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| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
An index to our management’s discussion and analysis follows:
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| Forward-Looking Statements |
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, but instead represent only management’s current beliefs regarding future events. By their nature, forward-looking statements are subject to risks, uncertainties, assumptions, and other important factors that may cause actual results, performance, or achievements to differ materially from those expressed in or implied by such forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. We do not undertake any obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law. Forward-looking statements include, without limitation, statements concerning future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Statements preceded by, followed by or that otherwise include the words “anticipates,” “appears,” “are likely,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “foresees,” “goals,” “intends,” “likely,” “objective,” “plans,” “projects,” “target,” “trend,” “remains,” and similar expressions or future or conditional verbs such as “could,” “may,” “might,” “should,” “will,” or “would” are intended to identify forward-looking statements, but these words are not the exclusive means of identifying forward-looking statements. Important factors that could cause actual results, performance, or achievements to differ materially from those expressed in or implied by forward-looking statements include, without limitation, the following:
•adverse changes in general economic conditions, including the interest rate environment and the financial markets;
•risks associated with the coronavirus (“COVID-19”) pandemic and the measures taken in response thereto;
•geopolitical risks, including recent geopolitical actions outside the U.S.;
•the sufficiency of our allowance for finance receivable losses;
•increased levels of unemployment and personal bankruptcies;
•natural or accidental events such as earthquakes, hurricanes, pandemics, floods, or wildfires affecting our customers, collateral, or our facilities;
•a failure in or breach of our information, operational or security systems, or infrastructure or those of third parties, including as a result of cyber-attacks, war, or other disruptions;
•the adequacy of our credit risk scoring models;
•adverse changes in our ability to attract and retain employees or key executives;
•increased competition or adverse changes in customer responsiveness to our distribution channels or products;
•changes in federal, state, or local laws, regulations, or regulatory policies and practices or increased regulatory scrutiny of our industry;
•risks associated with our insurance operations;
•the costs and effects of any actual or alleged violations of any federal, state, or local laws, rules or regulations;
•the costs and effects of any fines, penalties, judgments, decrees, orders, inquiries, investigations, subpoenas, or enforcement or other proceedings of any governmental or quasi-governmental agency or authority;
•our substantial indebtedness and our continued ability to access the capital markets and maintain adequate current sources of funds to satisfy our cash flow requirements;
•our ability to comply with all of our covenants; and
•the effects of any downgrade of our debt ratings by credit rating agencies.
We also direct readers to the other risks and uncertainties discussed in other documents we file with the SEC.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. You should specifically consider the factors identified in this report and in the documents we file with the SEC that could cause actual results to differ before making an investment decision to purchase our securities and should not place undue reliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
We are the leader in offering nonprime customers responsible access to credit. Our customers are hardworking Americans who have been largely underserved by traditional lenders such as banks and credit unions. We believe our customers deserve fair and responsible access to credit, and we empower them to solve today’s problems and reach a better financial future through our personalized solutions.
We operate in the United States and market our personal loans in 44 states. In the third quarter of 2021, we began offering 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. 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 PRODUCTS
Our product offerings include:
•Personal Loans — We offer personal loans through our branch network, centralized operations, and our website, www.omf.com, to customers who need timely access to cash. Our personal loans are non-revolving, with a fixed rate, fixed terms generally between three and six years, and are secured by automobiles, other titled collateral, or are unsecured. At June 30, 2022, we had approximately 2.32 million personal loans totaling $19.4 billion of net finance receivables, of which 52% were secured by titled property, compared to approximately 2.34 million personal loans totaling $19.2 billion of net finance receivables, of which 52% were secured by titled property at December 31, 2021. We also service personal loans for our whole loan sale partners.
•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 June 30, 2022, we had approximately 79 thousand open credit card customer accounts, totaling $64 million of net finance receivables, compared to approximately 66 thousand open credit card customer accounts, totaling $25 million of net finance receivables at December 31, 2021.
•Insurance Products — We offer our customers 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. Credit insurance and non-credit insurance products are provided by our affiliated insurance companies. We offer GAP coverage as a waiver product or insurance. We also offer optional membership plans from an unaffiliated company.
Our non-originating legacy products include:
•Other Receivables — We ceased originating real estate loans in 2012 and we continue to service or sub-service liquidating real estate loans. Our real estate loans held for sale are reported in “Other assets” of our consolidated balance sheets.
OUR SEGMENT
At June 30, 2022, Consumer and Insurance (“C&I”) is our only reportable segment, which includes personal loans, credit cards, and insurance products. At June 30, 2022, we managed a combined total of 2.47 million customer accounts and $20.1 billion of managed receivables, compared to 2.45 million customer accounts and $19.6 billion of managed receivables at December 31, 2021.
The remaining components (which we refer to as “Other”) consist of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which primarily include our liquidating real estate loans. See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our segment.
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| 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 June 30, 2022, we had $825 million of authorized share repurchase capacity, excluding fees and commissions, remaining under the program.
See “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 2. Unregistered Sales of Equity Securities and Use of Proceeds in Part II of this report for further information on our shares repurchased.
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 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.
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.
Securitization Transaction Completed - ODART 2022-1
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.
