OneMain Holdings, Inc. - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

OF 1934

For the quarterly period ended September 30, 2020

☐ 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 October 22, 2020, there were 134,325,845 shares of OneMain Holdings, Inc’s common stock, $0.01 par value, outstanding.

At October 22, 2020, there were 10,160,021 shares of OneMain Finance Corporation’s common stock, $0.50 par value, outstanding.

TABLE OF CONTENTS



GLOSSARY		4

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements of OneMain Holdings, Inc. and Subsidiaries (Unaudited):
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Operations	8
	Condensed Consolidated Statements of Comprehensive Income	9
	Condensed Consolidated Statements of Shareholders’ Equity	10
	Condensed Consolidated Statements of Cash Flows	11
	Financial Statements of OneMain Finance Corporation and Subsidiaries (Unaudited):
	Condensed Consolidated Balance Sheets	12
	Condensed Consolidated Statements of Operations	13
	Condensed Consolidated Statements of Comprehensive Income	14
	Condensed Consolidated Statements of Shareholder’s Equity	15
	Condensed Consolidated Statements of Cash Flows	16
	Notes to the Condensed Consolidated Financial Statements	18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	69
Item 4.	Controls and Procedures	70
	Controls and Procedures of OneMain Holdings, Inc.	70
	Controls and Procedures of OneMain Finance Corporation	70

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibit Index	74

SIGNATURES
	OneMain Holdings, Inc. Signature	75
	OneMain Finance Corporation Signature	76

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GLOSSARY

Terms and abbreviations used in this report are defined below.


Term or Abbreviation						Definition

2019 Annual Report on Form 10-K						Combined OMH and SFC (now known as OMFC) Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 14, 2020
30-89 Delinquency ratio						net finance receivables 30-89 days past due as a percentage of net finance receivables










8.25% Senior Notes due 2020						$1.0 billion of 8.25% Senior Notes due 2020 issued by OMFC on April 11, 2016, guaranteed by OMH and redeemed in full on July 29, 2020
8.875% Senior Notes due 2025						$600 million of 8.875% Senior Notes due 2025 issued by OMFC on May 14, 2020 and guaranteed by OMH


ABS						asset-backed securities
Accretable yield						the excess of the cash flows expected to be collected on the purchased credit impaired finance receivables over the discounted cash flows
Adjusted pretax income (loss)						a non-GAAP financial measure used by management as a key performance measure of our segment
AETR						annual effective tax rate
AHL						American Health and Life Insurance Company, an insurance subsidiary of OneMain Financial Holdings, LLC




Apollo						Apollo Global Management, LLC and its consolidated subsidiaries
Apollo-Värde Group						an investor group led by funds managed by Apollo and Värde
Apollo-Värde Transaction						the purchase by the Apollo-Värde Group of 54,937,500 shares of OMH common stock from SFH pursuant to the Share Purchase Agreement for an aggregate purchase price of approximately $1.4 billion in cash on June 25, 2018
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
Average daily debt balance						average of debt for each day in the period
Average net receivables						average of monthly average net finance receivables (net finance receivables at the beginning and end of each month divided by two) in the period

Base Indenture						OMFC Indenture, dated as of December 3, 2014
CARES Act						Coronavirus Aid, Relief, and Economic Security Act signed into law by President Trump on March 27, 2020
C&I						Consumer and Insurance
CDO						collateralized debt obligations





CMBS						commercial mortgage-backed securities



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
February 2019 Real Estate Loan Sale						OMFC and certain of its subsidiaries sold a portfolio of real estate loans with a carrying value of $16 million, classified in finance receivables held for sale, for aggregate cash proceeds of $19 million on February 5, 2019

FICO score						a credit score created by Fair Isaac Corporation

Fortress						Fortress Investment Group LLC


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

Guaranty Agreements						agreements entered into on December 30, 2013 by OMH whereby it agreed to fully and unconditionally guarantee the payments of principal, premium (if any), and interest on the Other Notes, and the 6.00% Senior Notes due 2020 and 8.25% Senior Notes due 2020, which were redeemed in full on April 15, 2019 and July 29, 2020, respectively
Indenture						the Base Indenture, together with all subsequent Supplemental Indentures



IRS						Internal Revenue Service
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

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Term or Abbreviation						Definition

Merit						Merit Life Insurance Co., a former insurance subsidiary of OMFC. In the fourth quarter of 2019, the Company sold all of the issued and outstanding shares in Merit to a third party




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)
OMFIT						OneMain Financial Issuance Trust
OMH						OneMain Holdings, Inc.


OneMain Acquisition						Acquisition of OneMain Financial Holdings, LLC from CitiFinancial Credit Company, effective November 1, 2015
Other securities						securities for which the fair value option was elected and equity securities. Other securities recognize unrealized gains and losses in investment revenues
Other Notes						collectively, the 8.25% Senior Notes due 2023 and the 7.75% Senior Notes due 2021, 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
RSAs						restricted stock awards
RSUs						restricted stock units


SCLH						Springleaf Consumer Loan Holding Company
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


SFC						Springleaf Finance Corporation (effective as of July 1, 2020, SFC has been renamed to OMFC)











SFH						Springleaf Financial Holdings, LLC, an entity owned primarily by a private equity fund managed by an affiliate of Fortress that sold 54,937,500 shares of OMH's common stock to the Apollo-Värde Group in the Apollo-Värde Transaction
SFI						Springleaf Finance, Inc.

Share Purchase Agreement						a share purchase agreement entered into on January 3, 2018, among the Apollo-Värde Group, SFH and the Company to acquire from SFH 54,937,500 shares of OMH's common stock that was issued and outstanding as of such date, representing the entire holdings of OMH's stock beneficially owned by Fortress
SLFT						Springleaf Funding Trust
SMHC						Springleaf Mortgage Holding Company and subsidiaries
SpringCastle Interests Sale						the March 31, 2016 sale by SpringCastle Holdings, LLC and Springleaf Acquisition Corporation of the equity interest in the SpringCastle Joint Venture

SpringCastle Portfolio						loans the Company previously owned and now services on behalf of a third party



Supplemental Indentures						collectively, the following supplements to the Base Indenture: First Supplemental Indenture, dated as of December 3, 2014; Second Supplemental Indenture, dated as of April 11, 2016; 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; and Tenth Supplemental Indenture, dated as of May 14, 2020
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

Tenth Supplemental Indenture						Tenth Supplemental Indenture, dated as of May 14, 2020, to the Base Indenture
Triton						Triton Insurance Company, an insurance subsidiary of OneMain Financial Holdings, LLC

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

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Term or Abbreviation						Definition

UPB						unpaid principal balance for interest bearing accounts and the gross remaining contractual payments less the unaccreted balance of unearned finance charges for precompute accounts
Värde						Värde Partners, Inc.
VIEs						variable interest entities

Weighted average interest rate						annualized interest expense as a percentage of average debt
XBRL						eXtensible Business Reporting Language
Yield						annualized finance charges as a percentage of average net receivables

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PART I


Item 1. Financial Statements.

ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)



(dollars in millions, except par value amount)	September 30, 2020		December 31, 2019

Assets
Cash and cash equivalents	$	1,944	$	1,227
Investment securities (includes available-for-sale securities with a fair value of $1.8 billion and an amortized cost basis of $1.7 billion in 2020)	1,882		1,884
Net finance receivables (includes loans of consolidated VIEs of $9.4 billion in 2020 and $8.4 billion in 2019)	17,817		18,389
Unearned insurance premium and claim reserves	(778)		(793)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $1.2 billion in 2020 and $340 million in 2019)	(2,324)		(829)
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses	14,715		16,767

Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $479 million in 2020 and $400 million in 2019)	497		405
Goodwill	1,422		1,422
Other intangible assets	315		343
Other assets	1,082		769
Total assets	$	21,857	$	22,817

Liabilities and Shareholders’ Equity
Long-term debt (includes debt of consolidated VIEs of $8.4 billion in 2020 and $7.6 billion in 2019)	$	17,531	$	17,212
Insurance claims and policyholder liabilities	620		649
Deferred and accrued taxes	55		34
Other liabilities (includes other liabilities of consolidated VIEs of $15 million in 2020 and $14 million in 2019)	528		592
Total liabilities	18,734		18,487
Contingencies (Note 14)

Shareholders’ equity:
Common stock, par value $0.01 per share; 2,000,000,000 shares authorized, 134,323,013 and 136,101,156 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	1		1
Additional paid-in capital	1,651		1,689
Accumulated other comprehensive income	79		44
Retained earnings	1,392		2,596
Total shareholders’ equity	3,123		4,330
Total liabilities and shareholders’ equity	$	21,857	$	22,817

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

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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts)	2020		2019		2020		2019




Interest income	$	1,089	$	1,065	$	3,273	$	3,020

Interest expense	255		244		781		717

Net interest income	834		821		2,492		2,303

Provision for finance receivable losses	231		282		1,186		836

Net interest income after provision for finance receivable losses	603		539		1,306		1,467

Other revenues:
Insurance	109		117		334		341
Investment	17		21		56		71
Net loss on repurchase and repayment of debt	(38)		(2)		(38)		(35)
Net gain on sale of real estate loans	—		—		—		3
Other	13		20		38		80
Total other revenues	101		156		390		460

Other expenses:
Salaries and benefits	186		205		568		609
Other operating expenses	134		146		425		422
Insurance policy benefits and claims	43		47		201		141
Total other expenses	363		398		1,194		1,172

Income before income taxes	341		297		502		755

Income taxes	91		49		131		161

Net income	$	250	$	248	$	371	$	594

Share Data:
Weighted average number of shares outstanding:
Basic	134,321,929		136,095,481		134,847,170		136,060,832
Diluted	134,507,549		136,376,051		134,999,487		136,272,391
Earnings per share:
Basic	$	1.86	$	1.82	$	2.75	$	4.36
Diluted	$	1.86	$	1.82	$	2.75	$	4.36

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

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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)	2020		2019		2020		2019

Net income	$	250	$	248	$	371	$	594

Other comprehensive income:
Net change in unrealized gains on non-credit impaired available-for-sale securities	16		14		49		90

Foreign currency translation adjustments	2		(1)		(3)		3
Income tax effect:
Net change in unrealized gains on non-credit impaired available-for-sale securities	(4)		(3)		(11)		(21)

Foreign currency translation adjustments	—		—		1		—
Other comprehensive income, net of tax, before reclassification adjustments	14		10		36		72
Reclassification adjustments included in net income, net of tax:
Net realized gains on available-for-sale securities, net of tax	—		—		(1)		—

Reclassification adjustments included in net income, net of tax	—		—		(1)		—
Other comprehensive income, net of tax	14		10		35		72

Comprehensive income	$	264	$	258	$	406	$	666

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

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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		Total Shareholders’ Equity

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

Three Months Ended September 30, 2019
Balance, July 1, 2019	$	1	$	1,683	$	28	$	2,429	$	4,141

Share-based compensation expense, net of forfeitures	—		3		—		—		3

Other comprehensive income	—		—		10		—		10
Cash dividends *	—		—		—		(308)		(308)
Net income	—		—		—		248		248
Balance, September 30, 2019	$	1	$	1,686	$	38	$	2,369	$	4,094

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 (see Note 3)	—		—		—		(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	—		13		—		—		13
Withholding tax on share-based compensation	—		(6)		—		—		(6)

Other comprehensive income	—		—		35		—		35

Cash dividends *	—		—		—		(747)		(747)
Net income	—		—		—		371		371
Balance, September 30, 2020	$	1	$	1,651	$	79	$	1,392	$	3,123

Nine Months Ended September 30, 2019
Balance, January 1, 2019	$	1	$	1,681	$	(34)	$	2,151	$	3,799

Share-based compensation expense, net of forfeitures	—		10		—		—		10
Withholding tax on share-based compensation	—		(5)		—		—		(5)
Other comprehensive income	—		—		72		—		72
Cash dividends *	—		—		—		(376)		(376)
Net income	—		—		—		594		594
Balance, September 30, 2019	$	1	$	1,686	$	38	$	2,369	$	4,094

* Cash dividends declared were $2.33 per share and $2.25 per share during the three months ended September 30, 2020 and 2019, respectively, and $5.49 per share and $2.75 per share during the nine months ended September 30, 2020 and 2019, respectively.

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

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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
(dollars in millions)	2020		2019

Cash flows from operating activities
Net income	$	371	$	594
Reconciling adjustments:
Provision for finance receivable losses	1,186		836
Depreciation and amortization	196		203
Deferred income tax charge (benefit)	(72)		8
Net loss on repurchase and repayment of debt	38		35

Share-based compensation expense, net of forfeitures	13		10
Other	5		(8)
Cash flows due to changes in other assets and other liabilities	(108)		51
Net cash provided by operating activities	1,629		1,729

Cash flows from investing activities
Net principal originations of finance receivables held for investment and held for sale	(278)		(2,445)
Proceeds on sale of finance receivables held for sale originated as held for investment	—		19
Available-for-sale securities purchased	(341)		(499)
Available-for-sale securities called, sold, and matured	383		457
Other securities purchased	(11)		(13)
Other securities called, sold, and matured	11		26
Other, net	(21)		(1)
Net cash used for investing activities	(257)		(2,456)

Cash flows from financing activities
Proceeds from issuance of long-term debt, net of commissions	6,445		5,157
Repayment of long-term debt	(6,212)		(3,402)
Cash dividends	(745)		(374)
Common stock repurchased and retired	(45)		—
Withholding tax on share-based compensation	(6)		(5)
Net cash provided by (used for) financing activities	(563)		1,376



Net change in cash and cash equivalents and restricted cash and restricted cash equivalents	809		649
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period	1,632		1,178
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period	$	2,441	$	1,827

Supplemental cash flow information
Cash and cash equivalents	$	1,944	$	1,393
Restricted cash and restricted cash equivalents	497		434
Total cash and cash equivalents and restricted cash and restricted cash equivalents	$	2,441	$	1,827

Cash paid for amounts included in the measurement of operating lease liabilities	$	44	$	44









Supplemental non-cash activities
Right-of-use assets obtained in exchange for operating lease obligations	$	34	$	221

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).

