shareholder’s Equity			Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Springleaf Finance Corporation Shareholder’s Equity			Non-controlling Interests			Total Shareholder’s Equity

Balance, January 1, 2017																				$	5	$	799		$	(7	)	$	1,546	$	2,343		$	—		$	2,343
Other comprehensive income																				—		—			1			—		1			—			1
Net income																				—		—			—			27		27			—			27
Balance, March 31, 2017																				$	5	$	799		$	(6	)	$	1,573	$	2,371		$	—		$	2,371

Balance, January 1, 2016	$	5	$	789		$	(24	)	$	1,341	$	2,111		$	(79	)	$	2,032		$	5	$	789		$	(24	)	$	1,341	$	2,111		$	(79	)	$	2,032
Capital contribution from parent	—		10			—			—		10			—			10			—		10			—			—		10			—			10
Share-based compensation expense, net of forfeitures	—		1			—			—		1			—			1			—		1			—			—		1			—			1
Excess tax benefit from share-based compensation	—		1			—			—		1			—			1			—		1			—			—		1			—			1
Withholding tax on vested RSUs	—		(1		)	—			—		(1		)	—			(1		)
Withholding tax on share-based compensation																				—		(1		)	—			—		(1		)	—			(1		)
Change in non-controlling interests:
Distributions declared to joint venture partners	—		—			—			—		—			(18		)	(18		)	—		—			—			—		—			(18		)	(18		)
Sale of equity interests in SpringCastle joint venture	—		—			—			—		—			69			69			—		—			—			—		—			69			69
Other comprehensive income	—		—			13			—		13			—			13			—		—			7			—		7			—			7
Net income	—		—			—			149		149			28			177			—		—			—			136		136			28			164
Balance, June 30, 2016	$	5	$	800		$	(11	)	$	1,490	$	2,284		$	—		$	2,284

Balance, January 1, 2015	$	5	$	771		$	3		$	1,327	$	2,106		$	(129	)	$	1,977
Non-cash incentive compensation from Initial Stockholder	—		15			—			—		15			—			15
Share-based compensation expense, net of forfeitures	—		1			—			—		1			—			1
Change in non-controlling interests:
Distributions declared to joint venture partners	—		—			—			—		—			(39		)	(39		)
Other comprehensive loss	—		—			(10		)	—		(10		)	—			(10		)
Net income	—		—			—			7		7			66			73
Balance, June 30, 2015	$	5	$	787		$	(7	)	$	1,334	$	2,119		$	(102	)	$	2,017
Balance, March 31, 2016																				$	5	$	800		$	(17	)	$	1,477	$	2,265		$	—		$	2,265

See Notes to Condensed Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


(dollars in millions)	Six Months Ended June 30,						Three Months Ended March 31,
	2016			2015			2017			2016

Cash flows from operating activities
Net income	$	177		$	73		$	27		$	164
Reconciling adjustments:
Provision for finance receivable losses	176			152			71			91
Depreciation and amortization	64			45			39			19
Deferred income tax charge (benefit)	8			(37		)	(5		)	8
Net gain on sale of personal loans	(22		)	—
Net loss on repurchases and repayments of debt	16			—
Non-cash incentive compensation from Initial Stockholder	—			15
Share-based compensation expense, net of forfeitures	1			1			—			1
Net gain on sale of SpringCastle interests	(167		)	—			—			(167		)
Other	4			(12		)	—			6
Cash flows due to changes in:
Other assets and other liabilities	(24		)	(10		)	98			37
Insurance claims and policyholder liabilities	(7		)	13			9			(7		)
Taxes receivable and payable	(13		)	(5		)	(1		)	47
Accrued interest and finance charges	10			3			(5		)	20
Restricted cash and cash equivalents not reinvested	4			—
Other, net	2			—			—			2
Net cash provided by operating activities	229			238			233			221

Cash flows from investing activities
Net principal collections (originations) of finance receivables held for investment and held for sale	(276		)	(287		)	7			(30		)
Proceeds on sales of finance receivables held for sale originated as held for investment	624			74
Proceeds from sale of SpringCastle interests	101			—
Cash advances on intercompany notes receivables	(187		)	(77		)
Principal collections on intercompany notes receivables	214			26
Proceeds from sale of SpringCastle interests, net of restricted cash released							—			26
Cash advances on intercompany notes receivable							(211		)	(112		)
Proceeds from repayments of principal and assignment of intercompany notes receivable							138			127
Available-for-sale securities purchased	(134		)	(209		)	(72		)	(92		)
Trading and other securities purchased	(10		)	(1,309		)	—			(1		)
Available-for-sale securities called, sold, and matured	221			219			63			78
Trading and other securities called, sold, and matured	10			1,945			—			10
Change in restricted cash and cash equivalents	57			(109		)
Proceeds from sale of real estate owned	4			10
Other, net	3			8			3			6
Net cash provided by investing activities	627			291
Net cash provided by (used for) investing activities							(72		)	12

Cash flows from financing activities
Proceeds from issuance of long-term debt, net of commissions	1,990			1,829			366			295
Proceeds from intercompany note payable	670			—			—			370
Repayments of long-term debt	(3,140		)	(591		)	(405		)	(916		)
Distributions to joint venture partners	(18		)	(39		)	—			(18		)
Payments on note payable to affiliate	(370		)	—
Excess tax benefit from share-based compensation	1			—			—			1
Withholding tax on share-based compensation							—			(1		)
Capital contribution from parent	10			—			—			10
Net cash provided by (used for) financing activities	(857		)	1,199
Net cash used for financing activities							(39		)	(259		)


Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)

(dollars in millions)	Six Months Ended June 30,					At or for the Three Months Ended March 31,
(dollars in millions)	2016			2015		2017			2016

Net change in cash and cash equivalents	(1		)	1,728
Cash and cash equivalents at beginning of period	321			749
Cash and cash equivalents at end of period	$	320		$	2,477
Net change in cash and cash equivalents and restricted cash and restricted cash equivalents						122			(26		)
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period						467			616
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period						$	589		$	590

Supplemental cash flow information
Cash and cash equivalents						$	397		$	365
Restricted cash and restricted cash equivalents						192			225
Total cash and cash equivalents and restricted cash and restricted cash equivalents						$	589		$	590

Supplemental non-cash activities
Transfer of finance receivables held for investment to finance receivables held for sale (prior to deducting allowance for finance receivable losses)	$	1,895		$	—	$	—		$	1,608
Increase in finance receivables held for investment financed with intercompany payable	$	89		$	—
Transfer of finance receivables to real estate owned	$	4		$	5	2			2
Net unsettled investment security dispositions (purchases)	$	(8	)	$	14
Net unsettled investment security purchases						(19		)	—

Restricted cash and restricted cash equivalents represent funds required to be set aside by local state authorities for the payment of state specific insurance licenses, as well as funds to be used for future debt payments relating to our securitization transactions and escrow deposits.

See Notes to Condensed Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~June 30, 2016~~March 31, 2017

1. Business and Basis of Presentation

Springleaf Finance Corporation ~~(“SFC”~~is referred to in this report as “SFC” or, collectively with its subsidiaries, whether directly or indirectly owned, “Springleaf,” the “Company,” “we,” “us,” or ~~“our”)~~“our.” SFC is a wholly owned subsidiary of ~~Springleaf Finance, Inc. (“SFI”).~~SFI. SFI is a wholly owned subsidiary of ~~OneMain Holdings, Inc. (“OMH”).~~OMH.

At ~~June 30, 2016, Springleaf Financial Holdings, LLC (the “Initial Stockholder”)~~March 31, 2017, the Initial Stockholder owned approximately ~~58%~~57% of OMH’s common stock. The Initial Stockholder is owned primarily by a private equity fund managed by an affiliate of ~~Fortress Investment Group LLC (“Fortress”).~~Fortress.

~~SFC is a financial services holding company with subsidiaries engaged in the consumer finance and insurance businesses.~~

BASIS OF PRESENTATION

We prepared our condensed consolidated financial statements using ~~generally accepted accounting principles in the United States of America (“GAAP”).~~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 SFC, its subsidiaries (all of which are wholly owned, except for certain subsidiaries associated with ~~a joint venture~~the SpringCastle Joint Venture, in which we owned a 47% equity interest prior to March 31, 2016), and ~~variable interest entities (“VIEs”)~~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. Ultimate 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 ~~2016~~2017 presentation, we have reclassified ~~certain items in prior periods, including~~ certain items in prior periods of our condensed consolidated financial statements. ~~These~~Also, to conform to the new alignment of our segments, as further discussed in Note 16, we have revised our prior period segment disclosures.

The condensed consolidated financial statements in this report should be read in conjunction with the consolidated financial statements and related notes included in our 2016 Annual Report on Form ~~10-K for the fiscal year ended December 31, 2015 (“2015 Annual Report on Form 10-K”).~~10-K. We follow the same significant accounting policies for our interim ~~reporting, except for the change in accounting policy discussed below.~~

~~CHANGE IN ACCOUNTING POLICY~~

Effective April 1, 2016, we changed our accounting policy for the derecognition of loans within a purchased credit impaired (“PCI”) pool. Historically, we removed loans from a PCI pool upon charge-off of the loan, based on the Company’s charge-off accounting policy at their allocated carrying value. Under our new accounting policy, loans will be removed from a PCI pool when the loan is written-off, at which time further collections efforts would not be pursued, or sold or repaid. While both methods are acceptable under GAAP, we believe the new method for derecognition of PCI loans is preferable as it enhances consistency with our industry peers. As of April 1, 2016, the cumulative effect of applying the change in accounting policy increased shareholder’s equity by $6 million.

~~Our policy for derecognition of PCI loans following the change described above is presented below:~~

~~Purchased Credit Impaired Finance Receivables~~

As part of each of our acquisitions, we identify a population of finance receivables for which it is determined that it is probable that we will be unable to collect all contractually required payments. The population of accounts identified generally consists of those finance receivables that are (i) 60 days or more past due at acquisition, (ii) which had been classified as troubled debt restructured (“TDR”) finance receivables as of the acquisition date, (iii) may have been previously modified, or (iv) had other indications of credit deterioration as of the acquisition date.

We accrete the excess of the cash flows expected to be collected on the purchased credit impaired finance receivables over the discounted cash flows (the “accretable yield”) into interest income at a level rate of return over the expected lives of the underlying pools of the purchased credit impaired finance receivables. The underlying pools are based on finance receivables with common risk characteristics. We have established policies and procedures to periodically (at least once a quarter) update

the amount of cash flows we expect to collect, incorporating assumptions regarding default rates, loss severities, the amounts and timing of prepayments and other factors that are reflective of then current market conditions. Probable decreases in expected finance receivable cash flows result in the recognition of impairment, which is recognized through the provision for finance receivable losses. Probable significant increases in expected cash flows to be collected would first reverse any previously recorded allowance for finance receivable losses; any remaining increases are recognized prospectively as adjustments to the respective pool’s yield.

Our purchased credit impaired finance receivables remain in our purchased credit impaired pools until liquidation or write-off. We do not reclassify modified purchased credit impaired finance receivables as TDR finance receivables.

We have additionally established policies and procedures related to maintaining the integrity of these pools. A finance receivable will not be removed from a pool unless we sell, foreclose, or otherwise receive assets in satisfaction of a particular finance receivable or a finance receivable is written-off. If a finance receivable is renewed and additional funds are lent and terms are adjusted to current market conditions, we consider this a new finance receivable and the previous finance receivable is removed from the pool. If the facts and circumstances indicate that a finance receivable should be removed from a pool, that finance receivable will be removed at its allocated carrying amount. Removal of the finance receivable from a pool does not affect the yield used to recognize accretable yield of the pool.

We have retrospectively applied this change in accounting policy. The effect of this change in accounting policy on income (loss) before provision for (benefit from) income taxes and net income (loss) attributable to SFC, and the cumulative effect of this change in accounting policy on shareholder’s equity attributable to SFC for the following prior periods are included in the table below.

(dollars in millions) As Reported Adjustments As Adjusted

Income (loss) before provision for (benefit from) income taxes
Year ended December 31, 2013 $ (136 ) $ 11
$ (125 )
Year ended December 31, 2014 755
(77 ) 678
Year ended December 31, 2015 144
15
159

Three months ended March 31, 2015 42
5
47
Three months ended March 31, 2016 304
(55 ) 249

Net income (loss) attributable to SFC
Year ended December 31, 2013 $ (83 ) $ 7
$ (76 )
Year ended December 31, 2014 448
(51 ) 397
Year ended December 31, 2015 9
5
14

Three months ended March 31, 2015 3
2
5
Three months ended March 31, 2016 172
(36 ) 136

Shareholder’s equity attributable to SFC

January 1, 2014 $ 1,328
$ 57
$ 1,385
January 1, 2015 2,069
37
2,106
January 1, 2016 2,069
42
2,111

The following tables present the impact of the retrospective application of this change in accounting policy on the amounts previously reported in our (i) consolidated balance sheet as of December 31, 2015, (ii) condensed consolidated statements of operations for the three and six months ended June 30, 2015 and (iii) condensed consolidated statements of cash flows for the six months ended June 30, 2015.

~~Revised Condensed Consolidated Balance Sheet~~

December 31, 2015
(dollars in millions) As Reported Adjustments As Adjusted

Assets

Cash and cash equivalents $ 321
$ —
$ 321
Investment securities 604
—
604
Net finance receivables:
Personal loans 4,300
—
4,300
SpringCastle Portfolio 1,576
127
1,703
Real estate loans 524
14
538
Retail sales finance 23
—
23
Net finance receivables 6,423
141
6,564
Unearned insurance premium and claim reserves (250 ) —
(250 )
Allowance for finance receivable losses (219 ) (5 ) (224 )
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses 5,954
136
6,090
Finance receivables held for sale 796
(3 ) 793
Notes receivable from parent and affiliates 3,804
—
3,804
Restricted cash and cash equivalents 295
—
295
Other assets 281
—
281

Total assets $ 12,055
$ 133
$ 12,188

Liabilities and Shareholder’s Equity

Long-term debt $ 9,582
$ —
$ 9,582
Insurance claims and policyholder liabilities 230
—
230
Deferred and accrued taxes 103
25
128
Other liabilities 217
(1 ) 216
Total liabilities 10,132
24
10,156

Shareholder’s equity:

Common stock 5
—
5
Additional paid-in capital 758
31
789
Accumulated other comprehensive loss (24 ) —
(24 )
Retained earnings 1,330
11
1,341
Springleaf Finance Corporation shareholder’s equity 2,069
42
2,111
Non-controlling interests (146 ) 67
(79 )
Total shareholder’s equity 1,923
109
2,032

Total liabilities and shareholder’s equity $ 12,055
$ 133
$ 12,188

~~Revised Condensed Consolidated Statements of Operations~~

(dollars in millions) Three Months Ended June 30, 2015 Six Months Ended June 30, 2015
As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted

Interest income:
Finance charges $ 404
$ (2 ) $ 402
$ 802
$ (5 ) $ 797
Finance receivables held for sale originated as held for investment 5
(1 ) 4
9
(1 ) 8
Total interest income 409
(3 ) 406
811
(6 ) 805

Interest expense 171
—
171
329
—
329

Net interest income 238
(3 ) 235
482
(6 ) 476

Provision for finance receivable losses 79
(6 ) 73
165
(13 ) 152

Net interest income after provision for finance receivable losses 159
3
162
317
7
324

Other revenues:

Insurance 40
—
40
76
—
76
Investment 15
—
15
32
—
32
Interest income on notes receivable from parent and affiliates 4
—
4
6
—
6
Other —
—
—
(2 ) 1
(1 )
Total other revenues 59
—
59
112
1
113

Other expenses:

Operating expenses:

Salaries and benefits 98
—
98
178
—
178
Other operating expenses 68
—
68
141
—
141
Insurance policy benefits and claims 20
—
20
36
—
36
Total other expenses 186
—
186
355
—
355

Income before provision for (benefit from) income taxes 32
3
35
74
8
82

Provision for (benefit from) income taxes (1 ) 1
—
7
2
9

Net income 33
2
35
67
6
73

Net income attributable to non-controlling interests 31
2
33
62
4
66

Net income attributable to Springleaf Finance Corporation $ 2
$ —
$ 2
$ 5
$ 2
$ 7

~~Revised Condensed Consolidated Statement of Cash Flows~~

(dollars in millions) Six Months Ended June 30, 2015
As Reported Adjustments As Adjusted

Cash flows from operating activities

Net income $ 67
$ 6
$ 73
Reconciling adjustments:

Provision for finance receivable losses 165
(13 ) 152
Depreciation and amortization 39
6
45
Deferred income tax charge (benefit) (38 ) 1
(37 )
Non-cash incentive compensation from Initial Stockholder 15
—
15
Share-based compensation expense, net of forfeitures 1
—
1
Other (12 ) —
(12 )
Cash flows due to changes in:

Other assets and other liabilities (10 ) —
(10 )
Insurance claims and policyholder liabilities 13
—
13
Taxes receivable and payable (5 ) —
(5 )
Accrued interest and finance charges 3
—
3
Net cash provided by operating activities 238
—
238

Cash flows from investing activities

Net principal collections (originations) of finance receivables held for investment and held for sale (287 ) —
(287 )
Proceeds on sales of finance receivables held for sale originated as held for investment 74
—
74
Cash advances on intercompany notes receivables (77 ) —
(77 )
Principal collections on intercompany notes receivables 26
—
26
Available-for-sale securities purchased (209 ) —
(209 )
Trading and other securities purchased (1,309 ) —
(1,309 )
Available-for-sale securities called, sold, and matured 219
—
219
Trading and other securities called, sold, and matured 1,945
—
1,945
Change in restricted cash and cash equivalents (109 ) —
(109 )
Proceeds from sale of real estate owned 10
—
10
Other, net 8
—
8
Net cash provided by investing activities 291
—
291

Cash flows from financing activities

Proceeds from issuance of long-term debt, net of commissions 1,829
—
1,829
Repayments of long-term debt (591 ) —
(591 )
Distributions to joint venture partners (39 ) —
(39 )
Net cash provided by (used for) financing activities 1,199
—
1,199

Net change in cash and cash equivalents 1,728
—
1,728
Cash and cash equivalents at beginning of period 749
—
749
Cash and cash equivalents at end of period $ 2,477
$ —
$ 2,477

We have also adjusted the applicable prior period amounts in the Notes to the Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 herein to reflect the impact of this change in accounting policy.

~~2. Significant Transactions~~

~~OMH’S ACQUISITION OF ONEMAIN FINANCIAL HOLDINGS, LLC~~

On November 15, 2015, OMH, through its wholly owned subsidiary, Independence Holdings, LLC (“Independence”), completed its acquisition of OneMain Financial Holdings, LLC (“OMFH”) from CitiFinancial Credit Company (“Citigroup”) for approximately $4.5 billion in cash (the “OneMain Acquisition”). As a result of the OneMain Acquisition, OMFH became a wholly owned, indirect subsidiary of OMH. OMFH is not a subsidiary of SFC and SFC is not a subsidiary of OMFH.

In connection with the closing of the OneMain Acquisition, on November 13, 2015, OMH and certain subsidiaries of SFC entered into an Asset Preservation Stipulation and Order and agreed to a Proposed Final Judgment (collectively, the “Settlement Agreement”) with the U.S. Department of Justice (the “DOJ”), as well as the state attorneys general for Colorado, Idaho, Pennsylvania, Texas, Virginia, Washington and West Virginia. The Settlement Agreement resolved the inquiries of the DOJ and such attorneys general with respect to the OneMain Acquisition and allowed OMH to proceed with the closing. Pursuant to the Settlement Agreement, OMH agreed to divest 127 branches of SFC subsidiaries across 11 states as a condition for approval of the OneMain Acquisition. The Settlement Agreement required certain of OMH’s subsidiaries (the “Branch Sellers”) to operate these 127 branches as an ongoing, economically viable and competitive business until sold to the divestiture purchaser. The court overseeing the settlement appointed a third-party monitor to oversee management of the divestiture branches and ensure the Company’s compliance with the terms of the Settlement Agreement.

~~SPRINGCASTLE INTERESTS SALE~~

On March 31, 2016, SFI, SpringCastle Holdings, LLC (“SpringCastle Holdings”) and Springleaf Acquisition Corporation (“Springleaf Acquisition” and, together with SpringCastle Holdings, the “SpringCastle Sellers”), wholly owned subsidiaries of OMH, entered into a purchase agreement with certain subsidiaries of New Residential Investment Corp. (“NRZ” and such subsidiaries, the “NRZ Buyers”) and BTO Willow Holdings II, L.P. and Blackstone Family Tactical Opportunities Investment Partnership—NQ—ESC L.P. (collectively, the “Blackstone Buyers” and together with the NRZ Buyers, the “SpringCastle Buyers”). Pursuant to the purchase agreement, on March 31, 2016, SpringCastle Holdings sold its 47% limited liability company interest in each of SpringCastle America, LLC, SpringCastle Credit, LLC and SpringCastle Finance, LLC, and Springleaf Acquisition sold its 47% limited liability company interest in SpringCastle Acquisition LLC, to the SpringCastle Buyers for an aggregate purchase price of approximately $112 million (the “SpringCastle Interests Sale”). SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC and SpringCastle Acquisition LLC are collectively referred to herein as the “SpringCastle Joint Venture.”

The SpringCastle Joint Venture primarily holds subordinate ownership interests in a securitized loan portfolio (the “SpringCastle Portfolio”), which consists of unsecured loans and loans secured by subordinate residential real estate mortgages and includes both closed-end accounts and open-end lines of credit. These loans are in a liquidating status and vary in form and substance from the Company’s originated loans. At December 31, 2015, the SpringCastle Portfolio included over 232,000 of acquired loans, representing $1.7 billion in net finance receivables.

In connection with the SpringCastle Interests Sale, the SpringCastle Buyers paid $101 million of the aggregate purchase price to the SpringCastle Sellers on March 31, 2016, with the remaining $11 million to be paid into an escrow account within 120 days following March 31, 2016. Such escrowed funds are expected to be held in escrow for a period of up to five years following March 31, 2016, and, subject to the terms of the purchase agreement and assuming certain portfolio performance requirements are satisfied, paid to the SpringCastle Sellers at the end of such five-year period. In connection with the SpringCastle Interests Sale, we recorded a net gain in other revenues at the time of sale of $167 million.

As a result of this sale, SpringCastle Acquisition and SpringCastle Holdings no longer hold any ownership interests of the SpringCastle Joint Venture. However, unless terminated, SFI will remain as servicer of the SpringCastle Portfolio under the existing servicing agreement for the SpringCastle Funding Trust. In addition, we deconsolidated the underlying loans of the SpringCastle Portfolio and previously issued securitized interests, which were reported in long-term debt, as we no longer were considered the primary beneficiary.

Prior to the SpringCastle Interests Sale, affiliates of the NRZ Buyers owned a 30% limited liability company interest in the SpringCastle Joint Venture, and affiliates of the Blackstone Buyers owned a 23% limited liability company interest in the SpringCastle Joint Venture (together, the “Other Members”). The Other Members are parties to the purchase agreement for purposes of certain limited indemnification obligations and post-closing expense reimbursement obligations of the SpringCastle Joint Venture to the SpringCastle Sellers.

The NRZ Buyers are subsidiaries of NRZ, which is externally managed by an affiliate of Fortress. The Initial Stockholder, which owned approximately 58% of OMH’s common stock as of March 31, 2016, the date of sale, was owned primarily by a private equity fund managed by an affiliate of Fortress. Mr. Edens, Chairman of the Board of Directors of OMH, also serves as Chairman of the Board of Directors of NRZ. Mr. Edens is also a principal of Fortress and serves as Co-Chairman of the Board of Directors of Fortress. Mr. Jacobs, a member of the Board of Directors of OMH, also serves as a member of NRZ’s Board of Directors and Fortress’ Board of Directors.

~~The purchase agreement included customary representations, warranties, covenants and indemnities. We did not record a sales recourse obligation related to the SpringCastle Interests Sale.~~

~~SFC’S OFFERING OF 8.25% SENIOR NOTES~~

On April 11, 2016, SFC issued $1.0 billion aggregate principal amount of 8.25% Senior Notes due 2020 (the “8.25% SFC Notes”) under an Indenture dated as of December 3, 2014 (the “Base Indenture”), as supplemented by a Second Supplemental Indenture, dated as of April 11, 2016 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), pursuant to which OMH provided a guarantee of the notes on an unsecured basis.

SFC used a portion of the proceeds from the offering to repurchase approximately $600 million aggregate principal amount of its existing senior notes that mature in 2017, at a premium to principal amount from certain beneficial owners, and certain of those beneficial owners purchased new SFC senior notes in the offering. SFC intends to use the remaining net proceeds for general corporate purposes, which may include further debt repurchases and repayments.

The notes are SFC’s senior unsecured obligations and rank equally in right of payment to all of SFC’s other existing and future unsubordinated indebtedness from time to time outstanding. The notes are effectively subordinated to all of SFC’s secured obligations to the extent of the value of the assets securing such obligations and structurally subordinated to any existing and future obligations of SFC’s subsidiaries with respect to claims against the assets of such subsidiaries.

The notes may be redeemed at any time and from time to time, at the option of SFC, in whole or in part at a “make-whole” redemption price specified in the Indenture. The notes will not have the benefit of any sinking fund.

The Indenture contains covenants that, among other things, (i) limit SFC’s ability to create liens on assets and (ii) restrict SFC’s ability to consolidate, merge or sell its assets. The Indenture also provides for events of default which, if any of them were to occur, would permit or require the principal of and accrued interest on the notes to become, or to be declared, due and payable.

~~LENDMARK SALE~~

On November 12, 2015, OMH and the Branch Sellers entered into a purchase and sale agreement with Lendmark Financial Services, LLC (“Lendmark”) to sell 127 Springleaf branches and, subject to certain exclusions, the associated personal loans issued to customers of such branches, fixed non-information technology assets and certain other tangible personal property located in such branches to Lendmark (the “Lendmark Sale”) for a purchase price equal to the sum of (i) the aggregate unpaid balance as of closing of the purchased loans multiplied by 103%, plus (ii) for each interest-bearing purchased loan, an amount equal to all unpaid interest that has accrued on the unpaid balance at the applicable note rate from the most recent interest payment date through the closing, plus (iii) the sum of all prepaid charges and fees and security deposits of the Branch Sellers to the extent arising under the purchased contracts as reflected on the books and records of the Branch Sellers as of closing, subject to certain limitations if the purchase price would exceed $695 million and Lendmark would be unable to obtain financing on certain specified terms. In anticipation of the sale of these branches, we transferred $608 million of personal loans from held for investment to held for sale on September 30, 2015.

Pursuant to the Settlement Agreement, we were required to dispose of the branches to be sold in connection with the Lendmark Sale within 120 days following November 13, 2015, subject to such extensions as the DOJ may approve. As we did not believe we would be able to consummate the Lendmark Sale prior to April 1, 2016, we requested two extensions of the closing deadline set forth in the Settlement Agreement. The DOJ granted our requests through May 13, 2016.

On May 2, 2016, we completed the Lendmark Sale for an aggregate cash purchase price of $624 million. Such sale was effective as of April 30, 2016, and included the sale to Lendmark of personal loans with an unpaid principal balance (“UPB”) as of March 31, 2016 of $600 million. OMH has entered into a transition services agreement with Lendmark dated as of May 2, 2016 (the “Transition Services Agreement”), and OMH’s and our activities will remain subject to the oversight of the Monitoring Trustee appointed by the court pursuant to the Settlement Agreement until the expiration of the Transition Services Agreement. The Transition Services Agreement is currently scheduled to expire on November 2, 2016, subject to up to two

additional three-month extensions with the permission of the DOJ. Although we and OMH continue to take such steps as we believe are necessary to comply with the terms of the Settlement Agreement, no assurance can be given that we will not incur fines or penalties associated with OMH’s or our activities pursuant to the Transition Services Agreement or OMH’s or our efforts to comply with the terms of the Settlement Agreement.

~~On May 2, 2016, SFC used a portion of the proceeds from the Lendmark Sale to repay, in full, its revolving demand note with OMFH, which totaled $376 million (including interest payable of $6 million).~~reporting.

3.2. Recent Accounting Pronouncements

ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED

~~Consolidation~~Investments

In ~~February~~March of ~~2015,~~2016, the ~~Financial Accounting Standards Board (the “FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”) 2015-02,~~ASU 2016-07, ~~Consolidation - Amendments~~Simplifying the Transition to the ~~Consolidation Analysis~~Equity Method of Accounting, which ~~amends~~eliminates the ~~current consolidation guidance~~requirement that, when an investment qualifies for use of the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and ~~ends~~retained earnings retroactively on a step-by-step basis as if the ~~deferral granted to reporting entities with variable interests~~equity method of accounting had been in effect during all previous periods that the investment ~~companies from applying certain prior amendments to~~had been held. The ASU requires that an entity that has available-for-sale securities recognize, through earnings, the ~~VIE guidance. This~~unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method of accounting. The amendment in this ASU is applicable to entities across all industries, particularly those that use limited partnerships as well as entities in any industry that outsource decision making or have historically applied related party tiebreakers in their consolidation analysis and disclosures. The standard became effective prospectively for ~~public business entities for fiscal years,~~annual periods, and ~~for~~ interim periods within those ~~fiscal years,~~annual periods, beginning after December 15, ~~2015.~~ 2016.We have adopted this ASU as of January 1, 2017 and concluded that it does not have ~~a material effect~~an impact on our consolidated financial statements.

Statement of Cash Flows

In November of 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which simplifies the presentation of restricted cash on the statement of cash flows by requiring entities to include restricted cash and restricted cash equivalents in the reconciliation of cash and cash equivalents. The amendments in this ASU become effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We have elected to early adopt this ASU as of January 1, 2017 and presented this change on a retrospective basis for all periods presented. We have concluded that this ASU does not have a material impact on our consolidated financial statements.

Technical Corrections and Improvements

In ~~June~~January of ~~2015,~~2017, the FASB issued ASU ~~2015-10,~~2017-03, ~~Technical~~Accounting Changes and Error Corrections ~~and Improvements~~, to ~~correct differences between original guidance~~enhance the footnote disclosure guidelines for ASUs 2014-09, 2016-02, and ~~the Accounting Standards Codification, clarify the guidance, correct references and make minor improvements affecting a variety of topics.~~2016-13. The amendments to this transition guidance became effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2015.~~2016. We have adopted this ASU ~~and~~as of January 1, 2017 on a prospective basis. We have concluded that itthis ASU does not have a material ~~effect on our consolidated financial statements.~~

~~Debt Instruments~~

~~In March of 2016, the FASB issued ASU 2016-06,~~ ~~Contingent Puts and Call Options in Debt Instruments~~, which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt host. The ASU requires assessing the embedded call (put) options solely in accordance with the four-step decision sequence. The amendment of this ASU becomes effective on a modified retrospective basis for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We have early adopted this ASU and concluded that it does not have a material effectimpact on our consolidated financial statements.

ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED

Revenue Recognition

In May of 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a consistent revenue accounting model across industries. In August of 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date, to defer the effective date of the new revenue recognition standard by one year, which would result in the ASU becoming effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. In March of 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations, which clarifies the implementation of the guidance on principal versus agent considerations from ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~.2014-09. ASU 2016-08 does not change the core principle of the guidance in ASU 2014-09, but rather clarifies the distinction between principal versus agent considerations when implementing ASU 2014-09. In April of 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, to clarify the implementation guidance of ASU 2014-09 relating to performance obligations and licensing. In May of 2016, the FASB issued ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, to clarify guidance in ASU 2014-09 related to assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts/contract modifications. In December of 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, which improves the guidance specific to the amendments in ASU 2014-09. We ~~are evaluating whether~~believe that the adoption of ~~these accounting pronouncements~~this ASU will not have a material effect on our consolidated financial ~~statements.~~

~~Short-Duration Insurance Contracts Disclosures~~

~~In May~~statements, and we are in the process of ~~2015,~~quantifying the ~~FASB issued ASU 2015-09,~~ ~~Disclosures about Short-Duration Contracts~~, to address enhanced disclosure requirements for insurers relating to short-duration insurance contract claims and unpaid claims liability rollforward for long and short-duration contracts. The disclosures are intended to provide users of financial statements with more transparent information about an insurance entity’s initial claim estimates and subsequent adjustments to those estimates, the methodologies and judgments used to estimate claims, and the timing, frequency, and severity of claims. The amendments in this ASU become effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. We are evaluating the potential impact of the adoption of the ASU on our consolidated financial statements.expected impact.

Financial Instruments

In January of 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which simplifies the impairment assessment of equity investments. The update requires equity investments to be measured at fair value with changes recognized in net income. This ASU eliminates the requirement to disclose the methods and assumptions to estimate fair value for financial instruments, requires the use of the exit price for disclosure purposes, requires the change in liability due to a change in credit risk to be presented in other comprehensive income, requires separate presentation of financial assets and liabilities by measurement category and form of asset (securities and loans), and clarifies the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The amendments in this ASU become effective prospectively for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

In March of 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs, which amends the amortization period for certain purchased callable debt securities held at a premium. This ASU shortens the amortization period for the premium from the adjustment of yield over the contractual life of the instrument to the earliest call date. The amendments in this ASU become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

Leases

In February of 2016, the FASB issued ASU 2016-02, Leases ~~(Topic 842)~~. The ASU ~~will require~~requires lessees to recognize ~~assets~~a right-to-use asset and ~~liabilities~~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. The amendments in this ASU become effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. We ~~are evaluating whether~~believe that the adoption of this ASU will have a material effect on our consolidated financial ~~statements.~~statements, and we are in the process of quantifying the expected impact.

~~Investments~~

~~In March of 2016, the FASB issued ASU 2016-07,~~ ~~Simplifying the Transition to the Equity Method of Accounting~~, which eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The ASU requires that an entity that has available-for-sale securities recognize, through earnings, the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendment in this ASU becomes effective prospectively for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

~~Stock Compensation~~

~~In March of 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share - Based Payment Accounting~~, which simplifies the accounting for share-based payment transactions, income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendment in this ASU becomes effective on a modified retrospective basis for accounting in tax benefits recognized, retrospectively for accounting related to the presentation of employee taxes paid, prospectively for accounting related to recognition of excess tax benefits, and either prospectively or retrospectively for accounting related to presentation of excess employee tax benefits for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

Revenue Recognition and Derivatives and Hedging

In May of 2016, the FASB issued ASU 2016-11, Revenue Recognition ~~(Topic 605)~~ and Derivatives and Hedging ~~(Topic 815)~~, to rescind certain ~~Securities and Exchange Commission (the “SEC”)~~SEC guidance in Topic 605 and Topic 815 as ASU 2014-09

becomes effective. Our adoption of ASU 2014-09 will bring us into alignment with this ASU. We ~~are evaluating whether~~believe that the adoption of this ASU will not have a material effect on our consolidated financial statements.

Allowance for Finance Receivables Losses

In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit ~~Losses (Topic 326):~~Losses: Measurement of Credit Losses on Financial Instruments. The ASU 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 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.

The ASU requires that credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis be determined 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 requires companies to record allowances for held-to-maturity and available-for-sale debt securities 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. We believe the adoption of this ASU will have a material effect on our consolidated financial statements and we are in the process of quantifying the expected impacts.

Statement of Cash Flows

In August of 2016, the FASB issued ASU 2016-15, Statement of Cash Flows, which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU will become effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

Income Taxes

In October of 2016, the FASB issued ASU 2016-16, Income Taxes, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU will become effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

Business Combinations

In January of 2017, the FASB issued ASU 2017-01, Business Combinations, to clarify the definition of a business, which establishes a process to determine when an integrated set of assets and activities can be deemed a business combination. The amendments in this ASU become effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

Compensation and Benefits

In March of 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits, to improve the presentation of the net periodic pension cost and net periodic postretirement benefit costs. It requires that a company present separately the service cost component on the income statement. The amendments in this ASU become effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. We are evaluating whether the adoption of this ASU will have a material effect on our consolidated financial statements.

We do not believe that any other accounting pronouncements issued during the ~~first half of 2016,~~three months ended March 31, 2017, but not yet effective, would have a material impact on our consolidated financial statements or disclosures, if adopted.

4.3. Finance Receivables

Our finance receivable types include personal loans, real estate loans, and retail sales finance as defined below:

Personal loans — are secured by consumer goods, automobiles, or other personal property or are unsecured, typically non-revolving with a fixed-rate and a fixed, original term of ~~two~~three to five years. At ~~June 30, 2016,~~March 31, 2017, we had ~~nearly 923,000~~over 893,000 personal loans representing $4.7 billion of net finance receivables, compared to ~~890,000~~928,000 personal loans totaling ~~$4.3~~$4.8 billion at December 31, ~~2015.~~2016.

Real estate loans — are secured by first or second mortgages on residential real estate, generally have maximum original terms of 360 months, and are considered non-conforming. Real estate loans may be closed-end accounts or open-end home equity lines of credit and are primarily fixed-rate products. Since we ceased originating real estate ~~lending~~loans in January of 2012, our real estate loans ~~are~~have been in a liquidating status.

Retail sales finance — include retail sales contracts and revolving retail accounts. Retail sales contracts are closed-end accounts that represent a single purchase transaction. Revolving retail accounts are open-end accounts that can be used for financing repeated purchases from the same merchant. Retail sales contracts are secured by the personal property designated in the contract and generally have maximum original terms of 60 months. Revolving retail accounts are secured by the goods purchased and generally require minimum monthly payments based on the amount financed calculated after the most recent purchase or outstanding balances. Our retail sales finance portfolio is in a liquidating status.

~~Our finance receivable types also included the SpringCastle Portfolio at December 31, 2015, as defined below:~~

~~SpringCastle Portfolio —~~ included unsecured loans and loans secured by subordinate residential real estate mortgages that were sold on March 31, 2016, in connection with the SpringCastle Interests Sale. The SpringCastle Portfolio included both closed-end accounts and open-end lines of credit. These loans were in a liquidating status and varied in substance and form from our originated loans. Unless terminated, SFI will continue to provide the servicing for these loans, which we service as unsecured loans because the liens are subordinated to superior ranking security interests.

Components of net finance receivables held for investment by type were as follows:


(dollars in millions)	Personal Loans			SpringCastle Portfolio		Real Estate Loans		Retail Sales Finance			Total			Personal Loans			Real Estate Loans		Retail Sales Finance			Total

June 30, 2016
March 31, 2017
Gross receivables *	$	5,360		$	—	$	207	$	17		$	5,584		$	5,293		$	137	$	10		$	5,440
Unearned finance charges and points and fees	(804		)	—		1		(1		)	(804		)	(681		)	1		(1		)	(681		)
Accrued finance charges	61			—		1		—			62			60			1		—			61
Deferred origination costs	46			—		—		—			46			43			—		—			43
Total	$	4,663		$	—	$	209	$	16		$	4,888		$	4,715		$	139	$	9		$	4,863

December 31, 2015
December 31, 2016
Gross receivables *	$	5,028		$	1,672	$	534	$	25		$	7,259		$	5,449		$	142	$	12		$	5,603
Unearned finance charges and points and fees	(833		)	—		—		(2		)	(835		)	(754		)	1		(1		)	(754		)
Accrued finance charges	60			31		4		—			95			63			1		—			64
Deferred origination costs	45			—		—		—			45			46			—		—			46
Total	$	4,300		$	1,703	$	538	$	23		$	6,564		$	4,804		$	144	$	11		$	4,959


*	Gross receivables are defined as follows:

Finance receivables purchased as a performing receivable — gross finance receivables equal the UPB for interest bearing accounts and the gross remaining contractual payments for precompute ~~accounts; additionally,~~accounts. Additionally, the remaining unearned discount,

net of premium established at the time of purchase, is included in both interest bearing and precompute accounts to reflect the finance receivable balance at its initial fair value;

Finance receivables originated subsequent to the Fortress Acquisition — gross finance receivables equal the UPB for interest bearing accounts and the gross remaining contractual payments for precompute accounts;

Purchased credit impaired finance receivables — gross finance receivables equal the remaining estimated cash flows less the current balance of accretable yield on the purchased credit impaired accounts; and

~~Troubled debt restructured (“TDR”)~~TDR finance receivables — gross finance receivables equal the UPB for interest bearing accounts and the gross remaining contractual payments for precompute ~~accounts; additionally,~~accounts. Additionally, the remaining unearned discount, net of premium established at the time of purchase, is included in both interest bearing and precompute accounts previously purchased as a performing receivable.

Included in the table above are finance receivables associated with securitizations that remain on our balance sheet. The carrying value of our personal loans associated with securitizations totaled $2.4 billion and $3.6 billion at June 30, 2016At March 31, 2017 and December 31, ~~2015, respectively, and the carrying value of the SpringCastle Portfolio, all of which were associated with securitizations, totaled $1.7 billion at December 31, 2015.~~

~~Unused~~2016, unused lines of credit extended to customers by the Company were ~~as follows:~~

(dollars in millions) June 30,
2016 December 31,
2015

Personal loans $ 1
$ 2
SpringCastle Portfolio —
365
Real estate loans 18
30
Total $ 19
$ 397

Unused lines of credit on our personal loans can be suspended if any of the following occurs: (i) the value of the collateral declines significantly; (ii) we believe the borrower will be unable to fulfill the repayment obligations; or (iii) any other default by the borrower of any material obligation under the agreement occurs. Unused lines of credit on our real estate loans can be suspended if any of the following occurs: (i) the value of the real estate declines significantly below the property’s initial appraised value; (ii) we believe the borrower will be unable to fulfill the repayment obligations because of a material change in the borrower’s financial circumstances; or (iii) any other default by the borrower of any material obligation under the agreement occurs. Unused lines of credit on home equity lines of credit can be terminated for delinquency. Accordingly, no reserve has been recorded for the unused lines of credit.immaterial.

CREDIT QUALITY ~~INDICATORS~~INDICATOR

We consider the delinquency status ~~and nonperforming status~~ of ~~the~~our finance ~~receivable~~receivables as our primary credit quality ~~indicators.~~indicator. We monitor delinquency trends to manage our exposure to credit risk. When finance receivables are 60 days past due, we consider them delinquent and transfer collections management of these accounts to our centralized operations, as these accounts are considered to be at increased risk for loss. At 90 days or more past due, we consider our finance receivables to be nonperforming.

The following is a summary of net finance receivables held for investment by type and by number of days delinquent:



(dollars in millions)	Personal Loans		Real Estate Loans		Retail Sales Finance		Total

March 31, 2017
Net finance receivables:
Performing
Current	$	4,525	$	102	$	9	$	4,636
30-59 days past due	57		8		—		65
60-89 days past due	39		4		—		43
Total performing	4,621		114		9		4,744
Nonperforming
90-179 days past due	91		5		—		96
180 days or more past due	3		20		—		23
Total nonperforming	94		25		—		119
Total	$	4,715	$	139	$	9	$	4,863

December 31, 2016
Net finance receivables:
Performing
Current	$	4,579	$	102	$	11	$	4,692
30-59 days past due	64		9		—		73
60-89 days past due	45		4		—		49
Total performing	4,688		115		11		4,814
Nonperforming
90-179 days past due	112		8		—		120
180 days or more past due	4		21		—		25
Total nonperforming	116		29		—		145
Total	$	4,804	$	144	$	11	$	4,959

We accrue finance charges on revolving retail finance receivables up to the date of charge-off at 180 days past due. Our revolving retail finance receivables that were more than 90 days past due and still accruing finance charges at ~~June 30, 2016~~March 31, 2017 and at December 31, ~~2015~~2016 were immaterial. Our personal loans and real estate loans do not have finance receivables that were more than 90 days past due and still accruing finance charges.

~~Delinquent Finance Receivables~~

We consider the delinquency status of the finance receivable as our primary credit quality indicator. We monitor delinquency trends to manage our exposure to credit risk. We consider finance receivables 60 days or more past due as delinquent and consider the likelihood of collection to decrease at such time.

~~The following is a summary of net finance receivables held for investment by type and by number of days delinquent:~~

(dollars in millions) Personal
Loans
SpringCastle
Portfolio

Real Estate
Loans
Retail
Sales Finance Total

June 30, 2016
Net finance receivables:
60-89 days past due $ 43
$ —
$ 6
$ —
$ 49
90-119 days past due 32
—
4
—
36
120-149 days past due 29
—
3
—
32
150-179 days past due 27
—
3
—
30
180 days or more past due 3
—
21
—
24
Total delinquent finance receivables 134
—
37
—
171
Current 4,462
—
162
15
4,639
30-59 days past due 67
—
10
1
78
Total $ 4,663
$ —
$ 209
$ 16
$ 4,888

December 31, 2015
Net finance receivables:
60-89 days past due $ 49
$ 26
$ 19
$ —
$ 94
90-119 days past due 41
16
3
—
60
120-149 days past due 34
12
2
1
49
150-179 days past due 31
11
2
—
44
180 days or more past due 3
1
13
—
17
Total delinquent finance receivables 158
66
39
1
264
Current 4,077
1,588
486
22
6,173
30-59 days past due 65
49
13
—
127
Total $ 4,300
$ 1,703
$ 538
$ 23
$ 6,564

~~Nonperforming Finance Receivables~~

We also monitor finance receivable performance trends to evaluate the potential risk of future credit losses. At 90 days or more past due, we consider our finance receivables to be nonperforming. Once the finance receivables are considered as nonperforming, we consider them to be at increased risk for credit loss.

~~Our performing and nonperforming net finance receivables held for investment by type were as follows:~~

(dollars in millions)
Personal
Loans
SpringCastle
Portfolio
Real Estate
Loans Retail
Sales Finance Total

June 30, 2016

Performing
$ 4,572

$ —

$ 178

$ 16

$ 4,766
Nonperforming
91

—

31

—
122
Total
$ 4,663
$ —
$ 209
$ 16
$ 4,888

December 31, 2015

Performing
$ 4,191
$ 1,663
$ 518
$ 22
$ 6,394
Nonperforming
109
40
20
1
170
Total
$ 4,300
$ 1,703
$ 538
$ 23
$ 6,564

PURCHASED CREDIT IMPAIRED FINANCE RECEIVABLES

Our purchased credit impaired finance receivables consist of receivables purchased ~~as part of~~in connection with the ~~following transaction:~~Fortress Acquisition.

~~Ownership interest acquired by FCFI Acquisition LLC, an affiliate of Fortress (the “Fortress Acquisition”)~~ - we revalued our assets and liabilities based on their fair value at the date of the Fortress Acquisition, November 30, 2010, in accordance with purchase accounting and adjusted the carrying value of our finance receivables (the “FA Loans”)Prior to ~~their fair value.~~

~~At December~~March 31, ~~2015,~~2016, our purchased credit impaired finance receivables also included the SpringCastle Portfolio, which was purchased ~~as part~~in connection with the joint venture acquisition of the ~~following transaction:~~

~~SFI’s capital contribution of its wholly owned subsidiary, Springleaf Acquisition Corporation (“SAC”), to SFC~~ ~~- on July 31, 2014 (the “SAC Capital Contribution”), SFC acquired a 47% equity interest in the~~ SpringCastle ~~Portfolio (the “SCP Loans”), some of which were determined to be credit impaired when SAC acquired the SCP Loans on April 1, 2013.~~Portfolio. On March 31, 2016, we sold the SpringCastle Portfolio in connection with the SpringCastle Interests ~~Sale described in Note 2.~~

Sale.

We report the carrying amount (which initially was the fair value) of our purchased credit impaired finance receivables in net finance receivables, less allowance for finance receivable losses or in finance receivables held for sale as discussed below.

At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, finance receivables held for sale totaled ~~$420~~$148 million and ~~$793~~$153 million, ~~respectively. See Note 6 for further information on our finance receivables held for sale,~~respectively, which include purchased credit impaired finance receivables, as well as TDR finance receivables. Therefore, we are presenting the financial information for our purchased credit impaired finance receivables and TDR finance receivables combined for finance receivables held for investment and finance receivables held for sale in the tables below. See Note 5 for further information on our finance receivables held for sale.

Information regarding our purchased credit impaired ~~finance receivables~~FA Loans held for investment and held for sale were as follows:


(dollars in millions)	SCP Loans		FA Loans *		Total		March 31, 2017		December 31, 2016

June 30, 2016
FA Loans (a)
Carrying amount, net of allowance	$	—	$	85	$	85	$	68	$	70
Outstanding balance(b)	—		129		129		105		107
Allowance for purchased credit impaired finance receivable losses	—		8		8		8		8

December 31, 2015
Carrying amount, net of allowance	$	350	$	89	$	439
Outstanding balance	482		136		618
Allowance for purchased credit impaired finance receivable losses	—		12		12


*(a)	Purchased credit impaired FA Loans held for sale included in the table above were as follows:


(dollars in millions)	FA Loans		March 31, 2017		December 31, 2016

June 30, 2016
Carrying amount	$	68	$	53	$	54
Outstanding balance	103		81		83

December 31, 2015
Carrying amount	$	59
Outstanding balance	89


(b)	Outstanding balance is defined as UPB of the loans with a net carrying amount.

The allowance for purchased credit impaired finance receivable losses at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, reflected the ~~net~~ carrying value of the purchased credit impaired FA Loans being higher than the present value of the expected cash flows.

Changes in accretable yield for purchased credit impaired finance receivables held for investment and held for sale were as follows:


(dollars in millions)	SCP Loans			FA Loans			Total			SCP Loans			FA Loans			Total

Three Months Ended June 30, 2016
Three Months Ended March 31, 2017
Balance at beginning of period	$	—		$	74		$	74		$	—		$	60		$	60
Accretion (a)	—			(2		)	(2		)	—			(1		)	(1		)
Reclassifications to nonaccretable difference (b)	—			(11		)	(11		)
Balance at end of period	$	—		$	61		$	61		$	—		$	59		$	59

Three Months Ended June 30, 2015
Three Months Ended March 31, 2016
Balance at beginning of period	$	431		$	54		$	485		$	375		$	66		$	441
Accretion (a)	(20		)	(2		)	(22		)	(16		)	(2		)	(18		)
Reclassifications from nonaccretable difference (b)	—			1			1			—			10			10
Balance at end of period	$	411		$	53		$	464

Six Months Ended June 30, 2016
Balance at beginning of period	$	375		$	66		$	441
Accretion (a)	(16		)	(4		)	(20		)
Reclassifications to nonaccretable difference (b)	—			(1		)	(1		)
Transfer due to finance receivables sold	(359		)	—			(359		)	(359		)	—			(359		)
Balance at end of period	$	—		$	61		$	61		$	—		$	74		$	74

Six Months Ended June 30, 2015
Balance at beginning of period	$	452		$	54		$	506
Accretion (a)	(41		)	(4		)	(45		)
Reclassifications from nonaccretable difference (b)	—			3			3
Balance at end of period	$	411		$	53		$	464


(a)	Accretion on our purchased credit impaired FA Loans held for sale included in the table above were ~~as follows:~~immaterial.

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015

Accretion $ 1
$ 2
$ 2
$ 3


(b)	Reclassifications from ~~(to)~~ nonaccretable difference represents the increases ~~(decreases)~~ in ~~accretion~~accretable yield resulting from higher ~~(lower)~~ estimated undiscounted cash flows.

~~TROUBLED DEBT RESTRUCTURED~~TDR FINANCE RECEIVABLES

Information regarding TDR finance receivables held for investment and held for sale were as follows:


(dollars in millions)	Personal Loans (a)		SpringCastle Portfolio		Real Estate Loans (a)		Total		Personal Loans		Real Estate Loans *		Total

June 30, 2016
March 31, 2017
TDR gross finance receivables ~~(b)~~	$	34	$	—	$	201	$	235	$	49	$	133	$	182
TDR net finance receivables	34		—		202		236		49		134		183
Allowance for TDR finance receivable losses	11		—		12		23		20		11		31

December 31, 2015
December 31, 2016
TDR gross finance receivables ~~(b)~~	$	32	$	14	$	200	$	246	$	47	$	133	$	180
TDR net finance receivables	31		13		201		245		47		134		181
Allowance for TDR finance receivable losses	9		4		34		47		20		11		31


~~(a)~~*	TDR ~~finance receivables~~real estate loans held for sale included in the table above were as follows:


(dollars in millions)	Personal Loans		Real Estate Loans		Total		March 31, 2017		December 31, 2016

June 30, 2016
TDR gross finance receivables	$	—	$	154	$	154	$	88	$	89
TDR net finance receivables	—		155		155		88		90

December 31, 2015
TDR gross finance receivables	$	2	$	92	$	94
TDR net finance receivables	2		92		94


~~(b)~~	~~As defined earlier in this Note.~~

~~We have~~As of March 31, 2017, we had no commitments to lend additional funds on our TDR finance receivables.

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 *		SpringCastle Portfolio		Real Estate Loans *		Total		Personal Loans *		SpringCastle Portfolio		Real Estate Loans *		Total

Three Months Ended June 30, 2016
Three Months Ended March 31, 2017
TDR average net receivables	$	34	$	—	$	202	$	236	$	48	$	—	$	134	$	182
TDR finance charges recognized	1		—		3		4		1		—		2		3

Three Months Ended June 30, 2015
Three Months Ended March 31, 2016
TDR average net receivables	$	28	$	12	$	198	$	238	$	32	$	11	$	201	$	244
TDR finance charges recognized	1		—		3		4		1		—		3		4

Six Months Ended June 30, 2016
TDR average net receivables	$	33	$	—	$	202	$	235
TDR finance charges recognized	2		—		6		8

Six Months Ended June 30, 2015
TDR average net receivables	$	27	$	11	$	196	$	234
TDR finance charges recognized	2		—		6		8


*	TDR finance receivables held for sale included in the table above were as follows:


(dollars in millions)	Personal Loans		Real Estate Loans		Total		Personal Loans		Real Estate Loans		Total

Three Months Ended June 30, 2016
Three Months Ended March 31, 2017
TDR average net receivables	$	1	$	112	$	113	$	—	$	89	$	89
TDR finance charges recognized	—		2		2		—		1		1

Three Months Ended June 30, 2015
Three Months Ended March 31, 2016
TDR average net receivables	$	—	$	91	$	91	$	2	$	92	$	94
TDR finance charges recognized	—		1		1		—		1		1

Six Months Ended June 30, 2016
TDR average net receivables	$	2	$	102	$	104
TDR finance charges recognized	—		3		3

Six Months Ended June 30, 2015
TDR average net receivables	$	—	$	91	$	91
TDR finance charges recognized	—		2		2

Information regarding the new volume of the TDR finance receivables held for investment and held for sale were as follows:


(dollars in millions)	Personal Loans (a)		SpringCastle Portfolio			Real Estate Loans (a)		Total		Personal Loans (a)		SpringCastle Portfolio		Real Estate Loans (a)		Total
					��
Three Months Ended June 30, 2016
Three Months Ended March 31, 2017
Pre-modification TDR net finance receivables	$	9	$	—		$	6	$	15	$	15	$	—	$	3	$	18
Post-modification TDR net finance receivables:
Rate reduction	$	6	$	—		$	5	$	11	$	10	$	—	$	3	$	13
Other (b)	2		—			1		3		4		—		—		4
Total post-modification TDR net finance receivables	$	8	$	—		$	6	$	14	$	14	$	—	$	3	$	17
Number of TDR accounts	1,767		—			116		1,883		2,740		—		64		2,804

Three Months Ended June 30, 2015
Three Months Ended March 31, 2016
Pre-modification TDR net finance receivables	$	7	$	2		$	6	$	15	$	9	$	1	$	4	$	14
Post-modification TDR net finance receivables:
Rate reduction	$	3	$	2		$	5	$	10	$	5	$	1	$	3	$	9
Other (b)	3		—			2		5		3		—		1		4
Total post-modification TDR net finance receivables	$	6	$	2		$	7	$	15	$	8	$	1	$	4	$	13
Number of TDR accounts	1,461		213			99		1,773		1,782		157		89		2,028

Six Months Ended June 30, 2016
Pre-modification TDR net finance receivables	$	18	$	1		$	10	$	29
Post-modification TDR net finance receivables:
Rate reduction	$	11	$	1		$	8	$	20
Other (b)	5		—			2		7
Total post-modification TDR net finance receivables	$	16	$	1		$	10	$	27
Number of TDR accounts	3,549		157			205		3,911

Six Months Ended June 30, 2015
Pre-modification TDR net finance receivables	$	16	$	4		$	10	$	30
Post-modification TDR net finance receivables:
Rate reduction	$	8	$	4		$	9	$	21
Other (b)	6		—			2		8
Total post-modification TDR net finance receivables	$	14	$	4		$	11	$	29
Number of TDR accounts	3,315		408			177		3,900


(a)	TDR finance receivables held for sale included in the table above were ~~as follows:~~

(dollars in millions)
Personal
Loans

Real Estate
Loans
Total

Three Months Ended June 30, 2016

Pre-modification TDR net finance receivables * $ —
$ 1
$ 1
Post-modification TDR net finance receivables * $ —
$ 1
$ 1
Number of TDR accounts 46
32
78

Three Months Ended June 30, 2015
Pre-modification TDR net finance receivables $ —
$ 3
$ 3
Post-modification TDR net finance receivables $ —
$ 3
$ 3
Number of TDR accounts —
35
35

Six Months Ended June 30, 2016
Pre-modification TDR net finance receivables * $ —
$ 2
$ 2
Post-modification TDR net finance receivables * $ —
$ 2
$ 2
Number of TDR accounts 174
51
225

Six Months Ended June 30, 2015
Pre-modification TDR net finance receivables $ —
$ 3
$ 3
Post-modification TDR net finance receivables $ —
$ 3
$ 3
Number of TDR accounts —
44
44


*	~~Pre- and post-modification TDR personal loans held for sale for the three and six months ended June 30, 2016 were less than $1 million and, therefore, are not quantified in the table above.~~immaterial.


(b)	“Other” modifications primarily include forgiveness of principal or interest.

Net finance receivables held for investment and held for sale 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:


(dollars in millions)	Personal Loans		SpringCastle Portfolio		Real Estate Loans (a)		Total		Personal Loans		SpringCastle Portfolio		Real Estate Loans (a)		Total

Three Months Ended June 30, 2016
Three Months Ended March 31, 2017
TDR net finance receivables (b)	$	2	$	—	$	1	$	3	$	3	$	—	$	1	$	4
Number of TDR accounts	320		—		19		339		585		—		6		591

Three Months Ended June 30, 2015
Three Months Ended March 31, 2016
TDR net finance receivables (b) (c)	$	2	$	1	$	—	$	3	$	1	$	—	$	1	$	2
Number of TDR accounts	456		86		8		550		355		19		20		394

Six Months Ended June 30, 2016
TDR net finance receivables (b) (d)	$	3	$	—	$	2	$	5
Number of TDR accounts	675		19		39		733

Six Months Ended June 30, 2015
TDR net finance receivables (b)	$	2	$	1	$	1	$	4
Number of TDR accounts	513		96		26		635


(a)	TDR ~~finance receivables~~real estate loans held for sale included in the table above ~~were as follows:~~

(dollars in millions)
Real Estate
Loans

Three Months Ended June 30, 2016
TDR net finance receivables * $ —
Number of TDR accounts 12

Three Months Ended June 30, 2015
TDR net finance receivables $ 1
Number of TDR accounts 4

Six Months Ended June 30, 2016
TDR net finance receivables $ 1
Number of TDR accounts 21

Six Months Ended June 30, 2015
TDR net finance receivables $ 1
Number of TDR accounts 13


*	~~TDR real estate loans held for sale for the three months ended June 30, 2016~~ that defaulted during the previous 12-month period were less than $1 million for the three months ended March 31, 2017 and ~~therefore, are not quantified in~~$1 million for the ~~combined table above.~~three months ended March 31, 2016.


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


(c)	TDR ~~real estate~~SpringCastle Portfolio loans for the three months ended ~~June 30, 2015 that defaulted during the previous 12-month period were less than $1 million and, therefore, are not quantified in the combined table above.~~


~~(d)~~	~~TDR SpringCastle Portfolio loans for the six months ended June 30,~~March 31, 2016 that defaulted during the previous 12-month period were less than $1 million and, therefore, are not quantified in the combined table above.

5.4. 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			SpringCastle Portfolio			Real Estate Loans			Retail Sales Finance			Consolidated Total			Personal Loans			SpringCastle Portfolio			Real Estate Loans			Retail Sales Finance			Consolidated Total

Three Months Ended June 30, 2016
Three Months Ended March 31, 2017
Balance at beginning of period																$	184		$	—		$	19		$	1		$	204
Provision for finance receivable losses																70			—			1			—			71
Charge-offs																(99		)	—			(1		)	—			(100		)
Recoveries																21			—			—			—			21
Balance at end of period																$	176		$	—		$	19		$	1		$	196

Three Months Ended March 31, 2016
Balance at beginning of period	$	168		$	—		$	49		$	—		$	217		$	173		$	4		$	46		$	1		$	224
Provision for finance receivable losses	83			—			2			—			85			73			14			4			—			91
Charge-offs	(85		)	—			(4		)	—			(89		)	(89		)	(17		)	(2		)	(1		)	(109		)
Recoveries	10			—			2			1			13			11			3			1			—			15
Other *	—			—			(29		)	—			(29		)	—			(4		)	—			—			(4		)
Balance at end of period	$	176		$	—		$	20		$	1		$	197		$	168		$	—		$	49		$	—		$	217

Three Months Ended June 30, 2015
Balance at beginning of period	$	132		$	3		$	45		$	1		$	181
Provision for finance receivable losses	54			18			—			1			73
Charge-offs	(58		)	(21		)	(5		)	(1		)	(85		)
Recoveries	11			3			1			—			15
Balance at end of period	$	139		$	3		$	41		$	1		$	184

Six Months Ended June 30, 2016
Balance at beginning of period	$	173		$	4		$	46		$	1		$	224
Provision for finance receivable losses	156			14			6			—			176
Charge-offs	(174		)	(17		)	(6		)	(1		)	(198		)
Recoveries	21			3			3			1			28
Other *	—			(4		)	(29		)	—			(33		)
Balance at end of period	$	176		$	—		$	20		$	1		$	197

Six Months Ended June 30, 2015
Balance at beginning of period	$	130		$	3		$	46		$	1		$	180
Provision for finance receivable losses	110			37			4			1			152
Charge-offs	(119		)	(43		)	(11		)	(2		)	(175		)
Recoveries	18			6			2			1			27
Balance at end of period	$	139		$	3		$	41		$	1		$	184


*	Other consists ~~of:~~of the elimination of allowance for finance receivable losses due to the sale of the SpringCastle Portfolio on March 31, 2016, in connection with the SpringCastle Interests Sale.

