UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31,September 30, 2021
OR
☐ 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
001-36129 (OneMain Holdings, Inc.)
001-06155 (OneMain Finance Corporation)
ONEMAIN HOLDINGS, INC.
ONEMAIN FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
Delaware (OneMain Holdings, Inc.) | 27-3379612 |
Indiana (OneMain Finance Corporation) | 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)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| | | | | | | | | | | | | | |
OneMain Holdings, Inc.: |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | | OMF | | New York Stock Exchange |
OneMain Finance Corporation: None | | | | |
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.
OneMain Holdings, Inc. Yes ☑ No ☐
OneMain Finance Corporation Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
OneMain Holdings, Inc. Yes ☑ No ☐
OneMain Finance Corporation Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OneMain Holdings, Inc.: | | | | | | | |
Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
OneMain Finance Corporation: | | | | | | | |
Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☑ | Smaller reporting company | ☐ | Emerging growth 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.
OneMain Holdings, Inc. ☐
OneMain Finance Corporation ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
OneMain Holdings, Inc. Yes ☐ No ☑
OneMain Finance Corporation Yes ☐ No ☑
At April 19,October 15, 2021, there were 134,477,096131,356,199 shares of OneMain Holdings, Inc’s common stock, $0.01 par value, outstanding.
At April 19,October 15, 2021, there were 10,160,021 shares of OneMain Finance Corporation’s common stock, $0.50 par value, outstanding.
TABLE OF CONTENTS
GLOSSARY
Terms and abbreviations used in this report are defined below.
| | | | | | | | |
Term or Abbreviation | | Definition |
| | |
| | |
30-89 Delinquency ratio | | net finance receivables 30-89 days past due as a percentage of net finance receivables |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
3.875% Senior Notes due 2028 | | $600 million of 3.875% Senior Notes due 2028 issued by OMFC on August 11, 2021 and guaranteed by OMH |
ABS | | asset-backed securities |
| | |
Adjusted pretax income (loss) | | a non-GAAP financial measure used by management as a key performance measure of our segment |
AETR | | annual effective tax rate |
AHL | | American Health and Life Insurance Company, an insurance subsidiary of OneMain Financial Holdings, LLC |
| | |
| | |
Annual Report | | the Annual Report on Form 10-K of OMH and OMFC for the fiscal year ended December 31, 2020, filed with the SEC on February 9, 2021 |
AOCI | | Accumulated other comprehensive income (loss) |
Apollo | | Apollo Global Management, LLC and its consolidated subsidiaries |
Apollo-Värde Group | | an investor group led by funds managed by Apollo and Värde |
| | |
ARPA | | American Rescue Plan Act of 2021 signed into law on March 11, 2021 |
ASC | | Accounting Standards Codification |
ASU | | Accounting Standards Update |
ASU 2016-13 | | the accounting standard issued by FASB in June of 2016, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments |
Average daily debt balance | | average of debt for each day in the period |
Average net receivables | | average of monthly average net finance receivables (net finance receivables at the beginning and end of each month divided by two) in the period |
| | |
Base Indenture | | OMFC Indenture, dated as of December 3, 2014 |
CAA | | Consolidated Appropriations Act of 2021 signed into law on December 27, 2020 |
CARES Act | | Coronavirus Aid, Relief, and Economic Security Act signed into law on March 27, 2020 |
C&I | | Consumer and Insurance |
CDO | | collateralized debt obligations |
| | |
| | |
| | |
| | |
CMBS | | commercial mortgage-backed securities |
| | |
| | |
| | |
Concurrent Share Buyback | | the purchase of 1,700,000 shares of OMH common stock by OMH in accordance with a July 2021 underwriting agreement, and completed on August 3, 2021 |
COVID-19 | | the global outbreak of a novel strain of coronavirus |
| | |
| | |
| | |
| | |
| | |
| | |
Exchange Act | | Securities Exchange Act of 1934, as amended |
FASB | | Financial Accounting Standards Board |
| | |
| | |
FICO score | | a credit score created by Fair Isaac Corporation |
| | |
| | |
| | |
| | |
GAAP | | generally accepted accounting principles in the United States of America |
GAP | | guaranteed asset protection |
| | |
Gross charge-off ratio | | annualized gross charge-offs as a percentage of average net receivables |
Gross finance receivables | | the unpaid principal balance of our personal loans. For precompute loans, unpaid principal balance is the gross contractual payments less the unaccreted balance of unearned finance charges |
| | |
| | |
Guaranty AgreementsIndenture | | 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 NotesBase Indenture, together with all subsequent Supplemental Indentures |
| | |
| | |
| | |
| | |
| | |
Junior Subordinated Debenture | | $350 million aggregate principal amount of 60-year junior subordinated debt issued by OMFC under an indenture dated January 22, 2007, by and between OMFC and Deutsche Bank Trust Company, as trustee, and guaranteed by OMH |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | | | | | |
Term or Abbreviation | | Definition |
| | |
Managed receivables | | consist of our net finance receivables and finance receivables serviced for our whole loan sale partners |
Net charge-off ratio | | annualized net charge-offs as a percentage of average net receivables |
Net interest income | | interest income less interest expense |
| | |
ODART | | OneMain Direct Auto Receivables Trust |
| | |
| | |
| | |
| | |
| | |
| | |
OMFC | | OneMain Finance Corporation (formerly Springleaf Finance Corporation) |
| | | | | | | | |
Term or Abbreviation | | Definition |
| | |
OMFIT | | OneMain Financial Issuance Trust |
OMH | | OneMain Holdings, Inc. |
| | |
OneMain | | OneMain Financial Holdings, LLC, collectively with its subsidiaries |
| | |
Other securities | | primarily consist of equity securities and those securities for which the fair value option was elected. Other securities recognize unrealized gains and losses in investment revenues |
Other Notes | | collectively, the 8.25% Senior Notes due 2023, on a senior unsecured basis, and the Junior Subordinated Debenture, on a junior subordinated basis, issued by OMFC and guaranteed by OMH |
| | |
| | |
Pretax capital generation | | a non-GAAP financial measure used by management as a key performance measure of our segment, defined as adjusted pretax income (loss) excluding the change in allowance for finance receivable losses |
Recovery ratio | | annualized recoveries on net charge-offs as a percentage of average net receivables |
| | |
| | |
RMBS | | residential mortgage-backed securities |
| | |
| | |
| | |
| | |
| | |
SEC | | U.S. Securities and Exchange Commission |
Securities Act | | Securities Act of 1933, as amended |
Segment Accounting Basis | | a basis used to report the operating results of our C&I segment and our Other components, which reflects our allocation methodologies for certain costs and excludes the impact of applying purchase accounting |
| | |
| | |
Selling Stockholder | | an entity managed by affiliates of Apollo Global Management, Inc. that agreed to sell shares of OMH common stock in two secondary public offerings in July and August 2021 |
SFC | | Springleaf Finance Corporation (effective as of July 1, 2020, SFC was renamed to OMFC) |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Social Bond | | $750 million of 3.50% Senior Notes due 2027 issued by OMFC on June 22, 2021 and guaranteed by OMH |
SpringCastle Portfolio | | loans the Company previously owned and now services on behalf of a third party |
| | |
SpringleafSupplemental Indentures | | OMHcollectively, the following supplements to the Base Indenture: Third Supplemental Indenture, dated as of May 15, 2017; Fourth Supplemental Indenture, dated as of December 8, 2017; Fifth Supplemental Indenture, dated as of March 12, 2018; Sixth Supplemental Indenture, dated as of May 11, 2018; Seventh Supplemental Indenture, dated as of February 22, 2019; Eighth Supplemental Indenture, dated as of May 9, 2019; Ninth Supplemental Indenture, dated as of November 7, 2019; Tenth Supplemental Indenture, dated as of May 14, 2020; Eleventh Supplemental Indenture, dated as of December 17, 2020; Twelfth Supplemental Indenture, dated as of June 22, 2021; and its subsidiaries (other than OneMain)Thirteenth Supplemental Indenture, dated as of August 11, 2021 |
| | |
| | |
| | |
Tax Act | | Public Law 115-97 amending the Internal Revenue Code of 1986 |
TDR finance receivables | | troubled debt restructured finance receivables. Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower’s financial difficulties |
| | |
Thirteenth Supplemental Indenture | | Thirteenth Supplemental Indenture, dated as of August 11, 2021, to the Base Indenture |
Triton | | Triton Insurance Company, an insurance subsidiary of OneMain Financial Holdings, LLC |
| | |
Twelfth Supplemental Indenture | | Twelfth Supplemental Indenture, dated as of June 22, 2021, to the Base Indenture |
Underwriter | | a third party that agreed to purchase OMH common stock from the Selling Stockholder in two secondary public offerings in July and August 2021 |
Unearned finance charges | | the amount of interest that is capitalized at time of origination on a precompute loan that will be earned over the remaining contractual life of the loan |
| | |
Unsecured Notes | | the notes, on a senior unsecured basis, issued by OMFC and guaranteed by OMH |
Värde | | Värde Partners, Inc. |
| | | | | | | | |
Term or Abbreviation | | Definition |
| | |
VIEs | | variable interest entities |
| | |
Weighted average interest rate | | annualized interest expense as a percentage of average debt |
XBRL | | eXtensible Business Reporting Language |
Yield | | annualized finance charges as a percentage of average net receivables |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
PART I - FINANCIAL INFORMATION
| | |
Item 1. Financial Statements. |
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| | | | | | | | | | | | | | |
| | | | |
(dollars in millions, except par value amount) | | March 31, 2021 | | December 31, 2020 |
| | | | |
Assets | | | | |
Cash and cash equivalents | | $ | 1,301 | | | $ | 2,272 | |
Investment securities (includes available-for-sale securities with a fair value and an amortized cost basis of $1.9 billion and $1.8 billion in 2021, respectively, and $1.8 billion and $1.7 billion in 2020, respectively) | | 1,951 | | | 1,922 | |
Net finance receivables (includes loans of consolidated VIEs of $8.2 billion in 2021 and $8.8 billion in 2020) | | 17,564 | | | 18,084 | |
Unearned insurance premium and claim reserves | | (719) | | | (771) | |
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $1.0 billion in 2021 and $1.1 billion in 2020) | | (2,062) | | | (2,269) | |
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses | | 14,783 | | | 15,044 | |
| | | | |
Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $553 million in 2021 and $441 million in 2020) | | 571 | | | 451 | |
Goodwill | | 1,422 | | | 1,422 | |
Other intangible assets | | 296 | | | 306 | |
| | | | |
Other assets | | 961 | | | 1,054 | |
Total assets | | $ | 21,285 | | | $ | 22,471 | |
| | | | |
Liabilities and Shareholders’ Equity | | | | |
Long-term debt (includes debt of consolidated VIEs of $7.4 billion in 2021 and $7.8 billion in 2020) | | $ | 16,789 | | | $ | 17,800 | |
Insurance claims and policyholder liabilities | | 614 | | | 621 | |
Deferred and accrued taxes | | 90 | | | 45 | |
Other liabilities (includes other liabilities of consolidated VIEs of $14 million in 2021 and $15 million in 2020) | | 484 | | | 564 | |
Total liabilities | | 17,977 | | | 19,030 | |
Contingencies (Note 12) | | 0 | | 0 |
| | | | |
Shareholders’ equity: | | | | |
Common stock, par value $0.01 per share; 2,000,000,000 shares authorized, 134,477,096 and 134,341,724 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | | 1 | | | 1 | |
Additional paid-in capital | | 1,657 | | | 1,655 | |
Accumulated other comprehensive income | | 80 | | | 94 | |
Retained earnings | | 1,570 | | | 1,691 | |
Total shareholders’ equity | | 3,308 | | | 3,441 | |
Total liabilities and shareholders’ equity | | $ | 21,285 | | | $ | 22,471 | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(dollars in millions, except per share amounts) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Interest income | | $ | 1,060 | | | $ | 1,106 | | | | | | | |
| | | | | | | | | | |
Interest expense | | 235 | | | 255 | | | | | | | |
| | | | | | | | | | |
Net interest income | | 825 | | | 851 | | | | | | | |
| | | | | | | | | | |
Provision for finance receivable losses | | (2) | | | 531 | | | | | | | |
| | | | | | | | | | |
Net interest income after provision for finance receivable losses | | 827 | | | 320 | | | | | | | |
| | | | | | | | | | |
Other revenues: | | | | | | | | | | |
Insurance | | 107 | | | 117 | | | | | | | |
Investment | | 17 | | | 9 | | | | | | | |
Net loss on repurchases and repayments of debt | | (47) | | | 0 | | | | | | | |
| | | | | | | | | | |
Other | | 14 | | | 15 | | | | | | | |
Total other revenues | | 91 | | | 141 | | | | | | | |
| | | | | | | | | | |
Other expenses: | | | | | | | | | | |
Salaries and benefits | | 189 | | | 199 | | | | | | | |
Other operating expenses | | 150 | | | 151 | | | | | | | |
Insurance policy benefits and claims | | 33 | | | 68 | | | | | | | |
Total other expenses | | 372 | | | 418 | | | | | | | |
| | | | | | | | | | |
Income before income taxes | | 546 | | | 43 | | | | | | | |
| | | | | | | | | | |
Income taxes | | 133 | | | 11 | | | | | | | |
| | | | | | | | | | |
Net income | | $ | 413 | | | $ | 32 | | | | | | | |
| | | | | | | | | | |
Share Data: | | | | | | | | | | |
Weighted average number of shares outstanding: | | | | | | | | | | |
Basic | | 134,405,368 | | | 135,909,100 | | | | | | | |
Diluted | | 134,807,165 | | | 136,138,677 | | | | | | | |
Earnings per share: | | | | | | | | | | |
Basic | | $ | 3.07 | | | $ | 0.24 | | | | | | | |
Diluted | | $ | 3.06 | | | $ | 0.24 | | | | | | | |
| | | | | | | | | | | | | | |
| | | | |
(dollars in millions, except par value amount) | | September 30, 2021 | | December 31, 2020 |
| | | | |
Assets | | | | |
Cash and cash equivalents | | $ | 821 | | | $ | 2,272 | |
Investment securities (includes available-for-sale securities with a fair value and an amortized cost basis of $1.9 billion and $1.8 billion in 2021, respectively, and $1.8 billion and $1.7 billion in 2020, respectively) | | 1,963 | | | 1,922 | |
Net finance receivables (includes loans of consolidated VIEs of $7.7 billion in 2021 and $8.8 billion in 2020) | | 18,843 | | | 18,084 | |
Unearned insurance premium and claim reserves | | (750) | | | (771) | |
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $849 million in 2021 and $1.1 billion in 2020) | | (2,061) | | | (2,269) | |
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses | | 16,032 | | | 15,044 | |
| | | | |
Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $445 million in 2021 and $441 million in 2020) | | 459 | | | 451 | |
Goodwill | | 1,437 | | | 1,422 | |
Other intangible assets | | 278 | | | 306 | |
| | | | |
Other assets | | 973 | | | 1,054 | |
Total assets | | $ | 21,963 | | | $ | 22,471 | |
| | | | |
Liabilities and Shareholders’ Equity | | | | |
Long-term debt (includes debt of consolidated VIEs of $6.9 billion in 2021 and $7.8 billion in 2020) | | $ | 17,661 | | | $ | 17,800 | |
Insurance claims and policyholder liabilities | | 616 | | | 621 | |
Deferred and accrued taxes | | 9 | | | 45 | |
Other liabilities (includes other liabilities of consolidated VIEs of $13 million in 2021 and $15 million in 2020) | | 556 | | | 564 | |
Total liabilities | | 18,842 | | | 19,030 | |
Contingencies (Note 12) | | 0 | | 0 |
| | | | |
Shareholders’ equity: | | | | |
Common stock, par value $0.01 per share; 2,000,000,000 shares authorized, 131,453,207 and 134,341,724 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | | 1 | | | 1 | |
Additional paid-in capital | | 1,665 | | | 1,655 | |
Accumulated other comprehensive income | | 77 | | | 94 | |
Retained earnings | | 1,554 | | | 1,691 | |
Treasury stock, at cost; 3,047,844 shares at September 30, 2021 and no shares at December 31, 2020, respectively | | (176) | | | — | |
Total shareholders’ equity | | 3,121 | | | 3,441 | |
Total liabilities and shareholders’ equity | | $ | 21,963 | | | $ | 22,471 | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)Operations (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(dollars in millions, except per share amounts) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
Interest income | | $ | 1,113 | | | $ | 1,089 | | | $ | 3,244 | | | $ | 3,273 | | | |
| | | | | | | | | | |
Interest expense | | 237 | | | 255 | | | 703 | | | 781 | | | |
| | | | | | | | | | |
Net interest income | | 876 | | | 834 | | | 2,541 | | | 2,492 | | | |
| | | | | | | | | | |
Provision for finance receivable losses | | 226 | | | 231 | | | 356 | | | 1,186 | | | |
| | | | | | | | | | |
Net interest income after provision for finance receivable losses | | 650 | | | 603 | | | 2,185 | | | 1,306 | | | |
| | | | | | | | | | |
Other revenues: | | | | | | | | | | |
Insurance | | 109 | | | 109 | | | 323 | | | 334 | | | |
Investment | | 14 | | | 17 | | | 47 | | | 56 | | | |
| | | | | | | | | | |
Net loss on repurchases and repayments of debt | | (1) | | | (38) | | | (49) | | | (38) | | | |
| | | | | | | | | | |
Other | | 33 | | | 13 | | | 75 | | | 38 | | | |
Total other revenues | | 155 | | | 101 | | | 396 | | | 390 | | | |
| | | | | | | | | | |
Other expenses: | | | | | | | | | | |
Salaries and benefits | | 229 | | | 186 | | | 613 | | | 568 | | | |
Other operating expenses | | 155 | | | 134 | | | 457 | | | 425 | | | |
Insurance policy benefits and claims | | 45 | | | 43 | | | 125 | | | 201 | | | |
Total other expenses | | 429 | | | 363 | | | 1,195 | | | 1,194 | | | |
| | | | | | | | | | |
Income before income taxes | | 376 | | | 341 | | | 1,386 | | | 502 | | | |
| | | | | | | | | | |
Income taxes | | 88 | | | 91 | | | 335 | | | 131 | | | |
| | | | | | | | | | |
Net income | | $ | 288 | | | $ | 250 | | | $ | 1,051 | | | $ | 371 | | | |
| | | | | | | | | | |
Share Data: | | | | | | | | | | |
Weighted average number of shares outstanding: | | | | | | | | | | |
Basic | | 132,487,234 | | | 134,321,929 | | | 133,709,146 | | | 134,847,170 | | | |
Diluted | | 132,924,333 | | | 134,507,549 | | | 134,096,382 | | | 134,999,487 | | | |
Earnings per share: | | | | | | | | | | |
Basic | | $ | 2.17 | | | $ | 1.86 | | | $ | 7.86 | | | $ | 2.75 | | | |
Diluted | | $ | 2.17 | | | $ | 1.86 | | | $ | 7.84 | | | $ | 2.75 | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
Net income | | $ | 413 | | | $ | 32 | | | | | | | |
| | | | | | | | | | |
Other comprehensive loss: | | | | | | | | | | |
Net change in unrealized losses on non-credit impaired available-for-sale securities | | (43) | | | (55) | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | 2 | | | (10) | | | | | | | |
Other | | 23 | | | 0 | | | | | | | |
Income tax effect: | | | | | | | | | | |
Net change in unrealized losses on non-credit impaired available-for-sale securities | | 10 | | | 13 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | 0 | | | 2 | | | | | | | |
Other | | (6) | | | 0 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Other comprehensive loss, net of tax | | (14) | | | (50) | | | | | | | |
| | | | | | | | | | |
Comprehensive income (loss) | | $ | 399 | | | $ | (18) | | | | | | | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
Net income | | $ | 288 | | | $ | 250 | | | $ | 1,051 | | | $ | 371 | | | |
| | | | | | | | | | |
Other comprehensive income (loss): | | | | | | | | | | |
Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities | | (9) | | | 16 | | | (34) | | | 49 | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | (2) | | | 2 | | | 1 | | | (3) | | | |
Other | | 1 | | | — | | | 12 | | | — | | | |
Income tax effect: | | | | | | | | | | |
Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities | | 2 | | | (4) | | | 8 | | | (11) | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | — | | | — | | | — | | | 1 | | | |
Other | | — | | | — | | | (3) | | | — | | | |
Other comprehensive income (loss), net of tax, before reclassification adjustments | | (8) | | | 14 | | | (16) | | | 36 | | | |
Reclassification adjustments included in net income, net of tax: | | | | | | | | | | |
Net realized losses on available-for-sale securities, net of tax | | — | | | — | | | (1) | | | (1) | | | |
| | | | | | | | | | |
Reclassification adjustments included in net income, net of tax | | — | | | — | | | (1) | | | (1) | | | |
Other comprehensive income (loss), net of tax | | (8) | | | 14 | | | (17) | | | 35 | | | |
| | | | | | | | | | |
Comprehensive income | | $ | 280 | | | $ | 264 | | | $ | 1,034 | | | $ | 406 | | | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | OneMain Holdings, Inc. Shareholders’ Equity |
(dollars in millions) | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Treasury Stock | | Total Shareholders’ Equity |
| | | | | | | | | | | | |
Three Months Ended September 30, 2021 | | | | | | | | | | | | |
Balance, July 1, 2021 | | $ | 1 | | | $ | 1,661 | | | $ | 85 | | | $ | 1,825 | | | $ | (35) | | | $ | 3,537 | |
Common stock repurchased | | — | | | — | | | — | | | — | | | (141) | | | (141) | |
Share-based compensation expense, net of forfeitures | | — | | | 4 | | | — | | | — | | | — | | | 4 | |
| | | | | | | | | | | | |
Other comprehensive loss | | — | | | — | | | (8) | | | — | | | — | | | (8) | |
Cash dividends * | | — | | | — | | | — | | | (559) | | | — | | | (559) | |
Net income | | — | | | — | | | — | | | 288 | | | — | | | 288 | |
Balance, September 30, 2021 | | $ | 1 | | | $ | 1,665 | | | $ | 77 | | | $ | 1,554 | | | $ | (176) | | | $ | 3,121 | |
| | | | | | | | | | | | |
Three Months Ended September 30, 2020 | | | | | | | | | | | | |
Balance, July 1, 2020 | | $ | 1 | | | $ | 1,648 | | | $ | 65 | | | $ | 1,457 | | | $ | — | | | $ | 3,171 | |
| | | | | | | | | | | | |
Share-based compensation expense, net of forfeitures | | — | | | 3 | | | — | | | — | | | — | | | 3 | |
| | | | | | | | | | | | |
Other comprehensive income | | — | | | — | | | 14 | | | — | | | — | | | 14 | |
Cash dividends * | | — | | | — | | | — | | | (315) | | | — | | | (315) | |
Net income | | — | | | — | | | — | | | 250 | | | — | | | 250 | |
Balance, September 30, 2020 | | $ | 1 | | | $ | 1,651 | | | $ | 79 | | | $ | 1,392 | | | $ | — | | | $ | 3,123 | |
|
* Cash dividends declared were $4.20 per share and $2.33 per share during the three months ended September 30, 2021 and 2020, respectively. |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | OneMain Holdings, Inc. Shareholders’ Equity |
(dollars in millions) | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total Shareholders’ Equity |
| | | | | | | | | | |
| | | | | | | | | | |
Balance, January 1, 2021 | | $ | 1 | | | $ | 1,655 | | | $ | 94 | | | $ | 1,691 | | | $ | 3,441 | |
Share-based compensation expense, net of forfeitures | | — | | | 7 | | | — | | | — | | | 7 | |
Withholding tax on share-based compensation | | — | | | (5) | | | — | | | — | | | (5) | |
| | | | | | | | | | |
Other comprehensive loss | | — | | | — | | | (14) | | | — | | | (14) | |
| | | | | | | | | | |
Cash dividends (a) | | — | | | — | | | — | | | (534) | | | (534) | |
| | | | | | | | | | |
| | | | | | | | | | |
Net income | | — | | | — | | | — | | | 413 | | | 413 | |
Balance, March 31, 2021 | | $ | 1 | | | $ | 1,657 | | | $ | 80 | | | $ | 1,570 | | | $ | 3,308 | |
| | | | | | | | | | |
| | | | | | | | | | |
Balance, January 1, 2020 (pre-adoption) | | $ | 1 | | | $ | 1,689 | | | $ | 44 | | | $ | 2,596 | | | $ | 4,330 | |
Net impact of adoption of ASU 2016-13 (b) | | — | | | — | | | — | | | (828) | | | (828) | |
Balance, January 1, 2020 (post-adoption) | | 1 | | | 1,689 | | | 44 | | | 1,768 | | | 3,502 | |
Common stock repurchased and retired | | — | | | (45) | | | — | | | — | | | (45) | |
Share-based compensation expense, net of forfeitures | | — | | | 7 | | | — | | | — | | | 7 | |
Withholding tax on share-based compensation | | — | | | (6) | | | — | | | — | | | (6) | |
Other comprehensive loss | | — | | | — | | | (50) | | | — | | | (50) | |
Cash dividends (a) | | — | | | — | | | — | | | (388) | | | (388) | |
Net income | | — | | | — | | | — | | | 32 | | | 32 | |
Balance, March 31, 2020 | | $ | 1 | | | $ | 1,645 | | | $ | (6) | | | $ | 1,412 | | | $ | 3,052 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) (Continued) |
| | | | | | | | | | | | |
| | OneMain Holdings, Inc. Shareholders’ Equity |
(dollars in millions) | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Treasury Stock | | Total Shareholders’ Equity |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2021 | | | | | | | | | | | | |
Balance, January 1, 2021 | | $ | 1 | | | $ | 1,655 | | | $ | 94 | | | $ | 1,691 | | | $ | — | | | $ | 3,441 | |
Common stock repurchased | | — | | | — | | | — | | | — | | | (176) | | | (176) | |
Share-based compensation expense, net of forfeitures | | — | | | 16 | | | — | | | — | | | — | | | 16 | |
Withholding tax on share-based compensation | | — | | | (6) | | | — | | | — | | | — | | | (6) | |
Other comprehensive loss | | — | | | — | | | (17) | | | — | | | — | | | (17) | |
Cash dividends (a) | | — | | | — | | | — | | | (1,188) | | | — | | | (1,188) | |
Net income | | — | | | — | | | — | | | 1,051 | | | — | | | 1,051 | |
Balance, September 30, 2021 | | $ | 1 | | | $ | 1,665 | | | $ | 77 | | | $ | 1,554 | | | $ | (176) | | | $ | 3,121 | |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2020 | | | | | | | | | | | | |
Balance, January 1, 2020 (pre-adoption) | | $ | 1 | | | $ | 1,689 | | | $ | 44 | | | $ | 2,596 | | | $ | — | | | $ | 4,330 | |
Net impact of adoption of ASU 2016-13 (b) | | — | | | — | | | — | | | (828) | | | — | | | (828) | |
Balance, January 1, 2020 (post-adoption) | | 1 | | | 1,689 | | | 44 | | | 1,768 | | | — | | | 3,502 | |
Common stock repurchased (c) | | — | | | (45) | | | — | | | — | | | — | | | (45) | |
Share-based compensation expense, net of forfeitures | | — | | | 13 | | | — | | | — | | | — | | | 13 | |
Withholding tax on share-based compensation | | — | | | (6) | | | — | | | — | | | — | | | (6) | |
Other comprehensive income | | — | | | — | | | 35 | | | — | | | — | | | 35 | |
Cash dividends (a) | | — | | | — | | | — | | | (747) | | | — | | | (747) | |
Net income | | — | | | — | | | — | | | 371 | | | — | | | 371 | |
Balance, September 30, 2020 | | $ | 1 | | | $ | 1,651 | | | $ | 79 | | | $ | 1,392 | | | $ | — | | | $ | 3,123 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
(a) Cash dividends declared were $3.95$8.85 per share and $2.83$5.49 per share during the threenine months ended March 31,September 30, 2021 and 2020, respectively.