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ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)



(dollars in millions, except par value amount)	September 30, 2020		December 31, 2019

Assets
Cash and cash equivalents	$	1,944	$	1,227
Investment securities (includes available-for-sale securities with a fair value of $1.8 billion and an amortized cost basis of $1.7 billion in 2020)	1,882		1,884
Net finance receivables (includes loans of consolidated VIEs of $9.4 billion in 2020 and $8.4 billion in 2019)	17,817		18,389
Unearned insurance premium and claim reserves	(778)		(793)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $1.2 billion in 2020 and $340 million in 2019)	(2,324)		(829)
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses	14,715		16,767


Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $479 million in 2020 and $400 million in 2019)	497		405
Goodwill	1,422		1,422
Other intangible assets	315		343
Other assets	1,081		768
Total assets	$	21,856	$	22,816

Liabilities and Shareholder's Equity
Long-term debt (includes debt of consolidated VIEs of $8.4 billion in 2020 and $7.6 billion in 2019)	$	17,531	$	17,212
Insurance claims and policyholder liabilities	620		649
Deferred and accrued taxes	57		35
Other liabilities (includes other liabilities of consolidated VIEs of $15 million in 2020 and $14 million in 2019)	526		595
Total liabilities	18,734		18,491
Contingencies (Note 14)

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, 2020 and December 31, 2019	5		5
Additional paid-in capital	1,895		1,888
Accumulated other comprehensive income	79		44
Retained earnings	1,143		2,388
Total shareholder's equity	3,122		4,325
Total liabilities and shareholder's equity	$	21,856	$	22,816

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

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ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2020		2019		2020		2019




Interest income	$	1,089	$	1,065	$	3,273	$	3,020

Interest expense	255		247		781		719

Net interest income	834		818		2,492		2,301

Provision for finance receivable losses	231		282		1,186		836

Net interest income after provision for finance receivable losses	603		536		1,306		1,465

Other revenues:
Insurance	109		117		334		341
Investment	17		21		56		71

Net loss on repurchase and repayment of debt	(38)		(2)		(38)		(35)
Net gain on sale of real estate loans	—		—		—		3
Other	13		20		38		88
Total other revenues	101		156		390		468

Other expenses:
Salaries and benefits	186		205		568		609
Other operating expenses	134		145		425		421
Insurance policy benefits and claims	43		47		201		141
Total other expenses	363		397		1,194		1,171

Income before income taxes	341		295		502		762

Income taxes	91		51		131		165

Net income	$	250	$	244	$	371	$	597

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

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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)	2020		2019		2020		2019

Net income	$	250	$	244	$	371	$	597

Other comprehensive income:
Net change in unrealized gains on non-credit impaired available-for-sale securities	16		14		49		90

Foreign currency translation adjustments	2		(1)		(3)		4
Income tax effect:
Net change in unrealized gains on non-credit impaired available-for-sale securities	(4)		(3)		(11)		(21)
Retirement plan liability adjustments	—		—		—		(1)
Foreign currency translation adjustments	—		—		1		—
Other comprehensive income, net of tax, before reclassification adjustments	14		10		36		72
Reclassification adjustments included in net income, net of tax:
Net realized gains on available-for-sale securities, net of tax	—		—		(1)		—
Reclassification adjustments included in net income, net of tax	—		—		(1)		—
Other comprehensive income, net of tax	14		10		35		72

Comprehensive income	$	264	$	254	$	406	$	669

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

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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, 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

Three Months Ended September 30, 2019
Balance, July 1, 2019	$	5	$	2,146	$	28	$	2,225	$	4,404

Share-based compensation expense, net of forfeitures	—		3		—		—		3

Other comprehensive income	—		—		10		—		10
Merger of SFI with OMFC	—		(408)		—		—		(408)
Cash contribution from OMH	—		144		—		—		144
Cash dividends	—		—		—		(308)		(308)
Net income	—		—		—		244		244
Balance, September 30, 2019	$	5	$	1,885	$	38	$	2,161	$	4,089

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 (see Note 3)	—		—		—		(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 share-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

Nine Months Ended September 30, 2019
Balance, January 1, 2019	$	5	$	2,110	$	(34)	$	1,940	$	4,021


Merger of SFI with OMFC	—		(408)		—		—		(408)
Cash contribution from OMH	—		144		—		—		144
Contribution of SCHC to OMFC from SFI	—		34		—		—		34
Share-based compensation expense, net of forfeitures	—		10		—		—		10
Withholding tax on shared-based compensation	—		(5)		—		—		(5)
Other comprehensive income	—		—		72		—		72
Cash dividends	—		—		—		(376)		(376)
Net income	—		—		—		597		597
Balance, September 30, 2019	$	5	$	1,885	$	38	$	2,161	$	4,089

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

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ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
(dollars in millions)	2020		2019

Cash flows from operating activities
Net income	$	371	$	597
Reconciling adjustments:
Provision for finance receivable losses	1,186		836
Depreciation and amortization	196		203
Deferred income tax charge (benefit)	(72)		9
Net loss on repurchase and repayment of debt	38		35

Share-based compensation expense, net of forfeitures	13		10
Other	5		(8)
Cash flows due to changes in other assets and other liabilities	(112)		77
Net cash provided by operating activities	1,625		1,759

Cash flows from investing activities
Net principal originations of finance receivables held for investment and held for sale	(278)		(2,445)
Proceeds on sale of finance receivables held for sale originated as held for investment	—		19


Available-for-sale securities purchased	(341)		(499)
Available-for-sale securities called, sold, and matured	383		457
Other securities purchased	(11)		(13)
Other securities called, sold, and matured	11		26
Other, net	(21)		(1)
Net cash used for investing activities	(257)		(2,456)

Cash flows from financing activities
Proceeds from issuance of long-term debt, net of commissions	6,445		5,157
Repayment of long-term debt	(6,212)		(3,402)
Cash contribution of SCLH	—		12
Cash dividends to OMH	(786)		(374)
Cash contribution from OMH	—		144




Payments on intercompany notes payable	—		(170)
Withholding tax on share-based compensation	(6)		(5)
Net cash provided by (used for) financing activities	(559)		1,362





Net change in cash and cash equivalents and restricted cash and restricted cash equivalents	809		665
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period	1,632		1,162
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period	$	2,441	$	1,827

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Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
	Nine Months Ended September 30,
(dollars in millions)	2020		2019

Supplemental cash flow information
Cash and cash equivalents	$	1,944	$	1,393
Restricted cash and restricted cash equivalents	497		434
Total cash and cash equivalents and restricted cash and restricted cash equivalents	$	2,441	$	1,827

Cash paid for amounts included in the measurement of operating lease liabilities	$	44	$	44




Supplemental non-cash activities
Right-of-use assets obtained in exchange for operating lease obligations	$	34	$	221
Non-cash contribution of SCLH	—		22
Non-cash merger of SFI with OMFC	—		(408)

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).

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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020


1. Business and Basis of Presentation

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. Prior to the completion of the merger described below, OMH’s direct subsidiary was Springleaf Finance, Inc. (“SFI”).

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.

On September 20, 2019, OMFC entered into a merger agreement with its direct parent, SFI, to merge SFI with and into OMFC, with OMFC as the surviving entity. The merger was effective in OMFC's condensed consolidated financial statements as of July 1, 2019. As a result of the merger with SFI, OMFC became a wholly-owned direct subsidiary of OMH.

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 September 30, 2020, the Apollo-Värde Group owned approximately 40.9% 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. To conform to the 2020 presentation, we have reclassified certain items in prior periods of our condensed consolidated financial statements.

The condensed consolidated financial statements in this report should be read in conjunction with the consolidated financial statements and related notes included in our 2019 Annual Report on Form 10-K. We follow the same significant accounting policies for our interim reporting, except for the new accounting pronouncements subsequently adopted and disclosed in Note 3 below.

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2. Reconciliation of OneMain Finance Corporation Results to OneMain Holdings, Inc. Results

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 disclosures relate only to itself and not to any other company.

Except where otherwise indicated, and excluding certain insignificant cash and non-cash transactions at the OMH level, these notes relate to the condensed consolidated financial statements for both companies, OMH and OMFC. In addition to certain intercompany payable and receivable amounts between the entities, the following is a reconciliation of the condensed consolidated balance sheets and results of our condensed consolidated statements of operations of OMFC to OMH:


	September 30, 2020						December 31, 2019
(dollars in millions)	OMH		OMFC		Difference		OMH		OMFC		Difference






Other assets	$	1,082	$	1,081	$	1	$	769	$	768	$	1
Deferred and accrued taxes	55		57		(2)		34		35		(1)
Other liabilities	528		526		2		592		595		(3)
Total shareholders' equity (a)	3,123		3,122		1		4,330		4,325		5


	Three Months Ended September 30,
	2020						2019
(dollars in millions)	OMH		OMFC		Difference		OMH		OMFC		Difference


Interest expense	$	255	$	255	$	—	$	244	$	247	$	(3)




Other operating expenses	134		134		—		146		145		1
Income before income taxes	341		341		—		297		295		2
Income taxes	91		91		—		49		51		(2)
Net Income	250		250		—		248		244		4

	Nine Months Ended September 30,
	2020						2019
(dollars in millions)	OMH		OMFC		Difference		OMH		OMFC		Difference


Interest expense	$	781	$	781	$	—	$	717	$	719	$	(2)


Other revenues (b)	38		38		—		80		88		(8)

Other operating expenses	425		425		—		422		421		1
Income before income taxes	502		502		—		755		762		(7)
Income taxes	131		131		—		161		165		(4)
Net Income	371		371		—		594		597		(3)

(a) The differences between total shareholders’ equity in the periods ended September 30, 2020 and December 31, 2019 were due to historical differences in results of operations of the companies and differences in equity awards.

(b) Other revenues include the interest income on notes receivables from parent, which were notes from SFI held by OMFC and Springleaf Mortgage Holding Company and subsidiaries (“SMHC”), a wholly-owned direct subsidiary of OMFC. See Note 1 and below for further discussion of the merger between SFI and OMFC.

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The following transactions are related to OMFC and have no impact on OMH's condensed consolidated financial results.

Merger of SFI into OMFC

On September 20, 2019, OMFC entered into a merger agreement with its direct parent SFI, to merge SFI with and into OMFC, with OMFC as the surviving entity. The merger was effective in OMFC's condensed consolidated financial statements as of July 1, 2019. In conjunction with the merger, the net deficiency of SFI, after elimination of its investment in OMFC, was absorbed by OMFC resulting in an equity reduction of $408 million to OMFC, which included the elimination of the intercompany notes and receivables between OMFC and SFI, as discussed below.

The net deficiency of SFI included an intercompany note payable plus accrued interest of $166 million from SFI to OMH, which OMFC assumed through the merger. On September 23, 2019, OMFC repaid SFI’s note to OMH. Concurrently, OMH paid $22 million in other payables due to OMFC and made an equity contribution of $144 million to OMFC.

The transactions noted above resulted in a net $264 million reduction to OMFC's equity.

OMFC's Notes Receivable from Parent

As a result of the merger between SFI and OMFC, described in Note 1 and above, a $232 million note receivable from SFI to OMFC was dissolved effective July 1, 2019. Additionally, OMFC assumed a $28 million note payable from SFI to SMHC, a wholly-owned subsidiary of OMFC, and OMFC subsequently paid off the note on September 23, 2019. For the three months ended September 30, 2019, there was no interest income recognized on these notes. For the nine months ended September 30, 2019, interest income on these notes totaled $8 million, which we report in other revenues.

Springleaf Consumer Loan Holding Company (“SCLH”) Contribution

On March 10, 2019, all of the outstanding capital stock of SCLH, a subsidiary of SFI, was contributed to OMFC and SCLH became a wholly-owned direct subsidiary of OMFC. The contribution was effective as of January 1, 2019 and increased OMFC’s total shareholder’s equity and total assets by $34 million and $53 million, respectively. The contribution is presented prospectively because it is deemed to be a contribution of net assets.


3. Recent Accounting Pronouncements

ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED

Financial Instruments - Credit Losses

In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which significantly changes the way that entities are required to measure credit losses. The new standard requires that the estimated credit loss be based upon an “expected credit loss” approach rather than the “incurred loss” approach previously required. The new approach requires entities to measure all expected credit losses for financial assets over their expected lives based on historical experience, current conditions, and reasonable and supportable forecasts of collectability. The expected credit loss model requires earlier recognition of credit losses than the incurred loss approach. We expect ongoing changes in the allowance for finance receivable losses will be driven primarily by the growth of our loan portfolio, mix of secured and unsecured loans, credit quality, and the economic environment at that time. In addition, the ASU developed a new accounting treatment for purchased financial assets with credit deterioration.