~~the elimination of allowance for finance receivable losses due to the transfer of real estate loans held for investment to finance receivable held for sale on June 30, 2016; and~~

the elimination of allowance for finance receivable losses due to the sale of the SpringCastle Portfolio on March 31, 2016, in connection with the sale of our equity interest in the SpringCastle Joint Venture. See Note 2 for further information on this sale.

Included in the allowance for finance receivable losses are allowances associated with securitizations that totaled $85 million at June 30, 2016 and $128 million at December 31, 2015. See Note 11 for further discussion regarding our securitization transactions.

The allowance for finance receivable losses and net finance receivables by type and by impairment method were as follows:


(dollars in millions)	Personal Loans			SpringCastle Portfolio			Real Estate Loans			Retail Sales Finance			Total			Personal Loans			Real Estate Loans			Retail Sales Finance			Total

June 30, 2016
March 31, 2017
Allowance for finance receivable losses:
Collectively evaluated for impairment	$	165		$	—		$	—		$	1		$	166		$	156		$	—		$	1		$	157
Purchased credit impaired finance receivables	—			—			8			—			8			—			8			—			8
TDR finance receivables	11			—			12			—			23			20			11			—			31
Total	$	176		$	—		$	20		$	1		$	197		$	176		$	19		$	1		$	196

Finance receivables:
Collectively evaluated for impairment	$	4,629		$	—		$	137		$	16		$	4,782		$	4,666		$	70		$	9		$	4,745
Purchased credit impaired finance receivables	—			—			25			—			25			—			23			—			23
TDR finance receivables	34			—			47			—			81			49			46			—			95
Total	$	4,663		$	—		$	209		$	16		$	4,888		$	4,715		$	139		$	9		$	4,863

Allowance for finance receivable losses as a percentage of finance receivables	3.78		%	—		%	9.64		%	3.42		%	4.03		%	3.74		%	13.70		%	4.72		%	4.03		%

December 31, 2015
December 31, 2016
Allowance for finance receivable losses:
Collectively evaluated for impairment	$	164		$	—		$	—		$	1		$	165		$	164		$	—		$	1		$	165
Purchased credit impaired finance receivables	—			—			12			—			12			—			8			—			8
TDR finance receivables	9			4			34			—			47			20			11			—			31
Total	$	173		$	4		$	46		$	1		$	224		$	184		$	19		$	1		$	204

Finance receivables:
Collectively evaluated for impairment	$	4,271		$	1,340		$	387		$	23		$	6,021		$	4,757		$	76		$	11		$	4,844
Purchased credit impaired finance receivables	—			350			42			—			392			—			24			—			24
TDR finance receivables	29			13			109			—			151			47			44			—			91
Total	$	4,300		$	1,703		$	538		$	23		$	6,564		$	4,804		$	144		$	11		$	4,959

Allowance for finance receivable losses as a percentage of finance receivables	4.01		%	0.25		%	8.72		%	3.46		%	3.42		%	3.84		%	13.31		%	4.42		%	4.12		%

6.5. Finance Receivables Held for Sale

We report finance receivables held for sale of ~~$420~~$148 million at ~~June 30, 2016~~March 31, 2017 and ~~$793~~$153 million at December 31, ~~2015,~~2016, which are carried at the lower of cost or fair ~~value. At June 30, 2016, finance receivables held for sale consisted~~value and consist entirely of real estate ~~loans, compared to $617 million of personal loans~~loans. At March 31, 2017 and ~~$176 million of real estate loans at~~ December 31, ~~2015. At June 30,~~ 2016, we marked our real estate loans held for sale to fair value and recorded impairments of $5 million in other revenues. See Note 17 for further information on the impairments of our real estate loans held for sale. At December 31, 2015, the fair value of our finance receivables held for sale exceeded the cost. We used the aggregate basis to determine the lower of cost or fair value of finance receivables held for sale.

SPRINGCASTLE PORTFOLIO

During March of 2016, we transferred $1.6 billion of loans of the SpringCastle Portfolio (after deducting allowance for finance receivable losses) from held for investment to held for sale due to management’s intent to no longer hold these finance receivables for the foreseeable future. We simultaneously sold our interests in these finance receivables held for sale on March 31, 2016 in the SpringCastle Interests Sale and recorded a net gain in other revenues at the time of sale of $167 million.

~~On May 2, 2016, we sold personal loans held for sale with a carrying value of $602 million and recorded a net gain in other revenues at the time of sale of $22 million.~~

On June 30, 2016, we transferred $257 million of real estate loans (after deducting allowance for finance receivable losses) from held for investment to held for sale due to management’s intent to no longer hold these finance receivables for the foreseeable future.

We did not have any other material transfer activity to or from finance receivables held for sale during ~~each of~~ the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and ~~2015.~~2016.

7.6. Investment Securities

AVAILABLE-FOR-SALE SECURITIES

Cost/amortized cost, unrealized gains and losses, and fair value of available-for-sale securities by type were as follows:


(dollars in millions)	Cost/ Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cost/ Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value

June 30, 2016
March 31, 2017
Fixed maturity available-for-sale securities:
Bonds:
Bonds
U.S. government and government sponsored entities	$	41	$	1	$	—		$	42	$	19	$	—	$	—		$	19
Obligations of states, municipalities, and political subdivisions	82		2		—			84		74		—		(1		)	73
Corporate debt	278		6		(2		)	282
Mortgage-backed, asset-backed, and collateralized:
Residential mortgage-backed securities (“RMBS”)	38		—		—			38
Commercial mortgage-backed securities (“CMBS”)	47		1		—			48
Collateralized debt obligations (“CDO”)/Asset-backed securities (“ABS”)	34		—		—			34
Total bonds	520		10		(2		)	528
Preferred stock	6		—		—			6
Other long-term investments	2		—		(1		)	1
Total *	$	528	$	10	$	(3	)	$	535

December 31, 2015
Fixed maturity available-for-sale securities:
Bonds:
U.S. government and government sponsored entities	$	83	$	—	$	(1	)	$	82
Obligations of states, municipalities, and political subdivisions	88		1		—			89
Non-U.S. government and government sponsored entities										3		—		—			3
Corporate debt	278		2		(13		)	267		372		3		(4		)	371
Mortgage-backed, asset-backed, and collateralized:
RMBS	74		—		—			74		40		—		—			40
CMBS	44		—		—			44		32		—		—			32
CDO/ABS	30		—		(1		)	29		64		—		—			64
Total bonds	597		3		(15		)	585		604		3		(5		)	602
Preferred stock	6		—		(1		)	5
Preferred stock (a)										6		—		—			6
Other long-term investments	1		—		—			1		1		—		—			1
Total *	$	604	$	3	$	(16	)	$	591
Total (b)										$	611	$	3	$	(5	)	$	609

December 31, 2016
Fixed maturity available-for-sale securities:
Bonds
U.S. government and government sponsored entities										$	13	$	—	$	—		$	13
Obligations of states, municipalities, and political subdivisions										83		—		(1		)	82
Non-U.S. government and government sponsored entities										5		—		—			5
Corporate debt										356		2		(5		)	353
Mortgage-backed, asset-backed, and collateralized:
RMBS										39		—		—			39
CMBS										33		—		—			33
CDO/ABS										46		—		—			46
Total bonds										575		2		(6		)	571
Preferred stock (a)										6		—		—			6
Other long-term investments										1		—		—			1
Total (b)										$	582	$	2	$	(6	)	$	578


*(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.


(b)	Excludes an immaterial interest in a limited partnership that we account for using the equity method and ~~Federal Home Loan Bank~~FHLB common stock of $1 million at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, which is classified as a restricted investment and carried at cost.

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					Less Than 12 Months					12 Months or Longer					Total
(dollars in millions)	Fair Value		Unrealized Losses *			Fair Value		Unrealized Losses *			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses *			Fair Value		Unrealized Losses *			Fair Value		Unrealized Losses

June 30, 2016
March 31, 2017
Bonds:
U.S. government and government sponsored entities	$	1	$	—		$	—	$	—		$	1	$	—		$	9	$	—		$	—	$	—		$	9	$	—
Obligations of states, municipalities, and political subdivisions	7		—			3		—			10		—			30		—			8		(1		)	38		(1		)
Non-U.S. government and government sponsored entities																—		—			2		—			2		—
Corporate debt	25		(1		)	22		(1		)	47		(2		)	151		(3		)	19		(1		)	170		(4		)
RMBS	17		—			—		—			17		—			20		—			12		—			32		—
CMBS	7		—			9		—			16		—			16		—			—		—			16		—
CDO/ABS	16		—			—		—			16		—			33		—			—		—			33		—
Total bonds	73		(1		)	34		(1		)	107		(2		)	259		(3		)	41		(2		)	300		(5		)
Preferred stock	—		—			6		—			6		—			—		—			6		—			6		—
Other long-term investments	—		—			1		(1		)	1		(1		)
Total	$	73	$	(1	)	$	41	$	(2	)	$	114	$	(3	)	$	259	$	(3	)	$	47	$	(2	)	$	306	$	(5	)

December 31, 2015
December 31, 2016
Bonds:
U.S. government and government sponsored entities	$	76	$	(1	)	$	—	$	—		$	76	$	(1	)	$	9	$	—		$	—	$	—		$	9	$	—
Obligations of states, municipalities, and political subdivisions	36		—			2		—			38		—			57		(1		)	2		—			59		(1		)
Non-U.S. government and government sponsored entities																3		—			—		—			3		—
Corporate debt	189		(13		)	7		—			196		(13		)	171		(5		)	5		—			176		(5		)
RMBS	68		—			—		—			68		—			33		—			—		—			33		—
CMBS	36		—			5		—			41		—			22		—			—		—			22		—
CDO/ABS	29		(1		)	—		—			29		(1		)	25		—			—		—			25		—
Total bonds	434		(15		)	14		—			448		(15		)	320		(6		)	7		—			327		(6		)
Preferred stock	—		—			6		(1		)	6		(1		)	—		—			6		—			6		—
Other long-term investments	1		—			—		—			1		—
Total	$	435	$	(15	)	$	20	$	(1	)	$	455	$	(16	)	$	320	$	(6	)	$	13	$	—		$	333	$	(6	)


*	Unrealized losses on certain available-for-sale securities were less than $1 million and, therefore, are not quantified in the table above.

On a lot basis, we had 187 and 217 investment securities in an unrealized loss position at March 31, 2017 and December 31, 2016, respectively. We do not consider the ~~above~~ 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 ~~June 30, 2016,~~March 31, 2017, we had no plans to sell any investment securities with unrealized losses, 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 ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ we did not recognize any other-than-temporary impairment credit losses on our available-for-sale securities in investment revenues.

~~Changes~~During the three months ended March 31, 2017 and 2016, there were no additions or reductions in the cumulative amount of credit losses (recognized in earnings) on other-than-temporarily impaired available-for-sale ~~securities were as follows:~~securities.

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015

Balance at beginning of period $ 1
$ 1
$ 1
$ 1
Reductions:
Realized due to dispositions with no prior intention to sell 1
—
1
—
Balance at end of period $ —
$ 1
$ —
$ 1

The proceeds of available-for-sale securities sold or redeemed and the resulting ~~realized gains, realized losses, and~~ net realized gains were as follows:

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016
2015
2016 2015

Proceeds from sales and redemptions $ 123
$ 130
$ 193
$ 204

Realized gains $ 3
$ 4
$ 4
$ 11
Realized losses —
—
—
(1 )
Net realized gains $ 3
$ 4
$ 4
$ 10



(dollars in millions)	Three Months Ended March 31,
(dollars in millions)	2017		2016

Proceeds from sales and redemptions	$	51	$	70

Net realized gains *	$	2	$	1


*	Realized losses on available-for-sale securities sold or redeemed during the three months ended March 31, 2017 and 2016 were less than $1 million and, therefore, are not quantified in the table above.

Contractual maturities of fixed-maturity available-for-sale securities at ~~June 30, 2016~~March 31, 2017 were as follows:


(dollars in millions)	Fair Value		Amortized Cost		Fair Value		Amortized Cost

Fixed maturities, excluding mortgage-backed, asset-backed, and collateralized securities:
Due in 1 year or less	$	68	$	69	$	51	$	51
Due after 1 year through 5 years	170		169		234		236
Due after 5 years through 10 years	50		47		44		43
Due after 10 years	120		116		137		138
Mortgage-backed, asset-backed, and collateralized securities	120		119		136		136
Total	$	528	$	520	$	602	$	604

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 ~~bonds~~securities on deposit with ~~insurance regulatory authorities~~third parties totaled $11 million at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015.~~2016.

TRADING AND OTHER SECURITIES

The fair value of ~~trading and~~ other securities by type was as follows:


(dollars in millions)	June 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016

Fixed maturity trading and other securities:
Bonds:
Fixed maturity other securities:
Bonds
Corporate debt	$	11	$	10	$	2	$	2
Mortgage-backed, asset-backed, and collateralized:
CMBS	2		2		1		1
Total *	$	13	$	12
Total					$	3	$	3


*	~~The fair value of other securities totaled $13 million at June 30, 2016 and $2 million at December 31, 2015.~~

~~The net unrealized~~Mark-to-market gains (losses) on trading and other securities held at March 31, 2017 and 2016 and realized gains (losses) on ~~our~~ trading and other securities sold or redeemed during the 2017 and 2016 periods were less than $1 million for the three months ended March 31, 2017 and 2016. Other securities are those securities for which ~~we report~~the fair value option was elected. Our remaining trading securities were sold in ~~investment revenues, were as follows:~~

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015
2016 2015

Net unrealized gains on trading and other securities held at period end $ 1
$ 1
$ 1
$ 4
Net realized losses on trading and other securities sold or redeemed —
(1 ) —
(1 )
Total $ 1
$ —
$ 1
$ 3
the first quarter of 2016.

8.7. Transactions with Affiliates of Fortress

SUBSERVICING AGREEMENT

Nationstar ~~Mortgage LLC (“Nationstar”)~~ subservices the real estate loans of certain of our indirect subsidiaries (collectively, the “Owners”). Investment funds managed by affiliates of Fortress indirectly own a majority interest in Nationstar. The Owners paid Nationstar subservicing fees of less than $1 million for the three months ended ~~June 30, 2016~~March 31, 2017 and ~~2015 and $1 million for the six months ended June 30, 2016 and 2015.~~2016.

INVESTMENT MANAGEMENT AGREEMENT

Logan Circle ~~Partners, L.P. (“Logan Circle”)~~ provides investment management services for our investments. Logan Circle is a wholly owned subsidiary of Fortress. Costs and fees incurred for these investment management services were less than $1 million for the three months ended ~~June 30, 2016~~March 31, 2017 and ~~2015 and for the six months ended June 30,~~ 2016. ~~Costs and fees incurred for these investment management services totaled $1 million for the six months ended June 30, 2015.~~

SALE OF EQUITY INTEREST IN SPRINGCASTLE JOINT VENTURE

On March 31, 2016, we sold our 47% equity interest in the SpringCastle Joint Venture, which owns the SpringCastle Portfolio, to certain subsidiaries of NRZ and Blackstone. ~~See Note 2 for further information on this sale.~~ NRZ is managed by an affiliate of Fortress.

9.8. Related Party Transactions

AFFILIATE LENDING

Notes Receivable from Parent and Affiliates

Note Receivable from SFI. SFC’s note receivable from SFI is payable in full on May 31, 2022, and SFC may demand payment at any time prior to May 31, 2022; however, SFC does not anticipate the need for additional liquidity during ~~2016~~2017 and does not expect to demand payment from SFI in ~~2016.~~2017. The note receivable from SFI totaled ~~$290~~$337 million at ~~June 30, 2016~~March 31, 2017 and ~~$389~~$285 million at December 31, ~~2015.~~2016. The interest rate for the UPB is the lender’s cost of funds rate, which was ~~5.52%~~6.28% at ~~June 30, 2016.~~March 31, 2017. Interest revenue on the note receivable from SFI totaled $5 million ~~and $10 million~~ for the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, ~~respectively, compared to $4 million and $6 million for the three and six months ended June 30, 2015, respectively,~~ which we report in ~~other revenues.~~interest income on notes receivable from parent and affiliates.

Independence Demand Note. On November 12, 2015, in connection with the closing of the OneMain Acquisition, ~~Springleaf Financial Cash Services, Inc. (“CSI”),~~CSI, SFC’s wholly owned subsidiary, entered into ~~a revolving demand note with~~the Independence ~~(the “Independence~~ Demand ~~Note”),~~Note, whereby CSI agreed to make advances to Independence from time to time, with an aggregate amount outstanding not to exceed $3.55 billion. On November 12, 2015, Independence borrowed $3.4 billion under the Independence Demand Note. Under the Independence Demand Note, Independence iswas required to use the proceeds of any advance either (i) to fund a portion of the purchase price for the OneMain Acquisition or (ii) for general corporate purposes. The note iswas payable in full on December 31, 2019, and CSI ~~may~~could demand payment at any time prior to December 31, 2019. Independence ~~may~~could repay the note in whole or in part at any time without premium or penalty. The interest rate for the UPB was the lender’s cost of funds rate. Interest revenue on the note receivable from Independence totaled $46 million for the three months ended March 31, 2016.

On July 19, 2016, CSI, Independence, and OMFH entered into the Note Assignment pursuant to which CSI sold and assigned to OMFH, and OMFH purchased and assumed from CSI, an interest in and to CSI’s right to receive $150 million principal amount outstanding under the Independence Demand Note for a purchase price of $150 million. On July 20, 2016, OMFH paid the $150 million purchase price to CSI.

In connection with the Note Assignment discussed above, Independence exchanged the Independence Demand Note for (i) the Cash Services Note issued to CSI with a maximum borrowing amount not to exceed $3.4 billion and (ii) the OMFH Note issued to OMFH with a maximum borrowing amount not to exceed $150 million. The Cash Services Note and the OMFH Note provide that no advances shall be made to Independence on or after December 31, 2019 and all principal and interest shall be payable in full on December 31, 2019, unless earlier payment is demanded by CSI or OMFH. The interest rate for the UPB is the lender’s cost of funds rate, which was ~~5.52%~~6.28% at ~~June 30, 2016. On November 12, 2015, Independence borrowed $3.4 billion under the Independence Demand Note.~~March 31, 2017.

At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, the note receivable from Independence relating to the Cash Services Note totaled ~~$3.4~~$2.8 billion and $2.9 billion, respectively, which included compounded interest due to CSI. Interest revenue on the note receivable from Independence relating to the Cash Services Note totaled ~~$46~~$45 million ~~and $92 million, respectively, during~~for the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, which we report in ~~other revenues.~~interest income on notes receivable from parent and affiliates.

OneMain Demand Note. On November 15, 2015, in connection with the closing of the OneMain Acquisition, SFC entered into ~~a revolving demand note (the “OneMain~~the OneMain Demand ~~Note”)~~Note with OMFH, whereby SFC agreed to make advances to OMFH from time to time, with an aggregate amount outstanding not to exceed $500 million. Under the OneMain Demand Note, OMFH is required to use the proceeds of any advance either (i) exclusively to finance the purchase, origination, pooling, funding or carrying of receivables by OMFH or any of its restricted subsidiaries or (ii) for general corporate purposes. The note is payable in full on December 31, 2024, and SFC may demand payment with five days prior notice. OMFH may repay the note in whole or in part at any time without premium or penalty. The interest rate for the UPB is the lender’s cost of funds rate. ~~At June 30, 2016, no amounts were drawn under the note.~~

On August 12, 2016 and March 15, 2017, SFC amended the note to increase the maximum amount that may be advanced to $750 million and $1.3 billion, respectively. At March 31, 2017 and December 31, 2016, the note receivable from OMFH totaled $638 million and $530 million, respectively, which included compounded interest due to SFC. Interest revenue on the note receivable from OMFH totaled $9 million for the three months ended March 31, 2017, which we report in interest income on notes receivable from parent and affiliates.

Receivables from Parent and Affiliates

At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, receivables from parent and affiliates totaled ~~$27 million and $9 million, respectively.~~$40 million. Receivables from parent and affiliates also included (i) interest receivable on SFC’s note receivable from SFI previously discussed in this Note, (ii) taxes paid by SFC for all entities and then settled under the tax sharing agreement, ~~and~~ (iii) expenses paid by a subsidiary of SFC for the benefit of parent and ~~affiliates.~~affiliates, (iv) intercompany insurance premiums collected, and (v) the servicing fees and collections received on the legacy OneMain loans serviced by legacy Springleaf branches. Receivables from parent and affiliates at March 31, 2017 and December 31, ~~2015~~2016 are presented net of a payable to SFI of ~~$12~~$6 million. Excluding this payable, receivables from parent and affiliates totaled ~~$21~~$46 million at March 31, 2017 and December 31, ~~2015.~~2016.

Note Payable to Affiliate

On December 1, 2015, in connection with the closing of the OneMain Acquisition, OMFH entered into a revolving demand note with SFC, whereby OMFH agreed to make advances to SFC from time to time, with an aggregate amount outstanding not to exceed $500 million. Under the note, SFC is required to use the proceeds of any advance for general corporate purposes. The note is payable in full on December 31, 2024, and OMFH may demand payment with five days prior notice. SFC may repay the note in whole or in part at any time without premium or penalty. The interest rate for the UPB is the lender’s cost of funds rate, which was ~~5.52%~~6.28% at ~~June 30, 2016. At December~~March 31, ~~2015, no amounts were drawn under the note.~~2017.

~~At June 30, 2016, the note payable to OMFH totaled $301 million, which included compounded interest due to OMFH.~~ Interest expense on the note payable to OMFH ~~totaled $2~~was $4 million ~~and $6 million, respectively,~~ for the three ~~and six~~ months ended ~~June 30, 2016.~~

March 31, 2016, which we report in interest expense. On March 15, 2017, OMFH amended the note to increase the maximum amount that may be advanced to $750 million. At March 31, 2017 and December 31, 2016, no amounts were drawn under the note.

Payables to Parent and Affiliates

At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, payables to parent and affiliates totaled $3$45 million and ~~$24~~$13 million, respectively. At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015, Springleaf Finance Management Corporation (“SFMC”), a subsidiary of~~2016, SFC had net payables of $2$40 million and ~~$19~~$12 million, respectively, to ~~Springleaf General Services Corporation (“SGSC”),~~SGSC, a subsidiary of SFI, related to the intercompany agreements further discussed below in this Note. At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015, SFMC~~2016, SFC also had a payable of $2 million and $1 million, respectively, to ~~Springleaf Consumer Loan, Inc. (“SCLI”)~~OCLI, a subsidiary of SFI, for internet lending referral fees charged to the branch network.

~~Prior~~ See “Loan Referral Fees” below. Additionally, at March 31, 2017, SFC had a payable of $3 million to ~~the SpringCastle Interests Sale, SFI provided~~OMFH for servicing and collection fees of the SpringCastle Portfolio through a master servicing agreement with SpringCastle Holdings, LLC, a subsidiary of SFC. At December 31, 2015, SpringCastle Holdings LLC’s payable to SFI totaled $4 million. Subsequent to the SpringCastle Interests Sale, SFI continues to act as the servicer of the SpringCastle Portfoliolegacy Springleaf loans serviced by legacy OneMain branches. See “Loan Servicing Fees” below for ~~the SpringCastle Funding Trust.~~further information.

~~RELATED PARTY~~ LOAN SALE TRANSACTIONS

During the second quarter of 2016, ~~Springleaf Consumer Loan, Inc. (“SCLI”), a subsidiary of SFI,~~OCLI entered into loan purchase and sale agreements with certain subsidiaries of SFC pursuant to which ~~SCLI~~OCLI sold certain personal loans with an aggregate UPB at the time of sale of $89 million for an aggregate purchase price of $89 million. OCLI continues to service these loans. During the three months ended March 31, 2017, SFC recorded less than $1 million of service fee expenses.

LOAN SERVICING FEES

In connection with the combining of certain legacy OneMain branches with legacy Springleaf branches and vice versa, during the fourth quarter of 2016, SFC entered into an intercompany service agreement with OMFH relating to the servicing of loans when a legacy OneMain loan is serviced by a legacy Springleaf branch and vice versa. During the three months ended March 31, 2017, SFC recorded $3 million of service fee expenses for the legacy Springleaf loans serviced by legacy OneMain branches and $3 million of service fee income for the legacy OneMain loans serviced by legacy Springleaf branches. At March 31, 2017, SFC’s receivable from OMFH for the servicing fees and collections received on the legacy OneMain loans serviced by legacy Springleaf branches totaled $3 million, and SFC’s payable to OMFH for the servicing fees and collections received on the legacy Springleaf loans serviced by legacy OneMain branches totaled $3 million.

LOAN REFERRAL FEES

OCLI provides personal loan application processing and credit underwriting services on behalf of SFC for personal loan applications that are submitted online. SFC is charged a fee of $35 for each underwritten approved application processed, as well as any other fees agreed to by the parties. During the three months ended March 31, 2017 and 2016, SFC recorded $5 million and $3 million, respectively, of referral fee expense. SFC’s payable to OCLI for internet lending referral fees totaled $2 million at March 31, 2017 and $1 million at December 31, 2016.

DEBT PURCHASES

In March of 2017, OMAS, a subsidiary of OMFH, purchased $1 million principal amount of SFC’s medium term notes in the open market for an aggregate purchase price of $1 million. At the purchase dates, these notes had a carrying value of $1 million.

In December of 2016, OMAS purchased $5 million principal amount of SFC’s medium term notes in the open market for an aggregate purchase price of $5 million. At the purchase dates, these notes had a carrying value of $5 million.

These purchase transactions did not impact our condensed consolidated financial statements.

CAPITAL CONTRIBUTIONS

During the first quarter of 2016, SFC received a capital contribution of $10 million to satisfy an interest payment required by the Junior Subordinated Debenture in respect of SFC’s junior subordinated debt.

INTERCOMPANY AGREEMENTS

On December 24, 2012, SGSC, a subsidiary of SFI, entered into the following intercompany agreements with SFMC, a subsidiary of SFC, and with certain other subsidiaries of SFI, ~~(collectively,~~collectively, the ~~“Recipients”). SFMC’s net payable to SGSC relating to these agreements totaled $2 million at June 30, 2016 and $19 million at December 31, 2015.~~“Recipients.”

Services Agreement

SGSC provides the following services to the Recipients: management and administrative services; financial, accounting, treasury, tax, and audit services; facilities support services; capital funding services; legal services; human resources services (including payroll); centralized collections and lending support services; insurance, risk management, and marketing services; and information technology services. The fees payable by each Recipient to SGSC is equal to 100% of the allocated cost of providing the services to such Recipient. SGSC allocates its cost of providing these services among the Recipients and any of the companies to which it provides similar services based on an allocation method defined in the agreement. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, ~~SFMC~~SFC recorded ~~$58~~$59 million and ~~$125~~$67 million, respectively, of service fee expenses, which are included in other operating ~~expenses, compared to $47 million and $101 million for the three and six months ended June 30, 2015, respectively.~~expenses.

License Agreement

The license agreement provides for use by SGSC of SFMC’s information technology systems and software and other related equipment. The monthly license fee payable by SGSC for its use of the information technology systems and software is 100% of the actual costs incurred by SFMC plus a 7.00% margin. The fee payable by SGSC for its use of the related equipment is 100% of the actual costs incurred by SFMC. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, SFMC recorded $2$1 million ~~and $3 million, respectively,~~ of license fees, which are included as a contra expense to other operating ~~expenses, compared to $2 million and $3 million for the three and six months ended June 30, 2015, respectively.~~expenses.

Building Lease Agreement

The building lease agreement provides that SFMC will lease six of its buildings to SGSC for an annual rental amount of $4 million, plus additional rental amounts to cover other sums and charges, including real estate taxes, water charges, and sewer rents. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, SFMC recorded $1 million ~~and $2 million, respectively,~~ of rent charged to SGSC, which are included as a contra expense to other operating ~~expenses, compared to $1 million and $2 million for the three and six months ended June 30, 2015, respectively.~~expenses.

See Note 18 for information on the subsequent termination of the building lease agreement effective April 5, 2017 in contemplation of the merger of SFMC and SGSC on April 10, 2017 and the subsequent termination of the license agreement as a result of this merger.

~~10.~~

9. 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 ~~June 30, 2016~~March 31, 2017 were as follows:


	Senior Debt														Senior Debt
(dollars in millions)	Securitizations			Revolving Conduit Facilities		Medium Term Notes			Junior Subordinated Debt			Total			Securitizations			Revolving Conduit Facilities			Medium Term Notes			Junior Subordinated Debt			Total

Interest rates (a)	2.41% - 6.50%			1.90% - 2.29%		5.25% - 8.25%			6.00		%				2.04% - 6.50%			2.59		%	5.25% - 8.25%			2.77		%

Third quarter 2016	$	—		$	—	$	375		$	—		$	375
Fourth quarter 2016	—			—		—			—			—
First quarter 2017	—			—		—			—			—
Second quarter 2017	—			—		—			—			—			$	—		$	—		$	—		$	—		$	—
Remainder of 2017	—			—		1,289			—			1,289
2018	—			—		—			—			—
Third quarter 2017															—			—			257			—			257
Fourth quarter 2017															—			—			1,030			—			1,030
First quarter 2018															—			—			—			—			—
Remainder of 2018															—			—			—			—			—
2019	—			—		700			—			700			—			—			700			—			700
2020	—			—		1,300			—			1,300			—			—			1,300			—			1,300
2021-2067	—			—		950			350			1,300
2021															—			—			650			—			650
2022-2067															—			—			300			350			650
Securitizations (b)	1,890			—		—			—			1,890			2,641			—			—			—			2,641
Revolving conduit facilities (b)	—			325		—			—			325			—			10			—			—			10
Total principal maturities	$	1,890		$	325	$	4,614		$	350		$	7,179		$	2,641		$	10		$	4,237		$	350		$	7,238

Total carrying amount ~~(c)~~	$	1,882		$	325	$	4,320		$	172		$	6,699		$	2,629		$	10		$	4,012		$	172		$	6,823
Debt issuance costs ~~(d)~~(c)	$	(7	)	$	—	$	(16	)	$	—		$	(23	)	$	(12	)	$	—		$	(13	)	$	—		$	(25	)

(a)

The interest rates shown are the range of contractual rates in effect at ~~June 30, 2016.~~March 31, 2017. Effective January 16, 2017, the interest rate on the UPB of the Junior Subordinated Debenture became a variable floating rate (determined quarterly) equal to 3-month LIBOR plus 1.75%, or 2.77% as of March 31, 2017. Prior to January 16, 2017, the interest rate on the UPB of the Junior Subordinated Debenture was a fixed rate of 6.00%.


