OneMain Holdings, Inc. Reports First Quarter 2019 Results

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    • 1Q 2019 diluted EPS of $1.11
    • 1Q 2019 C&I adjusted diluted EPS of $1.37
    • 1Q 2019 C&I Ending Net Finance Receivables of $16.2 billion
    • 1Q 2019 C&I Net Charge-Off ratio of 7.1%

    EVANSVILLE, Ind.–(BUSINESS WIRE)–OneMain Holdings, Inc. (NYSE: OMF) today reported pretax income of $202
    million and net income of $152 million for the first quarter of 2019,
    compared to $168 million and $124 million, respectively, in the prior
    year quarter. Earnings per diluted share were $1.11 in the first quarter
    of 2019, compared to $0.91 in the prior year quarter.

    On April 29, 2019, OneMain’s Board of Directors approved a regular
    quarterly dividend of $0.25 per share, payable on June 14, 2019 to
    record holders of our common stock as of the close of business on May
    29, 2019.

    “We delivered strong financial results for the first quarter of 2019,”
    said Doug Shulman, President and CEO of OneMain. “Our credit performance
    and operating efficiency continued to improve, and we further reinforced
    our funding and liquidity. These results demonstrate the strength of our
    business and I am confident that we are well positioned for the long
    term.”

    The following segment results are reported on a non-GAAP basis. Refer
    to the required reconciliations of non-GAAP to comparable GAAP measures
    at the end of this press release.

    Consumer and Insurance Segment (“C&I”)

    C&I generated adjusted pretax income of $246 million and adjusted net
    income of $187 million for the first quarter of 2019, compared to $211
    million and $160 million, respectively, in the prior year quarter.
    Adjusted earnings per diluted share were $1.37 for the first quarter of
    2019, compared to $1.18 in the prior year quarter.

    Originations totaled $2.6 billion in the first quarter of 2019, up 2%
    from $2.5 billion in the prior year quarter. The percentage of secured
    originations was 56% in the first quarter of 2019, up from 44% in the
    prior year quarter.

    Ending net finance receivables reached $16.2 billion at March 31, 2019,
    up 9% from $14.9 billion in the prior year quarter. Secured receivables
    represented $1.5 billion of the increase in ending net finance
    receivables from the prior year and were 49% of ending net finance
    receivables at March 31, 2019, up from 43% in the prior year quarter.

    Average net finance receivables were $16.2 billion in the first quarter
    of 2019, up 9% from $14.9 billion in the prior year quarter.

    Yield was 23.9% in the first quarter of 2019, up from 23.8% in the prior
    year quarter, primarily reflecting improvement in late stage
    delinquencies.

    Interest income in the first quarter of 2019 was $954 million, up from
    $873 million in the prior year quarter, reflecting higher average
    receivables and higher yield.

    The provision for finance receivable losses was $276 million in the
    first quarter of 2019, up from $258 million in the prior year quarter,
    primarily as a result of higher average receivables.

    The 30-89 day delinquency ratio was 1.9% at March 31, 2019, down from
    2.1% at March 31, 2018.

    The 90+ day delinquency ratio was 2.1% at March 31, 2019, down from 2.3%
    at March 31, 2018.

    The net charge-off ratio was 7.1% in the first quarter of 2019, down
    from 7.2% in the prior year quarter.

    Operating expense for the first quarter of 2019 was $309 million, up 4%
    from $298 million in the prior year quarter, primarily reflecting
    inflationary increases and investment in the business.

    Acquisitions and Servicing Segment (“A&S”)

    A&S broke even in the first quarter of 2019 on an adjusted pretax income
    basis, compared to adjusted pretax income of $1 million prior year
    quarter.

    Other

    During the first quarter of 2019, Other generated an adjusted pretax
    loss of $2 million, compared to an adjusted pretax loss of $10 million
    in the prior year quarter. Other consists of our non-originating legacy
    operations, which include our liquidating real estate loan portfolio.
    During the first quarter of 2019, we sold a portion of our real estate
    loans held for sale. The remaining real estate loans held for sale are
    carried at $79 million compared to the unpaid principal balance of $136
    million.

