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Item 1A. Risk Factors

2021-02-09 compared with 2020-02-14 · 195 added, 171 removed, 356 unchanged (51% of the section changed)

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We face a variety of risks that are inherent in our business.

Accordingly, you should carefully consider the following discussion of risks of which we are currently aware that could affect our businesses, results of operations and financial condition.

In addition to the factors discussed in this report and in other documents we file with the SEC that could adversely affect our businesses, results of operations and financial condition, new risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our business or financial performance.

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Any risk factor described in this Annual Report on Form 10-K or in any of our other SEC filings could by itself, or together with other factors, materially adversely affect our liquidity, competitive position, business, reputation, results of operations or financial condition, including by materially increasing our expenses or decreasing our revenues, which could result in material losses.

RISK FACTOR SUMMARY

Risks Related to our Business

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

• Our results of operations and financial condition and our borrowers’ ability to make payments on their loans have been, and may in the future be, adversely affected by economic conditions and other factors that we cannot control.

• There are risks associated with the acquisition or sale of assets or businesses and the formation, termination or operation of joint ventures or other strategic alliances.

• 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 could adversely affect our results of operations.

• Our risk management efforts may not be effective.

• Changes in market conditions could adversely affect the rate at which our borrowers prepay their loans, which could negatively affect our results of operations, financial condition and liquidity.

• We may be required to indemnify or repurchase finance receivables from purchasers of finance receivables that we have sold or securitized.

• Our business and reputation may be materially impacted by information system failures, cyber threats, or network disruptions.

• There may be losses or unauthorized access to or releases of confidential information, that could subject us to significant reputational, financial, legal and operational consequences.

• We are subject to the theft or misuse of physical customer and employee records at our facilities.

• Our insurance operations are subject to a number of risks and uncertainties.

• Our use of derivatives exposes us to credit and market risks.

• We may not be able to make technological improvements as quickly as some of our competitors.

• If goodwill and other intangible assets become impaired, it could have a negative impact on our profitability.

• Damage to our reputation could adversely impact our business and financial results.

Risks Related to our Industry and Regulation

• We operate in a highly competitive market, which may have a material adverse effect on our results of operations, financial condition and liquidity.

• Our businesses are subject to regulation in the jurisdictions in which we conduct business.

• Requirements of the Dodd-Frank Act and oversight by the CFPB significantly increase our regulatory costs and burdens.

• Current and proposed regulations relating to consumer privacy, data protection and information security could increase our costs.

• Our use of third-party vendors is subject to regulatory review.

• We purchase and sell finance receivables, which could subject us to heightened regulatory scrutiny.

• Changes in law and regulatory developments could result in significant additional compliance costs relating to securitizations.

• We may have to constrain our business activities to avoid being deemed an investment company under the Investment Company Act.

Risks Related to our Indebtedness

• An inability to access adequate sources of liquidity may adversely affect our ability to fund operational requirements and satisfy financial obligations.

• Our indebtedness is significant.

• Certain of our outstanding notes contain covenants that restrict our operations.

• The assessment of our liquidity is based upon significant judgments and estimates that could prove to be materially incorrect.

• OMFC's credit ratings could adversely affect our ability to raise capital in the debt markets at attractive rates.

• Our securitizations may expose us to financing and other risks.

Risks Related to Our Organization and Structure

• The Apollo-Värde Group is OMH's largest stockholder, and the Apollo-Värde Group may exercise significant influence over us.

• OMH and OMFC are holding companies with no operations.

• OMH may not pay dividends on its common stock in the future.

• Certain provisions of an amended and restated stockholders agreement with the Apollo-Värde Group, restated certificate of incorporation and amended and restated bylaws could hinder, delay or prevent a change in control of OMH.

• Certain OMH's stockholders have the right to engage or invest in the same or similar businesses as us.

• Licensing and insurance laws and regulations may delay or impede purchases of OMH's common stock.

Risks Related to Financial Reporting

• Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business and stock price.

• Our valuations methodologies are subject to differing interpretations which may materially adversely affect our results of operations and financial condition.

Risks Related to OMH’s Common Stock

• The market price and trading volume of OMH's common stock may be volatile.

• Future offerings of debt or equity securities by us may adversely affect the market price of OMH's common stock.

• The market price of OMH's common stock could be negatively affected by sales of substantial amounts of OMH's common stock in the public markets.

• Future issuances of common stock in connection with our incentive plans, acquisitions or otherwise will dilute all other stockholdings.

General Risks

• We are a party to various lawsuits and proceedings.

• Certain operations rely on external vendors.

• If we lose the services of any of our key management personnel, our business could suffer.

• Employee misconduct could harm us.

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.

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 over time may result in increased delinquencies and credit losses on finance receivables outstanding.

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.

Recently, authorities have begun to distribute newly developed COVID-19 vaccines to health care workers and other priority groups, which over time are designed to create “herd immunity” and diminish, if not eliminate, the crisis.

The success of the vaccination program will depend to a large extent on the willingness of Americans to receive vaccinations and the effectiveness of the distribution effort, both of which are uncertain at this time.

Moreover, new strains of the virus are spreading in the U.S.

and abroad, and it is uncertain how effective the vaccines will be against these new strains.

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.

We believe they will also benefit from the CAA.

The CAA provides for another round of direct payments, enhanced unemployment benefits, education funding, and aid to sectors still reeling from the economic fallout of the pandemic.

While these measures may benefit many of our customers, we cannot assure you that the implementation of these measures will offset the negative impact of COVID-19 on our customers.

If the CAA or any additional stimulus measures are not sufficient to remediate the financial stress on our customers as a result of the pandemic, we may experience an increase in delinquencies that could materially and adversely impact our results of operations and financial condition in future periods.

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, 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.

Finally, to the extent that the pandemic harms our business and results of operations, many of the other risks described in this “Risk Factors” section may be heightened.

Our results of operations and financial condition and our borrowers’ ability to make payments on their loans have been, and may in the future be, adversely affected by economic conditions and other factors that we cannot control.

Uncertainty and deterioration in general economic conditions in the U.S.

and abroad historically have created a difficult operating environment for companies involved in consumer lending.

and abroad historically have created a difficult operating environment for consumer lending.

Many factors, including factors that are beyond our control, may impact our results of operations or financial condition and/or affect our borrowers’ willingness or capacity to make payments on their loans.

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and the quality of any collateral underlying our finance receivables.