(b)	Securitizations and borrowings under revolving conduit facilities are not included in the above maturities by period due to their variable monthly repayments. See Note 1110 for further information on our long-term debt associated with securitizations and revolving conduit facilities.

(c)

The carrying amount of our long-term debt associated with certain securitizations that were (i) issued at a premium or discount, (ii) revalued at a premium or discount based on its fair value at the time of the Fortress Acquisition or (iii) recorded at fair value on a recurring basis in circumstances when the embedded derivative within the securitization structure cannot be separately accounted for at fair value.


~~(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 ~~$10~~$9 million at ~~June 30, 2016~~March 31, 2017 and are reported in other ~~assets and are excluded from the table above.~~assets.

GUARANTY AGREEMENTS

8.25% SFC Notes

On April 11, 2016, OMH entered into athe SFC Second Supplemental Indenture, pursuant to which it agreed to fully and unconditionally guarantee, on a senior unsecured basis, the payments of principal, premium (if any) and interest on ~~$1.0 billion of~~ the 8.25% SFC Notes. As of ~~June 30, 2016,~~March 31, 2017, $1.0 billion aggregate principal amount of the 8.25% SFC Notes were outstanding. ~~See Note 2 for further discussion of this offering.~~

5.25% SFC Notes

On December 3, 2014, OMH entered into anthe SFC Base Indenture and the SFC First Supplemental Indenture, pursuant to which it agreed to fully and unconditionally guarantee, on a senior unsecured basis, the payments of principal, premium (if any) and interest on ~~$700~~

~~million of~~the 5.25% ~~Senior Notes due 2019 issued by~~ SFC ~~(the “5.25% SFC Notes”).~~Notes. As of ~~June 30, 2016,~~March 31, 2017, $700 million aggregate principal amount of the 5.25% SFC Notes were outstanding.

Other SFC Notes

On December 30, 2013, OMH entered into SFC Guaranty Agreements whereby it agreed to fully and unconditionally guarantee the payments of principal, premium (if any), and interest on approximately $5.2 billion aggregate principal amount of senior notes, on a senior unsecured basis, and $350 million aggregate principal amount of a junior subordinated debenture, on a junior subordinated basis, issued bythe Other SFC ~~(collectively, the “Other SFC Notes”).~~Notes. The Other SFC Notes consisted of the following: 8.25% Senior Notes due 2023; 7.75% Senior Notes due 2021; 6.00% Senior Notes due 2020; ~~a 60-year junior subordinated debenture;~~the Junior Subordinated Debenture; and all senior notes outstanding on December 30, 2013, issued pursuant to the ~~Indenture dated as of May 1,~~ 1999 ~~(the “1999 Indenture”),~~Indenture, between SFC and Wilmington ~~Trust, National Association~~ (the successor trustee to Citibank N.A.). The ~~60-year junior subordinated debenture~~Junior Subordinated Debenture underlies the trust preferred securities sold by a trust sponsored by SFC. On December 30, 2013, OMH entered into athe SFC Trust Guaranty Agreement whereby it agreed to fully and unconditionally guarantee the related payment obligations under the trust preferred securities. As of ~~June 30, 2016, approximately $3.3~~March 31, 2017, $2.9 billion aggregate principal amount of the Other SFC Notes ~~was~~were outstanding.

The OMH guarantees of SFC’s long-term debt discussed above are subject to customary release provisions.

~~11.~~10. Variable Interest Entities

CONSOLIDATED VIES

As part of our overall funding strategy and as part of our efforts to support our liquidity from sources other than our traditional capital market sources, we have transferred certain finance receivables to VIEs for asset-backed financing transactions, including securitization and conduit transactions. ~~Since~~We have determined that we are the primary beneficiary of these ~~transactions involve securitization trusts required to be consolidated,~~VIEs and, as a result, we include each VIE’s assets, including any finance receivables securing the ~~securitized assets~~VIE’s debt obligations, and related liabilities ~~are included~~ in our ~~condensed~~ consolidated financial statements and each VIE’s asset-backed debt obligations are accounted for as secured borrowings.

~~CONSOLIDATED VIES~~

~~We evaluated the securitization trusts and determined that these entities are VIEs of which we are the primary beneficiary, and therefore, we consolidated such entities.~~ We are deemed to be the primary ~~beneficiaries~~beneficiary of ~~these VIEs~~each VIE because we have the ability to direct the activities of ~~each~~the VIE that most significantly impact ~~the entity’s~~its economic performance, including the losses it absorbs and ~~the obligation to absorb losses and the~~its right to receive economic benefits that are potentially ~~significant to each VIE.~~significant. Such ability arises from SFC’s and its affiliates’ contractual right to service the ~~securitized~~ finance ~~receivables. Our retained~~receivables securing the VIEs’ debt obligations. To the extent we retain any subordinated ~~note and~~debt obligation or residual interest ~~trust certificates expose us~~in an asset-backed financing facility, we are exposed to potentially significant losses and potentially significant returns.

The asset-backed ~~securities~~debt obligations issued by the ~~securitization trusts~~VIEs are supported by the expected cash flows from the underlying ~~securitized~~ finance ~~receivables.~~receivables securing such debt obligations. Cash inflows from these finance receivables are distributed to ~~investors~~repay the debt obligations and related service providers in accordance with each transaction’s contractual priority of payments, ~~(“waterfall”) and,~~referred to as ~~such, most of these inflows must be directed first to service and repay each trust’s senior notes or certificates held principally by third-party investors.~~the “waterfall.” The holders of the asset-backed ~~securities~~debt obligations have no recourse to the Company if the cash flows from the underlying ~~qualified securitized assets~~finance receivables securing such debt obligations are not sufficient to pay all principal and interest on the asset-backed ~~securities. After these senior~~debt obligations. With respect to any asset-backed financing transaction that has multiple classes of debt obligations, ~~are extinguished,~~ substantially all cash inflows will be directed to the ~~subordinated notes~~senior debt obligations until fully repaid and, thereafter, to the ~~residual interest that we own in each securitization trust.~~subordinate debt obligations on a sequential basis. We retain ~~interests in these securitization transactions, including residual interests in each securitization trust~~an interest and ~~in some cases, subordinated securities issued by the VIEs. We retain~~ credit risk in ~~the securitizations~~these financing transactions through our ownership of the residual interest in each ~~securitization trust,~~VIE and, in some cases, ~~ownership of~~ the most ~~subordinated~~subordinate class of ~~asset-backed securities,~~debt obligations issued by the VIE, which are the first to absorb credit losses on the ~~securitized assets.~~finance receivables securing the debt obligations. We expect that any credit losses in the pools of ~~securitized assets~~finance receivables securing the asset-backed debt obligations will likely be limited to our subordinated and residual retained interests. We have no obligation to repurchase or replace qualified ~~securitized assets~~finance receivables that subsequently become delinquent or are otherwise in default.

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 were as follows:


(dollars in millions)	June 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016

Assets
Cash and cash equivalents	$	1	$	7	$	1	$	2
Finance receivables:
Personal loans	2,436		3,621		2,863		2,943
SpringCastle Portfolio	—		1,703
Allowance for finance receivable losses	85		128		85		94
Finance receivables held for sale	—		435
Restricted cash and cash equivalents	150		282
Restricted cash and restricted cash equivalents					173		211
Other assets	45		48		9		9

Liabilities
Long-term debt	$	2,207	$	5,513	$	2,639	$	2,675
Other liabilities	4		9		5		7

~~Consumer Loan Securitization Transaction~~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, except for the ODART 2016-1 securitization which has no revolving period. The indentures governing our securitizations 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 securitized borrowings at March 31, 2017 consisted of the following:



(dollars in millions)	Current Note Amounts Outstanding		Current Weighted Average Interest Rate		Original Revolving Period

Consumer Securitizations:
SLFT 2015-A (a)	$	1,163	3.47	%	3 years
SLFT 2015-B (b)	314		3.78	%	5 years
SLFT 2016-A (c)	500		3.10	%	2 years
Total consumer securitizations	1,977

Auto Securitization:
ODART 2016-1 (d)	396		2.45	%	—
ODART 2017-1 (e)	268		2.61	%	1 year
Total auto securitizations	664

Total secured structured financings	$	2,641


(a)	SLFT 2015-A Securitization. On February 26, 2015, we issued $1.2 billion of notes backed by personal loans. The notes mature in November 2024.


(b)	SLFT 2015-B Securitization. On April 7, 2015, we issued $314 million of notes backed by personal loans. The notes mature in May 2028.


(c)	SLFT 2016-A Securitization. On December 14, 2016, we issued $532 million of notes backed by personal loans. The notes mature in November 2029. We initially retained $32 million of the asset-backed notes.


(d)	ODART 2016-1 Securitization. On July 19, 2016, we issued $754 million of notes backed by direct auto loans. The maturity dates of the notes occur in January 2021 for the Class A notes, May 2021 for the Class B notes, September 2021 for the Class C notes and February 2023 for the Class D notes. We initially retained $54 million of the Class D notes.


(e)	ODART 2017-1 Securitization. On February 1, 2017, we issued $300 million of notes backed by direct auto loans. The maturity dates of the notes occur in October 2020 for the Class A notes, June 2021 for the Class B notes, August 2021 for the Class C notes, December 2021 for the Class D notes, and

January 2025 for the Class E notes. We initially retained $11 million of the Class A notes, $1 million of each of the Class B, Class C, and Class D notes, and the entire $18 million of the Class E notes.

Call of ~~2013-B~~2014-A Notes.On February ~~16, 2016, Sixteenth~~15, 2017, we exercised our right to redeem the 2014-A Notes for a redemption price of $188 million, which excluded $33 million for the Class D Notes owned by Twenty First Street, ~~Funding LLC (“Sixteenth Street”),~~ a wholly owned subsidiary of SFC, exercised its right to redeem the asset backed notes issued by the Springleaf Funding Trust 2013-B on June 19, 2013 (the “2013-B Notes”). To redeem the 2013-B Notes, Sixteenth Street paid a redemption price of $371 million, which included $1 million of accrued interest and excluded $30 million for the Class C and Class D Notes owned by Sixteenth Street on February ~~16, 2016,~~15, 2017, the date of the optional redemption. The outstanding principal balance of the ~~2013-B Notes~~asset-backed notes was ~~$400~~$221 million on the date of the optional redemption.

~~Conduit Facilities~~REVOLVING CONDUIT FACILITIES

As of ~~June 30, 2016,~~March 31, 2017, our borrowings under conduit facilities consisted of the following:

(dollar in millions)
Note Maximum
Balance
Amount
Drawn
Revolving
Period End

First Avenue Funding LLC (a)
$ 250

$ —

June 2018
Midbrook 2013-VFN1 Trust (b)
300

—

February 2018
Mill River 2015-VFN1 Trust (c)
100

—

May 2018
Second Avenue Funding LLC
250

—

June 2018
Springleaf 2013-VFN1 Trust (d)
850

50

January 2018
Sumner Brook 2013-VFN1 Trust
350

275

January 2018
Whitford Brook 2014-VFN1 Trust (e)
250

—

June 2018
Total
$ 2,350

$ 325



(dollar in millions)	Note Maximum Balance		Amount Drawn		Revolving Period End

Midbrook 2013-VFN1 Trust *	$	50	$	—	February 2018
Sumner Brook 2013-VFN1 Trust	350		10		January 2018
Springleaf 2013-VFN1 Trust	850		—		January 2018
Whitford Brook 2014-VFN1 Trust	250		—		June 2018
First Avenue Funding LLC	250		—		June 2018
Second Avenue Funding LLC	250		—		June 2018
Seine River Funding, LLC	500		—		December 2019
Total	$	2,500	$	10

~~(a)~~

~~First Avenue Funding LLC.~~ On June 30, 2016, we amended the note purchase agreement with the First Avenue Funding LLC (“First Avenue”) to extend the revolving period ending in March 2018 to June 2018. Following the revolving period, the principal amount of the notes, if any, will be reduced as cash payments are received on the underlying auto secured personal loans and will be due and payable in full 12 months following the maturity of the last auto secured personal loan held by First Avenue.

~~(b)~~*

Midbrook 2013-VFN1 Trust. On February 24, ~~2016, we amended~~2017, the maximum principal balance decreased from $100 million to $50 million. See Note 18 for information on the subsequent termination of the note purchase agreement with ~~the~~ Midbrook Funding Trust 2013-VFN1 to (i) extend the revolving period ending in June 2016 to February 2018 and (ii) decrease the maximum principal balance from $300 million to $250 million on February 24, 2017. Following the revolving period, the principal amount of the notes, if any, will be reduced as cash payments are received on the underlying personal loans and will be due and payable in the 36^th~~month following the end of the revolving period.~~


~~(c)~~	~~Mill River 2015-VFN1 Trust.~~ ~~On January 21, 2016, we amended the note purchase agreement with the Mill River 2015-VFN1 Trust to decrease the maximum principal balance from $400 million to $100 million.~~

~~(d)~~

~~Springleaf~~ 2013-VFN1 Trust.On January 21, 2016, we amended the note purchase agreement with the Springleaf 2013-VFN1 Trust to (i) increase the maximum principal balance from $350 million to $850 million and (ii) extend the revolving period ending in April 2017 to January 2018, which may be extended to January 2019, subject to satisfaction of customary conditions precedent. Following the revolving period, the principal amount of the notes, if any, will be reduced as cash payments are received on the underlying personal loans and will be due and payable in the 36^th~~month following the end of the revolving period.~~

~~(e)~~

~~Whitford Brook 2014-VFN1 Trust.~~ On February 24, 2016, we amended the note purchase agreement with the Whitford Brook Funding Trust 2014-VFN1 (the “Whitford Brook 2014-VFN1 Trust”) to extend the revolving period ending in June 2017 to June 2018. Following the revolving period, the principal amount of the notes, if any, will be reduced as cash payments are received on the underlying personal loans and will be due and payable in the 12^th~~month following the end of the revolving period.~~

VIE INTEREST EXPENSE

Other than our retained subordinate and residual interests in the remaining consolidated ~~securitization trusts,~~VIEs, we are under no obligation, either contractually or implicitly, to provide financial support to these entities. Consolidated interest expense related to our VIEs for the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 totaled ~~$24~~$27 million, ~~and $72 million, respectively,~~ compared to ~~$49 million and $87~~$48 million for the three ~~and six~~ months ended ~~June 30, 2015, respectively.~~March 31, 2016.

DECONSOLIDATED VIES

As a result of the SpringCastle Interests Sale on March 31, 2016, we deconsolidated the securitization trust holding the underlying loans of the SpringCastle Portfolio and previously issued securitized interests, which were reported in long-term debt.

~~As a result of~~

11. Insurance

Changes in the sales of the mortgage-backed retained certificates during 2014, we (i) deconsolidated the securitization trusts holding the underlying real estate loans and previously issued securitized interests which were reported in long-term debt and (ii) established a reserve for ~~sales recourse obligations of $6 million related to these sales. At June 30, 2016, this reserve totaled $6 million. We had no repurchase activity associated with these sales~~unpaid claims and loss adjustment expenses (not considering reinsurance recoverable) were as of June 30, 2016. See Note 14 for further information on the total reserve for sales recourse obligations relating to the real estate loan sales, including the sales of the mortgage-backed retained certificates.follows:



	At or for the Three Months Ended March 31,
(dollars in millions)	2017			2016

Balance at beginning of period	$	70		$	73
Less reinsurance recoverables	(22		)	(22		)
Net balance at beginning of period	48			51
Additions for losses and loss adjustment expenses incurred to:
Current year	17			18
Prior years *	1			(2		)
Total	18			16
Reductions for losses and loss adjustment expenses paid related to:
Current year	(7		)	(6		)
Prior years	(11		)	(11		)
Total	(18		)	(17		)
Net balance at end of period	48			50
Plus reinsurance recoverables	23			22
Balance at end of period	$	71		$	72

Reflects (i) a shortfall in the prior years’ net reserves of $1 million at March 31, 2017 primarily resulting from increased estimates for claims incurred in prior years as claims have developed, and (ii) a redundancy in the prior years’ net reserves of $2 million at March 31, 2016 primarily due to credit disability and credit involuntary unemployment insurance claims developing more favorably than anticipated.

12. 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)			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, 2016
Three Months Ended March 31, 2017
Balance at beginning of period	$	(2	)	$	(19	)	$	4		$	(17	)	$	(3	)	$	(4	)	$	—	$	(7	)
Other comprehensive income before reclassifications	7			—			—			7			2			—			—		2
Reclassification adjustments from accumulated other comprehensive income (loss)	(1		)	—			—			(1		)	(1		)	—			—		(1		)
Balance at end of period	$	4		$	(19	)	$	4		$	(11	)	$	(2	)	$	(4	)	$	—	$	(6	)

Three Months Ended June 30, 2015
Balance at beginning of period	$	11		$	(13	)	$	5		$	3
Other comprehensive loss before reclassifications	(6		)	—			(1		)	(7		)
Reclassification adjustments from accumulated other comprehensive income (loss)	(3		)	—			—			(3		)
Balance at end of period	$	2		$	(13	)	$	4		$	(7	)

Six Months Ended June 30, 2016
Three Months Ended March 31, 2016
Balance at beginning of period	$	(9	)	$	(19	)	$	4		$	(24	)	$	(9	)	$	(19	)	$	4	$	(24	)
Other comprehensive income before reclassifications	15			—			—			15			8			—			—		8
Reclassification adjustments from accumulated other comprehensive income (loss)	(2		)	—			—			(2		)	(1		)	—			—		(1		)
Balance at end of period	$	4		$	(19	)	$	4		$	(11	)	$	(2	)	$	(19	)	$	4	$	(17	)

Six Months Ended June 30, 2015
Balance at beginning of period	$	12		$	(13	)	$	4		$	3
Other comprehensive loss before reclassifications	(3		)	—			—			(3		)
Reclassification adjustments from accumulated other comprehensive income (loss)	(7		)	—			—			(7		)
Balance at end of period	$	2		$	(13	)	$	4		$	(7	)

Reclassification adjustments from accumulated other comprehensive income (loss) to the applicable line item on our condensed consolidated statements of operations were as follows:

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015
2016
2015

Unrealized gains on investment securities:

Reclassification from accumulated other comprehensive income
(loss) to investment revenues, before taxes
$ 2
$ 4
$ 3
$ 10
Income tax effect (1 ) (1 ) (1 ) (3 )
Reclassification from accumulated other comprehensive income
(loss) to investment revenues, net of taxes
$ 1
$ 3
$ 2
$ 7



(dollars in millions)	Three Months Ended March 31,
(dollars in millions)	2017			2016

Unrealized gains on available-for-sale securities:
Reclassification from accumulated other comprehensive income (loss) to investment revenues, before taxes	$	2		$	1
Income tax effect	(1		)	—
Reclassification from accumulated other comprehensive income (loss) to investment revenues, net of taxes	$	1		$	1

13. Income Taxes

At ~~June 30, 2016,~~March 31, 2017, we had a net deferred tax liability of ~~$129~~$37 million, compared to ~~$113~~$42 million at December 31, ~~2015.~~2016. The ~~increase~~decrease in net deferred tax liability of ~~$16~~$5 million was primarily due to ~~the impact of the SpringCastle Interests Sale,~~tax accounting method change, partially offset by changes in the fair value of our finance ~~receivables and purchase accounting for debt writedown.~~receivables.

The effective tax rate for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 was ~~34.0%~~37.6%, compared to ~~10.7%~~34.1% for the same period in ~~2015.~~2016. The effective tax ~~rates~~rate for the ~~six~~three months ended ~~June 30, 2016 and 2015~~March 31, 2017 differed from the federal statutory ~~rates~~rate primarily due to the ~~effects~~effect of state income taxes. The effective tax rate for the three months ended March 31, 2016 differed from the federal statutory rate primarily due to the effect of the non-controlling interests in the previously owned SpringCastle Portfolio.

We are currently under examination of our U.S. federal tax return for the years 2011 to 2013 by the Internal Revenue Service. Management believes it has adequately provided for taxes for such years.

~~The Company’s~~Our gross unrecognized tax ~~positions,~~benefits, including related interest and penalties, totaled ~~$10 million and $9~~$11 million at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015, respectively, all of which would affect the effective~~2016. We accrue interest related to uncertain tax ~~rate if recognized.~~positions in income tax expense. The amount of any change in the balance of uncertain tax ~~positions~~liabilities over the next 12 months is not expected to be material to our consolidated financial statements.

14. Contingencies

LEGAL CONTINGENCIES

In the normal course of business, ~~the Company has~~we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation arising in connection with ~~its~~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 ~~identify certain~~evaluate legal actions ~~where we believe~~to determine whether a ~~material~~ loss ~~to be~~is reasonably possible or probable and is reasonably estimable, there can be no assurance that material losses will not be incurred from ~~claims that we have not yet been notified of~~pending, threatened or ~~are not yet determined to be probable~~future litigation, investigations, examinations, or ~~reasonably possible and reasonably estimable.~~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 condensed 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.

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 condensed consolidated financial statements as a whole.

SALES RECOURSE OBLIGATIONS

At ~~June 30, 2016,~~March 31, 2017, our reserve for sales recourse obligations totaled ~~$15~~$14 million, which primarily related to ~~the~~our real estate loan sales in ~~2014.~~2014, with a minimal portion of the reserve related to net charge-off sales of our finance receivables. We did not establish any additional reserves for sales recourse obligations associated with the personal loans sold in the Lendmark Sale or our real estate loan sales in 2016 based on the credit quality of the loans sold and the terms of each transaction. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, we had no repurchase activity related to these sales and no material activity related to our ~~real estate loan~~ sales ~~in 2014. For the three and six months ended June 30, 2015, we repurchased 13 loans, totaling $1 million, associated with the real estate loan sales in 2014.~~ recourse obligations.

At ~~June 30, 2016,~~March 31, 2017, there were no material ~~recourse~~repurchase requests with loss exposure that management ~~believes will~~believed would not be covered by the reserve. However, we will continue to monitor any repurchase activity in the future and will adjust the reserve accordingly.

~~The activity in our reserve for sales recourse obligations primarily associated with the real estate loan sales during 2014 was as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2016 2015 2016 2015

Balance at beginning of period $ 15
$ 24
$ 15
$ 24
Recourse losses —
(5 ) —
(5 )
Provision for recourse obligations, net of recoveries * —
(1 ) —
(1 )
Balance at end of period $ 15
$ 18
$ 15
$ 18


*	~~Reflects the elimination of the reserve associated with other prior sales of finance receivables.~~

~~It is inherently difficult to determine whether any recourse losses are probable or even reasonably possible or to estimate the amounts of any losses. In addition, even where~~ When recourse losses are reasonably possible or exposure to such losses exists in excess of the liability already accrued, it is not always possible to reasonably estimate the size of the possible recourse losses or range of losses.

15. Benefit Plans

~~The following table presents~~During the three months ended March 31, 2017 and 2016, the components of net periodic benefit cost with respect to our defined benefit pension ~~plans:~~

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015
2016 2015

Components of net periodic benefit cost - pension plans:

Interest cost $ 4
$ 4
$ 8
$ 8
Expected return on assets (4 ) (4 ) (8 ) (9 )
Net periodic benefit cost $ —
$ —
$ —
$ (1 )

plans were immaterial. We do not currently fund post retirement benefits.

16. Segment Information

Our segments coincide with how our businesses are managed. At ~~June 30, 2016,~~March 31, 2017, our ~~three~~two segments ~~include:~~included:

Consumer and Insurance — We originate and service personal loans (secured and unsecured) through ~~two business divisions:~~our branch ~~operations~~network and our centralized ~~operations and~~operations. We also offer credit insurance (life insurance, disability insurance, and involuntary unemployment insurance), non-credit insurance, and ~~ancillary products, such as warranty protection. Branch operations primarily conduct~~auto membership plans provided by a third party. Our branch network conducts business in 28 states. Our centralized operations underwrite and process certain loan applications that we receive from our branch ~~operations~~network or through an internet portal. If the applicant is “in footprint,” located near an existing branch, ~~(“in footprint”),~~ our centralized operations make the credit decision regarding the application and then request, but do not require, the customer to visit a nearby branch for closing, funding and servicing. If the applicant is “out of footprint,” not located near a branch, ~~(“out of footprint”),~~ our centralized operations originate the loan.

Acquisitions and Servicing — SFI services the SpringCastle Portfolio that was acquired by an indirect subsidiary of OMH through ~~a joint venture in which SFC owned a 47% equity interest.~~the SpringCastle Joint Venture. On March 31, 2016, the SpringCastle Portfolio was sold in connection with the sale of our equity interest in the SpringCastle Joint Venture. These loans consist of unsecured loans and loans secured by subordinate residential real estate mortgages and include both closed-end accounts and open-end lines of credit. These loans are in a liquidating status and vary in substance and form from our originated loans. Unless SFI is terminated, SFI will continue to provide the servicing for these loans pursuant to a servicing agreement, which ~~we service~~SFI services as unsecured loans because the liens are subordinated to superior ranking security interests.

~~Real Estate~~ — We service and hold real estate loans secured by first or second mortgages on residential real estate. Real estate loans previously originated through our branch offices or previously acquired or originated through centralized distribution channels are serviced by: (i) MorEquity and subserviced by Nationstar; (ii) Select Portfolio Servicing, Inc.; or (iii) our centralized operations. Investment funds managed by affiliates of Fortress indirectly own a majority interest in Nationstar. Prior to the OneMain Acquisition, this segment also included proceeds from the sale of our real estate loans in 2014. OMH used these proceeds to acquire OneMain.

The remaining components (which we refer to as “Other”) consist of our ~~other~~ non-originating legacy operations, which ~~are isolated by geographic market and/or distribution channel from our three segments. These operations include:~~include (i) our ~~legacy operations in 14 states where we had also ceased branch-based personal lending;~~liquidating real estate loan portfolio as discussed below, (ii) our liquidating retail sales finance portfolio (including retail sales finance accounts from ~~its~~our legacy auto finance operation);, and (iii) our ~~lending operations~~short equity personal loans that we are no longer originating.

Beginning in ~~Puerto Rico and the U.S. Virgin Islands; and (iv) the operations~~2017, management no longer views or manages our real estate assets as a separate operating segment. Therefore, we are now including Real Estate, which was previously presented as a distinct reporting segment, in “Other.” To conform to this new alignment of our ~~United Kingdom subsidiary.~~segments, we have revised our prior period segment disclosures.

The accounting policies of the segments are the same as those disclosed in Note 3 to the consolidated financial statements of our ~~2015~~2016 Annual Report on Form 10-K, except as described below.

Due to the nature of the Fortress Acquisition, we applied purchase accounting. However, we report the operating results of Consumer and Insurance, Acquisitions and Servicing, ~~Real Estate,~~ and Other using ~~a “Segment~~the Segment Accounting Basis,” which (i) reflects our allocation methodologies for certain costs, primarily interest expense and loan loss reserves, ~~and acquisition costs~~ to reflect the manner in which we assess our business results and (ii) excludes the impact of applying purchase ~~accounting. These allocations and adjustments currently have a material effect~~accounting (eliminates premiums/discounts on our ~~reported segment basis income~~finance receivables and long-term debt at acquisition, as ~~compared to GAAP. We believe a Segment Accounting Basis (a basis other than GAAP) provides investors a consistent basis for which management evaluates segment performance.~~

well as the amortization/accretion in future periods).

We allocate revenues and expenses (on a Segment Accounting Basis) to each segment using the following methodologies:



Interest income	Directly correlated with a specific segment.
Interest expense	~~Acquisition~~Acquisitions and Servicing - This segment includes interest expense specifically identified to the SpringCastle Portfolio.
	Consumer and Insurance ~~Real Estate~~ and Other - The Company has securitization debt and unsecured debt. The Company first allocates interest expense to its segments based on actual expense for securitizations and secured term debt and using a weighted average for unsecured debt allocated to the segments. ~~Average unsecured debt allocations for the periods presented are as follows:~~
	~~Subsequent to the OneMain Acquisition~~
	Total average unsecured debt is allocated as follows:
	l Consumer and Insurance - receives remainder of unallocated average debt; and
l ~~Real Estate and~~ Other - at 100% of asset base. (Asset base represents the average net finance receivables including finance receivables held for sale.)
The net effect of the change in debt allocation and asset base methodologies for the three months ended June 30, 2015 had it been in place as of the beginning of the year would be an increase in interest expense of $66 million for Consumer and Insurance and a decrease in interest expense of $45 million and $21 million for Real Estate and Other, respectively.
The net effect of the change in debt allocation and asset base methodologies for the six months ended June 30, 2015 had it been in place as of the beginning of the year would be an increase in interest expense of $120 million for Consumer and Insurance and a decrease in interest expense of $90 million and $30 million for Real Estate and Other, respectively.
~~For the period third quarter 2014 to the OneMain Acquisition~~
Total average unsecured debt was allocated to Consumer and Insurance, Real Estate and Other, such that the total debt allocated across each segment equaled 83%, up to 100% and 100% of each of its respective asset base. Any excess was allocated to Consumer and Insurance.
~~Average unsecured debt was allocated after average securitized debt to achieve the calculated average segment debt.~~
~~Asset base represented the following:~~
l ~~Consumer and Insurance~~ ~~- average net finance receivables including average net finance receivables held for sale;~~
l ~~Real Estate~~ ~~- average net finance receivables including average net finance receivables held for sale, cash and cash equivalents, investments including proceeds from Real Estate sales; and~~
l ~~Other~~ ~~- average net finance receivables other than the periods listed below:~~
l ~~May 2015 to the OneMain Acquisition~~ ~~- average net finance receivables and cash and cash equivalents less proceeds from equity issuance in 2015, operating cash reserve and cash included in other segments.~~
l ~~February 2015 to April 2015~~ ~~- average net finance receivables and cash and cash equivalents less operating cash reserve and cash included in other segments.~~
Provision for finance receivable losses	Directly correlated with a specific segment, except for allocations to Other, which are based on the remaining delinquent accounts as a percentage of total delinquent accounts.
Other revenues	Directly correlated with a specific segment, except for: (i) net gain (loss) on repurchases and repayments of debt, which is allocated to the segments based on the interest expense allocation of debt and (ii) gains and losses on foreign currency exchange, which are allocated to the segments based on the interest expense allocation of debt.
Other expenses	Salaries and benefits	- Directly correlated with a specific segment. Other salaries and benefits not directly correlated with a specific segment are allocated to each of the segments based on services provided.
	Other operating expenses	- Directly correlated with a specific segment. Other operating expenses not directly correlated with a specific segment are allocated to each of the segments based on services provided.
	Insurance policy benefits and claims	- Directly correlated with a specific segment.