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 June 30, 2022, no amounts were drawn under this facility.
For further information regarding the redemption of our unsecured debt and our corporate revolver, see Note 6 of the Notes to the Condensed 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 OMH Board of Directors
On January 27, 2022, Toos N. Daruvala was elected to the OMH Board of Directors, effective February 14, 2022.
On February 24, 2022, Peter B. Sinensky resigned from the OMH Board of Directors.
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. Governmental authorities continue to take steps to combat the spread of COVID-19, including the ongoing distribution of vaccines. Throughout the pandemic, we have 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.
OUTLOOK
We are actively monitoring the current macroeconomic developments, including recent geopolitical actions outside of the U.S., and remain prepared for any additional opportunities or challenges that may impact our business and industry. Our financial condition and results of operations could be affected by the macroeconomic environment including inflationary pressures, unemployment rates, and other macroeconomic conditions. There remains uncertainty regarding the effects of additional variants of COVID-19, recent geopolitical events, and their impacts on economic markets. 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 cumulative investments in our digital capabilities, combined with our proprietary data and advanced analytics, have allowed us to serve our customers through the branch, over the phone, and remotely throughout the pandemic and into the future.
Our experienced management team continues to remain 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 the evolving economic, social, political, and regulatory environment.
The results of OMFC are consolidated into the results of OMH. Due to the nominal differences between OMFC and OMH, content throughout this section relates only to OMH. See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information.
OMH'S CONSOLIDATED RESULTS
See the table below for OMH's consolidated operating results and selected financial statistics. A further discussion of OMH's operating results for our operating segment is provided under “Segment Results” below.
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| | At or for the
Three Months Ended June 30, | | At or for the
Six Months Ended June 30, | | |
| (dollars in millions, except per share amounts) | | 2022 | | 2021 | | 2022 | | 2021 | | |
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| Interest income | | $ | 1,106 | | | $ | 1,071 | | | $ | 2,195 | | | $ | 2,130 | | | |
| Interest expense | | 219 | | | 231 | | | 438 | | | 465 | | | |
| Provision for finance receivable losses | | 339 | | | 132 | | | 577 | | | 130 | | | |
Net interest income after provision for finance receivable losses | | 548 | | | 708 | | | 1,180 | | | 1,535 | | | |
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| Other revenues | | 128 | | | 150 | | | 290 | | | 241 | | | |
| Other expenses | | 396 | | | 395 | | | 794 | | | 766 | | | |
Income before income taxes | | 280 | | | 463 | | | 676 | | | 1,010 | | | |
| Income taxes | | 71 | | | 113 | | | 166 | | | 247 | | | |
| Net income | | $ | 209 | | | $ | 350 | | | $ | 510 | | | $ | 763 | | | |
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| Earnings per share: | | | | | | | | | | |
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| Diluted | | $ | 1.68 | | | $ | 2.60 | | | $ | 4.04 | | | $ | 5.67 | | | |
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| Selected Financial Statistics (a) | | | | | | | | | | |
| Total finance receivables: | | | | | | | | | | |
| Net finance receivables | | $ | 19,448 | | | $ | 18,163 | | | $ | 19,448 | | | $ | 18,163 | | | |
| Average net receivables | | $ | 19,160 | | | $ | 17,717 | | | $ | 19,122 | | | $ | 17,770 | | | |
| Yield | | 23.13 | % | | 24.21 | % | | 23.12 | % | | 24.14 | % | | |
| Gross charge-off ratio | | 7.35 | % | | 5.70 | % | | 7.17 | % | | 5.75 | % | | |
| Recovery ratio | | (1.41) | % | | (1.29) | % | | (1.41) | % | | (1.22) | % | | |
| Net charge-off ratio | | 5.95 | % | | 4.40 | % | | 5.76 | % | | 4.54 | % | | |
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| Personal loans: | | | | | | | | | | |
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| Net finance receivables | | $ | 19,384 | | | $ | 18,163 | | | $ | 19,384 | | | $ | 18,163 | | | |
| Origination volume | | $ | 3,897 | | | $ | 3,835 | | | $ | 6,856 | | | $ | 6,119 | | | |
| Number of accounts | | 2,320,582 | | | 2,270,043 | | | 2,320,582 | | | 2,270,043 | | | |
| Number of accounts originated | | 395,902 | | | 389,220 | | | 682,293 | | | 614,322 | | | |
| 30-89 Delinquency ratio | | 2.73 | % | | 1.76 | % | | 2.73 | % | | 1.76 | % | | |
| Credit cards (b): | | | | | | | | | | |
| Net finance receivables | | $ | 64 | | | $ | — | | | $ | 64 | | | $ | — | | | |
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| Purchase volume | | $ | 34 | | | $ | — | | | $ | 79 | | | $ | — | | | |
| Number of open accounts | | 78,979 | | | — | | | 78,979 | | | — | | | |
| 30-89 Delinquency ratio | | 6.07 | % | | — | % | | 6.07 | % | | — | % | | |
| Debt balances: | | | | | | | | | | |
| Long-term debt balance | | $ | 17,922 | | | $ | 17,605 | | | $ | 17,922 | | | $ | 17,605 | | | |
| Average daily debt balance | | $ | 17,693 | | | $ | 16,860 | | | $ | 17,623 | | | $ | 16,947 | | | |
(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 three and six months ended June 30, 2021 as the product offering began in the third quarter of 2021.