If we experience an economic downturn, or if we become affected by other events beyond our control, we may experience a significant reduction in revenues, earnings and cash flows, difficulties accessing capital and a deterioration in the value of our investments.

We may also become exposed to increased credit risk from our customers and third parties who have obligations to us.

If we experience a future economic downturn, or if we become affected by other events beyond our control, we may experience increased credit risks, significant reductions in revenues, earnings and cash flows, difficulties accessing capital and a deterioration in the value of our investments.

Moreover, our customers are primarily non-prime borrowers, who have historically been more likely to be affected, or more severely affected, by adverse macroeconomic conditions than prime borrowers.

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The cost to service our loans may also increase without a corresponding increase in our finance charge income.

We are exposed to geographic customer concentration risk.

We also are exposed to geographic customer concentration risk.

An economic downturn or catastrophic event that disproportionately affects certain geographic regions could materially and adversely affect our business, financial condition and results of operations, including the performance of our finance receivables portfolio.

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the integration of the assets or business into our information technology platforms and servicing systems;

• the quality of servicing during any interim servicing period after we purchase a portfolio but before we assume servicing obligations from the seller or its agents;

• the disruption to our ongoing businesses and distraction of our management teams from ongoing business concerns;

• incomplete or inaccurate files and records;

• the retention of existing customers;

• the creation of uniform standards, controls, procedures, policies and information systems;

• the occurrence of unanticipated expenses;

• potential unknown liabilities associated with the transactions, including legal liability related to origination and servicing prior to the acquisition.

For example, in some cases loan files and other information (including servicing records) may be incomplete or inaccurate.

If our employees are unable to access customer information easily, or if we are unable to produce originals or copies of documents or accurate information about the loans, collections could be materially and adversely affected, and we may not be able to enforce our right to collect in some cases.

Similarly, collections could be affected by any changes to our collection practices, the restructuring of any key servicing functions, transfer of files and other changes that would result from our assumption of the servicing of the acquired portfolios.

the quality of servicing;

disruption of our ongoing businesses and distraction of our management teams;

incomplete or inaccurate records;

inability to retain existing customers;

unanticipated expenses;

and potential unknown liabilities associated with the transactions, including legal liability related to origination and servicing prior to the acquisition.

The anticipated benefits and synergies of our future acquisitions will assume a successful integration, and will be based on projections, which are inherently uncertain, as well as other assumptions.

Even if integration is successful, anticipated benefits and synergies may not be achieved.

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.

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 could 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 economic trends.

Our methodology for establishing our allowance for finance receivable losses is based on the guidance in Accounting Standards Codification (“ASC”) 450, Contingencies, and, in part, on our historic loss experience.

If customer behavior changes as a result of economic conditions and if we are unable to predict how the unemployment rate, housing price index, and general economic uncertainty may affect our allowance for finance receivable losses, our allowance for finance receivable losses may be inadequate.

Our methodology for establishing our allowance for finance receivable losses is based on the guidance from Accounting Standards Codification (“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.

In June of 2016, the Financial Accounting Standards Board issued Accounting Standard Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This ASU 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.

The new approach requires entities to measure all expected credit losses for financial assets based on historical experience, current conditions, and reasonable forecasts of collectability.

It is anticipated that the expected credit loss model may require earlier recognition of credit losses than the incurred loss approach.

This ASU is effective for the Company beginning January 1, 2020.

See Note 4 of the Notes to the Consolidated Financial Statements included in this report for more information on this new accounting standard.

Our risk management efforts may not be effective.

We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related risks, as well as operational risks related to our business, assets and liabilities.

To the extent our models used to assess the creditworthiness of potential borrowers do not adequately identify potential risks, the valuations produced would not adequately represent the risk profile of the borrowers and could result in a riskier finance receivables profile than originally identified.

To the extent our models used to assess the creditworthiness of potential borrowers do not adequately identify potential risks, the valuations produced will not adequately represent the risk profile of the borrowers and could result in a riskier finance receivables profile than originally identified.

Our risk management policies, procedures, and techniques, including our scoring technology, may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified or identify concentrations of risk or additional risks to which we may become subject in the future.

We also face new risks as a result of COVID-19 and the significant increase in our remote work force and digital operations.

These risks may not be adequately captured by our existing risk management framework.

Changes in market conditions, including rising interest rates, could adversely affect the rate at which our borrowers prepay their loans and the value of our finance receivables portfolio, as well as increase our financing cost, which could negatively affect our results of operations, financial condition and liquidity.

Changing market conditions, including but not limited to, changes in interest rates, the availability of credit, the relative economic vitality of the area in which our borrowers and their assets are located, changes in tax laws, other opportunities for investment available to our customers, homeowner mobility, and other economic, social, geographic, demographic, and legal factors beyond our control, may affect the rates at which our borrowers prepay their loans.

Changing market conditions, the availability of credit, the relative economic vitality of the area in which our borrowers and their assets are located, changes in tax laws, other opportunities for investment available to our customers, homeowner mobility, and other economic, social, geographic, demographic, and legal factors beyond our control, may affect the rates at which our borrowers prepay their loans.

Generally, in situations where prepayment rates have slowed, the weighted-average life of our finance receivables has increased.

Any increase in interest rates may further slow the rate of prepayment for our finance receivables, which could adversely affect our liquidity by reducing the cash flows from, and the value of, the finance receivables we hold for sale or utilize as collateral in our secured funding transactions.

Moreover, the vast majority of our finance receivables are fixed-rate finance receivables, which generally decline in value if interest rates increase.

As such, if changing market conditions cause interest rates to increase substantially, the value of our fixed-rate finance receivables could decline.

Increases in market interest rates could negatively impact our net interest income, as well as our cash flow from operations and results of operations.

Because we are subject to applicable legal and regulatory restrictions in certain jurisdictions that limit the maximum interest rate that we may charge on a certain population of our loans, we are limited in our ability to increase the interest rate on our loans to offset any increases in our cost of funds as market interest rates increase.

Our yield, as well as our cash flows from operations and results of operations, could be materially and adversely affected if we are unable to increase the interest rates charged on newly originated loans to offset any increases in our cost of funds as market interest rates increase.

Moreover, our finance receivables are fixed-rate and generally decline in value if interest rates increase.

As such, if changing market conditions cause interest rates to increase substantially, the value of our finance receivables could decline.

Some jurisdictions limit the maximum interest rate that we may charge on a certain population of our loans so we have limited ability to increase the interest rate on our loans made in those jurisdictions.