The “Segment to GAAP Adjustment” column in the following tables primarily consists of:

Interest income - reverses the ~~net purchase accounting~~ impact of ~~the amortization (accretion) of the net premium (discount) assigned to~~premiums/discounts on purchased finance receivables and the ~~impact of identifying purchased credit impaired finance receivables as compared to the~~interest income recognition under guidance in ASC 310-20, Nonrefundable Fees and Other Costs, and ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, and reestablishes interest income recognition on a historical ~~values of finance receivables;~~cost basis;

Interest expense - reverses the ~~accretion~~impact of ~~the net discount applied to our~~premiums/discounts on acquired long-term debt ~~as part of purchase accounting;~~and reestablishes interest expense recognition on a historical cost basis;

Provision for finance receivable losses - reverses the ~~adjustment to reflect~~impact of providing an allowance for finance receivable losses upon acquisition and reestablishes the ~~difference between our~~ allowance ~~adjustment calculated under~~on a ~~Segment Accounting Basis~~historical cost basis and ~~purchase accounting~~reverses the impact of recognition of net charge-offs on purchased credit impaired finance receivables and reestablishes the net charge-offs on a historical cost basis;

Other revenues - reestablishes the ~~impact~~historical cost basis of ~~carrying value differences between a Segment Accounting Basis and purchase accounting basis when measuring mark to market for loans~~mark-to-market adjustments on finance receivables held for sale and on realized gains/losses associated with our investment portfolio; ~~and~~

Other expenses - reestablishes expenses on a historical cost basis by reversing the ~~net~~ impact of amortization ~~associated with identified intangibles as part~~from acquired intangible assets and including amortization of ~~purchase accounting~~other historical deferred costs; and ~~deferred costs impacted by purchase accounting.~~

Assets - revalues assets based on their fair values at the effective date of the Fortress Acquisition.

The following tables present information about the Company’s segments, as well as reconciliations to the condensed consolidated financial statement amounts.


(dollars in millions)	Consumer and Insurance		Acquisitions and Servicing			Real Estate			Other			Segment to GAAP Adjustment			Consolidated Total		Consumer and Insurance		Acquisitions and Servicing		Other (a)			Segment to GAAP Adjustment			Consolidated Total

Three Months Ended June 30, 2016
At or for the Three Months Ended March 31, 2017
Interest income	$	295	$	—		$	15		$	1		$	2		$	313	$	290	$	—	$	6		$	1		$	297
Interest expense	99		—			14			3			22			138		104		—		6			17			127
Provision for finance receivable losses	83		—			2			—			—			85		70		—		1			—			71
Net interest income (loss) after provision for finance receivable losses	113		—			(1		)	(2		)	(20		)	90		116		—		(1		)	(16		)	99
Other revenues(b)	71		—			(7		)	52			(10		)	106		49		—		59			(2		)	106
Other expenses	167		1			7			3			(1		)	177		158		—		4			—			162
Income (loss) before provision for (benefit from) income taxes	$	17	$	(1	)	$	(15	)	$	47		$	(29	)	$	19
Income before income taxes																	$	7	$	—	$	54		$	(18	)	$	43

Assets (c)																	$	5,452	$	—	$	4,481		$	(67	)	$	9,866

Three Months Ended
June 30, 2015

Interest income $ 267
$ 116
$ 17
$ 3
$ 3
$ 406
Interest expense 36
22
59
22
32
171
Provision for finance receivable losses 53
17
(5 ) 1
7
73
Net interest income (loss) after provision for finance receivable losses 178
77
(37 ) (20 ) (36 ) 162
Other revenues 55
—
3
4
(3 ) 59
Other expenses 151
15
9
10
1
186
Income (loss) before provision for (benefit from) income taxes 82
62
(43 ) (26 ) (40 ) 35
Income before provision for income taxes attributable to non-controlling interests —
33
—
—
—
33
Income (loss) before provision for (benefit from) income taxes attributable to Springleaf Finance Corporation $ 82
$ 29
$ (43 ) $ (26 ) $ (40 ) $ 2

(dollars in millions)
Consumer
and
Insurance

Acquisitions
and
Servicing

Real
Estate
Other Eliminations
Segment to
GAAP
Adjustment

Consolidated
Total

At or for the Six Months Ended
June 30, 2016

Interest income $ 606
$ 102
$ 30
$ 2
$ —
$ 4
$ 744
Interest expense 194
20
27
7
—
46
294
Provision for finance receivable losses 156
14
4
—
—
2
176
Net interest income (loss) after provision for finance receivable losses 256
68
(1 ) (5 ) —
(44 ) 274
Net gain on sale of SpringCastle interests —
167
—
—
—
—
167
Other revenues (a) 116
—
(18 ) 102
—
(5 ) 195
Other expenses 341
15
14
(1 ) —
(1 ) 368
Income (loss) before provision for (benefit from) income taxes 31
220
(33 ) 98
—
(48 ) 268
Income before provision for income taxes attributable to non-controlling interests —
28
—
—
—
—
28
Income (loss) before provision for (benefit from) income taxes attributable to Springleaf Finance Corporation $ 31
$ 192
$ (33 ) $ 98
$ —
$ (48 ) $ 240

Assets $ 5,285
$ —
$ 634
$ 3,958
$ —
$ 3
$ 9,880

At or for the Six Months Ended
June 30, 2015

Interest income $ 521
$ 238

$ 35

$ 5
$ —

$ 6

$ 805
Interest expense 76
45
119
32
(5 ) 62
329
Provision for finance receivable losses 108
37
(3 ) 1
—
9
152
Net interest income (loss) after provision for finance receivable losses 337
156
(81 ) (28 ) 5
(65 ) 324
Other revenues 106
5
6
6
(5 ) (5 ) 113
Other expenses 291
31
16
15
—
2
355
Income (loss) before provision for (benefit from) income taxes 152
130
(91 ) (37 ) —
(72 ) 82
Income before provision for income taxes attributable to non-controlling interests —
66
—
—
—
—
66
Income (loss) before provision for (benefit from) income taxes attributable to Springleaf Finance Corporation $ 152
$ 64
$ (91 ) $ (37 ) $ —
$ (72 ) $ 16

Assets (b) $ 5,009
$ 1,963
$ 3,540
$ 1,729
$ —
$ 64
$ 12,305



At or for the Three Months Ended March 31, 2016
Interest income	$	311	$	102	$	16		$	2		$	431
Interest expense	95		20		17			24			156
Provision for finance receivable losses	73		14		2			2			91
Net interest income (loss) after provision for finance receivable losses	143		68		(3		)	(24		)	184
Net gain on sale of SpringCastle interests	—		167		—			—			167
Other revenues (b)	45		—		39			5			89
Other expenses	174		14		3			—			191
Income before income taxes	14		221		33			(19		)	249
Income before income taxes attributable to non-controlling interests	—		28		—			—			28
Income before income taxes attributable to Springleaf Finance Corporation	$	14	$	193	$	33		$	(19	)	$	221

Assets (c)	$	5,704	$	101	$	4,709		$	(13	)	$	10,501


(a)	Real Estate segment has been combined with “Other” for the prior period.


(b)	Other revenues reported in “Other” primarily includes interest income on the ~~Independence~~Cash Services Note (previously referred to as the “Independence Demand ~~Note~~Note”) and on SFC’s note receivable from SFI. See Note 98 for further information on the notes receivable from parent and affiliates.

~~(b)~~(c)

~~In connection with our policy integration with OneMain, we report unearned insurance premium and claim reserves related to finance receivables (previously~~Assets reported in ~~insurance claims~~“Other” primarily includes notes receivable from parent and ~~policyholder liabilities) as a contra-asset to net finance receivables, which totaled $230 million at June 30, 2015.~~affiliates discussed above. See Note 8 for further information on the notes receivable from parent and affiliates.

17. Fair Value Measurements

The fair value of a financial instrument is the amount that would be expected to be received if an asset were to be sold or the amount that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The degree of judgment used in measuring the fair value of financial instruments generally correlates with the level of pricing observability. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments traded in other-than-active markets or that do not have quoted prices have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. An other-than-active market is one in which there are few transactions, the prices are not current, price quotations vary substantially either over time or among market makers, or little information is released publicly for the asset or liability being valued. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is listed on an exchange or traded over-the-counter or is new to the market and not yet established, the characteristics specific to the transaction, and general market conditions.

The following table summarizes the fair values and carrying values of our financial instruments and indicates the fair value hierarchy based on the level of inputs we utilized to determine such fair values:


	Fair Value Measurements Using						Total Fair Value		Total Carrying Value			Fair Value Measurements Using								Total Fair Value		Total Carrying Value
(dollars in millions)	Level 1		Level 2		Level 3						Level 1			Level 2			Level 3

June 30, 2016
March 31, 2017
Assets
Cash and cash equivalents	$	263	$	57	$	—	$	320	$	320		$	340		$	57		$	—	$	397	$	397
Investment securities	—		547		2		549		549			—			611			2		613		613
Net finance receivables, less allowance for finance receivable losses	—		—		4,881		4,881		4,691			—			—			5,000		5,000		4,667
Finance receivables held for sale	—		—		426		426		420			—			—			151		151		148
Notes receivable from parent and affiliates	—		3,683		—		3,683		3,683			—			3,803			—		3,803		3,803
Restricted cash and cash equivalents	159		—		—		159		159
Other assets:
Commercial mortgage loans	—		—		50		50		50
Escrow advance receivable	—		—		10		10		10
Receivables from parent and affiliates	—		27		—		27		27
Receivables related to sales of real estate loans and related trust assets	—		1		—		1		5
Restricted cash and restricted cash equivalents												192			—			—		192		192
Other assets (a)												—			41			30		71		73

Liabilities
Long-term debt	$	—	$	6,943	$	—	$	6,943	$	6,699		$	—		$	7,281		$	—	$	7,281	$	6,823
Note payable to affiliate	—		301		—		301		301
Payables to parent and affiliates	—		3		—		3		3
Other liabilities (b)												—			45			—		45		45

December 31, 2015
December 31, 2016
Assets
Cash and cash equivalents	$	321	$	—	$	—	$	321	$	321		$	198		$	42		$	—	$	240	$	240
Investment securities	—		602		2		604		604			—			580			2		582		582
Net finance receivables, less allowance for finance receivable losses	—		—		6,897		6,897		6,340			—			—			5,122		5,122		4,755
Finance receivables held for sale	—		—		819		819		793			—			—			159		159		153
Notes receivable from parent and affiliates	—		3,804		—		3,804		3,804			—			3,723			—		3,723		3,723
Restricted cash and cash equivalents	295		—		—		295		295
Other assets:
Commercial mortgage loans	—		—		62		62		62
Escrow advance receivable	—		—		11		11		11
Receivables from parent and affiliates	—		9		—		9		9
Receivables related to sales of real estate loans and related trust assets	—		1		—		1		5
Restricted cash and restricted cash equivalents												227			—			—		227		227
Other assets (a)												—			41			34		75		77

Liabilities
Long-term debt	$	—	$	9,998	$	—	$	9,998	$	9,582		$	—		$	7,308		$	—	$	7,308	$	6,837
Payables to parent and affiliates	—		24		—		24		24
Other liabilities (b)												—			13			—		13		13


(a)	Includes commercial mortgage loans, escrow advance receivable, receivables from parent and affiliates, and receivables related to sales of real estate loans and related trust assets.


(b)	Consists of payables to parent and affiliates.

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 (a)

June 30, 2016
March 31, 2017
Assets
Cash equivalents in mutual funds	$	119	$	—	$	—	$	119	$	232	$	—	$	—	$	232
Cash equivalents securities	—		57		—		57
Cash equivalents in securities									—		57		—		57
Investment securities:
Available-for-sale securities:
Available-for-sale securities
Bonds:
U.S. government and government sponsored entities	—		42		—		42		—		19		—		19
Obligations of states, municipalities, and political subdivisions	—		84		—		84		—		73		—		73
Non-U.S. government and government sponsored entities									—		3		—		3
Corporate debt	—		282		—		282		—		371		—		371
RMBS	—		38		—		38		—		40		—		40
CMBS	—		48		—		48		—		32		—		32
CDO/ABS	—		34		—		34		—		64		—		64
Total bonds	—		528		—		528		—		602		—		602
Preferred stock	—		6		—		6		—		6		—		6
Other long-term investments	—		—		1		1		—		—		1		1
Total available-for-sale securities *	—		534		1		535
Other securities:
Total available-for-sale securities (b)									—		608		1		609
Other securities
Bonds:
Corporate debt	—		11		—		11		—		2		—		2
CMBS	—		2		—		2		—		1		—		1
Total other securities	—		13		—		13		—		3		—		3
Total investment securities	—		547		1		548		—		611		1		612
Restricted cash in mutual funds	153		—		—		153		174		—		—		174
Total	$	272	$	604	$	1	$	877	$	406	$	668	$	1	$	1,075


*(a)	Due to the insignificant activity within the Level 3 assets during the three months ended March 31, 2017, 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.


(b)	Excludes an immaterial interest in a limited partnership that we account for using the equity method and ~~Federal Home Loan Bank~~FHLB common stock of $1 million at ~~June 30, 2016,~~March 31, 2017, which is carried at cost.


	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 (a)

December 31, 2015
December 31, 2016
Assets
Cash equivalents in mutual funds	$	224	$	—	$	—	$	224	$	119	$	—	$	—	$	119
Cash equivalents in securities									—		42		—		42
Investment securities:
Available-for-sale securities:
Available-for-sale securities
Bonds:
U.S. government and government sponsored entities	—		82		—		82		—		13		—		13
Obligations of states, municipalities, and political subdivisions	—		89		—		89		—		82		—		82
Non-U.S. government and government sponsored entities									—		5		—		5
Corporate debt	—		267		—		267		—		353		—		353
RMBS	—		74		—		74		—		39		—		39
CMBS	—		44		—		44		—		33		—		33
CDO/ABS	—		29		—		29		—		46		—		46
Total bonds	—		585		—		585		—		571		—		571
Preferred stock	—		5		—		5		—		6		—		6
Other long-term investments	—		—		1		1		—		—		1		1
Total available-for-sale securities (a)	—		590		1		591
Trading and other securities:
Total available-for-sale securities (b)									—		577		1		578
Other securities
Bonds:
Corporate debt	—		10		—		10		—		2		—		2
CMBS	—		2		—		2		—		1		—		1
Total trading and other securities (b)	—		12		—		12
Total other securities									—		3		—		3
Total investment securities	—		602		1		603		—		580		1		581
Restricted cash in mutual funds	276		—		—		276		212		—		—		212
Total	$	500	$	602	$	1	$	1,103	$	331	$	622	$	1	$	954


(a)	Due to the insignificant activity within the Level 3 assets during 2016, 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.


(b)	Excludes an immaterial interest in a limited partnership that we account for using the equity method and ~~Federal Home Loan Bank~~FHLB common stock of $1 million at December 31, ~~2015,~~2016, which is carried at cost.


~~(b)~~	~~The fair value of other securities totaled $2 million at December 31, 2015.~~

We had no transfers between Level 1 and Level 2 during the three ~~and six~~ months ended ~~June 30, 2016.~~

~~The following table presents changes in Level 3 assets measured at fair value on a recurring basis:~~

Net gains (losses) included in: Purchases, sales, issues, settlements (a) Transfers into
Level 3 Transfers
out of
Level 3 (b) Balance
at end of
period

Balance at beginning
of period
Other revenues
Other comprehensive
income (loss)

(dollars in millions)

Three Months Ended
June 30, 2016

Investment securities:

Available-for-sale securities:

Other long-term investments $ 1
$ —
$ —
$ —
$ —
$ —
$ 1
Total $ 1
$ —
$ —
$ —
$ —
$ —
$ 1

Three Months Ended
June 30, 2015
Investment securities:
Available-for-sale securities:
Bonds:
Corporate debt $ 4
$ —
$ —
$ (4 ) $ —
$ —
$ —
Other long-term investments 1
—
—
—
—
—
1
Total $ 5
$ —
$ —
$ (4 ) $ —
$ —
$ 1

Six Months Ended
June 30, 2016

Investment securities:

Available-for-sale securities:

Other long-term investments $ 1
$ —
$ —
$ —
$ —
$ —
$ 1
Total $ 1
$ —
$ —
$ —
$ —
$ —
$ 1

Six Months Ended
June 30, 2015

Investment securities:

Available-for-sale securities:

Bonds:

Corporate debt $ 4
$ —
$ —
$ (4 ) $ —
$ —
$ —
CMBS 3
—
—
—
—
(3 ) —
Total bonds 7
—
—
(4 ) —
(3 ) —
Other long-term investments 1
—
—
—
—
—
1
Total $ 8
$ —
$ —
$ (4 ) $ —
$ (3 ) $ 1


~~(a)~~	~~“Purchases, sales, issues, and settlements” column consisted only of settlements.~~


~~(b)~~	~~During the six months ended June 30, 2015, we transferred CMBS securities totaling $3 million out of Level 3 primarily related to the greater observability of pricing inputs.~~

We used observable and/or unobservable inputs to determine the fair value of positions that we have classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category presented in the Level 3 tables above may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

The unobservable inputs and quantitative data used in our Level 3 valuations for our investment securities were developed and used in models created by our third-party valuation service providers, which values were used by us for fair value disclosure purposes without adjustment.

Quantitative information about Level 3 inputs for our assets measured at fair value on a recurring basis for which information about the unobservable inputs was reasonably available to us at June 30, 2016 and DecemberMarch 31, ~~2015 is as follows:~~



			~~Range (Weighted Average)~~
	~~Valuation Technique(s)~~	~~Unobservable Input~~	~~June 30, 2016~~	~~December 31, 2015~~
~~RMBS~~	~~Discounted cash flows~~	~~Spread~~	—	~~665 bps (a)~~
~~Other long-term investments~~	~~Discounted cash flows and indicative valuations~~	~~Historical costs~~ ~~Nature of investment~~ ~~Local market conditions~~ ~~Comparables~~ ~~Operating performance~~ ~~Recent financing activity~~	~~(b)~~	~~(b)~~


~~(a)~~	~~At December 31, 2015, RMBS consisted of one bond, which was less than $1 million.~~


~~(b)~~	We applied the third-party exception which allows us to omit certain quantitative disclosures about unobservable inputs for other long-term investments. As a result, the weighted average ranges of the inputs for these investment securities are not applicable.

The fair values of the assets using significant unobservable inputs are sensitive and can be impacted by significant increases or decreases in any of those inputs. Level 3 broker-priced instruments, including RMBS (except for the one bond previously noted), CMBS, and CDO/ABS, are excluded from the table above because the unobservable inputs are not reasonably available to us.

Our RMBS, CMBS, and CDO/ABS securities have unobservable inputs that are reliant on and sensitive to the quality of their underlying collateral. The inputs, although not identical, have similar characteristics and interrelationships. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment speeds. An improvement in the workout criteria related to the restructured debt and/or debt covenants of the underlying collateral may lead to an improvement in the cash flows and have an inverse impact on other inputs, specifically a reduction in the amount of discount applied for marketability and liquidity, making the structured bonds more attractive to market participants.2017.

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.

~~Assets measured at fair value on a non-recurring basis on which we recorded impairment charges were as follows:~~

Fair Value Measurements Using *
(dollars in millions) Level 1 Level 2 Level 3 Total

June 30, 2016

Assets

Finance receivables held for sale $ —
$ —
$ 163
$ 163
Real estate owned —
—
8
8
Commercial mortgage loans —
—
8
8
Total $ —
$ —
$ 179
$ 179

December 31, 2015

Assets

Real estate owned $ —
$ —
$ 11
$ 11
Commercial mortgage loans —
—
8
8
Total $ —
$ —
$ 19
$ 19


*	~~The fair value information presented in the table is as of the date the fair value adjustment was recorded.~~

Net impairment charges recorded on assets measured at fair value on a non-recurring basis were ~~as follows:~~

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015

Assets

Finance receivables held for sale $ 5
$ —
$ 5
$ —
Real estate owned —
1
1
2
Commercial mortgage loans —
(2 ) 1
(2 )
Total $ 5
$ (1 ) $ 7
$ —

In accordance with the authoritative guidance for the accounting for the impairment of finance receivables held for sale, we wrote down certain finance receivables held for sale reported in our Real Estate segment to their fair value during the second quarter of 2016 and recorded the writedowns in other revenues.

In accordance with the authoritative guidance for the accounting for the impairment of long-lived assets, we wrote down certain real estate owned reported in our Real Estate segment to their fair value less cost to sellimmaterial for the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and 2015 and recorded the writedowns in other revenues. The fair values of real estate owned disclosed in the table above are unadjusted for transaction costs, as required by the authoritative guidance for fair value measurements. The amounts of real estate owned recorded in other assets are net of transaction costs as required by the authoritative guidance for accounting for the impairment of long-lived assets.

In accordance with the authoritative guidance for the accounting for the impairment of commercial mortgage loans, we recorded allowance adjustments on certain impaired commercial mortgage loans reported in our Consumer and Insurance segment to record their fair value for the three and six months ended June 30, 2016 and 2015 and recorded the net impairments in investment revenues.

The inputs and quantitative data used in our Level 3 valuations for our real estate owned and commercial mortgage loans are unobservable primarily due to the unique nature of specific real estate assets. Therefore, we used independent third-party providers, familiar with local markets, to determine the values used for fair value disclosures without adjustment.

~~Quantitative information about Level 3 inputs for our assets measured at fair value on a non-recurring basis at June 30, 2016 and December 31, 2015 is as follows:~~



			~~Range (Weighted Average)~~
	~~Valuation Technique(s)~~	~~Unobservable Input~~	~~June 30, 2016~~	~~December 31, 2015~~
~~Finance receivables held for sale~~	~~Income approach~~	~~Market value for similar type loan transactions to obtain a price point~~	*	*
~~Real estate owned~~	~~Market approach~~	~~Third-party valuation~~	*	*
~~Commercial mortgage loans~~	~~Market approach~~ ~~Income approach~~ ~~Cost approach~~	~~Local market conditions~~ ~~Nature of investment~~ ~~Comparable property sales~~ ~~Operating performance~~	*	*


*	We applied the third-party exception which allows us to omit certain quantitative disclosures about unobservable inputs for the assets measured at fair value on a non-recurring basis included in the table above. As a result, the weighted average ranges of the inputs for these assets are not applicable.

2016.

FAIR VALUE MEASUREMENTS — VALUATION METHODOLOGIES AND ASSUMPTIONS

~~We use~~See Note 23 of the ~~following~~Notes to Consolidated Financial Statements in Part II - Item 8 included in our 2016 Annual Report on Form 10-K for information regarding our methods and assumptions used to estimate fair value.

~~Cash and Cash Equivalents~~

~~The carrying amount of cash and cash equivalents, including cash and certain cash equivalents, approximates fair value.~~

~~Mutual Funds~~

~~Our unit of account is the mutual fund, which is measured at net asset value.~~

~~Investment Securities~~

We utilize third-party valuation service providers to measure the fair value of our investment securities, which are classified as available-for-sale or as trading and other and consist primarily of bonds. Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure investment securities at fair value. We generally obtain market price data from exchange or dealer markets.

We estimate the fair value of fixed maturity investment securities not traded in active markets by referring to traded securities with similar attributes, using dealer quotations and a matrix pricing methodology, or discounted cash flow analyses. This methodology considers such factors as the issuer’s industry, the security’s rating and tenor, its coupon rate, its position in the capital structure of the issuer, yield curves, credit curves, composite ratings, bid-ask spreads, prepayment rates and other relevant factors. For fixed maturity investment securities that are not traded in active markets or that are subject to transfer restrictions, we adjust the valuations to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used.

~~We elect the fair value option for investment securities that are deemed to incorporate an embedded derivative and for which it is impracticable for us to isolate and/or value the derivative.~~

~~The fair value of certain investment securities is based on the amortized cost, which is assumed to approximate fair value.~~

~~Finance Receivables~~

The fair value of net finance receivables, less allowance for finance receivable losses, both non-impaired and purchased credit impaired, are determined using discounted cash flow methodologies. The application of these methodologies requires us to make certain judgments and estimates based on our perception of market participant views related to the economic and competitive environment, the characteristics of our finance receivables, and other similar factors. The most significant judgments and estimates made relate to prepayment speeds, default rates, loss severity, and discount rates. The degree of judgment and estimation applied is significant in light of the current capital markets and, more broadly, economic environments. Therefore, the fair value of our finance receivables could not be determined with precision and may not be realized in an actual sale. Additionally, there may be inherent limitations in the valuation methodologies we employed, and changes in the underlying assumptions used could significantly affect the results of current or future values.

~~Finance Receivables Held for Sale~~

We determined the fair value of finance receivables held for sale that were originated as held for investment based on negotiations with prospective purchasers (if any) or by using projected cash flows discounted at the weighted-average interest rates offered by us in the market for similar finance receivables. We based cash flows on contractual payment terms adjusted for estimates of prepayments and credit related losses.

~~Restricted Cash and Cash Equivalents~~

~~The carrying amount of restricted cash and cash equivalents approximates fair value.~~

~~Notes Receivable from Parent and Affiliates~~

The carrying amount of the notes receivable from parent and affiliates approximates the fair value because the notes are payable on a demand basis prior to their due dates and the interest rates on these notes adjust with changing market interest rates.

~~Commercial Mortgage Loans~~

Given the short remaining average life of the portfolio, the carrying amount of commercial mortgage loans approximates fair value. The carrying amount includes an estimate for credit related losses, which is based on independent third-party valuations.

~~Real Estate Owned~~

We initially base our estimate of the fair value on independent third-party valuations at the time we take title to real estate owned. Subsequent changes in fair value are based upon independent third-party valuations obtained periodically to estimate a price that would be received in a then current transaction to sell the asset.

~~Escrow Advance Receivable~~

~~The carrying amount of escrow advance receivable approximates fair value.~~

~~Receivables from Parent and Affiliates~~

~~The carrying amount of receivables from parent and affiliates approximates fair value.~~

~~Receivables Related to Sales of Real Estate Loans and Related Trust Assets~~

~~The carrying amount of receivables related to sales of real estate loans and related trust assets less estimated forfeitures, which are reflected in other liabilities, approximates fair value.~~

~~Long-term Debt~~

We either receive fair value measurements of our long-term debt from market participants and pricing services or we estimate the fair values of long-term debt using projected cash flows discounted at each balance sheet date’s market-observable implicit-credit spread rates for our long-term debt.

We record at fair value long-term debt issuances that are deemed to incorporate an embedded derivative and for which it is impracticable for us to isolate and/or value the derivative. At June 30, 2016, we had no debt carried at fair value under the fair value option.

~~We estimate the fair values associated with variable rate revolving lines of credit to be equal to par.~~

~~Note Payable to Affiliate~~

The carrying amount of the note payable to affiliate approximates the fair value because the note is payable on a demand basis prior to its due date and the interest rate on the note adjusts with changing market interest rates.

~~Payables to Parent and Affiliates~~

~~The fair value of payable to parent and affiliates approximates the carrying value due to its short-term nature.~~

18. Subsequent Events

~~ODART 2016-1 SECURITIZATION~~

On July 19, 2016, we completed a private securitization transaction in which OneMain Direct Auto Receivables Trust 2016-1 (“ODART 2016-1”), a wholly owned special purpose vehicle of SFC, issued $754 million principal amount of notes backed by auto secured personal loans with an aggregate UPB of $754 million as of June 30, 2016. $700 million principal amount of the notes issued by ODART 2016-1, represented by Classes A, B and C, were sold to unaffiliated parties at a weighted average

interest rate of 2.27%, and $54 million principal amount of Class D notes were retained. The maturity dates of the notes occur on January 15, 2021 for the Class A, May 17, 2021 for the Class B, September 15, 2021 for the Class C and February 15, 2023 for the Class D. The first principal and interest payment on the notes is due on August 15, 2016. The indenture governing the ODART 2016-1 notes contains events of default which, if triggered, may result in the acceleration of the obligation to pay principal and interest on the notes.

RELATED PARTY TRANSACTIONS

~~Note Payable~~Dividend of SFMC to ~~Affiliate~~SFI

On ~~July~~April 10, 2017, SFMC, a subsidiary of SFC, was contributed to SFI in the form of a dividend. SFI then contributed SFMC and SGSC to OMH, and SFMC merged into SGSC. As a result of the dividend, the Company’s total shareholder equity and total assets were reduced by $38 million and $65 million, respectively, on the contribution date.

The contribution was the result of the continuing integration process, and part of a series of corporate consolidation transactions surrounding the OneMain Acquisition.

Termination of Building Lease Agreement and License Agreement

In contemplation of the merger of SFMC and SGSC noted above, the building lease agreement, whereby SFMC leased six of its buildings to SGSC, was terminated effective April 5, ~~2016, SFC paid $200 million~~2017. In addition, the license agreement, whereby SFMC leased its information technology systems and software and other related equipment to ~~OMFH,~~SGSC, was terminated as a ~~payment~~result of ~~principal under a revolving demand note with OMFH. On July 18, 2016, SFC paid $101 million, including $1 million of interest, to OMFH to repay the note in full.~~this merger.

OneMain Demand Note

On ~~July 19, 2016,~~April 13, 2017 and May 2, 2017, SFC advanced ~~$400~~$50 million and $37 million, respectively, to OMFH, under the OneMain Demand Note.

~~Independence Demand Note~~REVOLVING CONDUIT FACILITIES

On ~~July 19, 2016, CSI, a subsidiary of SFC, received $344 million from Independence, as a payment of principal and interest on the Independence Demand Note.~~

~~Assignment of a Portion of the Independence Demand Note~~

On July 19, 2016, CSI, Independence, and OMFH entered into an Assignment of Intercompany Demand Note (the “Note Assignment”) pursuant to which CSI sold and assigned to OMFH, and OMFH purchased and assumed from CSI, an interest in and to CSI’s right to receive $150 million principal amount outstanding under the $3.6 billion Independence Demand Note (the “Original Note”), dated November 12, 2015, between CSI, as the lender, and Independence, as the borrower, for aApril 13, 2017, Midbrook 2013-VFN1 Trust voluntarily terminated its note purchase ~~price of $150 million (the “Assignment Purchase Price”). On July 20, 2016, OMFH paid the Assignment Purchase Price to CSI.~~

~~In connection~~agreement with the Note Assignment, Independence exchanged the Original Note for a new intercompany demand note issued to CSI with a maximum borrowing amount not to exceed $3.4 billion (the “Cash Services Note”), and a new intercompany demand note issued to OMFH with a maximum borrowing amount not to exceed $150 million (the “OMFH Note” and together with the Cash Services Note, the “New Notes”). The New Notes provide that no advances shall be made to Independence on or after December 31, 2019 and all principal and interest shall be payable in full on December 31, 2019, unless earlier payment is demanded by CSI or OMFH.

