What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-11 compared with 2021-02-09 · 303 added, 303 removed, 320 unchanged (65% of the section changed)

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Liquidity and Capital Resources

Off-Balance Sheet Arrangements

Critical Accounting Policies and Estimates

Recent Accounting Pronouncements

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 our digital platform, which provides current and prospective customers the option of applying for a personal loan via our website, www.omf.com.

We are a leading provider of responsible personal loan products, primarily to nonprime customers.

In 2021, we also began offering credit cards.

Our branch network of approximately 1,400 locations in 44 states is staffed with expert personnel and is complemented by our centralized operations and our digital platform, which provides current and prospective customers the option of applying for a personal loan or credit card via our website, www.omf.com.

The information on our website is not incorporated by reference into this report.

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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 December 31, 2020, we had approximately 2.30 million personal loans, of which 53% were secured by titled property, totaling $18.1 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.

At December 31, 2021, we had approximately 2.34 million personal loans totaling $19.2 billion of net finance receivables, of which 52% were secured by titled property, compared to approximately 2.30 million personal loans totaling $18.1 billion of net finance receivables, of which 53% were secured by titled property at December 31, 2020.

We also service personal loans for our whole loan sale partners, which we commenced during the first quarter of 2021.

• Credit Cards — In the third quarter of 2021, we began offering credit cards through a third-party bank partner from which we purchase the receivable balances.

The credit cards are offered through our branch network, direct mail marketing, and direct-to-consumer via our affiliates.

Credit cards are open-ended, revolving, with a fixed rate, and are unsecured.

At December 31, 2021, we had approximately 66 thousand open credit card customer accounts, totaling $25 million of net finance receivables.

• Insurance Products — We offer our custom ers 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.

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

Effective September 30, 2018, our real estate loans previously classified as other receivables were transferred from held for investment to held for sale due to management’s intent to no longer hold these finance receivables for the foreseeable future.

At December 31, 2020, C&I is our only reportable segment.

Our real estate loans held for sale are reported in “Other assets” of our consolidated balance sheets.

At December 31, 2021, Consumer and Insurance (“C&I”) is our only reportable segment, which includes personal loans, credit cards, and insurance products.

At December 31, 2021, we managed a combined total of 2.45 million customer accounts and $19.6 billion of managed receivables.

The remaining components (which we refer to as “Other”) consist of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which primarily include our liquidating real estate loans.

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We track the interest expense incurred on our debt, along with amortization or accretion of premiums or discounts, and issuance costs, to monitor the components of our cost of funds.

We expect interest expense to fluctuate based on changes in the secured versus unsecured mix of our debt, time to maturity, the cost of funds rate, and access to revolving conduit facilities.

We expect interest expense to fluctuate based on changes in the secured versus unsecured mix of our debt, time to maturity, the cost of funds rate, and utilization of revolving conduit facilities.

Net Credit Losses

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Our operating expense analysis also includes a review of origination and servicing costs to assist us in managing overall profitability.

Finance Receivables Originations

Because loan volume and portfolio size determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor origination volume and annual percentage rate.

Finance Receivables Originations and Purchase Volume

Because loan volume and portfolio size determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor originations and purchase volume and annual percentage rate.

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 continue to take 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.

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.

In the meantime, we will continue to be focused on assisting and supporting our customers and employees.

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 in excess of 24 months 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:

In late March 2020, we quickly took steps to tighten our underwriting standards and reduce originations to higher risk applicants in response to the COVID-19 pandemic.

We continued to monitor and evaluate our underwriting standards as we further understood the evolving impacts the COVID-19 pandemic was having on local-level economies.

Through the remainder of the year we refined our underwriting as we introduced more granular state and industry segmentation.

This allowed us to open up credit to certain segments, while maintaining more conservative underwriting in other segments.

We will continue with this approach as we learn the effects of the additional stimulus on our customer base and as the economy reacts to the vaccine rollout.

• 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 digitally originated more than 30% of our personal loans during 2020.

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.

Cash Dividends to OMH's Common Stockholders

On February 8, 2021, OMH declared a dividend of $3.95 per share payable on February 25, 2021 to record holders of OMH's common stock as of the close of business on February 18, 2021.

For information regarding the quarterly dividends declared by OMH, see “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Issuances of 8.875% Senior Notes Due 2025 and 4.00% Senior Notes Due 2030, and Redemptions of 8.25% Senior Notes due 2020 and 7.75% Senior Notes due 2021

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.

On December 17, 2020, OMFC issued a total of $850 million of aggregate principal amount of 4.00% Senior Notes due 2030.

Credit Cards - BrightWay and BrightWay+

As part of our mission to improve the financial well-being of hardworking Americans, we continue to invest in new products and services that help our customers solve for their present needs while helping them build a stronger financial tomorrow.

In the third quarter of 2021, we began offering our two credit cards, BrightWay and BrightWay+, giving our customers access to more credit, while also enabling a better financial future.

Credit cards will help customers take concrete steps to improve their financial well-being by offering tangible rewards for credit building behaviors.

This is an important milestone for our company as we continue to deepen our existing customer relationships, attract new customers, and become the lender of choice for nonprime customers.

We continue to expand credit card offerings across our branch network and through direct-to-consumer and affiliate card marketing.

Issuance and Redemption of Unsecured Debt

Redemption of 7.75% Senior Notes Due 2021

On January 8, 2021, OMFC paid a net aggregate amount of $681 million, inclusive of accrued interest and premiums, to complete the redemption of its 7.75% Senior Notes due 2021.

For further information regarding the issuances and redemptions of our unsecured debt, see Note 9 of the Notes to the Consolidated Financial Statements included in this report.

Social Bond Offering - Issuance of 3.50% Senior Notes Due 2027

As part of our commitment to improve the financial well-being of hardworking Americans, OMFC issued its inaugural Social Bond offering on June 22, 2021 for a total of $750 million aggregate principal amount of 3.50% Senior Notes due 2027.

We intend to allocate an amount equivalent to the net proceeds of the offering to finance or re-finance, in part or in full, a portfolio of new or existing loans that meet the eligibility criteria of the OneMain Social Bond Framework.

This offering advances our goal of enabling access to responsible financial products and services for vulnerable and/or historically underserved populations.

At least 75% of the loans funded by the Social Bond will be allocated to women and/or minority borrowers as outlined in OneMain’s Social Bond Framework, which is available on OneMain’s Investor Relations website.

Issuance of 3.875% Senior Notes Due 2028

On August 11, 2021, OMFC issued a total of $600 million of aggregate principal amount of 3.875% Senior Notes due 2028.