Our yield, as well as our cash flows from operations and results of operations, could be materially and adversely affected if we are unable to increase the interest rates charged on new loans to offset any increases in our cost of funds.

Accordingly, any increase in interest rates could negatively affect our results of operations, financial condition and liquidity.

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• we fail to comply, at the individual finance receivable level or otherwise, with regulatory requirements in connection with the origination and servicing of the finance receivables.

Many purchasers or investors in finance receivables (including through securitizations) are particularly aware of the conditions under which originators must indemnify purchasers or repurchase finance receivables and would benefit from enforcing any repurchase remedies that they may have.

At its maximum, our exposure to repurchases or our indemnification obligations under our representations and warranties could include the current unpaid balance of all finance receivables that we have sold or securitized, and which are not subject to settlement agreements with purchasers.

The risk of loss on the finance receivables that we have securitized is recognized in our allowance for finance receivable losses since all of our loan securitizations are recorded on our balance sheet.

If we are required to indemnify purchasers or repurchase finance receivables that we sell or have sold that result in losses that exceed our reserve for sales recourse or recognize losses on securitized finance receivables that exceed our recorded allowance for finance receivable losses associated with our securitizations, this could adversely affect our results of operations, financial condition and liquidity.

If we are required to indemnify purchasers or repurchase finance receivables that we sell or have sold that result in losses or recognize losses on securitized finance receivables that exceed our recorded allowance for finance receivable losses associated with our securitizations, this could adversely affect our results of operations, financial condition and liquidity.

Our business and reputation may be materially impacted by information system failures, cyber threats, or network disruptions.

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Cyber threats are constantly evolving, increasing the difficulty of detecting and successfully defending against them.

We also may face new or heightened risk due to the increase in our remote workforce and digital operations.

We may have no current capability to detect certain vulnerabilities, which may allow them to persist in our system environment over long periods of time.

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There may be losses or unauthorized access to or releases of confidential information, including personally identifiable information, that could subject us to significant reputational, financial, legal and operational consequences.

Our operations rely heavily on the secure processing, storage and transmission of confidential customer and other information including, among other things, personally identifiable information (“PII”), in our computer systems and networks, as well as those of third parties.

Our operations rely heavily on the secure processing, storage and transmission of confidential customer and other information including, among other things, PII, in our computer systems and networks, as well as those of third parties.

Our branch offices and centralized servicing centers, as well as our administrative and executive offices, are part of an electronic information network that is designed to permit us to originate and track finance receivables and collections and perform other tasks that are part of our everyday operations.

Additionally, as a result of COVID-19 and the significant increase in our remote work force and digital operations, our vulnerability to unauthorized access to confidential information may increase.

We devote significant resources to network and data security, including through the use of encryption and other security measures intended to protect our computer systems and data.

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We are also subject to the theft or misuse of physical customer and employee records at our facilities.

Our branch offices and centralized servicing centers have physical customer records necessary for day-to-day operations that contain extensive confidential information about our customers, including financial data and PII.

Our branch offices and centralized servicing centers have physical customer records necessary for day-to-day operations that contain confidential information about our customers.

We also retain physical records in various storage locations.

The loss or theft of customer information and data from our branch offices, central servicing facilities, or other storage locations could subject us to additional regulatory scrutiny and penalties and could expose us to civil litigation and possible financial liability, which could have a material adverse effect on our results of operations, financial condition and liquidity.

The loss or theft of customer information from our branch offices, central servicing facilities, or other storage locations could subject us to additional regulatory scrutiny and penalties and could expose us to civil litigation and possible financial liability, which could

have a material adverse effect on our results of operations, financial condition and liquidity.

In addition, if we cannot locate original documents (or copies, in some cases) for certain finance receivables, we may not be able to collect on those finance receivables.

Certain of our operations rely on external vendors.

We rely on third-party vendors to provide products and services necessary to maintain day-to-day operations.

For example, we outsource a portion of our information systems, communication, data management and transaction processing to third parties.

Accordingly, we are exposed to the risk that these vendors might not perform in accordance with the contracted arrangements or service level agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products and services, or strategic focus.

Such failure to perform could be disruptive to our operations, and have a materially adverse impact on our business, results of operations and financial condition.

These third parties are also sources of risk associated with operational errors, system interruptions or breaches and unauthorized disclosure of confidential information.

If the vendors encounter any of these issues, we could be exposed to disruption of service, damage to reputation and litigation.

Our insurance operations are subject to a number of risks and uncertainties, including claims, catastrophic events, underwriting risks and dependence on a primary distribution channel.

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If our lending operations discontinue offering insurance products, including as a result of regulatory requirements or rate caps, our insurance operations would need to find an alternate distribution partner for their products, of which there can be no assurance.

We are a party to various lawsuits and proceedings and may become a party to various lawsuits and proceedings in the future which, if resolved in a manner adverse to us, could materially adversely affect our results of operations, financial condition and liquidity.

In the normal course of business, from time to time, we have been named, and may be named in the future, as a defendant in various legal actions, including governmental investigations, examinations or other proceedings, arbitrations, class actions and other litigation, arising in connection with our business activities.

Certain of the legal actions may include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.

Some of these proceedings are pending in jurisdictions that permit damage awards disproportionate to the actual economic damages alleged to have been incurred.

The continued occurrences of large damage awards in general in the U.S., including large punitive damage awards in certain jurisdictions that bear little or no relation to actual economic damages incurred by plaintiffs, create the potential for an unpredictable result in any given proceeding.

A large judgment that is adverse to us could cause our reputation to suffer, encourage additional lawsuits against us and have a material adverse effect on our results of operations, financial condition and liquidity.

For additional information regarding pending legal proceedings and other contingencies, see Note 16 of the Notes to the Consolidated Financial Statements included in this report.

Our use of derivatives exposes us to credit and market risks.

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By using derivative instruments, we are exposed to credit and market risks, including the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost, default risk, and the risk of insolvency or other inability of the counterparty to a particular derivative financial instrument to perform its obligations.

If we lose the services of any of our key management personnel, our business could suffer.

Our future success significantly depends on the continued service and performance of our key management personnel.

Competition for these employees is intense and we may not be able to attract and retain key personnel.

We do not maintain any “key man” or other related insurance.

If we are unable to attract appropriately qualified personnel, we may not be successful in originating loans and servicing our customers, which could materially harm our business, financial condition and results of operations.

Employee misconduct could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.

Our reputation is critical to developing and maintaining relationships with our existing and potential customers and third parties with whom we do business.