~~REAL ESTATE LOAN SALE~~

~~On August 3, 2016, SFC and certain of~~ its subsidiaries sold a portfolio of second lien mortgage loans for aggregate cash proceeds of $246 million, which approximated the carrying value of such loans. Unless terminated or we resign as servicer, we will continue to service the loans included in such sale pursuant to a servicing agreement. The purchase and sale agreement and the servicing agreement include customary representations and warranties and indemnification provisions.lender.

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

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

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 involve inherent risks, uncertainties 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 that speak only as of the date they were made. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this ~~presentation~~report or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events. 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” and similar expressions or future or conditional verbs such as “would,” “should,” “could,” “may,” or “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:

various uncertainties and risks in connection with the OneMain Acquisition which may result in an adverse impact on us;

various risks relating to our continued compliance with the ~~previously disclosed~~ Settlement Agreement;

changes in general economic conditions, including the interest rate environment in which we conduct business and the financial markets through which we can access capital and also invest cash flows from our Consumer and Insurance segment;

levels of unemployment and personal bankruptcies;

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

war, acts of terrorism, riots, civil disruption, pandemics, disruptions in the operation of our information systems, ~~cyber~~cyber-attacks or other security breaches, or other events disrupting business or commerce;

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

the effectiveness of our credit risk scoring models in assessing the risk of customer unwillingness or lack of capacity to repay;

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

changes in the competitive environment in which we operate, including the demand for our products, customer responsiveness to our distribution channels, our ability to make technological improvements, and the strength and ability of our competitors to operate independently or to enter into business combinations that result in a more attractive range of customer products or provide greater financial resources;

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

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

the inability to successfully implement our growth strategy for our consumer lending business as well as various risks associated with successfully acquiring portfolios of consumer loans, pursuing acquisitions, and/or establishing joint ventures;

~~shifts~~declines in collateral values or increases in actual or projected delinquencies or ~~credit losses;~~net charge-offs;

changes in federal, state or local laws, regulations, or regulatory policies and practices, including the Dodd-Frank ~~Wall Street Reform and Consumer Protection~~ Act (which, among other things, established the ~~Consumer Financial Protection Bureau,~~CFPB, which has broad authority to regulate and examine financial institutions, including us), that affect our ability to conduct business or the manner in which we 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;~~servicing, or changes in corporate or individual income tax laws or regulations;

potential liability relating to real estate and personal loans which we have sold or may sell in the future, or relating to securitized loans, 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, any impact to our business operations, reputation, financial position, results of operations or cash flows arising therefrom, any impact to our relationships with lenders, investors or other third parties attributable thereto, and the costs and effects of any breach of any representation, warranty or covenant under any of our contractual arrangements, including indentures or other financing arrangements or contracts, as a result of any such violation;

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;

our continued ability to access the capital markets or the sufficiency of our 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 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;

the impacts of our securitizations and 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 to~~practices;

changes in accounting principles and policies or changes in accounting estimates;

effects of the ~~manner in which we conduct business;~~contemplated acquisition of Fortress by an affiliate of SoftBank Group Corp.;

any failure or inability to achieve the SpringCastle Portfolio performance requirements set forth in the SpringCastle Interests Sale purchase agreement; and

the effect of future sales of our remaining portfolio of real estate loans and the transfer of servicing of these loans, including the environmental liability and costs for damage caused by hazardous waste if a real estate loan goes into default.

We also direct readers to other risks and uncertainties discussed in other documents we file 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. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this report that could cause actual results to differ before making an investment decision to purchase our common stock. 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.

Overview

~~Springleaf is~~We are a ~~branch-based consumer finance company providing~~leading provider of responsible personal ~~loans~~loan products, primarily to non-prime ~~customers through its~~customers. Our network of ~~nearly 700~~over 600 branch offices in 28 states as of ~~June 30, 2016~~March 31, 2017 and ~~on a centralized basis as part of its~~expert personnel is complemented by our online personal loan origination capabilities and centralized operations, which allow us to reach customers located outside our branch footprint. Our digital platform provides current and prospective customers the option of obtaining an unsecured personal loan via our ~~iLoan platform (our online consumer~~website, www.onemainfinancial.com. (The information on our website is not incorporated by reference into this report.) In connection with our personal loan ~~origination business). We also write~~business, we offer our customers credit and non-credit ~~insurance policies covering our customers and the property pledged as collateral for our personal loans.~~insurance.

In addition, we service or sub-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 or arrangements from time to time.

OUR PRODUCTS

Our product offerings include:

Personal Loans — We offer personal loans through our branch network and over the ~~internet~~Internet through our centralized operations to customers who generally need timely access to cash. Our personal loans are typically non-revolving with a fixed-rate and a fixed, original term of ~~two~~three to five years and are secured by consumer goods, automobiles, or other personal property or are unsecured. At ~~June 30, 2016,~~March 31, 2017, we had ~~nearly 923,000~~over 893,000 personal loans, representing $4.7 billion of net finance receivables, of which ~~79%~~58% were secured by titled collateral, compared to ~~890,000~~928,000 personal loans totaling ~~$4.3~~$4.8 billion at December 31, ~~2015,~~2016, of which ~~74%~~58% were secured by titled collateral. ~~Personal loans held for sale totaled $617 million at December 31, 2015.~~

Insurance Products — We offer our customers credit insurance (life insurance, disability insurance, and involuntary unemployment insurance) and non-credit insurance through both our branch network and our centralized operations. Credit insurance and non-credit insurance products are provided by our subsidiaries, Merit ~~Life Insurance Co. (“Merit”)~~ and ~~Yosemite Insurance Company (“Yosemite”).~~Yosemite. We also offer auto ~~warranty~~ membership plans of an unaffiliated ~~company as an ancillary product.~~company.

~~Our products also included the SpringCastle Portfolio at December 31, 2015, as described below:~~

~~SpringCastle Portfolio —~~ SFI services the SpringCastle Portfolio that was acquired by an indirect subsidiary of OMH through a joint venture in which SFC owned a 47% equity interest. On March 31, 2016, the SpringCastle Portfolio was sold in connection with the SpringCastle Interests Sale. These loans consisted of unsecured loans and loans secured by subordinate residential real estate mortgages and include both closed-end accounts and open-end lines of credit. These loans were in a liquidating status and varied in substance and form from our originated loans. Unless terminated, SFI will continue to provide the servicing for these loans, which we service as unsecured loans due to the fact that the liens are subordinated to superior ranking security interests.

Our non-originating legacy products include:

Real Estate Loans — We ceased originating real estate ~~lending~~loans in January of 2012, and during 2014, we sold ~~$6.3~~$6.4 billion real estate loans held for sale. During 2016, we sold $308 million real estate loans held for sale. The remaining real estate loans may be closed-end accounts or open-end home equity lines of credit, generally have a fixed rate and maximum original terms of 360 months, and are secured by first or second

mortgages on residential real estate. ~~Our~~Predominantly, our first lien mortgages are serviced by third-party servicers, and we continue to provide servicing for our second lien mortgages (home equity lines of credit). At ~~June 30, 2016,~~March 31, 2017, we had ~~$209~~$139 million of real estate loans held for investment, of which ~~93%~~94% were secured by first mortgages, compared to ~~$538~~$144 million at December 31, ~~2015,~~2016, of which ~~38%~~93% were secured by first mortgages. Real estate loans held for sale totaled ~~$420~~$148 million and ~~$176~~$153 million at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively.

Retail Sales Finance — We ceased purchasing retail sales contracts and revolving retail accounts in January of 2013. We continue to service the liquidating retail sales contracts and will provide revolving retail sales financing services on our revolving retail accounts. We refer to retail sales contracts and revolving retail accounts collectively as “retail sales finance.”

OUR SEGMENTS

At ~~June 30, 2016,~~March 31, 2017, we had ~~three~~two operating segments:

Consumer and Insurance; and

Acquisitions and ~~Servicing; and~~

~~Real Estate.~~Servicing.

Beginning in 2017, we include Real Estate, which was previously presented as a distinct reporting segment, in “Other.” See Note 16 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this report for further information on this change in our segment alignment and for more information about our segments. To conform to the new alignment of our segments, we have revised our prior period segment disclosures.

Recent Developments and Outlook

~~ONEMAIN ACQUISITION~~DIVIDEND OF SFMC TO SFI

On ~~November 15, 2015,~~April 10, 2017, SFMC, a subsidiary of SFC, was contributed to SFI in the form of a dividend. SFI then contributed SFMC to OMH, ~~completed its acquisition of OMFH from Citigroup for approximately $4.5 billion in cash.~~and SFMC merged into SGSC. As a result of the ~~OneMain Acquisition, OMFH became a wholly owned, indirect subsidiary of OMH.~~dividend, the Company’s total shareholder equity and total assets were reduced by $38 million and $65 million, respectively, on the contribution date.

~~On November 12, 2015, in connection with~~The contribution was the ~~closing~~result of the ~~OneMain Acquisition, SFC’s wholly owned subsidiary, CSI, entered into the Independence Demand Note with Independence, whereby CSI provided Independence with $3.4 billion cash pursuant to the terms~~continuing integration process, and part of ~~the Independence Demand Note. See Note 9~~a series of ~~the Notes to Condensed Consolidated Financial Statements for further information regarding the Independence Demand Note and other related party agreements with OMFH.~~

Although management intends for Springleaf and OneMain to become an integrated operation, the two operations will initially be separately maintained under the Springleaf and OneMain brands, with the expectation of migrating tocorporate consolidation transactions surrounding the OneMain ~~brand.~~

~~SPRINGCASTLE INTERESTS SALE~~

On March 31, 2016, the SpringCastle Sellers, wholly owned subsidiaries of OMH, entered into a purchase agreement with the SpringCastle Buyers. Pursuant to the purchase agreement, SpringCastle Holdings sold its 47% limited liability company interest in each of SpringCastle America, LLC, SpringCastle Credit, LLC and SpringCastle Finance, LLC, and Springleaf Acquisition sold its 47% limited liability company interest in SpringCastle Acquisition LLC, to the SpringCastle Buyers for an aggregate purchase price of approximately $112 million.

~~See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information on the SpringCastle Interests Sale.~~

~~LENDMARK SALE~~

On November 12, 2015, the Branch Sellers entered into a purchase and sale agreement with respect to the Lendmark Sale, and on May 2, 2016, the Branch Sellers completed the sale of 127 Springleaf branches to Lendmark for an aggregate cash purchase price of $624 million. On this date, SFC used a portion of the proceeds from the Lendmark Sale to repay, in full, its revolving demand note with OMFH, which totaled $376 million (including interest payable of $6 million) on May 2, 2016. See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information on the Lendmark Sale.

~~REAL ESTATE LOAN SALE~~

On August 3, 2016, SFC and certain of its subsidiaries sold a portfolio of second lien mortgage loans for aggregate cash proceeds of $246 million, which approximated the carrying value of such loans. Unless terminated or we resign as servicer, we will continue to service the loans included in such sale pursuant to a servicing agreement. The purchase and sale agreement and the servicing agreement include customary representations and warranties and indemnification provisions.Acquisition.

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 of strengthening our capital base by reducing leverage and maintaining a strong liquidity level and diversified funding sources.

Assuming the U.S. economy continues to experience slow to moderate growth, we expect to continue our long history of strong credit ~~performance. We~~performance and believe the strong credit quality of our ~~personal~~ loan portfolio iswill continue as the result of our disciplined underwriting practices and ongoing collection efforts. We ~~also continue~~have continued to see ~~growth in the volume of personal loan originations, including growth in our auto secured personal loans, driven by the~~some migration of customer activity away from traditional channels, such as direct mail, to online channels (primarily serviced through our branch network), where we believe we are well suited to capture volume due to our scale, technology, and deployment of advanced analytics.

~~In addition, with an experienced management team, long track record~~Tax Reform Proposals

The new presidential administration and several members of ~~successfully accessing~~ the ~~capital markets,~~U.S. Congress have indicated significant reform of various aspects of the U.S. tax code as a top legislative priority. A number of proposals for tax reform, including significant changes to corporate tax provisions, are currently under consideration. Such changes could have a material impact, either positive or negative, on our deferred tax assets and ~~strong~~liabilities and our consolidated financial position, results of operations and cash flows, depending on the nature and extent of any changes to the U.S. tax code that are ultimately enacted into law. Additionally,

changes to the U.S. tax code could more broadly impact the U.S. economy, which could potentially result in a material impact, either positive or negative, on the demand for ~~consumer credit, we believe we are well positioned for future personal loan growth.~~our products and services and the ability of our customers to repay their loans. We ~~are focused on executing on~~cannot predict if or when any of these proposals to reform the U.S. tax code will be enacted into law and, accordingly, no assurance can be given as to whether or to what extent any changes to the U.S. tax code will impact us or our ~~strategic priorities~~customers or our financial position, results of ~~strengthening our capital base through the following key initiatives:~~operations or cash flows.

~~Reducing leverage;~~

~~Maintaining a strong liquidity level and diversified funding sources; and~~

~~Optimizing non-core assets.~~

Results of Operations

CONSOLIDATED RESULTS

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


(dollars in millions)	Three Months Ended June 30,						At or for the Six Months Ended June 30,						At or for the Three Months Ended March 31,
(dollars in millions)	2016			2015			2016			2015			2017			2016

Interest income	$	313		$	406		$	744		$	805		$	297		$	431
Interest expense	138			171			294			329			127			156
Provision for finance receivable losses	85			73			176			152			71			91
Net interest income after provision for finance receivable losses	90			162			274			324			99			184
Net gain on sale of SpringCastle interests	—			—			167			—			—			167
Other revenues	106			59			195			113			106			89
Other expenses	177			186			368			355			162			191
Income before provision for income taxes	19			35			268			82
Provision for income taxes	6			—			91			9
Income before income taxes													43			249
Income taxes													16			85
Net income	13			35			177			73			27			164
Net income attributable to non-controlling interests	—			33			28			66			—			28
Net income attributable to SFC	$	13		$	2		$	149		$	7		$	27		$	136

Selected Financial Statistics(a)
Finance receivables held for investment:
Net finance receivables							$	4,888		$	6,756		$	4,863		$	4,914
Number of accounts							930,587			1,231,810			898,642			905,809
Finance receivables held for sale:
Net finance receivables							$	420		$	191		$	148		$	776
Number of accounts							15,596			3,368			2,714			146,302
Finance receivables held for investment and held for sale:(b)
Average net receivables *	$	5,280		$	6,630		$	6,213		$	6,579
Yield *	23.52		%	24.29		%	23.82		%	24.36		%
Gross charge-off ratio *	6.78		%	5.12		%	6.42		%	5.33		%
Recovery ratio *	(0.95		)%	(0.89		)%	(0.89		)%	(0.82		)%
Net charge-off ratio *	5.83		%	4.23		%	5.53		%	4.51		%
Delinquency ratio *							3.39		%	3.09		%
Average net receivables													$	4,894		$	7,145
Yield													24.33		%	24.00		%
Gross charge-off ratio													8.29		%	6.11		%
Recovery ratio													(1.73		)%	(0.83		)%
Net charge-off ratio													6.56		%	5.28		%
30-89 Delinquency ratio													2.22		%	2.22		%
Origination volume	$	1,016		$	1,194		$	1,977		$	2,074		$	773		$	961
Number of accounts originated	168,538			218,743			323,297			374,266			110,385			154,759


*(a)	See ~~“Key Financial Definitions”~~“Glossary” at the ~~end~~beginning of ~~our management's discussion and analysis~~this report for formulas and definitions of our key performance ratios.


(b)	Includes personal loans held for sale for the 2016 period in connection with the Lendmark Sale, but excludes real estate loans held for sale for both periods in order to be comparable with our segment statistics disclosed in “Segment Results.”

Comparison of Consolidated Results for the Three Months Ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~

Interest income decreased $134 million for the three months ended ~~June 30, 2016~~March 31, 2017 when compared to the same period in ~~2015~~2016 due to the following:

Finance charges decreased $91 million primarily due to the net of the following:

(dollars in millions)

Three Months Ended June 30, 2016 compared to 2015
Decrease in average net receivables $ (101 )
Decrease in yield (6 )
Increase in interest income on finance receivables held for sale 14
Total $ (93 )

◦

Average net receivables held for investment decreased primarily due to (i) the SpringCastle Interests Sale and (ii) our liquidating real estate loan portfolio, including the transfers of $257 million and $50 million of real estate loans to finance receivables held for sale on June 30, 2016 and November 30, 2016, respectively. This decrease was partially offset by the continued growth of our personal loan portfolio.


◦	Yield on finance receivables held for investment remained stable when compared to the same period in 2017.

~~Average net~~Interest income on finance receivables held for sale decreased ~~for the three months ended June 30, 2016~~$43 million primarily due to ~~(i) the SpringCastle Interests Sale, (ii)~~ the transfer of $608 million of our personal loans to finance receivables held for sale on September 30, 2015, as part of OMH’s initiative to close the OneMain Acquisition, and (iii) our liquidating real estate loan portfolio. This decrease was partially offset by higher personal loan average net receivables resulting from (i) our continued focus on personal loan originations through our branch network and centralized operations and (ii) the continued growth of our auto secured personal loans.

~~Yield~~ ~~decreased for the three months ended June 30, 2016 primarily due to the continued growth of our auto secured personal loans, which generally have lower yields relative to our other personal loans.~~

~~Interest income on finance receivables held for sale~~ increased for the three months ended June 30, 2016 primarily due to higher average finance receivables held for sale during the 2016 period resulting from the transfer of $608 million of our personal loans to held for sale on September 30, 2015, which were sold in the Lendmark Sale on May 2, 2016.

Interest expense decreased $29 million for the three months ended ~~June 30, 2016~~March 31, 2017 when compared to the same period in ~~2015~~2016 primarily due to the net of the following:

(dollars in millions)

Three Months Ended June 30, 2016 compared to 2015
Decrease in average debt $ (47 )
Increase in weighted average interest rate 12
Interest expense on note payable to affiliate 2
Total $ (33 )

Average debt decreased ~~for the three months ended June 30, 2016~~ primarily due to (i) the elimination of the debt associated with ~~our SpringCastle securitization as a result of~~ the SpringCastle Interests Sale and the resulting deconsolidation of the securitization trust holding the underlying loans of the SpringCastle Portfolio and previously issued securitized interests, which were reported in long-term debt and (ii) net debt repurchases and ~~repayment~~repayments during the past 12 months relating to our ~~consumer securitization transactions.~~conduit facilities. This decrease was partially offset by ~~(i)~~ net debt ~~issued in connection with SFC’s offering of~~issuances during the ~~8.25% SFC Notes in April of 2016 and (ii) additional borrowings under~~past 12 months relating to our ~~conduit facilities.~~securitization transactions. See Notes 109 and 1110 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this report for further information on our long-term debt, ~~consumer loan~~ securitization transactions and ~~borrowings under~~ our conduit facilities.

Weighted average interest rate on our debt increased ~~for the three months ended June 30, 2016~~ primarily due to (i) SFC’s offering of the 8.25% SFC Notes in April of 2016 and (ii) the elimination of debt associated with ~~our~~the SpringCastle ~~securitization discussed above,~~Interests Sale, which generally had a lower interest rate relative to our other indebtedness. This increase was partially offset by the repurchase of $600 million unsecured notes, which had a higher interest rate relative to our other indebtedness, in connection with SFC’s offering of the 8.25% SFC Notes.

Interest expense on note payable to affiliate of $4 million for the three months ended March 31, 2016 resulted from a revolving demand note agreement between SFC and OMFH, entered into on December 1, 2015. See Note 98 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this report for further information on this note.

Provision for finance receivable losses ~~increased $12~~ decreased $20 million for the three months ended ~~June 30, 2016~~March 31, 2017 when compared to the same period in ~~2015~~2016 primarily due to ~~higher net charge-offs on our personal loans reflecting~~ (i) ~~growth in these personal loans during~~ the ~~past 12 months and (ii) a higher personal loan delinquency ratio at June 30, 2016. This increase was partially offset by (i)~~absence of net charge-offs on the previously owned SpringCastle Portfolio and (ii) a larger provision release during the ~~2015~~2017 period ~~and (ii) lower~~due to the reserves required in the fourth quarter of 2016 in response to the higher level of delinquency of our personal loans. This decrease was partially offset by higher net charge-offs onin the 2017 period primarily resulting from the increase in delinquency of our ~~real estate~~personal loans ~~reflecting~~in third quarter of 2016 that charged-off in the ~~liquidating status~~first quarter of ~~the real estate loan portfolio.~~2017.

~~Other revenues increased $47~~Net gain on sale of SpringCastle interests of $167 million for the three months ended ~~June 30,~~March 31, 2016 reflected the net gain associated with the sale of our equity interest in the SpringCastle Joint Venture on March 31, 2016.

Other revenues increased $17 million for the three months ended March 31, 2017 when compared to the same period in ~~2015~~2016 primarily due to the net of (i) ~~increase in~~higher interest income on notes receivable from parent and affiliates of ~~$47~~$8 million primarily reflecting interest income on the ~~Independence~~OneMain Demand Note during the ~~2016~~2017 period, (ii) $5 million lower net charge-offs recognized on finance receivables held for sale and ~~higher interest income on SFC’s note receivable from SFI reflecting additional SFI borrowings~~provision adjustments for liquidated held for sale accounts during the ~~2016~~2017 period, (iii) $3 million of service fee income in the 2017 period under an intercompany service agreement between SFC and OMFH, as discussed in Note 8 of the Notes to ~~fund the operations~~Condensed Consolidated Financial Statements in Part I - Item 1 of ~~its subsidiaries, (ii) net gain on sale of personal loans of $22~~this report, (iv) $3 million ~~(iii)~~ net loss on repurchases and repayments of debt ~~of $13 million,~~in the 2016 period, and ~~(iv) decrease in investment revenues of $7 million primarily due to lower realized gains on the sale of investment securities and~~(v) a decrease in ~~invested assets.~~insurance revenues of $2 million during the 2017 period reflecting lower earned non-credit premiums, partially offset by higher earned credit premiums.

Other expenses decreased $9$29 million for the three months ended ~~June 30, 2016~~March 31, 2017 when compared to the same period in ~~2015~~2016 primarily due to the ~~net of the~~ following:

Salaries and benefits decreased ~~$13~~$18 million ~~for the three months ended June 30, 2016~~ primarily due to ~~non-cash incentive compensation expense~~a decrease in average staffing as a result of ~~$15 million recorded in the second quarter of 2015 relating to the rights of certain executives to receive a portion~~our integration of the cash proceeds from the sale of OMH’s common stock by the Initial Stockholder. This decrease was partially offset by higher salary accruals during the 2016 period resulting from an increase in the number of employees.two legacy companies.

Other operating expenses ~~increased $9~~decreased $10 million ~~for the three months ended June 30, 2016~~ primarily due to (i) ~~higher~~the absence of servicing expenses for the previously owned SpringCastle Portfolio and (ii) lower professional fees inof $9 million during the ~~2016 period reflecting debt refinance costs and increased business efforts, (ii)~~2017 period. This decrease was partially offset by (i) a $5$6 million reduction in reserves related to estimated ~~Payment~~Property Protection Insurance claims ~~that occurred in the 2015 period, and (iii) higher advertising expenses~~ in the 2016 period ~~due~~related to ~~increased direct mailings to pre-approved customers~~our UK subsidiary, which was liquidated on August 16, 2016 and ~~increased use~~(ii) a decrease in deferral of ~~promotions. This increase was partially offset by three months~~origination costs of ~~servicing expenses for the SpringCastle Portfolio~~$3 million during the ~~2015~~2017 period.

~~Insurance policy benefits and claims~~Income taxes ~~decreased $5~~totaled $16 million for the three months ended ~~June 30, 2016 primarily due to favorable variances in benefits incurred during the 2016 period.~~

~~Provision for income taxes totaled $6 million for the three months ended June 30, 2016~~March 31, 2017 compared to ~~benefit from income taxes of less than $1~~$85 million for the same period in ~~2015.~~2016. The effective tax rate for the three months ended ~~June 30, 2016~~March 31, 2017 was ~~33.5%~~37.6% compared to ~~(1.3)%~~34.1% for the same period in ~~2015.~~2016. The effective tax rate for the three months ended ~~June 30, 2016~~March 31, 2017 differed from the federal statutory rate primarily due to the effect of state income taxes. The effective tax rate for the three months ended ~~June 30, 2015~~March 31, 2016 differed from the federal statutory rate primarily due to the effect of the non-controlling ~~interest~~interests in the previously owned SpringCastle Portfolio. ~~As discussed in Note 2 of the Notes to Condensed Consolidated Financial Statements, on March 31, 2016, the Company sold its equity interest in the SpringCastle Portfolio.~~

~~Comparison of Consolidated Results for the Six Months Ended June 30, 2016 and 2015~~NON-GAAP FINANCIAL MEASURES

~~Interest income decreased for the six months ended June 30, 2016 when compared to the same period in 2015 due to the net of the following:~~

(dollars in millions)

Six Months Ended June 30, 2016 compared to 2015
Decrease in average net receivables $ (109 )
Decrease in yield (11 )
Increase in number of days in 2016 3
Increase in interest income on finance receivables held for sale 56
Total $ (61 )

~~Average net receivables~~ decreased for the six months ended June 30, 2016 primarily due to (i) the SpringCastle Interests Sale and the liquidating status of the previously owned SpringCastle Portfolio, (ii) the transfer of $608

million of our personal loans to finance receivables held for sale on September 30, 2015 as part of OMH’s initiative to close the OneMain Acquisition, and (iii) our liquidating real estate loan portfolio. This decrease was partially offset by higher personal loan average net receivables resulting from (i) our continued focus on personal loan originations through our branch network and centralized operations and (ii) the continued growth of our auto secured personal loans.

~~Yield~~ ~~decreased for the six months ended June 30, 2016 primarily due to the continued growth of our auto secured personal loans, which generally have lower yields relative to our other personal loans.~~

~~Interest income on finance receivables held for sale~~ increased for the six months ended June 30, 2016 primarily due to higher average finance receivables held for sale during the 2016 period resulting from the transfer of $608 million of our personal loans to held for sale on September 30, 2015, which were sold on May 2, 2016.

~~Interest expense decreased for the six months ended June 30, 2016 when compared to the same period in 2015 due to the net of the following:~~

(dollars in millions)

Six Months Ended June 30, 2016 compared to 2015
Decrease in average debt $ (38 )
Decrease in weighted average interest rate (3 )
Interest expense on note payable to affiliate 6
Total $ (35 )

~~Average debt~~ decreased for the six months ended June 30, 2016 primarily due to (i) the elimination of the debt associated with our SpringCastle securitization as a result of the SpringCastle Interests Sale and the resulting deconsolidation of the securitization trust holding the underlying loans of the SpringCastle Portfolio and previously issued securitized interests, which were reported in long-term debt and (ii) net debt repurchases and repayment during the past 12 months relating to our consumer securitization transactions. This decrease was partially offset by (i) net debt issued in connection with SFC’s offering of the 8.25% SFC Notes in April of 2016 and (ii) additional borrowings under our conduit facilities. See Notes 10 and 11 of the Notes to Condensed Consolidated Financial Statements for further information on our long-term debt, consumer loan securitization transactions, and borrowings under our conduit facilities.

~~Weighted average interest rate on our debt~~ ~~decreased for the six months ended June 30, 2016 primarily due to additional borrowings under our conduit facilities, which generally have lower interest rates relative to our other indebtedness.~~

~~Interest expense on note payable to affiliate~~ resulted from a revolving demand note agreement between SFC and OMFH, entered into on December 1, 2015. See Note 9 of the Notes to Condensed Consolidated Financial Statements for further information on this note.

Provision for finance receivable losses increased $24 million for the six months ended June 30, 2016 when compared to the same period in 2015 primarily due to higher net charge-offs on our personal loans reflecting (i) growth in these personal loans during the past 12 months and (ii) a higher personal loan delinquency ratio at June 30, 2016. This increase was partially offset by (i) lower net charge-offs on the previously owned SpringCastle Portfolio reflecting the SpringCastle Interests Sale and the improved central servicing performance as the acquired portfolio matured under our ownership and (ii) lower net charge-offs on our real estate loans reflecting the liquidating status of the real estate loan portfolio.

Net gain on sale of SpringCastle interests of $167 million for the six months ended June 30, 2016 reflected the net gain associated with the sale of our equity interest in the SpringCastle Joint Venture on March 31, 2016. See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information on the sale.

Other revenues increased $82 million for the six months ended June 30, 2016 when compared to the same period in 2015 primarily due to the net of (i) increase in interest income on notes receivable from parent and affiliates of $96 million reflecting interest income on the Independence Demand Note during the 2016 period and higher interest income on SFC’s note receivable from SFI reflecting additional SFI borrowings during the 2016 period to fund the operations of its subsidiaries, (ii) net gain on sale of personal loans of $22 million, (iii) decrease in investment revenues of $18 million primarily due to lower realized gains

~~on the sale of investment securities and a decrease in invested assets, and (iv) net loss on repurchases and repayments of debt of $16 million.~~

~~Other expenses increased $13 million for the six months ended June 30, 2016 when compared to the same period in 2015 due to the net of the following:~~

~~Salaries and benefits~~ increased $4 million for the six months ended June 30, 2016 primarily due to higher salary accruals in the 2016 period resulting from an increase in the number of employees. This increase was partially offset by non-cash incentive compensation expense of $15 million recorded in the second quarter of 2015 relating to the rights of certain executives to receive a portion of the cash proceeds from the sale of OMH’s common stock by the Initial Stockholder.

~~Other operating expenses~~ increased $13 million for the six months ended June 30, 2016 primarily due to (i) higher professional fees in the 2016 period reflecting debt refinance costs and increased business efforts, (ii) higher advertising expenses in the 2016 period due to increased focus on e-commerce, increased direct mailings to pre-approved customers, and increased use of promotions, and (iii) higher information technology expenses in the 2016 period. This increase was partially offset by three additional months of servicing expenses for the SpringCastle Portfolio during the 2015 period.

