1. Nature of Operations

Springleaf Finance Corporation (SLFC or, collectively with its subsidiaries, whether directly or indirectly owned, the Company, we, us, or our) is a wholly-owned subsidiary of Springleaf Finance, Inc. (SLFI).

On November 30, 2010, FCFI Acquisition LLC (FCFI), an affiliate of Fortress Investment Group LLC (Fortress), indirectly acquired an 80% economic interest in SLFI from AIG Capital Corporation (ACC), a direct wholly-owned subsidiary of American International Group, Inc. (AIG) (the FCFI Transaction). AIG, through ACC, indirectly retained a 20% economic interest in SLFI. See Note 5 for further information on the FCFI Transaction.

SLFC is a financial services holding company with subsidiaries engaged in the consumer finance and credit insurance businesses. At December 31, 2012, we had $11.7 billion of net finance receivables due from over 973,000 customer accounts and $3.4 billion of credit and non-credit life insurance policies in force covering over 630,000 customer accounts. At December 31, 2012, we had 852 branch offices in the United States, Puerto Rico, and the U.S. Virgin Islands and over 3,600 employees. In December 2012, over 1,000 of our employees were redeployed to a subsidiary of SLFI, which now provides management services to us. See Note 12 for further information.

SEGMENTS

Prior to our 2012 restructuring initiatives discussed in Note 4 and further refinement of our business strategy, we had three business segments: branch, centralized real estate, and insurance, which were defined by the types of financial service products we offered, the nature of our production processes, and the methods we used to distribute our products and to provide our services, as well as our management reporting structure.

Subsequent to our 2012 strategic review of our operations, we have redefined our segments to coincide with how our businesses are currently managed. At December 31, 2012, our three business segments include: consumer, insurance, and real estate. These business segments evolved primarily from management’s redefined business strategy, including its decision to cease real estate lending effective January 1, 2012 and to shift its focus to consumer loan products which we believe have significant prospects for growth and business development due to the strong demand in our target market of nonprime borrowers. Throughout 2012, management continued to refine our business strategy and operating footprint and the reporting tools necessary to manage the Company under the new segments, which were defined in final form in the fourth quarter of 2012 and led to our revision to 2012 segment reporting.

Consumer Business Segment

In our consumer business segment, we originate and service personal loans (secured and unsecured) in 26 states, which are our core operating states.

To supplement our lending activities, we have historically purchased finance receivables originated by other lenders. We also offer credit and non-credit insurance and ancillary products to all eligible branch customers.

Insurance Business Segment

In our insurance business segment, we write and reinsure credit life, credit accident and health, credit-related property and casualty, and credit involuntary unemployment insurance covering our customers and the property pledged as collateral through products that the consumer and real estate business segments offer to its customers. We also offer non-credit insurance and ancillary products.

Real Estate Business Segment

In our real estate business segment, we service and hold real estate loans secured by first or second mortgages on residential real estate. Real estate loans previously originated through our branch offices are either serviced by our branch personnel or centrally serviced at our Evansville, Indiana location or other specialized servicing centers. Real estate loans previously acquired or originated through centralized distribution channels are serviced by MorEquity, Inc. (MorEquity), a wholly-owned subsidiary of SLFC, all of which are subserviced by Nationstar Mortgage LLC (Nationstar), except for certain securitized real estate loans, which are serviced and subserviced by third parties. Investment funds managed by affiliates of Fortress indirectly own a majority interest in Nationstar. As a result of the cessation of real estate lending effective January 1, 2012, all of our real estate loans are in a liquidating status.

Other

The remaining components (which we refer to as “Other”) consist of our non-core and non-originating legacy operations, which are isolated by geographic market and/or distribution channel from our prospective core operations. These operations include our legacy operations in 14 states where we have also ceased personal lending and retail sales financing as a result of our restructuring activities during the first half of 2012, our liquidating retail sales finance portfolio (including our retail sales finance accounts from our dedicated auto finance operation), our lending operations in Puerto Rico and the U.S. Virgin Islands, and Ocean Finance and Mortgages Limited (Ocean).

SALE OF FINANCE RECEIVABLES AND MORTGAGE BROKERAGE BUSINESS

On August 29, 2012, Ocean Money Limited (Ocean Money), and Ocean Money (II) Limited (Ocean Money (II)), wholly owned subsidiaries of Ocean and our indirect subsidiaries, sold their entire finance receivable portfolios totaling $103.1 million, which resulted in a gain of $6.3 million. On August 31, 2012, Ocean, Ocean Money, and Ocean Money (II) sold their mortgage brokerage business consisting of various intangible assets including supplier lists, records, sales, marketing and promotional material, the business pipeline, the client database and records, and the Ocean brand name, which resulted in a gain of $0.6 million. As result of the sales of these assets, as well as our decision to cease loan originations in the United Kingdom, we recorded a loss of $4.6 million in the third quarter of 2012, which represented the full impairment of our United Kingdom customer lists intangible assets and wrote off $1.4 million of related fixed assets.