Comparison of Consolidated Results for the Three and Six Months Ended June 30, 2022 and 2021
Interest income increased $35 million or 3% and $65 million or 3% for the three and six months ended June 30, 2022, respectively, when compared to the same periods in 2021 primarily due to growth in our loan portfolio, partially offset by lower yield.
Interest expense decreased $12 million or 5% and $27 million or 6% for the three and six months ended June 30, 2022, respectively, when compared to the same periods in 2021 primarily due to a lower average cost of funds, partially offset by an increase in average debt.
See Notes 6 and 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, private secured term funding, and our revolving conduit facilities.
Provision for finance receivable losses increased $207 million and $447 million for the three and six months ended June 30, 2022, respectively, when compared to the same periods in 2021 primarily driven by the current period increase in the allowance for finance receivable losses due to the growth in the portfolio and higher net charge-offs along with a release in our allowance reserve in the prior year period as the result of an improved credit environment and historically low net charge-offs.
Other revenues decreased $22 million or 14% for the three months ended June 30, 2022 when compared to the same period in 2021 primarily due to a net loss on the repurchase and repayment of debt in the current period and a decrease in investment revenue due to declining equity markets, offset by 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 revenues increased $49 million or 20% for the six months ended June 30, 2022 when compared to the same period in 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 repurchase and repayment of debt in the current period compared to the prior year period, partially offset by a decrease in investment revenue due to declining equity markets.
Other expenses remained relatively consistent for the three months ended June 30, 2022 when compared to the same period in 2021 primarily due to an increase in salaries and benefits driven by an increase in headcount as we continue to invest in our business, offset by a decrease in insurance policy and benefits claims expense due to favorable development of credit life, credit disability, and term life claims.
Other expenses increased $28 million or 4% for the six months ended June 30, 2022 when compared to the same period in 2021 due to an increase in salaries and benefits driven by an increase in headcount as we continue to invest in our business.
Income taxes totaled $71 million and $166 million for the three and six months ended June 30, 2022, respectively compared to $113 million and $247 million for the three and six months ended June 30, 2021, respectively, due to higher pre-tax income in the prior year period.
For the three and six months ended June 30, 2022 the effective tax rates were 25.3% and 24.6%, respectively, compared to 24.4% for the three and six months ended June 30, 2021. The effective tax rates differed from the federal statutory rate of 21% primarily due to the effect of state income taxes. See Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on effective tax rates.
NON-GAAP FINANCIAL MEASURES
Management uses C&I adjusted pretax income (loss), a non-GAAP financial measure, as a key performance measure of our segment. 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, the cash-settled stock-based awards, and direct costs associated with COVID-19. Management believes C&I adjusted pretax income (loss) is useful in assessing the profitability of our segment.
Management also uses C&I pretax capital generation, a non-GAAP financial measure, as a key performance measure of our segment. This measure represents C&I adjusted pretax income as discussed above and excludes the change in our C&I allowance for finance receivable losses in the period while still considering the C&I net charge-offs incurred during the period. Management believes that C&I pretax capital generation is useful in assessing the capital created in the period impacting the overall capital adequacy of the Company. Management believes that the Company’s reserves, combined with its equity, represent the Company’s loss absorption capacity.
Management utilizes both C&I adjusted pretax 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. 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:
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| | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (dollars in millions) | | 2022 | | 2021 | | 2022 | | 2021 | | |
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| Consumer and Insurance | | | | | | | | | | |
Income before income taxes - Segment Accounting Basis | | $ | 281 | | | $ | 474 | | | $ | 677 | | | $ | 1,041 | | | |
Adjustments: | | | | | | | | | | |
Net loss on repurchases and repayments of debt | | 28 | | | 1 | | | 28 | | | 39 | | | |
| Cash-settled stock-based awards | | 1 | | | — | | | 2 | | | — | | | |
Direct costs associated with COVID-19 | | 1 | | | 2 | | | 2 | | | 4 | | | |
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Adjusted pretax income (non-GAAP) | | 311 | | | 477 | | | 709 | | | 1,084 | | | |
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| Provision for finance receivable losses | | 338 | | | 130 | | | 575 | | | 127 | | | |
| Net charge-offs | | (283) | | | (194) | | | (545) | | | (399) | | | |
| Pretax capital generation (non-GAAP) | | $ | 366 | | | $ | 413 | | | $ | 739 | | | $ | 812 | | | |
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The results of OMFC are consolidated into the results of OMH. Due to the nominal differences between OMFC and OMH, content throughout this section relate only to OMH. See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information.
See Note 17 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for a description of our segment and methodologies used to allocate revenues and expenses to our C&I segment. See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in this report for reconciliations of segment total to condensed consolidated financial statement amounts.