Redemption of 6.125% Senior Notes Due 2022

On December 10, 2021, OMFC paid a net aggregate amount of $1.0 billion, inclusive of accrued interest and premiums, to complete the redemption of its 6.125% Senior Notes due 2022.

Unsecured Corporate Revolver

On October 25, 2021, OMFC entered into an unsecured corporate revolver with a total maximum borrowing capacity of $1.0 billion.

At December 31, 2021, no amounts were drawn under this facility.

For further information regarding the issuances and redemption of our unsecured debt and our corporate revolver, see Note 8 of the Notes to the 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.

OMFIT 2021-1 and ODART 2021-1

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

Apollo-Värde Group Share Sales

We entered into two underwriting agreements, in February and April of 2021, with certain entities managed by affiliates of Apollo-Värde Group, in their capacities as selling stockholders (the “Selling Stockholders”), and several underwriters, for sale by the Selling Stockholders of up to 9,200,000 shares per agreement of OMH’s common stock.

The two secondary public offerings closed during the first half of 2021 and resulted in the sale by the Selling Stockholders of 18,400,000 shares of OMH common stock.

We did not receive any proceeds from the sales of the shares by the Selling Stockholders in these transactions.

We entered into three underwriting agreements, in July, August, and October of 2021, with an entity managed by affiliates of Apollo, in its capacity as selling stockholder (the “Selling Stockholder”), and an underwriter for sales by the Selling Stockholder of 10,925,000, 8,050,000, and 10,010,208 shares, respectively, of OMH’s common stock.

The three secondary public offerings closed during the second half of 2021 and resulted in the sale by the Selling Stockholder of a total of 28,985,208 shares of OMH common stock.

The shares sold represented all of the shares that were held by the Selling Stockholder.

We did not receive any proceeds from the sale of the shares by the Selling Stockholder in these transactions.

Prior to the secondary public offerings described above, the Apollo-Värde Group was entitled to designate six of OMH's nine directors, as provided for in the Amended and Restated Stockholders Agreement (“Stockholders Agreement”).

As a result of the share sales, Apollo is no longer a stockholder.

Värde retained a portion of their shares, and as of December 31, 2021, Värde and funds managed by Värde beneficially owned approximately 5.9% of OMH common stock.

Värde currently has the right to designate one director of the OMH Board of Directors, pursuant to the Stockholders Agreement, as a result of beneficially owning less than 10% but greater than 5% of the voting power of OMH common stock.

August and October Concurrent Share Buybacks

On August 3, 2021, pursuant to the July 2021 underwriting agreement, we concurrently purchased 1,700,000 of the shares of OMH common stock at a purchase price of $58.36 per share, which is equal to the price at which the underwriter purchased the shares from the Selling Stockholder, resulting in an aggregate purchase price of $99 million (the “August Concurrent Share Buyback”).

On October 28, 2021, pursuant to the October 2021 underwriting agreement, we concurrently purchased 1,870,000 of the shares of OMH common stock at a purchase price of $53.45 per share, which is equal to the price at which the underwriter purchased the shares from the Selling Stockholder, resulting in an aggregate purchase price of $100 million (the “October Concurrent Share Buyback”).

The terms and conditions of the August and October Concurrent Share Buybacks were reviewed and approved by a special committee of the Board, comprised of independent and disinterested directors of OMH.

The August and October Concurrent Share Buybacks were made pursuant to separate Board authorizations and did not reduce our availability of repurchases under our stock repurchase program commenced during the second quarter of 2021.

The August and October Concurrent Share Buybacks were funded from our existing cash on hand.

The underwriter did not receive any compensation for the shares of OMH common stock repurchased by OMH.

Stock Repurchase Program

For information regarding our stock repurchase program, see Note 12 of the Notes to the Consolidated Financial Statements and “Liquidity and Capital Resources—Sources and Uses of Funds” under Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.

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.

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.

We are actively managing 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.

The ultimate impact on our financial condition and results of operations depends on the speed of the economic recovery, driven by unemployment rates, government stimulus measures, states reopening or closing, and the distribution of the newly developed COVID-19 vaccines.

There is also uncertainty regarding the effects of additional outbreaks of COVID-19 and the related potential for additional shutdowns over the near-term.

To the extent economies are suppressed or slow to recover, we could see lower consumer demand, higher delinquency trends, and related losses in 2021.

We may incorporate additional updates to the macroeconomic assumptions which could lead to further adjustments in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.

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 keeping our branch locations open with appropriate protective protocols in place.

We have served hardworking Americans for many decades, through changing economic conditions and natural disasters.

Our prudent historical underwriting, combined with the actions we've taken to innovate and strategically evolve our business over the last year, especially the transition to our digital closing model, has led to our strong operating performance through the pandemic and enabled us to serve and support our customers effectively during these unprecedented times.

While we anticipate that the economic recovery could be unstable, we believe the actions we have taken in 2020 and the underlying strength of our balance sheet positions us to take advantage of growth opportunities as the economy recovers.

Our digital platform and our operating model, combined with our decades of experience, proprietary data, and advanced analytics, enable us to expand our customer base through various channels and products.

With these tools, we are able to underwrite and manage our portfolio in a precise and effective manner, thus better serving our customers to meet their preferences, as well as optimizing returns.

Our experienced management team continues to remain focused on our strategic priorities of maintaining a solid balance sheet that enables business continuity, providing a flexible liquidity runway and capital coverage through the changing economic conditions, upholding a conservative and disciplined underwriting model, and building strong relationships with our customers.

As a result, we will support and serve our customers, invest in our business, and drive growth while creating value for our shareholders and effectively navigating the evolving economic, social, political, and regulatory environments in which we operate.

During the second quarter of 2021 we commenced our stock repurchase program.

In December 2021, the Board increased the share repurchase authorization to $300 million from the previously announced $200 million.

As of December 31, 2021, we had $86 million of authorized share repurchase capacity, excluding fees and commissions, remaining under the program.

On February 2, 2022, the Board authorized a new stock repurchase program, which allows us to repurchase up to $1.0 billion of the OMH’s outstanding common stock, excluding fees, commissions, and other expenses related to the repurchases.

The authorization expires on December 31, 2024.

The new program replaces the previous share repurchase program.

See “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in Part II of this report for further information on our shares repurchased.

Cash Dividends to OMH's Common Stockholders

Acquisition of Trim

On May 14, 2021, we completed our previously announced acquisition of Ask Benjamin, Inc.

(“Trim”), a customer-focused financial wellness fintech company.

The acquisition of Trim will enhance our mission to help our customers progress to a better financial future and further expand the ways in which we help our customers improve their financial well-being.

Resignations and Election of Member(s) of the OMH and OMFC Board of Directors

On March 5, 2021, Phyllis R.

