What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-13 compared with 2023-02-10 · 141 added, 204 removed, 370 unchanged (48% of the section changed)

13 unchanged sentences

We operate in the United States and market our personal loans in 44 states.

We service the loans that we originate and retain on our balance sheet, as well as loans owned by third parties on their behalf in connection with our whole loan sale program and legacy businesses.

In connection with our offerings, our insurance subsidiaries offer our personal loan customers optional credit and non-credit insurance and other optional products.

We also offer two credit cards, BrightWay and BrightWay+, which are designed to reward customers for responsible credit activity, such as consistent on-time payments.

We continue to expand BrightWay and BrightWay+ credit cards across our branch network, through direct mail, and through our digital affiliates.

In connection with our offerings, our insurance subsidiaries offer our personal loan customers optional credit and non-credit insurance, and other insurance-related products.

We strive to meet our customers at their preferred channel and to deliver a seamless customer experience through our digital platforms or working with our expert team members at our approximately 1,400 locations.

We strive to meet our customers at their preferred channel and to deliver a seamless customer experience through our digital platforms, distribution partnerships, or working with our expert team members at our approximately 1,400 locations.

Our personal loans, credit cards, and other products help customers meet everyday needs and take steps to improve their financial well-being.

In addition to our loan originations, insurance, and other product sales activities, we also service the loans that we originate and retain on our balance sheet, as well as loans owned by third parties on their behalf in connection with our whole loan sale program and legacy businesses.

We also pursue strategic acquisitions and dispositions of assets and businesses, including loan portfolios or other financial assets, and may establish joint ventures or enter into other strategic alliances.

Our product offerings include:

• Personal Loans — We offer personal loans through our branch network, centralized operations, and our website, www.omf.com, to customers who need timely access to cash.

• Personal Loans — We offer personal loans through our branch network, central operations, auto dealership network, and our website, www.onemainfinancial.com, to customers who need timely access to cash.

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

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We also service personal loans for our whole loan sale partners.

• Credit Cards — We offer 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 — BrightWay and BrightWay+ credit cards originate through a third-party bank partner from which we purchase the receivable balances.

The credit cards are offered across our branch network, through direct mail, and through our digital affiliates.

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

At December 31, 2023, we had approximately 431 thousand open credit card customer accounts, totaling $330 million of net finance receivables, compared to approximately 135 thousand open credit card customer accounts, totaling $107 million of net finance receivables at December 31, 2022.

• Insurance Products — We offer our custom ers optional credit insurance products (life, disability, and involuntary unemployment insurance) and optional non-credit insurance products through both our branch network and our centralized operations.

• Optional Products — We offer our custom ers optional credit insurance products (life, disability, and involuntary unemployment insurance) and optional non-credit insurance products through both our branch network and our central operations.

Credit insurance and non-credit insurance products are provided by our affiliated insurance companies.

We offer GAP coverage as a waiver product or insurance.

We offer Guaranteed Asset Protection (“GAP”) coverage as a waiver product or insurance.

We also offer optional membership plans from an unaffiliated company.

At December 31, 2022, Consumer and Insurance (“C&I”) is our only reportable segment, which includes personal loans, credit cards, and insurance products.

At December 31, 2022, we managed a combined total of 2.56 million customer accounts and $20.8 billion of managed receivables, compared to 2.45 million customer accounts and $19.6 billion of managed receivables at December 31, 2021.

At December 31, 2023, Consumer and Insurance (“C&I”) is our only reportable segment, which includes personal loans, credit cards, and optional products.

At December 31, 2023, we had $22.2 billion of managed receivables due from approximately 3.0 million customer accounts, compared to $20.8 billion of managed receivables due from approximately 2.6 million customer accounts at December 31, 2022.

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 held for sale and reported in Other assets in our consolidated balance sheets.

See Note 17 of the Notes to the Consolidated Financial Statements included in this report for more information about our segment.

See Note 17 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for more information about our segment.

HOW WE ASSESS OUR BUSINESS PERFORMANCE

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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 utilization of revolving conduit facilities.

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

Net Credit Losses

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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, purchase volume, and annual percentage rate.

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

Recent Developments and Outlook

RECENT DEVELOPMENTS

Stock Repurchase Program

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

The authorization expires on December 31, 2024.

As of December 31, 2022, we had $726 million of authorized share repurchase capacity, excluding fees and commissions, remaining under the program.

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

Private Secured Term Funding

On April 25, 2022, OMFC entered into a $350 million private secured term funding collateralized by our personal loans.

No principal payments are required to be made during the first three years, followed by a subsequent one-year amortization period at the expiration of which the outstanding principal amount is due and payable.