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The ASU also modifies the other-than-temporary impairment model for available-for-sale debt securities by requiring companies to record an allowance for credit impairment rather than write-downs of such assets.

Management has reviewed this update and other ASUs that were subsequently issued to further clarify the implementation guidance outlined in ASU 2016-13.

We adopted the amendments of these ASUs as of January 1, 2020.

Upon adoption, we recorded an increase to the allowance for finance receivable losses of $1.12 billion, an increase to deferred tax assets of $0.28 billion, and a corresponding one-time cumulative reduction to retained earnings, net of tax, of $0.83 billion in the consolidated balance sheet as of January 1, 2020.

The adoption of this ASU, as it relates to available-for-sale debt securities, did not have a material impact on the consolidated financial statements as of January 1, 2020.

As a result of the adoption of ASU 2016-13, several of our significant accounting policies have changed to reflect the requirements of the new standard. See below for these updated significant accounting policies as of January 1, 2020.

Allowance for Finance Receivable Losses

We establish the allowance for finance receivable losses through the provision for finance receivable losses. We evaluate our finance receivable portfolio by level of contractual delinquency in the portfolio, specifically in the late stage delinquency buckets and inclusive of the migration of the loans through the delinquency buckets. Our finance receivables consist of a large number of relatively small, homogeneous accounts. We evaluate our finance receivables for impairment as pools. None of our accounts are large enough to warrant individual evaluation for impairment.

We estimate the allowance for finance receivable losses primarily on historical loss experience using a cumulative loss model applied to our finance receivable portfolios. Our gross credit loss expectation is offset by the estimate of future recoveries using historical recovery curves. Our finance receivables are primarily segmented in the loss model by contractual delinquency status. Other attributes in the model include collateral mix and recent credit score. To estimate the gross credit losses, the model utilizes a roll rate matrix to project the first 12 months of losses and historical cohort performance to project the expected losses over the remaining term. Our methodology relies on historical loss experience to forecast the corresponding future outcomes. These patterns are then applied to the current portfolio to obtain an estimate of future losses. We also consider key economic trends including unemployment rates and bankruptcy filings. Forecasted macroeconomic conditions extend to our reasonable and supportable forecast period and revert to a historical average. No new volume is assumed. Renewals are a significant piece of our new volume and are considered a terminal event of the previous loan. We have elected not to measure an allowance on accrued finance charges as it is our policy to reverse finance charge amounts previously accrued after four contractual payments become past due.

Management exercises its judgment when determining the amount of allowance for finance receivable losses. Our judgment is based on quantitative analyses, qualitative factors, such as recent portfolio, industry, and other economic trends, and experience in the consumer finance industry. We adjust the amounts determined by our model for management’s estimate of the effects of model imprecision which include but are not limited to, any changes to underwriting criteria and portfolio seasoning.

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Impairments on Investment Securities: Available-for-sale.

We evaluate our available-for-sale securities on an individual basis to identify any instances where the fair value of the investment security is below its amortized cost. For these securities, we then evaluate whether an impairment exists if any of the following conditions are present:

•we intend to sell the security;

•it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or

•we do not expect to recover the security’s entire amortized cost basis (even if we do not intend to sell the security).

If we intend to sell an impaired investment security or we will likely be required to sell the security before recovery of its amortized cost basis less any current period credit loss, we recognize the impairment as a direct write-down in investment revenues equal to the difference between the investment security’s amortized cost and its fair value at the balance sheet date. Once the impairment is recorded, we adjust the investment security to a new amortized cost basis equal to the previous amortized cost basis less the impairment write-down recognized in the current period.

In determining whether a credit loss exists, we compare our best estimate of the present value of the cash flows expected to be collected from the security to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses is recorded, not to exceed the total unrealized loss on the security. The cash flows expected to be collected are determined by assessing all available information, including issuer default rate, ratings changes and adverse conditions related to the industry sector, financial condition of issuer, credit enhancements, collateral default rates, and other relevant criteria. Management considers factors such as our investment strategy, liquidity requirements, overall business plans, and recovery periods for securities in previous periods of broad market declines.

If a credit loss exists with respect to an investment in a security (i.e., we do not expect to recover the entire amortized cost basis of the security), we would be unable to assert that we will recover our amortized cost basis even if we do not intend to sell the security. Therefore, in these situations, a credit impairment is considered to have occurred.

If a credit impairment exists, but we do not intend to sell the security and we will likely not be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the impairment is bifurcated as: (i) the estimated amount relating to credit loss; and (ii) the amount relating to non-credit related factors. We recognize the estimated credit loss as an allowance on the balance sheet in investment securities, with a corresponding loss in investment revenues, and the non-credit loss amount in accumulated other comprehensive income or loss.

For investment securities in which a credit impairment was recorded through an allowance, we record subsequent increases and decreases in the allowance for credit losses as credit loss expense or reversal of credit loss expense in investment revenues. We will not reverse a previously recorded allowance to an amount below zero. We recognize subsequent increases and decreases in the fair value of our available-for-sale securities from non-credit related factors in accumulated other comprehensive income or loss.

Interest receivables on our investment securities are excluded from the amortized cost and fair value and are recorded in “Other assets.” We have elected not to measure an allowance on interest receivables due to our policy to reverse interest receivable at the time collectability is uncertain. The reversal of interest receivable is recorded in investment revenue.

See Notes 4, 5, and 7 for additional information on the adoption of ASU 2016-13.

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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. Under current guidance, this ASU will become effective for us beginning January 1, 2022. In July of 2020, the FASB proposed a one-year deferral of this ASU to become effective for public entities for fiscal years beginning January 1, 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 engaged various vendors to assess a software solution to meet the new accounting and disclosure requirements of the ASU and are currently working toward an agreement with our preferred candidate. We 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.


4. Finance Receivables

Our finance receivables consist of personal loans, which 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.

Net finance receivables consist of our total portfolio of personal loans. Components of our personal loans were as follows:


(dollars in millions)	September 30, 2020		December 31, 2019

Gross receivables *	$	17,606	$	18,195
Unearned points and fees	(224)		(242)
Accrued finance charges	290		289
Deferred origination costs	145		147
Total	$	17,817	$	18,389

* Gross receivables equal the unpaid principal balance (“UPB”) except for the following:

•Finance receivables purchased as a performing receivable — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase to reflect the finance receivable balance at its initial fair value;

•Purchased credit impaired finance receivables — gross receivables equal the remaining estimated cash flows less the current balance of accretable yield on the purchased credit impaired accounts established prior to the adoption of ASU 2016-13; and

•Purchased credit deteriorated finance receivables — gross receivables equal the UPB and any remaining unearned discount established at the time of the adoption of ASU 2016-13 on January 1, 2020.

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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 $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 $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 is a summary of our personal loans held for investment by the year of origination and number of days delinquent, our key credit quality indicator, at September 30, 2020:


(dollars in millions)	2020		2019		2018		2017		2016		Prior		Total

Performing
Current	$	6,504	$	6,940	$	2,534	$	844	$	251	$	132	$	17,205
30-59 days past due	36		103		45		19		7		5		215
60-89 days past due	20		66		28		11		4		2		131
Total performing	6,560		7,109		2,607		874		262		139		17,551
Nonperforming (Nonaccrual)
90-179 days past due	26		133		61		23		9		6		258
180 days or more past due	—		5		2		1		—		—		8
Total nonperforming	26		138		63		24		9		6		266
Total	$	6,586	$	7,247	$	2,670	$	898	$	271	$	145	$	17,817

The following is a summary of our personal loans held for investment by number of days delinquent at December 31, 2019, which is prior to the adoption of ASU 2016-13 on January 1, 2020 and continues to be reported under ASC 310, Receivables:


(dollars in millions)	Total

Performing
Current	$	17,550
30-59 days past due	272
60-89 days past due	181
Total performing	18,003
Nonperforming
90-179 days past due	377
180 days or more past due	9
Total nonperforming	386
Total	$	18,389

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PURCHASED CREDIT IMPAIRED FINANCE RECEIVABLES

ASU 2016-13 superseded the accounting for purchased credit impaired finance receivables with purchase credit deteriorated finance receivables. As a result, we converted all purchased credit impaired finance receivables to purchased credit deteriorated finance receivables in accordance with ASC Topic 326, which resulted in the gross-up of net finance receivables and allowance for finance receivable losses of $15 million on January 1, 2020. Due to the adoption of ASU 2016-13, the following disclosures related to purchase credit impaired finance receivables are no longer applicable for reporting periods beginning in 2020.

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

At December 31, 2019, finance receivables held for sale, reported in “Other assets,” totaled $64 million, which include purchased credit impaired real estate loans, as well as TDR real estate loans. See Note 6 for further information on our finance receivables held for sale.

Information regarding purchased credit impaired finance receivables were as follows:


(dollars in millions)	December 31, 2019

Personal Loans
Carrying amount, net of allowance	$	40
Outstanding balance (a)	74
Allowance for purchased credit impaired finance receivable losses (b)	—

Real Estate Loans - Held for Sale
Carrying amount	$	19
Outstanding balance (a)	35

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

(b) The allowance for purchased credit impaired finance receivable losses reflects the carrying value of the purchased credit impaired loans held for investment exceeding the present value of the expected cash flows. As indicated above, no allowance was required as of December 31, 2019.

Changes in accretable yield for purchased credit impaired finance receivables were as follows:


(dollars in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019

Personal Loans
Balance at beginning of period	$	46	$	39
Accretion	(6)		(15)
Reclassifications from nonaccretable difference *	—		16
Balance at end of period	$	40	$	40







Real Estate Loans - Held for Sale
Balance at beginning of period	$	23	$	27
Accretion	(1)		(2)

Transfer due to finance receivables sold	—		(3)
Balance at end of period	$	22	$	22

* Reclassifications from nonaccretable difference represents the increases in accretable yield resulting from higher estimated undiscounted cash flows.

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TDR FINANCE RECEIVABLES

Information regarding TDR finance receivables were as follows:


(dollars in millions)	September 30, 2020		December 31, 2019

Personal Loans
TDR gross receivables (a)	$	699	$	655
TDR net receivables (b)	701		658
Allowance for TDR finance receivable losses	321		272

Real Estate Loans - Held for Sale
TDR gross receivables (a)	$	49	$	52
TDR net receivables (b)	49		53

(a) TDR gross receivables — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase if previously purchased as a performing receivable.

(b) TDR net receivables — TDR gross receivables net of unearned points and fees, accrued finance charges, and deferred origination costs.

TDR average net receivables and finance charges recognized on TDR finance receivables for our personal loans that are held for investment and our real estate loans that are held for sale were as follows:


(dollars in millions)	Personal Loans		Real Estate Loans		Total

Three Months Ended September 30, 2020
TDR average net receivables	$	701	$	49	$	750
TDR finance charges recognized	13		1		14

Three Months Ended September 30, 2019
TDR average net receivables	$	571	$	55	$	626
TDR finance charges recognized	11		1		12

Nine Months Ended September 30, 2020
TDR average net receivables	$	692	$	51	$	743
TDR finance charges recognized	38		2		40

Nine Months Ended September 30, 2019
TDR average net receivables	$	525	$	59	$	584
TDR finance charges recognized	35		2		37

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2020		2019		2020		2019

Personal Loans
Pre-modification TDR net finance receivables	$	105	$	129	$	392	$	373
Post-modification TDR net finance receivables:
Rate reduction	67		86		242		257
Other *	38		43		150		116
Total post-modification TDR net finance receivables	$	105	$	129	$	392	$	373
Number of TDR accounts	13,581		18,545		52,780		55,358

* “Other” modifications primarily include potential principal and interest forgiveness contingent on future payment performance by the borrower under the modified terms.

New volume of TDR finance receivables held for sale are not included in the table above as they were immaterial for the three and nine months ended September 30, 2020 and 2019.

Personal loans held for investment that were modified as TDR finance receivables within the previous 12 months and for which there was a default during the period to cause the TDR finance receivables to be considered nonperforming (90 days or more past due) are reflected in the following table.


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2020		2019		2020		2019


Personal Loans
TDR net finance receivables *	$	20	$	27	$	77	$	66
Number of TDR accounts	2,947		4,202		11,286		10,298

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

Real estate loans held for sale that were modified as TDR finance receivables within the previous 12 months and for which there was a default during the period to cause the TDR finance receivables to be considered nonperforming (90 days or more past due) were immaterial for the three and nine months ended September 30, 2020 and 2019.

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5. 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 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, pursuant to the adoption of ASU 2016-13 on January 1, 2020. Prior to the adoption of ASU 2016-13, we estimated and recorded an allowance for finance receivable losses to cover estimated incurred losses on our finance receivables. Our allowance for finance receivable losses may fluctuate based upon changes in portfolio growth, credit quality, and economic conditions. See Note 3 for additional information regarding our policy for allowance for finance receivable losses.

Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the projected impacts of 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 September 30, 2020, our economic forecast used a reasonable and supportable period of 12 months. The increase in our allowance for finance receivable losses for the nine months ended September 30, 2020 was largely due to these economic considerations relating to COVID-19 along with the adoption of ASU 2016-13.