Caldwell was elected to the OMH Board of Directors, effective June 1, 2021.

On July 19, 2021, Adam Rosman resigned from the OMFC Board of Directors and Jeannette Osterhout was elected to the OMFC Board of Directors.

On November 1, 2021, Matthew R.

Michelini and Lisa Green Hall resigned from and Philip L.

Bronner was elected to the OMH Board of Directors, effective November 8, 2021.

On January 27, 2022, Toos N.

Daruvala was elected to the OMH Board of Directors, effective February 14, 2022.

Management’s Response to the COVID-19 Pandemic

In early 2020, COVID-19 evolved into a global pandemic, resulting in widespread volatility and deterioration in economic conditions across the United States.

Governmental authorities continue to take steps to combat the spread of COVID-19, including the ongoing distribution of COVID-19 vaccines.

During the pandemic, we continue to focus on assisting and supporting our customers and employees, while remaining committed to the safety of our employees.

We continue to serve our customers by keeping our branch locations open with appropriate protective protocols in place and through our digital closing solutions.

This combination has enhanced our operating performance through the pandemic and enabled us to serve and support our customers effectively during these unprecedented times.

We believe the actions we have taken and the underlying strength of our balance sheet has positioned us to take advantage of growth opportunities as the economy continues to recover.

We are actively managing the continuing impacts of the COVID-19 pandemic and remain prepared for any additional opportunities or challenges that may impact our industry or business.

The impact on our financial condition and results of operations depends on the continued progress of the economic recovery, which is dependent on unemployment rates, inflationary pressures, supply chain concerns, and businesses’ ability to remain open.

There is also uncertainty regarding the effects of additional variants of COVID-19 and the impact of vaccination rates.

Current credit performance trends continue to be favorable, yet are trending back to pre-pandemic levels.

We will continue to incorporate updates, as necessary, to our macroeconomic assumptions which could lead to further adjustments in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.

Our experienced management team continues to remain focused on our strategic priorities of maintaining a solid balance sheet with an adequate liquidity runway and capital coverage, upholding a conservative and disciplined underwriting model, and building strong relationships with our customers.

We are well positioned to continue supporting and serving our customers, investing in our business, and driving growth while creating value for our stockholders as we effectively navigate the evolving economic, social, political, and regulatory environments in which we operate.

Results of Operations

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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 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 $18.1 billion as of December 31, 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 applicants, 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 the fourth quarter, 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 in 2020 remained below 2019 levels.

• The government stimulus measures, our borrower assistance programs, and our collection efforts contributed to strong customer payment trends, which resulted in a decrease in our 30-89 and 90+ day delinquency ratios to 2.3% and 1.7%, respectively, as of December 31, 2020 when compared to 2.5% and 2.1%, respectively, as of December 31, 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 fourth quarter of 2020.

• 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 year ended December 31, 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 year ended December 31, 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 year ended December 31, 2020, we also issued debt securities in both the unsecured and ABS markets.

As of December 31, 2020, we had $2.3 billion of cash and cash equivalents, $9.2 billion of unencumbered gross finance receivables, and $7.2 billion in potential borrowing capacity from our 13 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.

• We did not have any impairments with respect to goodwill, intangible assets, long-lived assets, and right of use assets during the year ended December 31, 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.

See Note 1 of the Notes to the Consolidated Financial Statements included in this report for further information.

OMH'S CONSOLIDATED RESULTS

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Diluted $ 9.87 $ 5.41 $ 6.27

Selected Financial Statistics *

Finance receivables held for investment:

Selected Financial Statistics (a)

Total finance receivables:

Net finance receivables $ 19,212 $ 18,084 $ 18,389

Number of accounts 2,304,951 2,435,172 2,373,330

Average net receivables $ 18,281 $ 17,997 $ 17,055

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30-89 Delinquency ratio 2.43 % 2.28 % 2.46 %

Personal loans:

Net finance receivables $ 19,187 $ 18,084 $ 18,389

Origination volume $ 13,825 $ 10,729 $ 13,803

Number of accounts 2,336,845 2,304,951 2,435,172

Number of accounts originated 1,388,123 1,099,767 1,481,166

Credit cards (b):

Net finance receivables $ 25 $ — $ —

Purchase volume $ 26 $ — $ —

Number of open accounts 65,513 — —

Debt balances:

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Average daily debt balance $ 17,441 $ 18,080 $ 16,336

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

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

(b) There were no credit cards for the years ended December 31, 2020 and 2019 as the product offering began in 2021.

Comparison of Consolidated Results for 2021 and 2020

Interest income increased $241 million or 5.8% in 2020 when compared to 2019 primarily due to growth in our average net finance receivables of $942 million along with higher yields driven by the impacts of lower delinquencies.

Interest expense increased $57 million or 5.9% in 2020 when compared to 2019 primarily due to an increase in average outstanding debt of $1.7 billion, offset by a lower average cost of funds.

Interest income remained relatively consistent in 2021 when compared to 2020 primarily due to growth in our average net finance receivables, offset by lower yield.

Interest expense decreased $90 million or 8.8% in 2021 when compared to 2020 primarily due to a lower average cost of funds along with a decrease in average outstanding debt.

See Notes 8 and 9 of the Notes to the 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 increased $190 million or 16.8% in 2020 when compared to 2019 primarily due to higher expected credit losses in our allowance as a result of the current year adoption of the accounting standard Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments , issued in June of 2016 (“ASU 2016-13”), which were primarily driven by our forecast of elevated unemployment as a result of COVID-19.

Other revenues decreased $96 million or 15.4% in 2020 when compared to 2019 primarily due to a $34 million decrease from lower insurance products and membership plans sold as a result of reduced loan origination volume, a $28 million decrease in investment revenue and interest income primarily driven by lower interest rates on cash, restricted cash, and invested assets, and other decreases from the prior period due to lower servicing fee income, and the gain on sale of a cost method investment in 2019.

Other expenses increased $19 million or 1.2% in 2020 when compared to 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.

Provision for finance receivable losses decreased $726 million or 55.0% in 2021 when compared to 2020 primarily due to an improved outlook for unemployment and macroeconomic conditions resulting in a release in our allowance reserve in 2021 as compared to a build in 2020 at the onset of the COVID-19 pandemic, as well as a decrease in our net charge-offs due to improved credit performance aligning with government stimulus measures.

Other revenues increased $5 million or 1.0% in 2021 when compared to 2020 primarily due to the gains on the sales of finance receivables associated with the whole loan sale program that commenced in 2021 and an increase in membership plans fee revenue due to loan origination growth.

The increase was partially offset by higher net losses on the repurchases and repayments of debt and a decrease in investment revenue driven by lower interest rates on cash.