There is a risk that our employees could engage in misconduct that adversely affects our business.

For example, if an employee were to engage—or be accused of engaging—in illegal or suspicious activities including fraud or theft, we could suffer direct losses from the activity, and in addition we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer relationships, and ability to attract future customers or employees.

Employee misconduct could prompt regulators to allege or to determine, based upon such misconduct, that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect and deter violations of such rules.

It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases.

Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business.

We may not be able to make technological improvements as quickly as some of our competitors, which could harm our ability to compete and adversely affect our results of operations, financial condition and liquidity.

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Failure to successfully keep pace with technological change affecting the financial services industry could harm our ability to compete with our competitors and adversely affect our results of operations, financial condition and liquidity.

As part of our growth strategy, we have committed to building our lending business.

If we are unable to successfully implement our strategy, our results of operations, financial condition and liquidity may be materially adversely affected.

We believe that our future success depends on our ability to implement our strategy, the key feature of which has been to shift our primary focus to originating personal loans as well as acquiring portfolios of personal loans, pursuing acquisitions of companies, and/or establishing joint ventures or other strategic alliances.

We have also expanded our digital presence in online lending through our centralized operations, which may involve additional risks associated with verifying income and customer identities.

We may not be able to implement our strategy successfully, and our success depends on a number of factors, including, but not limited to, our ability to:

• address the risks associated with our focus on personal loans (including direct auto loans), including, but not limited to consumer demand and changes in economic conditions and interest rates;

• address the risks associated with the new centralized method of originating and servicing our loans online through our centralized operations, which represents a departure from our traditional high-touch branch-based servicing function and includes the potential for higher default and delinquency rates;

• integrate, and develop the expertise required to capitalize on, our centralized operations;

• obtain regulatory approval in connection with the acquisition of loan portfolios and/or companies in the business of selling loans or related products;

• comply with regulations in connection with doing business and offering loan products over the internet, including various state and federal e-signature rules mandating that certain disclosures be made, and certain steps be followed in order to obtain and authenticate e-signatures, with which we have limited experience;

• finance future growth;

• successfully source, underwrite and integrate new acquisitions of loan portfolios and other businesses.

In order for us to realize the benefits associated with our focus on originating and servicing personal loans and growing our business, we must implement our strategic objectives in a timely and cost-effective manner as well as anticipate and address any potential risks.

In any event, we may not realize these benefits for many years, or our competitors may introduce more compelling products, services or enhancements.

If we are not able to realize the benefits of our personal loan focus, or if we do not do so in a timely manner, our results of operations, financial condition and liquidity could be negatively affected which would have a material adverse effect on our business.

If goodwill and other intangible assets become impaired, it could have a negative impact on our profitability.

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See Note 8 of the Notes to the Consolidated Financial Statements included in this report.

We could face environmental liability and costs for damage caused by hazardous waste (including the cost of cleaning up contaminated property) if we foreclose upon or otherwise take title to real estate pledged as collateral.

If a real estate loan goes into default, we may start foreclosure proceedings in appropriate circumstances, which could result in our taking title to the mortgaged real estate.

We also consider alternatives to foreclosure, such as “short sales,” where we do not take title to mortgaged real estate.

There is a risk that toxic or hazardous substances could be found on property after we take title.

In addition, we own certain properties through which we operate our business, such as the buildings at our headquarters and certain servicing facilities.

As the owner of any property where hazardous waste is present, we could be held liable for clean-up and remediation costs, as well as damages for any personal injuries or property damage caused by the condition of the property.

We may also be responsible for these costs if we are in the chain of title for the property, even if we were not responsible for the contamination and even if the contamination is not discovered until after we have sold the property.

Costs related to these activities and damages could be substantial.

Although we have policies and procedures in place to investigate properties for potential hazardous substances before taking title to properties, these reviews may not always uncover potential environmental hazards.

Damage to our reputation could adversely impact our business and financial results.

Our ability to attract and retain customers and employees is significantly impacted by our reputation.

Damage to our reputation can arise from a number of circumstances as a result of our actions or those of our employees or as a result of negative public opinion about the financial services industry generally.

Negative public opinion can result from a number of sources, such as our lending practices, cybersecurity breaches, failures to safeguard personal information, discriminating or harassing behavior of employees toward other employees or customers, compensation practices, sales practices, environmental, social, and governance practices and disclosures, failure or perceived failure of us, our customers, or other parties to comply with laws or regulations, including companies we have made investments, and vendors with which we do business.

Such negative attention and publicity directed at us could generate dissatisfaction among our customers and employees.

Although we have policies and procedures in place intended to prevent and detect conduct by team members and third-party service providers that could potentially harm customers or our reputation, we cannot assure you that such policies and procedures will be fully effective in preventing such conduct.

Furthermore, our actual or perceived failure to address or prevent any such conduct or otherwise to effectively manage our business or operations could result in significant reputational harm.

RISKS RELATED TO OUR INDUSTRY AND REGULATION

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Some competitors may also have a lower cost of funds and access to funding sources that may not be available to us.

Banks and credit card companies, which had focused largely on prime customers following the financial crisis, have recently resumed lending to non-prime customers.

Banks and credit card companies, which had focused largely on prime customers following the financial crisis, have resumed lending to non-prime customers.

This shift could increase competition in the markets in which we operate.

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The laws under which a substantial amount of our consumer and real estate businesses are conducted generally:

provide for state licensing of lenders and, in some cases, licensing of employees involved in real estate loan modifications;

provide for state licensing of lenders and, in some cases, licensing of employees involved in real estate loans, including loan modifications;

impose limits on the terms of consumer credit, including amounts, interest rates and charges;

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Many state regulators and some federal regulators have indicated an intention to pool their resources in order to conduct examinations of licensed entities, including us, at the same time (referred to as a “multi-state” examination).

This could result in more in-depth examinations, which could be costlier and lead to more significant enforcement actions.

This could result in more in-depth examinations, which could be costlier and lead to more significant

enforcement actions.

We are also subject to potential enforcement, supervisions and other actions that may be brought by state attorneys general or other state enforcement authorities and other governmental agencies.

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Then, several consumer financial laws like the Truth in Lending Act and Fair Credit Reporting Act grant enforcement or litigation authority to state attorneys general.

Should the CFPB decrease its enforcement activity, we expect to see an increase in actions brought by state attorneys general.

The Department of Defense has made changes to the regulations that have been promulgated as a result of the Military Lending Act.