(b) As a result of the adoption of ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, on January 1, 2020, we recorded a one-time cumulative reduction to retained earnings, net of tax. See Note 4 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for additional information on the adoption of ASU 2016-13.
(c) The common stock repurchased was retired during the nine months ended September 30, 2020.
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| | | | | | | | | | | | | | | | |
| | | | | | |
| | Three Months Ended March 31, | | |
(dollars in millions) | | 2021 | | 2020 | | |
| | | | | | |
Cash flows from operating activities | | | | | | |
Net income | | $ | 413 | | | $ | 32 | | | |
Reconciling adjustments: | | | | | | |
Provision for finance receivable losses | | (2) | | | 531 | | | |
Depreciation and amortization | | 61 | | | 64 | | | |
Deferred income tax charge (benefit) | | 59 | | | (36) | | | |
Net loss on repurchases and repayments of debt | | 47 | | | 0 | | | |
| | | | | | |
Share-based compensation expense, net of forfeitures | | 7 | | | 7 | | | |
Other | | (6) | | | 12 | | | |
Cash flows due to changes in other assets and other liabilities | | (23) | | | (45) | | | |
Net cash provided by operating activities | | 556 | | | 565 | | | |
| | | | | | |
Cash flows from investing activities | | | | | | |
Net principal collections (originations) of finance receivables | | 217 | | | (188) | | | |
| | | | | | |
| | | | | | |
Available-for-sale securities purchased | | (146) | | | (132) | | | |
Available-for-sale securities called, sold, and matured | | 91 | | | 128 | | | |
Other securities purchased | | (688) | | | (4) | | | |
Other securities called, sold, and matured | | 681 | | | 6 | | | |
Other, net | | 43 | | | (6) | | | |
Net cash provided by (used for) investing activities | | 198 | | | (196) | | | |
| | | | | | |
Cash flows from financing activities | | | | | | |
Proceeds (expenses) from issuance of long-term debt, net of issuance costs | | (1) | | | 3,547 | | | |
Repayment of long-term debt | | (1,065) | | | (332) | | | |
Cash dividends | | (534) | | | (387) | | | |
Common stock repurchased and retired | | 0 | | | (45) | | | |
Withholding tax on share-based compensation | | (5) | | | (6) | | | |
Net cash provided by (used for) financing activities | | (1,605) | | | 2,777 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Net change in cash and cash equivalents and restricted cash and restricted cash equivalents | | (851) | | | 3,146 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period | | 2,723 | | | 1,632 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period | | $ | 1,872 | | | $ | 4,778 | | | |
| | | | | | |
Supplemental cash flow information | | | | | | |
Cash and cash equivalents | | $ | 1,301 | | | $ | 4,203 | | | |
Restricted cash and restricted cash equivalents | | 571 | | | 575 | | | |
Total cash and cash equivalents and restricted cash and restricted cash equivalents | | $ | 1,872 | | | $ | 4,778 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | |
| | Nine Months Ended September 30, | | |
(dollars in millions) | | 2021 | | 2020 | | |
| | | | | | |
Cash flows from operating activities | | | | | | |
Net income | | $ | 1,051 | | | $ | 371 | | | |
Reconciling adjustments: | | | | | | |
Provision for finance receivable losses | | 356 | | | 1,186 | | | |
Depreciation and amortization | | 197 | | | 196 | | | |
Deferred income tax charge (benefit) | | 57 | | | (72) | | | |
Net loss on repurchases and repayments of debt | | 49 | | | 38 | | | |
Share-based compensation expense, net of forfeitures | | 16 | | | 13 | | | |
| | | | | | |
Other | | (34) | | | 5 | | | |
Cash flows due to changes in other assets and other liabilities | | (53) | | | (108) | | | |
Net cash provided by operating activities | | 1,639 | | | 1,629 | | | |
| | | | | | |
Cash flows from investing activities | | | | | | |
Net principal originations of finance receivables | | (1,738) | | | (278) | | | |
| | | | | | |
Proceeds from sales of finance receivables | | 361 | | | — | | | |
Available-for-sale securities purchased | | (347) | | | (341) | | | |
Available-for-sale securities called, sold, and matured | | 294 | | | 383 | | | |
Other securities purchased | | (706) | | | (11) | | | |
Other securities called, sold, and matured | | 691 | | | 11 | | | |
Other, net | | (54) | | | (21) | | | |
Net cash used for investing activities | | (1,499) | | | (257) | | | |
| | | | | | |
Cash flows from financing activities | | | | | | |
Proceeds from issuance of long-term debt, net of issuance costs | | 2,168 | | | 6,445 | | | |
Repayment of long-term debt | | (2,384) | | | (6,212) | | | |
Cash dividends | | (1,185) | | | (745) | | | |
Common stock repurchased | | (176) | | | (45) | | | |
Withholding tax on share-based compensation | | (6) | | | (6) | | | |
Net cash used for financing activities | | (1,583) | | | (563) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Net change in cash and cash equivalents and restricted cash and restricted cash equivalents | | (1,443) | | | 809 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period | | 2,723 | | | 1,632 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period | | $ | 1,280 | | | $ | 2,441 | | | |
| | | | | | |
Supplemental cash flow information | | | | | | |
Cash and cash equivalents | | $ | 821 | | | $ | 1,944 | | | |
Restricted cash and restricted cash equivalents | | 459 | | | 497 | | | |
Total cash and cash equivalents and restricted cash and restricted cash equivalents | | $ | 1,280 | | | $ | 2,441 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Restricted cash and restricted cash equivalents primarily represent funds required to be used for future debt payments relating to our securitization transactions.
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| | | | | | | | | | | | | | |
| | | | |
(dollars in millions, except par value amount) | | March 31, 2021 | | December 31, 2020 |
| | | | |
Assets | | | | |
Cash and cash equivalents | | $ | 1,301 | | | $ | 2,272 | |
Investment securities (includes available-for-sale securities with a fair value and an amortized cost basis of $1.9 billion and $1.8 billion in 2021, respectively, and $1.8 billion and $1.7 billion in 2020, respectively) | | 1,951 | | | 1,922 | |
Net finance receivables (includes loans of consolidated VIEs of $8.2 billion in 2021 and $8.8 billion in 2020) | | 17,564 | | | 18,084 | |
Unearned insurance premium and claim reserves | | (719) | | | (771) | |
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $1.0 billion in 2021 and $1.1 billion in 2020) | | (2,062) | | | (2,269) | |
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses | | 14,783 | | | 15,044 | |
| | | | |
| | | | |
Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $553 million in 2021 and $441 million in 2020) | | 571 | | | 451 | |
Goodwill | | 1,422 | | | 1,422 | |
Other intangible assets | | 296 | | | 306 | |
| | | | |
Other assets | | 961 | | | 1,054 | |
Total assets | | $ | 21,285 | | | $ | 22,471 | |
| | | | |
Liabilities and Shareholder's Equity | | | | |
Long-term debt (includes debt of consolidated VIEs of $7.4 billion in 2021 and $7.8 billion in 2020) | | $ | 16,789 | | | $ | 17,800 | |
Insurance claims and policyholder liabilities | | 614 | | | 621 | |
Deferred and accrued taxes | | 92 | | | 47 | |
Other liabilities (includes other liabilities of consolidated VIEs of $14 million in 2021 and $15 million in 2020) | | 484 | | | 563 | |
Total liabilities | | 17,979 | | | 19,031 | |
Contingencies (Note 12) | | 0 | | 0 |
| | | | |
Shareholder's equity: | | | | |
Common stock, par value $0.50 per share; 25,000,000 shares authorized, 10,160,021 shares issued and outstanding at March 31, 2021 and December 31, 2020 | | 5 | | | 5 | |
Additional paid-in capital | | 1,901 | | | 1,899 | |
Accumulated other comprehensive income | | 80 | | | 94 | |
Retained earnings | | 1,320 | | | 1,442 | |
Total shareholder's equity | | 3,306 | | | 3,440 | |
Total liabilities and shareholder's equity | | $ | 21,285 | | | $ | 22,471 | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Interest income | | $ | 1,060 | | | $ | 1,106 | | | | | | | |
| | | | | | | | | | |
Interest expense | | 235 | | | 255 | | | | | | | |
| | | | | | | | | | |
Net interest income | | 825 | | | 851 | | | | | | | |
| | | | | | | | | | |
Provision for finance receivable losses | | (2) | | | 531 | | | | | | | |
| | | | | | | | | | |
Net interest income after provision for finance receivable losses | | 827 | | | 320 | | | | | | | |
| | | | | | | | | | |
Other revenues: | | | | | | | | | | |
Insurance | | 107 | | | 117 | | | | | | | |
Investment | | 17 | | | 9 | | | | | | | |
| | | | | | | | | | |
Net loss on repurchases and repayments of debt | | (47) | | | 0 | | | | | | | |
| | | | | | | | | | |
Other | | 14 | | | 15 | | | | | | | |
Total other revenues | | 91 | | | 141 | | | | | | | |
| | | | | | | | | | |
Other expenses: | | | | | | | | | | |
Salaries and benefits | | 189 | | | 199 | | | | | | | |
Other operating expenses | | 150 | | | 151 | | | | | | | |
Insurance policy benefits and claims | | 33 | | | 68 | | | | | | | |
Total other expenses | | 372 | | | 418 | | | | | | | |
| | | | | | | | | | |
Income before income taxes | | 546 | | | 43 | | | | | | | |
| | | | | | | | | | |
Income taxes | | 133 | | | 11 | | | | | | | |
| | | | | | | | | | |
Net income | | $ | 413 | | | $ | 32 | | | | | | | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
Net income | | $ | 413 | | | $ | 32 | | | | | | | |
| | | | | | | | | | |
Other comprehensive loss: | | | | | | | | | | |
Net change in unrealized losses on non-credit impaired available-for-sale securities | | (43) | | | (55) | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | 2 | | | (10) | | | | | | | |
| | | | | | | | | | |
Other | | 23 | | | 0 | | | | | | | |
Income tax effect: | | | | | | | | | | |
Net change in unrealized losses on non-credit impaired available-for-sale securities | | 10 | | | 13 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | 0 | | | 2 | | | | | | | |
Other | | (6) | | | 0 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Other comprehensive loss, net of tax | | (14) | | | (50) | | | | | | | |
| | | | | | | | | | |
Comprehensive income (loss) | | $ | 399 | | | $ | (18) | | | | | | | |
| | | | | | | | | | | | | | |
| | | | |
(dollars in millions, except par value amount) | | September 30, 2021 | | December 31, 2020 |
| | | | |
Assets | | | | |
Cash and cash equivalents | | $ | 798 | | | $ | 2,272 | |
Investment securities (includes available-for-sale securities with a fair value and an amortized cost basis of $1.9 billion and $1.8 billion in 2021, respectively, and $1.8 billion and $1.7 billion in 2020, respectively) | | 1,963 | | | 1,922 | |
Net finance receivables (includes loans of consolidated VIEs of $7.7 billion in 2021 and $8.8 billion in 2020) | | 18,843 | | | 18,084 | |
Unearned insurance premium and claim reserves | | (750) | | | (771) | |
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $849 million in 2021 and $1.1 billion in 2020) | | (2,061) | | | (2,269) | |
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses | | 16,032 | | | 15,044 | |
| | | | |
| | | | |
Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $445 million in 2021 and $441 million in 2020) | | 459 | | | 451 | |
Goodwill | | 1,437 | | | 1,422 | |
Other intangible assets | | 278 | | | 306 | |
| | | | |
Other assets | | 972 | | | 1,054 | |
Total assets | | $ | 21,939 | | | $ | 22,471 | |
| | | | |
Liabilities and Shareholder's Equity | | | | |
Long-term debt (includes debt of consolidated VIEs of $6.9 billion in 2021 and $7.8 billion in 2020) | | $ | 17,661 | | | $ | 17,800 | |
Insurance claims and policyholder liabilities | | 616 | | | 621 | |
Deferred and accrued taxes | | 10 | | | 47 | |
Other liabilities (includes other liabilities of consolidated VIEs of $13 million in 2021 and $15 million in 2020) | | 556 | | | 563 | |
Total liabilities | | 18,843 | | | 19,031 | |
Contingencies (Note 12) | | 0 | | 0 |
| | | | |
Shareholder's equity: | | | | |
Common stock, par value $0.50 per share; 25,000,000 shares authorized, 10,160,021 shares issued and outstanding at September 30, 2021 and December 31, 2020 | | 5 | | | 5 | |
Additional paid-in capital | | 1,909 | | | 1,899 | |
Accumulated other comprehensive income | | 77 | | | 94 | |
Retained earnings | | 1,105 | | | 1,442 | |
| | | | |
Total shareholder's equity | | 3,096 | | | 3,440 | |
Total liabilities and shareholder's equity | | $ | 21,939 | | | $ | 22,471 | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Interest income | | $ | 1,113 | | | $ | 1,089 | | | $ | 3,244 | | | $ | 3,273 | | | |
| | | | | | | | | | |
Interest expense | | 237 | | | 255 | | | 703 | | | 781 | | | |
| | | | | | | | | | |
Net interest income | | 876 | | | 834 | | | 2,541 | | | 2,492 | | | |
| | | | | | | | | | |
Provision for finance receivable losses | | 226 | | | 231 | | | 356 | | | 1,186 | | | |
| | | | | | | | | | |
Net interest income after provision for finance receivable losses | | 650 | | | 603 | | | 2,185 | | | 1,306 | | | |
| | | | | | | | | | |
Other revenues: | | | | | | | | | | |
Insurance | | 109 | | | 109 | | | 323 | | | 334 | | | |
Investment | | 14 | | | 17 | | | 47 | | | 56 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net loss on repurchases and repayments of debt | | (1) | | | (38) | | | (49) | | | (38) | | | |
| | | | | | | | | | |
Other | | 33 | | | 13 | | | 75 | | | 38 | | | |
Total other revenues | | 155 | | | 101 | | | 396 | | | 390 | | | |
| | | | | | | | | | |
Other expenses: | | | | | | | | | | |
Salaries and benefits | | 229 | | | 186 | | | 613 | | | 568 | | | |
Other operating expenses | | 155 | | | 134 | | | 457 | | | 425 | | | |
Insurance policy benefits and claims | | 45 | | | 43 | | | 125 | | | 201 | | | |
Total other expenses | | 429 | | | 363 | | | 1,195 | | | 1,194 | | | |
| | | | | | | | | | |
Income before income taxes | | 376 | | | 341 | | | 1,386 | | | 502 | | | |
| | | | | | | | | | |
Income taxes | | 88 | | | 91 | | | 335 | | | 131 | | | |
| | | | | | | | | | |
Net income | | $ | 288 | | | $ | 250 | | | $ | 1,051 | | | $ | 371 | | | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
Net income | | $ | 288 | | | $ | 250 | | | $ | 1,051 | | | $ | 371 | | | |
| | | | | | | | | | |
Other comprehensive income (loss): | | | | | | | | | | |
Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities | | (9) | | | 16 | | | (34) | | | 49 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | (2) | | | 2 | | | 1 | | | (3) | | | |
| | | | | | | | | | |
Other | | 1 | | | — | | | 12 | | | — | | | |
Income tax effect: | | | | | | | | | | |
Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities | | 2 | | | (4) | | | 8 | | | (11) | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation adjustments | | — | | | — | | | — | | | 1 | | | |
Other | | — | | | — | | | (3) | | | — | | | |
Other comprehensive income (loss), net of tax, before reclassification adjustments | | (8) | | | 14 | | | (16) | | | 36 | | | |
Reclassification adjustments included in net income, net of tax: | | | | | | | | | | |
Net realized losses on available-for-sale securities, net of tax | | — | | | — | | | (1) | | | (1) | | | |
Reclassification adjustments included in net income, net of tax | | — | | | — | | | (1) | | | (1) | | | |
Other comprehensive income (loss), net of tax | | (8) | | | 14 | | | (17) | | | 35 | | | |
| | | | | | | | | | |
Comprehensive income | | $ | 280 | | | $ | 264 | | | $ | 1,034 | | | $ | 406 | | | |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholder's Equity (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | OneMain Finance Corporation Shareholder's Equity |
(dollars in millions) | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | | | Total Shareholder’s Equity |
| | | | | | | | | | | | |
Three Months Ended September 30, 2021 | | | | | | | | | | | | |
Balance, July 1, 2021 | | $ | 5 | | | $ | 1,905 | | | $ | 85 | | | $ | 1,535 | | | | | $ | 3,530 | |
| | | | | | | | | | | | |
Share-based compensation expense, net of forfeitures | | — | | | 4 | | | — | | | — | | | | | 4 | |
| | | | | | | | | | | | |
Other comprehensive loss | | — | | | — | | | (8) | | | — | | | | | (8) | |
Cash dividends | | — | | | — | | | — | | | (718) | | | | | (718) | |
Net income | | — | | | — | | | — | | | 288 | | | | | 288 | |
Balance, September 30, 2021 | | $ | 5 | | | $ | 1,909 | | | $ | 77 | | | $ | 1,105 | | | | | $ | 3,096 | |
| | | | | | | | | | | | |
Three Months Ended September 30, 2020 | | | | | | | | | | | | |
Balance, July 1, 2020 | | $ | 5 | | | $ | 1,892 | | | $ | 65 | | | $ | 1,208 | | | | | $ | 3,170 | |
| | | | | | | | | | | | |
Share-based compensation expense, net of forfeitures | | — | | | 3 | | | — | | | — | | | | | 3 | |
| | | | | | | | | | | | |
Other comprehensive income | | — | | | — | | | 14 | | | — | | | | | 14 | |
Cash dividends | | — | | | — | | | — | | | (315) | | | | | (315) | |
Net income | | — | | | — | | | — | | | 250 | | | | | 250 | |
Balance, September 30, 2020 | | $ | 5 | | | $ | 1,895 | | | $ | 79 | | | $ | 1,143 | | | | | $ | 3,122 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | OneMain Finance Corporation Shareholder's Equity |
(dollars in millions) | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total Shareholder’s Equity |
| | | | | | | | | | |
| | | | | | | | | | |
Balance, January 1, 2021 | | $ | 5 | | | $ | 1,899 | | | $ | 94 | | | $ | 1,442 | | | $ | 3,440 | |
| | | | | | | | | | |
| | | | | | | | | | |
Share-based compensation expense, net of forfeitures | | — | | | 7 | | | — | | | — | | | 7 | |
Withholding tax on share-based compensation | | — | | | (5) | | | — | | | — | | | (5) | |
| | | | | | | | | | |
Other comprehensive loss | | — | | | — | | | (14) | | | — | | | (14) | |
Cash dividends | | — | | | — | | | — | | | (535) | | | (535) | |
| | | | | | | | | | |
| | | | | | | | | | |
Net income | | — | | | — | | | — | | | 413 | | | 413 | |
Balance, March 31, 2021 | | $ | 5 | | | $ | 1,901 | | | $ | 80 | | | $ | 1,320 | | | $ | 3,306 | |
| | | | | | | | | | |
| | | | | | | | | | |
Balance, January 1, 2020 (pre-adoption) | | $ | 5 | | | $ | 1,888 | | | $ | 44 | | | $ | 2,388 | | | $ | 4,325 | |
Net impact of adoption of ASU 2016-13 * | | — | | | — | | | — | | | (828) | | | (828) | |
Balance, January 1, 2020 (post-adoption) | | 5 | | | 1,888 | | | 44 | | | 1,560 | | | 3,497 | |
Share-based compensation expense, net of forfeitures | | — | | | 7 | | | — | | | — | | | 7 | |
Withholding tax on share-based compensation | | — | | | (6) | | | — | | | — | | | (6) | |
Other comprehensive loss | | — | | | — | | | (50) | | | — | | | (50) | |
| | | | | | | | | | |
| | | | | | | | | | |
Cash dividends | | — | | | — | | | — | | | (433) | | | (433) | |
Net income | | — | | | — | | | — | | | 32 | | | 32 | |
Balance, March 31, 2020 | | $ | 5 | | | $ | 1,889 | | | $ | (6) | | | $ | 1,159 | | | $ | 3,047 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES |
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) (Continued) |
| | | | | | | | | | | | |
| | OneMain Finance Corporation Shareholder's Equity |
(dollars in millions) | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | | | Total Shareholders’ Equity |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2021 | | | | | | | | | | | | |
Balance, January 1, 2021 | | $ | 5 | | | $ | 1,899 | | | $ | 94 | | | $ | 1,442 | | | | | $ | 3,440 | |
| | | | | | | | | | | | |
Share-based compensation expense, net of forfeitures | | — | | | 16 | | | — | | | — | | | | | 16 | |
Withholding tax on share-based compensation | | — | | | (6) | | | — | | | — | | | | | (6) | |
Other comprehensive loss | | — | | | — | | | (17) | | | — | | | | | (17) | |
Cash dividends | | — | | | — | | | — | | | (1,388) | | | | | (1,388) | |
Net income | | — | | | — | | | — | | | 1,051 | | | | | 1,051 | |
Balance, September 30, 2021 | | $ | 5 | | | $ | 1,909 | | | $ | 77 | | | $ | 1,105 | | | | | $ | 3,096 | |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2020 | | | | | | | | | | | | |
Balance, January 1, 2020 (pre-adoption) | | $ | 5 | | | $ | 1,888 | | | $ | 44 | | | $ | 2,388 | | | | | $ | 4,325 | |
Net impact of adoption of ASU 2016-13 * | | — | | | — | | | — | | | (828) | | | | | (828) | |
Balance, January 1, 2020 (post-adoption) | | 5 | | | 1,888 | | | 44 | | | 1,560 | | | | | 3,497 | |
| | | | | | | | | | | | |
Share-based compensation expense, net of forfeitures | | — | | | 13 | | | — | | | — | | | | | 13 | |
Withholding tax on shared-based compensation | | — | | | (6) | | | — | | | — | | | | | (6) | |
Other comprehensive income | | — | | | — | | | 35 | | | — | | | | | 35 | |
Cash dividends | | — | | | — | | | — | | | (788) | | | | | (788) | |
Net income | | — | | | — | | | — | | | 371 | | | | | 371 | |
Balance, September 30, 2020 | | $ | 5 | | | $ | 1,895 | | | $ | 79 | | | $ | 1,143 | | | | | $ | 3,122 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
* As a result of the adoption of ASU 2016-13, on January 1, 2020, we recorded a one-time cumulative reduction to retained earnings, net of tax. See Note 4 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for additional information on the adoption of ASU 2016-13.