    Funding and Liquidity

    As of March 31, 2019, the company had principal debt balances
    outstanding of $16.5 billion, 50% of which was secured and 50% of which
    was unsecured. The company had $1.7 billion of cash and cash
    equivalents, which included $312 million of cash and cash equivalents
    held at our regulated insurance subsidiaries or for other operating
    activities that are unavailable for general corporate purposes. The
    company had $6.2 billion of undrawn revolving conduit facilities and
    $6.9 billion of unencumbered personal loans.

    Use of Non-GAAP Financial Measures

    We report the operating results of Consumer and Insurance, Acquisitions
    and Servicing, and Other using the Segment Accounting Basis, which (i)
    reflects our allocation methodologies for interest expense and operating
    costs, to reflect the manner in which we assess our business results and
    (ii) excludes the impact of applying purchase accounting (eliminates
    premiums/discounts on our finance receivables and long-term debt at
    acquisition, as well as the amortization/accretion in future periods).
    Consumer and Insurance adjusted pretax income (loss), Consumer and
    Insurance adjusted net income (loss), Consumer and Insurance adjusted
    earnings (loss) per diluted share, Acquisitions and Servicing adjusted
    pretax income (loss), and Other adjusted pretax income (loss) are key
    performance measures used by management in evaluating the performance of
    our business. Consumer and Insurance adjusted pretax income (loss),
    Acquisitions and Servicing adjusted pretax income (loss), and Other
    adjusted pretax income (loss) represents income (loss) before income
    taxes on a Segment Accounting Basis and excludes net losses resulting
    from repurchases and repayments of debt, acquisition-related transaction
    and integration expenses, restructuring charges, net gain on sale of
    cost method investment, and net loss on sale of real estate loans.
    Management believes these non-GAAP financial measures are useful in
    assessing the profitability of our segments and uses these non-GAAP
    financial measures in evaluating our operating performance and as a
    performance goal under the company’s executive compensation programs.
    These non-GAAP financial measures 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 U.S. generally accepted accounting principles
    (“GAAP”).

    Conference Call & Webcast Information

    OneMain management will host a conference call and webcast to discuss
    our first quarter 2019 results and other general matters at 8:00 am
    Eastern Time on Tuesday, April 30, 2019. Both the call and webcast are
    open to the general public. The general public is invited to listen to
    the call by dialing 877-330-3668 (U.S. domestic) or 678-304-6859
    (international), and using conference ID 7889473, or via a live audio
    webcast through the Investor Relations section of the website. For those
    unable to listen to the live broadcast, a replay will be available on
    our website, or by dialing 800-585-8367 (U.S. domestic) or 404-537-3406,
    and using conference ID 7889473, beginning approximately two hours after
    the event. The replay of the conference call will be available via audio
    webcast through May 11, 2019. An investor presentation will be available
    on the Investor Relations page of OneMain’s website at https://www.omf.com
    prior to the start of the conference call.

    This document contains summarized information concerning OneMain
    Holdings, Inc. (the “Company”) and the Company’s business, operations,
    financial performance and trends. No representation is made that the
    information in this document is complete. For additional financial,
    statistical and business related information see the Company’s most
    recent Annual Report on Form 10-K (“Form 10-K”) and Quarterly Reports on
    Form 10-Q (“Form 10-Qs”) filed with the U.S. Securities and Exchange
    Commission (the “SEC”), as well as the Company’s other reports filed
    with the SEC from time to time. Such reports are or will be available in
    the Investor Relations section of the Company’s website (
    https://www.omf.com)
    and the SEC’s website (
    http://www.sec.gov).