Social Securitization Transaction - OMFIT 2022-S1

As part of our continued commitment to improve the financial well-being of hardworking Americans, on April 27, 2022, OMFC completed its first social securitization under Rule 144A.

We issued $600 million principal amount of notes backed by personal loans (“OMFIT 2022-S1”) made to the target population identified in the OneMain 2022 ABS Social Bond Framework.

OMFIT 2022-S1 has a revolving period of three years, during which no principal payments are required.

Generally, the target population is comprised of borrowers residing in rural communities (by zip code), 75% of whom are lower income borrowers in these communities.

Through the OneMain 2022 ABS Social Bond Framework we aim to promote financial inclusion to the target population by providing equitable access to fair and transparent credit.

The OneMain 2022 ABS Social Bond Framework, which is available on OneMain’s Investor Relations website, aligns to the Social Bond Principles 2021, as administered by the International Capital Market Association.

Acquisition of Foursight Capital LLC

On November 21, 2023, we announced that we have entered into a definitive agreement to acquire Foursight Capital LLC (“Foursight”), a wholly owned subsidiary of Jefferies Financial Group, Inc.

for a purchase price of $115 million in cash.

Foursight is an automobile finance company that purchases and services automobile retail installment contracts.

Contracts are sourced through an extensive network of auto dealers.

We will acquire Foursight's approximately $900 million auto loan portfolio in the transaction, which is expected to close in the first quarter of 2024, subject to customary closing conditions and applicable regulatory approvals.

Issuances and Redemption of Unsecured Debt

Issuance of 9.00% Senior Notes Due 2029

On June 22, 2023, OMFC issued a total of $500 million aggregate principal amount of 9.00% Senior Notes due 2029.

On November 14, 2023, OMFC issued a total of $400 million aggregate principal amount as an add-on to the 9.00% Senior Notes due 2029.

Issuance of 7.875% Senior Notes Due 2030

On December 13, 2023, OMFC issued a total of $700 million aggregate principal amount of 7.875% Senior Notes due 2030.

Redemption of 6.125% Senior Notes Due 2024

On September 18, 2023, OMFC paid a net aggregate amount of $558 million, inclusive of accrued interest, to complete a partial redemption of its 6.125% Senior Notes due 2024.

On December 14, 2023, OMFC paid a net aggregate amount of $546 million, inclusive of accrued interest, to complete a full redemption.

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

Securitization Transactions Completed - ODART 2023-1, OMFIT 2023-1, and OMFIT 2023-2

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.

Redemption of 8.875% Senior Notes Due 2025

On June 1, 2022, OMFC paid a net aggregate amount of $637 million, inclusive of accrued interest and premiums, to complete the redemption of its 8.875% Senior Notes due 2025.

Unsecured Corporate Revolver

On June 15, 2022, OMFC increased the total maximum borrowing capacity of its unsecured corporate revolver to $1.25 billion.

At December 31, 2022, no amounts were drawn under this facility.

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

Cash Dividends to OMH's Common Stockholders

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

Election and Resignation of Members of the Board

On January 27, 2022, Toos N.

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

On February 24, 2022, Peter B.

Sinensky resigned from the Board.

Appointments of OMFC’s President and Chief Executive Officer (“CEO”), and Vice President, Chief Financial Officer (“CFO”) and a new member of OMFC’s Board of Directors

On December 12, 2022, OMFC’s Board of Directors appointed Micah R.

Conrad as OMFC’s President and CEO and elected Matthew Vaughan as Vice President, CFO of OMFC and to OMFC’s Board of Directors.

Conrad succeeds Richard N.

Tambor and Mr.

Vaughan succeeds Mr.

Conrad’s former position as CFO of OMFC.

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 states and regions that we serve.

Throughout the pandemic, we maintained our focus on assisting and supporting our customers, 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 platform.

This hybrid capability has sustained our operating performance through the pandemic and enabled us to serve and support our customers effectively.

We are actively monitoring the current macroeconomic developments, including geopolitical actions outside of the U.S., and remain prepared for any opportunities or challenges that may impact our business.

Regulatory Settlements

On May 24, 2023, we entered into a consent order with the NYDFS relating primarily to a past examination of our cybersecurity policies from 2017 to early 2020.

Pursuant to the consent order, we agreed to pay a $4.25 million civil penalty and represent that certain improvements to our cybersecurity controls and procedures had previously been completed.

Additionally, on May 31, 2023, we entered into a consent order with the CFPB to resolve a previously disclosed investigation focused on certain refunding practices for optional insurance and membership plan products that were subsequently canceled by the consumer after purchase.