Effective October 3, 2016, we are subject to the limitations of the Military Lending Act, which places a 36% “all-in” annual percentage rate limitation on certain fees, charges, interest, and credit and non-credit insurance premiums for non-purchase money loans made to active military service members, their spouses, or covered dependents.

We are also no longer able to make non-purchase money loans secured by the titles of motor vehicles to these customers.

If there is a perception of diminished CFPB enforcement, there may be an increase in actions brought by state attorneys general.

We are subject to potential changes in federal and state law, which could lower the interest-rate limit that non-depository financial institutions may charge for consumer loans or could expand the definition of interest under federal and state law to include the cost of optional products, such as insurance.

Such changes could limit our interest income, insurance revenues, and other revenue, which could have a material adverse effect on our results of operations and financial condition.

We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable federal, state and local regulations, but we may not be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on our operations.

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Effective in January 2014, the CFPB finalized mortgage servicing regulations, which makes it more difficult and expensive to service mortgages.

The Dodd-Frank Act also gives the CFPB supervisory authority over entities that are designated as “larger participants” in certain financial services markets.

The Dodd-Frank Act also gives the CFPB supervisory authority over entities that are

designated as “larger participants” in certain financial services markets.

The CFPB has published regulations for “larger participants” in the market of auto finance, and we have been designated as a larger participant in this market.

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As a result, the complete impact of the Dodd-Frank Act remains uncertain.

The CFPB issued a proposed rule addressing third party debt collection, including communication practices and consumer disclosures, in May 2019.

The CFPB also announced that it is considering rulemaking to further clarify the meaning of “abusive” under section 1031 of the Dodd-Frank Act.

It is not clear what form these and other remaining regulations will ultimately take, or how our business will be affected.

It is not clear what form remaining regulations will ultimately take, or how our business will be affected.

No assurance can be given that the Dodd-Frank Act and related regulations or any other new legislative changes enacted will not have a significant impact on our business.

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Federal and state legislators and regulators are increasingly pursuing new guidance, laws, and regulations relating to consumer privacy, data protection and information security.

Compliance with current or future customer privacy, data protection, and information security laws and regulations could result in higher compliance, technology or other operating costs.

Compliance with current or future consumer privacy, data protection, and information security laws and regulations could result in higher compliance, technology or other operating costs.

Any violations of these laws and regulations may require us to change our business practices or operational structure, and could subject us to material legal claims, monetary penalties, sanctions, and the obligation to compensate and/or notify customers, employees, state attorneys general, regulators and others or take other remedial actions.

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Although the borrowers for some of these finance receivables are current on their payments, other borrowers may be in default (including in bankruptcy) or the debt may have been charged off as uncollectible.

The CFPB and other regulators have recently significantly increased their scrutiny of the purchase and sale of debt, and collections practices undertaken by purchasers of debt, especially delinquent and charged-off debt.

The CFPB has scrutinized sellers of debt for not maintaining sufficient documentation to support and verify the validity or amount of the debt.

Recently, the CFPB and other regulators have significantly increased their scrutiny of the purchase and sale of debt, and collections practices undertaken by purchasers of debt, especially delinquent and charged-off debt.

The CFPB has scrutinized sellers of debt for not maintaining sufficient documentation to support and verify the validity or

amount of the debt.

It has also scrutinized debt collectors for, among other things, their collection tactics, attempting to collect debts that no longer are valid, misrepresenting the amount of the debt and not having sufficient documentation to verify the validity or amount of the debt.

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Furthermore, sponsors are prohibited from diluting the required risk retention by dividing the economic interest among multiple parties or hedging or transferring the credit risk the sponsor is required to maintain.

Moreover, the SEC’s significant changes to Regulation AB could result in sweeping changes to the commercial and residential mortgage loan securitization markets, as well as to the market for the re-securitization of mortgage-backed securities.

Rules relating to securitizations rated by nationally-recognized statistical rating agencies require that the findings of any third-party due diligence service providers be made publicly available at least five (5) business days prior to the first sale of securities, which has led and will continue to lead us to incur additional costs in connection with each securitization.

Investment Company Act considerations could affect our method of doing business.

We intend to continue conducting our business operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act of 1940 (the “Investment Company Act”).

We are a holding company that conducts its businesses primarily through wholly-owned subsidiaries and are not an investment company because our subsidiaries are primarily engaged in the non-investment company business of consumer finance.

Certain of our subsidiaries rely on exemptions from registration as an investment company, including pursuant to Sections 3(c)(4) and 3(c)(5) of the Investment Company Act.

We rely on guidance published by the SEC staff or on our analyses of such guidance to determine our subsidiaries’ qualification under these and other exemptions.

We may have to constrain our business activities to avoid being deemed an investment company under the Investment Company Act.

The Investment Company Act imposes a regulatory regime that regulates the manner in which “investment companies” are permitted to conduct their business activities.

We believe we have conducted, and intend to continue to conduct, our business in a manner that does not result in the Company being characterized as an investment company, including relying on certain exemptions from registration as an investment company.

We rely on guidance published by the SEC staff or on our analyses of such guidance to determine our qualification under these and other exemptions.

To the extent that the SEC staff publishes new or different guidance with respect to these matters, we may be required to adjust our business operations accordingly.

Any additional guidance from the SEC staff could provide additional flexibility to us, or it could inhibit our ability to conduct our business operations.

There can be no assurance that the laws and regulations governing the Investment Company Act status of real estate or real estate related assets or SEC guidance regarding Investment Company Act exemptions for real estate assets will not change in a manner that adversely affects our operations.

If we fail to qualify for an exemption or exception from the Investment Company Act in the future, we could be required to restructure our activities or the activities of our subsidiaries, which could negatively affect us.

In addition, if we or one or more of our subsidiaries fail to maintain compliance with the applicable exemptions or exceptions and we do not have another basis available to us on which we may avoid registration, and we were therefore required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure, management, operations, transactions with affiliated persons, holdings, and other matters, which could have an adverse effect on us.

We cannot assure you that the laws and regulations governing our Investment Company Act status or SEC guidance regarding the Investment Company Act will not change in a manner that adversely affects our operations.

If we are deemed to be an investment company, we may attempt to seek exempting relief from the SEC, which could impose significant costs and delays on our business.

We may not receive such relief on a timely basis, if at all, and such relief may require us to modify or curtail our operations.

If we are deemed to be an investment company, we may also be required to institute burdensome compliance requirements and our activities may be restricted.