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| | | | | | | | | | | | | | | | |
| | | | | | |
| | Three Months Ended March 31, | | |
(dollars in millions) | | 2021 | | 2020 | | |
| | | | | | |
Cash flows from operating activities | | | | | | |
Net income | | $ | 413 | | | $ | 32 | | | |
Reconciling adjustments: | | | | | | |
Provision for finance receivable losses | | (2) | | | 531 | | | |
Depreciation and amortization | | 61 | | | 64 | | | |
Deferred income tax charge (benefit) | | 59 | | | (36) | | | |
Net loss on repurchases and repayments of debt | | 47 | | | 0 | | | |
| | | | | | |
Share-based compensation expense, net of forfeitures | | 7 | | | 7 | | | |
Other | | (6) | | | 12 | | | |
Cash flows due to changes in other assets and other liabilities | | (23) | | | (45) | | | |
Net cash provided by operating activities | | 556 | | | 565 | | | |
| | | | | | |
Cash flows from investing activities | | | | | | |
Net principal collections (originations) of finance receivables | | 217 | | | (188) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Available-for-sale securities purchased | | (146) | | | (132) | | | |
Available-for-sale securities called, sold, and matured | | 91 | | | 128 | | | |
Other securities purchased | | (688) | | | (4) | | | |
Other securities called, sold, and matured | | 681 | | | 6 | | | |
Other, net | | 43 | | | (6) | | | |
Net cash provided by (used for) investing activities | | 198 | | | (196) | | | |
| | | | | | |
Cash flows from financing activities | | | | | | |
Proceeds (expenses) from issuance of long-term debt, net of issuance costs | | (1) | | | 3,547 | | | |
Repayment of long-term debt | | (1,065) | | | (332) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Cash dividends | | (534) | | | (432) | | | |
| | | | | | |
Withholding tax on share-based compensation | | (5) | | | (6) | | | |
Net cash provided by (used for) financing activities | | (1,605) | | | 2,777 | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
Net change in cash and cash equivalents and restricted cash and restricted cash equivalents | | (851) | | | 3,146 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period | | 2,723 | | | 1,632 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period | | $ | 1,872 | | | $ | 4,778 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
Supplemental cash flow information | | | | | | |
Cash and cash equivalents | | $ | 1,301 | | | $ | 4,203 | | | |
Restricted cash and restricted cash equivalents | | 571 | | | 575 | | | |
Total cash and cash equivalents and restricted cash and restricted cash equivalents | | $ | 1,872 | | | $ | 4,778 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | |
| | Nine Months Ended September 30, | | |
(dollars in millions) | | 2021 | | 2020 | | |
| | | | | | |
Cash flows from operating activities | | | | | | |
Net income | | $ | 1,051 | | | $ | 371 | | | |
Reconciling adjustments: | | | | | | |
Provision for finance receivable losses | | 356 | | | 1,186 | | | |
Depreciation and amortization | | 197 | | | 196 | | | |
Deferred income tax charge (benefit) | | 57 | | | (72) | | | |
Net loss on repurchases and repayments of debt | | 49 | | | 38 | | | |
Share-based compensation expense, net of forfeitures | | 16 | | | 13 | | | |
| | | | | | |
Other | | (34) | | | 5 | | | |
Cash flows due to changes in other assets and other liabilities | | (50) | | | (112) | | | |
Net cash provided by operating activities | | 1,642 | | | 1,625 | | | |
| | | | | | |
Cash flows from investing activities | | | | | | |
Net principal originations of finance receivables | | (1,738) | | | (278) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Proceeds from sales of finance receivables | | 361 | | | — | | | |
Available-for-sale securities purchased | | (347) | | | (341) | | | |
Available-for-sale securities called, sold, and matured | | 294 | | | 383 | | | |
Other securities purchased | | (706) | | | (11) | | | |
Other securities called, sold, and matured | | 691 | | | 11 | | | |
Other, net | | (53) | | | (21) | | | |
Net cash used for investing activities | | (1,498) | | | (257) | | | |
| | | | | | |
Cash flows from financing activities | | | | | | |
Proceeds from issuance of long-term debt, net of issuance costs | | 2,168 | | | 6,445 | | | |
Repayment of long-term debt | | (2,384) | | | (6,212) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Cash dividends | | (1,388) | | | (786) | | | |
| | | | | | |
Withholding tax on share-based compensation | | (6) | | | (6) | | | |
Net cash used for financing activities | | (1,610) | | | (559) | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
Net change in cash and cash equivalents and restricted cash and restricted cash equivalents | | (1,466) | | | 809 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period | | 2,723 | | | 1,632 | | | |
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period | | $ | 1,257 | | | $ | 2,441 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
Supplemental cash flow information | | | | | | |
Cash and cash equivalents | | $ | 798 | | | $ | 1,944 | | | |
Restricted cash and restricted cash equivalents | | 459 | | | 497 | | | |
Total cash and cash equivalents and restricted cash and restricted cash equivalents | | $ | 1,257 | | | $ | 2,441 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Restricted cash and restricted cash equivalents primarily represent funds required to be used for future debt payments relating to our securitization transactions.
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
March 31,September 30, 2021
| | |
1. Business and Basis of Operations |
OneMain Holdings, Inc. (“OMH”), and its wholly-owned direct subsidiary, OneMain Finance Corporation (“OMFC”) (formerly known as Springleaf Finance Corporation (“SFC”)) are financial services holding companies whose subsidiaries engage in the consumer finance and insurance businesses.
Effective July 1, 2020, SFC was renamed to OMFC. The name change did not affect OMFC’s legal entity structure, nor did it have an impact on OMH’s or OMFC’s financial statements. OMFC is used in this report to include references to transactions and arrangements occurring prior to the name change.
The results of OMFC are consolidated into the results of OMH. Due to the nominal differences between OMFC and OMH, content throughout this filing relates to both OMH and OMFC.OMFC, except where otherwise indicated. OMH and OMFC are referred to in this report, collectively with their subsidiaries, whether directly or indirectly owned, as “the Company,” “we,” “us,” or “our.” The information in this Quarterly Report on Form 10-Q is equally applicable to OMH and OMFC, except where otherwise indicated.
At March 31,September 30, 2021, the Apollo-Värde Group owned approximately 34.0%13.4% of OMH’s common stock.
BASIS OF PRESENTATION
We prepared our condensed consolidated financial statements using generally accepted accounting principles in the United States of America (“GAAP”). These statements are unaudited. The year-end condensed balance sheet data was derived from our audited financial statements but does not include all disclosures required by GAAP. The statements include the accounts of OMH, its subsidiaries (all of which are wholly-owned), and variable interest entities (“VIEs”) in which we hold a controlling financial interest and for which we are considered to be the primary beneficiary as of the financial statement date.
We eliminated all material intercompany accounts and transactions. We made judgments, estimates, and assumptions that affect amounts reported in our condensed consolidated financial statements and disclosures of contingent assets and liabilities. In management’s opinion, the condensed consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of results. Actual results could differ from our estimates. We evaluated the effects of and the need to disclose events that occurred subsequent to the balance sheet date.
The condensed consolidated financial statements in this report should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report. We follow the same significant accounting policies for our interim reporting.
| | |
2. Recent Accounting Pronouncements |
ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED
Insurance
In August of 2018, the FASB issued ASU 2018-12, Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, which provides targeted improvements to Topic 944 for the assumptions used to measure the liability for future policy benefits for nonparticipating traditional and limited-payment contracts; measurement of market risk benefits; amortization of deferred acquisition costs; and enhanced disclosures. The amendments in this ASU become effective for the Company beginning January 1, 2023, as a result of the FASB issuing a one-year deferral of this ASU for public companies.2023.
We have a cross-functional implementation team and a project plan to ensure we comply with all the amendments in this ASU at the time of adoption. We have selected a vendor for a software solution to meet the new accounting and disclosure requirements of the ASU and continue to make progress in evaluating the potential impact of the adoption of the ASU on our consolidated financial statements.
We do not believe that any other accounting pronouncements issued, but not yet effective, would have a material impact on our consolidated financial statements or disclosures, if adopted.
Our finance receivables consist of personal loans, which are non-revolving, with a fixed-rate,fixed rate, fixed terms generally between three and six years, and are secured by automobiles, other titled collateral, or are unsecured.
Components of our net finance receivables were as follows:
| | | | | | | | | | | | | | |
(dollars in millions) | | March 31, 2021 | | December 31, 2020 |
| | | | |
| | | | |
| | | | |
Gross finance receivables * | | $ | 17,363 | | | $ | 17,860 | |
Unearned points and fees | | (210) | | | (225) | |
Accrued finance charges | | 268 | | | 299 | |
Deferred origination costs | | 143 | | | 150 | |
Total | | $ | 17,564 | | | $ | 18,084 | |
| | | | | | | | | | | | | | |
(dollars in millions) | | September 30, 2021 | | December 31, 2020 |
| | | | |
| | | | |
| | | | |
Gross finance receivables * | | $ | 18,610 | | | $ | 17,860 | |
Unearned points and fees | | (226) | | | (225) | |
Accrued finance charges | | 282 | | | 299 | |
Deferred origination costs | | 177 | | | 150 | |
Total | | $ | 18,843 | | | $ | 18,084 | |
* Gross finance receivables equal the unpaid principal balance of our personal loans. For precompute loans, unpaid principal balance is the gross contractual payments less the unaccreted balance of unearned finance charges.
WHOLE LOAN SALE TRANSACTIONS
As of September 30, 2021, we have whole loan sale flow agreements, with remaining terms ranging between one to two years, with third-party buyers in which we agreed to sell a combined total of $180 million gross receivables per quarter of newly originated unsecured personal loans along with any associated accrued interest. These unsecured personal loans are sold to unconsolidated VIEs and are derecognized from our balance sheet at the time of sale. We service the personal loans sold and are entitled to a servicing fee and other fees commensurate with the services performed as part of the agreements. The gain on sales and servicing fees are recorded in other revenue. Our first sale was executed in the first quarter of 2021. During the three and nine months ended September 30, 2021, we sold $160 million and $325 million of gross finance receivables, respectively. The gain on the sales were $15 million and $30 million during the three and nine months ended September 30, 2021, respectively.
CREDIT QUALITY INDICATOR
We consider the delinquency status of our finance receivables as our key credit quality indicator. We monitor the delinquency of our finance receivable portfolio, including the migration between the delinquency buckets and changes in the delinquency trends to manage our exposure to credit risk in the portfolio. When finance receivables are 60 days contractually past due, we consider these accounts to be at an increased risk for loss and we transfer collection of these accounts to our centralized operations.
At 90 days or more contractually past due, we consider our finance receivables to be nonperforming. We stop accruing finance charges and reverse finance charges previously accrued on nonperforming loans. We reversed net accrued finance charges of $20$18 million and $28$52 million during the three and nine months ended March 31,September 30, 2021, respectively, and $16 million and $66 million during the three and nine months ended September 30, 2020, respectively. Finance charges recognized from the contractual interest portion of payments received on nonaccrual finance receivables totaled $4$2 million and $10 million during the three and nine months ended March 31,September 30, 2021, respectively, and 2020.$3 million and $12 million during the three and nine months ended September 30, 2020, respectively. All loans in nonaccrual status are considered in our estimate of allowance for finance receivable losses.
The following tables below are a summary of our finance receivables by the year of origination and number of days delinquent, our key credit quality indicator:
| (dollars in millions) | (dollars in millions) | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | (dollars in millions) | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| March 31, 2021 | | |
September 30, 2021 | | September 30, 2021 | |
Performing | Performing | | Performing | |
Current | Current | | $ | 2,193 | | | $ | 7,488 | | | $ | 4,860 | | | $ | 1,703 | | | $ | 500 | | | $ | 224 | | | $ | 16,968 | | Current | | $ | 8,435 | | | $ | 4,947 | | | $ | 3,283 | | | $ | 1,063 | | | $ | 270 | | | $ | 135 | | | $ | 18,133 | |
30-59 days past due | 30-59 days past due | | 1 | | | 62 | | | 57 | | | 22 | | | 9 | | | 6 | | | 157 | | 30-59 days past due | | 73 | | | 84 | | | 64 | | | 23 | | | 8 | | | 6 | | | 258 | |
60-89 days past due | 60-89 days past due | | 0 | | | 47 | | | 45 | | | 17 | | | 6 | | | 4 | | | 119 | | 60-89 days past due | | 38 | | | 57 | | | 40 | | | 14 | | | 5 | | | 3 | | | 157 | |
Total performing | Total performing | | 2,194 | | | 7,597 | | | 4,962 | | | 1,742 | | | 515 | | | 234 | | | 17,244 | | Total performing | | 8,546 | | | 5,088 | | | 3,387 | | | 1,100 | | | 283 | | | 144 | | | 18,548 | |
Nonperforming (Nonaccrual) | Nonperforming (Nonaccrual) | | | | | | | | | | | | | | | Nonperforming (Nonaccrual) | | | | | | | | | | | | | | |
90-179 days past due | 90-179 days past due | | 0 | | | 103 | | | 131 | | | 49 | | | 18 | | | 10 | | | 311 | | 90-179 days past due | | 36 | | | 122 | | | 89 | | | 30 | | | 10 | | | 6 | | | 293 | |
180 days or more past due | 180 days or more past due | | 0 | | | 2 | | | 5 | | | 1 | | | 1 | | | 0 | | | 9 | | 180 days or more past due | | — | | | 1 | | | 1 | | | — | | | — | | | — | | | 2 | |
Total nonperforming | Total nonperforming | | 0 | | | 105 | | | 136 | | | 50 | | | 19 | | | 10 | | | 320 | | Total nonperforming | | 36 | | | 123 | | | 90 | | | 30 | | | 10 | | | 6 | | | 295 | |
Total | Total | | $ | 2,194 | | | $ | 7,702 | | | $ | 5,098 | | | $ | 1,792 | | | $ | 534 | | | $ | 244 | | | $ | 17,564 | | Total | | $ | 8,582 | | | $ | 5,211 | | | $ | 3,477 | | | $ | 1,130 | | | $ | 293 | | | $ | 150 | | | $ | 18,843 | |
| (dollars in millions) | (dollars in millions) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | (dollars in millions) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total |
| December 31, 2020 | December 31, 2020 | | December 31, 2020 | |
Performing | Performing | | Performing | |
Current | Current | | $ | 8,659 | | | $ | 5,691 | | | $ | 2,064 | | | $ | 651 | | | $ | 184 | | | $ | 106 | | | $ | 17,355 | | Current | | $ | 8,659 | | | $ | 5,691 | | | $ | 2,064 | | | $ | 651 | | | $ | 184 | | | $ | 106 | | | $ | 17,355 | |
30-59 days past due | 30-59 days past due | | 72 | | | 106 | | | 44 | | | 18 | | | 6 | | | 5 | | | 251 | | 30-59 days past due | | 72 | | | 106 | | | 44 | | | 18 | | | 6 | | | 5 | | | 251 | |
60-89 days past due | 60-89 days past due | | 44 | | | 72 | | | 28 | | | 11 | | | 4 | | | 3 | | | 162 | | 60-89 days past due | | 44 | | | 72 | | | 28 | | | 11 | | | 4 | | | 3 | | | 162 | |
Total performing | Total performing | | 8,775 | | | 5,869 | | | 2,136 | | | 680 | | | 194 | | | 114 | | | 17,768 | | Total performing | | 8,775 | | | 5,869 | | | 2,136 | | | 680 | | | 194 | | | 114 | | | 17,768 | |
Nonperforming (Nonaccrual) | Nonperforming (Nonaccrual) | | | | | | | | | | | | | | | Nonperforming (Nonaccrual) | | | | | | | | | | | | | | |
90-179 days past due | 90-179 days past due | | 62 | | | 154 | | | 59 | | | 22 | | | 8 | | | 5 | | | 310 | | 90-179 days past due | | 62 | | | 154 | | | 59 | | | 22 | | | 8 | | | 5 | | | 310 | |
180 days or more past due | 180 days or more past due | | 1 | | | 3 | | | 1 | | | 1 | | | 0 | | | 0 | | | 6 | | 180 days or more past due | | 1 | | | 3 | | | 1 | | | 1 | | | — | | | — | | | 6 | |
Total nonperforming | Total nonperforming | | 63 | | | 157 | | | 60 | | | 23 | | | 8 | | | 5 | | | 316 | | Total nonperforming | | 63 | | | 157 | | | 60 | | | 23 | | | 8 | | | 5 | | | 316 | |
Total | Total | | $ | 8,838 | | | $ | 6,026 | | | $ | 2,196 | | | $ | 703 | | | $ | 202 | | | $ | 119 | | | $ | 18,084 | | Total | | $ | 8,838 | | | $ | 6,026 | | | $ | 2,196 | | | $ | 703 | | | $ | 202 | | | $ | 119 | | | $ | 18,084 | |
TROUBLED DEBT RESTRUCTURED FINANCE RECEIVABLES
Information regarding TDR finance receivables were as follows:
| (dollars in millions) | (dollars in millions) | | March 31, 2021 | | December 31, 2020 | (dollars in millions) | | September 30, 2021 | | December 31, 2020 |
| | | | | | | | | | | |
| TDR gross finance receivables | TDR gross finance receivables | | $ | 687 | | | $ | 689 | | TDR gross finance receivables | | $ | 652 | | | $ | 689 | |
TDR net finance receivables * | TDR net finance receivables * | | 690 | | | 691 | | TDR net finance receivables * | | 656 | | | 691 | |
Allowance for TDR finance receivable losses | Allowance for TDR finance receivable losses | | 311 | | | 314 | | Allowance for TDR finance receivable losses | | 281 | | | 314 | |
|
* TDR net finance receivables — are TDR gross finance receivables net of unearned points and fees, accrued finance charges, and deferred origination costs.
TDR average net finance receivables and finance charges recognized on TDR finance receivables were as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(dollars in millions) | | 2021 | | 2020 | | | | |
| | | | | | | | |
| | | | | | | | |
TDR average net finance receivables | | $ | 691 | | | $ | 676 | | | | | |
TDR finance charges recognized | | 13 | | | 12 | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | | |
| | | | | | | | |
TDR average net finance receivables | | $ | 665 | | | $ | 701 | | | $ | 681 | | | 692 | |
TDR finance charges recognized | | 13 | | | 13 | | | 40 | | | 38 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Information regarding the new volume of the TDR finance receivables were as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | | | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Pre-modification TDR net finance receivables | | $ | 116 | | | $ | 158 | | | | | | | | | |
Post-modification TDR net finance receivables: | | | | | | | | | | | | |
Rate reduction | | 78 | | | 100 | | | | | | | | | |
Other * | | 38 | | | 58 | | | | | | | | | |
Total post-modification TDR net finance receivables | | $ | 116 | | | $ | 158 | | | | | | | | | |
Number of TDR accounts | | 14,508 | | | 21,818 | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Pre-modification TDR net finance receivables | | $ | 105 | | | $ | 105 | | | $ | 332 | | | $ | 392 | | | | | |
Post-modification TDR net finance receivables: | | | | | | | | | | | | |
Rate reduction | | 72 | | | 67 | | | 228 | | | 242 | | | | | |
Other * | | 33 | | | 38 | | | 104 | | | 150 | | | | | |
Total post-modification TDR net finance receivables | | $ | 105 | | | $ | 105 | | | $ | 332 | | | $ | 392 | | | | | |
Number of TDR accounts | | 12,528 | | | 13,581 | | | 40,727 | | | 52,780 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
* “Other” modifications primarily consist of potential principal and interest forgiveness contingent on future payment performance by the borrower under the modified terms.
Finance receivables 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) are reflected in the following table:
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | | | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
TDR net finance receivables * | | $ | 30 | | | $ | 31 | | | | | | | | | |
Number of TDR accounts | | 4,183 | | | 4,552 | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
TDR net finance receivables * | | $ | 31 | | | $ | 20 | | | $ | 88 | | | $ | 77 | | | | | |
Number of TDR accounts | | 4,221 | | | 2,947 | | | 12,147 | | | 11,286 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
* Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted.
| | |
4. Allowance for Finance Receivable Losses |
We establish an allowance for finance receivable losses through the provision for finance receivable losses. We evaluate our finance receivable portfolio by the level of contractual delinquency in the portfolio, specifically in the late stagelate-stage delinquency buckets and inclusive of the migration of the loans through the delinquency buckets. We estimate and record an allowance for finance receivable losses to cover the estimated lifetime expected credit losses on our finance receivables. Our allowance for finance receivable losses may fluctuate based upon changes in portfolio growth, credit quality, and economic conditions.
Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the projected impacts and expected recovery offrom the global outbreak of a novel strain of coronavirus (“COVID-19”) on the U.S. economy. Our forecast leveraged economic projections from an industry leading forecast provider. We also incorporated estimated impacts from known government stimulus measures, the involuntary unemployment insurance coverage of our portfolio, and our borrower assistance efforts. At March 31,September 30, 2021, our economic forecast used a reasonable and supportable period of 12 months. The decreaseincrease in our allowance for finance receivable losses for the three months ended March 31,September 30, 2021 was primarily due to growth in our loan portfolio. The decrease in our allowance for finance receivable losses for the expectation ofnine months ended September 30, 2021 was primarily due to an improved outlook for unemployment and anticipated economic recovery from the COVID-19 pandemic.macroeconomic conditions, partially offset by growth in our loan portfolio. In the near-term, we may experience further changes to the macroeconomic assumptions within our forecast which could lead to further changes in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.
Changes in the allowance for finance receivable losses were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Balance at beginning of period | | $ | 2,269 | | | $ | 829 | | | | | | | |
Impact of adoption of ASU 2016-13 * | | — | | | 1,118 | | | | | | | |
Provision for finance receivable losses | | (2) | | | 531 | | | | | | | |
Charge-offs | | (255) | | | (337) | | | | | | | |
Recoveries | | 50 | | | 41 | | | | | | | |
Balance at end of period | | $ | 2,062 | | | $ | 2,182 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Balance at beginning of period | | $ | 2,000 | | | $ | 2,324 | | | $ | 2,269 | | | $ | 829 | | | |
Impact of adoption of ASU 2016-13 * | | — | | | — | | | — | | | 1,118 | | | |
Provision for finance receivable losses | | 226 | | | 231 | | | 356 | | | 1,186 | | | |
Charge-offs | | (223) | | | (274) | | | (730) | | | (931) | | | |
Recoveries | | 58 | | | 43 | | | 166 | | | 122 | | | |
Balance at end of period | | $ | 2,061 | | | $ | 2,324 | | | $ | 2,061 | | | $ | 2,324 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
* As a result of the adoption of ASU 2016-13, on January 1, 2020, we recorded a one-time adjustment to the allowance for finance receivable losses and a corresponding cumulative reduction to retained earnings, net of tax. See Note 4 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for additional information on the adoption of ASU 2016-13.
The allowance for finance receivable losses and net finance receivables by impairment method were as follows:
| | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | March 31, 2021 | | December 31, 2020 | | | | | |
| | | | | | | | | |
Allowance for finance receivable losses: | | | | | | | | | |
Collectively evaluated for impairment | | $ | 1,751 | | | $ | 1,955 | | | | | | |
| | | | | | | | | |
TDR finance receivables | | 311 | | | 314 | | | | | | |
Total | | $ | 2,062 | | | $ | 2,269 | | | | | | |
| | | | | | | | | |
Finance receivables: | | | | | | | | | |
Collectively evaluated for impairment | | $ | 16,874 | | | $ | 17,393 | | | | | | |
| | | | | | | | | |
TDR net finance receivables | | 690 | | | 691 | | | | | | |
Total | | $ | 17,564 | | | $ | 18,084 | | | | | | |
| | | | | | | | | |
Allowance for finance receivable losses as a percentage of finance receivables | | 11.74 | % | | 12.55 | % | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | September 30, 2021 | | December 31, 2020 | | | | | |
| | | | | | | | | |
Allowance for finance receivable losses: | | | | | | | | | |
Collectively evaluated for impairment | | $ | 1,780 | | | $ | 1,955 | | | | | | |
| | | | | | | | | |
TDR finance receivables | | 281 | | | 314 | | | | | | |
Total | | $ | 2,061 | | | $ | 2,269 | | | | | | |
| | | | | | | | | |
Finance receivables: | | | | | | | | | |
Collectively evaluated for impairment | | $ | 18,187 | | | $ | 17,393 | | | | | | |
| | | | | | | | | |
TDR net finance receivables | | 656 | | | 691 | | | | | | |
Total | | $ | 18,843 | | | $ | 18,084 | | | | | | |
| | | | | | | | | |
Allowance for finance receivable losses as a percentage of finance receivables | | 10.94 | % | | 12.55 | % | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
AVAILABLE-FOR-SALE SECURITIES
Cost/amortized cost, allowance for credit losses, unrealized gains and losses, and fair value of fixed maturity available-for-sale securities by type were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Cost/ Amortized Cost | | | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| | | | | | | | | | |
March 31, 2021* | | | | | | | | | | |
Fixed maturity available-for-sale securities: | | | | | | | | | | |
U.S. government and government sponsored entities | | $ | 11 | | | | | $ | 0 | | | $ | 0 | | | $ | 11 | |
Obligations of states, municipalities, and political subdivisions | | 85 | | | | | 3 | | | 0 | | | 88 | |
Commercial paper | | 49 | | | | | 0 | | | 0 | | | 49 | |
Non-U.S. government and government sponsored entities | | 141 | | | | | 6 | | | 0 | | | 147 | |
Corporate debt | | 1,175 | | | | | 65 | | | (6) | | | 1,234 | |
Mortgage-backed, asset-backed, and collateralized: | | | | | | | | | | |
RMBS | | 191 | | | | | 5 | | | (1) | | | 195 | |
CMBS | | 54 | | | | | 2 | | | 0 | | | 56 | |
CDO/ABS | | 85 | | | | | 2 | | | 0 | | | 87 | |
Total | | $ | 1,791 | | | | | $ | 83 | | | $ | (7) | | | $ | 1,867 | |
| | | | | | | | | | |
December 31, 2020* | | | | | | | | | | |
Fixed maturity available-for-sale securities: | | | | | | | | | | |
U.S. government and government sponsored entities | | $ | 12 | | | | | $ | 0 | | | $ | 0 | | | $ | 12 | |
Obligations of states, municipalities, and political subdivisions | | 87 | | | | | 5 | | | 0 | | | 92 | |
Commercial paper | | 28 | | | | | 0 | | | 0 | | | 28 | |
Non-U.S. government and government sponsored entities | | 137 | | | | | 9 | | | 0 | | | 146 | |
Corporate debt | | 1,124 | | | | | 95 | | | (1) | | | 1,218 | |
Mortgage-backed, asset-backed, and collateralized: | | | | | | | | | | |
RMBS | | 208 | | | | | 7 | | | 0 | | | 215 | |
CMBS | | 55 | | | | | 3 | | | 0 | | | 58 | |
CDO/ABS | | 77 | | | | | 2 | | | (1) | | | 78 | |
Total | | $ | 1,728 | | | | | $ | 121 | | | $ | (2) | | | $ | 1,847 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Cost/ Amortized Cost | | | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| | | | | | | | | | |
September 30, 2021* | | | | | | | | | | |
Fixed maturity available-for-sale securities: | | | | | | | | | | |
U.S. government and government sponsored entities | | $ | 14 | | | | | $ | — | | | $ | — | | | $ | 14 | |
Obligations of states, municipalities, and political subdivisions | | 80 | | | | | 4 | | | — | | | 84 | |
Commercial paper | | 28 | | | | | — | | | — | | | 28 | |
Non-U.S. government and government sponsored entities | | 143 | | | | | 5 | | | — | | | 148 | |
Corporate debt | | 1,213 | | | | | 72 | | | (3) | | | 1,282 | |
Mortgage-backed, asset-backed, and collateralized: | | | | | | | | | | |
RMBS | | 177 | | | | | 4 | | | (1) | | | 180 | |
CMBS | | 50 | | | | | 2 | | | — | | | 52 | |
CDO/ABS | | 83 | | | | | 1 | | | — | | | 84 | |
Total | | $ | 1,788 | | | | | $ | 88 | | | $ | (4) | | | $ | 1,872 | |
| | | | | | | | | | |
December 31, 2020* | | | | | | | | | | |
Fixed maturity available-for-sale securities: | | | | | | | | | | |
U.S. government and government sponsored entities | | $ | 12 | | | | | $ | — | | | $ | — | | | $ | 12 | |
Obligations of states, municipalities, and political subdivisions | | 87 | | | | | 5 | | | — | | | 92 | |
Commercial paper | | 28 | | | | | — | | | — | | | 28 | |
Non-U.S. government and government sponsored entities | | 137 | | | | | 9 | | | — | | | 146 | |
Corporate debt | | 1,124 | | | | | 95 | | | (1) | | | 1,218 | |
Mortgage-backed, asset-backed, and collateralized: | | | | | | | | | | |
RMBS | | 208 | | | | | 7 | | | — | | | 215 | |
CMBS | | 55 | | | | | 3 | | | — | | | 58 | |
CDO/ABS | | 77 | | | | | 2 | | | (1) | | | 78 | |
Total | | $ | 1,728 | | | | | $ | 121 | | | $ | (2) | | | $ | 1,847 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
* There was 0no material allowance for credit losses related to our investment securities as of March 31,September 30, 2021 and there was no allowance for credit losses as of December 31, 2020.