Pursuant to the consent order, we agreed to issue $10 million in interest refunds to affected customers, pay a $10 million civil penalty and make certain other enhancements to our sales and refunding practices.

In agreeing to these two consent orders, we did not admit to any of the NYDFS’ or the CFPB’s factual findings or legal conclusions.

We are actively monitoring the current macroeconomic environment, including geopolitical actions outside of the U.S., and remain prepared for any developments that may impact our business.

Our financial condition and results of operations could be affected by macroeconomic conditions, including changes in unemployment, inflation, interest rates, and consumer confidence.

We will continue to incorporate updates to our macroeconomic assumptions, as necessary, 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 remains focused on maintaining a solid balance sheet with a strong liquidity runway and capital coverage, upholding a conservative and disciplined underwriting model, and building strong relationships with our customers to ensure that we are serving them well.

We believe we are well positioned to serve our customers, invest in our business, and drive long-term growth to create value for our stockholders as we navigate an ever-evolving economic, social, political, and regulatory environment.

Our experienced management team remains focused on maintaining a strong balance sheet with a long liquidity runway and adequate capital while maintaining a conservative and disciplined underwriting model.

We believe we are well positioned to serve our customers and execute on our strategic priorities, including:

• striving to be the lender of choice for nonprime consumers and improve their financial well-being;

• continuing to grow our receivables through new products and distribution channels;

• maintaining a rigorous underwriting standard with a goal of enhancing credit performance;

• leveraging our scale and cost discipline across the Company to deliver improved operating leverage;

• maintaining a strong liquidity level with diversified funding sources.

We believe our commitment to closely monitor the macroeconomic environment, retain disciplined underwriting, drive strategic growth initiatives, and maintain a robust balance sheet strengthens our ability to navigate challenges and seize opportunities.

As we pursue our key initiatives, we are confident in our ability to increase shareholder value and remain resilient and adaptable to navigate an ever-evolving economic, social, political, and regulatory landscape.

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

See Note 1 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for further information.

OMH'S CONSOLIDATED RESULTS

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Diluted $ 5.32 $ 7.01 $ 9.88

Selected Financial Statistics (a)

Selected Financial Statistics *

Total finance receivables:

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Average net receivables $ 20,527 $ 19,440 $ 18,281

Yield 22.79 % 23.84 % 24.24 %

Gross charge-off ratio 8.74 % 7.40 % 5.41 %

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Net finance receivables $ 21,019 $ 19,879 $ 19,187

Yield 22.20 % 22.78 % 23.84 %

Origination volume $ 12,851 $ 13,879 $ 13,825

1 unchanged sentence

Number of accounts originated 1,258,813 1,365,989 1,388,123

Net charge-off ratio 7.42 % 6.09 % 4.20 %

30-89 Delinquency ratio 3.28 % 3.07 % 2.43 %

Credit cards (b):

Credit cards:

Net finance receivables $ 330 $ 107 $ 25

1 unchanged sentence

Number of open accounts 430,784 135,335 65,513

30-89 Delinquency ratio 5.90 % 0.08 % — %

Debt balances:

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Average daily debt balance $ 19,047 $ 17,854 $ 17,441

(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 year ended December 31, 2020, as the product offering began in 2021.

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

Comparison of Consolidated Results for 2023 and 2022

Interest income increased $71 million or 2% in 2022 when compared to 2021 primarily due to growth in our loan portfolio, partially offset by lower yield.

Interest expense decreased $45 million or 5% in 2022 when compared to 2021 primarily due to a lower average cost of funds, partially offset by an increase in average 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, private secured term funding, and our revolving conduit facilities.

Provision for finance receivable losses increased $809 million or 136% in 2022 when compared to 2021 primarily driven by higher net charge-offs and an increase in the allowance for finance receivable losses due to the weakened macroeconomic environment and growth in the portfolio.

Other revenues increased $98 million or 18% in 2022 when compared to 2021 primarily due to an increase in gains on the sales of finance receivables and an increase in servicing revenue associated with the whole loan sale program as a result of more loans sold in the current period and lower net losses on the repurchases and repayments of debt in the current period compared to the prior year period.

Other expenses decreased $17 million or 1% in 2022 when compared to 2021 primarily due to a decrease in insurance policy and benefits claims expense due to favorable experiences in credit life and term life products, the prior year expense associated with the cash-settled stock-based awards not present in the current year, and a decrease in amortization expense of other intangibles primarily due to the customer relationships intangible asset being fully amortized in the prior year.

The decrease was partially offset by an increase in salaries and benefits expense and an increase in software and technology expense driven by the continued investment in our business.

Income taxes totaled $285 million for 2022 compared to $427 million for 2021.

The effective tax rate for 2022 was 24.5% compared to 24.6% for 2021.