RISKS RELATED TO OUR INDEBTEDNESS

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Any future capital markets transactions will be dependent on our financial performance as well as market conditions, which may result in receiving financing on terms less favorable to us than our existing financings.

In addition, our access to future financing and our ability to refinance existing debt will depend on a variety of factors such as our financial performance, the general availability of credit, our credit ratings and credit capacity at the time we pursue such financing.

In addition, our access to future

financing and our ability to refinance existing debt will depend on a variety of factors such as our financial performance, the general availability of credit, our credit ratings and credit capacity at the time we pursue such financing.

If we are unable to complete additional securitization transactions or unsecured debt offerings on a timely basis or upon terms acceptable to us or otherwise access adequate sources of liquidity, our ability to fund our own operational requirements and satisfy financial obligations may be adversely affected.

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Our significant indebtedness could have important consequences, including the following:

• it may require us to dedicate a significant portion of our cash flows from operations to the payment of the principal of, and interest on, our indebtedness, which reduces the funds available for other purposes, including finance receivable originations and capital returns;

• it may require us to dedicate a significant portion of our cash flows from operations to the payment of our indebtedness, which reduces the funds available for other purposes, including finance receivable originations and capital returns;

• it could limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing regulatory, business and economic conditions;

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Certain of our outstanding notes contain covenants that restrict our operations and may inhibit our ability to grow our business and increase revenues.

SFC’s indenture and certain of SFC’s notes contain a covenant that limits SFC’s and its subsidiaries’ ability to create or incur liens.

The restrictions may interfere with our ability to obtain new or additional financing or may affect the manner in which we structure such new or additional financing or engage in other business activities, which may significantly limit or harm our results of operations, financial condition and liquidity.

OMFC’s indenture and certain of OMFC’s notes contain a covenant that limits OMFC’s and its subsidiaries’ ability to create or incur liens.

The restrictions may interfere with our ability to obtain additional financing or may affect the manner in which we structure such financing or engage in other business activities, which may significantly limit or harm our results of operations, financial condition and liquidity.

A default and resulting acceleration of obligations could also result in an event of default and declaration of acceleration under certain of our other existing debt agreements.

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• our continued ability to access debt and securitization markets and other sources of funding on favorable terms;

• our ability to complete on favorable terms, as needed, additional borrowings, securitizations, finance receivable portfolio sales, or other transactions to support liquidity, and the costs associated with these funding sources, including sales at less than carrying value and limits on the types of assets that can be securitized or sold, which would affect our profitability;

including sales at less than carrying value and limits on the types of assets that can be securitized or sold, which would affect our profitability;

• the potential for downgrade of our debt by rating agencies, which would have a negative impact on our cost of, and access to, capital;

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• our inability to obtain the additional necessary funding to finance our operations;

• the effect of current and potential new federal, state and local laws, regulations, or regulatory policies and practices, including the Dodd-Frank Act, on our ability to conduct business or the manner in which we conduct business, such as licensing requirements, pricing limitations or restrictions on the method of offering products, as well as changes that may result from increased regulatory scrutiny of the sub-prime lending industry;

• the effect of current and potential new federal, state and local laws, regulations, or regulatory policies and practices on our ability to conduct business or the manner in which we conduct business, as well as changes that may result from increased regulatory scrutiny of the sub-prime lending industry;

• potential liability relating to real estate and personal loans which we have sold or may sell in the future, or relating to securitized loans, if it is determined that there was a non-curable breach of a warranty made in connection with the transaction;

• the potential for increasing costs and difficulty in servicing our loan portfolio as a result of heightened nationwide regulatory scrutiny of loan servicing and foreclosure practices in the industry generally, and related costs that could be passed on to us in connection with the subservicing of our real estate loans that were originated or acquired centrally;

• reduced cash flows as a result of the liquidation of our real estate loan portfolio;

• the potential for increasing costs and difficulty in servicing our loan portfolio as a result of heightened regulatory scrutiny of loan servicing and foreclosure practices in the industry generally;

• the potential for additional unforeseen cash demands or acceleration of obligations;

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• the potential effect on us if the capital levels of our regulated and unregulated subsidiaries prove inadequate to support our current business plans.

We intend to repay indebtedness with one or more of the following sources, among others:

finance receivable collections, cash on hand, proceeds of additional debt financings (particularly new securitizations and possible new issuances and/or debt refinancing transactions), finance receivable portfolio sales, or a combination of the foregoing.

There can be no assurance that we will be successful in undertaking any of these activities to support our operations and repay our obligations.

The actual outcome of one or more of our plans could be materially different than expected or one or more of our significant judgments or estimates about the potential effects of these risks and uncertainties could prove to be materially incorrect.

In the event of such an occurrence, if third-party financing is not available, our liquidity could be materially adversely affected, and as a result, substantial doubt could exist about our ability to continue as a going concern.

SFC's credit ratings could adversely affect our ability to raise capital in the debt markets at attractive rates, which could negatively affect our results of operations, financial condition, and liquidity.

S&P, Moody’s, and KBRA rate SFC’s debt.

OMFC's credit ratings could adversely affect our ability to raise capital in the debt markets at attractive rates, which could negatively affect our results of operations, financial condition, and liquidity.

S&P, Moody’s, and KBRA rate OMFC’s debt.

Ratings reflect the rating agencies’ opinions of a company’s financial strength, operating performance, strategic position and ability to meet its obligations.

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Each agency’s rating should be evaluated independently of any other agency’s rating.

The table below outlines SFC’s long-term corporate debt ratings and outlook by rating agencies:

As of December 31, 2019 Rating Outlook

The table below outlines OMFC’s long-term corporate debt ratings and outlook by rating agencies:

As of December 31, 2020

Rating Outlook

S&P BB- Stable

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Currently, no other entity has a corporate debt rating, though they may be rated in the future.

If SFC’s current ratings are downgraded, it will likely increase the interest rate that we would have to pay to raise money in the capital markets, making it more expensive for us to borrow money and adversely impacting our access to capital.

As a result, a downgrade of SFC's ratings could negatively impact our results of operations, financial condition and liquidity.

If OMFC’s current ratings are downgraded, it will likely increase the interest rate that we would have to pay to raise money in the capital markets, making it more expensive for us to borrow money and adversely impacting our access to capital.

As a result, a downgrade of OMFC's ratings could negatively impact our results of operations, financial condition and liquidity.

Our securitizations may expose us to financing and other risks, and there can be no assurance that we will be able to access the securitization market in the future, which may require us to seek more costly financing.