~~Insurance policy benefits and claims~~ ~~decreased $4 million for the six months ended June 30, 2016 primarily due to favorable variances in benefits incurred during the 2016 period.~~

Provision for income taxes totaled $91 million for the six months ended June 30, 2016 compared to $9 million for the same period in 2015. The effective tax rate for the six months ended June 30, 2016 was 34.0% compared to 10.7% for the same period in 2015. The effective tax rates for the six months ended June 30, 2016 and 2015 differed from the federal statutory rates primarily due to the effects of the non-controlling interest in the previously owned SpringCastle Portfolio. As discussed in Note 2 of the Notes to Condensed Consolidated Financial Statements, on March 31, 2016, the Company sold its equity interest in the SpringCastle Portfolio.

~~Non-GAAP Financial Measures~~Adjusted Pretax Income

~~Segment Accounting Basis.~~ We report the operating results of Consumer and Insurance, Acquisitions and Servicing, Real Estate, and Other using the Segment Accounting Basis, which (i) reflects our allocation methodologies for certain costs, primarily interest expense, loan loss reserves and acquisition costs to reflect the manner in which we assess our business results and (ii) excludes the impact of applying purchase accounting. These allocations and adjustments currently have a material effect on our reported segment basis income as compared to GAAP. See Note 16 of the Notes to Condensed Consolidated Financial Statements for a complete discussion of our segment accounting. We believe the Segment Accounting Basis (a basis other than GAAP) provides investors a consistent basis for which management evaluates segment performance.

~~The reconciliations of income before provision for income taxes attributable to SFC on a GAAP basis (purchase accounting) to the same amounts under a Segment Accounting Basis were as follows:~~

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015

Income before provision for income taxes attributable to SFC - GAAP basis $ 19
$ 2
$ 240
$ 16
GAAP to Segment Accounting Basis adjustments: (a) (b)
Interest income (2 ) (3 ) (4 ) (6 )
Interest expense 22
32
46
62
Provision for finance receivable losses —
7
2
9
Other revenues 10
3
5
5
Other expenses (1 ) 1
(1 ) 2
Income before provision for income taxes attributable to SFC - Segment Accounting Basis $ 48
$ 42
$ 288
$ 88


~~(a)~~	~~The GAAP to Segment Accounting Basis adjustments primarily consists of:~~

~~Interest~~Management uses adjusted pretax income - the net purchase accounting impact of the amortization (accretion) of the net premium (discount) assigned to finance receivables and the impact of identifying purchased credit impaired finance receivables as compared to the historical values of finance receivables;

~~Interest expense~~ ~~- the accretion of the net discount applied to our long-term debt as part of purchase accounting;~~

~~Provision for finance receivable losses~~ ~~- the adjustment to reflect the difference between our allowance adjustment calculated under a Segment Accounting Basis and purchase accounting basis;~~

~~Other revenues~~ - the impact of carrying value differences between a Segment Accounting Basis and purchase accounting basis when measuring mark to market for loans held for sale and realized gains/losses associated with our investment portfolio; and

~~Other expenses~~ ~~- the net impact of amortization associated with identified intangibles as part of purchase accounting and deferred costs impacted by purchase accounting.~~


~~(b)~~	~~Purchase accounting was not elected at the segment level.~~

We also report selected financial statistics relating to the net finance receivables and credit quality of Consumer and Insurance, Acquisitions and Servicing, Real Estate, and Other using a Segment Accounting Basis.

~~Adjusted Pretax Earnings (Loss).Management uses~~ ~~adjusted pretax earnings (loss)~~, a non-GAAP financial measure, as a key performance measure of our segments. Adjusted pretax ~~earnings (loss)~~income represents income ~~(loss)~~ before ~~provision for (benefit from)~~ income taxes on a Segment Accounting Basis and excludes net gain on sale of ~~personal loans, net gain on sale of~~ SpringCastle interests, SpringCastle transaction costs, and losses resulting from ~~accelerated repayment~~repurchases and ~~repurchases~~repayments of ~~long-term debt, and debt refinance costs.~~debt. Management believes adjusted pretax ~~earnings (loss)~~income is useful in assessing the profitability of our segments and uses adjusted pretax ~~earnings (loss)~~income in evaluating our operating performance. Adjusted pretax ~~earnings (loss)~~income is a non-GAAP measure and should be considered supplemental to, but not as a substitute for or superior to, income ~~(loss)~~ before ~~provision for (benefit from)~~ income taxes, net income, or other measures of financial performance prepared in accordance with GAAP.

The reconciliations of income ~~(loss)~~ before ~~provision for (benefit from)~~ income taxes attributable to SFC on a Segment Accounting Basis to adjusted pretax ~~earnings (loss)~~income attributable to SFC (non-GAAP) by segment were as follows:

(dollars in millions) Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015

Consumer and Insurance
Income before provision for income taxes - Segment Accounting Basis $ 17
$ 82
$ 31
$ 152
Adjustments:
Net gain on sale of personal loans (22 ) —
(22 ) —
Net loss from accelerated repayment/repurchase of debt 5
—
7
—
Debt refinance costs 4
—
4
—
Adjusted pretax earnings (non-GAAP) $ 4
$ 82
$ 20
$ 152

Acquisitions and Servicing
Income (loss) before provision for (benefit from) income taxes attributable to SFC - Segment Accounting Basis $ (1 ) $ 29
$ 192
$ 64
Adjustments:
Net gain on sale of SpringCastle interests —
—
(167 ) —
SpringCastle transaction costs —
—
1
—
Adjusted pretax earnings (loss) attributable to SFC (non-GAAP) $ (1 ) $ 29
$ 26
$ 64

Real Estate
Loss before benefit from income taxes - Segment Accounting Basis $ (15 ) $ (43 ) $ (33 ) $ (91 )
Adjustments:
Net loss from accelerated repayment/repurchase of debt 1
—
1
—
Debt refinance costs 1
—
1
—
Adjusted pretax loss (non-GAAP) $ (13 ) $ (43 ) $ (31 ) $ (91 )

Other
Adjusted pretax earnings (loss) (non-GAAP) $ 47
$ (26 ) $ 98
$ (37 )

Total
Income before provision for income taxes attributable to SFC - Segment Accounting Basis $ 48
$ 42
$ 288
$ 88
Adjustments:
Net gain on sale of SpringCastle interests —
—
(167 ) —
Net gain on sale of personal loans (22 ) —
(22 ) —
Net loss from accelerated repayment/repurchase of debt 6
—
8
—
Debt refinance costs 5
—
5
—
SpringCastle transaction costs —
—
1
—
Total adjusted pretax earnings attributable to SFC (non-GAAP) $ 37
$ 42
$ 113
$ 88



(dollars in millions)	Three Months Ended March 31,
(dollars in millions)	2017		2016

Consumer and Insurance
Income before income taxes - Segment Accounting Basis	$	7	$	14
Adjustments:
Net loss on repurchases and repayments of debt	—		2
Adjusted pretax income (non-GAAP)	$	7	$	16

Acquisitions and Servicing
Income before income taxes attributable to SFC - Segment Accounting Basis	$	—	$	193
Adjustments:
Net gain on sale of SpringCastle interests	—		(167		)
SpringCastle transaction costs	—		1
Adjusted pretax income attributable to SFC (non-GAAP)	$	—	$	27

Other
Adjusted pretax income (non-GAAP)	$	54	$	33

Segment Results

See Note 16 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this report for (i) a description of our segments. As a result of the Fortress Acquisition, we have applied purchase accounting. However, we report the operating results of Consumer and Insurance, Acquisitions and Servicing, Real Estate, and Other using a “Segment Accounting Basis,” which (i) reflects our allocation methodologies for certain costs, primarily interest expense, loan loss reserves and acquisition costs to reflect the manner in which we assess our business results andsegments, (ii) excludes the impact of applying purchase accounting. These allocations and adjustments have a material effect on our reported segment basis income as compared to GAAP. We believe a Segment Accounting Basis (a basis other than GAAP) provides investors the basis for which management evaluates segment performance. See Note 16 of the Notes to Condensed Consolidated Financial Statements for (i) reconciliations of segment totals to condensed consolidated financial statement amounts, ~~(ii)~~(iii) methodologies used to allocate revenues and expenses to each segment, and ~~(iii)~~(iv) further discussion of the differences in our Segment Accounting Basis and GAAP.

CONSUMER AND INSURANCE

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


(dollars in millions)	Three Months Ended June 30,						At or for the Six Months Ended June 30,						At or for the Three Months Ended March 31,
(dollars in millions)	2016			2015			2016			2015			2017			2016

Interest income	$	295		$	267		$	606		$	521		$	290		$	311
Interest expense	99			36			194			76			104			95
Provision for finance receivable losses	83			53			156			108			70			73
Net interest income after provision for finance receivable losses	113			178			256			337			116			143
Other revenues	54			55			101			106			49			47
Other expenses	163			151			337			291			158			174
Adjusted pretax earnings (non-GAAP)	$	4		$	82		$	20		$	152
Adjusted pretax income (non-GAAP)													$	7		$	16

Selected Financial Statistics(a)
Finance receivables held for investment:
Net finance receivables							$	4,651		$	4,234		$	4,710		$	4,365
Number of accounts							920,739			944,792			892,111			880,116
Finance receivables held for investment and held for sale:
Average net receivables *	$	4,744		$	4,043		$	4,835		$	3,921
Yield *	25.01		%	26.52		%	25.27		%	26.71		%
Gross charge-off ratio *	7.25		%	5.81		%	7.24		%	6.10		%
Recovery ratio *	(0.93		)%	(0.98		)%	(0.90		)%	(0.88		)%
Net charge-off ratio *	6.32		%	4.83		%	6.34		%	5.22		%
Delinquency ratio *							2.81		%	2.38		%
Finance receivables held for sale:
Net finance receivables													$	—		$	606
Number of accounts													—			143,254
Finance receivables held for investment and held for sale: (b)
Average net receivables													$	4,736		$	4,926
Yield													24.84		%	25.47		%
Gross charge-off ratio													8.45		%	7.20		%
Recovery ratio													(1.76		)%	(0.85		)%
Net charge-off ratio													6.69		%	6.35		%
30-89 Delinquency ratio													2.03		%	1.97		%
Origination volume	$	1,015		$	1,171		$	1,958		$	2,031		$	773		$	943
Number of accounts originated	168,538			218,743			323,297			374,266			110,385			154,759


*(a)	See ~~“Key Financial Definitions”~~“Glossary” at the ~~end~~beginning of ~~our management's discussion and analysis~~this report for formulas and definitions of our key performance ratios.


(b)	Includes personal loans held for sale for the 2016 period in connection with the Lendmark Sale.

Comparison of Adjusted Pretax ~~Operating Results~~Income for the Three Months Ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~

Interest income ~~increased $28~~ decreased $21 million for the three months ended ~~June 30,~~March 31, 2017 when compared to the same period in 2016 due to the net of the following:

Finance chargesincreased ~~$14~~$21 million ~~for the three months ended June 30, 2016~~ primarily due to the net of the following:


◦	Average net receivables held for investment increased ~~for the three months ended June 30, 2016~~ primarily due to the ~~higher proportion~~continued growth of ~~auto secured personal loans, which generally have larger original~~our loan ~~balances. At June 30,~~portfolio.

~~2016, we had over 93,000 auto secured personal loans totaling $1.1 billion compared to over 52,000 auto secured personal loans totaling $630 million at June 30, 2015.~~


◦	Yield on finance receivables held for investment decreased ~~for the three months ended June 30, 2016~~ primarily due to the continued growth of ~~auto~~ secured personal loans, which generally have lower yields relative to our ~~other~~unsecured personal loans.

Interest income on finance receivables held for sale of ~~$14~~$42 million for the three months ended ~~June 30,~~March 31, 2016 resulted from the transfer of personal loans to finance receivables held for sale on September 30, 2015, ~~and subsequently~~which were sold in the Lendmark Sale on May 2, 2016.

Interest expense increased ~~$63~~$9 million for the three months ended ~~June 30,~~March 31, 2017 when compared to the same period in 2016 primarily due to ~~a change~~an increase in the ~~methodology~~utilization of ~~allocating~~financing from unsecured notes, which generally have higher interest ~~expense, as previously described in the allocation methodologies table.~~rates relative to our other indebtedness.

Provision for finance receivable losses ~~increased $30~~ decreased $3 million for the three months ended ~~June 30,~~March 31, 2017 when compared to the same period in 2016 primarily due to a larger provision release during the 2017 period due to the reserves required in the fourth quarter of 2016 in response to the higher level of delinquency of our personal loans. This decrease was partially offset by higher net charge-offs onin the 2017 period primarily resulting from the increase in delinquency of our personal loans ~~during~~in third quarter of 2016 that charged-off in the ~~2016 period reflecting (i) growth in our personal loans during the past 12 months and (ii) a higher personal loan delinquency ratio at June 30, 2016.~~first quarter of 2017.

Other ~~expenses~~revenues increased ~~$12~~$2 million for the three months ended ~~June 30,~~March 31, 2017 when compared to the same period in 2016 primarily due to the net of (i) $3 million of service fee income in the 2017 period under an intercompany service agreement between SFC and OMFH, as discussed in Note 8 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this report and (ii) a decrease in insurance revenues of $2 million during the 2017 period reflecting lower earned non-credit premiums, partially offset by higher earned credit premiums.

Other expenses decreased $16 million for the three months ended March 31, 2017 when compared to the same period in 2016 primarily due to the following:

Salaries and benefits ~~increased $3~~decreased $12 million ~~for the three months ended June 30, 2016~~ primarily due to ~~increased~~a decrease in average staffing inas a result of our integration of the ~~2016 period.~~two legacy companies.

Other operating expenses ~~increased $13~~decreased $3 million for the three months ended June 30, 2016 primarily due to (i) higher professional fees in the 2016 period reflecting debt refinance costs and increased business efforts, (ii) higher advertising expenses in the 2016 period reflecting increased direct mailings to pre-approved customers and increased use of promotions, (iii) higher information technology expenses in the 2016 period, and (iv) higher credit and collection related costs in the 2016 period reflecting growth in personal loans, including our auto secured personal loans.

~~Insurance policy benefits and claims~~ ~~decreased $4 million for the three months ended June 30, 2016 primarily due to favorable variances in benefits incurred during the 2016 period.~~

~~Comparison of Pretax Operating Results for the Six Months Ended June 30, 2016 and 2015~~

~~Interest income increased $85 million for the six months ended June 30, 2016 due to the following:~~

~~Finance chargesincreased$29 million~~ ~~for the six months ended June 30, 2016~~ primarily due to the net of (i) lower professional fees of $7 million during the ~~following:~~


◦	~~Average net receivables~~ increased for the six months ended June 30, 2016 primarily due to the higher proportion of auto secured personal loans, which generally have larger original loan balances. At June 30, 2016, we had over 93,000 auto secured personal loans totaling $1.1 billion compared to over 52,000 auto secured personal loans totaling $630 million at June 30, 2015.


◦	~~Yield~~ ~~decreased for the six months ended June 30, 2016 primarily due to the continued growth of auto secured personal loans, which generally have lower yields relative to our other personal loans.~~

~~Interest income on finance receivables held for sale~~2017 period, (ii) a decrease in advertising expenses of ~~$56~~$4 million ~~for~~during the ~~six months ended June 30, 2016 resulted from~~2017 period, (iii) a decrease in deferral of origination costs of $4 million during the ~~transfer~~2017 period, and (iv) $3 million of ~~personal loans~~service fee expenses in the 2017 period under an intercompany service agreement between SFC and OMFH, as discussed in Note 8 of the Notes to ~~finance receivables held for sale on September 30, 2015 and subsequently sold on May 2, 2016.~~Condensed Consolidated Financial Statements in Part I - Item 1 of this report.

Interest expense increased $118 million for the six months ended June 30, 2016 primarily due to a change in the methodology of allocating interest expense, as previously described in the allocation methodologies table.

Provision for finance receivable losses increased $48 million for the six months ended June 30, 2016 primarily due to higher net charge-offs on our personal loans during the 2016 period reflecting (i) growth in our personal loans during the past 12 months and (ii) a higher personal loan delinquency ratio at June 30, 2016.

Other revenues decreased $5 million for the six months ended June 30, 2016 when compared to the same period in 2015 due to (i) a decrease in investment revenues of $11 million in the 2016 period resulting from lower realized gains on the sale of investment securities and lower investment income generated from an investment in SpringCastle debt, which is eliminated in our consolidating operating results, (ii) an increase in insurance revenues of $3 million in the 2016 period primarily due to increases in earned credit premiums, and (iii) and an increase in other revenue - other of $3 million resulting from income generated from the Lendmark Sale.

~~Other expenses increased $46 million for the six months ended June 30, 2016 due to the net of the following:~~

~~Salaries and benefits~~ ~~increased $18 million for the six months ended June 30, 2016 primarily due to increased staffing in the 2016 period.~~

~~Other operating expenses~~ increased $31 million for the six months ended June 30, 2016 primarily due to (i) higher advertising expenses in the 2016 period reflecting increased focus on e-commerce, increased direct mailings to pre-approved customers, and increased use of promotions, (ii) higher professional fees in the 2016 period reflecting debt refinance costs and increased business efforts, (iii) higher information technology expenses in the 2016 period, and (iv) higher credit and collection related costs in the 2016 period reflecting growth in personal loans, including our auto secured personal loans.

~~Insurance policy benefits and claims~~ ~~decreased $3 million for the six months ended June 30, 2016 primarily due to favorable variances in benefits incurred during the 2016 period.~~

ACQUISITIONS AND SERVICING

Adjusted pretax ~~operating results~~income attributable to SFC and selected financial statistics for Acquisitions and Servicing (which are reported on an adjusted Segment Accounting Basis) were as follows:

(dollars in millions) Three Months Ended June 30, At or for the
Six Months Ended June 30,
2016 2015 2016 2015

Interest income $ —
$ 116
$ 102
$ 238
Interest expense —
22
20
45
Provision for finance receivable losses —
17
14
37
Net interest income after provision for finance receivable losses —
77
68
156
Other revenues —
—
—
5
Other expenses 1
15
14
31
Adjusted pretax earnings (loss) (non-GAAP) (1 ) 62
54
130
Pretax earnings attributable to non-controlling interests —
33
28
66
Adjusted pretax earnings (loss) attributable to SFC (non-GAAP) $ (1 ) $ 29
$ 26
$ 64

Selected Financial Statistics

Finance receivables held for investment:
Net finance receivables $ —
$ 1,883
Number of accounts —
253,351
Average net receivables * $ —
$ 1,932
828
1,984
Yield * — % 24.13 % 24.32 % 24.20 %
Net charge-off ratio * — % 3.62 % 3.50 % 3.70 %
Delinquency ratio *
— % 3.75 %



(dollars in millions)	At or for the Three Months Ended March 31,
(dollars in millions)	2017			2016

Interest income	$	—		$	102
Interest expense	—			20
Provision for finance receivable losses	—			14
Net interest income after provision for finance receivable losses	—			68
Other expenses	—			13
Adjusted pretax income (non-GAAP)	—			55
Pretax income attributable to non-controlling interests	—			28
Adjusted pretax income attributable to SFC (non-GAAP)	$	—		$	27

Selected Financial Statistics *
Finance receivables held for investment:
Average net receivables	$	—		$	1,656
Yield	—		%	24.32		%
Net charge-off ratio	—		%	3.44		%


*	See ~~“Key Financial Definitions”~~“Glossary” at the ~~end~~beginning of ~~our management's discussion and analysis~~this report for formulas and definitions of our key performance ratios.

On March 31, 2016, we sold our equity interest in the SpringCastle Joint Venture, the primary component of our Acquisitions and Servicing segment. ~~See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information on the SpringCastle Interests Sale.~~

~~REAL ESTATE~~

~~Adjusted pretax operating results and selected financial statistics for Real Estate (which are reported on an adjusted Segment Accounting Basis) were as follows:~~

(dollars in millions) Three Months Ended June 30, At or for the
Six Months Ended June 30,
2016 2015
2016 2015

Interest income
$ 15

$ 17
$ 30

$ 35
Interest expense (a)
14

59
27

119
Provision for finance receivable losses
2

(5 ) 4

(3 )
Net interest loss after provision for finance receivable losses
(1 )
(37 ) (1 )
(81 )
Other revenues (b)
(6 )
3

(17 )
6
Other expenses
6

9
13

16
Adjusted pretax loss (non-GAAP)
$ (13 )
$ (43 ) $ (31 )
$ (91 )

Selected Financial Statistics
Finance receivables held for investment:
Net finance receivables

$ 219
$ 619
Number of accounts

2,888
20,121
Average net receivables (c) $ 531
$ 632
$ 543
$ 646
Yield (c) 8.75 % 8.96 % 8.74 % 9.10 %
Loss ratio (c) 2.50 % 3.79 % 2.78 % 4.23 %
Delinquency ratio (c) (d)

17.67 % 6.34 %
Finance receivables held for sale:
Net finance receivables $ 428
$ 191
Number of accounts 15,596
3,368


~~(a)~~	Interest expense decreased $45 million and $92 million for the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015 primarily due to a change in the methodology of allocating interest expense, as previously described in the allocation methodologies table.

~~(b)~~

Other revenues decreased $9 million and $23 million for the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015 primarily due to (i) impairments of $3 million and $10 million recognized on our real estate loans held for sale during the three and six months ended June 30, 2016, respectively, and (ii) a decrease in investment revenues during the 2016 periods, as the prior periods reflected higher investment income generated from investing the proceeds of the 2014 real estate loan sales.


~~(c)~~	~~See “Key Financial Definitions” at the end of our management's discussion and analysis for formulas of key performance ratios.~~


~~(d)~~	~~Delinquency ratio at June 30, 2016 reflected the retained real estate loan portfolio that was not eligible for sale.~~

OTHER

“Other” consists of our ~~other~~ non-originating legacy operations, which ~~are isolated by geographic market and/or distribution channel from our three segments. These operations include:~~include (i) our ~~legacy operations in 14 states where we had also ceased branch-based personal lending during 2012;~~liquidating real estate loan portfolio as discussed below, (ii) our liquidating retail sales finance portfolio (including retail sales finance accounts from ~~its~~our legacy auto finance operation);, and (iii) our ~~lending operations~~short equity personal loans that we are no longer originating.

segments, we have revised our prior period segment disclosures.

Adjusted pretax ~~operating results~~income of the Other components (which are reported on an adjusted Segment Accounting Basis) were as follows:


(dollars in millions)	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
(dollars in millions)	2016			2015			2016			2015			2017			2016

Interest income	$	1		$	3		$	2		$	5		$	6		$	16
Interest expense ~~(a)~~	3			22			7			32			6			17
Provision for finance receivable losses	—			1			—			1			1			2
Net interest loss after provision for finance receivable losses	(2		)	(20		)	(5		)	(28		)	(1		)	(3		)
Other revenues ~~(b)~~	52			4			102			6			59			39
Other expenses ~~(c)~~	3			10			(1		)	15			4			3
Adjusted pretax earnings (loss) (non-GAAP)	$	47		$	(26	)	$	98		$	(37	)
Adjusted pretax income (non-GAAP)													$	54		$	33


~~(a)~~	Interest expense for the three and six months ended June 30, 2016 when compared to the same periods in 2015 reflected a change in the methodology of allocating interest expense, as previously described in the allocation methodologies table.

~~(b)~~

Other revenues for the three and six months ended June 30, 2016 included (i) interest income on the Independence Demand Note and (ii) higher interest income on SFC’s note receivable from SFI reflecting additional SFI borrowings during the 2016 period to fund the operations of its subsidiaries. See Note 9 of the Notes to Condensed Consolidated Financial Statements for further information on the Independence Demand Note.


~~(c)~~	In connection with the sale of our common stock by the Initial Stockholder, we recorded non-cash incentive compensation expense of $15 million in the second quarter of 2015 relating to the rights of certain executives to ~~receive~~ ~~a portion of the cash proceeds received by the Initial Stockholder.~~

Net finance receivables of the Other components (which are reported on a Segment Accounting Basis) were as follows:


(dollars in millions)	June 30,				March 31,
(dollars in millions)	2016		2015		2017		2016

Net finance receivables:
Net finance receivables held for investment:
Personal loans	$	13	$	22	$	6	$	15
Real estate loans					148		542
Retail sales finance	17		34		10		20
Total	$	30	$	56	$	164	$	577

Net finance receivables held for sale:
Real estate loans					$	151	$	170

Credit Quality

FINANCE RECEIVABLE COMPOSITION

The following table presents the composition of our finance receivables for each of the Company’s segments on a Segment Accounting Basis, as well as reconciliations to our total net finance receivables on a GAAP basis:



(dollars in millions)	Consumer and Insurance		Other		Segment to GAAP Adjustment			Consolidated Total

March 31, 2017
Personal loans	$	4,710	$	6	$	(1	)	$	4,715
Real estate loans	—		148		(9		)	139
Retail sales finance	—		10		(1		)	9
Total	$	4,710	$	164	$	(11	)	$	4,863

December 31, 2016
Personal loans	$	4,794	$	11	$	(1	)	$	4,804
Real estate loans	—		153		(9		)	144
Retail sales finance	—		12		(1		)	11
Total	$	4,794	$	176	$	(11	)	$	4,959

The largest component of our finance receivables and primary source of our interest income is our personal loan portfolio. Our ~~customers encompass~~personal loans are typically non-revolving with a ~~wide range~~fixed-rate and a fixed, original term of ~~borrowers. In~~three to five years and are secured by consumer goods, automobiles, or other personal property or are unsecured. At March 31, 2017, 58% of our personal loans were secured by titled collateral, compared to 58% at December 31, 2016.

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, non-prime, and sub-prime. We track and analyze the performance of our finance ~~industry, they~~receivable portfolio using many different parameters, including FICO scores, which is widely recognized in the consumer lending industry.

We group FICO scores into the following credit strength categories:

Prime: FICO score of 660 or higher

Non-prime: FICO score of 620-659

Sub-prime: FICO score of 619 or below

Our customers are described as prime ~~or near-prime~~ at one ~~extreme~~end of the credit spectrum and ~~non-prime or~~ sub-prime ~~(less creditworthy)~~ at the other. Our customers’ ~~incomes~~demographics are ~~generally~~in many respects near the national median, but ~~our customers~~ may vary from national norms ~~as to their debt-to-income ratios, employment~~in terms of credit and ~~residency stability, and/or credit~~ repayment histories. ~~In general,~~Many of our customers have ~~lower~~experienced some level of prior financial difficulty or have limited credit ~~quality~~experience and require ~~significant~~higher levels of ~~servicing.~~servicing and support from our branch network.

~~We may offer borrowers~~Our net finance receivables grouped into the ~~opportunity to defer their personal loan by extending~~following categories based solely on borrower FICO credit scores at the purchase, origination, renewal, or most recently refreshed date on which any payment is due. We may require a partial payment prior to granting such a deferral. Deferments must bring the account contractually current or due for the current month’s payment. Borrowers are generally limited to two deferments in a rolling 12-month period unless it is determined that an exception is warranted.were as follows:



(dollars in millions)	Personal Loans		Real Estate Loans		Retail Sales Finance		Total

March 31, 2017 *
FICO scores
660 or higher	$	1,111	$	40	$	5	$	1,156
620-659	1,189		25		1		1,215
619 or below	2,412		72		3		2,487
Unavailable	3		2		—		5
Total	$	4,715	$	139	$	9	$	4,863

December 31, 2016
FICO scores
660 or higher	$	888	$	41	$	5	$	934
620-659	1,079		23		2		1,104
619 or below	2,814		77		4		2,895
Unavailable	23		3		—		26
Total	$	4,804	$	144	$	11	$	4,959


*	The shift in FICO distribution reflects the alignment in FICO versions across OMH. As of March 31, 2017, the legacy Springleaf FICO scores were refreshed to FICO 08 version, which is comparable with the legacy OneMain FICO version.

In addition to deferrals, we may also offer borrowers the opportunity to cure delinquent accounts when a customer demonstrates that he or she has rehabilitated from a temporary event that caused the delinquency. An account may be brought to current status after the cause for delinquency has been identified and remediated and the customer has made two consecutive qualified payments; however, no principal or interest amounts are forgiven or credited. Independent risk management approval is required for all cures.

When a loan is 60 days past due, we transfer the loan to one of our centralized service centers for account servicing and collection processing. This process includes assessing previous collection efforts, contacting the customer to determine whether

the customer’s financial problems are temporary, reviewing the collateral securing the loan and developing a plan to maintain contact with the customer to increase the likelihood of future payments. Certain non-routine collection activities may include litigation, repossession of collateral, or filing involuntary bankruptcy petitions.

We may renew a delinquent personal loan if the related borrower meets current underwriting criteria and we determine that it does not appear that the cause of past delinquency will affect the customer’s ability to repay the new personal loan. We employ the same credit risk underwriting process that we would use for an application from a new customer to determine whether to grant a renewal of a personal loan, regardless of whether the borrower’s account is current or delinquent.DELINQUENCY

We consider the delinquency status of ~~the~~our finance receivable as ~~our~~the primary indicator of credit ~~quality indicator.~~quality. We monitor delinquency trends to evaluate the risk of future credit losses and employ advanced analytical tools to manage our exposure and appetite. Our branch team members work with customers through occasional periods of financial difficulty and offer a variety of borrower assistance programs to ~~credit risk. Although we~~help customers continue to make payments. Team members also actively engage in collection activities ~~well before an account is~~throughout the early stages of delinquency. We closely track and report the percentage of receivables that are 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 60 days past due, we consider them delinquent and transfer collections management of these accounts to our centralized operations, as these accounts are considered to be at increased risk for loss. Use of our centralized operations teams for managing late stage delinquency allows us to apply more advanced collections technologies/tools and drives operating efficiencies in servicing. At 90 days past due, we consider our finance receivables 60to be nonperforming.

The following table presents (i) delinquency information of the Company’s segments on a Segment Accounting Basis, (ii) reconciliations to our total net finance receivables on a GAAP basis, by number of days ~~or more past due as~~ delinquent, and ~~consider the likelihood~~(iii) delinquency ratios as a percentage of ~~collection to decrease at such time.~~ net finance receivables:



(dollars in millions)	Consumer and Insurance			Other			Segment to GAAP Adjustment			Consolidated Total

March 31, 2017
Current	$	4,520		$	125		$	(9	)	$	4,636
30-59 days past due	57			9			(1		)	65
Delinquent (60-89 days past due)	39			4			—			43
Performing	4,616			138			(10		)	4,744

Nonperforming (90+ days past due)	94			26			(1		)	119
Total net finance receivables	$	4,710		$	164		$	(11	)	$	4,863

Delinquency ratio
30-89 days past due	2.03		%	7.83		%	*			2.22		%
30+ days past due	4.03		%	23.99		%	*			4.67		%
60+ days past due	2.81		%	18.65		%	*			3.33		%
90+ days past due	1.99		%	16.16		%	*			2.45		%

December 31, 2016
Current	$	4,570		$	131		$	(9	)	$	4,692
30-59 days past due	64			10			(1		)	73
Delinquent (60-89 days past due)	45			4			—			49
Performing	4,679			145			(10		)	4,814

Nonperforming (90+ days past due)	115			31			(1		)	145
Total net finance receivables	$	4,794		$	176		$	(11	)	$	4,959

Delinquency ratio
30-89 days past due	2.26		%	8.32		%	*			2.47		%
30+ days past due	4.67		%	25.88		%	*			5.38		%
60+ days past due	3.33		%	20.16		%	*			3.90		%
90+ days past due	2.40		%	17.56		%	*			2.91		%

��


*	Not applicable.