Interest receivables reported in “Other assets” totaled $13 million and $12 million as of March 31,September 30, 2021 and December 31, 2020, respectively. There were no amounts reversed from investment revenue for available-for-sale securities for the three and nine months ended March 31,September 30, 2021 and 2020.
Fair value and unrealized losses on available-for-sale securities by type and length of time in a continuous unrealized loss position without an allowance for credit losses were as follows:
| | | | Less Than 12 Months | | 12 Months or Longer | | Total | | | Less Than 12 Months | | 12 Months or Longer | | Total |
(dollars in millions) | (dollars in millions) | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | (dollars in millions) | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
| March 31, 2021 | | | | | | | | | | | | | |
| September 30, 2021 | | September 30, 2021 | | | | | | | | | | | | |
U.S. government and government sponsored entities | | U.S. government and government sponsored entities | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | |
Obligations of states, municipalities, and political subdivisions | Obligations of states, municipalities, and political subdivisions | | $ | 9 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 9 | | | $ | 0 | | Obligations of states, municipalities, and political subdivisions | | 7 | | | — | | | — | | | — | | | 7 | | | — | |
Commercial paper | Commercial paper | | 18 | | | 0 | | | 0 | | | 0 | | | 18 | | | 0 | | Commercial paper | | 1 | | | — | | | — | | | — | | | 1 | | | — | |
Non-U.S. government and government sponsored entities | Non-U.S. government and government sponsored entities | | 12 | | | 0 | | | 1 | | | 0 | | | 13 | | | 0 | | Non-U.S. government and government sponsored entities | | 21 | | | — | | | 1 | | | — | | | 22 | | | — | |
Corporate debt | Corporate debt | | 174 | | | (5) | | | 22 | | | (1) | | | 196 | | | (6) | | Corporate debt | | 153 | | | (3) | | | 8 | | | — | | | 161 | | | (3) | |
Mortgage-backed, asset-backed, and collateralized: | Mortgage-backed, asset-backed, and collateralized: | | Mortgage-backed, asset-backed, and collateralized: | |
RMBS | RMBS | | 38 | | | (1) | | | 0 | | | 0 | | | 38 | | | (1) | | RMBS | | 66 | | | (1) | | | — | | | — | | | 66 | | | (1) | |
CMBS | | 3 | | | 0 | | | 0 | | | 0 | | | 3 | | | 0 | | |
| CDO/ABS | CDO/ABS | | 23 | | | 0 | | | 6 | | | 0 | | | 29 | | | 0 | | CDO/ABS | | 19 | | | — | | | 3 | | | — | | | 22 | | | — | |
Total | Total | | $ | 277 | | | $ | (6) | | | $ | 29 | | | $ | (1) | | | $ | 306 | | | $ | (7) | | Total | | $ | 268 | | | $ | (4) | | | $ | 12 | | | $ | — | | | $ | 280 | | | $ | (4) | |
| December 31, 2020 | December 31, 2020 | | | | | | | | | | | | | December 31, 2020 | | | | | | | | | | | | |
| Obligations of states, municipalities, and political subdivisions | Obligations of states, municipalities, and political subdivisions | | $ | 2 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2 | | | $ | 0 | | Obligations of states, municipalities, and political subdivisions | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | | | $ | — | |
Commercial paper | Commercial paper | | 19 | | | 0 | | | 0 | | | 0 | | | 19 | | | 0 | | Commercial paper | | 19 | | | — | | | — | | | — | | | 19 | | | — | |
Non-U.S. government and government sponsored entities | Non-U.S. government and government sponsored entities | | 1 | | | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | Non-U.S. government and government sponsored entities | | 1 | | | — | | | — | | | — | | | 1 | | | — | |
Corporate debt | Corporate debt | | 45 | | | (1) | | | 8 | | | 0 | | | 53 | | | (1) | | Corporate debt | | 45 | | | (1) | | | 8 | | | — | | | 53 | | | (1) | |
Mortgage-backed, asset-backed, and collateralized: | Mortgage-backed, asset-backed, and collateralized: | | Mortgage-backed, asset-backed, and collateralized: | |
| CMBS | CMBS | | 8 | | | 0 | | | 0 | | | 0 | | | 8 | | | 0 | | CMBS | | 8 | | | — | | | — | | | — | | | 8 | | | — | |
CDO/ABS | CDO/ABS | | 17 | | | (1) | | | 0 | | | 0 | | | 17 | | | (1) | | CDO/ABS | | 17 | | | (1) | | | — | | | — | | | 17 | | | (1) | |
Total | Total | | $ | 92 | | | $ | (2) | | | $ | 8 | | | $ | 0 | | | $ | 100 | | | $ | (2) | | Total | | $ | 92 | | | $ | (2) | | | $ | 8 | | | $ | — | | | $ | 100 | | | $ | (2) | |
On a lot basis, we had 368379 and 148 investment securities in an unrealized loss position at March 31,September 30, 2021 and December 31, 2020, respectively. We do not consider the unrealized losses to be credit-related, as these unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase. Additionally, at March 31,as of September 30, 2021, there were no credit impairments on investment securities that we intend to sell. We do not have plans to sell any of the remaining investment securities with unrealized losses as of March 31,September 30, 2021, 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 credit impairments. During the three and nine months ended March 31,September 30, 2021 and 2020, there were no material credit impairments related to our investment securities. Therefore, there were no material additions or reductions in the allowance for credit losses (impairments recognized or reversed in earnings) on credit impaired available-for-sale securities for the three and nine months ended March 31,September 30, 2021 and 2020.
The proceeds of available-for-sale securities sold or redeemed during the three and nine months ended March 31,September 30, 2021 totaled $50 million and $189 million, respectively. The proceeds of available-for-sale securities sold or redeemed during the three and nine months ended September 30, 2020 totaled $67$74 million and $58$179 million, respectively. The net realized gains and losses were immaterial during the three and nine months ended March 31,September 30, 2021 and 2020.
Contractual maturities of fixed-maturity available-for-sale securities at March 31,September 30, 2021 were as follows:
| | | | | | | | | | | | | | |
(dollars in millions) | | Fair Value | | Amortized Cost |
| | | | |
Fixed maturities, excluding mortgage-backed, asset-backed, and collateralized securities: | | | | |
Due in 1 year or less | | $ | 176 | | | $ | 175 | |
Due after 1 year through 5 years | | 592 | | | 561 | |
Due after 5 years through 10 years | | 593 | | | 568 | |
Due after 10 years | | 168 | | | 157 | |
Mortgage-backed, asset-backed, and collateralized securities | | 338 | | | 330 | |
Total | | $ | 1,867 | | | $ | 1,791 | |
| | | | | | | | | | | | | | |
(dollars in millions) | | Fair Value | | Amortized Cost |
| | | | |
Fixed maturities, excluding mortgage-backed, asset-backed, and collateralized securities: | | | | |
Due in 1 year or less | | $ | 146 | | | $ | 145 | |
Due after 1 year through 5 years | | 577 | | | 548 | |
Due after 5 years through 10 years | | 658 | | | 626 | |
Due after 10 years | | 175 | | | 159 | |
Mortgage-backed, asset-backed, and collateralized securities | | 316 | | | 310 | |
Total | | $ | 1,872 | | | $ | 1,788 | |
Actual maturities may differ from contractual maturities since issuers and borrowers may have the right to call or prepay obligations. We may sell investment securities before maturity for general corporate and working capital purposes and to achieve certain investment strategies.
The fair value of securities on deposit with third parties totaled $581$569 million and $604 million at March 31,September 30, 2021 and December 31, 2020, respectively.
OTHER SECURITIES
The fair value of other securities by type was as follows:
| | | | | | | | | | | | | | |
(dollars in millions) | | March 31, 2021 | | December 31, 2020 |
| | | | |
| | | | |
| | | | |
| | | | |
Fixed maturity other securities: | | | | |
Bonds | | | | |
| | | | |
| | | | |
| | | | |
Non-U.S. government and government sponsored entities | | $ | 1 | | | $ | 1 | |
Corporate debt | | 13 | | | 17 | |
Mortgage-backed, asset-backed, and collateralized bonds | | 23 | | | 17 | |
Total bonds | | 37 | | | 35 | |
Preferred stock * | | 18 | | | 13 | |
Common stock * | | 29 | | | 27 | |
| | | | |
Total | | $ | 84 | | | $ | 75 | |
| | | | | | | | | | | | | | |
(dollars in millions) | | September 30, 2021 | | December 31, 2020 |
| | | | |
| | | | |
| | | | |
| | | | |
Fixed maturity other securities: | | | | |
Bonds | | | | |
| | | | |
| | | | |
| | | | |
Non-U.S. government and government sponsored entities | | $ | — | | | $ | 1 | |
Corporate debt | | 11 | | | 17 | |
Mortgage-backed, asset-backed, and collateralized bonds | | 28 | | | 17 | |
Total bonds | | 39 | | | 35 | |
Preferred stock * | | 22 | | | 13 | |
Common stock * | | 30 | | | 27 | |
| | | | |
Total | | $ | 91 | | | $ | 75 | |
* We employ an income equity strategy targeting investments in stocks with strong current dividend yields. Stocks included have a history of stable or increasing dividend payments.
Net unrealized gains on other securities held were immaterial for the three and nine months ended March 31, 2021. Net unrealized losses on other securities held were $13 million for the three months ended March 31,September 30, 2021 and 2020. Net realized gains and losses on other securities sold or redeemed were immaterial for the three and nine months ended March 31,September 30, 2021 and 2020.
Other securities primarily consist of equity securities and those securities for which the fair value option was elected. We report net unrealized and realized gains and losses on other securities held, sold, or redeemed in investment revenue.
Principal maturities of long-term debt (excluding projected repayments on securitizations by period) by type of debt at March 31,September 30, 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Senior Debt | | | | |
(dollars in millions) | | Securitizations | | Unsecured Notes (a) | | Junior Subordinated Debt (a) | | Total |
| | | | | | | | |
Interest rates (b) | | 0.91% - 6.94% | | 4.00% - 8.88% | | 1.99 | % | | |
| | | | | | | | |
Remainder of 2021 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
2022 | | 0 | | | 992 | | | 0 | | | 992 | |
2023 | | 0 | | | 1,175 | | | 0 | | | 1,175 | |
2024 | | 0 | | | 1,300 | | | 0 | | | 1,300 | |
2025 | | 0 | | | 1,835 | | | 0 | | | 1,835 | |
2026-2067 | | 0 | | | 3,999 | | | 350 | | | 4,349 | |
Securitizations (c) | | 7,424 | | | 0 | | | 0 | | | 7,424 | |
Total principal maturities | | $ | 7,424 | | | $ | 9,301 | | | $ | 350 | | | $ | 17,075 | |
| | | | | | | | |
Total carrying amount | | $ | 7,394 | | | $ | 9,223 | | | $ | 172 | | | $ | 16,789 | |
Debt issuance costs (d) | | $ | (27) | | | $ | (82) | | | $ | 0 | | | $ | (109) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Senior Debt | | | | |
(dollars in millions) | | Securitizations | | Unsecured Notes (a) | | Junior Subordinated Debt (a) | | Total |
| | | | | | | | |
Interest rates (b) | | 0.81% - 6.94% | | 3.50% - 8.88% | | 1.88 | % | | |
| | | | | | | | |
Remainder of 2021 | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
2022 | | — | | | 992 | | | — | | | 992 | |
2023 | | — | | | 1,175 | | | — | | | 1,175 | |
2024 | | — | | | 1,300 | | | — | | | 1,300 | |
2025 | | — | | | 1,835 | | | — | | | 1,835 | |
2026-2067 | | — | | | 5,349 | | | 350 | | | 5,699 | |
Securitizations (c) | | 6,955 | | | — | | | — | | | 6,955 | |
Total principal maturities | | $ | 6,955 | | | $ | 10,651 | | | $ | 350 | | | $ | 17,956 | |
| | | | | | | | |
Total carrying amount | | $ | 6,924 | | | $ | 10,565 | | | $ | 172 | | | $ | 17,661 | |
Debt issuance costs (d) | | $ | (28) | | | $ | (89) | | | $ | — | | | $ | (117) | |
(a) Pursuant to the Base Indenture, the Supplemental Indentures, and the Guaranty Agreements, OMH agreed to fully and unconditionally guarantee, on a senior unsecured basis, payments of principal, premium and interest on the Unsecured Notes and Junior Subordinated Debenture. The OMH guarantees of OMFC’s long-term debt are subject to customary release provisions.
(b) The interest rates shown are the range of contractual rates in effect at March 31,September 30, 2021.
(c) Securitizations are not included in the above maturities by period due to their variable monthly repayments, which may result in pay-off prior to the stated maturity date. At March 31,September 30, 2021, there were 0no amounts drawn under our revolving conduit facilities. See Note 7 for further information on our long-term debt associated with securitizations and revolving conduit facilities.
(d) Debt issuance costs are reported as a direct deduction from long-term debt, with the exception of debt issuance costs associated with our revolving conduit facilities, which totaled $3233 million at March 31,September 30, 2021 and are reported in “Other assets.”
Redemption of 7.75% Senior Notes Due 2021
On December 9, 2020, OMFC issued a notice of full redemption of its 7.75% Senior Notes due 2021. On January 8, 2021, OMFC paid a net aggregate amount of $681 million, inclusive of accrued interest and premiums, to complete the redemption. In connection with the redemption, we recognized $47 million of net loss on repurchases and repayments of debt duringin the three months ended March 31,first quarter of 2021.
Social Bond Offering - Issuance of 3.50% Senior Notes Due 2027
OMFC issued its inaugural social bond offering on June 22, 2021 for a total of $750 million aggregate principal amount of 3.50% Senior Notes due 2027 (the “Social Bond”) under the Base Indenture, as supplemented by the Twelfth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.
3.875% Senior Notes Due 2028 Offering
On August 11, 2021, OMFC issued a total of $600 million aggregate principal amount of 3.875% Senior Notes due 2028 (the “3.875% Senior Notes due 2028”) under the Base Indenture, as supplemented by the Thirteenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.
| | |
7. Variable Interest Entities |
CONSOLIDATED VIES
We have transferred finance receivables to VIEs for asset-backed financing transactions and include the assets and liabilities in our consolidated financial statements because we are the primary beneficiary of each VIE. We account for these asset-backed debt obligations as secured borrowings.
See Note 3 and Note 10 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for more detail regarding VIEs.
We parenthetically disclose on our consolidated balance sheets the VIE’s assets that can only be used to settle the VIE’s obligations and liabilities if its creditors have no recourse against the primary beneficiary’s general credit. The carrying amounts of consolidated VIE assets and liabilities associated with our securitization trusts and revolving conduit facilities were as follows:
| | | | | | | | | | | | | | |
(dollars in millions) | | March 31, 2021 | | December 31, 2020 |
| | | | |
Assets | | | | |
Cash and cash equivalents | | $ | 2 | | | $ | 2 | |
Net finance receivables | | 8,219 | | | 8,772 | |
Allowance for finance receivable losses | | 955 | | | 1,085 | |
Restricted cash and restricted cash equivalents | | 553 | | | 441 | |
Other assets | | 32 | | | 33 | |
| | | | |
Liabilities | | | | |
Long-term debt | | $ | 7,394 | | | $ | 7,789 | |
Other liabilities | | 14 | | | 15 | |
| | | | | | | | | | | | | | |
(dollars in millions) | | September 30, 2021 | | December 31, 2020 |
| | | | |
Assets | | | | |
Cash and cash equivalents | | $ | 2 | | | $ | 2 | |
Net finance receivables | | 7,731 | | | 8,772 | |
Allowance for finance receivable losses | | 849 | | | 1,085 | |
Restricted cash and restricted cash equivalents | | 445 | | | 441 | |
Other assets | | 33 | | | 33 | |
| | | | |
Liabilities | | | | |
Long-term debt | | $ | 6,924 | | | $ | 7,789 | |
Other liabilities | | 13 | | | 15 | |
Other than the retained subordinate and residual interests in our consolidated VIEs, we are under no further obligation than is otherwise noted herein, either contractually or implicitly, to provide financial support to these entities. Consolidated interest expense related to our VIEs totaled $78$72 million and $81$225 million during the three and nine months ended March 31,September 30, 2021, respectively, compared to $84 million and $256 million during the three and nine months ended September 30, 2020, respectively.
SECURITIZED BORROWINGS
Each of our outstanding securitizations contain a revolving period ranging from two to seven years during which no principal payments are required to be made on the related asset-backed notes. The indentures governing our securitization borrowings contain early amortization events and events of default, that, if triggered, may result in the acceleration of the obligation to pay principal and interest on the related asset-backed notes.
REVOLVING CONDUIT FACILITIES
We had access to 1314 revolving conduit facilities with a total maximum borrowing capacity of $7.2$7.3 billion as of March 31,September 30, 2021. Our conduit facilities contain revolving periods during which time no principal payments are required, but may be made without penalty, followed by a subsequent amortization period. Principal balances of outstanding loans, if any, are due and payable in full over periods ranging up to ten years as of March 31,September 30, 2021. Amounts drawn on these facilities are collateralized by our personal loans.
At March 31,September 30, 2021, 0no amounts were drawn under these facilities.
Changes in the reserve for unpaid claims and loss adjustment expenses (net of reinsurance recoverables):
| | | | | | | | | | | | | | |
| | At or for the Three Months Ended March 31, |
(dollars in millions) | | 2021 | | 2020 |
| | | | |
Balance at beginning of period | | $ | 148 | | | $ | 117 | |
Less reinsurance recoverables | | (3) | | | (4) | |
| | | | |
Net balance at beginning of period | | 145 | | | 113 | |
| | | | |
Additions for losses and loss adjustment expenses incurred to: | | | | |
Current year | | 57 | | | 77 | |
Prior years * | | (18) | | | (9) | |
Total | | 39 | | | 68 | |
Reductions for losses and loss adjustment expenses paid related to: | | | | |
Current year | | (18) | | | (17) | |
Prior years | | (47) | | | (30) | |
Total | | (65) | | | (47) | |
Foreign currency translation adjustment | | 0 | | | (1) | |
Net balance at end of period | | 119 | | | 133 | |
Plus reinsurance recoverables | | 3 | | | 3 | |
| | | | |
Balance at end of period | | $ | 122 | | | $ | 136 | |
| | | | | | | | | | | | | | |
| | At or for the Nine Months Ended September 30, |
(dollars in millions) | | 2021 | | 2020 |
| | | | |
Balance at beginning of period | | $ | 148 | | | $ | 117 | |
Less reinsurance recoverables | | (3) | | | (4) | |
| | | | |
Net balance at beginning of period | | 145 | | | 113 | |
| | | | |
Additions for losses and loss adjustment expenses incurred to: | | | | |
Current year | | 158 | | | 221 | |
Prior years * | | (19) | | | (10) | |
Total | | 139 | | | 211 | |
Reductions for losses and loss adjustment expenses paid related to: | | | | |
Current year | | (91) | | | (107) | |
Prior years | | (79) | | | (60) | |
Total | | (170) | | | (167) | |
| | | | |
Net balance at end of period | | 114 | | | 157 | |
Plus reinsurance recoverables | | 3 | | | 3 | |
| | | | |
Balance at end of period | | $ | 117 | | | $ | 160 | |
* Reflects (i) a redundancy in the prior years’ net reserves of $18$19 million at March 31,September 30, 2021, primarily due to favorable development of credit disability and unemployment claims during the period, and (ii) a redundancy in the prior years’ net reserves of $9$10 million at March 31,September 30, 2020, primarily due to a favorable development of credit life, term life, and credit disability claims during the period.
| | |
9. Capital Stock and Earnings Per Share (OMH Only) |
CAPITAL STOCK
OMH has 2 classes of authorized capital stock: preferred stock and common stock. OMFC has 2 classes of authorized capital stock: special stock and common stock. OMH and OMFC may issue preferred stock and special stock, respectively, in one or more series. The OMH Board of Directors and the OMFC Board of Directors determine the dividend, liquidation, redemption, conversion, voting, and other rights prior to issuance.
During the first quarter of 2020, the OMH Board of Directors approved a stock repurchase program, which allows us to repurchase up to $200 million of OMH’s outstanding common stock with no stated expiration. On March 20, 2020, OMH temporarily suspended its stock repurchase program. OMH retains the right to reinstate the stock repurchase program as circumstances change.
Prior to the suspension of the program, OMH repurchased and retired 2,031,698 shares of its common stock with an average price paid per share of $22.30, for an aggregate total of approximately $45 million, including commissions and fees. The aggregate purchase price in excess of the par value of the repurchased OMH common stock is recorded as a reduction to additional paid-in-capital. To provide funding for the OMH stock repurchase and retirement program, the OMFC Board of Directors authorized multiple dividend payments in the aggregate amount of $45 million.
Changes in OMH shares of common stock issued and outstanding were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
Balance at beginning of period | | 133,884,043 | | | 134,319,171 | | | 134,341,724 | | | 136,101,156 | | | |
Common stock issued | | 4,653 | | | 3,842 | | | 159,327 | | | 253,555 | | | |
Common stock repurchased * | | (2,435,489) | | | — | | | (3,047,844) | | | (2,031,698) | | | |
| | | | | | | | | | |
Balance at end of period | | 131,453,207 | | | 134,323,013 | | | 131,453,207 | | | 134,323,013 | | | |
* During the three and nine months ended September 30, 2021, the common stock repurchased were held in treasury. During the nine months ended September 30, 2020, the common stock repurchased was retired.
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
| | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
Balance at beginning of period | | 134,341,724 | | | 136,101,156 | | | | | | | |
Common shares issued | | 135,372 | | | 240,249 | | | | | | | |
Common shares retired | | 0 | | | (2,031,698) | | | | | | | |
Balance at end of period | | 134,477,096 | | | 134,309,707 | | | | | | | |
EARNINGS PER SHARE (OMH ONLY)
The computation of earnings per share was as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(dollars in millions, except per share data) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
Numerator (basic and diluted): | | | | | | | | | | |
Net income | | $ | 413 | | | $ | 32 | | | | | | | |
Denominator: | | | | | | | | | | |
Weighted average number of shares outstanding (basic) | | 134,405,368 | | | 135,909,100 | | | | | | | |
Effect of dilutive securities * | | 401,797 | | | 229,577 | | | | | | | |
Weighted average number of shares outstanding (diluted) | | 134,807,165 | | | 136,138,677 | | | | | | | |
Earnings per share: | | | | | | | | | | |
Basic | | $ | 3.07 | | | $ | 0.24 | | | | | | | |
Diluted | | $ | 3.06 | | | $ | 0.24 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(dollars in millions, except per share data) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
Numerator (basic and diluted): | | | | | | | | | | |
Net income | | $ | 288 | | | $ | 250 | | | $ | 1,051 | | | $ | 371 | | | |
Denominator: | | | | | | | | | | |
Weighted average number of shares outstanding (basic) | | 132,487,234 | | | 134,321,929 | | | 133,709,146 | | | 134,847,170 | | | |
Effect of dilutive securities * | | 437,099 | | | 185,620 | | | 387,236 | | | 152,317 | | | |
Weighted average number of shares outstanding (diluted) | | 132,924,333 | | | 134,507,549 | | | 134,096,382 | | | 134,999,487 | | | |
Earnings per share: | | | | | | | | | | |
Basic | | $ | 2.17 | | | $ | 1.86 | | | $ | 7.86 | | | $ | 2.75 | | | |
Diluted | | $ | 2.17 | | | $ | 1.86 | | | $ | 7.84 | | | $ | 2.75 | | | |
* We have excluded weighted-average unvested restricted stock units totaling 133,004491,541 and 214,752256,034 for the three months ended March 31,September 30, 2021 and 2020, respectively, and 322,430 and 303,913 for the nine months ended September 30, 2021 and 2020, respectively, from the fully-diluted earnings per share calculations as these shares would be anti-dilutive, which could impact the earnings per share calculation in the future.
Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during each period. Diluted earnings per share is computed based on the weighted-average number of shares outstanding plus the effect of potentially dilutive shares outstanding during the period using the treasury stock method. The potentially dilutive shares represent outstanding unvested restricted stock units.
| | |
10. 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 (a) | | | | Retirement Plan Liabilities Adjustments | | Foreign Currency Translation Adjustments | | Other (b) | | Total Accumulated Other Comprehensive Income (Loss) |
| | | | | | | | | | | | |
Three Months Ended March 31, 2021 | | | | | | | | | | | | |
Balance at beginning of period | | $ | 91 | | | | | $ | 1 | | | $ | 2 | | | $ | 0 | | | $ | 94 | |
Other comprehensive income (loss) before reclassifications | | (33) | | | | | 0 | | | 2 | | | 17 | | | (14) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Balance at end of period | | $ | 58 | | | | | $ | 1 | | | $ | 4 | | | $ | 17 | | | $ | 80 | |
| | | | | | | | | | | | |
Three Months Ended March 31, 2020 | | | | | | | | | | | | |
Balance at beginning of period | | $ | 41 | | | | | $ | 3 | | | $ | 0 | | | $ | 0 | | | $ | 44 | |
Other comprehensive loss before reclassifications | | (42) | | | | | 0 | | | (8) | | | 0 | | | (50) | |
| | | | | | | | | | | | |
Balance at end of period | | $ | (1) | | | | | $ | 3 | | | $ | (8) | | | $ | 0 | | | $ | (6) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Unrealized Gains (Losses) Available-for-Sale Securities (a) | | Retirement Plan Liabilities Adjustments | | Foreign Currency Translation Adjustments | | Other (b) | | Total Accumulated Other Comprehensive Income (Loss) |
| | | | | | | | | | |
Three Months Ended September 30, 2021 | | | | | | | | | | |
Balance at beginning of period | | $ | 71 | | | $ | 1 | | | $ | 5 | | | $ | 8 | | | $ | 85 | |
Other comprehensive income (loss) before reclassifications | | (7) | | | — | | | (2) | | | 1 | | | (8) | |
| | | | | | | | | | |
Balance at end of period | | $ | 64 | | | $ | 1 | | | $ | 3 | | | $ | 9 | | | $ | 77 | |
| | | | | | | | | | |
Three Months Ended September 30, 2020 | | | | | | | | | | |
Balance at beginning of period | | $ | 66 | | | $ | 3 | | | $ | (4) | | | $ | — | | | $ | 65 | |
Other comprehensive income before reclassifications | | 12 | | | — | | | 2 | | | — | | | 14 | |
| | | | | | | | | | |
Balance at end of period | | $ | 78 | | | $ | 3 | | | $ | (2) | | | $ | — | | | $ | 79 | |
| | | | | | | | | | |
Nine Months Ended September 30, 2021 | | | | | | | | | | |
Balance at beginning of period | | $ | 91 | | | $ | 1 | | | $ | 2 | | | $ | — | | | $ | 94 | |
Other comprehensive income (loss) before reclassifications | | (26) | | | — | | | 1 | | | 9 | | | (16) | |
Reclassification adjustments from accumulated other comprehensive income | | (1) | | | — | | | — | | | — | | | (1) | |
Balance at end of period | | $ | 64 | | | $ | 1 | | | $ | 3 | | | $ | 9 | | | $ | 77 | |
| | | | | | | | | | |
Nine Months Ended September 30, 2020 | | | | | | | | | | |
Balance at beginning of period | | $ | 41 | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 44 | |
Other comprehensive income (loss) before reclassifications | | 38 | | | — | | | (2) | | | — | | | 36 | |
Reclassification adjustments from accumulated other comprehensive income | | (1) | | | — | | | — | | | 0 | | (1) | |
| | | | | | | | | | |
Balance at end of period | | $ | 78 | | | $ | 3 | | | $ | (2) | | | $ | — | | | $ | 79 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(a) There were 0no material amounts related to available-for-sale debt securities for which an allowance for credit losses was recorded during the three and nine months ended March 31, 2021September 30, 2021. There were no available-for-sale debt securities for which an allowance for credit losses was recorded during the three and nine months ended September 30, 2020.
(b) Other primarily includes changes in the fair value of our mark-to-market derivative instruments that have been designated as cash flow hedges.
Reclassification adjustments from accumulated other comprehensive income (loss) to the applicable line item on our condensed consolidated statements of operations were immaterial for the three and nine months ended March 31,September 30, 2021 and 2020.
We had a net deferred tax asset of $349$354 million and $405 million at March 31,September 30, 2021 and December 31, 2020, respectively. The decrease in our net deferred tax asset of $56$51 million was primarily due to the tax effect of the decrease in the allowance for finance receivable losses and the decrease due to tax amortization of goodwill.
We follow the guidance of ASC 740, Income Taxes, for interim reporting of income taxes under which we calculate an estimated annual effective tax rate (“AETR”) and apply the AETR to our year-to-date income (loss) before income taxes. In addition, we recognize any discrete items as they occur.
The effective tax rate for the threenine months ended March 31,September 30, 2021 was 24.4%24.2%, compared to 24.3%26.1% for the same period in 2020. The effective tax rate for the threenine months ended March 31,September 30, 2021 and 2020 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes.
We are under examination by various states for the years 20142017 to 2018. Management believes it has adequately provided for taxes for such years.
Our gross unrecognized tax benefits, including related interest and penalties, totaled $8 million at September 30, 2021 and $10 million at March 31, 2021 and December 31, 2020. We accrue interest related to uncertain tax positions in income tax expense. The amount of any change in the balance of uncertain tax liabilities over the next 12 months is not expected to be material to our consolidated financial statements.
During 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Consolidated Appropriations Act of 2021 (the “CAA”) were signed into law. During 2021, the American Rescue Plan Act of 2021 (the “ARPA”) was signed into law. Among other things, the provisions of these laws relate to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, and technical corrections to tax depreciation methods for qualified improvement property. We do not anticipateBased on our review, we have determined the CARES Act, the CAA, orand the ARPA will not have a material impact on our consolidated financial statements. We will continue to monitor legislative developments related to the COVID-19 pandemic.
LEGAL CONTINGENCIES
In the normal course of business, we have been named, from time to time, as defendants in various legal actions, including arbitrations, class actions, and other litigation arising in connection with our activities. Some of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. While we will continue to evaluate legal actions to determine whether a loss is reasonably possible or probable and is reasonably estimable, there can be no assurance that material losses will not be incurred from pending, threatened or future litigation, investigations, examinations, or other claims.
We contest liability and/or the amount of damages, as appropriate, in each pending matter. Where available information indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and we can reasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income. In many actions, however, it is inherently difficult to determine whether any loss is probable or even reasonably possible, or to estimate the amount of any loss. In addition, even where loss is reasonably possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss.
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 range of additional loss can be reasonably estimated for any given action.
For certain other legal actions, we can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued, but do not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on our consolidated financial statements as a whole.
At March 31,September 30, 2021, Consumer and Insurance (“C&I”) is our only reportable segment. The remaining components (which we refer to as “Other”) consist of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which primarily include our liquidating real estate loans.
The accounting policies of the C&I segment are the same as those disclosed in Note 3 and Note 18 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report.
The following tables present information about C&I and Other, as well as reconciliations to the consolidated financial statement amounts.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Consumer and Insurance | | | | | | Other | | Segment to GAAP Adjustment | | Consolidated Total |
| | | | | | | | | | | | |
At or for the Three Months Ended March 31, 2021 | | | | | | | | | | | | |
Interest income | | $ | 1,057 | | | | | | | $ | 1 | | | $ | 2 | | | $ | 1,060 | |
Interest expense | | 233 | | | | | | | 1 | | | 1 | | | 235 | |
Provision for finance receivable losses | | (3) | | | | | | | 0 | | | 1 | | | (2) | |
Net interest income after provision for finance receivable losses | | 827 | | | | | | | 0 | | | 0 | | | 827 | |
Other revenues | | 98 | | | | | | | 3 | | | (10) | | | 91 | |
Other expenses | | 358 | | | | | | | 6 | | | 8 | | | 372 | |
Income (loss) before income tax expense (benefit) | | $ | 567 | | | | | | | $ | (3) | | | $ | (18) | | | $ | 546 | |
| | | | | | | | | | | | |
Assets | | $ | 19,194 | | | | | | | $ | 57 | | | $ | 2,034 | | | $ | 21,285 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Consumer and Insurance | | Other | | Segment to GAAP Adjustment | | Consolidated Total |
| | | | | | | | |
Three Months Ended September 30, 2021 | | | | | | | | |
Interest income | | $ | 1,111 | | | $ | 1 | | | $ | 1 | | | $ | 1,113 | |
Interest expense | | 235 | | | 1 | | | 1 | | | 237 | |
Provision for finance receivable losses | | 224 | | | — | | | 2 | | | 226 | |
Net interest income after provision for finance receivable losses | | 652 | | | — | | | (2) | | | 650 | |
Other revenues | | 151 | | | 4 | | | — | | | 155 | |
Other expenses | | 415 | | | 5 | | | 9 | | | 429 | |
Income (loss) before income tax expense (benefit) | | $ | 388 | | | $ | (1) | | | $ | (11) | | | $ | 376 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Three Months Ended September 30, 2020 | | | | | | | | |
Interest income | | $ | 1,086 | | | $ | 1 | | | $ | 2 | | | $ | 1,089 | |
Interest expense | | 250 | | | 1 | | | 4 | | | 255 | |
Provision for finance receivable losses | | 232 | | | — | | | (1) | | | 231 | |
Net interest income after provision for finance receivable losses | | 604 | | | — | | | (1) | | | 603 | |
Other revenues | | 99 | | | 4 | | | (2) | | | 101 | |
Other expenses | | 352 | | | 6 | | | 5 | | | 363 | |
Income (loss) before income tax expense (benefit) | | $ | 351 | | | $ | (2) | | | $ | (8) | | | $ | 341 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
At or for the Three Months Ended March 31, 2020 | | | | | | | | | | | | |
Interest income | | $ | 1,101 | | | | | | | $ | 2 | | | $ | 3 | | | $ | 1,106 | |
Interest expense | | 249 | | | | | | | 1 | | | 5 | | | 255 | |
Provision for finance receivable losses | | 530 | | | | | | | 0 | | | 1 | | | 531 | |
Net interest income after provision for finance receivable losses | | 322 | | | | | | | 1 | | | (3) | | | 320 | |
Other revenues | | 136 | | | | | | | 4 | | | 1 | | | 141 | |
Other expenses | | 407 | | | | | | | 6 | | | 5 | | | 418 | |
Income (loss) before income tax expense (benefit) | | $ | 51 | | | | | | | $ | (1) | | | $ | (7) | | | $ | 43 | |
| | | | | | | | | | | | |
Assets | | $ | 22,570 | | | | | | | $ | 72 | | | $ | 2,051 | | | $ | 24,693 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Consumer and Insurance | | Other | | Segment to GAAP Adjustment | | Consolidated Total |
| | | | | | | | |
At or for the Nine Months Ended September 30, 2021 | | | | | | | | |
Interest income | | $ | 3,237 | | | $ | 4 | | | $ | 3 | | | $ | 3,244 | |
Interest expense | | 698 | | | 3 | | | 2 | | | 703 | |
Provision for finance receivable losses | | 351 | | | — | | | 5 | | | 356 | |
Net interest income after provision for finance receivable losses | | 2,188 | | | 1 | | | (4) | | | 2,185 | |
Other revenues | | 395 | | | 10 | | | (9) | | | 396 | |
Other expenses | | 1,154 | | | 17 | | | 24 | | | 1,195 | |
Income (loss) before income tax expense (benefit) | | $ | 1,429 | | | $ | (6) | | | $ | (37) | | | $ | 1,386 | |
| | | | | | | | |
Assets | | $ | 19,897 | | | $ | 44 | | | $ | 2,022 | | | $ | 21,963 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
At or for the Nine Months Ended September 30, 2020 | | | | | | | | |
Interest income | | $ | 3,260 | | | $ | 4 | | | $ | 9 | | | $ | 3,273 | |
Interest expense | | 765 | | | 3 | | | 13 | | | 781 | |
Provision for finance receivable losses | | 1,184 | | | — | | | 2 | | | 1,186 | |
Net interest income after provision for finance receivable losses | | 1,311 | | | 1 | | | (6) | | | 1,306 | |
Other revenues | | 380 | | | 12 | | | (2) | | | 390 | |
Other expenses | | 1,161 | | | 18 | | | 15 | | | 1,194 | |
Income (loss) before income tax expense (benefit) | | $ | 530 | | | $ | (5) | | | $ | (23) | | | $ | 502 | |
| | | | | | | | |
Assets | | $ | 19,743 | | | $ | 63 | | | $ | 2,051 | | | $ | 21,857 | |
| | |
14. Fair Value Measurements |
The accounting policies of our fair value measurements are the same as those disclosed in Note 3 and Note 19 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report.
The following table presents the carrying amounts and estimated fair values of our financial instruments and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements Using | | Total Fair Value | | Total Carrying Value |
(dollars in millions) | | Level 1 | | Level 2 | | Level 3 | | |
| | | | | | | | | | |
September 30, 2021 | | | | | | | | | | |
Assets | | | | | | | | | | |
Cash and cash equivalents | | $ | 821 | | | $ | — | | | $ | — | | | $ | 821 | | | $ | 821 | |
Investment securities | | 56 | | | 1,901 | | | 6 | | | 1,963 | | | 1,963 | |
Net finance receivables, less allowance for finance receivable losses | | — | | | — | | | 19,845 | | | 19,845 | | | 16,782 | |
Restricted cash and restricted cash equivalents | | 459 | | | — | | | — | | | 459 | | | 459 | |
Other assets * | | — | | | — | | | 53 | | | 53 | | | 49 | |
| | | | | | | | | | |
Liabilities | | | | | | | | | | |
Long-term debt | | $ | — | | | $ | 18,933 | | | $ | — | | | $ | 18,933 | | | $ | 17,661 | |
| | | | | | | | | | |
December 31, 2020 | | | | | | | | | | |
Assets | | | | | | | | | | |
Cash and cash equivalents | | $ | 2,255 | | | $ | 17 | | | $ | — | | | $ | 2,272 | | | $ | 2,272 | |
Investment securities | | 44 | | | 1,870 | | | 8 | | | 1,922 | | | 1,922 | |
Net finance receivables, less allowance for finance receivable losses | | — | | | — | | | 18,629 | | | 18,629 | | | 15,815 | |
Restricted cash and restricted cash equivalents | | 451 | | | — | | | — | | | 451 | | | 451 | |
Other assets * | | — | | | 2 | | | 60 | | | 62 | | | 62 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities | | | | | | | | | | |
Long-term debt | | $ | — | | | $ | 19,426 | | | $ | — | | | $ | 19,426 | | | $ | 17,800 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements Using | | Total Fair Value | | Total Carrying Value |
(dollars in millions) | | Level 1 | | Level 2 | | Level 3 | | |
| | | | | | | | | | |
March 31, 2021 | | | | | | | | | | |
Assets | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,298 | | | $ | 3 | | | $ | 0 | | | $ | 1,301 | | | $ | 1,301 | |
Investment securities | | 52 | | | 1,891 | | | 8 | | | 1,951 | | | 1,951 | |
Net finance receivables, less allowance for finance receivable losses | | 0 | | | 0 | | | 18,447 | | | 18,447 | | | 15,502 | |
Restricted cash and restricted cash equivalents | | 571 | | | 0 | | | 0 | | | 571 | | | 571 | |
Other assets * | | 0 | | | 3 | | | 57 | | | 60 | | | 60 | |
| | | | | | | | | | |
Liabilities | | | | | | | | | | |
Long-term debt | | $ | 0 | | | $ | 18,082 | | | $ | 0 | | | $ | 18,082 | | | $ | 16,789 | |
| | | | | | | | | | |
December 31, 2020 | | | | | | | | | | |
Assets | | | | | | | | | | |
Cash and cash equivalents | | $ | 2,255 | | | $ | 17 | | | $ | 0 | | | $ | 2,272 | | | $ | 2,272 | |
Investment securities | | 44 | | | 1,870 | | | 8 | | | 1,922 | | | 1,922 | |
Net finance receivables, less allowance for finance receivable losses | | 0 | | | 0 | | | 18,629 | | | 18,629 | | | 15,815 | |
Restricted cash and restricted cash equivalents | | 451 | | | 0 | | | 0 | | | 451 | | | 451 | |
Other assets * | | 0 | | | 2 | | | 60 | | | 62 | | | 62 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities | | | | | | | | | | |
Long-term debt | | $ | 0 | | | $ | 19,426 | | | $ | 0 | | | $ | 19,426 | | | $ | 17,800 | |
*Other assets at March 31,September 30, 2021 and December 31, 2020 primarily consists of finance receivables held for sale.
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 |
(dollars in millions) | | Level 1 | | Level 2 | | Level 3 | |
| | | | | | | | |
March 31, 2021 | | | | | | | | |
Assets | | | | | | | | |
Cash equivalents in mutual funds | | $ | 881 | | | $ | 0 | | | $ | 0 | | | $ | 881 | |
Cash equivalents in securities | | 0 | | | 3 | | | 0 | | | 3 | |
Investment securities: | | | | | | | | |
Available-for-sale securities | | | | | | | | |
| | | | | | | | |
U.S. government and government sponsored entities | | 0 | | | 11 | | | 0 | | | 11 | |
Obligations of states, municipalities, and political subdivisions | | 0 | | | 88 | | | 0 | | | 88 | |
Commercial paper | | 0 | | | 49 | | | 0 | | | 49 | |
Non-U.S. government and government sponsored entities | | 0 | | | 147 | | | 0 | | | 147 | |
Corporate debt | | 5 | | | 1,223 | | | 6 | | | 1,234 | |
RMBS | | 0 | | | 195 | | | 0 | | | 195 | |
CMBS | | 0 | | | 56 | | | 0 | | | 56 | |
CDO/ABS | | 0 | | | 87 | | | 0 | | | 87 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total available-for-sale securities | | 5 | | | 1,856 | | | 6 | | | 1,867 | |
Other securities | | | | | | | | |
| | | | | | | | |
Bonds: | | | | | | | | |
| | | | | | | | |
Non-U.S. government and government sponsored entities | | 0 | | | 1 | | | 0 | | | 1 | |
Corporate debt | | 0 | | | 12 | | | 1 | | | 13 | |
RMBS | | 0 | | | 1 | | | 0 | | | 1 | |
| | | | | | | | |
CDO/ABS | | 0 | | | 21 | | | 1 | | | 22 | |
Total bonds | | 0 | | | 35 | | | 2 | | | 37 | |
Preferred stock | | 18 | | | 0 | | | 0 | | | 18 | |
Common stock | | 29 | | | 0 | | | 0 | | | 29 | |
| | | | | | | | |
Total other securities | | 47 | | | 35 | | | 2 | | | 84 | |
Total investment securities | | 52 | | | 1,891 | | | 8 | | | 1,951 | |
| | | | | | | | |
Restricted cash equivalents in mutual funds | | 560 | | | 0 | | | 0 | | | 560 | |
Total | | $ | 1,493 | | | $ | 1,894 | | | $ | 8 | | | $ | 3,395 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements Using | | Total Carried At Fair Value |
(dollars in millions) | | Level 1 | | Level 2 | | Level 3 | |
| | | | | | | | |
September 30, 2021 | | | | | | | | |
Assets | | | | | | | | |
Cash equivalents in mutual funds | | $ | 204 | | | $ | — | | | $ | — | | | $ | 204 | |
| | | | | | | | |
Investment securities: | | | | | | | | |
Available-for-sale securities | | | | | | | | |
| | | | | | | | |
U.S. government and government sponsored entities | | — | | | 14 | | | — | | | 14 | |
Obligations of states, municipalities, and political subdivisions | | — | | | 84 | | | — | | | 84 | |
Commercial paper | | — | | | 28 | | | — | | | 28 | |
Non-U.S. government and government sponsored entities | | — | | | 148 | | | — | | | 148 | |
Corporate debt | | 5 | | | 1,273 | | | 4 | | | 1,282 | |
RMBS | | — | | | 180 | | | — | | | 180 | |
CMBS | | — | | | 52 | | | — | | | 52 | |
CDO/ABS | | — | | | 84 | | | — | | | 84 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total available-for-sale securities | | 5 | | | 1,863 | | | 4 | | | 1,872 | |
Other securities | | | | | | | | |
| | | | | | | | |
Bonds: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Corporate debt | | — | | | 10 | | | 1 | | | 11 | |
RMBS | | — | | | 1 | | | — | | | 1 | |
| | | | | | | | |
CDO/ABS | | — | | | 27 | | | — | | | 27 | |
Total bonds | | — | | | 38 | | | 1 | | | 39 | |
Preferred stock | | 22 | | | — | | | — | | | 22 | |
Common stock | | 29 | | | — | | | 1 | | | 30 | |
| | | | | | | | |
Total other securities | | 51 | | | 38 | | | 2 | | | 91 | |
Total investment securities | | 56 | | | 1,901 | | | 6 | | | 1,963 | |
| | | | | | | | |
Restricted cash equivalents in mutual funds | | 450 | | | — | | | — | | | 450 | |
Total | | $ | 710 | | | $ | 1,901 | | | $ | 6 | | | $ | 2,617 | |
| | | Fair Value Measurements Using | | Total Carried At Fair Value | | Fair Value Measurements Using | | Total Carried At Fair Value |
(dollars in millions) | (dollars in millions) | | Level 1 | | Level 2 | | Level 3 | | (dollars in millions) | | Level 1 | | Level 2 | | Level 3 | |
| December 31, 2020 | December 31, 2020 | | | | | | | | | December 31, 2020 | | | | | | | | |
Assets | Assets | | | | | | | | | Assets | | | | | | | | |
Cash equivalents in mutual funds | Cash equivalents in mutual funds | | $ | 2,018 | | | $ | 0 | | | $ | 0 | | | $ | 2,018 | | Cash equivalents in mutual funds | | $ | 2,018 | | | $ | — | | | $ | — | | | $ | 2,018 | |
Cash equivalents in securities | Cash equivalents in securities | | 0 | | | 17 | | | 0 | | | 17 | | Cash equivalents in securities | | — | | | 17 | | | — | | | 17 | |
Investment securities: | Investment securities: | | | | | | | | | Investment securities: | | | | | | | | |
Available-for-sale securities | Available-for-sale securities | | | | | | | | | Available-for-sale securities | | | | | | | | |
| U.S. government and government sponsored entities | U.S. government and government sponsored entities | | 0 | | | 12 | | | 0 | | | 12 | | U.S. government and government sponsored entities | | — | | | 12 | | | — | | | 12 | |
Obligations of states, municipalities, and political subdivisions | Obligations of states, municipalities, and political subdivisions | | 0 | | | 92 | | | 0 | | | 92 | | Obligations of states, municipalities, and political subdivisions | | — | | | 92 | | | — | | | 92 | |
Certificates of deposit and commercial paper | Certificates of deposit and commercial paper | | 0 | | | 28 | | | 0 | | | 28 | | Certificates of deposit and commercial paper | | — | | | 28 | | | — | | | 28 | |
Non-U.S. government and government sponsored entities | Non-U.S. government and government sponsored entities | | 0 | | | 146 | | | 0 | | | 146 | | Non-U.S. government and government sponsored entities | | — | | | 146 | | | — | | | 146 | |
Corporate debt | Corporate debt | | 5 | | | 1,207 | | | 6 | | | 1,218 | | Corporate debt | | 5 | | | 1,207 | | | 6 | | | 1,218 | |
RMBS | RMBS | | 0 | | | 215 | | | 0 | | | 215 | | RMBS | | — | | | 215 | | | — | | | 215 | |
CMBS | CMBS | | 0 | | | 58 | | | 0 | | | 58 | | CMBS | | — | | | 58 | | | — | | | 58 | |
CDO/ABS | CDO/ABS | | 0 | | | 78 | | | 0 | | | 78 | | CDO/ABS | | — | | | 78 | | | — | | | 78 | |
| Total available-for-sale securities | Total available-for-sale securities | | 5 | | | 1,836 | | | 6 | | | 1,847 | | Total available-for-sale securities | | 5 | | | 1,836 | | | 6 | | | 1,847 | |
Other securities | Other securities | | | | | | | | Other securities | | | | | | | |
| Bonds: | Bonds: | | | | | | | | | Bonds: | | | | | | | | |
Non-U.S. government and government sponsored entities | Non-U.S. government and government sponsored entities | | 0 | | | 1 | | | 0 | | | 1 | | Non-U.S. government and government sponsored entities | | — | | | 1 | | | — | | | 1 | |
Corporate debt | Corporate debt | | 0 | | | 16 | | | 1 | | | 17 | | Corporate debt | | — | | | 16 | | | 1 | | | 17 | |
| CDO/ABS | CDO/ABS | | 0 | | | 17 | | | 0 | | | 17 | | CDO/ABS | | — | | | 17 | | | — | | | 17 | |
Total bonds | Total bonds | | 0 | | | 34 | | | 1 | | | 35 | | Total bonds | | — | | | 34 | | | 1 | | | 35 | |
Preferred stock | Preferred stock | | 13 | | | 0 | | | 0 | | | 13 | | Preferred stock | | 13 | | | — | | | — | | | 13 | |
Common stock | Common stock | | 26 | | | 0 | | | 1 | | | 27 | | Common stock | | 26 | | | — | | | 1 | | | 27 | |
| Total other securities | Total other securities | | 39 | | | 34 | | | 2 | | | 75 | | Total other securities | | 39 | | | 34 | | | 2 | | | 75 | |
Total investment securities | Total investment securities | | 44 | | | 1,870 | | | 8 | | | 1,922 | | Total investment securities | | 44 | | | 1,870 | | | 8 | | | 1,922 | |
Restricted cash equivalents in mutual funds | Restricted cash equivalents in mutual funds | | 441 | | | 0 | | | 0 | | | 441 | | Restricted cash equivalents in mutual funds | | 441 | | | — | | | — | | | 441 | |
Total | Total | | $ | 2,503 | | | $ | 1,887 | | | $ | 8 | | | $ | 4,398 | | Total | | $ | 2,503 | | | $ | 1,887 | | | $ | 8 | | | $ | 4,398 | |
Due to the insignificant activity within the Level 3 assets during the three and nine months ended March 31,September 30, 2021 and 2020, 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.