Changes in the allowance for finance receivable losses were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2020		2019		2020		2019
















Personal Loans
Balance at beginning of period	$	2,324	$	744	$	829	$	731
Impact of adoption of ASU 2016-13 *	—		—		1,118		—
Provision for finance receivable losses	231		282		1,186		836
Charge-offs	(274)		(260)		(931)		(862)
Recoveries	43		32		122		93
Balance at end of period	$	2,324	$	798	$	2,324	$	798

* 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. See Notes 3 and 4 for additional information on the adoption of ASU 2016-13.

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


(dollars in millions)	September 30, 2020			December 31, 2019

Allowance for finance receivable losses:
Collectively evaluated for impairment	$	2,003		$	557
Purchased credit impaired finance receivables *	—			—
TDR finance receivables	321			272
Total	$	2,324		$	829

Finance receivables:
Collectively evaluated for impairment	$	17,116		$	17,691
Purchased credit impaired finance receivables *	—			40
TDR finance receivables	701			658
Total	$	17,817		$	18,389

Allowance for finance receivable losses as a percentage of finance receivables	13.05		%	4.51		%

* As a result of the adoption of ASU 2016-13 on January 1, 2020, the accounting for purchased credit impaired finance receivables was superseded with purchase credit deteriorated finance receivables which are collectively evaluated for impairment. See Notes 3 and 4 for additional information on the adoption of ASU 2016-3.


6. Finance Receivables Held for Sale

We reported finance receivables held for sale, included within “Other assets,” of $54 million at September 30, 2020 and $64 million at December 31, 2019, which consist entirely of real estate loans, and are carried at the lower of cost or fair value, applied on an aggregate basis.

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

We did not have any material impairments or transfers to or from finance receivables held for sale during the three and nine months ended September 30, 2020 and 2019.

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7. Investment Securities

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

September 30, 2020*
Fixed maturity available-for-sale securities:
U.S. government and government sponsored entities	$	12	$	—	$	—	$	12
Obligations of states, municipalities, and political subdivisions	81		5		—		86
Commercial paper	24		—		—		24
Non-U.S. government and government sponsored entities	132		9		—		141
Corporate debt	1,106		83		(5)		1,184
Mortgage-backed, asset-backed, and collateralized:
RMBS	211		7		—		218
CMBS	61		2		—		63
CDO/ABS	78		1		(1)		78
Total	$	1,705	$	107	$	(6)	$	1,806

* There was no allowance for credit losses related to our investment securities as of September 30, 2020.


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

December 31, 2019*
Fixed maturity available-for-sale securities:
U.S. government and government sponsored entities	$	11	$	—	$	—	$	11
Obligations of states, municipalities, and political subdivisions	91		2		(1)		92
Commercial paper	91		—		—		91
Non-U.S. government and government sponsored entities	144		3		—		147
Corporate debt	1,054		45		(1)		1,098
Mortgage-backed, asset-backed, and collateralized:
RMBS	214		3		—		217
CMBS	56		1		—		57
CDO/ABS	84		1		—		85
Total	$	1,745	$	55	$	(2)	$	1,798

* The balances reported as of December 31, 2019 are not subject to the adoption of ASU 2016-13 on January 1, 2020 and continue to be reported under ASC 320, Investments – Debt and Equity Securities.

As of September 30, 2020, interest receivables reported in “Other assets” totaled $13 million. Amounts reversed from investment revenue for available-for-sale securities were immaterial.

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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
(dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

September 30, 2020

Obligations of states, municipalities, and political subdivisions	$	3	$	—	$	—	$	—	$	3	$	—
Commercial paper	19		—		—		—		19		—
Non-U.S. government and government sponsored entities	3		—		—		—		3		—
Corporate debt	95		(4)		5		(1)		100		(5)
Mortgage-backed, asset-backed, and collateralized:
RMBS	10		—		—		—		10		—
CMBS	21		—		—		—		21		—
CDO/ABS	21		(1)		—		—		21		(1)
Total	$	172	$	(5)	$	5	$	(1)	$	177	$	(6)

December 31, 2019*
U.S. government and government sponsored entities	$	—	$	—	$	3	$	—	$	3	$	—
Obligations of states, municipalities, and political subdivisions	29		(1)		4		—		33		(1)
Commercial paper	76		—		—		—		76		—
Non-U.S. government and government sponsored entities	19		—		14		—		33		—
Corporate debt	63		(1)		13		—		76		(1)
Mortgage-backed, asset-backed, and collateralized:
RMBS	45		—		—		—		45		—
CMBS	15		—		7		—		22		—
CDO/ABS	14		—		—		—		14		—
Total	$	261	$	(2)	$	41	$	—	$	302	$	(2)

On a lot basis, we had 233 and 398 investment securities in an unrealized loss position at September 30, 2020 and December 31, 2019, 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 September 30, 2020, 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 September 30, 2020, 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 September 30, 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 September 30, 2020.

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Prior to the adoption of ASU 2016-13, other-than-temporary impairment losses, primarily on corporate debt, in investment revenues were immaterial during the three and nine months ended September 30, 2019. There were no material additions or reductions in the cumulative amount of credit losses (recognized in earnings) on other-than-temporarily impaired available-for-sale securities during the three and nine months ended September 30, 2019.

The proceeds of available-for-sale securities sold or redeemed during the three and nine months ended September 30, 2020 totaled $74 million and $179 million, respectively. The proceeds of available-for-sale securities sold or redeemed during the three and nine months ended September 30, 2019 totaled $36 million and $245 million, respectively. The net realized gains and losses were immaterial during the three and nine months ended September 30, 2020 and 2019.

Contractual maturities of fixed-maturity available-for-sale securities at September 30, 2020 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	$	128	$	127
Due after 1 year through 5 years	605		573
Due after 5 years through 10 years	526		485
Due after 10 years	188		170
Mortgage-backed, asset-backed, and collateralized securities	359		350
Total	$	1,806	$	1,705

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 $604 million and $633 million at September 30, 2020 and December 31, 2019, respectively.

OTHER SECURITIES

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



(dollars in millions)	September 30, 2020		December 31, 2019

Fixed maturity other securities:
Bonds



Non-U.S. government and government sponsored entities	$	1	$	1
Corporate debt	20		24
Mortgage-backed, asset-backed, and collateralized bonds	17		15
Total bonds	38		40
Preferred stock *	14		19
Common stock *	24		26
Other long-term investments	—		1
Total	$	76	$	86

* 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.

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Net unrealized gains and losses on other securities held were immaterial for the three and nine months ended September 30, 2020 and 2019. Net realized gains and losses on other securities sold or redeemed were also immaterial for the three and nine months ended September 30, 2020 and 2019.

Other securities include 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.


8. Long-term Debt

Principal maturities of long-term debt (excluding projected repayments on securitizations by period) by type of debt at September 30, 2020 were as follows:


	Senior Debt
(dollars in millions)	Securitizations		Unsecured Notes (a)		Junior Subordinated Debt (a)		Total

Interest rates (b)	0.95%-6.94%		5.38%-8.88%		2.03%

Fourth quarter 2020	$	—	$	—	$	—	$	—
2021	—		635		—		635
2022	—		992		—		992
2023	—		1,175		—		1,175
2024	—		1,300		—		1,300
2025-2067	—		4,985		350		5,335
Securitizations (c)	8,401		—		—		8,401

Total principal maturities	$	8,401	$	9,087	$	350	$	17,838

Total carrying amount	$	8,366	$	8,993	$	172	$	17,531
Debt issuance costs (d)	(32)		(80)		—		(112)

(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 September 30, 2020.

(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 September 30, 2020, there were no amounts drawn under our revolving conduit facilities. See Note 9 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 $31 million at September 30, 2020 and are reported in “Other assets.”

8.875% SENIOR NOTES DUE 2025 OFFERING

On May 14, 2020, OMFC issued a total of $600 million aggregate principal amount of 8.875% Senior Notes due 2025 (the “8.875% Senior Notes due 2025”) under the Base Indenture, as supplemented by the Tenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

REDEMPTION OF 8.25% SENIOR NOTES DUE 2020

On June 29, 2020, OMFC issued a notice of full redemption of its 8.25% Senior Notes due 2020. On July 29, 2020, OMFC paid an aggregate amount of $1.0 billion, inclusive of accrued interest and premiums, to complete the redemption. In connection with the redemption, we recognized $35 million of net loss on repurchases and repayments of debt for the three and nine months ended September 30, 2020.

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9. 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 11 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2019 Annual Report on Form 10-K for more detail regarding VIEs.

We parenthetically disclose on our consolidated balance sheets the VIE’s assets that can only be used to settle the VIE’s obligations and liabilities if its creditors have no recourse against the primary beneficiary’s general credit. The carrying amounts of consolidated VIE assets and liabilities associated with our securitization trusts and revolving conduit facilities were as follows:


(dollars in millions)	September 30, 2020		December 31, 2019

Assets
Cash and cash equivalents	$	2	$	4
Finance receivables - Personal loans	9,371		8,428
Allowance for finance receivable losses	1,184		340
Restricted cash and restricted cash equivalents	479		400
Other assets	31		29

Liabilities
Long-term debt	$	8,366	$	7,643
Other liabilities	16		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 $84 million and $256 million during the three and nine months ended September 30, 2020, respectively, compared to $79 million and $243 million during the three and nine months ended September 30, 2019, respectively.

SECURITIZED BORROWINGS

Each of our outstanding securitizations contain a revolving period ranging from one 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 14 revolving conduit facilities with a total maximum borrowing capacity of $7.2 billion as of September 30, 2020. 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 September 30, 2020. Amounts drawn on these facilities are collateralized by our personal loans.

At September 30, 2020, no amounts were drawn under these facilities.

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10. Insurance

Changes in the reserve for unpaid claims and loss adjustment expenses (net of reinsurance recoverables):


	At or for the Nine Months Ended September 30,
(dollars in millions)	2020		2019

Balance at beginning of period	$	117	$	117
Less reinsurance recoverables	(4)		(4)

Net balance at beginning of period	113		113

Additions for losses and loss adjustment expenses incurred to:
Current year	221		154
Prior years *	(10)		(13)
Total	211		141
Reductions for losses and loss adjustment expenses paid related to:
Current year	(107)		(85)
Prior years	(60)		(57)
Total	(167)		(142)

Net balance at end of period	157		112
Plus reinsurance recoverables	3		3

Balance at end of period	$	160	$	115

* Reflects (i) a redundancy in the prior years’ net reserves of $10 million at September 30, 2020, primarily due to favorable development of credit life, term life, and credit disability claims during the period, and (ii) a redundancy in the prior years’ net reserves of $13 million at September 30, 2019, primarily due to a favorable development of credit life, disability, and unemployment claims during the period.


11. Capital Stock and Earnings Per Share (OMH Only)

CAPITAL STOCK

OMH has two classes of authorized capital stock: preferred stock and common stock. OMFC has two 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 allowed 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.

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Changes in OMH shares of common stock issued and outstanding were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019

Balance at beginning of period	134,319,171	136,089,417	136,101,156	135,832,278
Common shares issued	3,842	6,257	253,555	263,396
Common shares retired	—	—	(2,031,698)	—
Balance at end of period	134,323,013	136,095,674	134,323,013	136,095,674

EARNINGS PER SHARE (OMH ONLY)

The computation of earnings per share was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share data)	2020		2019		2020		2019

Numerator (basic and diluted):
Net income	$	250	$	248	$	371	$	594
Denominator:
Weighted average number of shares outstanding (basic)	134,321,929		136,095,481		134,847,170		136,060,832
Effect of dilutive securities *	185,620		280,570		152,317		211,559
Weighted average number of shares outstanding (diluted)	134,507,549		136,376,051		134,999,487		136,272,391
Earnings per share:
Basic	$	1.86	$	1.82	$	2.75	$	4.36
Diluted	$	1.86	$	1.82	$	2.75	$	4.36

* We have excluded weighted-average unvested restricted stock units totaling 256,034 and 184,997 for the three months ended September 30, 2020 and 2019, respectively, and 303,913 and 297,194 for the nine months ended September 30, 2020 and 2019, 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 RSUs and RSAs.

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12. Accumulated Other Comprehensive Income (Loss)

Changes, net of tax, in accumulated other comprehensive income (loss) were as follows:


(dollars in millions)	Unrealized Gains (Losses) Available-for-Sale Securities *		Retirement Plan Liabilities Adjustments		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended September 30, 2019
Balance at beginning of period	$	30	$	(3)	$	1	$	28
Other comprehensive income (loss) before reclassifications	11		—		(1)		10

Balance at end of period	$	41	$	(3)	$	—	$	38

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)		—		—		(1)
Balance at end of period	$	78	$	3	$	(2)	$	79

Nine Months Ended September 30, 2019
Balance at beginning of period	$	(28)	$	(3)	$	(3)	$	(34)
Other comprehensive income before reclassifications	69		—		3		72


Balance at end of period	$	41	$	(3)	$	—	$	38

* There were no amounts related to available-for-sale debt securities for which an allowance for credit losses was recorded during the three and nine months ended September 30, 2020.

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13. Income Taxes

We had a net deferred tax asset of $440 million and $104 million at September 30, 2020 and December 31, 2019, respectively. The increase in our net deferred tax asset of $336 million was primarily due to the tax effect of the increase in the allowance for finance receivable losses from both the adoption of ASU 2016-13 and the current period activity. See Note 5 for further information on the increase in allowance. The increase was partly offset by 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. Our estimates may need to be further adjusted throughout the year as the effects of the COVID-19 pandemic plays out in the economic and financial markets, and as a result, our AETR may significantly change in the remaining period of 2020.