We have securitized, and may in the future securitize, certain of our finance receivables to generate cash to originate or purchase new finance receivables or repay our outstanding indebtedness.

In such transactions, we typically convey a pool of finance receivables to a special purpose entity, which, in turn, conveys the finance receivables to a trust (the issuing entity).

Concurrently, the trust typically issues non-recourse notes or certificates pursuant to the terms of an indenture or pooling and servicing agreement, which then are transferred to the special purpose entity in exchange for the finance receivables.

The securities issued by the trust are secured by the pool of finance receivables.

In exchange for the transfer of finance receivables to the issuing entity, we typically receive the cash proceeds from the sale of the trust securities, all residual interests, if any, in the cash flows from the finance receivables after payment of the trust securities, and a 100% beneficial interest in the issuing entity.

Although we have successfully completed a number of securitizations since 2013, we can give no assurances that we will be able to complete additional securitizations if the securitization markets become constrained.

In addition, the value of any subordinated securities that we may retain in our securitizations might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions or the financial markets.

SFC, OMFG, and OMFH currently act as the servicers with respect to the personal loan securitization trusts and related series of asset-backed securities.

If SFC, OMFG, or OMFH defaults in its servicing obligations, an early amortization event could occur with respect to the relevant asset-backed securities and SFC, OMFG, or OMFH, as applicable, could be replaced as servicer.

OMFC, OMFG, and OMFH currently act as the servicers with respect to the personal loan securitization trusts and related series of asset-backed securities.

If OMFC, OMFG, or OMFH defaults in its servicing obligations, an early amortization event could occur with respect to the relevant asset-backed securities and OMFC, OMFG, or OMFH, as applicable, could be replaced as servicer.

Servicer defaults include, for example, the failure of the servicer to make any payment, transfer or deposit in accordance with the securitization documents, a breach of representations, warran ties or agreements made by the servicer under the securitization documents and the occurrence of certain insolvency events with respect to the servicer.

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RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE

The Apollo-Värde Group is OMH's largest stockholder, and the Apollo-Värde Group may exercise significant influence over us, including through its ability to designate a majority of the members of the board of directors, and its interests may conflict with the interests of OMH's other stockholders.

Effective June 25, 2018, OMH Holdings, L.P., a Delaware limited partnership, an entity formed by the Apollo-Värde Group, an investor group led by funds managed by Apollo and Värde, completed its purchase of 54,937,500 shares of OMH's common stock formerly beneficially owned by Springleaf Financial Holdings, LLC, an entity owned primarily by a private equity fund managed by an affiliate of Fortress.

The Apollo-Värde Group is OMH's largest stockholder, and may exercise significant influence over us, including through its ability to designate a majority of the members of the board of directors, and its interests may conflict with the interests of OMH's other stockholders.

The Apollo-Värde Group's holdings represent approximately 40.9% of OMH's outstanding common stock as of December 31, 2020.

As a result, the Apollo-Värde Group is OMH's largest stockholder and has significant influence on all matters requiring a stockholder vote, including the election of its directors;

mergers, consolidations and acquisitions;

the sale of all or substantially all of OMH's assets and other decisions affecting its capital structure;

the amendment of OMH's restated certificate of incorporation and its amended and restated bylaws;

and its winding up and dissolution.

The Apollo-Värde Group is OMH's largest stockholder and has significant influence on all matters requiring a stockholder vote.

This concentration of ownership may delay, deter or prevent acts that would be favored by OMH's other stockholders, including delaying, preventing or deterring a change in control of OMH or a merger, takeover or other business combination that may be otherwise favorable to us or OMH's other stockholders.

As a result, the market price of OMH's common stock could decline, or stockholders might not receive a premium over the then-current market price of OMH's common stock upon a change in control.

In addition, this concentration of share ownership may adversely affect the trading price of OMH's common stock because investors may perceive disadvantages in owning shares in a company with a significant stockholder.

As a result, stockholders might not receive a premium over the then-current market price of OMH's common stock upon a change in control.

See additional information under “Business Overview” in Item 1 of this report.

In connection with the closing of the Apollo-Värde Transaction, OMH entered into an Amended and Restated Stockholders Agreement, which provides the Apollo-Värde Group with the right to designate a majority of the members of the board of directors, plus one director, for so long as the Apollo-Värde Group and certain of its affiliates and permitted transferees continue to beneficially own, directly or indirectly, at least 33% of OMH's issued and outstanding common stock.

With such representation on the board of directors, the Apollo-Värde Group will be able to exercise significant influence over decisions affecting OMH, including its direction and policies, the appointment of management and any action requiring the vote of its board of directors, including significant corporate action such as mergers and sales of substantially all of its assets and decisions affecting its capital structure.

permitted transferees continue to beneficially own, directly or indirectly, at least 33% of OMH's issued and outstanding common stock.

With such representation on the board of directors, the Apollo-Värde Group is able to exercise significant influence over decisions affecting OMH, including its direction and policies, the appointment of management and any action requiring the vote of its board of directors.

The interests of the Apollo-Värde Group may not always coincide with OMH's interests or the interests of OMH's other stockholders.

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The Amended and Restated Stockholders Agreement is filed as Exhibit 10.1 to that Current Report on Form 8-K, and such Current Report on Form 8-K, including Exhibit 10.1 thereto, is incorporated by reference herein in its entirety.

Affiliates of the Apollo-Värde Group are in the business of making or advising on investments in companies and may hold, and from time to time in the future may acquire, interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or are vendors or customers of ours.

The Apollo-Värde Group may also pursue acquisitions that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

OMH and SFC are holding companies with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations and enable us to pay dividends.

OMH and SFC are holding companies with no material direct operations.

In addition, the Apollo-Värde Group and its affiliates may conduct business with any business that is competitive or in the same line of business as us, do business with any of our clients, customers or vendors, make investments in the kind of property in which we may make investments or acquire the same or similar types of assets that we may seek to acquire and may in the future acquire interests in or provide advice to businesses that directly or indirectly compete with our business or are vendors or customers.

OMH and OMFC are holding companies with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations and enable us to pay dividends.

Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries, which own our operating assets.

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Our subsidiaries are legally distinct from us and certain of our subsidiaries are prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions.

For example, our insurance subsidiaries are subject to regulations that limit their ability to pay dividends or make loans or advances to us, principally to protect policyholders, and certain of SFC's debt agreements limit the ability of certain of our subsidiaries to pay dividends.