ALLOWANCE FOR FINANCE RECEIVABLE LOSSES

We record an allowance for ~~loan~~finance receivable losses to cover expected losses on our finance receivables. ~~See table~~Our allowance for finance receivable losses may fluctuate based upon our continual review of ~~net~~the credit quality of the finance receivable portfolios and changes in economic conditions.

Changes in the allowance for finance receivable losses for each of the Company’s segments on a Segment Accounting Basis, as well as reconciliations to our total allowance for finance receivable losses on a GAAP basis, were as follows:



(dollars in millions)	Consumer and Insurance			Acquisitions and Servicing			Other			Segment to GAAP Adjustment			Consolidated Total

Three Months Ended March 31, 2017
Balance at beginning of period	$	185		$	—		$	31		$	(12	)	$	204
Provision for finance receivable losses	70			—			1			—			71
Charge-offs	(99		)	—			(2		)	1			(100		)
Recoveries	21			—			—			—			21
Balance at end of period	$	177		$	—		$	30		$	(11	)	$	196

Allowance ratio	3.76		%	—		%	18.24		%	(a)			4.03		%

Three Months Ended March 31, 2016
Balance at beginning of period	$	174		$	4		$	70		$	(24	)	$	224
Provision for finance receivable losses	73			14			2			2			91
Charge-offs	(89		)	(17		)	(5		)	2			(109		)
Recoveries	11			3			1			—			15
Other (b)	—			(4		)	—			—			(4		)
Balance at end of period	$	169		$	—		$	68		$	(20	)	$	217

Allowance ratio	3.86		%	—		%	11.82		%	(a)			4.42		%


(a)	Not applicable.


(b)	Consists of the elimination of allowance for finance receivable losses due to the sale of the SpringCastle Portfolio on March 31, 2016, in connection with the sale of our equity interest in the SpringCastle Joint Venture.

The delinquency status of our finance receivable portfolio, along with the level of our TDR finance receivables, ~~held~~are the primary drivers that can cause fluctuations in our allowance for ~~investment by type and by number~~finance receivable losses from period to period. We monitor the allowance ratio to ensure we have a sufficient level of ~~days delinquent~~allowance for finance receivable losses to cover estimated incurred losses in our finance receivable portfolio.

See Note 4 of the Notes to Condensed Consolidated Financial ~~Statements.~~Statements in Part I - Item 1 of this report for more information about the changes in the allowance for finance receivable losses.

~~TROUBLED DEBT RESTRUCTURING~~TDR FINANCE RECEIVABLES

We make modifications to our finance receivables to assist borrowers during times of 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.

Information regarding TDR finance receivables held for investment ~~and~~for each of the Company’s segments on a Segment Accounting Basis, as well as reconciliations to information regarding our total TDR finance receivables held for ~~sale~~investment on a GAAP basis, were as follows:

(dollars in millions)
Personal
Loans *

SpringCastle
Portfolio

Real Estate
Loans *
Total

June 30, 2016
TDR net finance receivables $ 34
$ —
$ 202
$ 236
Allowance for TDR finance receivable losses $ 11
$ —
$ 12
$ 23
Number of TDR accounts 10,768
—
3,512
14,280

December 31, 2015
TDR net finance receivables $ 31
$ 13
$ 201
$ 245
Allowance for TDR finance receivable losses $ 9
$ 4
$ 34
$ 47
Number of TDR accounts 10,542
1,656
3,506
15,704


*	~~TDR finance receivables held for sale included in the table above were as follows:~~

(dollars in millions)
Personal
Loans

Real Estate
Loans
Total

June 30, 2016
TDR net finance receivables $ —
$ 155
$ 155
Number of TDR accounts —
2,857
2,857

December 31, 2015
TDR net finance receivables $ 2
$ 92
$ 94
Number of TDR accounts 738
1,322
2,060



(dollars in millions)	Consumer and Insurance		Other		Segment to GAAP Adjustment			Consolidated Total

March 31, 2017
TDR net finance receivables	$	49	$	72	$	(26	)	$	95
Allowance for TDR finance receivable losses	20		23		(12		)	31

December 31, 2016
TDR net finance receivables	$	47	$	71	$	(27	)	$	91
Allowance for TDR finance receivable losses	20		23		(12		)	31

Liquidity and Capital Resources

SOURCES 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 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.

~~SFC’s Offering of 8.25% Senior Notes~~

On April 11, 2016, SFC issued $1.0 billion aggregate principal amount of the 8.25% SFC Notes due 2020 under the Indenture, pursuant to which OMH provided a guarantee of the notes on a senior unsecured basis. SFC used a portion of the proceeds from the offering to repurchase approximately $600 million aggregate principal amount of its existing senior notes that mature in 2017 and the remainder for general corporate purposes. See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information on this offering.

Securitizations and Borrowings from Revolving Conduit Facilities

During the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, we (i) completed one auto securitization and (ii) exercised our right to redeem the ~~asset backed~~asset-backed notes issued by ~~the Springleaf Funding Trust 2013-B and (ii) deconsolidated the previously issued securitized interests of the SpringCastle Funding Asset-backed Notes~~SLFT 2014-A. See “Structured Financings” later in this section for further information on each of our securitization transactions.

During the six months ended June 30, 2016, we (i) extended the revolving periods on five existing revolving conduit facilities and (ii) amended three existing revolving conduit facilities to change the maximum principal balances. Net ~~repayments~~borrowings under the notes of our existing revolving conduit facilities totaled ~~$875~~$10 million for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017.

See ~~Note 11~~Notes 9 and 10 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this report for further information on our ~~personal~~long-term debt, consumer loan ~~securitizations~~securitization transactions and ~~revolving~~ conduit facilities.

Subsequent to ~~June 30, 2016,~~March 31, 2017, we completed the following transactions:

On ~~July 19, 2016,~~April 13, 2017, Midbrook 2013-VFN1 Trust voluntarily terminated its note purchase agreement with its lender.

On April 27, 2017, we ~~completed a private securitization transaction in which ODART 2016-1, a wholly owned special purpose vehicle~~drew $60 million of ~~SFC, issued $754 million principal amount of notes backed by auto secured personal loans with an aggregate UPB of $754 million as of June 30, 2016. $700 million principal amount of~~ the variable funding notes issued by ~~ODART 2016-1, represented by Classes A, B and C, were sold to unaffiliated parties at a weighted average interest rate of 2.27%, and $54 million principal amount of Class D notes were retained.~~Sumner Brook 2013-VFN1 Trust.

USES OF FUNDS

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.

At ~~June 30, 2016,~~March 31, 2017, we had ~~$320~~$397 million of cash and cash equivalents, and during the ~~six~~three months ended ~~June 30, 2016, SFC~~March 31, 2017, we generated net income ~~attributable to SFC~~ of ~~$149~~$27 million. Our net cash inflow from operating and investing activities totaled ~~$856~~$161 million for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017. At ~~June 30, 2016,~~March 31, 2017, our remaining scheduled principal and interest payments for ~~2016~~2017 on our existing debt (excluding ~~securitizations and borrowings under revolving conduit facilities)~~securitizations) totaled ~~$561 million.~~$1.6 billion. As of ~~June 30, 2016,~~March 31, 2017, we had ~~$2.2~~$1.8 billion UPB of unencumbered personal loans and ~~$745~~$357 million UPB of unencumbered real estate loans (including ~~$526~~$210 million 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.

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.

Subsequent Transactions

On April 13, 2017 and May 2, 2017, SFC advanced $50 million and $37 million, respectively, to OMFH, under the OneMain Demand Note.

LIQUIDITY

Operating Activities

Net cash provided by operations of ~~$229~~$233 million for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 reflected net income of $177 million, the impact of non-cash items, and an unfavorable change in working capital of $28 million. Net cash provided by operations of $238 million for the six months ended June 30, 2015 reflected net income of $73$27 million, the impact of non-cash items, and a favorable change in working capital of $1$101 million. Net cash provided by operations of $221 million for the three months ended March 31, 2016 reflected net income of $164 million, the impact of non-cash items, and a favorable change in working capital of $99 million.

Investing Activities

Net cash used for investing activities of $72 million for the three months ended March 31, 2017 was primarily due to net cash advances on intercompany notes receivable. Net cash provided by investing activities of ~~$627~~$12 million for the ~~six~~three months ended ~~June 30,~~March 31, 2016 was primarily due to the SpringCastle Interests Sale and ~~the Lendmark Sale,~~net collections on intercompany notes receivable, partially offset by net principal ~~collections and~~ originations of finance receivables held for ~~investment and held for sale. Net cash provided by investing activities of $291 million for the six months ended June 30, 2015 reflected net sales of investment securities during 2015.~~investment.

Financing Activities

Net cash used for financing activities of ~~$857~~$39 million and $259 million for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~was~~respectively, were primarily due to net repayments of long-term debt partially offset by net proceeds from intercompany note payable. Net cash provided by financing activities of $1.2 billion for the six months ended June 30, 2015 reflected the debt issuances associated with the 2015-A and 2015-B securitizations.debt.

Liquidity Risks and Strategies

SFC’s credit ratings are non-investment grade, which have a significant impact on our cost of, 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 include, but are not limited, to the following:

our inability to grow or maintain our personal loan portfolio with adequate profitability;

the effect of federal, state and local laws, regulations, or regulatory policies and practices;

potential liability relating to real estate and personal loans which we have sold or may sell in the future, or relating to securitized loans; and

the potential for disruptions in the debt and equity markets.

The 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 some or all the following strategies:

maintaining disciplined underwriting standards and pricing for loans we originate or purchase and managing purchases of finance receivables;

pursuing additional debt financings (including new securitizations and new unsecured debt issuances, debt refinancing transactions and ~~standby funding~~revolving conduit facilities), or a combination of the foregoing;

purchasing portions of our outstanding indebtedness through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we may determine; and

obtaining new and extending existing secured revolving ~~credit~~ facilities to ~~allow us to use excess cash to pay down higher cost debt.~~provide committed liquidity in case of prolonged market fluctuations.

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. State law restricts the amounts ~~our insurance subsidiaries,~~that Merit and Yosemite may pay as dividends without prior notice to the Indiana ~~Department of Insurance (the “Indiana DOI”).~~DOI. The maximum amount of dividends, ~~(referred~~referred to as “ordinary ~~dividends”)~~dividends,” for an Indiana domiciled life insurance company that can be paid without prior approval in a ~~12-month~~12 month period (measured retrospectively from the date of payment) is the greater of: (i) 10% of policyholders’ surplus as of the prior year-end; or (ii) the statutory net gain from operations as of the prior year-end. Any amount greater must be approved by the Indiana DOI prior to its payment. The maximum ordinary dividends for an Indiana domiciled property and casualty insurance company that can be paid without prior approval in a ~~12-month~~12 month period (measured retrospectively from the date of payment) is the greater of: (i) 10% of policyholders’ surplus as of the prior year-end; or (ii) the statutory net income. Any amount greater must be approved by the Indiana DOI prior to its payment. These approved dividends are called “extraordinary dividends.” ~~During~~Our insurance subsidiaries did not pay any dividends during the ~~six~~three months ended ~~June 30, 2016, Merit~~March 31, 2017 and ~~Yosemite paid extraordinary dividends to SFC totaling $63 million.~~2016.

~~OUR~~ DEBT ~~AGREEMENTS~~

~~8.25% SFC Notes.~~ On April 11, 2016, OMH entered into a Second Supplemental Indenture, pursuant to which it agreed to fully and unconditionally guarantee, on a senior unsecured basis, the payments of principal, premium (if any) and interest on $1.0 billion of the 8.25% SFC Notes. As of June 30, 2016, $1.0 billion aggregate principal amount of the 8.25% SFC Notes were outstanding. See Note 2 of the Notes to Condensed Consolidated Financial Statements for further discussion of this offering.

~~5.25% SFC Notes.~~ On December 3, 2014, OMH entered into an Indenture and First Supplemental Indenture, pursuant to which it agreed to fully and unconditionally guarantee, on a senior unsecured basis, the payments of principal, premium (if any) and interest on $700 million of 5.25% Senior Notes due 2019 issued by SFC (the “5.25% SFC Notes”). As of June 30, 2016, $700 million aggregate principal amount of the 5.25% SFC Notes were outstanding.

~~Other SFC Notes.~~ On December 30, 2013, OMH entered into Guaranty Agreements whereby it agreed to fully and unconditionally guarantee the payments of principal, premium (if any), and interest on approximately $5.2 billion aggregate principal amount of senior notes, on a senior unsecured basis, and $350 million aggregate principal amount of a junior subordinated debenture, on a junior subordinated basis, issued by SFC (collectively, the “Other SFC Notes”). The Other SFC Notes consisted of the following: 8.25% Senior Notes due 2023; 7.75% Senior Notes due 2021; 6.00% Senior Notes due 2020; a 60-year junior subordinated debenture; and all senior notes outstanding on December 30, 2013, issued pursuant to the Indenture dated as of May 1, 1999 (the “1999 Indenture”), between SFC and Wilmington Trust, National Association (the successor trustee to Citibank N.A.). The 60-year junior subordinated debenture underlies the trust preferred securities sold by a trust sponsored by SFC. On December 30, 2013, OMH entered into a Trust Guaranty Agreement whereby it agreed to fully and unconditionally guarantee the related payment obligations under the trust preferred securities. As of June 30, 2016, approximately $3.3 billion aggregate principal amount of the Other SFC Notes was outstanding.COVENANTS

The debt agreements to which SFC and its subsidiaries are a party include customary terms and conditions, including covenants and representations and warranties. Some or all of these agreements also contain certain restrictions, including (i) restrictions on the ability to create senior liens on property and assets in connection with any new debt financings and (ii) SFC’s ability to sell or convey all or substantially all of its assets, unless the transferee assumes SFC’s obligations under the applicable debt agreement. In addition, the OMH guarantees of SFC’s long-term debt discussed above are subject to customary release provisions.

With the exception of ~~SFC’s junior subordinated debenture,~~the Junior Subordinated Debenture, none of ~~our~~SFC’s debt agreements require SFC or any of its subsidiaries to meet or maintain any specific financial targets or ratios. However, certain events, including non-payment of principal or interest, bankruptcy or insolvency, or a breach of a covenant or a representation or warranty, may constitute an event of default and trigger an acceleration of payments. In some cases, an event of default or acceleration of payments under one debt agreement may constitute a cross-default under other debt agreements resulting in an acceleration of payments under the other agreements.

As of ~~June 30, 2016,~~March 31, 2017, SFC was in compliance with all of the covenants under ~~its~~our debt agreements.

Junior Subordinated ~~Debenture.~~Debenture

In January of 2007, SFC issued the Junior Subordinated Debenture, consisting of $350 million aggregate principal amount of 60-year junior subordinated ~~debenture (the “debenture”) under an indenture dated January 22, 2007 (the “Junior~~debt. The Junior Subordinated ~~Indenture”), by and between SFC and Deutsche Bank Trust Company, as trustee. The debenture~~Debenture underlies the trust preferred securities sold by a trust sponsored by SFC. SFC can redeem the ~~debenture~~Junior Subordinated Debenture at par beginning in January of 2017. Effective January 16, 2017, the interest rate on the UPB of the Junior Subordinated Debenture became a variable floating rate (determined quarterly) equal to 3-month LIBOR plus 1.75%, or 2.77% as of March 31, 2017. Prior to January 16, 2017, the interest rate on the UPB of the Junior Subordinated Debenture was a fixed rate of 6.00%.

Pursuant to the terms of the ~~debenture,~~Junior Subordinated Debenture, SFC, upon the occurrence of a mandatory trigger event, is required to defer interest payments to the holders of the ~~debenture~~Junior Subordinated Debenture (and not make dividend payments to SFI) unless SFC obtains non-debt capital funding in an amount equal to all accrued and unpaid interest on the ~~debenture~~Junior Subordinated Debenture otherwise payable on the next interest payment date and pays such amount to the holders of the ~~debenture.~~Junior Subordinated Debenture. A mandatory trigger event occurs if SFC’s (i) tangible equity to tangible managed assets is less than 5.5% or (ii) average fixed charge ratio is not more than 1.10x for the trailing four quarters (where the fixed charge ratio equals earnings excluding income taxes, interest expense, extraordinary items, goodwill impairment, and any amounts related to discontinued operations, divided by the sum of interest expense and any preferred dividends).quarters.

Based upon SFC’s financial results for the 12 months ended March 31, ~~2016,~~2017, a mandatory trigger event did not occur with respect to the interest payment due in ~~July~~April of ~~2016,~~2017, as SFC was in compliance with both required ratios discussed above.

Structured Financings

We execute private securitizations under Rule 144A of the Securities Act of 1933. As of ~~June 30, 2016,~~March 31, 2017, our structured financings consisted of the following:


(dollars in millions)	Initial Note Amounts Issued (a)		Initial Collateral Balance (b)		Current Note Amounts Outstanding		Current Collateral Balance (b)		Current Weighted Average Interest Rate		Collateral Type	Revolving Period	Initial Note Amounts Issued (a)		Initial Collateral Balance (b)		Current Note Amounts Outstanding		Current Collateral Balance (b)		Current Weighted Average Interest Rate (a)		Collateral Type	Original Revolving Period

Consumer Securitizations:
SLFT 2014-A	$	559	$	644	$	413	$	498	2.61	%	Personal loans	2 years
SLFT 2015-A	1,163		1,250		1,163		1,250		3.47	%	Personal loans	3 years	$	1,163	$	1,250	$	1,163	$	1,250	3.47	%	Personal loans	3 years
SLFT 2015-B	314		335		314		336		3.78	%	Personal loans	5 years	314		335		314		336		3.78	%	Personal loans	5 years
SLFT 2016-A													500		560		500		559		3.10	%	Personal loans	2 years
Total consumer securitizations													1,977		2,145		1,977		2,145

Total consumer securitizations	$	2,036	$	2,229	$	1,890	$	2,084
Auto Securitizations:
ODART 2016-1													700		754		396		456		2.45	%	Direct auto loans	—
ODART 2017-1													268		300		268		300		2.61	%	Direct auto loans	1 year
Total auto securitizations													968		1,054		664		756

Total secured structured financings													$	2,945	$	3,199	$	2,641	$	2,901


(a)	Represents securities sold at time of issuance or at a later date and does not include retained notes.


(b)	Represents UPB of the collateral supporting the issued and retained notes.

In addition to the structured financings included in the table above, we had access to seven conduit facilities with a total borrowing capacity of ~~$2.4~~$2.5 billion as of ~~June 30, 2016,~~March 31, 2017, as discussed in Note 1110 of the Notes to Condensed Consolidated Financial ~~Statements.~~Statements in Part I - Item 1 of this report. At ~~June 30, 2016, $325~~March 31, 2017, $10 million was drawn under these facilities.

See “Liquidity and Capital Resources - Sources of Funds - Securitizations and Borrowings from Revolving Conduit Facilities” above for information on the securitization and conduit transactions completed subsequent to ~~June 30, 2016.~~March 31, 2017.

Our securitizations have served to partially replace secured and unsecured debt in our capital structure with more favorable non-recourse funding. Our overall funding costs are positively impacted by our increased usage of securitizations, as we typically execute these transactions at interest rates significantly below those of our ~~maturing~~ unsecured debt.

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 ~~June 30, 2016~~March 31, 2017 or December 31, ~~2015,~~2016, other than certain representations and warranties associated with the sales of the mortgage-backed retained certificates during 2014. As of ~~June 30, 2016,~~March 31, 2017, 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 Consolidated Financial Statements in Part II, Item 8 of our ~~2015~~2016 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;

purchased credit impaired finance receivables;

TDR finance receivables; ~~and~~

fair value ~~measurements.~~measurements; and

other intangible assets.

~~Effective April 1, 2016, we changed our accounting policy for derecognition of PCI loans. See Note 1 of the Notes to Condensed Consolidated Financial Statements for further information.~~

There have been no ~~other~~ material changes to our critical accounting policies or to our methodologies for deriving critical accounting estimates during the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017.

Recent Accounting Pronouncements

See Note 32 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this report for discussion of recently issued accounting pronouncements.

Seasonality

Our personal loan volume is generally highest during the second and fourth quarters of the year, primarily due to marketing efforts, seasonality of demand, and increased traffic in branches after the winter months. Demand for our personal loans is usually lower in January and February after the holiday ~~season and as a result of tax refunds.~~season. Delinquencies on our personal loans are generally lowest in the first quarter 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.

~~Key Financial Definitions~~



~~Average debt~~	~~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 2) in the period~~
~~Delinquency ratio~~	~~UPB 60 days or more past due (greater than three payments unpaid) as a percentage of UPB~~
~~Gross charge-off ratio~~	~~annualized gross charge-offs as a percentage of average net receivables~~
~~Loss ratio~~	annualized net charge-offs, net writedowns on real estate owned, net gain (loss) on sales of real estate owned, and operating expenses related to real estate owned as a percentage of average real estate loans
~~Net charge-off ratio~~	~~annualized net charge-offs as a percentage of average net receivables~~
~~Net interest income~~	~~interest income less interest expense~~
~~Recovery ratio~~	~~annualized recoveries on net charge-offs as a percentage of average net receivables~~
~~Tangible equity~~	~~total equity less accumulated other comprehensive income or loss~~
~~Tangible managed assets~~	~~total assets less goodwill and other intangible assets~~
~~Trust preferred securities~~	capital securities classified as debt for accounting purposes but due to their terms are afforded, at least in part, equity capital treatment in the calculation of effective leverage by rating agencies
~~Weighted average interest rate~~	~~annualized interest expense as a percentage of average debt~~
~~Yield~~	~~annualized finance charges as a percentage of average net receivables~~

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 of our ~~2015~~2016 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 ~~Securities~~ Exchange Act, ~~of 1934, as amended (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 ~~June 30, 2016,~~March 31, 2017, 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 ~~June 30, 2016~~March 31, 2017 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 ~~second~~first quarter of ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 14 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 of this ~~Quarterly Report on Form 10-Q.~~report.

Item 1A. Risk Factors.

Since ~~the~~our transition services agreement with Lendmark ~~Sale was completed~~expired on May ~~2, 2016,~~1, 2017, the risk factor entitled “The DOJ may impose additional conditions or penalties relating to the Lendmark Sale may not be completed on the expected timeframe, or at all, and may be completed on terms less favorable than anticipated. In addition, the Branch Sellers and Lendmark may have difficulty fulfilling the terms of the Lendmark Sale.that could adversely affect us.” previously disclosed in Part I, - Item 1A of our ~~2015~~2016 Annual Report on Form 10-K is no longer applicable and is hereby deleted.

Additionally, the following risk factor relating to the Lendmark Sale previously disclosed in Part I - Item 1A of our 2015 Annual Report on Form 10-K is updated below to reflect the completion of the Lendmark Sale:

~~Even if we are able to close the Lendmark Sale, the DOJ may impose additional conditions or penalties that could adversely affect us.~~

Pursuant to the Final Judgment entered into in connection with the “Settlement Agreement” (as described in Note 2 of the Notes to Consolidated Financial Statements in Item 8), we are subject to various ongoing obligations, including a prohibition on entering into certain employee non-compete agreements and obligations under our Transition Services Agreement with Lendmark. Notwithstanding the consummation of the Lendmark Sale, we could be subject to certain penalties, including but not limited to fines and/or injunctions, in the event we violate the terms of the Final Judgment or Settlement Agreement. There can be no assurance that we will not be assessed fines or penalties or subjected to additional actions by the DOJ.

There have been no other material changes to ~~the~~our risk factors ~~included~~previously disclosed in Part I, - Item 1A of our ~~2015~~2016 Annual Report on Form 10-K.

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

On January 11, 2016, in order to satisfy a non-debt capital funding requirement with respect to SFC’s debenture, SFC issued one share of SFC common stock to SFI for $10 million. The share of SFC common stock was issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. See “Liquidity and Capital Resources - Our Debt Agreements” in Part I, Item 2 of this Quarterly Report on Form 10-Q for further information on SFC’s debentures.None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits are listed in the Exhibit Index beginning on page 8461 and incorporated by reference herein.

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.



		SPRINGLEAF FINANCE CORPORATION
		(Registrant)

Date:	~~August~~May 5, ~~2016~~2017	ByBy:	/s/ Micah R. Conrad
			Micah R. Conrad
			~~Senior~~Executive Vice President and Chief Financial Officer
			(Duly Authorized Officer and Principal Financial Officer)

Exhibit Index



Exhibit

~~4.1~~		Second Supplemental Indenture relating to Springleaf Finance Corporation’s 8.250% Senior Notes due 2020, dated as of April 11, 2016, by and among Springleaf Finance Corporation, OneMain Holdings, Inc. and Wilmington Trust, National Association, as trustee. Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 11, 2016.

~~4.2~~		Form of Springleaf Finance Corporation’s 8.250% Senior Notes due 2020 included in, and incorporated by reference to, Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 11, 2016.

~~10.1~~		OneMain Holdings, Inc. Amended and Restated 2013 Omnibus Incentive Plan, approved by stockholders on May 25, 2016. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 27, 2016.

~~18.1~~		~~Preferability Letter from PricewaterhouseCoopers LLP dated as of August 5, 2016.~~

31.1		Rule 13a-14(a)/15d-14(a) Certifications of the President and Chief Executive Officer of Springleaf Finance Corporation.

31.2		Rule 13a-14(a)/15d-14(a) Certifications of the Executive Vice President and Chief Financial Officer of Springleaf Finance Corporation.

32.1		Section 1350 Certifications.

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 Shareholder’s Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.



(dollars in millions)	As Reported			Adjustments			As Adjusted

Income (loss) before provision for (benefit from) income taxes
Year ended December 31, 2013	$	(136	)	$	11		$	(125	)
Year ended December 31, 2014	755			(77		)	678
Year ended December 31, 2015	144			15			159

Three months ended March 31, 2015	42			5			47
Three months ended March 31, 2016	304			(55		)	249

Net income (loss) attributable to SFC
Year ended December 31, 2013	$	(83	)	$	7		$	(76	)
Year ended December 31, 2014	448			(51		)	397
Year ended December 31, 2015	9			5			14

Three months ended March 31, 2015	3			2			5
Three months ended March 31, 2016	172			(36		)	136

Shareholder’s equity attributable to SFC
January 1, 2014	$	1,328		$	57		$	1,385
January 1, 2015	2,069			37			2,106
January 1, 2016	2,069			42			2,111



Three Months Ended June 30, 2015
Interest income	$	267	$	116	$	17		$	3		$	3		$	406
Interest expense	36		22		59			22			32			171
Provision for finance receivable losses	53		17		(5		)	1			7			73
Net interest income (loss) after provision for finance receivable losses	178		77		(37		)	(20		)	(36		)	162
Other revenues	55		—		3			4			(3		)	59
Other expenses	151		15		9			10			1			186
Income (loss) before provision for (benefit from) income taxes	82		62		(43		)	(26		)	(40		)	35
Income before provision for income taxes attributable to non-controlling interests	—		33		—			—			—			33
Income (loss) before provision for (benefit from) income taxes attributable to Springleaf Finance Corporation	$	82	$	29	$	(43	)	$	(26	)	$	(40	)	$	2



			Net gains (losses) included in:				Purchases, sales, issues, settlements (a)			Transfers into Level 3		Transfers out of Level 3 (b)		Balance at end of period
	Balance at beginning of period		Other revenues		Other comprehensive income (loss)
(dollars in millions)	Balance at beginning of period		Other revenues		Other comprehensive income (loss)

Three Months Ended June 30, 2016
Investment securities:
Available-for-sale securities:
Other long-term investments	$	1	$	—	$	—	$	—		$	—	$	—	$	1
Total	$	1	$	—	$	—	$	—		$	—	$	—	$	1

Three Months Ended June 30, 2015
Investment securities:
Available-for-sale securities:
Bonds:
Corporate debt	$	4	$	—	$	—	$	(4	)	$	—	$	—	$	—
Other long-term investments	1		—		—		—			—		—		1
Total	$	5	$	—	$	—	$	(4	)	$	—	$	—	$	1



Six Months Ended June 30, 2016
Investment securities:
Available-for-sale securities:
Other long-term investments	$	1	$	—	$	—	$	—		$	—	$	—		$	1
Total	$	1	$	—	$	—	$	—		$	—	$	—		$	1

Six Months Ended June 30, 2015
Investment securities:
Available-for-sale securities:
Bonds:
Corporate debt	$	4	$	—	$	—	$	(4	)	$	—	$	—		$	—
CMBS	3		—		—		—			—		(3		)	—
Total bonds	7		—		—		(4		)	—		(3		)	—
Other long-term investments	1		—		—		—			—		—			1
Total	$	8	$	—	$	—	$	(4	)	$	—	$	(3	)	$	1



	Fair Value Measurements Using *
(dollars in millions)	Level 1		Level 2		Level 3		Total

June 30, 2016
Assets
Finance receivables held for sale	$	—	$	—	$	163	$	163
Real estate owned	—		—		8		8
Commercial mortgage loans	—		—		8		8
Total	$	—	$	—	$	179	$	179

December 31, 2015
Assets
Real estate owned	$	—	$	—	$	11	$	11
Commercial mortgage loans	—		—		8		8
Total	$	—	$	—	$	19	$	19



Topic		Page

Forward-Looking Statements		5740
Overview		5942
Recent Developments and Outlook		6043
Results of Operations		6244
Segment Results		6947
Credit Quality		7350
Liquidity and Capital Resources		7454
Off-Balance Sheet Arrangements		7857
Critical Accounting Policies and Estimates		7858
Recent Accounting Pronouncements		7958
Seasonality		79
~~Key Financial Definitions~~		8058



(dollars in millions)

Three Months Ended June 30, 2016 compared to 2015
Decrease in average net receivables	$	(101	)
Decrease in yield	(6		)
Increase in interest income on finance receivables held for sale	14
Total	$	(93	)



(dollars in millions)

Three Months Ended June 30, 2016 compared to 2015
Decrease in average debt	$	(47	)
Increase in weighted average interest rate	12
Interest expense on note payable to affiliate	2
Total	$	(33	)



(dollars in millions)

Six Months Ended June 30, 2016 compared to 2015
Decrease in average net receivables	$	(109	)
Decrease in yield	(11		)
Increase in number of days in 2016	3
Increase in interest income on finance receivables held for sale	56
Total	$	(61	)