FAIR VALUE MEASUREMENTS — NON-RECURRING BASIS
We measure the fair value of certain assets on a non-recurring basis when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Net impairment charges recorded on assets measured at fair value on a non-recurring basis were immaterial during the three and nine months ended March 31,September 30, 2021 and 2020.
FAIR VALUE MEASUREMENTS — VALUATION METHODOLOGIES AND ASSUMPTIONS
See Note 19 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for information regarding our methods and assumptions used to estimate fair value.
| | |
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 are subject to risks, uncertainties, assumptions, and other important factors that may cause actual results, performance or achievements to differ materially from those expressed in or implied by such forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. We do not undertake any obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law. Forward-looking statements include, without limitation, statements concerning future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Statements preceded by, followed by or that otherwise include the words “anticipates,” “appears,” “are likely,” “believes,” “estimates,” “expects,” “foresees,” “intends,” “plans,” “projects,” 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:
•adverse changes in general economic conditions, including the interest rate environment and the financial markets;
•risks associated with the global outbreak of a novel strain of coronavirus (“COVID-19”) or any additional strains of COVID-19 and the mitigation efforts by governments and related effects on us, our customers, and employees;measures taken in response thereto;
•our estimatesthe sufficiency of theour allowance for finance receivable losses may not be adequate to absorb actual losses, causing our provision for finance receivable losses to increase, which would adversely affect our results of operations;losses;
•increased levels of unemployment and personal bankruptcies;
•adverse changes in the rate at which we can collect or potentially sell our finance receivables portfolio;
•natural or accidental events such as earthquakes, hurricanes, tornadoes, fires,pandemics or floods affecting our customers, collateral, or our branches or other operating facilities;
•war, acts of terrorism, riots, civil disruption, pandemics, disruptions in the operation of our information systems, or other events disrupting business or commerce;
•risks related to the acquisition or sale of assets or businesses or the formation, termination, or operation of joint ventures or other strategic alliances, including increased loan delinquencies or net charge-offs, integration or migration issues, increased costs of servicing, incomplete records, and retention of customers;
•a failure in or breach of our operational or security systems or infrastructure or those of third parties, including as a result of cyber-attacks, or other cyber-related incidents involving the loss, theft or unauthorized disclosure of personally identifiable information (“PII”) of our present or former customers;cyber-attacks;
•our credit risk scoring models may be inadequate to properly assess the risk of customer unwillingness or lack of capacity to repay;inadequate;
•adverse changes in our ability to attract and retain employees or key executives to support our businesses;executives;
•increased competition or adverse changes in customer responsiveness to our distribution channels an inability to make technological improvements, and the ability of our competitors to offer a more attractive range of personal loan products than we offer;or products;
•changes in federal, state, or local laws, regulations, or regulatory policies and practices that adversely affect our ability to conduct business or the manner in which we currently are permitted to conduct business, such as licensing requirements, pricing limitations or restrictions on the method of offering products, as well as changes that may result from increased regulatory scrutiny of the sub-prime lending industry, our use of third-party vendors and real estate loan servicing, or changes in corporate or individual income tax laws or regulations, including effects of the Tax Act, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Consolidated Appropriations Act of 2021 (the “CAA”), and the American Rescue Plan Act of 2021 (the “ARPA”);industry;
•risks associated with our insurance operations, including insurance claims that exceed our expectations or insurance losses that exceed our reserves;
•our inability to successfully implement our growth strategy for our consumer lending business or successfully acquire portfolios of finance receivables;
•a change in the proportion of secured loans may affect our finance receivables and portfolio yield;
•declines in collateral values or increases in actual or projected delinquencies or net charge-offs;
•potential liability relating to finance receivables which we have sold or securitized or may sell or securitize in the future if it is determined that there was a non-curable breach of a representation or warranty made in connection with such transactions;operations;
•the costs and effects of any actual or alleged violations of any federal, state, or local laws, rules or regulations, including any associated litigation and damage to our reputation;regulations;
•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 associated litigation and damage to our reputation;authority;
•our substantial indebtedness and our continued ability to access the capital markets and maintain adequate current sources of funds to satisfy our cash flow requirements;
•our ability to comply with all our debt covenants;
•our ability to generate sufficient cash to service all of our indebtedness;
•any material impairment or write-down of the value of our assets;
•the ownership of OMH's common stock continues to be highly concentrated, which may prevent other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest;
•the effects of any downgrade of our debt ratings by credit rating agencies, which could have a negative impact on our costagencies.
•our substantial indebtedness, which could prevent us from meeting our obligations under our debt instruments and limit our ability to react to changes in the economy or our industry or our ability to incur additional borrowings;
•our ability to maintain sufficient capital levels in our regulated and unregulated subsidiaries;
•changes in accounting standards or tax policies and practices and the application of such new standards, policies and practices; and
•management estimates and assumptions, including estimates and assumptions about future events, may prove to be incorrect.
We also direct readers to the other risks and uncertainties discussed in Part I - Item 1A. “Risk Factors” in our Annual Report and 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. You should specifically consider the factors identified in this report and in the documents we file with the SEC, including our Annual Report, that could cause actual results to differ before making an investment decision to purchase our securities and should not place undue reliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
We are a leading provider of responsible personal loan products, primarily to non-primenear-prime customers. Our network of approximately 1,5001,400 branch offices in 44 states is staffed with expert personnel and is complemented by our centralized operations and our digital platform, which provides current and prospective customers the option of applying for a personal loan via our website, www.omf.com. The information on our website is not incorporated by reference into this report. In connection with our personal loan business, our insurance subsidiaries offer our customers optional credit and non-credit insurance, and other products.
In addition to our loan originations, and insurance and other product sales activities, we service loans owned by us and service loans owned by third parties; pursue strategic acquisitions and dispositions of assets and businesses, including loan portfolios or other financial assets; and may establish joint ventures or enter into other strategic alliances.
OUR PRODUCTS
Our product offerings include:
•Personal Loans — We offer personal loans through our branch network, centralized operations, and our website, www.omf.com, to customers who generally need timely access to cash. Our personal loans are non-revolving, with a fixed-rate,fixed rate, fixed terms generally between three and six years, and are secured by automobiles, other titled collateral, or are unsecured. At March 31,September 30, 2021, we had approximately 2.232.33 million personal loans, of which 52%51% were secured by titled property, totaling $17.6$18.8 billion of net finance receivables, compared to approximately 2.30 million personal loans, of which 53% were secured by titled property, totaling $18.1 billion at December 31, 2020. We also service personal loans for our whole loan sale partners which we commenced during the first quarter of 2021. At September 30, 2021, we managed a combined total of 2.37 million customer accounts and $19.1 billion of managed receivables.
•Insurance Products — We offer our customers optional credit insurance products (life insurance, disability insurance, and involuntary unemployment insurance) and optional non-credit insurance products through both our branch network and our centralized operations. Credit insurance and non-credit insurance products are provided by our affiliated insurance companies. We offer GAP coverage as a waiver product or insurance. We also offer optional membership plans from an unaffiliated company.
Our non-originating legacy products include:
•Other Receivables — We ceased originating real estate loans in 2012 and we continue to service or sub-service liquidating real estate loans. Effective September 30, 2018, our real estate loans previously classified as other receivables were transferred from held for investment to held for sale due to management’s intent to no longer hold these finance receivables for the foreseeable future. Effective March 31, 2020, our real estate loans held for sale are reported in “Other assets” of our consolidated balance sheets.
OUR SEGMENT
At March 31,September 30, 2021, Consumer and Insurance (“C&I&I”) is our only reportable segment. The remaining components (which we refer to as “Other”) consist of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which primarily include our liquidating real estate loans. See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our segment.
| | |
Recent Developments and Outlook |
RECENT DEVELOPMENTS
Credit Cards - BrightWay and BrightWay+
As part of our mission to improve the financial well-being of hardworking Americans, we continue to invest in new products and services that help our customers solve for their present needs while helping them build a stronger financial tomorrow. In the third quarter of 2021, select branches began offering our two credit cards, BrightWay and BrightWay+, giving our customers access to more credit, while also enabling a better financial future. Our credit cards will help customers take concrete steps to improve their financial well-being by offering tangible rewards for credit building behaviors. This is an important milestone for our company as we continue to deepen our existing customer relationships, attract new customers, and become the lender of choice for near-prime consumers. During the remainder of 2021, we will continue to expand our credit cards offering across our branch network, and also introduce direct-to-consumer card marketing.
Issuance and Redemption of Unsecured Debt
Redemption of 7.75% Senior Notes Due 2021
On January 8, 2021, OMFC paid a net aggregate amount of $681 million, inclusive of accrued interest and premiums, to complete the redemption of its 7.75% Senior Notes due 2021.
Social Bond Offering - Issuance of 3.50% Senior Notes Due 2027
As part of our commitment to improve the financial well-being of hardworking Americans, OMFC issued its inaugural Social Bond offering on June 22, 2021 for a total of $750 million aggregate principal amount of 3.50% Senior Notes due 2027. We intend to allocate an amount equivalent to the net proceeds of the offering to finance or re-finance, in part or in full, a portfolio of new or existing loans that meet the eligibility criteria of the OneMain Social Bond Framework. This offering advances our goal of enabling access to responsible financial products and services for vulnerable and/or historically underserved populations. At least 75% of the loans funded by the Social Bond will be allocated to women and/or minority borrowers as outlined in OneMain’s Social Bond Framework, which is available on OneMain’s Investor Relations website.
Issuance of 3.875% Senior Notes Due 2028
On August 11, 2021, OMFC issued a total of $600 million of aggregate principal amount of 3.875% Senior Notes due 2028.
For further information regarding the issuances and redemption of our unsecured debt, see Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report.
Securitization Transactions Completed: OMFIT 2021-1 and ODART 2021-1
For information regarding the issuances of our secured debt, see “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.
Apollo-Värde Group Share Sales
We entered into two underwriting agreements, in February and April of 2021, with certain entities managed by affiliates of Apollo-Värde Group, in their capacities as selling stockholders (the “Selling Stockholders”), and several underwriters (the “Underwriters”), for sale by the Selling Stockholders of up to 9,200,000 shares per agreement (a combined total of 18,400,000 shares) of OMH’s common stock. The two secondary public offerings closed during the first half of 2021 and resulted in the sale by the Selling Stockholders to the Underwriters of 18,400,000 shares of OMH common stock. We did not receive any proceeds from the sales of the shares by the Selling Stockholders in these transactions.
We entered into two underwriting agreements, in July and August of 2021, with an entity managed by affiliates of Apollo, in its capacity as selling stockholder (the “Selling Stockholder”), and an underwriter (the “Underwriter”) for the sale by the Selling Stockholder of up to 10,925,000 and 8,050,000 shares, respectively, of OMH’s common stock. The two secondary public offerings closed during the third quarter of 2021 and resulted in the sale by the Selling Stockholder to the Underwriter for a total of 18,975,000 shares of OMH common stock. We did not receive any proceeds from the sale of the shares by the Selling Stockholders in either transaction.
Concurrent Share Buyback
On August 3, 2021, pursuant to the July 2021 underwriting agreement, we concurrently purchased from the Underwriter 1,700,000 of the shares of OMH common stock at a purchase price of $58.36 per share, which is equal to the price at which the Underwriter purchased the shares from the Selling Stockholder, resulting in an aggregate purchase price of $99 million (the “Concurrent Share Buyback”). The terms and conditions of the Concurrent Share Buyback were reviewed and approved by a special committee of the OMH Board of Directors, comprised of independent and disinterested directors of OMH. The Concurrent Share Buyback was made pursuant to a new OMH board authorization and did not reduce our availability under the stock repurchase program commenced during the second quarter of 2021. The Concurrent Share Buyback was funded from our existing cash on hand. The Underwriter did not receive any compensation for the shares of OMH common stock repurchased by OMH.
Stock Repurchase Program
During the second quarter of 2021 we commenced our stock repurchase program. As of September 30, 2021, we have $78 million of authorized share repurchase capacity, excluding fees and commissions, remaining under the program. See “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Part II included in this report for further information on our shares repurchased during the three months ended September 30, 2021.
Cash Dividends to OMH's Common Stockholders
For information regarding the quarterly dividends declared by OMH, see “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.
Acquisition of Trim
On May 14, 2021, we completed our previously announced acquisition of Ask Benjamin, Inc. (“Trim”), a customer-focused financial wellness fintech company. The acquisition of Trim will enhance our mission to help our customers progress to a better financial future and further expand the ways in which we help our customers improve their financial well-being.
Management’s Response to the COVID-19 Pandemic
In early 2020, COVID-19 evolved into a global pandemic, resulting in widespread volatility and deterioration in economic conditions across the United States. Governmental authorities continue to take steps to combat the spread of COVID-19, including the ongoing distribution of COVID-19 vaccines, which over time are designed to create “herd immunity” and diminish, if not eliminate,vaccines. During the crisis. At this time, the vaccination program has accelerated in many states to allow all adults to receive the vaccines. In the meantime,pandemic, we have continuedcontinue to focus on assisting and supporting our customers and employees, while remaining committed to the safety of our employees. We continue to serve our customers by keeping our branch locations open with appropriate protective protocols in place and through our digital closing solutions. This combination has enhanced our operating performance through the pandemic and enabled us to serve and support our customers effectively during these unprecedented times. We believe the actions we have taken and the underlying strength of our balance sheet positionshas positioned us to take advantage of growth opportunities as the economy continues to recover.
Redemption of 7.75% Senior Notes due 2021
On January 8, 2021, OMFC paid a net aggregate amount of $681 million, inclusive of accrued interest and premiums, to complete the redemption of its 7.75% Senior Notes due 2021. For further information regarding the redemption of our unsecured debt, see Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report.
Cash Dividends to OMH's Common Stockholders
On February 8, 2021, OMH declared a dividend of $3.95 per share payable on February 25, 2021 to record holders of OMH's common stock as of the close of business on February 18, 2021. For information regarding the quarterly dividends declared by OMH, see “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.
Apollo-Värde Group Share Sale
On February 11, 2021, we entered into an underwriting agreement with certain entities managed by affiliates of Apollo-Värde Group, in their capacities as selling stockholders (together, the “Selling Stockholders”), and Barclays Capital Inc. and Citigroup Global Markets Inc., as representatives of the several underwriters (the “Underwriters”), for the sale by the Selling Stockholders of up to 9,200,000 shares of the OMH’s common stock, which included an option for the Underwriters to purchase up to 1,200,000 shares of the common stock. The shares sold by the Selling Stockholders were beneficially owned by the Apollo-Värde Group. On February 12, 2021, the Underwriters exercised in full their option to purchase additional shares of common stock, and on February 16, 2021, the offering and sale of 9,200,000 shares by the Selling Stockholders to the Underwriters was completed. We did not receive any proceeds from the sale of the shares by the Selling Stockholders.
Share Repurchase Program
In the second quarter of 2021, the Company announced plans to commence a $150 million share repurchase program. For information regarding the share repurchase program, see “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.
OUTLOOK
While weWe are actively managing the continuing impacts of the COVID-19 pandemic and areremain prepared to facefor any additional opportunities or challenges that may impact our industry we expect near-term impacts to continue to affect our originations.or business. The ultimate impact on our financial condition and results of operations depends on the speedcontinued progress of the economic recovery, driven by distribution and effectiveness of the COVID-19 vaccines, government stimulus measures,which includes states reopening,actively open for business, and ultimately, unemployment rates. There is also uncertainty regarding the effects of additional strains of COVID-19 and the impact of any related government actions, includingactions. Current trends of originations and credit performance are favorable, but we continue to diligently monitor the recently enacted American Rescue Plan Act of 2021. To the extent economies are suppressed or sloweconomy and its impact to recover, we could see lower consumer demand, higher delinquency trends, and related losses.our customers. We will continue to incorporate updates, as necessary, to our macroeconomic assumptions which could lead to further adjustments in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.
To further expand the ways in which we help our customers improve their financial well-being, on April 26, 2021, we announced that we have entered into an agreement to acquire Trim, a customer-focused financial wellness fintech company. The acquisition of Trim, subject to completion of standard closing conditions, will enhance OneMain’s digital features designed to help its customers progress to a better financial future.
Our experienced management team continues to remain focused on our strategic priorities of maintaining a solid balance sheet, providing a flexiblewith an adequate liquidity runway and capital coverage, upholding a conservative and disciplined underwriting model, and building strong relationships with our customers. We are well positioned to continue to supportsupporting and serveserving our customers, investinvesting in our business and drivedriving growth while creating value for our stockholders andas we effectively navigatingnavigate the evolving economic, social, political, and regulatory environments in which we operate. We further describe our key initiatives and strategies under “Recent Developments and Outlook” of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our Annual Report.
The results of OMFC are consolidated into the results of OMH. Due to the nominal differences between OMFC and OMH, content throughout this section relates only to OMH. See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information.
OMH'S CONSOLIDATED RESULTS
See the table below for OMH's consolidated operating results and selected financial statistics. A further discussion of OMH's operating results for our operating segment is provided under “Segment Results” below.
| | | | At or for the Three Months Ended March 31, | | | At or for the Three Months Ended September 30, | | At or for the Nine Months Ended September 30, | |
(dollars in millions, except per share amounts) | (dollars in millions, except per share amounts) | | 2021 | | 2020 | | (dollars in millions, except per share amounts) | | 2021 | | 2020 | | 2021 | | 2020 | |
| Interest income | Interest income | | $ | 1,060 | | | $ | 1,106 | | | Interest income | | $ | 1,113 | | | $ | 1,089 | | | $ | 3,244 | | | $ | 3,273 | | |
Interest expense | Interest expense | | 235 | | | 255 | | | Interest expense | | 237 | | | 255 | | | 703 | | | 781 | | |
Provision for finance receivable losses | Provision for finance receivable losses | | (2) | | | 531 | | | Provision for finance receivable losses | | 226 | | | 231 | | | 356 | | | 1,186 | | |
Net interest income after provision for finance receivable losses | Net interest income after provision for finance receivable losses | | 827 | | | 320 | | | Net interest income after provision for finance receivable losses | | 650 | | | 603 | | | 2,185 | | | 1,306 | | |
| Other revenues | Other revenues | | 91 | | | 141 | | | Other revenues | | 155 | | | 101 | | | 396 | | | 390 | | |
Other expenses | Other expenses | | 372 | | | 418 | | | Other expenses | | 429 | | | 363 | | | 1,195 | | | 1,194 | | |
Income before income taxes | Income before income taxes | | 546 | | | 43 | | | Income before income taxes | | 376 | | | 341 | | | 1,386 | | | 502 | | |
Income taxes | Income taxes | | 133 | | | 11 | | | Income taxes | | 88 | | | 91 | | | 335 | | | 131 | | |
Net income | Net income | | $ | 413 | | | $ | 32 | | | Net income | | $ | 288 | | | $ | 250 | | | $ | 1,051 | | | $ | 371 | | |
| | Share Data: | Share Data: | | | | Share Data: | | | | | | | |
| Earnings per share: | Earnings per share: | | | Earnings per share: | | | | | |
| Diluted | Diluted | | $ | 3.06 | | | $ | 0.24 | | | Diluted | | $ | 2.17 | | | $ | 1.86 | | | $ | 7.84 | | | $ | 2.75 | | |
| Selected Financial Statistics * | Selected Financial Statistics * | | | Selected Financial Statistics * | | | | | |
Finance receivables held for investment: | Finance receivables held for investment: | | | Finance receivables held for investment: | | |
Net finance receivables | Net finance receivables | | $ | 17,564 | | | $ | 18,269 | | | Net finance receivables | | $ | 18,843 | | | $ | 17,817 | | | $ | 18,843 | | | $ | 17,817 | | |
Number of accounts | Number of accounts | | 2,229,609 | | | 2,400,536 | | | Number of accounts | | 2,334,395 | | | 2,297,167 | | | 2,334,395 | | | 2,297,167 | | |
| Average net receivables | Average net receivables | | $ | 17,824 | | | $ | 18,380 | | | Average net receivables | | $ | 18,545 | | | $ | 17,740 | | | $ | 18,029 | | | $ | 18,010 | | |
Yield | Yield | | 24.08 | % | | 24.17 | % | | Yield | | 23.79 | % | | 24.39 | % | | 24.02 | % | | 24.24 | % | |
Gross charge-off ratio | Gross charge-off ratio | | 5.81 | % | | 7.35 | % | | Gross charge-off ratio | | 4.76 | % | | 6.14 | % | | 5.41 | % | | 6.90 | % | |
Recovery ratio | Recovery ratio | | (1.14) | % | | (0.90) | % | | Recovery ratio | | (1.24) | % | | (0.95) | % | | (1.23) | % | | (0.91) | % | |
Net charge-off ratio | Net charge-off ratio | | 4.67 | % | | 6.45 | % | | Net charge-off ratio | | 3.52 | % | | 5.19 | % | | 4.19 | % | | 5.99 | % | |
30-89 Delinquency ratio | 30-89 Delinquency ratio | | 1.57 | % | | 2.25 | % | | 30-89 Delinquency ratio | | 2.20 | % | | 1.95 | % | | 2.20 | % | | 1.95 | % | |
Origination volume | Origination volume | | $ | 2,284 | | | $ | 2,589 | | | Origination volume | | $ | 3,870 | | | $ | 2,887 | | | $ | 9,989 | | | $ | 7,523 | | |
Number of accounts originated | Number of accounts originated | | 225,102 | | | 276,773 | | | Number of accounts originated | | 404,602 | | | 300,376 | | | 1,018,924 | | | 771,628 | | |
Debt balances: | Debt balances: | | | Debt balances: | | |
Long-term debt balance | Long-term debt balance | | $ | 16,789 | | | $ | 20,443 | | | Long-term debt balance | | $ | 17,661 | | | $ | 17,531 | | | $ | 17,661 | | | $ | 17,531 | | |
Average daily debt balance | Average daily debt balance | | 17,035 | | | 17,675 | | | Average daily debt balance | | 17,680 | | | 17,546 | | | 17,192 | | | 18,331 | | |
* See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.
Comparison of Consolidated Results for theThree and Nine Months Ended March 31,September 30, 2021 and 2020
Interest income decreased $46increased $24 million or 4.2%2% for the three months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily due to growth in our loan portfolio, partially offset by lower yield.
Interest income decreased $29 million or 1% for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily due to lower yield.
Interest expense decreased $18 million or 7% for the three months ended September 30, 2021 when compared to the same period in 2020 primarily due to a decreaselower average cost of funds, partially offset by an increase in our average net finance receivables.debt.
Interest expense decreased $20$78 million or 7.8%10% for the threenine months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily due to a decrease in average debt along with a lower average cost of funds.
See Notes 6 and 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, and our revolving conduit facilities.
Provision for finance receivable losses decreased $533$5 million or 2% for the three months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily driven by a decrease in our net charge-offs due to improved credit performance aligning with governmental stimulus payments, partially offset by a build in our allowance for finance receivable losses due to growth in our loan portfolio.
Provision for finance receivable losses decreased $830 million or 70% for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily due to an improved outlook for unemployment and macroeconomic conditions, along with the decrease in our net charge-offs due to improved credit performance aligning with governmental stimulus payments, as compared to a build in our allowance reserve at the onset of the COVID-19 pandemic.
Other revenues increased $54 million or 53% for the three months ended September 30, 2021 when compared to the same period in 2020 primarily due to a net loss on the repurchase and repayment of debt in the prior year quarter and the gains on the sales of finance receivables associated with the whole loan sale program that commenced in the current year.
Other revenues increased $6 million or 2% for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily due to the gains on the sales of finance receivables associated with the whole loan sale program that commenced in the current year and an increase in membership plans fee revenue due to loan origination growth. The increase was partially offset by higher net losses on the repurchases and repayments of debt and a decrease in our charge-offs andinvestment revenue driven by lower interest rates on cash.
Other expenses increased $66 million or 18% for the expectation of improved unemployment and anticipated economic recovery from the COVID-19 pandemic asthree months ended September 30, 2021 when compared to a build in our allowance reserve in the same period in 2020 primarily due to the uncertainty of expected credit losses atexpense associated with the onset ofcash-settled stock-based awards in the current period and an increase in general operating expenses due to growth in our receivables and our strategic investments in the business, including new products, compared to COVID-19 pandemic.cost cutting measures in the prior year.
Other revenues decreased $50 million or 35.5%expenses remained relatively consistent for the threenine months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily due to a $47 million net loss on the repayment of debt in the current period and a decrease in insurance products sold due to reduced loan origination volume, partially offset by an increase in investment revenue primarily driven by higher mark-to-market net gains on other securities.