The effective tax rate for 2022 and 2021 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes.

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

Interest income increased $129 million or 3% in 2023 when compared to 2022 due to growth in average net receivables, partially offset by lower yield.

Interest expense increased $127 million or 14% in 2023 when compared to 2022 due to a higher average cost of funds and an increase in average debt as we continue to grow the business.

Provision for finance receivable losses increased $319 million or 23% in 2023 when compared to 2022 driven by higher net charge-offs.

Other revenues increased $106 million or 17% in 2023 when compared to 2022 due to an increase in investment revenue due to higher market rates compared to the prior year period and a net loss on the repurchase and repayment of debt in the prior year period.

Other expenses increased $104 million or 6% in 2023 when compared to 2022 due to regulatory settlements in the current period, an increase in general operating expenses and salaries and benefits expense driven by our strategic investments in the business, as well as an increase in insurance policy and benefits claims expense largely driven by favorable claims experience in the prior period not present in the current period.

Income taxes decreased $84 million or 30% in 2023 when compared to 2022 due to lower pretax income.

See Note 13 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for further information on income taxes.

Comparison of Consolidated Results for 2022 and 2021

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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 net loss resulting from repurchases and repayments of debt, restructuring charges, direct costs associated with COVID-19, the expense associated with the cash-settled stock-based awards, and acquisition-related transaction and integration expenses.

C&I adjusted pretax income (loss) represents income (loss) before income taxes on a Segment Accounting Basis and excludes regulatory settlements, net gain or loss resulting from repurchases and repayments of debt, and other items and strategic activities, which include direct costs associated with COVID-19, restructuring charges, and the expense associated with cash-settled stock-based awards.

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

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$ 845 $ 1,169 $ 1,788

Regulatory settlements 26 — —

Net loss on repurchases and repayments of debt

Restructuring charges 7 — 7

Direct costs associated with COVID-19

Cash-settled stock-based awards — 54 —

Acquisition-related transaction and integration expenses — — 11

Adjusted pretax income (non-GAAP)

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Due to the nominal differences between OMFC and OMH, content throughout this section relate only to OMH.

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

See Note 17 of the Notes to the Consolidated Financial Statements in this report for a description of our segment, methodologies used to allocate revenues and expenses to our C&I segment, and reconciliations of segment total to consolidated financial statement amounts.

See Note 1 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for further information.

See Note 17 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for a description of our segment, methodologies used to allocate revenues and expenses to our C&I segment, and reconciliations of segment total to consolidated financial statement amounts.

CONSUMER AND INSURANCE

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Adjusted pretax income (non-GAAP) $ 874 $ 1,206 $ 1,918

Selected Financial Statistics (a)

Selected Financial Statistics *

Total finance receivables:

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Average net receivables $ 20,528 $ 19,442 $ 18,286

Yield 22.78 % 23.82 % 24.17 %

Gross charge-off ratio 8.74 % 7.40 % 5.42 %

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Net finance receivables $ 21,019 $ 19,880 $ 19,190

Yield 22.20 % 22.77 % 23.82 %

Origination volume $ 12,851 $ 13,879 $ 13,825

1 unchanged sentence

Number of accounts originated 1,258,813 1,365,989 1,388,123

Net charge-off ratio 7.42 % 6.09 % 4.20 %

30-89 Delinquency ratio 3.28 % 3.07 % 2.43 %

Credit cards (b):

Credit cards:

Net finance receivables $ 330 $ 107 $ 25

1 unchanged sentence

Number of open accounts 430,784 135,335 65,513

30-89 Delinquency ratio 5.90 % 0.08 % — %

(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 year ended December 31, 2020, as the product offering began in 2021.

Comparison of Adjusted Pretax Income for 2022 and 2021

Interest income increased $74 million or 2% in 2022 when compared to 2021 primarily due to growth in our loan portfolio, partially offset by lower yield.

Interest expense decreased $44 million or 5% in 2022 when compared to 2021 primarily due to a lower average cost of funds, partially offset by an increase in average debt.

Provision for finance receivable losses increased $812 million or 138% in 2022 when compared to 2021 primarily driven by higher net charge-offs and an increase in the allowance for finance receivable losses due to the weakened macroeconomic environment and growth in the portfolio.

Other revenues increased $47 million or 8% in 2022 when compared to 2021 primarily due to an increase in gains on the sales of finance receivables and an increase in servicing revenue associated with the whole loan sale program as a result of more loans sold in the current period.

Other expenses increased $57 million or 4% in 2022 when compared to 2021 primarily due to an increase in salaries and benefits expense and an increase in software and technology expense driven by the continued investment in our business.

The increase was partially offset by a decrease in insurance policy and benefits claims expense primarily due to favorable experiences in credit life and term life products.

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

Comparison of Adjusted Pretax Income for Twelve Months Ended December 31, 2023 and 2022

Interest income increased $130 million or 3% in 2023 when compared to 2022 due to growth in average net receivables, partially offset by lower yield.

Interest expense increased $129 million or 15% in 2023 when compared to 2022 due to a higher average cost of funds and an increase in average debt as we continue to grow the business.

Provision for finance receivable losses increased $322 million or 23% in 2023 when compared to 2022 driven by higher net charge-offs.

Other revenues increased $83 million or 13% in 2023 when compared to 2022 due to an increase in investment revenue due to higher market rates compared to the prior year period.

Other expenses increased $94 million or 6% in 2023 when compared to 2022 due to an increase in general operating expenses and salaries and benefits expense driven by our strategic investments in the business, as well as an increase in insurance policy benefits and claims expense largely driven by favorable claims experience in the prior period not present in the current period.

Comparison of Adjusted Pretax Income for 2022 and 2021

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We monitor the delinquency of our finance receivable portfolio, including the migration between the delinquency buckets and changes in the delinquency trends to manage our exposure to credit risk in the portfolio.

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

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

Our branch and central operation team members work closely with customers as necessary and offer a variety of borrower assistance programs to help support our customers.

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

Team members are actively engaged in collection activities throughout the early stages of delinquency.

We closely track and report the percentage of receivables that are contractually 30-89 days past due as a benchmark of portfolio quality, collections effectiveness, and as a strong indicator of losses in coming quarters.

When 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 managed 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.

When personal loans are contractually 60 days past due, we consider these accounts to be at an increased risk for loss and move collection of these accounts to our central collection operations.

Use of our central operations teams for managing late-stage delinquency allows us to apply more advanced collection techniques and tools to drive credit performance and operational efficiencies.

We consider our personal loans to be nonperforming at 90 days contractually past due, at which point we stop accruing finance charges and reverse finance charges previously accrue d .

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

For credit cards, we accrue finance charges and fees until charge-off at 180 days contractually past due, at which point we reverse finance charges and fees previously accrued.

The delinquency information for net finance receivables on a Segment Accounting Basis was as follows:

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90+ days past due

Total net finance receivables

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90+ days past due 2.88 % 5.03 %

90+ days past due 2.74 % 7.18 %

December 31, 2022

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90+ days past due

Total net finance receivables

5 unchanged sentences

90+ days past due 2.74 % 7.18 %

90+ days past due 2.00 % — %

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.

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

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

Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the overall unemployment rate.

Our unemployment outlook leveraged projections from various industry leading forecast providers.

We also considered inflationary pressures, consumer confidence levels, and continued interest rate increases negatively impacting the economic outlook.

Our methodology to estimate expected credit losses uses recent macroeconomic forecasts, which include forecasts for unemployment.

We leverage projections from various industry leading providers.

We also consider inflationary pressures, consumer confidence levels, and interest rate increases that may continue to impact the economic outlook.

At December 31, 2023, our economic forecast used a reasonable and supportable period of 12 months.

7 unchanged sentences

$ 2,294 $ 21 $ (4) $ 2,311

Impact of adoption of ASU 2022-02 (a) (20) — 4 (16)

Provision for finance receivable losses

4 unchanged sentences

Allowance ratio

11.54 % 19.12 % (a) 11.56 %

11.49 % 19.61 % (b) 11.62 %

Year Ended December 31, 2022

4 unchanged sentences

(1,431) (7) — (1,438)

222 — — $ 222

Balance at end of period

1 unchanged sentence

Allowance ratio

10.93 % 19.91 % (a) 10.90 %

Year Ended December 31, 2020 (b)

11.54 % 19.12 % (b) 11.56 %

Year Ended December 31, 2021

Balance at beginning of period

$ 2,283 $ — $ (14) $ 2,269

Impact of adoption of ASU 2016-13 (c)

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 % — % (a) 12.55 %

(a) Not applicable.

(b) There were no credit cards for the year ended December 31, 2020 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.

10.93 % 19.91 % (b) 10.90 %

(a) As a result of the adoption of ASU 2022-02, we recorded a one-time adjustment to the allowance for finance receivable losses.

See Notes 3, 4, and 5 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for additional information on the adoption of ASU 2022-02.

(b) Not applicable.

The current delinquency status of our finance receivable portfolio, inclusive of recent borrower performance and loss performance, volume of our modified finance receivable 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 for personal loans increased from the prior year period primarily due to the weakened macroeconomic environment.

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.

TDR FINANCE RECEIVABLES

We may modify the terms of our finance receivables to assist borrowers experiencing financial difficulties.

When we modify a loan’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and grant a concession that we would not otherwise consider, we classify that loan as a TDR finance receivable.

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

(dollars in millions) Personal

Loans Segment to

Adjustment GAAP

December 31, 2022

TDR net finance receivables $ 915 $ (11) $ 904

Allowance for TDR finance receivable losses 373 (4) 369

December 31, 2021

TDR net finance receivables $ 671 $ (21) $ 650

Allowance for TDR finance receivable losses 279 (9) 270

There were no credit cards classified as TDR finance receivables at December 31, 2022 or December 31, 2021.

DISTRIBUTION OF FINANCE RECEIVABLES BY FICO SCORE

There are many different categorizations used in the consumer lending industry to describe the creditworthiness of a borrower, including prime, near-prime, and sub-prime.

While management does not utilize FICO scores to manage credit quality, we group FICO scores into the following categories for comparability purposes across our industry:

FICO score of 660 or higher

• Near-prime:

FICO score of 620-659

FICO score of 619 or below

Our customers’ demographics are, in many respects, near the national median but may vary from national norms in terms of credit and repayment histories.

Many of our customers have experienced some level of prior financial difficulty or have limited credit experience and require higher levels of servicing and support from our branch network and central servicing operations.

The following table reflects our 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, 2022

660 or higher

$ 4,255 $ 15 $ 4,270

4,986 37 5,023

10,638 55 10,693

Total $ 19,879 $ 107 $ 19,986

December 31, 2021

FICO scores *

660 or higher

$ 4,897 $ 14 $ 4,911

5,321 7 5,328

8,969 4 8,973

Total $ 19,187 $ 25 $ 19,212

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

The allowance for finance receivable losses as a percentage of net finance receivables increased slightly from the prior year period primarily due to a weaker macroeconomic outlook and portfolio mix.

See Note 5 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for more information about the changes in the allowance for finance receivable losses.

Liquidity and Capital Resources

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As a holding company, all of the funds generated from our operations are earned by our operating subsidiaries.

Our operating subsidiaries’ primary cash needs relate to funding our lending activities, our debt service obligations, our operating expenses, payment of insurance claims, and expenditures relating to upgrading and monitoring our technology platform, risk systems, and branch locations.

We have previously purchased portions of our unsecured indebtedness, and we may elect to purchase additional portions of our unsecured indebtedness or securitized borrowings in the future.

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During the year ended December 31, 2023, OMH generated net income of $641 million.

OMH’s net cash inflow from operating and investing activities totaled $268 million for the year ended December 31, 2022.

At December 31, 2022, our scheduled principal and interest payments for 2023 on our existing debt (excluding securitizations) totaled $1.5 billion.

As of December 31, 2022, we had $9.3 billion of unencumbered loans.

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.

OMH’s net cash outflow from operating and investing activities totaled $343 million for the year ended December 31, 2023.

At December 31, 2023, our scheduled interest payments for 2024 totaled $526 million and there were no scheduled principal payments for 2024 on our existing unsecured debt.

As of December 31, 2023, we had $8.4 billion of unencumbered receivables.

OMFC’s Issuances, Redemptions, and Repurchases of Unsecured Debt

On June 22, 2023, OMFC issued a total of $500 million aggregate principal amount of 9.00% Senior Notes due 2029 under the Base Indenture, as supplemented by the Fifteenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

On November 14, 2023, OMFC issued a total of $400 million aggregate principal amount of 9.00% Senior Notes due 2029 in an add-on to the 9.00% Senior Notes due 2029 under the Base Indenture, as supplemented by the Fifteenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

On August 18, 2023, OMFC issued a notice to partially redeem its 6.125% Senior Notes due 2024.

On September 18, 2023, OMFC paid a net aggregate amount of $558 million, inclusive of accrued interest, to complete the partial redemption.

On November 14, 2023, OMFC issued a notice to fully redeem the remaining 6.125% Senior Notes due 2024.

On December 14, 2023, OMFC paid a net aggregate amount of $546 million, inclusive of accrued interest, to complete a full redemption.

On December 13, 2023, OMFC issued a total of $700 million aggregate principal amount of 7.875% Senior Notes due 2030 under the Base Indenture, as supplemented by the Sixteenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

From time to time we may purchase portions of our unsecured indebtedness through the open market.

During the year ended December 31, 2023, we repurchased $176 million of our unsecured notes.

OMFC’s Unsecured Corporate Revolver

At December 31, 2023, the borrowing capacity of our corporate revolver was $1.3 billion, and no amounts were drawn.

OMFC’s Redemption and Repurchases of Unsecured Debt

For information regarding the redemption and open market repurchases of OMFC’s unsecured debt, see Note 8 of the Notes to the Consolidated Financial Statements included in this report.

Securitizations and Borrowings from Revolving Conduit Facilities

During the year ended December 31, 2022, we completed four personal loan securitizations (OMFIT 2022-S1, ODART 2022-1, OMFIT 2022-2, and OMFIT 2022-3, see “Securitized Borrowings” below) and redeemed five personal loan securitizations (ODART 2018-1, OMFIT 2019-1, OMFIT 2015-3, OMFIT 2018-1, and OMFIT 2016-3).

During the year ended December 31, 2022, we entered into one new revolving conduit facility.

At December 31, 2022, $50 million was drawn under our revolving conduit facilities, and the remaining borrowing capacity was $6.1 billion.

At December 31, 2022, we had $10.3 billion of gross finance receivables pledged as collateral for our securitizations, revolving conduit facilities, and private secured term funding.

During the year ended December 31, 2023, we completed three personal loan securitizations (ODART 2023-1, OMFIT 2023-1, OMFIT 2023-2, see “Securitized Borrowings” below) and redeemed one personal loan securitization (OMFIT 2020-1).

During the year ended December 31, 2023, we entered into two new revolving conduit facilities.

At December 31, 2023, the borrowing capacity of our revolving conduit facilities was $6.4 billion.

At December 31, 2023, we had $12.6 billion of gross finance receivables pledged as collateral for our securitizations, conduit facilities, and private secured term funding.

Subsequent to year-end, on January 18, 2024, we entered into two credit card revolving variable funding note (“VFN”) facilities.

The maximum capacity of our credit card revolving VFN facilities was $300 million.

Private Secured Term Funding

On April 25, 2022, OMFC entered into a $350 million private secured term funding collateralized by our personal loans.

At December 31, 2023, an aggregate amount of $350 million was outstanding under the private secured term funding collateralized by our personal loans.

No principal payments are required to be made until after April 25, 2025, followed by a subsequent one-year amortization period at the expiration of which the outstanding principal amount is due and payable.

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

Credit Ratings

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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.

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

Cash Dividend to OMH's Common Stockholders

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Whole Loan Sale Transactions

As of December 31, 2022, we have whole loan sale flow agreements with third parties, with remaining terms of up to one year, 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.

We have whole loan sale flow agreements with third parties, with remaining terms of less than one year, in which we agreed to sell a total of $60 million gross receivables per quarter of newly originated unsecured personal loans along with any associated accrued interest.

During the year ended December 31, 2023, we sold $585 million of gross finance receivables, compared to $720 million during the year ended December 31, 2022.

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

Subsequent to year-end, we entered into a whole loan sale flow agreement with a third party, with a term of less than two years, in which we agreed to sell $600 million of gross receivables of newly originated unsecured personal loans along with any associated accrued interest.

OMH's Operating Activities

Net cash provided by operations of $2.4 billion for the year ended December 31, 2022 reflected net income of $878 million, the impact of non-cash items, and an unfavorable change in working capital of $90 million.

Net cash provided by operations of $2.5 billion for the year ended December 31, 2023 reflected net income of $641 million, the impact of non-cash items including provision for finance receivable losses of $1.7 billion, and an unfavorable change in working capital of $44 million.

Net cash provided by operations of $2.4 billion for the year ended December 31, 2022 reflected net income of $872 million, the impact of non-cash items including provision for finance receivable losses of $1.4 billion, and an unfavorable change in working capital of $82 million.

Net cash provided by operations of $2.2 billion for the year ended December 31, 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 the year ended December 31, 2020 reflected net income of $730 million, the impact of non-cash items, and an unfavorable change in working capital of $118 million.

OMH's Investing Activities

Net cash used for investing activities of $2.1 billion for both the years ended December 31, 2022 and 2021 was primarily due to net principal originations and purchases of finance receivables and purchases of available-for-sale and other securities, partially offset by the proceeds from sales of finance receivables and calls, sales, and maturities of available-for-sale and other securities.

Net cash used for investing activities of $751 million for the year ended December 31, 2020 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.

Net cash used for investing activities of $2.9 billion for the year ended December 31, 2023 was due to net principal originations and purchases of finance receivables and purchases of available-for-sale and other securities, partially offset by the proceeds from sales of finance receivables and calls, sales, and maturities of available-for-sale and other securities.

proceeds from sales of finance receivables and calls, sales, and maturities of available-for-sale and other securities.

OMH's Financing Activities

Net cash used for financing activities of $326 million for the year ended December 31, 2022 was primarily due to repayments and repurchases of long-term debt, cash dividends paid, and the cash paid to repurchase common stock, partially offset by the issuance and borrowings of long-term debt.

Net cash used for financing activities of $1.8 billion and $370 million for the years ended December 31, 2021 and 2020, respectively, were primarily due to debt repayments, cash dividends paid, and the cash paid to repurchase common stock, partially offset by the issuance and borrowings of long-term debt.

Net cash provided by financing activities of $932 million for the year ended December 31, 2023 was primarily due to the issuance and borrowings of long-term debt, partially offset by repayments and repurchases of long-term debt and cash dividends paid.

Net cash used for financing activities of $326 million and $1.8 billion for the years ended December 31, 2022 and 2021, respectively, were primarily due to repayments and repurchases of long-term debt, cash dividends paid, and the cash paid to repurchase common stock, partially offset by the issuance and borrowings of long-term debt.

OMH's Cash and Investments

At December 31, 2022, we had $498 million of cash and cash equivalents, which included $147 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, 2023, we had $1.0 billion of cash and cash equivalents, which included $148 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, 2023, we had $1.7 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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OMFIT 2021-1 850 904 850 904 2.82 % 5 years

OMFIT 2021-1 850 904 850 904 2.46 % 5 years

OMFIT 2022-S1 600 652 600 652 4.31 % 3 years

OMFIT 2022-2 1,000 1,099 1,000 1,099 5.17 % 2 years

OMFIT 2022-3 (c) 979 1,090 796 1,090 6.00 % 2 years

OMFIT 2022-3 979 1,090 796 1,090 6.00 % 2 years

OMFIT 2023-1 825 920 825 920 5.82 % 5 years

OMFIT 2023-2 1,400 1,566 1,400 1,566 6.45 % 3 years

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

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ODART 2022-1 600 632 600 632 5.10 % 2 years

ODART 2023-1 750 792 750 792 5.63 % 3 years

Total securitizations $ 11,798 $ 12,731 $ 11,275 $ 12,493

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(b) Inclusive of in-process replenishments of collateral for securitized borrowings in a revolving status as of December 31, 2023.

(c) On December 14, 2022, we issued $979 million of notes backed by personal loans and retained the Class C and Class D notes in the amount of $183 million.

The notes mature in May of 2034.

Revolving Conduit Facilities

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OneMain Financial Funding VII, LLC $ 600 $ —

OneMain Financial Funding IX, LLC 600 —

OneMain Financial Auto Funding I, LLC 550 —

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Hudson River Funding, LLC 500 —

OneMain Financial Funding XI, LLC 425 —

OneMain Financial Funding VIII, LLC 400 —

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OneMain Financial Funding X, LLC 400 —

OneMain Financial Funding XII, LLC 400 —

Chicago River Funding, LLC 375 —

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Total $ 6,400 $ 1

See “Liquidity and Capital Resources - Sources and Uses of Funds - Securitizations and Borrowings from Revolving Conduit Facilities” above for information on the credit card revolving conduit facilities entered into subsequent to December 31, 2023.

Contractual Obligations

At December 31, 2023, our material contractual obligations were as follows:

(dollars in millions) 2023 2024-2025 2026-2027 2028+ Securitizations Private Secured Term Funding Revolving

(dollars in millions) 2024 2025-2026

Securitizations Private Secured Term Funding Revolving

Facilities Total

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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.

Forecasting macroeconomic conditions requires significant judgment and involves estimation uncertainty.

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

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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:

reduce interest rate, extend the term, defer or forgive past due interest or forgive principal.

Account modifications that are deemed to be a TDR finance receivable are measured for impairment in accordance with the authoritative guidance for the accounting for impaired loans.

The allowance for finance receivable losses related to our 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 historical cash flow performance by TDR segments to estimate expected cash flows from our current portfolio of TDR finance receivables.

Recent Accounting Pronouncements

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

Our personal loan volume is generally highest during the second and fourth quarters of the year, primarily due to marketing efforts and seasonality of demand.

Demand for our personal loans is usually lower in January and February after the holiday season and as a result of tax refunds.

Delinquencies on our personal loans are generally lower in the first and second quarters and tend to rise throughout the remainder of the year.

See Note 3 of the Notes to the Consolidated Financial Statements in Part II - Item 8 in this report for discussion of recently issued accounting pronouncements.

Our personal loan volume and demand is generally lowest during the first part of the year following the holiday season and as a result of tax refunds, and increases through the end of the year.

Delinquencies follow the same trends, being generally lower during the first part of the year and rising throughout the remainder of the year.

These seasonal trends contribute to fluctuations in our operating results and cash needs throughout the year.

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