The effective tax rate for the nine months ended September 30, 2020 was 26.1%, compared to 21.3% for the same period in 2019. The effective tax rate for the nine months ended September 30, 2020 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes and discrete tax expense. The effective tax rate for the nine months ended September 30, 2019 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes, which was offset by the release of the valuation allowance against certain deferred taxes.

We are currently under examination of our U.S. federal tax returns for the years 2014 to 2016 by the IRS. We are also under examination by various states for the years 2011 to 2018. Management believes it has adequately provided for taxes for such years.

Our gross unrecognized tax benefits, including related interest and penalties, totaled $13 million at September 30, 2020 and $12 million at December 31, 2019. 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.

On March 27, 2020, the Coronarvirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act, among other things, includes provisions relating 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 anticipate the CARES Act will have a material impact on our consolidated financial statements. We will continue to monitor legislative developments related to the COVID-19 pandemic.


14. Contingencies

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.

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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.


15. Segment Information

At September 30, 2020, Consumer and Insurance (“C&I”) is our only reportable segment. The remaining components (which we refer to as “Other”) consist of (i) our liquidating SpringCastle Portfolio servicing activity and (ii) 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 19 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2019 Annual Report on Form 10-K.

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

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




Three Months Ended September 30, 2019
Interest income	$	1,060	$	2	$	3	$	1,065
Interest expense	238		1		5		244
Provision for finance receivable losses	277		—		5		282
Net interest income after provision for finance receivable losses	545		1		(7)		539
Other revenues	152		5		(1)		156
Other expenses	385		8		5		398
Income (loss) before income tax expense (benefit)	$	312	$	(2)	$	(13)	$	297

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

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




At or for the Nine Months Ended September 30, 2019
Interest income	$	3,013	$	7	$	—	$	3,020
Interest expense	700		4		13		717
Provision for finance receivable losses	816		—		20		836
Net interest income after provision for finance receivable losses	1,497		3		(33)		1,467
Other revenues *	442		26		(8)		460
Other expenses	1,125		31		16		1,172
Income (loss) before income tax expense (benefit)	$	814	$	(2)	$	(57)	$	755

Assets	$	20,276	$	82	$	2,052	$	22,410

* Other revenues in Other include the gain on the February 2019 Real Estate Loan Sale as well as the impairment adjustments on the remaining loans in held for sale in 2019.

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16. Fair Value Measurements

The accounting policies of our Fair Value Measurements are the same as those disclosed in Note 3 and Note 20 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2019 Annual Report on Form 10-K.

The following table presents the carrying amounts and estimated fair values of our financial instruments and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:


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

September 30, 2020
Assets
Cash and cash equivalents	$	1,944	$	—	$	—	$	1,944	$	1,944
Investment securities	42		1,833		7		1,882		1,882
Net finance receivables, less allowance for finance receivable losses	—		—		18,176		18,176		15,493

Restricted cash and restricted cash equivalents	497		—		—		497		497
Other assets *	—		—		62		62		62

Liabilities
Long-term debt	$	—	$	18,702	$	—	$	18,702	$	17,531

December 31, 2019
Assets
Cash and cash equivalents	$	1,159	$	68	$	—	$	1,227	$	1,227
Investment securities	45		1,835		4		1,884		1,884
Net finance receivables, less allowance for finance receivable losses	—		—		19,319		19,319		17,560

Restricted cash and restricted cash equivalents	405		—		—		405		405
Other assets *	—		—		84		84		74





Liabilities
Long-term debt	$	—	$	18,509	$	—	$	18,509	$	17,212

*Other assets at September 30, 2020 and December 31, 2019 includes finance receivables held for sale and miscellaneous receivables related to our liquidating loan portfolios.

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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

September 30, 2020
Assets
Cash equivalents in mutual funds	$	1,534	$	—	$	—	$	1,534

Investment securities:
Available-for-sale securities

U.S. government and government sponsored entities	—		12		—		12
Obligations of states, municipalities, and political subdivisions	—		86		—		86
Commercial paper	—		24		—		24
Non-U.S. government and government sponsored entities	—		141		—		141
Corporate debt	5		1,179		—		1,184
RMBS	—		212		6		218
CMBS	—		63		—		63
CDO/ABS	—		78		—		78




Total available-for-sale securities	5		1,795		6		1,806
Other securities
Bonds:

Non-U.S. government and government sponsored entities	—		1		—		1
Corporate debt	—		20		—		20
RMBS	—		1		—		1

CDO/ABS	—		16		—		16
Total bonds	—		38		—		38
Preferred stock	14		—		—		14
Common stock	23		—		1		24

Total other securities	37		38		1		76
Total investment securities	42		1,833		7		1,882

Restricted cash equivalents in mutual funds	487		—		—		487
Total	$	2,063	$	1,833	$	7	$	3,903

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

December 31, 2019
Assets
Cash equivalents in mutual funds	$	775	$	—	$	—	$	775
Cash equivalents in securities	—		68		—		68
Investment securities:
Available-for-sale securities

U.S. government and government sponsored entities	—		11		—		11
Obligations of states, municipalities, and political subdivisions	—		92		—		92
Certificates of deposit and commercial paper	—		91		—		91
Non-U.S. government and government sponsored entities	—		147		—		147
Corporate debt	5		1,093		—		1,098
RMBS	—		217		—		217
CMBS	—		57		—		57
CDO/ABS	—		85		—		85




Total available-for-sale securities	5		1,793		—		1,798
Other securities
Bonds:
Non-U.S. government and government sponsored entities	—		1		—		1
Corporate debt	—		23		1		24
RMBS	—		1		—		1

CDO/ABS	—		12		2		14
Total bonds	—		37		3		40
Preferred stock	14		5		—		19
Common stock	26		—		—		26
Other long-term investments	—		—		1		1
Total other securities	40		42		4		86
Total investment securities	45		1,835		4		1,884
Restricted cash equivalents in mutual funds	403		—		—		403
Total	$	1,223	$	1,903	$	4	$	3,130

Due to the insignificant activity within the Level 3 assets during the three and nine months ended September 30, 2020 and 2019, 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 for the three and nine months ended September 30, 2020 and 2019.

FAIR VALUE MEASUREMENTS — VALUATION METHODOLOGIES AND ASSUMPTIONS

See Note 20 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2019 Annual Report on Form 10-K for information regarding our methods and assumptions used to estimate fair value.

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

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


Topic						Page


Forward-Looking Statements						45
Overview						47
Recent Developments and Outlook						48
Results of Operations						51
Segment Results						56
Credit Quality						58
Liquidity and Capital Resources						63
Off-Balance Sheet Arrangements						68
Critical Accounting Policies and Estimates						68
Recent Accounting Pronouncements						69
Seasonality						69

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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 COVID-19 pandemic and the mitigation efforts by governments and related effects on us, our customers, and employees;

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

•increased levels of unemployment and personal bankruptcies;

•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, 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, or “PII,” of our present or former customers;

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

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

•increased competition, or 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;

•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 and the CARES Act;

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

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•our inability to successfully implement our growth strategy for our consumer lending business or successfully acquire portfolios of personal loans;

•a change in the proportion of secured loans may affect our personal loan 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;

•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;

•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;

•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 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 cost of and/or access to capital;

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

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

•changes in accounting standards or tax policies and practices and the application of such new standards, policies and practices; 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 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 2019 Annual Report on Form 10-K, 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.

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Overview

We are a leading provider of responsible personal loan products, primarily to non-prime customers. Our network of approximately 1,500 branch offices in 44 states is staffed with expert personnel and is complemented by our centralized operations and digital presence through online lending. Our digital platform 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 terms generally between three and six years, and are secured by automobiles, other titled collateral, or are unsecured. At September 30, 2020, we had approximately 2.30 million personal loans, of which 53% were secured by titled property, representing $17.8 billion of net finance receivables, compared to approximately 2.44 million personal loans, of which 52% were secured by titled property, totaling $18.4 billion at December 31, 2019.

•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 home and auto membership plans of an unaffiliated company.

Our non-originating legacy products include:

•Other Receivables — We ceased originating real estate loans in 2012 and we continue to service or sub-service liquidating real estate loans.

OUR SEGMENT

Beginning in the fourth quarter of 2019, C&I is our only reportable segment. The remaining components (which we refer to as “Other”) consist of (i) our liquidating SpringCastle Portfolio servicing activity and (ii) our non-originating legacy operations, which primarily include our liquidating real estate loans. See Note 15 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our segment.

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Recent Developments and Outlook

RECENT DEVELOPMENTS

Management’s Response to the COVID-19 Pandemic

COVID-19 has evolved into a global pandemic and has resulted in widespread volatility and deterioration in economic conditions across the United States. Governmental authorities have taken a number of steps to combat or slow the spread of COVID-19, including shutdowns of non-essential businesses, implementing stay-at-home orders, promoting social distancing measures, and other actions which have disrupted economic activity. We have been and will continue to be focused on helping our customers and employees through these difficult times. We are generally classified as an “essential business” by government authorities because we play a vital role in providing personal loans to hardworking Americans in hundreds of local communities. Our long track record of a strong balance sheet and liquidity profile, disciplined underwriting, and focus on our customers, allows us to remain well positioned to address the economic uncertainties, as well as take advantage of opportunities for growth as the economy recovers. Although we cannot predict how quickly and/or broadly the economy will recover, we will continue to:

•Maintain strong capital and liquidity: We have maintained a strong balance sheet and liquidity profile as a result of numerous actions taken over the last several years, such as deleveraging, increasing the available borrowing capacity under our revolving conduit facilities, diversifying our funding mix, and extending our unsecured debt maturities. Our cash and cash equivalents, together with our potential borrowings under our revolving conduit facilities, provide a liquidity runway through 2022 under numerous stress scenarios, assuming no access to the capital markets. This liquidity runway calculation contemplates all the cash needs of the Company.

•Continue to enhance our underwriting: We quickly took steps to tighten underwriting standards and reduce originations to higher risk categories of lending and continue to monitor and evaluate our underwriting standards as we further understand the evolving impacts the COVID-19 pandemic is having on local-level economies. We are using our decades of experience and proprietary data to serve our customers while maintaining an appropriately conservative portfolio risk-management program.

•Focus on serving our customers: Our top priority is to service and care for our current customers. We actively engaged with other lenders to put forward solutions to help our customers through this difficult time. We took steps to enhance our servicing capacity by shifting branch team members toward a greater focus on servicing existing loans. Beginning in late March, we increased proactive outreach to customers, offering to support them through our borrower assistance programs, which included reduced and deferred payment options, waiving of late fees, and temporary suspension in credit bureau reporting.

•Deploy business continuity plans: We deployed our existing business continuity plans which are designed to ensure operational flexibility, including the ability of our employees to work remotely. Our hybrid operating model, with fully scaled branch and central operations teams, can dynamically reroute application and servicing capabilities to service centers and branches across the United States. Although a small number of branches were temporarily closed, primarily for deep cleanings or due to government mandates, and subsequently reopened, all of our teams, both branch and central operations, remain operational today. We continue to serve our customers while maintaining social distancing and other safety protocols. Additionally, we have accelerated our digital origination strategy and have digitally originated more than 30% of our personal loans in the second and third quarters.

For further information regarding the impact of COVID-19 on our business, results of operations, and liquidity and capital resources, see “Outlook” and “Results of Operations” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

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Cash Dividends to OMH's Common Stockholders

On October 26, 2020, OMH declared a dividend of $0.45 per share payable on November 17, 2020 to record holders of OMH's common stock as of the close of business on November 9, 2020. 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.

Issuance of 8.875% Senior Notes Due 2025 and Redemption of 8.25% Senior Notes due 2020

On May 14, 2020, OMFC issued a total of $600 million of aggregate principal amount of 8.875% Senior Notes due 2025.

On July 29, 2020, OMFC paid an aggregate amount of $1.0 billion, inclusive of accrued interest and premiums, to complete the redemption of its 8.25% Senior Notes due 2020.

For further information regarding the issuance and redemption of our unsecured debt, see Note 8 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Securitization Transactions Completed: OMFIT 2020-1 and OMFIT 2020-2

On May 1, 2020, we completed a private securitization in which OMFIT 2020-1 issued $821 million principal amount of notes backed by personal loans.

On August 21, 2020, we completed a private securitization in which OMFIT 2020-2 issued $1.0 billion principal amount of notes backed by personal loans.

For further information regarding the issuances of our secured debt, see “Liquidity and Capital Resources—Securitized Borrowings” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Stock Repurchase Program

For information regarding the stock repurchase program, see Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Appointment of Member of the OMFC Board of Directors and Executive Vice President of OMFC

On January 2, 2020, Adam L. Rosman was appointed to the OMFC Board of Directors and as Executive Vice President. Mr. Rosman replaced John C. Anderson, who resigned as a member of OMFC's board of directors and as Executive Vice President on January 2, 2020.

Appointment of Chairman of the OMH Board of Directors

On August 28, 2020, Jay N. Levine resigned as Director and Chairman of the OMH Board of Directors, effective December 31, 2020. Mr. Levine’s resignation was not the result of any dispute or disagreement with the Company or the Company’s board on any matter relating to the operations, policies or practices of the Company. The OMH Board of Directors elected Douglas H. Shulman as Chairman of the Board, replacing Mr. Levine, effective December 31, 2020.