Other expenses increased $53 million or 3.4% in 2021 when compared to 2020 primarily due to the expense associated with the cash-settled stock-based awards in the current year and an increase in general operating expenses due to growth in our receivables and our strategic investments in the business, compared to COVID-19 cost cutting measures in 2020.

The increase was partially offset by a decrease in insurance policy and benefits claims expense resulting from lower than expected involuntary unemployment insurance claims.

Income taxes totaled $427 million for 2021 compared to $247 million for 2020.

The effective tax rate for 2021 was 24.6% compared to 25.3% for 2020.

The effective tax rate for 2020 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes and discrete tax expense during 2020.

The effective tax rate for 2019 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes, offset by the release of the valuation allowance against certain state deferred taxes.

The effective tax rate for 2021 and 2020 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes and discrete tax expense.

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

Comparison of Consolidated Results for 2020 and 2019

For a comparison of OMH's results of operation for the years ended 2019 and 2018, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Results” in Part II Item 7 of OMH's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 14, 2020.

For a comparison of OMH's results of operation for the years ended 2020 and 2019, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—OMH’s Consolidated Results” in Part II - Item 7 of OMH's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 9, 2021.

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, acquisition-related transaction and integration expenses, net loss resulting from repurchases and repayments of debt, 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, non-cash incentive compensation expense related to the Fortress Transaction, 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 uses C&I adjusted pretax income (loss), a non-GAAP financial measure, as a key performance measure of our segment.

C&I adjusted pretax income (loss) represents income (loss) before income taxes on a Segment Accounting Basis and excludes the expense associated with the cash-settled stock-based awards, direct costs associated with COVID-19, acquisition-related transaction and integration expenses, net loss resulting from repurchases and repayments of debt, and restructuring charges.

Management believes C&I adjusted pretax income (loss) is useful in assessing the profitability of our segment.

Management also uses C&I pretax capital generation, a non-GAAP financial measure, as a key performance measure of our segment.

This measure represents C&I adjusted pretax income as discussed above and excludes the change in our C&I allowance for finance receivable losses in the period while still considering the C&I net charge-offs incurred during the period.

Management believes that C&I pretax capital generation is useful in assessing the capital created in the period impacting the overall capital adequacy of the Company.

Management believes that the Company’s reserves, combined with its equity, represent the Company’s loss absorption capacity.

Management utilizes both adjusted pretax net income (loss) and pretax capital generation in evaluating our performance.

Management utilizes both C&I adjusted pretax income (loss) and C&I pretax capital generation in evaluating our performance.

Additionally, both of these non-GAAP measures are consistent with the performance goals established in OMH’s executive compensation program.

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.

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:

C&I adjusted pretax income (loss) and C&I pretax capital generation are non-GAAP financial measures and should be considered supplemental to, but not as a substitute for or superior to, income (loss) before income taxes, net income, or other measures of financial performance prepared in accordance with GAAP.

OMH's reconciliations of income before income tax expense on a Segment Accounting Basis to C&I adjusted pretax income (non-GAAP) and C&I pretax capital generation (non-GAAP) were as follows:

(dollars in millions)

3 unchanged sentences

$ 1,788 $ 1,021 $ 1,168

Net loss on repurchases and repayments of debt

Cash-settled stock-based awards 54 — —

Direct costs associated with COVID-19

Acquisition-related transaction and integration expenses — 11 14

Net loss on repurchases and repayments of debt

Net gain on sale of cost method investment — — (11)

5 unchanged sentences

Pretax capital generation (non-GAAP) $ 1,737 $ 1,407 $ 1,283

Loss before income taxes - Segment Accounting Basis $ (9) $ (3) $ (131)

Additional net gain on sale of SpringCastle interests

Lower of cost or fair value adjustment (a)

Non-cash incentive compensation expense — — 106

Net loss on sale of real estate loans (b)

Adjusted pretax loss (non-GAAP)

$ (6) $ (9) $ (19)

(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 year ended December 31, 2020.

(b) In 2019 and 2018, the resulting impairments on finance receivables held for sale that remained after the February 2019 and the December 2018 Real Estate Loan Sales were combined with the respective gains on sales.

Segment Results

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

See Note 18 of the Notes to the Consolidated Financial Statements included in this report for a description of our segment and methodologies used to allocate revenues and expenses to our C&I segment and Other.

See Note 1 of the Notes to the Consolidated Financial Statements included in this report for further information.

See Note 17 of the Notes to the Consolidated Financial Statements included in this report for a description of our segment and methodologies used to allocate revenues and expenses to our C&I segment.

CONSUMER AND INSURANCE

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Adjusted pretax income (non-GAAP) $ 1,918 $ 1,092 $ 1,206

Selected Financial Statistics *

Finance receivables held for investment:

Selected Financial Statistics (a)

Total finance receivables:

Net finance receivables $ 19,215 $ 18,091 $ 18,421

Number of accounts 2,304,951 2,435,172 2,373,330

Average net receivables $ 18,286 $ 18,009 $ 17,089

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30-89 Delinquency ratio 2.43 % 2.28 % 2.47 %

Personal loans:

Net finance receivables $ 19,190 $ 18,091 $ 18,421

Origination volume $ 13,825 $ 10,729 $ 13,803

Number of accounts 2,336,845 2,304,951 2,435,172

Number of accounts originated 1,388,123 1,099,767 1,481,166

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

Credit cards (b):

Net finance receivables $ 25 $ — $ —

Purchase volume $ 26 $ — $ —

Number of open accounts 65,513 — —

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

(b) There were no credit cards for the years ended December 31, 2020 and 2019 as the product offering began in 2021.

Comparison of Adjusted Pretax Income for 2021 and 2020

Interest income increased $239 million or 5.8% in 2020 when compared to 2019 primarily due to growth in our average net finance receivables of $920 million along with higher yields driven by the impacts of lower delinquencies.

Interest expense increased $60 million or 6.3% in 2020 when compared to 2019 primarily due to an increase in average outstanding debt of $1.7 billion, offset by a lower average cost of funds.

Interest income remained relatively consistent in 2021 when compared to 2020 primarily due to growth in our average net finance receivables, offset by lower yield.

Interest expense decreased $77 million or 7.6% in 2021 when compared to 2020 primarily due to a lower average cost of funds along with a decrease in average outstanding debt.

Provision for finance receivable losses increased $208 million or 18.8% in 2020 when compared to 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 $68 million or 11.0% in 2020 when compared to 2019 primarily due to a $34 million decrease from lower insurance products and membership plans sold as a result of reduced loan origination volume and a $29 million decrease in investment revenue and interest income primarily driven by lower interest rates on cash, restricted cash, and invested assets in the current period.