    Cautionary Note Regarding Forward-Looking Statements

    This document 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 that speak only
    as of the date on which 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 document 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 (including statements regarding the timing, declaration, amount
    and payment of any future dividends), objectives, goals, projections,
    strategies, events or performance, and underlying assumptions and other
    statements related thereto. Statements preceded by, followed by or that
    otherwise include the words “anticipates,” “appears,” “are likely,”
    “believes,” “estimates,” “expects,” “foresees,” “intends,” “plans,”
    “projects” and similar expressions or future or conditional verbs such
    as “would,” “should,” “could,” “may,” or “will,” are intended to
    identify forward-looking statements. Important factors that could cause
    actual results, performance or achievements to differ materially from
    those expressed in or implied by forward-looking statements include,
    without limitation, the following: adverse changes in general economic
    conditions, including the interest rate environment and the financial
    markets; risks related to the acquisition or sale of assets or
    businesses or the formation, termination or operation of joint ventures
    or other strategic alliances, including increased loan delinquencies or
    net charge-offs, integration or migration issues, increased costs of
    servicing, incomplete records, and retention of customers; our estimates
    of the allowance for finance receivable losses may not be adequate to
    absorb actual losses, causing our provision for finance receivable
    losses to increase, which would adversely affect our results of
    operations; increased levels of unemployment and personal bankruptcies;
    our strategy of increasing the proportion of secured loans may lead to
    declines in or slower growth in our personal loan receivables and
    portfolio yield; adverse changes in the rate at which we can collect or
    potentially sell our finance receivables portfolio; our decentralized
    branch loan approval process could expose us to greater than historical
    delinquencies and charge-offs; natural or accidental events such as
    earthquakes, hurricanes, tornadoes, fires, or floods affecting our
    customers, collateral, or branches or other operating facilities; war,
    acts of terrorism, riots, civil disruption, pandemics, disruptions in
    the operation of our information systems, or other events disrupting
    business or commerce; a failure in or breach of our operational or
    security systems or infrastructure or those of third parties, including
    as a result of cyber-attacks; or other cyber-related incidents involving
    the loss, theft or unauthorized disclosure of personally identifiable
    information, or “PII,” of our present or former customers; our credit
    risk scoring models may be inadequate to properly assess the risk of
    customer unwillingness or lack of capacity to repay; adverse changes in
    our ability to attract and retain employees or key executives to support
    our businesses; increased competition, lack of customer responsiveness
    to our distribution channels, an inability to make technological
    improvements, and the ability of our competitors to offer a more
    attractive range of personal loan products than we offer; changes in
    federal, state or local laws, regulations, or regulatory policies and
    practices that adversely affect our ability to conduct business or the
    manner in which we are permitted to conduct business, such as licensing
    requirements, pricing limitations or restrictions on the method of
    offering products, as well as changes that may result from increased
    regulatory scrutiny of the sub-prime lending industry, our use of
    third-party vendors and real estate loan servicing, or changes in
    corporate or individual income tax laws or regulations, including
    effects of the Tax Cuts and Jobs Act; risks associated with our
    insurance operations, including insurance claims that exceed our
    expectations or insurance losses that exceed our reserves; our ability
    be unable to successfully implement our growth strategy for our consumer
    lending business or successfully acquire portfolios of personal loans;
    declines in collateral values or increases in actual or projected
    delinquencies or net charge-offs; potential liability relating to
    finance receivables which we have sold or securitized or may sell or
    securitize in the future if it is determined that there was a
    non-curable breach of a representation or warranty made in connection
    with such transactions; the costs and effects of any actual or alleged
    violations of any federal, state or local laws, rules or regulations,
    including any litigation associated therewith; the costs and effects of
    any fines, penalties, judgments, decrees, orders, inquiries,
    investigations, subpoenas, or enforcement or other proceedings of any
    governmental or quasi-governmental agency or authority and any
    litigation associated therewith; our continued ability to access the
    capital markets or the sufficiency of our current sources of funds to
    satisfy our cash flow requirements; our ability to comply with our debt
    covenants; our ability to generate sufficient cash to service all of our
    indebtedness; any material impairment or write-down of the value of our
    assets; the ownership of our common stock continues to be highly
    concentrated, which may prevent minority stockholders from influencing
    significant corporate decisions and may result in conflicts of interest;
    the effects of any downgrade of our debt ratings by credit rating
    agencies, which could have a negative impact on our cost of and/or
    access to capital; our substantial indebtedness, which could prevent us
    from meeting our obligations under our debt instruments and limit our
    ability to react to changes in the economy or our industry or our
    ability to incur additional borrowings; our ability to maintain
    sufficient capital levels in our regulated and unregulated subsidiaries;
    changes in accounting standards or tax policies and practices and the
    application of such new standards, policies and practices; management
    estimates and assumptions, including estimates and assumptions about
    future events, may prove to be incorrect; any failure to achieve the
    SpringCastle Portfolio performance requirements, which could, among
    other things, cause us to lose our loan servicing rights over the
    SpringCastle Portfolio; various risks relating to continued compliance
    with the Settlement Agreement with the U.S. Department of Justice; and
    other risks and uncertainties described in the “Risk Factors” and
    “Management’s Discussion and Analysis” sections of the Company’s most
    recent Form 10-K and Form 10-Qs filed with the SEC and in the Company’s
    other filings with the SEC from time to time.

    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 document that could cause actual results to differ
    before making an investment decision to purchase our common stock 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.

         
    OneMain Holdings, Inc.
    CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
     
    Three Months Ended
     
    (unaudited, $ in millions, except per share amounts) 3/31/19 12/31/18 3/31/18
     
    Interest Income:
    Finance charges $ 953 $ 954 $ 859
    Finance receivables held for sale 3   4   3  
    Total interest income 956 958 862
     
    Interest expense (236 ) (229 ) (200 )
    Provision for finance receivable losses (286 ) (278 ) (254 )
    Net interest income after provision for finance receivable losses 434   451   408  
     
    Other Revenues:
    Insurance 110 111 105
    Investment 26 16 13
    Net gain on sale of real estate loans 3 18
    Net loss on repurchases and repayments of debt (21 ) (1 )
    Other (1) 30   8   20  
    Total other revenues 148   153   137  
     
    Other Expenses
    Salaries and benefits (199 ) (208 ) (199 )
    Other operating expenses (136 ) (135 ) (133 )
    Insurance policy benefits and claims (45 ) (47 ) (45 )
    Total other expenses (380 ) (390 ) (377 )
    Income before income taxes 202 214 168
    Income taxes (50 ) (46 ) (44 )
    Net income $ 152   $ 168   $ 124  
     
    Share Data:
    Weighted average number of diluted shares: 136.2 136.2 135.9
    Diluted EPS $ 1.11 $ 1.24 $ 0.91
    Book value per basic share $ 29.03 $ 27.97 $ 24.93
               
    (1) 1Q19 and 4Q18 include the fair value impairment of the remaining
    loans in held for sale after certain real estate loan sales. 1Q19
    includes a gain on sale related to an investment held at cost.
     
     
    OneMain Holdings, Inc.
    CONSOLIDATED BALANCE SHEETS (UNAUDITED)
     
    As of
       
    (unaudited, $ in millions) 3/31/2019 12/31/2018 3/31/2018
     
    Assets
    Cash and cash equivalents $ 1,709 $ 679 $ 1,807
    Investment securities 1,743 1,694 1,706
    Net finance receivables:
    Personal loans 16,136 16,164 14,858
    Other receivables (1)     129  
    Net finance receivables 16,136 16,164 14,987
    Unearned insurance premium and claim reserves (668 ) (662 ) (585 )
    Allowance for finance receivable losses (733 ) (731 ) (689 )

    Net finance receivables, less unearned insurance premium and
    claim reserves and allowance for finance receivable losses

    14,735 14,771 13,713
    Finance receivables held for sale (1) 78 103 126
    Restricted cash and restricted cash equivalents 575 499 679
    Goodwill 1,422 1,422 1,422
    Other intangible assets 372 388 428
    Other assets 724   534   586  
    Total assets $ 21,358   $ 20,090   $ 20,467  
     
    Liabilities and Shareholders’ Equity
    Long-term debt $ 16,117 $ 15,178 $ 15,898
    Insurance claims and policyholder liabilities 642 685 728
    Deferred and accrued taxes 81 45 72
    Other liabilities 568   383   387  
    Total liabilities 17,408   16,291   17,085  
     
    Common stock 1 1 1
    Additional paid-in capital 1,682 1,681 1,563
    Accumulated other comprehensive loss (2 ) (34 ) (12 )
    Retained earnings 2,269   2,151   1,830  
    Total shareholders’ equity 3,950   3,799   3,382  
    Total liabilities and shareholders’ equity $ 21,358   $ 20,090   $ 20,467  
               
    (1) On September 30, 2018, the company transferred all of the real
    estate loans from Other Receivables to Finance Receivables Held for
    Sale.
     
     
    OneMain Holdings, Inc.
    CONSOLIDATED KEY FINANCIAL METRICS (UNAUDITED)
     
    Three Months Ended
     
    (unaudited, $ in millions) 3/31/2019 12/31/2018 3/31/2018
     
    Non-TDR Net Finance Receivables $ 15,634 $ 15,711 $ 14,582
    TDR Net Finance Receivables 502   453   405  
    Net Finance Receivables $ 16,136   $ 16,164   $ 14,987  
     
    Average Net Receivables $ 16,146 $ 15,964 $ 14,986
    Average Daily Debt Balances 15,839 15,516 14,947
    Origination Volume 2,582 3,268 2,540
     
     
    Non-TDR Allowance $ 537 $ 561 $ 524
    TDR Allowance 196   170   165  
    Allowance $ 733   $ 731   $ 689  
     
    Non-TDR Allowance Ratio 3.4 % 3.6 % 3.6 %
    TDR Allowance Ratio 39.0 % 37.5 % 40.7 %
    Allowance Ratio 4.5 % 4.5 % 4.6 %
     
    Gross Charge-Off $ 311 $ 280 $ 290
    Recoveries (27 ) (26 ) (28 )
    Net Charge-Off $ 284   $ 254   $ 262  
     
    Gross Charge-Off Ratio 7.8 % 7.0 % 7.9 %
    Recoveries (0.7 )% (0.7 )% (0.8 )%
    Net Charge-Off Ratio 7.1 % 6.3 % 7.1 %
     
     
    30-89 Delinquency $ 312 $ 390 $ 317
    30+ Delinquency 647 753 671
    60+ Delinquency 468 524 490
    90+ Delinquency 335 363 354
     
    30-89 Delinquency Ratio 1.9 % 2.4 % 2.1 %
    30+ Delinquency Ratio 4.0 % 4.7 % 4.5 %
    60+ Delinquency Ratio 2.9 % 3.3 % 3.3 %
    90+ Delinquency Ratio 2.1 % 2.3 % 2.4 %
               
    Note: Delinquency ratios are calculated as a percentage of net
    finance receivables. Charge-off ratios are calculated as a
    percentage of average net finance receivables. Ratios may not sum
    due to rounding.
     
     
    OneMain Holdings, Inc.
    BALANCE SHEET METRICS (UNAUDITED)
     
    As of
       
    (unaudited, $ in millions) 3/31/2019 12/31/2018 3/31/2018
     
    Liquidity
    Cash and cash equivalents $ 1,709 $ 679 $ 1,807
    Unencumbered personal loans 6,944 7,607 4,829
    Undrawn conduit facilities 6,200 5,950 4,900
     
    Total Assets $ 21,358 $ 20,090 $ 20,467
    Less: Goodwill (1,422 ) (1,422 ) (1,422 )
    Less: Other intangible assets (372 ) (388 ) (428 )
    Tangible Managed Assets $ 19,564   $ 18,280   $ 18,617  
     
    Long-term debt $ 16,117 $ 15,178 $ 15,898
    Less: Junior subordinated debt (172 ) (172 ) (172 )
    Adjusted Debt $ 15,945   $ 15,006   $ 15,726  
     
    Total Shareholders’ Equity $ 3,950 $ 3,799 $ 3,382
    Less: Goodwill (1,422 ) (1,422 ) (1,422 )
    Less: Other intangible assets (372 ) (388 ) (428 )
    Plus: Junior subordinated debt 172   172   172  
    Adjusted Tangible Common Equity $ 2,328   $ 2,161   $ 1,704  
     
    Adjusted Debt to Adjusted Tangible Common Equity (Tangible
    Leverage)
    6.8 x 6.9 x 9.2 x
     
    Adjusted Tangible Common Equity to Tangible Managed Assets 11.9 % 11.8 % 9.2 %
     
     
    OneMain Holdings, Inc.
    CONSOLIDATED RETURN ON RECEIVABLES (UNAUDITED)
     
    Three Months Ended
       
    (unaudited, $ in millions) 3/31/19 12/31/18 3/31/18
     
    Revenue (1) 26.6 % 26.7 % 25.5 %
    Net Charge-Off (7.1 )% (6.3 )% (7.1 )%
    Risk Adjusted Margin 19.5 % 20.3 % 18.4 %
    Operating Expenses (8.4 )% (8.6 )% (8.9 )%
    Unlevered Return on Receivables 11.1 % 11.7 % 9.5 %
    Interest Expense (5.9 )% (5.7 )% (5.3 )%
    Change in Allowance (0.1 )% (0.6 )% 0.2 %
    Income Tax Expense (1.3 )% (1.2 )% (1.2 )%
    Return on Receivables 3.8 % 4.3 % 3.2 %
               
    Note: All ratios are based on consolidated results as a percentage
    of average net finance receivables held for investment. Ratios may
    not sum due to rounding.
     
    (1) Revenue includes interest income on finance receivables plus
    other revenues less insurance policy benefits and claims.
     
         
    OneMain Holdings, Inc.
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
     
    Three Months Ended
     
    (unaudited, $ in millions) 3/31/19 12/31/18 3/31/18
     
    Consumer & Insurance $ 232 $ 234 $ 174
    Acquisitions & Servicing 1
    Other (3 ) (9 ) (10 )
    Segment to GAAP Adjustment (27 ) (11 ) 3  
    Income Before Income Taxes – GAAP basis $ 202   $ 214   $ 168  
     
    Pretax Income – Segment Accounting Basis $ 232 $ 234 $ 174
    Net Loss on Repurchases and Repayments of Debt (1) 16 27
    Acquisition-Related Transaction and Integration Expenses (1) 6 6 10
    Restructuring Charges 3 8
    Net Gain on Sale of Cost Method Investment (11 )    
    Consumer & Insurance Adjusted Pretax Income (non-GAAP) $ 246   $ 248   $ 211  
     
    Pretax Income – Segment Accounting Basis 1
    Adjustments      
    Acquisitions & Servicing Adjusted Pretax Income (non-GAAP) $   $   $ 1  
     
    Pretax Loss – Segment Accounting Basis $ (3 ) $ (9 ) $ (10 )
    Net Loss on Sale of Real Estate Loans (2) 1   6    
    Other Adjusted Pretax Loss (non-GAAP) $ (2 ) $ (3 ) $ (10 )
     
    Springleaf Debt Discount Accretion $ (6 ) $ (6 ) $ (6 )
    OMFH LLR Provision Catch-up (10 ) (4 ) (4 )
    OMFH Receivable Premium Amortization (5 ) (8 ) (19 )
    OMFH Receivable Discount Accretion 3 4 10
    Other (9 ) 3   22  
    Total Segment to GAAP Adjustment $ (27 ) $ (11 ) $ 3  

    Contacts

    OneMain Holdings, Inc.
    Investor Contact:
    Kathryn
    Miller, 475-619-8821
    [email protected]

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