Other expenses decreased $46 million or 11.0% for the three months ended March 31, 2021 when compared to the same period in 2020 primarily due to a $35 million decrease in insurance policy and benefits claims expense due toresulting from lower than expected involuntary unemployment insurance claims, alongoffset by the expense associated with a decreasethe cash-settled stock-based awards in the current period and an increase in general operating expenses reflectingdue to growth in our efforts to manage costs through the pandemic, offset byreceivables and our strategic investments in the business.business, including new products, compared to COVID-19 cost cutting measures in the prior year.
Income taxes totaled $133$335 million for the threenine months ended March 31,September 30, 2021 compared to $11$131 million forin the three months ended March 31,same period in 2020 due to higher pre-tax income in the first quarter of 2021. current period.
For the three and nine months ended March 31,September 30, 2021, the effective tax rates were 23.5% and 24.2%, respectively. For the three and nine months ended September 30, 2020, the effective tax rates were 24.4%26.8% and 24.3%26.1%, respectively. The effective tax rates differed from the federal statutory rate of 21% primarily due to the effect of state income taxes.
See Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on effective tax rates.
NON-GAAP FINANCIAL MEASURES
Management uses C&I adjusted pretax income (loss), a non-GAAP financial measure, as a key performance measure of our segment. AdjustedC&I adjusted pretax income (loss) represents income (loss) before income taxes on a Segment Accounting Basis and excludes the expense associated with the cash-settled stock-based awards, direct costs associated with COVID-19, acquisition-related transaction and integration expenses, net loss resulting from repurchases and repayments of debt, and lower of cost or fair value adjustment on loans held for sale.restructuring charges. Management believes C&I adjusted pretax income (loss) is useful in assessing the profitability of our segment.
Management also uses C&I pretax capital generation, a non-GAAP financial measure, as a key performance measure of our segment. This measure represents C&I adjusted pretax income as discussed above and excludes the change in our C&I allowance for finance receivable losses in the period while still considering the C&I net charge-offs incurred during the period. Management believes that C&I pretax capital generation is useful in assessing the capital created in the period impacting the overall capital adequacy of the Company. Management believes that the Company’s reserves, combined with its equity, represent the Company’s loss absorption capacity.
Management utilizes both C&I adjusted pretax net income (loss) and C&I pretax capital generation in evaluating our performance. Additionally, both of these non-GAAP measures are consistent with the performance goals established in OMH’s executive compensation program. AdjustedC&I adjusted pretax income (loss) and C&I pretax capital generation are non-GAAP financial measures and should be considered supplemental to, but not as a substitute for or superior to, income (loss) before income taxes, net income, or other measures of financial performance prepared in accordance with GAAP.
OMH's reconciliations of income (loss) before income tax expense (benefit) on a Segment Accounting Basis to C&I adjusted pretax income (loss) (non-GAAP) by segment and Consumer and InsuranceC&I pretax capital generation (non-GAAP) were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended March 31, | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
Consumer and Insurance | | | | | | | | | | |
Income before income taxes - Segment Accounting Basis | | $ | 567 | | | $ | 51 | | | | | | | |
Adjustments: | | | | | | | | | | |
Direct costs associated with COVID-19 | | 2 | | | 3 | | | | | | | |
Acquisition-related transaction and integration expenses | | — | | | 6 | | | | | | | |
Net loss on repurchases and repayments of debt | | 38 | | | — | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Adjusted pretax income (non-GAAP) | | $ | 607 | | | $ | 60 | | | | | | | |
| | | | | | | | | | |
Provision for finance receivable losses | | $ | (3) | | | $ | 530 | | | | | | | |
Net charge-offs | | (205) | | | (296) | | | | | | | |
Pretax capital generation (non-GAAP) | | $ | 399 | | | $ | 294 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Other | | | | | | | | | | |
Loss before income taxes - Segment Accounting Basis | | $ | (3) | | | $ | (1) | | | | | | | |
Adjustments: | | | | | | | | | | |
| | | | | | | | | | |
Lower of cost or fair value adjustment (a) | | 1 | | | — | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Adjusted pretax loss (non-GAAP) | | $ | (2) | | | $ | (1) | | | | | | | |
(a) The carrying value of our remaining real estate loans classified in finance receivables held for sale exceeded their fair value, and accordingly, we have marked the loans to fair value and recorded an impairment in other revenue during the three months ended March 31, 2021. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
Consumer and Insurance | | | | | | | | | | |
Income before income taxes - Segment Accounting Basis | | $ | 388 | | | $ | 351 | | | $ | 1,429 | | | $ | 530 | | | |
Adjustments: | | | | | | | | | | |
Cash-settled stock-based awards | | 31 | | | — | | | 31 | | | — | | | |
Direct costs associated with COVID-19 | | 1 | | | 4 | | | 5 | | | 13 | | | |
Acquisition-related transaction and integration expenses | | — | | | 2 | | | — | | | 10 | | | |
Net loss on repurchases and repayments of debt | | 1 | | | 35 | | | 40 | | | 35 | | | |
| | | | | | | | | | |
Restructuring charges | | — | | | 1 | | | — | | | 7 | | | |
Adjusted pretax income (non-GAAP) | | $ | 421 | | | $ | 393 | | | $ | 1,505 | | | $ | 595 | | | |
| | | | | | | | | | |
Provision for finance receivable losses | | $ | 224 | | | $ | 232 | | | $ | 351 | | | $ | 1,184 | | | |
Net charge-offs | | (165) | | | (232) | | | (564) | | | (810) | | | |
Pretax capital generation (non-GAAP) | | $ | 480 | | | $ | 393 | | | $ | 1,292 | | | $ | 969 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The results of OMFC are consolidated into the results of OMH. Due to the nominal differences between OMFC and OMH, content throughout this section relate only to OMH. See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information.
See Note 1318 of the Notes to the Condensed Consolidated Financial Statements in Part II - Item 8 included in this reportour Annual Report for a description of our segment and methodologies used to allocate revenues and expenses to our C&I segment. See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in this report for reconciliations of segment and Other.total to condensed consolidated financial statement amounts.
CONSUMER AND INSURANCE
OMH's adjusted pretax income and selected financial statistics for C&I on an adjusted Segment Accounting Basis were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | At or for the Three Months Ended September 30, | | At or for the Nine Months Ended September 30, | | |
(dollars in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | |
Interest income | | $ | 1,111 | | | $ | 1,086 | | | $ | 3,237 | | | $3,260 | | |
Interest expense | | 235 | | | 250 | | | 698 | | | 765 | | |
Provision for finance receivable losses | | 224 | | | 232 | | | 351 | | | 1,184 | | |
Net interest income after provision for finance receivable losses | | 652 | | | 604 | | | 2,188 | | | 1,311 | | |
Other revenues | | 152 | | | 134 | | | 435 | | | 415 | | |
Other expenses | | 383 | | | 345 | | | 1,118 | | | 1,131 | | |
Adjusted pretax income (non-GAAP) | | $ | 421 | | | $ | 393 | | | $ | 1,505 | | | $595 | | |
| | | | | | | | | | |
| | | | | | | | | | |
Selected Financial Statistics * | | | | | | | | | | |
Finance receivables held for investment: | | | | | | | | | | |
Net finance receivables | | $ | 18,847 | | | $ | 17,826 | | | $ | 18,847 | | | $ | 17,826 | | | |
Number of accounts | | 2,334,395 | | | 2,297,167 | | | 2,334,395 | | | 2,297,167 | | | |
| | | | | | | | | | |
Average net receivables | | $ | 18,549 | | | $ | 17,750 | | | $ | 18,034 | | | $ | 18,023 | | | |
Yield | | 23.77 | % | | 24.34 | % | | 24.00 | % | | 24.16 | % | | |
Gross charge-off ratio | | 4.77 | % | | 6.15 | % | | 5.41 | % | | 6.91 | % | | |
Recovery ratio | | (1.24) | % | | (0.95) | % | | (1.22) | % | | (0.91) | % | | |
Net charge-off ratio | | 3.52 | % | | 5.20 | % | | 4.19 | % | | 6.00 | % | | |
30-89 Delinquency ratio | | 2.20 | % | | 1.95 | % | | 2.20 | % | | 1.95 | % | | |
Origination volume | | $ | 3,870 | | | $ | 2,887 | | | $ | 9,989 | | | $ | 7,523 | | | |
Number of accounts originated | | 404,602 | | | 300,376 | | | 1,018,924 | | | 771,628 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | At or for the Three Months Ended March 31, | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
Interest income | | $ | 1,057 | | | $ | 1,101 | | | | | | | |
Interest expense | | 233 | | | 249 | | | | | | | |
Provision for finance receivable losses | | (3) | | | 530 | | | | | | | |
Net interest income after provision for finance receivable losses | | 827 | | | 322 | | | | | | | |
Other revenues | | 136 | | | 136 | | | | | | | |
Other expenses | | 356 | | | 398 | | | | | | | |
Adjusted pretax income (non-GAAP) | | $ | 607 | | | $ | 60 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Selected Financial Statistics * | | | | | | | | | | |
Finance receivables held for investment: | | | | | | | | | | |
Net finance receivables | | $ | 17,569 | | | $ | 18,283 | | | | | | | |
Number of accounts | | 2,229,609 | | | 2,400,536 | | | | | | | |
| | | | | | | | | | |
Average net receivables | | $ | 17,830 | | | $ | 18,397 | | | | | | | |
Yield | | 24.04 | % | | 24.07 | % | | | | | | |
Gross charge-off ratio | | 5.81 | % | | 7.36 | % | | | | | | |
Recovery ratio | | (1.14) | % | | (0.90) | % | | | | | | |
Net charge-off ratio | | 4.67 | % | | 6.46 | % | | | | | | |
30-89 Delinquency ratio | | 1.57 | % | | 2.26 | % | | | | | | |
Origination volume | | $ | 2,284 | | | $ | 2,589 | | | | | | | |
Number of accounts originated | | 225,102 | | | 276,773 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
* See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.
Comparison of Adjusted Pretax Income for the Three and Nine Months Ended March 31,September 30, 2021 and 2020
Interest income decreased $44increased $25 million or 4.0%2% for the three months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily due to growth in our loan portfolio, partially offset by lower yield.
Interest income decreased $23 million or 1% for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily due to lower yield.
Interest expense decreased $15 million or 6% for the three months ended September 30, 2021 when compared to the same period in 2020 primarily due to a decreaselower average cost of funds, partially offset by an increase in our average net finance receivables.debt.
Interest expense decreased $16$67 million or 6.4%9% for the threenine months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily due to a decrease in average debt along with a lower average cost of funds.
See Notes 6 and 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, and our revolving conduit facilities.
Provision for finance receivable losses decreased $533$8 million or 3% for the three months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily driven by a decrease in our net charge-offs due to improved credit performance aligning with governmental stimulus payments, partially offset by a build in our allowance for finance receivable losses due to growth in our loan portfolio.
Provision for finance receivable losses decreased $833 million or 70% for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily due to an improved outlook for unemployment and macroeconomic conditions, along with the decrease in our net charge-offs due to improved credit performance aligning with governmental stimulus payments, as compared to a build in our allowance reserve at the onset of the COVID-19 pandemic.
Other revenues increased $18 million or 13% for the three months ended September 30, 2021 when compared to the same period in 2020 primarily due to the decrease in our charge-offs andgains on the expectationsales of improved unemployment and anticipated economic recovery fromfinance receivables associated with the COVID-19 pandemic as compared to a build in our allowance reservewhole loan sale program that commenced in the same period in 2020 primarily due to the uncertainty of expected credit losses at the onset of the COVID-19 pandemic.current year.
Other revenues increased $20 million or 5% for the threenine months ended March 31, 2021 remained consistent with the same period in 2020 primarily due to a decrease in insurance products sold due to reduced loan origination volume, offset by an increase in investment revenue primarily driven by higher mark-to-market net gains on other securities.
Other expenses decreased $42 million or 10.6% for the three months ended March 31,September 30, 2021 when compared to the same period in 2020 primarily due to the gains on the sales of finance receivables associated with the whole loan sale program that commenced in the current year and an increase in membership plans fee revenue due to loan origination growth. The increase was partially offset by a $35decrease in investment revenue primarily driven by lower interest rates on cash.
Other expenses increased $38 million or 11% for the three months ended September 30, 2021 when compared to the same period in 2020 primarily due to an increase in general operating expenses due to growth in our receivables and our strategic investments in the business, including new products, compared to COVID-19 cost cutting measures in the prior year.
Other expenses decreased $13 million or 1% for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily due to a decrease in insurance policy and benefits claims expense due to lower than expected involuntary unemployment insurance claims, along with a decreasepartially offset by an increase in general operating expenses reflectingdue to growth in our efforts to manage costs through the pandemic, offset byreceivables and our strategic investments in the business.
OTHER
“Other” consists of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which primarily include our liquidating real estate loans.
OMH's adjusted pretax loss ofbusiness, including new products, compared to COVID-19 cost cutting measures in the Other components on an adjusted Segment Accounting Basis was as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(dollars in millions) | | 2021 | | 2020 | | | | | | |
| | | | | | | | | | |
Interest income | | $ | 1 | | | $ | 2 | | | | | | | |
Interest expense | | 1 | | | 1 | | | | | | | |
| | | | | | | | | | |
Net interest income after provision for finance receivable losses | | — | | | 1 | | | | | | | |
Other revenues | | 4 | | | 4 | | | | | | | |
Other expenses | | 6 | | | 6 | | | | | | | |
Adjusted pretax loss (non-GAAP) | | $ | (2) | | | $ | (1) | | | | | | | |
Net finance receivables of the Other components, reported in “Other assets,” on a Segment Accounting Basis were as follows:
| | | | | | | | | | | | | | | | |
| | | | | | |
| | March 31, | | |
(dollars in millions) | | 2021 | | 2020 | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Net finance receivables held for sale: | | | | | | |
Other receivables | | $ | 46 | | | $ | 63 | | | |
prior year.
FINANCE RECEIVABLES
Our net finance receivables, consisting of personal loans, were $17.6$18.8 billion at March 31,September 30, 2021 and $18.1 billion at December 31, 2020. Our personal loans are non-revolving, with a fixed-rate, fixed terms generally between three and six years, and are secured by automobiles, other titled collateral, or are unsecured. We consider the delinquency status of our finance receivables as our key credit quality indicator. We monitor the delinquency of our finance receivable portfolio, including the migration between the delinquency buckets and changes in the delinquency trends to manage our exposure to credit risk in the portfolio. Our branch and central operation team members work with customers as necessary and offer a variety of borrower assistance programs to help customers continue to make payments.
DELINQUENCY
We monitor delinquency trends to evaluate the risk of future credit losses and employ advanced analytical tools to manage our exposure. Team members are actively engaged in collection activities throughout the early stages of delinquency. We closely track and report the percentage of receivables that are contractually 30-89 days past due as a benchmark of portfolio quality, collections effectiveness, and as a strong indicator of losses in coming quarters.
When finance receivables are contractually 60 days past due, we consider these accounts to be at an increased risk for loss and we transfer collection of these accounts to our centralized operations. Use of our centralized operations teams for managing late stagelate-stage delinquency allows us to apply more advanced collection technologies and tools, and drives operating efficiencies in servicing. At 90 days contractually past due, we consider our finance receivables to be nonperforming. We stop accruing finance charges and reverse finance charges previously accrued on nonperforming loans.
The delinquency information for net finance receivables is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Consumer and Insurance | | | | Segment to GAAP Adjustment | | GAAP Basis |
| | | | | | | | |
March 31, 2021 | | | | | | | | |
Current | | $ | 16,973 | | | | | $ | (5) | | | $ | 16,968 | |
30-59 days past due | | 157 | | | | | — | | | 157 | |
Delinquent (60-89 days past due) | | 119 | | | | | — | | | 119 | |
Performing | | 17,249 | | | | | (5) | | | 17,244 | |
| | | | | | | | |
Nonperforming (90+ days past due) | | 320 | | | | | — | | | 320 | |
Total net finance receivables | | $ | 17,569 | | | | | $ | (5) | | | $ | 17,564 | |
| | | | | | | | |
Delinquency ratio | | | | | | | | |
30-89 days past due | | 1.57 | % | | | | * | | 1.57 | % |
30+ days past due | | 3.39 | % | | | | * | | 3.39 | % |
60+ days past due | | 2.50 | % | | | | * | | 2.50 | % |
90+ days past due | | 1.82 | % | | | | * | | 1.82 | % |
| | | | | | | | |
December 31, 2020 | | | | | | | | |
Current | | $ | 17,362 | | | | | $ | (7) | | | $ | 17,355 | |
30-59 days past due | | 251 | | | | | — | | | 251 | |
Delinquent (60-89 days past due) | | 162 | | | | | — | | | 162 | |
Performing | | 17,775 | | | | | (7) | | | 17,768 | |
| | | | | | | | |
Nonperforming (90+ days past due) | | 316 | | | | | — | | | 316 | |
Total net finance receivables | | $ | 18,091 | | | | | $ | (7) | | | $ | 18,084 | |
| | | | | | | | |
Delinquency ratio | | | | | | | | |
30-89 days past due | | 2.28 | % | | | | * | | 2.28 | % |
30+ days past due | | 4.03 | % | | | | * | | 4.03 | % |
60+ days past due | | 2.64 | % | | | | * | | 2.64 | % |
90+ days past due | | 1.75 | % | | | | * | | 1.75 | % |
| | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Consumer and Insurance | | | | Segment to GAAP Adjustment | | GAAP Basis |
| | | | | | | | |
September 30, 2021 | | | | | | | | |
Current | | $ | 18,137 | | | | | $ | (4) | | | $ | 18,133 | |
30-59 days past due | | 258 | | | | | — | | | 258 | |
Delinquent (60-89 days past due) | | 157 | | | | | — | | | 157 | |
Performing | | 18,552 | | | | | (4) | | | 18,548 | |
| | | | | | | | |
Nonperforming (90+ days past due) | | 295 | | | | | — | | | 295 | |
Total net finance receivables | | $ | 18,847 | | | | | $ | (4) | | | $ | 18,843 | |
| | | | | | | | |
Delinquency ratio | | | | | | | | |
30-89 days past due | | 2.20 | % | | | | * | | 2.20 | % |
30+ days past due | | 3.77 | % | | | | * | | 3.77 | % |
60+ days past due | | 2.40 | % | | | | * | | 2.40 | % |
90+ days past due | | 1.57 | % | | | | * | | 1.57 | % |
| | | | | | | | |
December 31, 2020 | | | | | | | | |
Current | | $ | 17,362 | | | | | $ | (7) | | | $ | 17,355 | |
30-59 days past due | | 251 | | | | | — | | | 251 | |
Delinquent (60-89 days past due) | | 162 | | | | | — | | | 162 | |
Performing | | 17,775 | | | | | (7) | | | 17,768 | |
| | | | | | | | |
Nonperforming (90+ days past due) | | 316 | | | | | — | | | 316 | |
Total net finance receivables | | $ | 18,091 | | | | | $ | (7) | | | $ | 18,084 | |
| | | | | | | | |
Delinquency ratio | | | | | | | | |
30-89 days past due | | 2.28 | % | | | | * | | 2.28 | % |
30+ days past due | | 4.03 | % | | | | * | | 4.03 | % |
60+ days past due | | 2.64 | % | | | | * | | 2.64 | % |
90+ days past due | | 1.75 | % | | | | * | | 1.75 | % |
* Not applicable
ALLOWANCE FOR FINANCE RECEIVABLE LOSSES
We estimate and record an allowance for finance receivable losses to cover the estimated lifetime expected credit losses on our finance receivables. Our allowance for finance receivable losses may fluctuate based upon changes in portfolio growth, credit quality, and economic conditions.
Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the projected impacts and expected recovery offrom COVID-19 on the U.S. economy. We also considered known government stimulus measures, the involuntary unemployment insurance coverage of our portfolio, and our borrower assistance efforts. Our forecast leveraged economic projections from an industry leading forecast provider. At March 31,September 30, 2021, our economic forecast used a reasonable and supportable period of 12 months. In the near-term, weWe may experience further changes to the macroeconomic assumptions within our forecast, as well as changes to our loan loss performance outlook, both of which could lead to further changes in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.
Changes in the allowance for finance receivable losses were as follows:
| (dollars in millions) | (dollars in millions) | | Consumer and Insurance | | | | Segment to GAAP Adjustment | | Consolidated Total | (dollars in millions) | | Consumer and Insurance | | | Segment to GAAP Adjustment | | Consolidated Total |
| Three Months Ended March 31, 2021 | | | | |
Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | | | |
Balance at beginning of period | Balance at beginning of period | | $ | 2,283 | | | | | $ | (14) | | | $ | 2,269 | | Balance at beginning of period | | $ | 2,011 | | | | $ | (11) | | | $ | 2,000 | |
Provision for finance receivable losses | Provision for finance receivable losses | | (3) | | | | | 1 | | | (2) | | Provision for finance receivable losses | | 224 | | | | 2 | | | 226 | |
Charge-offs | Charge-offs | | (255) | | | | | — | | | (255) | | Charge-offs | | (223) | | | | — | | | (223) | |
Recoveries | Recoveries | | 50 | | | | | — | | | 50 | | Recoveries | | 58 | | | | — | | | 58 | |
Balance at end of period | Balance at end of period | | $ | 2,075 | | | | | $ | (13) | | | $ | 2,062 | | Balance at end of period | | $ | 2,070 | | | | $ | (9) | | | $ | 2,061 | |
| Allowance ratio | | 11.81 | % | | | | (b) | | 11.74 | % | |
| Three Months Ended March 31, 2020 | | | | |
| Three Months Ended September 30, 2020 | | Three Months Ended September 30, 2020 | | | |
Balance at beginning of period | Balance at beginning of period | | $ | 849 | | | | | $ | (20) | | | $ | 829 | | Balance at beginning of period | | $ | 2,342 | | | | $ | (18) | | | $ | 2,324 | |
Impact of adoption of ASU 2016-13 (a) | | 1,119 | | | | | (1) | | | 1,118 | | |
Provision for finance receivable losses | Provision for finance receivable losses | | 530 | | | | | 1 | | | 531 | | Provision for finance receivable losses | | 232 | | | | (1) | | | 231 | |
Charge-offs | Charge-offs | | (337) | | | | | — | | | (337) | | Charge-offs | | (274) | | | | — | | | (274) | |
Recoveries | Recoveries | | 41 | | | | | — | | | 41 | | Recoveries | | 42 | | | | 1 | | | 43 | |
Balance at end of period | Balance at end of period | | $ | 2,202 | | | | | $ | (20) | | | $ | 2,182 | | Balance at end of period | | $ | 2,342 | | | | $ | (18) | | | $ | 2,324 | |
| Allowance ratio | | 12.05 | % | | | | (b) | | 11.95 | % | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Nine Months Ended September 30, 2021 | | | | | | | | |
Balance at beginning of period | | $ | 2,283 | | | | | $ | (14) | | | $ | 2,269 | |
Provision for finance receivable losses | | 351 | | | | | 5 | | | 356 | |
Charge-offs | | (730) | | | | | — | | | (730) | |
Recoveries | | 166 | | | | | — | | | 166 | |
Balance at end of period | | $ | 2,070 | | | | | $ | (9) | | | $ | 2,061 | |
| | | | | | | | |
Allowance ratio | | 10.98 | % | | | | (a) | | 10.94 | % |
| | | | | | | | |
Nine Months Ended September 30, 2020 | | | | | | | | |
Balance at beginning of period | | $ | 849 | | | | | $ | (20) | | | $ | 829 | |
Impact of adoption of ASU 2016-13 (b) | | 1,119 | | | | | (1) | | | 1,118 | |
Provision for finance receivable losses | | 1,184 | | | | | 2 | | | 1,186 | |
Charge-offs | | (932) | | | | | 1 | | | (931) | |
Recoveries | | 122 | | | | | — | | | 122 | |
Balance at end of period | | $ | 2,342 | | | | | $ | (18) | | | $ | 2,324 | |
| | | | | | | | |
Allowance ratio | | 13.14 | % | | | | (a) | | 13.05 | % |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(a) Not applicable.
(b) As a result of the adoption of ASU 2016-13, we recorded a one-time adjustment to the allowance for finance receivable losses.
(b) Not applicable.
The current delinquency status of our finance receivable portfolio, inclusive of recent borrower performance, volume of our TDR activity, level and recoverability of collateral securing our finance receivable portfolio, and the reasonable and supportable forecast of economic conditions are the primary drivers that can cause fluctuations in our allowance for finance receivable losses from period to period. We monitor the allowance ratio to ensure we have a sufficient level of allowance for finance receivable losses based on the estimated lifetime expected credit losses in our finance receivable portfolio. The allowance for finance receivable losses as a percentage of net finance receivables decreased from prior period primarily due to the expectation ofan improved outlook for unemployment and anticipated economic recovery from the COVID-19 pandemicmacroeconomic conditions, partially offset by growth in our loan portfolio, as compared to a build in our allowance reserve in the same period in 2020 primarily due to the uncertainty of expected credit losses at the onset of the COVID-19 pandemic. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about the changes in the allowance for finance receivable losses.