For example, our insurance subsidiaries are subject to regulations that limit their ability to pay dividends or make loans or advances to us, principally to protect policyholders, and certain of OMFC's debt agreements limit the ability of certain of our subsidiaries to pay dividends.

If we are unable to obtain funds from our subsidiaries, or if our subsidiaries do not generate sufficient cash from operations, we may be unable to meet our financial obligations or pay dividends, and the board may exercise its discretion not to pay dividends.

OMH may not pay dividends on its common stock in the future, even if liquidity and leverage targets are met.

While OMH intends to pay regular quarterly dividends for the foreseeable future, and has announced an intention to pay semi-annual special dividends, all subsequent dividends will be reviewed quarterly and declared at the discretion of the board of directors and will depend on many factors.

As a result, OMH cannot provide any assurance that it will continue to pay dividends on its common stock in future periods, even if liquidity and target leverage objectives are met.

While OMH intends to pay its minimum quarterly dividends, currently $0.45 per share, for the foreseeable future, and has 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.

As a result, we cannot assure you that OMH will continue to pay dividends on its common stock in the future periods, even if liquidity and target leverage objectives are met.

See our “ Dividend Policy ” in Part II - Item 5 of this report for further information.

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These provisions provide for:

• a classified board of directors consisting of nine members with staggered three-year terms;

• a classified board of directors with staggered three-year terms;

• certain rights to the Apollo-Värde Group and certain of its affiliates and permitted transferees with respect to the designation of directors for nomination and election to the board of directors, including the ability to appoint a majority of the members of the board of directors, plus one director, for so long as the Apollo-Värde Group and certain of its affiliates and permitted transferees continue to beneficially own, directly or indirectly at least 33% of OMH's issued and outstanding common stock;

• removal of directors only for cause and only with the affirmative vote of at least 80% of the voting interest of stockholders entitled to vote (provided, however, that for so long as the Apollo-Värde Group and certain of its affiliates and permitted transferees beneficially own, directly or indirectly, at least 30% of OMH's issued and outstanding common stock, directors may be removed with or without cause with the affirmative vote of a majority of the then issued and outstanding voting interest of stockholders entitled to vote);

outstanding common stock, directors may be removed with or without cause with the affirmative vote of a majority of the then issued and outstanding voting interest of stockholders entitled to vote);

• no ability for stockholders to call special meetings of OMH's stockholders (provided, however, that for so long as the Apollo-Värde Group and certain of its affiliates and permitted transferees beneficially own, directly or indirectly, at least 20% of OMH's issued and outstanding common stock, any stockholders that collectively beneficially own at least 20% of OMH's issued and outstanding common stock may call special meetings of our stockholders);

• advance notice requirements by stockholders with respect to director nominations and actions to be taken at annual meetings;

• no cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of OMH's common stock can elect all the directors standing for election;

• the ability for stockholders to act outside a meeting by written consent only if unanimous, provided, however, that for so long as the Apollo-Värde Group and certain of its affiliates and permitted transferees beneficially own, directly or indirectly, at least 20% of OMH's issued and outstanding common stock, OMH's stockholders may act without a meeting by written consent of a majority of OMH's stockholders;

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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 roll rate-based model applied to our finance receivable portfolio.

We adjust the amounts determined by the roll rate-based model for management’s estimate of the effects of model imprecision which include any changes to underwriting criteria, portfolio seasoning, and current economic conditions, including levels of unemployment and personal bankruptcies.

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.

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The market price and trading volume of OMH's common stock may be volatile, which could result in rapid and substantial losses for OMH's stockholders.

The market price of OMH's common stock has been and may continue to be highly volatile and could be subject to wide fluctuations.

In addition, the trading volume in OMH's common stock may fluctuate and cause significant price variations to occur.

If the market price of OMH's common stock declines significantly, public stockholders may be unable to resell their shares at or above their purchase price, if at all.

The market price of OMH's common stock may fluctuate or decline significantly in the future.

The market price of OMH's common stock has been and may continue to be highly volatile and could be subject to wide fluctuations and may decline significantly in the future.

Some of the factors that could negatively affect the share price or result in fluctuations in the price or trading volume of OMH's common stock include:

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announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures or capital commitments;

• general market, political and economic conditions, including any such conditions and local conditions in the markets in which our borrowers are located.

and general market, political and economic conditions, including any such conditions and local conditions in the markets in which our borrowers are located.

These broad company, market and industry factors may decrease the market price of OMH's common stock, regardless of our actual operating performance.

The stock market in general has from time to time experienced extreme price and volume fluctuations.

In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies.

Volatility in the market price of a company’s securities may result in securities class action litigation.

This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Future offerings of debt or equity securities by us may adversely affect the market price of OMH's common stock.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of OMH's common stock or offering debt or other equity securities, including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity or shares of preferred stock.

In particular, we intend to continue to seek opportunities to acquire consumer finance portfolios and/or businesses that engage in consumer finance loan servicing and/or consumer finance loan originations.

Future acquisitions could require substantial additional capital in excess of cash from operations.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of OMH's common stock or offering debt or other equity securities, including debt securities convertible into equity or shares of preferred stock.

Future acquisitions of consumer finance portfolios and/or consumer finance lending or servicing businesses could require substantial additional capital in excess of cash from operations.

We would expect to finance the capital required for acquisitions through a combination of additional issuances of equity, corporate indebtedness, asset-backed acquisition financing and/or cash from operations.

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The future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise will dilute all other stockholdings.

OMH has an aggregate of 1,863,805,538 shares of common stock authorized but unissued as of January 31, 2020.

OMH has an aggregate of 1,865,651,598 shares of common stock authorized but unissued as of February 1, 2021.

OMH may issue all of these shares of common stock without any action or approval by OMH's stockholders, subject to certain exceptions.

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Any common stock issued in connection with our incentive plans, acquisitions, the exercise of outstanding stock options or otherwise would dilute the percentage ownership held by existing OMH's stockholders.

GENERAL RISKS

Certain of the legal actions may include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.

Some of these proceedings are pending in jurisdictions that permit damage awards disproportionate to the actual economic damages alleged to have been incurred.

For additional information regarding pending legal proceedings and other contingencies, see Note 15 of the Notes to the Consolidated Financial Statements included in this report.

Certain operations rely on external vendors.

We rely on third-party vendors to provide products and services necessary to maintain day-to-day operations, including a portion of our information systems, communication, data management and transaction processing.

Such failure to perform could be disruptive to our operations and have a materially adverse impact on our business, results of operations and financial condition.