Other expenses increased $17 million or 1.2% in 2020 when compared to 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.

Provision for finance receivable losses decreased $726 million or 55.3% in 2021 when compared to 2020 primarily due to an improved outlook for unemployment and macroeconomic conditions resulting in a release in our allowance reserve in 2021 as compared to a build in 2020 at the onset of the COVID-19 pandemic, as well as a decrease in our net charge-offs due to improved credit performance aligning with government stimulus measures.

Other revenues increased $46 million or 8.3% in 2021 when compared to 2020 primarily due to the gains on the sales of finance receivables associated with the whole loan sale program that commenced in 2021 and an increase in membership plans fee revenue due to loan origination growth.

The increase was partially offset by a decrease in investment revenue driven by lower interest rates on cash.

Other expenses increased $25 million or 1.7% in 2021 when compared to 2020 primarily due an increase in general operating expenses due to growth in our receivables and our strategic investments in the business, compared to COVID-19 cost cutting measures in 2020.

The increase was partially offset by a decrease in insurance policy and benefits claims expense resulting from lower than expected involuntary unemployment insurance claims.

Comparison of Adjusted Pretax Income for 2020 and 2019

For a comparison of OMH's adjusted pretax income for C&I for the years ended 2019 and 2018, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Results” in Part II Item 7 of OMH's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 14, 2020.

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

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

(dollars in millions)

Years Ended December 31, 2020 2019 2018

Interest income $ 6 $ 9 $ 17

Interest expense 4 5 17

Provision for finance receivable losses — — (5)

Net interest income after provision for finance receivable losses

Other revenues 16 26 33

Other expenses 24 39 57

Adjusted pretax loss (non-GAAP) $ (6) $ (9) $ (19)

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

(dollars in millions)

December 31, 2020 2019 2018

Net finance receivables held for sale:

Other receivables $ 49 $ 66 $ 103

For a comparison of OMH's adjusted pretax income for C&I for the years ended 2020 and 2019, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—OMH’s Consolidated Results” in Part II -Item 7 of OMH's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 9, 2021.

Credit Quality

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

FINANCE RECEIVABLES

Our net finance receivables, consisting of personal loans, were $18.1 billion at December 31, 2020 and $18.4 billion at December 31, 2019.

Our net finance receivables, consisting of personal loans and credit cards, were $19.2 billion at December 31, 2021 and $18.1 billion at December 31, 2020.

Our personal loans are non-revolving, with a fixed-rate, fixed terms generally between three and six years, and are secured by automobiles, other titled collateral, or are unsecured.

During the third quarter of 2021, we began offering credit cards.

Credit cards are open-ended, revolving, with a fixed rate, and 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.

Our branch and central operation team members work with customers as necessary and offer a variety of borrower assistance programs to help customers continue to make payments.

We monitor delinquency trends to evaluate the risk of future credit losses and employ advanced analytical tools to manage our exposure.

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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.

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.

When personal loans are contractually 60 days past due, we consider these accounts to be at an increased risk for loss and collection of these accounts is handled by 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

Insurance Segment to

Adjustment (a) GAAP

At 90 days contractually past due, we consider our personal loans to be nonperforming and stop accruing finance charges.

We reverse finance charges previously accrue d .

We accrue finance charges and fees on credit cards until charge-off at approximately 180 days past due and reverse finance charges and fees previously accrued.

The delinquency information for net finance receivables was as follows:

Consumer and Insurance Segment to

Adjustment GAAP

(dollars in millions) Personal Loans Credit Cards

December 31, 2021

1 unchanged sentence

30-59 days past due

Delinquent (60-89 days past due)

17,775 (7) 17,768

Nonperforming (90+ days past due)

60-89 days past due

90+ days past due

Total net finance receivables

2 unchanged sentences

30-89 days past due

2.28 % (b) 2.28 %

30+ days past due 4.03 % (b) 4.03 %

60+ days past due 2.64 % (b) 2.64 %

90+ days past due 1.75 % (b) 1.75 %

December 31, 2019

2.43 % 0.08 % * 2.43 %

30+ days past due 4.43 % 0.08 % * 4.42 %

Delinquent (60-89 days past due)

60+ days past due 2.96 % — % * 2.96 %

90+ days past due 2.00 % — % * 1.99 %

December 31, 2020

$ 17,362 * $ (7) $ 17,355

Nonperforming (90+ days past due)

30-59 days past due

60-89 days past due

90+ days past due

Total net finance receivables

2 unchanged sentences

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 4, 5, and 6 of the Notes to the Consolidated Financial Statements for additional information on the adoption of ASU 2016-13 included in this report.

(b) Not applicable

2.28 % * * 2.28 %

30+ days past due 4.03 % * * 4.03 %

60+ days past due 2.64 % * * 2.64 %

90+ days past due 1.75 % * * 1.75 %

* Not applicable

ALLOWANCE FOR FINANCE RECEIVABLE LOSSES

We estimate and record an allowance for finance receivable losses to cover the estimated lifetime expected credit losses on our finance receivables, 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.

We estimate and record an allowance for finance receivable losses to cover the estimated lifetime expected credit losses on our finance receivables.

Our allowance for finance receivable losses may fluctuate based upon changes in portfolio growth, credit quality, and economic conditions.

See Note 3 of the Notes to the Consolidated Financial Statements included in this report for further information on 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 COVID-19 on the U.S.

We also considered known government stimulus measures, the involuntary unemployment insurance coverage of our portfolio, and our borrower assistance efforts.

Our forecast leveraged economic projections from an industry leading forecast provider.

Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the ongoing impacts of COVID-19 on the U.S.

economy and the overall unemployment rate.

We also considered inflationary pressures, supply chain concerns, and businesses’ ability to remain open.

Our forecast leveraged economic projections from industry leading forecast providers.

At December 31, 2021, our economic forecast used a reasonable and supportable period of 12 months.

The increase in our allowance for finance receivable losses for the year ended December 31, 2020 was largely due to the adoption of ASU 2016-13 along with the economic considerations relating to COVID-19.

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 finance receivable losses, allowance ratio, and provision for finance receivable losses.

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

Insurance Other Segment to

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 finance receivable losses, allowance ratio, and provision for finance receivable losses.