CONSUMER AND INSURANCE
OMH's adjusted pretax income and selected financial statistics for C&I on an adjusted Segment Accounting Basis were as follows:
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| | At or for the
Three Months Ended June 30, | | At or for the
Six Months Ended June 30, | | |
| (dollars in millions) | | 2022 | | 2021 | | 2022 | | 2021 | | |
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| Interest income | | $ | 1,104 | | | $ | 1,069 | | | $ | 2,192 | | | $ | 2,125 | | | |
| Interest expense | | 218 | | | 230 | | | 435 | | | 462 | | | |
| Provision for finance receivable losses | | 338 | | | 130 | | | 575 | | | 127 | | | |
Net interest income after provision for finance receivable losses | | 548 | | | 709 | | | 1,182 | | | 1,536 | | | |
| Other revenues | | 153 | | | 148 | | | 311 | | | 283 | | | |
| Other expenses | | 390 | | | 380 | | | 784 | | | 735 | | | |
| Adjusted pretax income (non-GAAP) | | $ | 311 | | | $ | 477 | | | $ | 709 | | | $ | 1,084 | | | |
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| Selected Financial Statistics (a) | | | | | | | | | | |
| Total finance receivables: | | | | | | | | | | |
| Net finance receivables | | $ | 19,449 | | | $ | 18,168 | | | $ | 19,449 | | | $ | 18,168 | | | |
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| Average net receivables | | $ | 19,162 | | | $ | 17,722 | | | $ | 19,124 | | | $ | 17,776 | | | |
| Yield | | 23.12 | % | | 24.18 | % | | 23.11 | % | | 24.11 | % | | |
| Gross charge-off ratio | | 7.35 | % | | 5.70 | % | | 7.17 | % | | 5.75 | % | | |
| Recovery ratio | | (1.41) | % | | (1.29) | % | | (1.41) | % | | (1.22) | % | | |
| Net charge-off ratio | | 5.95 | % | | 4.41 | % | | 5.76 | % | | 4.54 | % | | |
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| Personal loans: | | | | | | | | | | |
| Net finance receivables | | $ | 19,385 | | | $ | 18,168 | | | $ | 19,385 | | | $ | 18,168 | | | |
| Origination volume | | $ | 3,897 | | | $ | 3,835 | | | $ | 6,856 | | | $ | 6,119 | | | |
| Number of accounts | | 2,320,582 | | | 2,270,043 | | | 2,320,582 | | | 2,270,043 | | | |
| Number of accounts originated | | 395,902 | | | 389,220 | | | 682,293 | | | 614,322 | | | |
| 30-89 Delinquency ratio | | 2.73 | % | | 1.76 | % | | 2.73 | % | | 1.76 | % | | |
| Credit cards (b): | | | | | | | | | | |
| Net finance receivables | | $ | 64 | | | $ | — | | | $ | 64 | | | $ | — | | | |
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| Purchase volume | | $ | 34 | | | $ | — | | | $ | 79 | | | $ | — | | | |
| Number of open accounts | | 78,979 | | | — | | | 78,979 | | | — | | | |
| 30-89 Delinquency ratio | | 6.07 | % | | — | % | | 6.07 | % | | — | % | | |
(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 three and six months ended June 30, 2021 as the product offering began in the third quarter of 2021.
Comparison of Adjusted Pretax Income for the Three and Six Months Ended June 30, 2022 and 2021
Interest income increased $35 million or 3% and $67 million or 3% for the three and six months ended June 30, 2022, respectively, when compared to the same periods in 2021 primarily due to growth in our loan portfolio, partially offset by lower yield.
Interest expense decreased $12 million or 5% and $27 million or 6% for the three and six months ended June 30, 2022, respectively, when compared to the same periods in 2021 primarily due to a lower average cost of funds, partially offset by an increase in average debt.
See Notes 6 and 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, private secured term funding, and our revolving conduit facilities.
Provision for finance receivable losses increased $208 million and $448 million for the three and six months ended June 30, 2022, respectively, when compared to the same periods in 2021 primarily driven by the current period increase in the allowance for finance receivable losses due to the growth in the portfolio and higher net charge-offs along with a release in our allowance reserve in the prior year period as the result of an improved credit environment and historically low net charge-offs.
Other revenues increased $5 million or 4% and $28 million or 10% for the three and six months ended June 30, 2022, respectively when compared to the same periods in 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, partially offset by a decrease in investment revenue due to declining equity markets.
Other expenses increased $10 million or 3% for the three months ended June 30, 2022 when compared to the same period in 2021 primarily due to an increase in salaries and benefits driven by an increase in headcount as we continue to invest in our business, offset by a decrease in insurance policy and benefits claims expense due to favorable development of credit life, credit disability, and term life claims.
Other expenses increased $49 million or 7% for the six months ended June 30, 2022 when compared to the same period in 2021 primarily due to an increase in salaries and benefits driven by an increase in headcount and an increase in general operating expenses due to our strategic investments in the business.
FINANCE RECEIVABLES
Our net finance receivables, consisting of personal loans and credit cards, were $19.4 billion at June 30, 2022 and $19.2 billion at December 31, 2021. 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 and central operation team members work with customers as necessary and offer a variety of borrower assistance programs to help customers continue to make payments.