TDR FINANCE RECEIVABLES
We make modifications to our finance receivables to assist borrowers experiencing 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 net finance receivables is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Consumer and Insurance | | | | Segment to GAAP Adjustment | | GAAP Basis |
| | | | | | | | |
March 31, 2021 | | | | | | | | |
TDR net finance receivables | | $ | 723 | | | | | $ | (33) | | | $ | 690 | |
Allowance for TDR finance receivable losses | | 327 | | | | | (16) | | | 311 | |
| | | | | | | | |
December 31, 2020 | | | | | | | | |
TDR net finance receivables | | $ | 728 | | | | | $ | (37) | | | $ | 691 | |
Allowance for TDR finance receivable losses | | 332 | | | | | (18) | | | 314 | |
| | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Consumer and Insurance | | | | Segment to GAAP Adjustment | | GAAP Basis |
| | | | | | | | |
September 30, 2021 | | | | | | | | |
TDR net finance receivables | | $ | 681 | | | | | $ | (25) | | | $ | 656 | |
Allowance for TDR finance receivable losses | | 292 | | | | | (11) | | | 281 | |
| | | | | | | | |
December 31, 2020 | | | | | | | | |
TDR net finance receivables | | $ | 728 | | | | | $ | (37) | | | $ | 691 | |
Allowance for TDR finance receivable losses | | 332 | | | | | (18) | | | 314 | |
DISTRIBUTION OF FINANCE RECEIVABLES BY FICO SCORE
There are many different categorizations used in the consumer lending industry to describe the creditworthiness of a borrower, including prime, near prime,near-prime, and sub-prime. While management does not utilize FICO scores to manage credit quality, we have presented the following on how we group FICO scores into said categories for comparability purposes across our industry:
•Prime: FICO score of 660 or higher
•Near prime:Near-prime: FICO score of 620-659
•Sub-prime: FICO score of 619 or below
Our customers’ demographics are, in many respects, near the national median but may vary from national norms in terms of credit and repayment histories. Many of our customers have experienced some level of prior financial difficulty or have limited credit experience and require higher levels of servicing and support from our branch network and central servicing operations.
The following table reflects our personal loans grouped into the categories described above based on borrower FICO credit scores as of the most recently refreshed date or as of the loan origination or purchase date:
| | | | | | | | | | | | | | |
| | | | |
(dollars in millions) | | March 31, 2021* | | December 31, 2020* |
| | | | |
FICO scores | | | | |
660 or higher | | $ | 4,646 | | | $ | 4,653 | |
620-659 | | 4,742 | | | 4,877 | |
619 or below | | 8,176 | | | 8,554 | |
Total | | $ | 17,564 | | | $ | 18,084 | |
| | | | | | | | | | | | | | |
| | | | |
(dollars in millions) | | September 30, 2021 | | December 31, 2020 |
| | | | |
FICO scores * | | | | |
660 or higher | | $ | 4,896 | | | $ | 4,653 | |
620-659 | | 5,172 | | | 4,877 | |
619 or below | | 8,775 | | | 8,554 | |
Total | | $ | 18,843 | | | $ | 18,084 | |
* Due to the impact of COVID-19, FICO scores as of March 31,September 30, 2021 and December 31, 2020 may have been impacted due toby government stimulus measures, borrower assistance programs, and potentially inconsistent reporting to credit bureaus.
| | |
Liquidity and Capital Resources |
SOURCES AND USES OF FUNDS
We finance the majority of our operating liquidity and capital needs through a combination of cash flows from operations, secured debt, unsecured debt, borrowings from revolving conduit facilities, whole loan sales, and equity. We may also utilize other sources in the future. As a holding company, all of the funds generated from our operations are earned by our operating subsidiaries. Our operating subsidiaries’ primary cash needs relate to funding our lending activities, our debt service obligations, our operating expenses, payment of insurance claims, and expenditures relating to upgrading and monitoring our technology platform, risk systems, and branch locations.
We have previously purchased portions of our unsecured indebtedness, and we may elect to purchase additional portions of our unsecured indebtedness or securitized borrowings 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 at our discretion.
During the threenine months ended March 31,September 30, 2021, OMH generated net income of $413 million.$1.1 billion. OMH’s net cash inflow from operating and investing activities totaled $754$140 million for the threenine months ended March 31,September 30, 2021. At March 31,September 30, 2021, our scheduled principal and interest payments for the remainder of 2021 on our existing debt (excluding securitizations) totaled $393$91 million. As of March 31,September 30, 2021, we had $9.2$11.0 billion of unencumbered gross finance receivables.
Based on our estimates and taking into accountconsidering 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 24 months.
OMFC’s Issuance and Notice of Redemption of Unsecured Debt
For information regarding the issuance and notice of redemption of OMFC's unsecured debt, see Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report.
Securitizations and Borrowings from Revolving Conduit Facilities
During the threenine months ended March 31,September 30, 2021, we did not terminate, cancel, or enter into any newcompleted one personal loan securitization (OMFIT 2021-1, see “Securitized Borrowings” below), and redeemed two personal loan securitizations or conduit facilities.(OMFIT 2017-1 and SLFT 2015-B). At March 31,September 30, 2021, we had $8.1$7.6 billion of gross finance receivables pledged as collateral for our securitization transactions.
Subsequent to September 30, 2021, we issued $1.0 billion principal amount of notes backed by personal loans (“ODART 2021-1”). ODART 2021-1 has a revolving period of two years, during which no principal payments are required to be made.
During the nine months ended September 30, 2021, we entered into two new revolving conduit facilities and terminated one revolving conduit facility. At March 31,September 30, 2021, the borrowing capacity of our revolving conduit facilities was $7.2$7.3 billion, and no amounts were drawn nor were any personal loans pledged as collateral under these facilities.
See Notes 6 and 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, and revolving conduit facilities.
Stock Repurchased
During the nine months ended September 30, 2021, OMH repurchased and held in treasury 1,347,844 shares of its common stock through its stock repurchase program for an aggregate total of $77 million, including commissions and fees. To provide funding for the OMH stock repurchase, the OMFC Board of Directors authorized dividend payments in the amount of $100 million.
Additionally, on August 3, 2021, OMH participated in the Concurrent Share Buyback, in which we purchased 1,700,000 shares of OMH common stock for an aggregate total of $99 million. The terms and conditions of the Concurrent Share Buyback were reviewed and approved by a special committee of the OMH Board of Directors, comprised of independent and disinterested directors of OMH. The Concurrent Share Buyback was made pursuant to a new OMH board authorization and did not reduce our availability under the stock repurchase program. To provide funding for the Concurrent Share Buyback, the OMFC Board of Directors authorized a dividend payment in the amount of $99 million. As of September 30, 2021, OMH held a total of 3,047,844 shares of treasury stock. For additional information regarding the shares repurchased, see Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Part II included in this report.
Cash Dividend to OMH's Common Stockholders
As of March 31,September 30, 2021, the dividend declarationdeclarations for the current year by OMH's board of directors waswere as follows:
| Declaration Date | Declaration Date | | Record Date | | Payment Date | | Dividend Per Share | | Amount Paid | Declaration Date | | Record Date | | Payment Date | | Dividend Per Share | | Amount Paid |
| | | | | | | | | (in millions) | | | | | | | | | (in millions) |
February 8, 2021 | February 8, 2021 | | February 18, 2021 | | February 25, 2021 | | $ | 3.95 | | * | | $ | 531 | | February 8, 2021 | | February 18, 2021 | | February 25, 2021 | | $ | 3.95 | | * | | $ | 531 | |
| April 26, 2021 | | April 26, 2021 | | May 6, 2021 | | May 13, 2021 | | 0.70 | | | 94 | |
July 21, 2021 | | July 21, 2021 | | August 6, 2021 | | August 13, 2021 | | 4.20 | | * | | 555 | |
| Total | Total | | $ | 3.95 | | | | $ | 531 | | Total | | $ | 8.85 | | | | $ | 1,180 | |
* IncludesOur February 8, 2021 and July 21, 2021 dividend declarations included the minimum quarterly dividenddividends of $0.45 per share as of February 8, 2021.and $0.70 per share, respectively.
To provide funding for the dividend, OMFC paid dividends of $531 million$1.2 billion to OMH during the threenine months ended March 31,September 30, 2021.
On April 26,October 20, 2021, OMH declared a dividend of $0.70 per share payable on May 13,November 9, 2021 to record holders of OMH's common stock as of the close of business on May 6,November 2, 2021. To provide funding for the OMH dividend, the OMFC Board of Directors authorized a dividend in the amount of up to $95$92 million payable on or after May 11,November 5, 2021.
While OMH intends to pay its minimum quarterly dividend, currently $0.70 per share, for the foreseeable future, and announced its intention to evaluate dividends above the minimum every first and third quarters, all subsequent dividends will be reviewed and declared at the discretion of the board of directors and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends, and other considerations that the board of directors deems relevant. OMH's dividend payments may change from time to time, and the board of directors may choose not to continue to declare dividends in the future. See our “Dividend Policy” in Part II - Item 5 included in our Annual Report for further information.
The Company plans to commence a $150 million programmatic share repurchase plan. The timing and amount of any shares repurchased will be determined by the company based on its evaluation of market conditions and other factors and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. The company is not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. The actual timing, number and share price of shares repurchased will depend on a number of factors, including the market price of the company’s stock, general market and economic conditions, and applicable legal requirements. The share repurchase program is expected to be funded by cash on hand and future cash generated from on-going operations.
Whole Loan Sale Transactions
As of March 31,September 30, 2021, we have entered into whole loan sale flow agreements, with remaining terms ranging between one to two years, with third-party buyers in which we agreed to sell a combined total of $120$180 million gross receivables per quarter of newly originated unsecured personal loans over a two-year commitment period. These unsecured personal loans arealong with any associated accrued interest. Our first sale was executed in the first quarter of 2021. During the three and nine months ended September 30, 2021, we sold to unconsolidated VIEs$160 million and are derecognized from our balance sheet at$325 million of gross finance receivables, respectively. For further information on the time of sale. We service the personal loans sold and are entitled to a servicing fee and other fees commensurate with the services performed as partwhole loan sale transactions, see Note 3 of the agreements. The amount sold underNotes to the agreements during the three months ended March 31, 2021 was immaterial.Condensed Consolidated Financial Statements included in this report.
LIQUIDITY
OMH's Operating Activities
Net cash provided by operations of $556 million$1.6 billion for the threenine months ended March 31,September 30, 2021 reflected net income of $413$1.1 billion, the impact of non-cash items, and an unfavorable change in working capital of $53 million. Net cash provided by operations of $1.6 billion for the nine months ended September 30, 2020 reflected net income of $371 million, the impact of non-cash items, and an unfavorable change in working capital of $23 million. Net cash provided by operations of $565 million for the three months ended March 31, 2020 reflected net income of $32 million, the impact of non-cash items, and an unfavorable change in working capital of $45$108 million.
OMH's Investing Activities
Net cash provided by investing activities of $198 million for the three months ended March 31, 2021 was primarily due to net principal collections of finance receivables, calls, sales, and maturities of available-for-sale and other securities, partially offset by purchases of available-for-sale and other securities. Net cash used for investing activities of $196$1.5 billion and $257 million for the threenine months ended March 31,September 30, 2021 and 2020, respectively, was primarily due to net principal originations of finance receivables and purchases of available-for-sale and other securities, partially offset by calls, sales, and maturities of available-for-sale securities.and other securities and proceeds from sales of finance receivables.
OMH's Financing Activities
Net cash used for financing activities of $1.6 billion for the threenine months ended March 31,September 30, 2021 was primarily due to debt repayments, and cash dividends paid.paid, and the cash paid to repurchase common stock during the period, partially offset by the issuances of the OMFIT 2021-1 securitization, the Social Bond, and the 3.875% Senior Notes due 2028. Net cash provided byused for financing activities of $2.8 billion$563 million for the threenine months ended March 31,September 30, 2020 was primarily due to net issuances of long-term debt offset by therepayments, cash dividends paid, and the cash paid on the common stock repurchased, inpartially offset by the quarter.issuances of the 8.875% Senior Notes due 2025, and the OMFIT 2020-1 and OMFIT 2020-2 securitizations during the period.
OMH's Cash and Investments
At March 31,September 30, 2021, we had $1.3 billion$821 million of cash and cash equivalents, which included $119$205 million of cash and cash equivalents held at our regulated insurance subsidiaries or for other operating activities that is unavailable for general corporate purposes.
At March 31,September 30, 2021, we had $2.0 billion of investment securities, which are all held as part of our insurance operations and are unavailable for general corporate purposes.
Liquidity Risks and Strategies
OMFC’s credit ratings are non-investment grade, which has a significant impact on our cost and access to capital. This, in turn, can negatively affect our ability to manage our liquidity and our ability or cost to refinance our indebtedness. There are numerous risks to our financial results, liquidity, capital raising, and debt refinancing plans, some of which may not be quantified in our current liquidity forecasts. These risks are further described in our “Liquidity and Capital Resources” of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our Annual Report.
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 strategies that are further described in our “Liquidity and Capital Resources” of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our Annual Report.
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. AHL and Triton did not pay any dividends during the threenine months ended March 31,September 30, 2021 and 2020. See Note 11 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for further information on these state restrictions and the dividends paid by our insurance subsidiaries in 2020.
OUR DEBT AGREEMENTS
The debt agreements to which OMFC and its subsidiaries are a party include customary terms and conditions, including covenants and representations and warranties. See Note 9 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for more information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.
Securitized Borrowings
We execute private securitizations under Rule 144A of the Securities Act of 1933. As of March 31,September 30, 2021, our structured financings consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Issue Amount (a) | | Initial Collateral Balance | | Current Note Amounts Outstanding (a) | | Current Collateral Balance (b) | | Current Weighted Average Interest Rate | | Original Revolving Period | | | | |
| | | | | | | | | | | | | | | | |
SLFT 2015-B | | $ | 314 | | | $ | 336 | | | $ | 132 | | | $ | 157 | | | 4.19 | % | | 5 years | | | | |
SLFT 2017-A | | 652 | | | 685 | | | 346 | | | 400 | | | 3.23 | % | | 3 years | | | | |
OMFIT 2015-3 | | 293 | | | 329 | | | 182 | | | 197 | | | 4.57 | % | | 5 years | | | | |
OMFIT 2016-3 | | 350 | | | 397 | | | 317 | | | 414 | | | 4.33 | % | | 5 years | | | | |
OMFIT 2017-1 | | 947 | | | 988 | | | 264 | | | 325 | | | 3.33 | % | | 2 years | | | | |
OMFIT 2018-1 | | 632 | | | 650 | | | 585 | | | 628 | | | 3.61 | % | | 3 years | | | | |
OMFIT 2018-2 | | 368 | | | 381 | | | 350 | | | 400 | | | 3.87 | % | | 5 years | | | | |
OMFIT 2019-1 | | 632 | | | 654 | | | 554 | | | 598 | | | 3.82 | % | | 2 years | | | | |
OMFIT 2019-2 | | 900 | | | 947 | | | 900 | | | 995 | | | 3.30 | % | | 7 years | | | | |
OMFIT 2019-A | | 789 | | | 892 | | | 750 | | | 892 | | | 3.78 | % | | 7 years | | | | |
OMFIT 2020-1 | | 821 | | | 958 | | | 821 | | | 958 | | | 4.12 | % | | 2 years | | | | |
OMFIT 2020-2 | | 1,000 | | | 1,053 | | | 1,000 | | | 1,053 | | | 2.03 | % | | 5 years | | | | |
ODART 2018-1 | | 947 | | | 964 | | | 523 | | | 558 | | | 3.66 | % | | 2 years | | | | |
ODART 2019-1 | | 737 | | | 750 | | | 700 | | | 750 | | | 3.79 | % | | 5 years | | | | |
Total securitizations | | $ | 9,382 | | | $ | 9,984 | | | $ | 7,424 | | | $ | 8,325 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Issue Amount (a) | | Initial Collateral Balance | | Current Note Amounts Outstanding (a) | | Current Collateral Balance (b) | | Current Weighted Average Interest Rate | | Original Revolving Period | | | | |
| | | | | | | | | | | | | | | | |
SLFT 2017-A | | $ | 652 | | | $ | 685 | | | $ | 201 | | | $ | 261 | | | 3.62 | % | | 3 years | | | | |
OMFIT 2015-3 | | 293 | | | 329 | | | 107 | | | 130 | | | 5.23 | % | | 5 years | | | | |
OMFIT 2016-3 | | 350 | | | 397 | | | 212 | | | 290 | | | 4.58 | % | | 5 years | | | | |
OMFIT 2018-1 | | 632 | | | 650 | | | 381 | | | 423 | | | 3.78 | % | | 3 years | | | | |
OMFIT 2018-2 | | 368 | | | 381 | | | 350 | | | 400 | | | 3.87 | % | | 5 years | | | | |
OMFIT 2019-1 | | 632 | | | 654 | | | 356 | | | 402 | | | 4.01 | % | | 2 years | | | | |
OMFIT 2019-2 | | 900 | | | 947 | | | 900 | | | 995 | | | 3.30 | % | | 7 years | | | | |
OMFIT 2019-A | | 789 | | | 892 | | | 750 | | | 892 | | | 3.78 | % | | 7 years | | | | |
OMFIT 2020-1 | | 821 | | | 958 | | | 821 | | | 958 | | | 4.12 | % | | 2 years | | | | |
OMFIT 2020-2 | | 1,000 | | | 1,053 | | | 1,000 | | | 1,053 | | | 2.03 | % | | 5 years | | | | |
OMFIT 2021-1 | | 850 | | | 904 | | | 850 | | | 904 | | | 1.57 | % | | 5 years | | | | |
ODART 2018-1 | | 947 | | | 964 | | | 327 | | | 354 | | | 3.79 | % | | 2 years | | | | |
ODART 2019-1 | | 737 | | | 750 | | | 700 | | | 750 | | | 3.79 | % | | 5 years | | | | |
Total securitizations | | $ | 8,971 | | | $ | 9,564 | | | $ | 6,955 | | | $ | 7,812 | | | | | | | | | |
(a) Issue Amount includes the retained interest amounts as applicable and the Current Note Amounts Outstanding balances reflect pay-downs subsequent to note issuance and exclude retained interest amounts.
(b) Inclusive of in-process replenishments of collateral for securitized borrowings in a revolving status as of March 31,September 30, 2021.
See “Liquidity and Capital Resources - Sources and Uses of Funds - Securitizations and Borrowings from Revolving Conduit Facilities” above for information on the securitization transaction completed subsequent to September 30, 2021.
Revolving Conduit Facilities
In addition to the structured financings, we have access to 1314 revolving conduit facilities with a total borrowing capacity of $7.2$7.3 billion as of March 31,September 30, 2021:
| | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Advance Maximum Balance | | Amount Drawn | | | | |
| | | | | | | | |
Rocky RiverOneMain Financial Auto Funding I, LLC | | $ | 400850 | | | $ | — | | | | | |
OneMain Financial Funding VII, LLC | | 850 | | | — | | | | | |
OneMain Financial Funding IX, LLC | | 850 | | | — | | | | | |
Seine River Funding, LLC | | 650 | | | — | | | | | |
Mystic River Funding, LLC | | 850600 | | | — | | | | | |
Chicago River Funding, LLC | | 500 | | | — | | | | | |
Columbia River Funding, LLC | | 500 | | | — | | | | | |
Hudson River Funding, LLC | | 500 | | | — | | | | | |
OneMain Financial Funding VIII, LLC | | 500 | | | — | | | | | |
Thayer Brook Funding, LLC | | 500 | | | — | | | | | |
Hubbard River Funding, LLC | | 250 | | | — | | | | | |
Seine River Funding, LLC | | 650 | | | — | | | | | |
New River Funding Trust | | 250 | | | — | | | | | |
Hudson River Thames Funding, LLC | | 500 | | | — | | | | | |
Columbia River Funding, LLC | | 500250 | | | — | | | | | |
St. Lawrence River Funding, LLC | | 250 | | | — | | | | | |
OneMain Financial Funding VII, LLC | | 850 | | | — | | | | | |
OneMain Financial Auto Funding I, LLC | | 850 | | | — | | | | | |
Total | | $ | 7,2007,300 | | | $ | — | | | | | |
| | |
Off-Balance Sheet Arrangements |
We have no material off-balance sheet arrangements as defined by SEC rules, and we had no material off-balance sheet exposure to losses associated with unconsolidated VIEs at March 31,September 30, 2021 or December 31, 2020.
| | |
Critical Accounting Policies and Estimates |
We describe our significant accounting policies used in the preparation of our consolidated financial statements in Note 3 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report. 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; and
•TDR finance receivables.
There have been no material changes to our critical accounting policies or to our methodologies for deriving critical accounting estimates during the threenine months ended March 31,September 30, 2021.
| | |
Recent Accounting Pronouncements |
See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this report for discussion of recently issued accounting pronouncements.
Our personal loan volume is generally highest during the second and fourth quarters of the year, primarily due to marketing efforts and seasonality of demand. Demand for our personal loans is usually lower in January and February after the holiday season and as a result of tax refunds. Delinquencies on our personal loans are generally lower in the first and second quarters and tend to rise throughout the remainder of the year. These seasonal trends contribute to fluctuations in our operating results and cash needs throughout the year. Our normalThe seasonality trends continueimpact on our delinquency trend continues to be affected by the COVID-19 pandemic and mitigating efforts from government stimulus measures.
| | |
Item 3. Quantitative and Qualitative Disclosures About Market Risk. |
There have been no material changes to our market risk previously disclosed in Part II - Item 7A included in our Annual Report.
| | |
Item 4. Controls and Procedures. |
CONTROLS AND PROCEDURES OF ONEMAIN HOLDINGS, INC.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that the information OMH is required to disclose in reports that OMH files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of March 31,September 30, 2021, OMH carried out an evaluation of the effectiveness of its 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 OMH’s management, including the Chief Executive Officer and the Chief Financial Officer. Based on the evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that OMH's disclosure controls and procedures were effective as of March 31,September 30, 2021 to provide the reasonable assurance described above.
Changes in Internal Control over Financial Reporting
There were no changes in OMH's internal control over financial reporting during the firstthird quarter of 2021 that have materially affected, or are reasonably likely to materially affect, OMH's internal control over financial reporting.
CONTROLS AND PROCEDURES OF ONEMAIN FINANCE CORPORATION
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that the information OMFC is required to disclose in reports that OMFC files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of March 31,September 30, 2021, OMFC carried out an evaluation of the effectiveness of its 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 OMFC’s management, including the Chief Executive Officer and the Chief Financial Officer. Based on the evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that OMFC's disclosure controls and procedures were effective as of March 31,September 30, 2021 to provide the reasonable assurance described above.
Changes in Internal Control over Financial Reporting
There were no changes in OMFC's internal control over financial reporting during the firstthird quarter of 2021 that have materially affected, or are reasonably likely to materially affect, OMFC's internal control over financial reporting.
PART II — OTHER INFORMATION
| | |
Item 1. Legal Proceedings. |
See Note 12 of the Notes to the Condensed Consolidated Financial Statements included in this report.
There have been no material changesIn addition to our riskthe other information set forth in this report, you should consider the factors includeddiscussed in Part I - Item 1A of1A. “Risk Factors” in our Annual Report.Report, which could materially affect our business, financial condition, or future results.
| | |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
None.There were no unregistered sales of our common stock during the period covered by this Quarterly Report on Form 10-Q.
Issuer Purchases of Equity Securities
The following table presents information regarding repurchases of our common stock, excluding commissions and fees, during the quarter ended September 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (a) | | Average Price paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) | | Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b) |
July 1 - July 31 | | 132,376 | | | $ | 59.73 | | | 132,376 | | $ | 112,239,658 | |
August 1 - August 31 | | 2,009,513 | | | 58.26 | | | 309,513 | | | 94,383,679 | |
September 1 - September 30 | | 293,600 | | | 56.51 | | | 293,600 | | | 77,791,092 | |
Total | | 2,435,489 | | | $ | 58.13 | | | 735,489 | | |
| | | | | | | | |
(a) On August 3, 2021, we participated in the Concurrent Share Buyback, in which we purchased 1,700,000 shares of OMH common stock that were the subject of a secondary public offering by the Selling Stockholder at a purchase price of $58.36 per share, which is equal to the price at which the Underwriter purchased such shares from the Selling Stockholder. The Concurrent Share Buyback did not reduce our availability under the stock repurchase program. For additional information regarding the Concurrent Share Buyback, see “Recent Developments and Outlook — Concurrent Share Buyback” under Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report.
(b) OMH Board of Directors approved a $200 million stock repurchase program, excluding commission and fees, with no stated expiration during the first quarter of 2020. The timing, number and share price of any additional shares repurchased will be determined by OMH based on its evaluation of market conditions and other factors and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. OMH is not obligated to purchase any shares under the program, and may be modified, suspended or discontinued at any time.
| | |
Item 3. Defaults Upon Senior Securities. |
None.
| | |
Item 4. Mine Safety Disclosures. |
None.
| | |
Item 5. Other Information. |
None.
| | | | | | | | |
Exhibit Number | | Description |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | Underwriting Agreement,Thirteenth Supplemental Indenture relating to the Notes, dated Februaryas of August 11, 2021, among OneMain Finance Corporation, OneMain Holdings, Inc., OMH (ML), L.P. and V-OMH (ML) II, L.P., as selling stockholders, and Barclays Capital Inc. and Citigroup Global Markets Inc.,Wilmington Trust, National Association, as representativestrustee (including the form of the several underwriters named3.875% Senior Notes due 2028 included therein incorporatedas Exhibit A). Incorporated by reference to Exhibit 1.14.2 to OMH’sour Current Report on Form 8-K filed on February 16,August 11, 2021. |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
101 | | Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Shareholder’s Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements. |
| | |
104 | | Cover Page Interactive Data File in Inline XBRL format (Included in Exhibit 101). |
* Management contract or compensatory plan or arrangement.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | | | | |
| | | ONEMAIN HOLDINGS, INC. |
| | | (Registrant) |
| | | |
Date: | April 27,October 21, 2021 | | By: | /s/ Micah R. Conrad |
| | | | Micah R. Conrad |
| | | | Executive Vice President and Chief Financial Officer |
| | | | (Duly Authorized Officer and Principal Financial Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | | | | |
| | | ONEMAIN FINANCE CORPORATION |
| | | (Registrant) |
| | | |
Date: | April 27,October 21, 2021 | | By: | /s/ Micah R. Conrad |
| | | | Micah R. Conrad |
| | | | Executive Vice President and Chief Financial Officer |
| | | | (Duly Authorized Officer and Principal Financial Officer) |