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

(dollars in millions) Consumer and Insurance Segment to

Adjustment Consolidated

Personal Loans Credit Cards

Year Ended December 31, 2021

1 unchanged sentence

$ 2,283 $ — $ (14) $ 2,269

Impact of adoption of ASU 2016-13 (a) 1,119 — (1) 1,118

Provision for finance receivable losses

(990) — 1 (989)

(1,163) — 1 (1,162)

Balance at end of period

1 unchanged sentence

Allowance ratio

12.62 % (b) (b) 12.55 %

Year Ended December 31, 2019

10.93 % 19.91 % (a) 10.90 %

Year Ended December 31, 2020 (b)

Balance at beginning of period

$ 849 $ — $ (20) $ 829

Impact of adoption of ASU 2016-13 (c) 1,119 — (1) 1,118

Provision for finance receivable losses

1 unchanged sentence

(1,163) — 1 (1,162)

143 — (17) 126

Balance at end of period

1 unchanged sentence

Allowance ratio

4.61 % (b) (b) 4.51 %

Year Ended December 31, 2018

12.62 % — % (a) 12.55 %

Year Ended December 31, 2019 (b)

Balance at beginning of period

4 unchanged sentences

143 — (17) 126

— (30) 7 (23)

Balance at end of period

1 unchanged sentence

Allowance ratio

4.77 % (b) (b) 4.52 %

(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 4, 5, and 6 of the Notes to the Consolidated Financial Statements for additional information on the adoption of ASU 2016-13 included in this report.

(b) Not applicable.

(c) Other consists primarily of the reclassification of allowance for finance receivable losses due to the transfer of the real estate loans in other receivables from held for investment to finance receivables held for sale on September 30, 2018.

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.

4.61 % — % (a) 4.51 %

(a) Not applicable.

(b) There were no credit cards for the years ended December 31, 2020 and 2019 as the product offering began in 2021.

(c) As a result of the adoption of ASU 2016-13, we recorded a one-time adjustment to the allowance for finance receivable losses.

The current delinquency status of our finance receivable portfolio, inclusive of recent borrower performance, volume of our TDR activity, level and recoverability of collateral securing our finance receivable portfolio, and the reasonable and supportable forecast of economic conditions are the primary drivers that can cause fluctuations in our allowance ratio 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.

The allowance for finance receivable losses as a percentage of net finance receivables for personal loans decreased from prior period primarily due to an improved outlook for unemployment and macroeconomic conditions, partially offset by growth in our loan portfolio, as compared to a build in our allowance reserve at the onset of the COVID-19 pandemic.

See Note 5 of the Notes to the Consolidated Financial Statements included in this report for more information about the changes in the allowance for finance receivable losses.

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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

Insurance Segment to

Information regarding TDR net finance receivables for personal loans are as follows:

(dollars in millions) Personal

Loans Segment to

Adjustment GAAP

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Allowance for TDR finance receivable losses 332 (18) 314

There were no credit cards classified as TDR finance receivables for the years ended December 31, 2021 and 2020.

DISTRIBUTION OF FINANCE RECEIVABLES BY FICO SCORE

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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)

The following table reflects our net finance receivables 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) Personal Loans Credit Cards Total

December 31, 2021

FICO scores *

660 or higher $ 4,897 $ 14 $ 4,911

2 unchanged sentences

Total $ 19,187 $ 25 $ 19,212

* Due to the impact of COVID-19, FICO scores as of December 31, 2020 may have been impacted due to government stimulus measures, borrower assistance programs, and potentially inconsistent reporting to credit bureaus.

December 31, 2020

FICO scores *

660 or higher $ 4,653 $ — $ 4,653

620-659 4,877 — 4,877

619 or below 8,554 — 8,554

Total $ 18,084 $ — $ 18,084

* Due to the impact of COVID-19, FICO scores as of December 31, 2021 and December 31, 2020 may have been impacted by government stimulus measures, borrower assistance programs, and potentially inconsistent reporting to credit bureaus.

Liquidity and Capital Resources

SOURCES AND USES OF FUNDS

We finance the majority of our operating liquidity and capital needs through a combination of cash flows from operations, secured debt, unsecured debt, borrowings from revolving conduit facilities and equity.

We may also utilize other sources in the future.

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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 2020, OMH generated net income of $730 million.

OMH net cash inflow from operating and investing activities totaled $1.5 billion for the year ended December 31, 2020.

At December 31, 2020, our scheduled principal and interest payments for 2021 on our existing debt (excluding securitizations) totaled $1.2 billion.

As of December 31, 2020, we had $9.2 billion of unencumbered gross finance receivables and $107 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 for at least the next 24 months.

OMFC’s Issuance and Redemption of Unsecured Debt

For information regarding the issuance and redemption of OMFC's unsecured debt, see Note 9 of the Notes to the Consolidated Financial Statements included in this report.

During 2021, OMH generated net income of $1.3 billion.

OMH’s net cash inflow from operating and investing activities totaled $104 million for the year ended December 31, 2021.

At December 31, 2021, our scheduled interest payments for 2022 totaled $594 million and there are no scheduled principal payments for 2022 on our existing debt (excluding securitizations).

As of December 31, 2021, we had $10.2 billion of unencumbered gross finance receivables.

Based on our estimates and considering the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our businesses and repay our obligations as they become due for at least the next 24 months.

OMFC’s Issuance and Notice of Redemption of Unsecured Debt

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

OMFC’s Unsecured Corporate Revolver

On October 25, 2021, we entered into an unsecured corporate revolver.

At December 31, 2021, the borrowing capacity of our corporate revolver was $1.0 billion, and no amounts were drawn.

Securitizations and Borrowings from Revolving Conduit Facilities

During the year ended December 31, 2020, we completed two personal loan securitizations (OMFIT 2020-1 and OMFIT 2020-2, see “Securitized Borrowings” below), and redeemed three personal loan securitizations (SLFT 2016-A, OMFIT 2016-1 and ODART 2017-2).

During the year ended December 31, 2021, we completed two personal loan securitizations (OMFIT 2021-1 and ODART 2021-1, see “Securitized Borrowings” below), and redeemed three personal loan securitizations (OMFIT 2017-1, SLFT 2015-B, and SLFT 2017-A).

At December 31, 2021, we had $8.7 billion of gross finance receivables pledged as collateral for our securitization transactions.

At December 31, 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 9 and 10 of the Notes to the Consolidated Financial Statements included in this report for further information on our long-term debt and revolving conduit facilities.

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 12 of the Notes to the Consolidated Financial Statements included in this report.

Cash Dividends to OMH's Common Stockholders

Dividend declarations by OMH's board of directors for the year ended December 31, 2020 were as follows:

During the year ended December 31, 2021, we entered into two new revolving conduit facilities and terminated one revolving conduit facility.

At December 31, 2021, an aggregate of $600 million was drawn under our conduit facilities, and the remaining borrowing capacity is $5.4 billion.

Amounts drawn on these facilities are collateralized by our personal loans.

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

Credit Ratings

Our credit ratings impact our ability to access capital markets and our borrowing costs.