DELINQUENCY
We monitor delinquency trends to evaluate the risk of future credit losses and employ advanced analytical tools to manage our exposure. Team members are actively engaged in collection activities throughout the early stages of delinquency. We closely track and report the percentage of receivables that are contractually 30-89 days past due as a benchmark of portfolio quality, collections effectiveness, and as a strong indicator of losses in coming quarters.
When 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. 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 accrued.
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.
The delinquency information for net finance receivables on a Segment Accounting Basis was as follows: | | | | | | | | | | | | | | | | | | | | |
| | Consumer and Insurance | | | | | | |
| (dollars in millions) | | Personal Loans | | Credit Cards | | | | |
| June 30, 2022 | | | | | | | | | | |
Current | | $ | 18,440 | | | $ | 56 | | | | | | | |
30-59 days past due | | 323 | | | 2 | | | | | | | |
60-89 days past due | | 206 | | | 2 | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
90+ days past due | | 416 | | | 4 | | | | | | | |
Total net finance receivables | | $ | 19,385 | | | $ | 64 | | | | | | | |
| | | | | | | | | | |
Delinquency ratio | | | | | | | | | | |
30-89 days past due | | 2.73 | % | | 6.07 | % | | | | | | |
| 30+ days past due | | 4.88 | % | | 12.32 | % | | | | | | |
| 60+ days past due | | 3.21 | % | | 8.87 | % | | | | | | |
| 90+ days past due | | 2.15 | % | | 6.25 | % | | | | | | |
| | | | | | | | | | |
| December 31, 2021 | | | | | | | | | | |
Current | | $ | 18,340 | | | $ | 25 | | | | | | | |
30-59 days past due | | 282 | | | — | | | | | | | |
60-89 days past due | | 185 | | | — | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
90+ days past due | | 383 | | | — | | | | | | | |
Total net finance receivables | | $ | 19,190 | | | $ | 25 | | | | | | | |
| | | | | | | | | | |
Delinquency ratio | | | | | | | | | | |
30-89 days past due | | 2.43 | % | | 0.08 | % | | | | | | |
| 30+ days past due | | 4.43 | % | | 0.08 | % | | | | | | |
| 60+ days past due | | 2.96 | % | | — | % | | | | | | |
| 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. 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. We also considered inflationary pressures, supply chain concerns, geopolitical risks, along with persistent labor supply shortages. Our forecast leveraged economic projections from industry leading forecast providers. At June 30, 2022, our economic forecast used a reasonable and supportable period of 12 months. 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
GAAP
Adjustment | | Consolidated
Total |
| Personal Loans | | Credit Cards | | | | |
| | | | | | | | | | |
| Three Months Ended June 30, 2022 | | | | | | | | | | |
Balance at beginning of period | | $ | 2,067 | | | $ | 10 | | | | | $ | (6) | | | $ | 2,071 | |
Provision for finance receivable losses | | 336 | | | 2 | | | | | 1 | | | 339 | |
Charge-offs | | (351) | | | — | | | | | — | | | (351) | |
Recoveries | | 68 | | | — | | | | | — | | | 68 | |
Balance at end of period | | $ | 2,120 | | | $ | 12 | | | | | $ | (5) | | | $ | 2,127 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Three Months Ended June 30, 2021 (a) | | | | | | | | | | |
Balance at beginning of period | | $ | 2,075 | | | $ | — | | | | | $ | (13) | | | $ | 2,062 | |
Provision for finance receivable losses | | 130 | | | — | | | | | 2 | | | 132 | |
Charge-offs | | (252) | | | — | | | | | — | | | (252) | |
Recoveries | | 58 | | | — | | | | | — | | | 58 | |
Balance at end of period | | $ | 2,011 | | | $ | — | | | | | $ | (11) | | | $ | 2,000 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Six Months Ended June 30, 2022 | | | | | | | | | | |
Balance at beginning of period | | $ | 2,097 | | | $ | 5 | | | | | $ | (7) | | | $ | 2,095 | |
Provision for finance receivable losses | | 568 | | | 7 | | | | | 2 | | | 577 | |
Charge-offs | | (680) | | | — | | | | | — | | | (680) | |
Recoveries | | 135 | | | — | | | | | — | | | 135 | |
Balance at end of period | | $ | 2,120 | | | $ | 12 | | | | | $ | (5) | | | $ | 2,127 | |
| | | | | | | | | | |
Allowance ratio | | 10.94 | % | | 19.13 | % | | | | (b) | | 10.94 | % |
| | | | | | | | | | |
| Six Months Ended June 30, 2021 (a) | | | | | | | | | | |
Balance at beginning of period | | $ | 2,283 | | | $ | — | | | | | $ | (14) | | | $ | 2,269 | |
Provision for finance receivable losses | | 127 | | | — | | | | | 3 | | | $ | 130 | |
Charge-offs | | (507) | | | — | | | | | — | | | $ | (507) | |
Recoveries | | 108 | | | — | | | | | — | | | $ | 108 | |
Balance at end of period | | $ | 2,011 | | | $ | — | | | | | $ | (11) | | | $ | 2,000 | |
| | | | | | | | | | |
Allowance ratio | | 11.07 | % | | — | % | | | | (b) | | 11.01 | % |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(a) There were no credit cards for the three and six months ended June 30, 2021 as the product offering began in the third quarter of 2021.