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OUTLOOK

We continue to manage the impacts of the COVID-19 pandemic and are prepared to face any additional challenges that may impact our industry. We expect near-term impacts to continue to affect our originations, loan loss reserves, and involuntary unemployment insurance claims. The ultimate impact on our financial condition and results of operations depends on the rates of unemployment, government stimulus measures, state reopenings, and the speed of economic recovery. There is also uncertainty regarding the effects of a secondary outbreak of COVID-19 and the related potential for additional shutdowns over the near-term. To the extent economies are suppressed or slow to recover, even with additional government stimulus measures, we could see higher delinquency trends during the remainder of 2020 and related losses to be realized in 2021. We may incorporate further changes to the macroeconomic assumptions within our forecast used in our credit loss allowance model, as well as changes to our loan loss performance outlook, both of which could lead to further changes in our allowance for loan losses, reserve rate, and provision expense.

The full extent to which the COVID-19 pandemic will impact our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the mitigation efforts by government entities, as well as our own continuing COVID-19 operational response. We have taken and will continue to take active and decisive steps in this time of uncertainty and remain committed to the safety of our employees, while also continuing to serve our customers by remaining open with appropriate protective protocols in place. While we anticipate that the economic recovery could be unstable, we believe we are well-positioned to face these challenges and are prepared for future growth opportunities. We have served hard working Americans for many decades, through both changing economic conditions and natural disasters, and will continue to remain focused on our strategic priorities of strong liquidity, disciplined underwriting, and serving our customers.

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Results of Operations

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 2 of the Notes to the Condensed Consolidated Financial Statements included in this report for the reconciliation of results of OMFC to OMH.

COVID-19 PANDEMIC IMPACTS ON RESULTS

The adverse effects caused by the COVID-19 pandemic, along with mitigation efforts from government stimulus measures, and our own operational response has impacted our business, results of operations, and liquidity and capital resources. The following is a summary of the most significant impacts:

•Net finance receivables were $17.8 billion as of September 30, 2020 compared to $18.4 billion as of December 31, 2019. Initial operational disruptions, combined with actions taken by management to tighten underwriting standards, which reduced originations to higher risk categories of lending, and a reduction in the demand for personal loans, resulted in an overall decline in net finance receivables. Originations began to be impacted in the last two weeks of March 2020, with our lowest production levels occurring in April. Originations increased in May and continued to increase through the end of September, driven by adjustments to our underwriting, enhancements to our digital origination capabilities, increased proactive outreach to our customers, and improved customer demand and unemployment trends. Originations continued to remain below 2019 levels.

•The government stimulus measures, our borrower assistance programs, and our collection efforts contribute to strong customer payment trends, which contributed to a decrease in our 30-89 and 90+ day delinquency ratios to 1.9% and 1.5%, respectively, as of September 30, 2020 when compared to 2.5% and 2.1%, respectively, as of December 31, 2019 and 2.3% and 1.9%, respectively, as of September 30, 2019.

•Under our borrower assistance programs, we waived late fees for payments due March 15, 2020 through April 30, 2020, suspended credit bureau reporting for newly delinquent accounts in March and April of 2020, and offered reduced and deferred payment options to our customers. Borrower assistance enrollment peaked in April at 8.0% of loans in the portfolio, and returned to a more historical normal average of 2.3% during the third quarter of 2020. As of September 30, 2020, the customers who received borrower assistance in the second quarter were performing 50% better than our historical experience.

•Our loan loss reserve methodology includes forecasted economic trends and unemployment levels, which significantly increased our provision for finance receivable losses as a result of the impacts of COVID-19 during the nine months ended September 30, 2020 compared to the same period from prior year. The rise in unemployment claims around the country also resulted in an increase in involuntary unemployment insurance claims expense during the nine months ended September 30, 2020. For further information regarding the impact of COVID-19 on net income for the periods, see “Results of Operations - OMH’s Consolidated Results” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

•In March 2020, out of an abundance of caution, we elected to draw on our revolving conduit facilities to preserve financial flexibility during the capital market disruption resulting from the COVID-19 pandemic. During the second quarter of 2020, we subsequently repaid all of our revolving conduit facilities. During the nine months ended September 30, 2020, we also issued debt securities in both the unsecured and ABS markets. As of September 30, 2020, we had $1.9 billion of cash and cash equivalents, $8.3 billion of unencumbered personal loans, and $7.2 billion in potential borrowing capacity from our 14 revolving conduit facilities.

•During the year, the Company incurred direct costs associated with COVID-19 relating to (i) information technology costs to transition employees to work remotely, (ii) branch, central operations, and corporate locations sanitization services and supplies, (iii) installation of protective barriers and other appropriate safety measures, and (iv) other costs and fees directly related to COVID-19. The Company also incurred restructuring costs associated with a reduction in workforce. For further information regarding direct costs associated with COVID-19 and restructuring charges, see “Results of Operations - Non-GAAP Financial Measures” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

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•We did not have any impairments with respect to goodwill, intangible assets, long-lived assets, and right of use assets during the three and nine months ended September 30, 2020. We currently do not anticipate any impairments as it relates to these assets at this time, but we will continue to monitor and test as appropriate.

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 September 30,						At or for the Nine Months Ended September 30,
(dollars in millions, except per share amounts)	2020			2019			2020			2019

Interest income	$	1,089		$	1,065		$	3,273		$	3,020
Interest expense	255			244			781			717
Provision for finance receivable losses	231			282			1,186			836
Net interest income after provision for finance receivable losses	603			539			1,306			1,467

Other revenues	101			156			390			460
Other expenses	363			398			1,194			1,172
Income before income taxes	341			297			502			755
Income taxes	91			49			131			161
Net income	$	250		$	248		$	371		$	594



Share Data:



Earnings per share:

Diluted	$	1.86		$	1.82		$	2.75		$	4.36

Selected Financial Statistics *
Finance receivables held for investment:
Net finance receivables	$	17,817		$	17,791		$	17,817		$	17,791
Number of accounts	2,297,167			2,406,753			2,297,167			2,406,753




Average net receivables	$	17,740		$	17,434		$	18,010		$	16,706
Yield	24.39		%	24.16		%	24.24		%	24.10		%
Gross charge-off ratio	6.14		%	5.92		%	6.90		%	6.89		%
Recovery ratio	(0.95)		%	(0.73)		%	(0.91)		%	(0.74)		%
Net charge-off ratio	5.19		%	5.19		%	5.99		%	6.15		%
30-89 Delinquency ratio	1.95		%	2.30		%	1.95		%	2.30		%
Origination volume	$	2,887		$	3,657		$	7,523		$	10,118
Number of accounts originated	300,376			395,899			771,628			1,082,576
Debt balances:
Long-term debt balance	$	17,531		$	17,021		$	17,531		$	17,021
Average daily debt balance	17,546			16,271			18,331			16,028

* See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.

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Comparison of Consolidated Results for the Three and Nine Months Ended September 30, 2020 and 2019

Interest income increased $24 million or 2.3% and $253 million or 8.4% for the three and nine months ended September 30, 2020, respectively, when compared to the same periods in 2019 primarily due to growth in our average loan portfolio along with higher yields driven by the impacts of lower delinquencies.

Interest expense increased $11 million or 4.5% and $64 million or 8.9% for the three and nine months ended September 30, 2020, respectively, when compared to the same periods in 2019 primarily due to an increase in average debt of $1.3 billion and $2.3 billion, respectively, offset by a lower average cost of funds.

See Notes 8 and 9 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 $51 million or 18.1% for the three months ended September 30, 2020 when compared to the same period in 2019 primarily due to the impact of lower delinquencies in the portfolio.

Provision for finance receivable losses increased $350 million or 41.9% for the nine months ended September 30, 2020 when compared to the same period in 2019 primarily due to higher expected credit losses in our allowance as a result of the current year adoption of ASU 2016-13, which were primarily driven by our forecast of elevated unemployment as a result of COVID-19.

Other revenues decreased $55 million or 35.3% for the three months ended September 30, 2020 when compared to the same period in 2019 primarily due to a $36 million increase in net loss on the repayments of debt in the current period and a $12 million decrease in revenue due to lower insurance products and home and auto membership plans sold as a result of reduced loan origination volume.

Other revenues decreased $70 million or 15.2% for the nine months ended September 30, 2020 when compared to the same period in 2019 primarily due to a $20 million decrease from lower insurance products and home and auto membership plans sold as a result of reduced loan origination volume, a $15 million decrease in investment revenue primarily driven by lower interest rates on cash and invested assets and lower mark-to-market net gain on equity investment securities, and other decreases from the prior period due to lower servicing fee income, lower interest income on restricted cash, lower net gain on sale from the sale of SpringCastle interests and the gain on sale of a cost method investment in 2019.

Other expenses decreased $35 million or 8.8% for the three months ended September 30, 2020 when compared to the same period in 2019 primarily due to a decrease in general operating expenses, reflecting our efforts to tightly manage costs as well as variable expenses associated with lower loan origination volume.

Other expenses increased $22 million or 1.9% for the nine months ended September 30, 2020 when compared to the same period in 2019 primarily due to an increase in insurance policy benefits and claims expense primarily due to the impact of COVID-19 on our involuntary unemployment insurance products. The increase was partially offset by a decrease in general operating expenses, reflecting our efforts to tightly manage costs as well as variable expenses associated with lower loan origination volume.

Income taxes totaled $91 million and $131 million for the three and nine months ended September 30, 2020, respectively, compared to $49 million and $161 million for the three and nine months ended September 30, 2019, respectively, due to higher pre-tax income in the third quarter of 2020 and lower pre-tax income during the nine months ended September 30, 2020.

For the three and nine months ended September 30, 2020, the effective tax rates were 26.8% and 26.1%, respectively. The effective tax rates differed from the federal statutory rate of 21% primarily due to the effect of state income taxes and discrete tax expense during the third quarter of 2020.

For the three and nine months ended September 30, 2019, the effective tax rates were 16.3% and 21.3%, respectively. The effective tax rates differed from the federal statutory rate of 21% primarily due to the effect of state income taxes, which was offset by the release of the valuation allowance against certain state deferred taxes.

See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on effective tax rates.

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NON-GAAP FINANCIAL MEASURES

Management uses adjusted pretax income (loss), a non-GAAP financial measure, as a key performance measure of our segment. Adjusted pretax income (loss) represents income (loss) before income taxes on a Segment Accounting Basis and excludes direct costs associated with COVID-19, net loss resulting from repurchases and repayments of debt, acquisition-related transaction and integration expenses, net gain on sale of cost method investment, restructuring charges, additional net gain on sale of SpringCastle interests, lower of cost or fair value adjustment on loans held for sale, and net loss on sale of real estate loans. Management believes adjusted pretax income (loss) is useful in assessing the profitability of our segment.

Management also uses pretax capital generation, a non-GAAP financial measure, as a key performance measure of our segment. This measure represents adjusted pretax income as discussed above and excludes the change in our allowance for finance receivable losses in the period while still considering the net charge-offs incurred during the period. Management believes that 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 adjusted pretax net income (loss) and 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. Adjusted pretax income (loss) and 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.

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OMH's reconciliations of income (loss) before income tax expense (benefit) on a Segment Accounting Basis to adjusted pretax income (loss) (non-GAAP) by segment and Consumer and Insurance pretax capital generation (non-GAAP) were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2020		2019		2020		2019

Consumer and Insurance
Income before income taxes - Segment Accounting Basis	$	351	$	312	$	530	$	814
Adjustments:
Direct costs associated with COVID-19	4		—		13		—
Acquisition-related transaction and integration expenses	2		2		10		16
Net loss on repurchase and repayment of debt	35		2		35		30
Net gain on sale of cost method investment	—		—		—		(11)
Restructuring charges	1		1		7		5
Adjusted pretax income (non-GAAP)	$	393	$	317	$	595	$	854

Provision for finance receivable losses	$	232	$	277	$	1,184	$	816
Net charge-offs	(232)		(227)		(810)		(767)
Pretax capital generation (non-GAAP)	$	393	$	367	$	969	$	903











Other
Loss before income taxes - Segment Accounting Basis	$	(2)	$	(2)	$	(5)	$	(2)
Adjustments:
Additional net gain on sale of SpringCastle interests	(4)		—		(4)		(7)
Lower of cost or fair value adjustment (a)	4		—		4		—
Net loss on sale of real estate loans (b)	—		—		—		1




Adjusted pretax loss (non-GAAP)	$	(2)	$	(2)	$	(5)	$	(8)

(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 and nine months ended September 30, 2020.

(b) During the nine months ended September 30, 2019, the resulting impairment on finance receivables held for sale remaining after the February 2019 Real Estate Loan Sale has been combined with the gain on the sale. See Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information regarding the real estate loan sale.

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Segment Results

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 2 of the Notes to the Condensed Consolidated Financial Statements included in this report for the reconciliation of results of OMFC to OMH.