Rating agencies base their ratings on numerous factors, including liquidity, capital adequacy, asset quality, quality of earnings, and the probability of systemic support.

Significant changes in these factors could result in different ratings.

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

As of December 31, 2021

Rating Outlook

S&P BB- Positive

Moody’s Ba2 Stable

KBRA BB+ Positive

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

Stock Repurchased

During the year ended December 31, 2021, OMH repurchased and held in treasury 3,142,923 shares of its common stock through its stock repurchase program for an aggregate total of $169 million, including commissions and fees.

To provide funding for the OMH stock repurchase, the OMFC Board of Directors authorized dividend payments in the amount of $200 million.

Additionally, on August 3, 2021 and October 28, 2021, OMH participated in two concurrent share buybacks, in which we purchased 1,700,000 shares and 1,870,000 shares, respectively, of OMH common stock for an aggregate total of $99 million and $100 million, respectively.

The August and October Concurrent Share Buybacks were made pursuant to separate Board authorizations and did not reduce our availability under the stock repurchase program.

To provide funding for the Concurrent Share Buybacks, the OMFC Board of Directors authorized dividend payments in the amount of $199 million.

As of December 31, 2021, OMH held a total of 6,712,923 shares of treasury stock.

For additional information regarding the shares repurchased, see Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of Part II included in this report.

Cash Dividend to OMH's Common Stockholders

As of December 31, 2021, the dividend declarations for the current year by the Board 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

February 8, 2021 February 18, 2021 February 25, 2021 $ 3.95 * $ 531

April 26, 2021 May 6, 2021 May 13, 2021 0.70 94

July 21, 2021 August 6, 2021 August 13, 2021 4.20 * 555

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Total $ 9.55 $ 1,271

* 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 $799 million to OMH for the year ended December 31, 2020.

* Our February 8, 2021 and July 21, 2021 dividend declarations included the minimum quarterly dividends of $0.45 per share and $0.70 per share, respectively.

To provide funding for the dividend, OMFC paid dividends of $1.3 billion to OMH during the year ended December 31, 2021.

On February 2, 2022, OMH declared a dividend of $0.95 per share payable on February 18, 2022 to record holders of OMH's common stock as of the close of business on February 14, 2022.

To provide funding for the OMH dividend, the OMFC Board of Directors authorized a dividend in the amount of up to $122 million payable on or after February 14, 2022.

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.

While OMH intends to pay its minimum quarterly dividend, currently $0.95 per share, for the foreseeable future, all subsequent dividends will be reviewed and declared at the discretion of the Board 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 deems relevant.

OMH's dividend payments may change from time to time, and the Board may choose not to continue to declare dividends in the future.

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

Whole Loan Sale Transaction

In December 2020, we entered into a whole loan sale transaction with a third-party buyer pursuant to a committed forward flow sale agreement under which we agree to sell $15 million in gross finance receivables each month, consisting of newly originated unsecured personal loans during the two-year commitment period.

The third-party buyer has an option within the first 90 days from the closing date of the agreement to increase the monthly commitment to $25 million in gross finance receivables.

The unsecured personal loans are sold to an unconsolidated VIE and derecognized from our balance sheet at the time of sale.

We will continue to service the personal loans sold and will be entitled a servicing fee and other fees commensurate with the services performed as part of the agreement.

Our first sale was executed on January 8, 2021 and the option to increase the monthly commitment to $25 million in gross finance receivables has not been exercised to date.

Whole Loan Sale Transactions

As of December 31, 2021, we have whole loan sale flow agreements with third parties, with remaining terms ranging between one to two years, in which we agreed to sell a combined total of $180 million gross receivables per quarter of newly originated unsecured personal loans along with any associated accrued interest.

Our first sale was executed in the first quarter of 2021.

During the year ended December 31, 2021, we sold $505 million of gross finance receivables.

For further information on the whole loan sale transactions, see Note 4 of the Notes to the Consolidated Financial Statements included in this report.

OMH's Operating Activities

Net cash provided by operations of $2.2 billion for 2021 reflected net income of $1.3 billion, the impact of non-cash items, and an unfavorable change in working capital of $48 million.

Net cash provided by operations of $2.2 billion for 2020 reflected net income of $730 million, the impact of non-cash items, and an unfavorable change in working capital of $118 million.

Net cash provided by operations of $2.4 billion for 2019 reflected net income of $855 million, the impact of non-cash items, and a favorable change in working capital of $67 million.

Net cash provided by operations of $2.0 billion for 2018 reflected net income of $447 million, the impact of non-cash items, and a favorable change in working capital of $86 million.

OMH's Investing Activities

Net cash used for investing activities of $751 million, $3.4 billion, and $2.4 billion for 2020, 2019, and 2018, respectively, was primarily due to net principal originations of finance receivables held for investment and held for sale and purchases of available-for-sale and other securities, partially offset by calls, sales, and maturities of available-for-sale and other securities.

Net cash used for investing activities of $2.1 billion, $751 million, and $3.4 billion for 2021, 2020, and 2019 respectively, was primarily due to net principal originations of finance receivables and purchases of available-for-sale and other securities, partially offset by calls, sales, and maturities of available-for-sale and other securities and proceeds from sales of finance receivables.

OMH's Financing Activities

Net cash used for financing activities of $370 million for 2020 was primarily due to debt repayments, cash dividends paid, and the cash paid on the common stock repurchased, offset by the issuances of long-term debt.

Net cash used for financing activities of $1.8 billion for 2021 was primarily due to debt repayments, cash dividends paid, and the cash paid to repurchase common stock during the period, partially offset by the issuances of the OMFIT 2021-1 and ODART 2021-1 securitizations, the Social Bond, and the 3.875% Senior Notes due 2028.

Net cash used for financing activities of $370 million for 2020 was primarily due to debt repayments, cash dividends paid, and the cash paid on the common stock repurchased, partially offset by the issuances of the 8.875% Senior Notes due 2025, and the OMFIT 2020-1 and OMFIT 2020-2 securitizations during the period.

Net cash provided by financing activities of $1.5 billion for 2019 was primarily due to net issuances of long-term debt offset primarily by the cash dividends paid in 2019.

Net cash provided by financing activities of $44 million for 2018 was primarily due to net issuances of long-term debt.

OMH's Cash and Investments

At December 31, 2020, we had $2.3 billion of cash and cash equivalents, which included $211 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 December 31, 2021, we had $541 million of cash and cash equivalents, which included $158 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 December 31, 2021, we had $2.0 billion of investment securities, which are all held as part of our insurance operations and are unavailable for general corporate purposes.