(b) Not applicable.
The current delinquency status of our finance receivable portfolio, inclusive of recent borrower performance, volume of our TDR activity, level and recoverability of collateral securing our finance receivable portfolio, and the reasonable and supportable forecast of economic conditions are the primary drivers that can cause fluctuations in our allowance 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 decreased from the prior year period primarily due to improved unemployment outlook. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about the changes in the allowance for finance receivable losses.
TDR FINANCE RECEIVABLES
We make modifications to our finance receivables to assist borrowers experiencing financial difficulties. When we modify a loan’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and grant a concession that we would not otherwise consider, we classify that loan as a TDR finance receivable.
Information regarding TDR net finance receivables for personal loans are as follows: | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | | Personal
Loans | | | | | | Segment to
GAAP
Adjustment | | GAAP
Basis |
| | | | | | | | | | |
| June 30, 2022 | | | | | | | | | | |
| TDR net finance receivables | | $ | 690 | | | | | | | $ | (15) | | | $ | 675 | |
| Allowance for TDR finance receivable losses | | 278 | | | | | | | (6) | | | 272 | |
| | | | | | | | | | |
| 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 June 30, 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 credit scores to manage credit quality, we group FICO scores into the following categories for comparability purposes across our industry:
•Prime: FICO score of 660 or higher
•Near-prime: FICO score of 620-659
•Sub-prime: FICO score of 619 or below
Our customers’ demographics are, in many respects, near the national median but may vary from national norms in terms of credit and repayment histories. Many of our customers have experienced some level of prior financial difficulty or have limited credit experience and require higher levels of servicing and support from our branch network and central servicing operations.
The following table reflects our net finance receivables grouped into the borrower 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 |
| | | | | | |
| June 30, 2022 | | | | | | |
| FICO scores | | | | | | |
660 or higher | | $ | 4,687 | | | $ | 9 | | | $ | 4,696 | |
620-659 | | 5,353 | | | 22 | | | 5,375 | |
619 or below | | 9,344 | | | 33 | | | 9,377 | |
| Total | | $ | 19,384 | | | $ | 64 | | | $ | 19,448 | |
| | | | | | |
| December 31, 2021 | | | | | | |
| FICO scores * | | | | | | |
660 or higher | | $ | 4,897 | | | $ | 14 | | | $ | 4,911 | |
620-659 | | 5,321 | | | 7 | | | 5,328 | |
619 or below | | 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.
| | |
| Liquidity and Capital Resources |
SOURCES AND USES OF FUNDS
We finance the majority of our operating liquidity and capital needs through a combination of cash flows from operations, secured debt, unsecured debt, borrowings from revolving conduit facilities, whole loan sales, and equity. We may also utilize other sources in the future. As a holding company, all of the funds generated from our operations are earned by our operating subsidiaries. Our operating subsidiaries’ primary cash needs relate to funding our lending activities, our debt service obligations, our operating expenses, payment of insurance claims, and expenditures relating to upgrading and monitoring our technology platform, risk systems, and branch locations.
We have previously purchased portions of our unsecured indebtedness, and we may elect to purchase additional portions of our unsecured indebtedness or securitized borrowings in the future. Future purchases may be made through the open market, privately negotiated transactions with third parties, or pursuant to one or more tender or exchange offers, all of which are subject to terms, prices, and consideration we may determine at our discretion.
During the six months ended June 30, 2022, OMH generated net income of $510 million. OMH’s net cash inflow from operating and investing activities totaled $376 million for the six months ended June 30, 2022. At June 30, 2022, our scheduled interest payments for the remainder of 2022 totaled $271 million, and there are no scheduled principal payments for the remainder of 2022 on our existing debt (excluding securitizations). As of June 30, 2022, we had $9.6 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.
OMFC’s Unsecured Corporate Revolver
At June 30, 2022, the borrowing capacity of our corporate revolver was $1.25 billion, and no amounts were drawn.
OMFC’s Redemption of Unsecured Debt
For information regarding the redemption of OMFC’s unsecured debt, see Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report.
Securitizations and Borrowings from Revolving Conduit Facilities
During the six months ended June 30, 2022, we completed two personal loan securitizations (OMFIT 2022-S1 and ODART 2022-1, see “Securitized Borrowings” below) and redeemed one personal loan securitization (ODART 2018-1). At June 30, 2022, an aggregate of $500 million was drawn under our conduit facilities, and the remaining borrowing capacity was $5.3 billion. At June 30, 2022, we had $9.5 billion of gross finance receivables pledged as collateral for our securitizations, conduit facilities, and private secured term funding.
Subsequent to quarter-end, we entered a loan and security agreement with OneMain Financial Funding X, LLC and a third-party lender on July 8, 2022. Under the agreement, we may borrow up to a maximum principal balance of $400 million.
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.
See Notes 6 and 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, private secured term funding, 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 June 30, 2022 | | Rating | | Outlook |
| | | | |
| S&P | | BB | | Stable |
| 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 six months ended June 30, 2022, OMH repurchased 4,378,949 shares of its common stock through its stock repurchase program for an aggregate total of $204 million, including commissions and fees. As of June 30, 2022, OMH held a total of 11,062,276 shares of treasury stock. To provide funding for the OMH stock repurchase, the OMFC Board of Directors authorized dividend payments in the amount of $180 million.
For additional information regarding the shares repurchased, see Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Part II included in this report.
Cash Dividend to OMH's Common Stockholders
As of June 30, 2022, 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 2, 2022 | | February 14, 2022 | | February 18, 2022 | | $ | 0.95 | | | | $ | 121 | |
| April 28, 2022 | | May 9, 2022 | | May 13, 2022 | | 0.95 | | | 118 | |
| | | | | | | | | |
| | | | | | | | | |
| Total | | | | | | $ | 1.90 | | | | $ | 239 | |
To provide funding for the dividend, OMFC paid dividends of $239 million to OMH during the six months ended June 30, 2022.
On July 27, 2022, OMH declared a dividend of $0.95 per share payable on August 12, 2022 to record holders of OMH's common stock as of the close of business on August 8, 2022. To provide funding for the OMH dividend, the OMFC Board of Directors authorized a dividend in the amount of up to $119 million payable on or after August 9, 2022.
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 included in our Annual Report for further information.
Whole Loan Sale Transactions
As of June 30, 2022, we have whole loan sale flow agreements with third parties, with remaining terms of less than 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. During the three and six months ended June 30, 2022 we sold $180 million and $360 million of gross finance receivables, respectively, compared to $120 million and $165 million during the same periods in 2021. See Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on the whole loan sale transactions.
LIQUIDITY
OMH's Operating Activities
Net cash provided by operations of $1.2 billion for the six months ended June 30, 2022 reflected net income of $510 million, the impact of non-cash items, and an unfavorable change in working capital of $52 million. Net cash provided by operations of $1.1 billion for the six months ended June 30, 2021 reflected net income of $763 million, the impact of non-cash items, and an unfavorable change in working capital of $6 million.
OMH's Investing Activities
Net cash used for investing activities of $802 million for the six months ended June 30, 2022 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 $630 million for the six months ended June 30, 2021 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 $333 million for the six months ended June 30, 2022 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 OMFIT 2022-S1, ODART 2022-1, and the private secured term funding. Net cash used for financing activities of $929 million for the six months ended June 30, 2021 was primarily due to debt repayments, cash dividends paid, and the cash paid on the common stock repurchased in the period, partially offset by the issuances of OMFIT 2021-1 securitization and the Social Bond.
OMH's Cash and Investments
At June 30, 2022, we had $526 million of cash and cash equivalents, which included $151 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 June 30, 2022, we had $1.8 billion of investment securities, which are all held as part of our insurance operations and are unavailable for general corporate purposes.
Liquidity Risks and Strategies
OMFC’s credit ratings are non-investment grade, which has a significant impact on our cost and access to capital. This, in turn, can negatively affect our ability to manage our liquidity and our ability or cost to refinance our indebtedness. There are numerous risks to our financial results, liquidity, capital raising, and debt refinancing plans, some of which may not be quantified in our current liquidity forecasts. These risks are further described in our “Liquidity and Capital Resources” of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our Annual Report.
The principal factors that could decrease our liquidity are customer delinquencies and defaults, a decline in customer prepayments, and a prolonged inability to adequately access capital market funding. We intend to support our liquidity position by utilizing strategies that are further described in our “Liquidity and Capital Resources” of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our Annual Report.
However, it is possible that the actual outcome of one or more of our plans could be materially different than expected or that one or more of our significant judgments or estimates could prove to be materially incorrect.
OUR INSURANCE SUBSIDIARIES
Our insurance subsidiaries are subject to state regulations that limit their ability to pay dividends. Triton paid an ordinary dividend to OneMain Financial Holdings, LLC of $50 million during the six months ended June 30, 2022. AHL did not pay any dividends during the six months ended June 30, 2022. Triton and AHL did not pay dividends during the six months ended June 30, 2021. See Note 10 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for further information on these state restrictions and the dividends paid by our insurance subsidiaries in 2021.
OUR DEBT AGREEMENTS
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 in Part II - Item 8 included in our Annual Report for more information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.