See Note 19 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2019 Annual Report on Form 10-K for a description of our segments and methodologies used to allocate revenues and expenses to each segment. See Note 15 of the Notes to the Condensed Consolidated Financial Statements included in this report for reconciliations of segment 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)	2020			2019			2020			2019

Interest income	$	1,086		$	1,060		$	3,260		$	3,013
Interest expense	250			238			765			700
Provision for finance receivable losses	232			277			1,184			816
Net interest income after provision for finance receivable losses	604			545			1,311			1,497
Other revenues	134			154			415			461
Other expenses	345			382			1,131			1,104
Adjusted pretax income (non-GAAP)	$	393		$	317		$	595		$	854


Selected Financial Statistics *
Finance receivables held for investment:
Net finance receivables	$	17,826		$	17,825		$	17,826		$	17,825
Number of accounts	2,297,167			2,406,753			2,297,167			2,406,753

Average net receivables	$	17,750		$	17,469		$	18,023		$	16,740
Yield	24.34		%	24.07		%	24.16		%	24.06		%
Gross charge-off ratio	6.15		%	5.98		%	6.91		%	6.97		%
Recovery ratio	(0.95)		%	(0.81)		%	(0.91)		%	(0.84)		%
Net charge-off ratio	5.20		%	5.17		%	6.00		%	6.13		%
30-89 Delinquency ratio	1.95		%	2.30		%	1.95		%	2.30		%
Origination volume	$	2,887		$	3,657		$	7,523		$	10,118
Number of accounts originated	300,376			395,899			771,628			1,082,576

* See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.

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Comparison of Adjusted Pretax Income for the Three and Nine Months Ended September 30, 2020 and 2019

Interest income increased $26 million or 2.5% and $247 million or 8.2% for the three and nine months ended September 30, 2020, respectively, when compared to the same periods in 2019 primarily due to growth in our average loan portfolio along with higher yields driven by the impacts of lower delinquencies.

Interest expense increased $12 million or 5.0% and $65 million or 9.3% for the three and nine months ended September 30, 2020, respectively, when compared to the same periods in 2019 primarily due to an increase in average debt of $1.3 billion and $2.3 billion, respectively, offset by a lower average cost of funds.

Provision for finance receivable losses decreased $45 million or 16.2% for the three months ended September 30, 2020 when compared to the same period in 2019 primarily due to the impact of lower delinquencies in the portfolio.

Provision for finance receivable losses increased $368 million or 45.1% for the nine months ended September 30, 2020 when compared to the same period in 2019 primarily due to higher expected credit losses in our allowance as a result of the current year adoption of ASU 2016-13, which were primarily driven by our forecast of elevated unemployment as a result of COVID-19.

Other revenues decreased $20 million or 13.0% and $46 million or 10.0% for the three and nine months ended September 30, 2020, respectively, when compared to the same periods in 2019 primarily due to lower insurance products and home and auto membership plans sold as a result of reduced loan origination volume and a decrease in investment revenue primarily driven by lower interest rates on cash and invested assets and lower mark-to-market net gain on equity investment securities in the current periods.

Other expenses decreased $37 million or 9.7% for the three months ended September 30, 2020 when compared to the same period in 2019 primarily due to a decrease in general operating expenses, reflecting our efforts to tightly manage costs as well as variable expenses associated with lower loan origination volume.

Other expenses increased $27 million or 2.4% for the nine months ended September 30, 2020 when compared to the same periods in 2019 primarily due to an increase in insurance policy benefits and claims expense primarily due to the impact of COVID-19 on our involuntary unemployment insurance products. The increase was partially offset by a decrease in general operating expenses, reflecting our efforts to tightly manage costs as well as variable expenses associated with lower loan origination volume.

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OTHER

“Other” consists of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which includes primarily our liquidating real estate loans.

OMH's adjusted pretax loss of the Other components on an adjusted Segment Accounting Basis was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2020		2019		2020		2019

Interest income	$	1	$	2	$	4	$	7
Interest expense	1		1		3		4

Net interest income after provision for finance receivable losses	—		1		1		3
Other revenues	4		5		12		20
Other expenses	6		8		18		31
Adjusted pretax loss (non-GAAP)	$	(2)	$	(2)	$	(5)	$	(8)

Net finance receivables of the Other components, reported in “Other assets,” on a Segment Accounting Basis were as follows:


	September 30,
(dollars in millions)	2020		2019






Net finance receivables held for sale:
Other receivables	$	54	$	70


Credit Quality

FINANCE RECEIVABLES

Our net finance receivables, consisting of personal loans, were $17.8 billion at September 30, 2020 and $18.4 billion at December 31, 2019. 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 team members work with customers as necessary and offer a variety of borrower assistance programs to help customers continue to make payments. See “Results of Operations” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report for further details on our borrower assistance programs.

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. See “Results of Operations” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report for further details on the COVID-19 impact on delinquency.

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

The delinquency information for net finance receivables is as follows:


(dollars in millions)	Consumer and Insurance			Segment to GAAP Adjustment (a)		GAAP Basis

September 30, 2020
Current	$	17,212		$	(7)	$	17,205
30-59 days past due	216			(1)		215
Delinquent (60-89 days past due)	132			(1)		131
Performing	17,560			(9)		17,551

Nonperforming (90+ days past due)	266			—		266
Total net finance receivables	$	17,826		$	(9)	$	17,817

Delinquency ratio
30-89 days past due	1.95		%	(b)		1.95		%
30+ days past due	3.44		%	(b)		3.44		%
60+ days past due	2.23		%	(b)		2.23		%
90+ days past due	1.49		%	(b)		1.49		%

December 31, 2019
Current	$	17,578		$	(28)	$	17,550
30-59 days past due	273			(1)		272
Delinquent (60-89 days past due)	182			(1)		181
Performing	18,033			(30)		18,003

Nonperforming (90+ days past due)	388			(2)		386
Total net finance receivables	$	18,421		$	(32)	$	18,389

Delinquency ratio
30-89 days past due	2.47		%	(b)		2.46		%
30+ days past due	4.58		%	(b)		4.56		%
60+ days past due	3.09		%	(b)		3.08		%
90+ days past due	2.11		%	(b)		2.10		%

(a) As a result of the adoption of ASU 2016-13, we converted all purchased credit impaired finance receivables to purchased credit deteriorated finance receivables in accordance with ASC Topic 326, which resulted in the gross-up of net finance receivables and allowance for finance receivable losses of $15 million on January 1, 2020. See Notes 3, 4, and 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on the adoption of ASU 2016-13 included in this report.

(b) Not applicable

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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, effective with the adoption of ASU 2016-13 on January 1, 2020. Prior to the adoption of ASU 2016-13, we estimated and recorded an allowance for finance receivable losses to cover estimated incurred losses on our finance receivables. Our allowance for finance receivable losses may fluctuate based upon our continual review of the growth and contractual delinquency of the finance receivable portfolio and changes in economic conditions.

Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the projected impacts of COVID-19 on the U.S. economy. We also incorporated estimated impacts from 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 September 30, 2020, our economic forecast used a reasonable and supportable period of 12 months. The increase in our allowance for finance receivable losses for the nine months ended September 30, 2020 was largely due to these economic considerations relating to COVID-19 along with the adoption of ASU 2016-13. In the near-term, we 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 loan losses, reserve rate, and provision expense. For further information regarding the impact of COVID-19 on our allowance for finance receivable losses see “Recent Development and Outlook” and “Results of Operations” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Changes in the allowance for finance receivable losses were as follows:


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

Three Months Ended September 30, 2020
Balance at beginning of period	$	2,342	$	(18)	$	2,324
Provision for finance receivable losses	232		(1)		231
Charge-offs	(274)		—		(274)
Recoveries	42		1		43
Balance at end of period	$	2,342	$	(18)	$	2,324



Three Months Ended September 30, 2019
Balance at beginning of period	$	772	$	(28)	$	744
Provision for finance receivable losses	277		5		282
Charge-offs	(263)		3		(260)
Recoveries	36		(4)		32

Balance at end of period	$	822	$	(24)	$	798

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

Nine Months Ended September 30, 2020
Balance at beginning of period	$	849		$	(20)	$	829
Impact of adoption of ASU 2016-13 (a)	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		%	(b)		13.05		%

Nine Months Ended September 30, 2019
Balance at beginning of period	$	773		$	(42)	$	731
Provision for finance receivable losses	816			20		836
Charge-offs	(873)			11		(862)
Recoveries	106			(13)		93
Balance at end of period	$	822		$	(24)	$	798

Allowance ratio	4.61		%	(c)		4.49		%

(a) As a result of the adoption of ASU 2016-13, we recorded a one-time adjustment to the allowance for finance receivable losses. Additionally, we converted all purchased credit impaired finance receivables to purchased credit deteriorated finance receivables in accordance with ASC Topic 326, which resulted in the gross-up of net finance receivables and allowance for finance receivable losses of $15 million on January 1, 2020. See Notes 3, 4, and 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on the adoption of ASU 2016-13 included in this report.

(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 (after the adoption of ASU 2016-13) 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 increased from prior periods due to the adoption of ASU 2016-13 and the impacts of the current economic environment.

See Note 5 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.

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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

September 30, 2020
TDR net finance receivables	$	743	$	(42)	$	701
Allowance for TDR finance receivable losses	344		(23)		321

December 31, 2019
TDR net finance receivables	$	721	$	(63)	$	658
Allowance for TDR finance receivable losses	292		(20)		272

DISTRIBUTION OF FINANCE RECEIVABLES BY FICO SCORE

There are many different categorizations used in the consumer lending industry to describe the creditworthiness of a borrower, including prime, near prime, and sub-prime. 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: 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)	September 30, 2020 *		December 31, 2019

FICO scores
660 or higher	$	4,612	$	3,951
620-659	4,835		4,683
619 or below	8,370		9,755
Total	$	17,817	$	18,389

* Due to the impact of COVID-19, FICO scores as of September 30, 2020 may have been impacted due to government stimulus measures, borrower assistance programs, and potentially inconsistent reporting to credit bureaus.

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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, 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 nine months ended September 30, 2020, OMH generated net income of $371 million. OMH net cash inflow from operating and investing activities totaled $1.4 billion for the nine months ended September 30, 2020. At September 30, 2020, our scheduled principal and interest payments for the remainder of 2020 on our existing debt (excluding securitizations) totaled $119 million. As of September 30, 2020, we had $8.3 billion of unencumbered personal loans and $110 million of unencumbered real estate loans. These real estate loans are classified as held for sale and reported in “Other assets.”

Based on our estimates and taking into account the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our businesses and repay our obligations as they become due through 2022.

OMFC’s Issuance and Redemption of Unsecured Debt

For information regarding the issuance and redemption of OMFC's unsecured debt, see Note 8 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Securitizations and Borrowings from Revolving Conduit Facilities

During the nine months ended September 30, 2020, we completed two personal loan securitizations (OMFIT 2020-1 and OMFIT 2020-2, see “Securitized Borrowings” below), and redeemed two personal loan securitizations (SLFT 2016-A and OMFIT 2016-1). At September 30, 2020, we had $9.3 billion in UPB of finance receivables pledged as collateral for our securitization transactions.

At September 30, 2020, the borrowing capacity of our revolving conduit facilities was $7.2 billion and no amounts were drawn nor were any personal loans pledged as collateral under these facilities.

See Notes 8 and 9 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt and revolving conduit facilities.

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Shares Repurchased and Retired

During the first quarter of 2020, OMH repurchased and retired 2,031,698 shares of its common stock at an average price per share of $22.30, for an aggregate total of approximately $45 million, including commissions and fees. 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. On March 20, 2020, OMH temporarily suspended its stock repurchase program. OMH retains the right to reinstate the stock repurchase program as circumstances change. For additional information regarding the shares repurchased see Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Cash Dividends to OMH's Common Stockholders

As of September 30, 2020, dividend declarations for the current year by OMH's board of directors were as follows:


Declaration Date	Record Date	Payment Date	Dividend Per Share			Amount Paid
						(in millions)
February 10, 2020	February 26, 2020	March 13, 2020	$	2.83	*	$	386
April 27, 2020	May 29, 2020	June 12, 2020	0.33			44
July 27, 2020	August 10, 2020	August 18, 2020	2.33		*	313
Total			$	5.49		$	743

* Our February 10, 2020 and July 27, 2020 dividend declarations of $2.83 and $2.33, respectively, each included a quarterly dividend of $0.33 per share.

To provide the primary funding for the dividends, OMFC paid dividends of $739 million to OMH during the nine months ended September 30, 2020.

On October 26, 2020, OMH declared a dividend of $0.45 per share payable on November 17, 2020 to record holders of OMH's common stock as of the close of business on November 9, 2020. To provide funding for the OMH dividend, the OMFC Board of Directors authorized a dividend in the amount of up to $61 million payable on or after November 13, 2020.

While OMH intends to pay its minimum quarterly dividend, currently $0.45 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.

LIQUIDITY

OMH's Operating Activities

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 $108 million. Net cash provided by operations of $1.7 billion for the nine months ended September 30, 2019 reflected net income of $594 million, the impact of non-cash items, and a favorable change in working capital of $51 million.

OMH's Investing Activities

Net cash used for investing activities of $257 million and $2.5 billion for the nine months ended September 30, 2020 and 2019, respectively, was primarily due to net principal originations of finance receivables held for investment and held for sale and purchases of available-for-sale securities, partially offset by calls, sales, and maturities of available-for-sale securities.

OMH's Financing Activities

Net cash used for financing activities of $563 million for the nine months ended September 30, 2020 was primarily due to debt repayments, cash dividends paid, and the cash paid on the common stock repurchased, offset by the issuances of the 8.875% Senior Notes due 2025, OMFIT 2020-1, and OMFIT 2020-2 securitizations during the period. Net cash provided by financing activities of $1.4 billion for the nine months ended September 30, 2019 was primarily due to net issuances of long-term debt.

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OMH's Cash and Investments

At September 30, 2020, we had $1.9 billion of cash and cash equivalents, which included $233 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 September 30, 2020, we had $1.9 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 may have 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 2019 Annual Report on Form 10-K.

Principal factors that could decrease our liquidity are customer delinquencies and defaults, a decline in customer prepayments, and a prolonged inability to adequately access capital market funding. We intend to support our liquidity position by utilizing strategies that are further described in our “Liquidity and Capital Resources” of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our 2019 Annual Report on Form 10-K.

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

OUR INSURANCE SUBSIDIARIES

Our insurance subsidiaries are subject to state regulations that limit their ability to pay dividends. AHL and Triton did not pay any dividends during the nine months ended September 30, 2020 and 2019. See Note 12 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2019 Annual Report on Form 10-K for more information on state regulation restrictions, the Merit sale, and dividends paid by Merit in 2019.

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 10 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2019 Annual Report on Form 10-K for more information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.

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Securitized Borrowings

We execute private securitizations under Rule 144A of the Securities Act of 1933. As of September 30, 2020, 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	$	213	$	235	3.92	%	5 years
SLFT 2017-A	652		685		532		590		3.04	%	3 years
OMFIT 2015-3	293		329		282		295		4.24	%	5 years
OMFIT 2016-3	350		397		317		415		4.33	%	5 years
OMFIT 2017-1	947		988		423		486		2.88	%	2 years
OMFIT 2018-1	632		650		600		683		3.60	%	3 years
OMFIT 2018-2	368		381		350		400		3.87	%	5 years
OMFIT 2019-1	632		654		600		687		3.79	%	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 (c)	821		958		821		958		4.12	%	2 years
OMFIT 2020-2 (d)	1,000		1,053		1,000		1,053		2.03	%	5 years
ODART 2017-2	605		624		122		149		3.58	%	1 year
ODART 2018-1	947		964		791		819		3.58	%	2 years
ODART 2019-1	737		750		700		750		3.79	%	5 years
Total securitizations	$	9,987	$	10,608	$	8,401	$	9,407

(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 September 30, 2020.

(c) On May 1, 2020, we issued $821 million of notes backed by personal loans. The notes mature in May of 2032. We initially retained $71 million of the Class C notes and subsequently sold the Class C notes on May 29, 2020.

(d) On August 21, 2020, we issued $1.0 billion of notes backed by personal loans. The notes mature in September of 2035.

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Revolving Conduit Facilities

In addition to the structured financings, we have access to 14 revolving conduit facilities with a total borrowing capacity of $7.2 billion as of September 30, 2020:


(dollars in millions)	Advance Maximum Balance		Amount Drawn

Rocky River Funding, LLC	$	400	$	—
OneMain Financial Funding IX, LLC	650		—
Mystic River Funding, LLC	850		—
Fourth Avenue Auto Funding, LLC	200		—
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 Funding, LLC	500		—
Columbia River Funding, LLC	500		—
St. Lawrence River Funding, LLC	250		—
OneMain Financial Funding VII, LLC	850		—
OneMain Financial Auto Funding I, LLC	850		—
Total	$	7,200	$	—

* On September 30, 2020, we terminated the conduit facility with New River Funding, LLC and simultaneously entered into a new conduit facility with New River Funding Trust.

See “Liquidity and Capital Resources - Sources and Uses of Funds - Securitizations and Borrowings from Revolving Conduit Facilities” above for information on the transaction completed subsequent to September 30, 2020.

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Off-Balance Sheet Arrangements

We have no other 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 September 30, 2020 or December 31, 2019.


Critical Accounting Policies and Estimates

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

Management exercises its judgment when determining the amount of the allowance for finance receivable losses. Our judgment is based on quantitative analyses, qualitative factors, such as recent portfolio, industry, and other economic trends, and experience in the consumer finance industry. We adjust the amounts determined by our model for management’s estimate of the effects of model imprecision which include but are not limited to, any changes to underwriting criteria and portfolio seasoning.

TDR FINANCE RECEIVABLES

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. Loan modifications primarily involve a combination of the following to reduce the borrower’s monthly payment: reduce interest rate, extend the term, defer or forgive past due interest or forgive principal. Account modifications that are deemed to be a TDR finance receivable are measured for impairment in accordance with the authoritative guidance for the accounting for impaired loans.

The allowance for finance receivable losses related to our TDR finance receivables represents loan-specific reserves based on an analysis of the present value of expected future cash flows. We establish our allowance for finance receivable losses related to our TDR finance receivables by calculating the present value (discounted at the loan’s effective interest rate prior to modification) of all expected cash flows less the recorded investment in the aggregated pool. We use certain assumptions to estimate the expected cash flows from our TDR finance receivables. The primary assumptions for our model are prepayment speeds, default rates, and loss severity rates.

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GOODWILL AND OTHER INTANGIBLE ASSETS

We test goodwill for potential impairment annually as of October 1 of each year and whenever events occur or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount. If the qualitative assessment indicates that it is more likely than not that the reporting unit’s fair value is less than its carrying amount, we proceed with the quantitative impairment test. When necessary, the fair value of the reporting unit is calculated utilizing the income approach, which uses prospective financial information of the reporting unit discounted at a rate that we estimate a market participant would use.

For indefinite-lived intangible assets, we review for impairment at least annually and whenever events occur or circumstances change that would indicate the assets are more likely than not to be impaired. We first complete an annual qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. If the qualitative assessment indicates that the assets are more likely than not to have been impaired, we proceed with the fair value calculation of the assets. The fair value is determined in accordance with our fair value measurement policy.

For those net intangible assets with a finite useful life, we review such intangibles for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.


Recent Accounting Pronouncements

See Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this report for discussion of recently issued accounting pronouncements.


Seasonality

Our personal loan volume is generally highest during the second and fourth quarters of the year, primarily due to marketing efforts 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 normal seasonality trends continue 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 2019 Annual Report on Form 10-K.

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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 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 September 30, 2020, 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 September 30, 2020 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 third quarter of 2020 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 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 September 30, 2020, 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 September 30, 2020 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 third quarter of 2020 that have materially affected, or are reasonably likely to materially affect, OMFC's internal control over financial reporting.

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PART II — OTHER INFORMATION


Item 1. Legal Proceedings.

See Note 14 of the Notes to the Condensed Consolidated Financial Statements included in this report.


Item 1A. Risk Factors.

In light of recent developments related to COVID-19 and the adoption of ASU 2016-13, we are supplementing our risk factors. The following supplemental risk factors should be read in conjunction with the risk factors contained in Item 1A and the information under “Forward-Looking Statements” in our 2019 Annual Report, as filed with the SEC on February 14, 2020.

RISKS RELATED TO OUR BUSINESS

The COVID-19 pandemic is adversely affecting consumer finance businesses including OneMain.

The COVID-19 pandemic has resulted in widespread volatility and deterioration in economic conditions across the United States. Governmental authorities have taken a number of steps to combat or slow the spread of COVID-19, including shutdowns of non-essential businesses, stay-at-home orders, social distancing measures, and other actions which have disrupted economic activity. Most states and localities have relaxed their restrictions and reopened their economies, in some cases at reduced capacity. Certain states are experiencing new outbreaks of COVID-19 and have re-imposed shutdowns of restaurants, entertainment, and similar venues. These disruptions and uncertainties related to shutdowns and reopenings have continued to result in a significant reduction in the number of customers at our branch locations and lowered demand for our products, which, combined with our credit tightening, has decreased our loan originations. COVID-19 has also resulted in higher unemployment in the United States, which we expect will over time result in increased delinquencies and credit losses on finance receivables outstanding. In addition, if significant portions of our workforce are unable to work effectively as a result of COVID-19, there may be servicing and other disruptions to our business. Additionally, a large secondary outbreak of COVID-19 could lead to further mandated shutdowns and economic uncertainty. As a result, we cannot foresee whether the outbreak of COVID-19 pandemic will be effectively contained, nor can we predict the severity and duration of its impact.

We believe that many of our customers have benefited from the enhanced benefits provided by the CARES Act, some of which, such as enhanced unemployment benefits, were available from March 2020 through July 2020. If Congress does not enact additional stimulus measures benefiting our customers, the effect may result in an increase in delinquencies and materially and adversely impact our results of operations and financial condition in future periods.

Federal, state and local governments have mandated or encouraged financial services companies to make accommodations to borrowers and other customers affected by COVID-19. Legal and regulatory responses to concerns about COVID-19 could result in additional regulation or restrictions affecting the conduct of our business in the future. All of the foregoing may adversely affect our income and other results of operations or make collection of our personal loans more difficult or reduce income received from such loans or our ability to obtain financing with respect to such loans.

COVID-19 has also caused significant volatility in financial markets and adverse economic conditions and may have significant long-term adverse effects on the U.S. economy, including increased instability in capital markets, declines in business and consumer confidence, reductions in economic activity, increased unemployment and recession, any of which may adversely affect our ability to access the capital markets and could have an adverse impact on our liquidity, our income and our ability to support our operations and other negative impacts on our financial position, results of operations, and prospects.

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If our estimates of allowance for finance receivable losses are not adequate to absorb actual losses, our provision for finance receivable losses would increase, which would adversely affect our results of operations.

We maintain an allowance for finance receivable losses. To estimate the appropriate level of allowance for finance receivable losses, we consider known and relevant internal and external factors that affect finance receivable collectability, including the total amount of finance receivables outstanding, historical finance receivable charge-offs, our current collection patterns, and current and forecasted economic trends. Our methodology for establishing our allowance for finance receivable losses is based on the guidance from ASC 326, Financial Instruments – Credit Losses, which requires us to measure expected credit losses for financial assets at each reporting date. The allowance is primarily based on historical experience, current conditions, and our reasonable and supportable forecast of economic conditions. If customer behavior changes as a result of economic conditions and if we are unable to accurately predict how the unemployment rates, personal bankruptcy filings, and general economic conditions may affect our allowance for finance receivable losses, our allowance for finance receivable losses may be inadequate. Our allowance for finance receivable losses is an estimate, and if actual finance receivable losses are materially greater than our allowance for finance receivable losses, our results of operations could be adversely affected. Neither state regulators nor federal regulators regulate our allowance for finance receivable losses.

RISKS RELATED TO FINANCIAL REPORTING

Our valuations may include methodologies, models, estimations and assumptions which are subject to differing interpretations and could result in changes to financial assets and liabilities that may materially adversely affect our results of operations and financial condition.

The allowance for finance receivable losses is a critical accounting estimate which requires us to use significant estimates and assumptions to determine the appropriate level of allowance. We estimate the allowance for finance receivable losses primarily on historical loss experience using a cumulative loss model applied to our finance receivable portfolio. Our gross loss expectation is offset by the estimate of future recoveries using historical recovery curves on the active portfolio along with accounts that were previously charged-off. We adjust the amounts determined by the model for the impact of management’s economic forecast, such as the levels of unemployment and personal bankruptcy filings, and the effects of model imprecision which include any changes to underwriting criteria and portfolio seasoning. If we are unable to predict certain of these assumptions accurately, our allowance for finance receivable losses may be inadequate. If actual finance receivable losses are materially greater than our allowance for finance receivable losses, our results of operations, financial condition, and liquidity could be adversely affected.

We use estimates, assumptions, and judgments when certain financial assets and liabilities are measured and reported at fair value. Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party sources, when available. During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent or market data becomes less observable. In such cases, certain asset valuations may require significant judgment, and may include inputs and assumptions that require greater estimation, including credit quality, liquidity, interest rates and other relevant inputs. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material adverse effect on our results of operations, financial condition, and liquidity.

There have been no other material changes to our risk factors included in Part I, Item 1A of our 2019 Annual Report on Form 10-K.

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

None.


Item 3. Defaults Upon Senior Securities.

None.


Item 4. Mine Safety Disclosures.

None.


Item 5. Other Information.

None.

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Item 6. Exhibit Index.


Exhibit Number						Description





















31.1						Rule 13a-14(a)/15d-14(a) Certifications of the President and Chief Executive Officer of OneMain Holdings, Inc.

31.2						Rule 13a-14(a)/15d-14(a) Certifications of the Executive Vice President and Chief Financial Officer of OneMain Holdings, Inc.

31.3						Rule 13a-14(a)/15d-14(a) Certifications of the President and Chief Executive Officer of OneMain Finance Corporation

31.4						Rule 13a-14(a)/15d-14(a) Certifications of the Executive Vice President and Chief Financial Officer of OneMain Finance Corporation

32.1						Section 1350 Certifications of OneMain Holdings, Inc.

32.2						Section 1350 Certifications of OneMain Finance Corporation

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).

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OMH Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ONEMAIN HOLDINGS, INC.

(Registrant)

Date:

October 29, 2020

By:

/s/ Micah R. Conrad

Micah R. Conrad

Executive Vice President and Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

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OMFC Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ONEMAIN FINANCE CORPORATION

(Registrant)

Date:

October 29, 2020

By:

/s/ Micah R. Conrad

Micah R. Conrad

Executive Vice President and Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)