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

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

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

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

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OUR DEBT AGREEMENTS

The debt agreements to which OMFC and its subsidiaries are a party include customary terms and conditions, including covenants and representations and warranties.

See Note 9 of the Notes to the Consolidated Financial Statements included in this report for further information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.

The debt agreements which OMFC and its subsidiaries are a party to include customary terms and conditions, including covenants and representations and warranties.

See Note 8 of the Notes to the Consolidated Financial Statements included in this report for more information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.

Securitized Borrowings

We execute private securitizations under Rule 144A of the Securities Act of 1933.

We execute private securitizations under Rule 144A of the Securities Act of 1933, as amended.

As of December 31, 2021, our structured financings consisted of the following:

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Interest Rate Original

SLFT 2015-B $ 314 $ 336 $ 166 $ 190 4.04 % 5 years

SLFT 2017-A 652 685 428 484 3.12 % 3 years

OMFIT 2015-3 $ 293 $ 329 $ 80 $ 104 5.75 % 5 years

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OMFIT 2019-2 900 947 900 995 3.30 % 7 years

OMFIT 2019-A 789 892 750 892 3.78 % 7 years

OMFIT 2020-1 821 958 821 958 4.12 % 2 years

OMFIT 2020-2 1,000 1,053 1,000 1,053 2.03 % 5 years

OMFIT 2021-1 (c) 850 904 850 904 1.57 % 5 years

OMFIT 2020-2 (d) 1,000 1,053 1,000 1,053 2.03 % 5 years

ODART 2018-1 947 964 253 277 3.90 % 2 years

ODART 2019-1 737 750 700 750 3.79 % 5 years

ODART 2021-1 (d) 1,000 1,053 1,000 1,053 0.98 % 2 years

Total securitizations $ 9,319 $ 9,932 $ 7,432 $ 8,281

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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.

The notes mature in June of 2036.

(d) On October 15, 2021, we issued $1 billion of notes backed by personal loans.

The notes mature in November of 2030.

Revolving Conduit Facilities

In addition to the structured financings, we have access to 13 revolving conduit facilities with a total borrowing capacity of $7.2 billion as of December 31, 2020:

In addition to the structured financings, we had access to 14 revolving conduit facilities with a total borrowing capacity of $6.0 billion as of December 31, 2021:

(dollars in millions) Advance Maximum Balance Amount

Rocky River Funding, LLC $ 400 $ —

OneMain Financial Funding VII, LLC $ 600 $ —

OneMain Financial Funding IX, LLC 600 —

Mystic River Funding, LLC 600 —

OneMain Financial Auto Funding I, LLC 550 —

Seine River Funding, LLC 550 150

Chicago River Funding, LLC 500 —

Hudson River Funding, LLC 500 —

OneMain Financial Funding VIII, LLC 400 —

Thayer Brook Funding, LLC 350 —

Columbia River Funding, LLC 350 —

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 —

River Thames Funding, LLC 250 200

Lawrence River Funding, LLC 250 250

OneMain Financial Funding VII, LLC 850 —

OneMain Financial Auto Funding I, LLC 850 —

Total $ 6,000 $ 600

* 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 Note 9 of the Notes to the Consolidated Financial Statements included in this report for information on the transaction completed subsequent to December 31, 2020.

Contractual Obligations

At December 31, 2021, our material contractual obligations were as follows:

(dollars in millions) 2021 2022-2023 2024-2025 2026+ Securitizations Total

(dollars in millions) 2022 2023-2024 2025-2026 2027+ Securitizations Revolving

Facilities Total

Principal maturities on long-term debt:

Securitization debt (a) $ — $ — $ — $ — $ 7,432 $ — $ 7,432

Revolving conduit facilities (a) — — — — — 600 600

Medium-term notes — 2,475 3,435 3,750 — — 9,660

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(a) On-balance sheet securitizations and borrowings under revolving conduit facilities are not included in maturities by period due to their variable monthly payments.

At December 31, 2020, there were no amounts drawn under our revolving conduit facilities.

(b) Future interest payments on floating-rate debt are estimated based upon floating rates in effect at December 31, 2021.

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ALLOWANCE FOR FINANCE RECEIVABLE LOSSES

We estimate the allowance for finance receivable losses primarily on historical loss experience using a cumulative loss model applied to our finance receivable portfolios.

We estimate the expected credit losses on our finance receivables over their expected lives based on historical experience, current conditions, and reasonable and supportable forecasts of collectability.

No new volume is assumed.

Personal loan renewals are a significant piece of our new volume and are considered a terminal event of the previous loan.

For our personal loans, we have elected not to measure an allowance on accrued finance charges as it is our policy to reverse finance charges previously accrued after four contractual payments become past due.

Our estimate of the allowance for finance receivable losses is primarily based on historical loss experience using a cumulative loss model applied to our personal loan 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.

Our personal loans are primarily segmented in the loss model by contractual delinquency status.

Other attributes in the model include collateral mix and recent credit score.

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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.

We may 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.

Forecasting macroeconomic conditions requires significant judgment and estimation uncertainty.

We consider key economic factors, most notably unemployment rates, to incorporate into our estimate of the allowance for finance receivable losses.

Our macroeconomic forecast considers various scenarios of economic projections from industry leading forecast providers, and extends over our reasonable and supportable forecast period, after which we revert to a historical average.

Due to the judgment and uncertainty in estimating the expected credit losses, we may experience changes to the macroeconomic assumptions within our forecast, as well as changes to our loan loss performance outlook, both of which could lead to further changes in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.

Macroeconomic Sensitivity

To demonstrate the sensitivity of forecasting macroeconomic conditions, we compared the output of our model using a baseline scenario to that of a downside scenario.

As of December 31, 2021, the impact of a ten percentage point increase in weighting towards a downside scenario increased the estimate by approximately $40 million.

The macroeconomic scenarios are highly influenced by the timing, severity, and duration of changes in the underlying economic factors.

This makes it difficult to estimate how potential changes in economic factors affect the estimated credit losses.

Therefore, this hypothetical analysis is not intended to represent our expectation of changes in our estimate of expected credit losses due to a change in the macroeconomic environment, nor does it consider management’s judgment of other quantitative and qualitative information which could increase or decrease the estimate.

TDR FINANCE RECEIVABLES

When we modify a personal 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:

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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.

The allowance for finance receivable losses related to our personal loan TDR finance receivables represent 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.

We use historical cash flow performance by TDR segments to estimate expected cash flows from our current portfolio of TDR finance receivables.

Recent Accounting Pronouncements

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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, whereby it decreased demand for personal loans during 2020 and reduced delinquency below historical experience.

The seasonality impact on our delinquency trend continues to be affected by the COVID-19 pandemic and mitigating efforts from government stimulus measures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis