OneMain Holdings Inc
For the period ended Dec 31, 2023. Filed Feb 13, 2024.
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FY2023 · Filed Feb 13, 2024
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Credit Quality
FINANCE RECEIVABLES
Our net finance receivables, consisting of personal loans and credit cards, were $21.3 billion at December 31, 2023 and $20.0 billion at December 31, 2022. 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 closely with customers as necessary and offer a variety of borrower assistance programs to help support our customers.
DELINQUENCY
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 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 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:
| Consumer and Insurance | ||
|---|---|---|
| (dollars in millions) | Personal Loans | Credit Cards |
| Current | $19,725 | $297 |
| 30-89 days past due | 689 | 16 |
| 90+ days past due | 605 | 17 |
| Total net finance receivables | $21,019 | $330 |
| Delinquency ratio | ||
| 30-89 days past due | 3.28% | 4.93% |
| 30+ days past due | 6.16% | 9.96% |
| 90+ days past due | 2.88% | 5.03% |
| Current | $18,726 | $93 |
| 30-89 days past due | 610 | 6 |
| 90+ days past due | 544 | 8 |
| Total net finance receivables | $19,880 | $107 |
| Delinquency ratio | ||
| 30-89 days past due | 3.07% | 5.90% |
| 30+ days past due | 5.80% | 13.08% |
| 90+ days past due | 2.74% | 7.18% |
ALLOWANCE FOR FINANCE RECEIVABLE LOSSES
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 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. 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 | |||||
| Balance at beginning of period | $2,294 | $21 | $(4) | $2,311 | |
| Impact of adoption of ASU 2022-02 (a) | (20) | — | 4 | (16) | |
| Provision for finance receivable losses | 1,651 | 70 | — | 1,721 | |
| Charge-offs | (1,768) | (27) | — | (1,795) | |
| Recoveries | 258 | 1 | — | 259 | |
| Balance at end of period | $2,415 | $65 | $— | $2,480 | |
| Allowance ratio | 11.49% | 19.61% | (b) | 11.62% | |
| Balance at beginning of period | $2,097 | $5 | $(7) | $2,095 | |
| Provision for finance receivable losses | 1,376 | 23 | 3 | 1,402 | |
| Charge-offs | (1,431) | (7) | — | (1,438) | |
| Recoveries | 252 | — | — | 252 | |
| Balance at end of period | $2,294 | $21 | $(4) | $2,311 | |
| Allowance ratio | 11.54% | 19.12% | (b) | 11.56% | |
| Balance at beginning of period | $2,283 | $— | $(14) | $2,269 | |
| Provision for finance receivable losses | 582 | 5 | 6 | 593 | |
| Charge-offs | (990) | — | 1 | (989) | |
| Recoveries | 222 | — | — | 222 | |
| Balance at end of period | $2,097 | $5 | $(7) | $2,095 | |
| Allowance ratio | 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 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.
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