Securitized Borrowings
We execute private securitizations under Rule 144A of the Securities Act of 1933, as amended. As of June 30, 2022, our structured financings consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | | Issue Amount (a) | | Initial Collateral Balance | | Current
Note Amounts
Outstanding (a) | | Current Collateral Balance
(b) | | Current
Weighted Average
Interest Rate | | Original
Revolving
Period | | | | |
| | | | | | | | | | | | | | | | |
| OMFIT 2015-3 | | $ | 293 | | | $ | 329 | | | $ | 42 | | | $ | 68 | | | 6.63 | % | | 5 years | | | | |
| OMFIT 2016-3 | | 350 | | | 397 | | | 70 | | | 156 | | | 6.08 | % | | 5 years | | | | |
| OMFIT 2018-1 | | 632 | | | 650 | | | 174 | | | 218 | | | 4.34 | % | | 3 years | | | | |
| OMFIT 2018-2 | | 368 | | | 381 | | | 350 | | | 400 | | | 3.87 | % | | 5 years | | | | |
| OMFIT 2019-1 | | 632 | | | 654 | | | 159 | | | 206 | | | 4.59 | % | | 2 years | | | | |
| OMFIT 2019-2 | | 900 | | | 947 | | | 900 | | | 995 | | | 3.30 | % | | 7 years | | | | |
| OMFIT 2019-A | | 789 | | | 892 | | | 750 | | | 892 | | | 3.78 | % | | 7 years | | | | |
| OMFIT 2020-1 | | 821 | | | 958 | | | 737 | | | 820 | | | 4.15 | % | | 2 years | | | | |
| OMFIT 2020-2 | | 1,000 | | | 1,053 | | | 1,000 | | | 1,053 | | | 2.03 | % | | 5 years | | | | |
| OMFIT 2021-1 | | 850 | | | 904 | | | 850 | | | 904 | | | 1.74 | % | | 5 years | | | | |
| OMFIT 2022-S1 (c) | | 600 | | | 652 | | | 600 | | | 652 | | | 4.31 | % | | 3 years | | | | |
| ODART 2019-1 | | 737 | | | 750 | | | 700 | | | 750 | | | 3.79 | % | | 5 years | | | | |
| ODART 2021-1 | | 1,000 | | | 1,053 | | | 1,000 | | | 1,053 | | | 0.98 | % | | 2 years | | | | |
| ODART 2022-1 (d) | | 600 | | | 632 | | | 600 | | | 632 | | | 4.56 | % | | 2 years | | | | |
| Total securitizations | | $ | 9,572 | | | $ | 10,252 | | | $ | 7,932 | | | $ | 8,799 | | | | | | | | | |
(a) Issue Amount includes the retained interest amounts as applicable and the Current Note Amounts Outstanding balances reflect pay-downs subsequent to note issuance and exclude retained interest amounts.
(b) Inclusive of in-process replenishments of collateral for securitized borrowings in a revolving status as of June 30, 2022.
(c) On April 27, 2022, we issued $600 million of notes backed by personal loans. The notes mature in 2035.
(d) On June 15, 2022, we issued $600 million of notes backed by direct auto loans. The notes mature in 2030.
Revolving Conduit Facilities
In addition to the structured financings, we had access to 14 revolving conduit facilities with a total borrowing capacity of $5.8 billion as of June 30, 2022: | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | | Advance Maximum Balance | | Amount
Drawn | | | | |
| | | | | | | | |
| OneMain Financial Funding VII, LLC | | $ | 600 | | | $ | — | | | | | |
| OneMain Financial Funding IX, LLC | | 600 | | | — | | | | | |
| OneMain Financial Auto Funding I, LLC | | 550 | | | — | | | | | |
| Seine River Funding, LLC | | 550 | | | — | | | | | |
| Chicago River Funding, LLC | | 375 | | | — | | | | | |
| Hudson River Funding, LLC | | 500 | | | — | | | | | |
| OneMain Financial Funding VIII, LLC | | 400 | | | — | | | | | |
| Mystic River Funding, LLC | | 350 | | | — | | | | | |
| Thayer Brook Funding, LLC | | 350 | | | — | | | | | |
| Columbia River Funding, LLC | | 350 | | | — | | | | | |
| Hubbard River Funding, LLC | | 250 | | | — | | | | | |
| New River Funding Trust | | 250 | | | — | | | | | |
| River Thames Funding, LLC | | 400 | | | 250 | | | | | |
| St. Lawrence River Funding, LLC | | 250 | | | 250 | | | | | |
| | | | | | | | |
| Total | | $ | 5,775 | | | $ | 500 | | | | | |
See “Liquidity and Capital Resources - Sources and Uses of Funds - Securitizations and Borrowings from Revolving Conduit Facilities” above for information on the revolving conduit facility entered into subsequent to June 30, 2022.
OFF-BALANCE SHEET ARRANGEMENTS
We have no material off-balance sheet arrangements as defined by SEC rules, and we had no material off-balance sheet exposure to losses associated with unconsolidated VIEs at June 30, 2022 or December 31, 2021.
| | |
| Critical Accounting Policies and Estimates |
We describe our significant accounting policies used in the preparation of our consolidated financial statements in Note 2 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report. We consider the following policies to be our most critical accounting policies because they involve critical accounting estimates and a significant degree of management judgment:
•allowance for finance receivable losses; and
•TDR finance receivables.
There have been no material changes to our critical accounting policies or to our methodologies for deriving critical accounting estimates during the six months ended June 30, 2022.
| | |
| Recent Accounting Pronouncements |
See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this report for discussion of recently issued accounting pronouncements.
Our personal loan volume is generally highest during the second and fourth quarters of the year, primarily due to marketing efforts and seasonality of demand. Demand for our personal loans is usually lower in January and February after the holiday season and as a result of tax refunds. Delinquencies on our personal loans are generally lower in the first and second quarters and tend to rise throughout the remainder of the year. These seasonal trends contribute to fluctuations in our operating results and cash needs throughout the year.