Ally Financial Inc. - Quarter Report: 2020 March (Form 10-Q)

---

---

---

---

---

(a)	Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.

(b)	Due to the antidilutive effect of the net loss from continuing operations for the three months ended March 31, 2020, basic weighted-average common shares outstanding was used to calculate basic and diluted earnings per share.

---

---

---

(a)	Refer to the section titled Recently Adopted Accounting Standards in Note 1 for additional information.

---

---

(a)	Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 11 for additional details describing the nature of restricted cash balances.

---

---

---

•	Consumer automotive — Consists of retail automotive financing for new and used vehicles.

•	Consumer mortgage — Consists of the following classes of finance receivables.

•	Mortgage Finance — Consists of consumer first-lien mortgages from our ongoing mortgage operations including bulk acquisitions, direct-to-consumer originations, and refinancing of high-quality jumbo mortgages and LMI mortgages.

•	Mortgage — Legacy — Consists of consumer mortgage assets originated prior to January 1, 2009, including first-lien mortgages, subordinate-lien mortgages, and home equity mortgages.

•	Consumer other — Consists of unsecured consumer lending from point-of-sale financing.

•	Commercial — Consists of the following classes of finance receivables.

•	Commercial and Industrial

•	Automotive — Consists of financing operations to fund dealer purchases of new and used vehicles through wholesale floorplan financing. Additional commercial offerings include automotive dealer term loans, revolving lines, and dealer fleet financing.

•	Other — Consists primarily of senior secured leveraged cash flow and asset-based loans related to our Corporate-Finance business.

•	Commercial Real Estate — Consists of term loans primarily secured by dealership land and buildings, and other commercial lending secured by real estate.

---

---

---

---

---

---

(a)

We had opening balances of $2.9 billion and $2.6 billion in unearned revenue associated with outstanding contracts at December 31, 2019, and December 31, 2018, respectively, and $214 million and $199 million of these balances were recognized as insurance premiums and service revenue earned in our Condensed Consolidated Statement of Comprehensive Income during the three months ended March 31, 2020, and March 31, 2019.

(b)	At March 31, 2020, we had unearned revenue of $2.9 billion associated with outstanding contracts, and with respect to this balance we expect to recognize revenue of $591 million in 2020, $714 million in 2021, $609 million in 2022, $476 million in 2023, and $498 million thereafter. At March 31, 2019, we had unearned revenue of $2.7 billion associated with outstanding contracts.

(c)

We had deferred insurance assets of $1.7 billion at both December 31, 2019, and March 31, 2020, respectively, and recognized $125 million of expense during the three months ended March 31, 2020. We had deferred insurance assets of $1.5 billion and $1.6 billion at December 31, 2018, and March 31, 2019, respectively, and recognized $111 million of expense during the three months ended March 31, 2019.

(d)	Insurance operations includes $132 million of insurance premiums and service revenue earned and $142 million of net losses on investment securities.

(e)	Represents a component of total net revenue. Refer to Note 22 for further information on our reportable operating segments.

---

(a)	There have been no material adverse changes to the reserve for prior years.

---

---

(a)	Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $12 million at both March 31, 2020, and December 31, 2019.

(b)	Certain available-for-sale securities are included in fair value hedging relationships. Refer to Note 18 for additional information.

(c)

Available-for-sale securities with a fair value of $3.0 billion and $1.9 billion at March 31, 2020, and December 31, 2019, respectively, were pledged to secure advances from the FHLB, repurchase agreements, other short-term borrowings, or for other purposes as required by contractual obligation or law. Under these agreements, we granted the counterparty the right to sell or pledge $668 million and $118 million of the underlying investment securities at March 31, 2020, and December 31, 2019, respectively.

(d)	Totals do not include accrued interest receivable, which was $90 million and $98 million at March 31, 2020, and December 31, 2019, respectively. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.

(e)	There was no allowance for credit losses recorded at March 31, 2020, as management determined that credit losses did not exist for our portfolio of available-for-sale and held-to-maturity securities.

(f)	Held-to-maturity securities with a fair value of $1.2 billion and $915 million at March 31, 2020, and December 31, 2019, respectively, were pledged to secure advances from the FHLB.

(g)	Totals do not include accrued interest receivable, which was $3 million at both March 31, 2020, and December 31, 2019. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.

---

(a)	Yield is calculated using the effective yield of each security at the end of the period, weighted based on the market value. The effective yield considers the contractual coupon and amortized cost, and excludes expected capital gains and losses.

---

(a)	Certain available-for-sale securities were sold at a loss during the three months ended March 31, 2019, as a result of identifiable market or credit events, or a loss was realized based on corporate actions outside of our control (such as a call by the issuer). Any such sales were made in accordance with our risk-management policies and practices.

(a)

Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, which may include capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current operating, legislative, and regulatory environment. A credit rating is not a recommendation to buy, sell, or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency.

---

---

(a)	Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 18 for additional information.

(b)	Includes loans originated as interest-only mortgage loans of $10 million and $11 million at March 31, 2020, and December 31, 2019, respectively, 48% of which are expected to start principal amortization in 2020. The remainder of these loans have exited the interest-only period.

(c)	Includes loans originated as interest-only mortgage loans of $190 million and $212 million at March 31, 2020, and December 31, 2019, respectively, of which 99% have exited the interest-only period.

(d)	Includes $10 million and $11 million of finance receivables at March 31, 2020, and December 31, 2019, respectively, for which we have elected the fair value option.

(e)	Totals include net unearned income, unamortized premiums and discounts, and deferred fees and costs of $2.1 billion at March 31, 2020.

(f)	Totals do not include accrued interest receivable, which was $575 million and $488 million at March 31, 2020, and December 31, 2019, respectively. Accrued interest receivable is included in other assets on the Consolidated Balance Sheet.

(a)	Excludes $10 million and $11 million of finance receivables at March 31, 2020, and December 31, 2019, respectively, for which we have elected the fair value option.

(b)

Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.

---

(a)

Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.

(b)	Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

(a)

During the three months ended March 31, 2019, we also sold $128 million of loans held-for-sale that were initially classified as finance receivables and loans held-for-investment and were transferred to held-for-sale during 2018, and transferred $63 million of finance receivables from held-for-sale to held-for-investment, both relating to equipment finance receivables from our commercial automotive business.

---

(a)	Represents a component of nonaccrual status at end of period.

(a)	Adjusted for charge-offs.

---

---

(a)	Excludes $10 million of finance receivables at March 31, 2020, for which we have elected the fair value option.

(a)	Excludes $11 million of finance receivables at December 31, 2019, for which we have elected the fair value option.

---

Special mention	Loans that have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

Substandard	Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These loans have a well-defined weakness or weakness that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful	Loans that have all the weaknesses inherent in those classified as substandard, with the additional characteristic that the weaknesses make collection or liquidation in full, based on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

---

(a)	Includes loans classified as special mention, substandard, or doubtful. These classifications are based on regulatory definitions and generally represent loans within our portfolio that have a higher default risk or have already defaulted.

---

(a)	Includes 16,767 loans modified as a result of COVID-19 with both a pre-modification and post-modification amount of $238 million at March 31, 2020.

(b)	Includes 8 loans modified as a result of COVID-19 with both a pre-modification and post-modification amount of $3 million at March 31, 2020.

(c)	Includes 15 loans modified as a result of COVID-19 with both a pre-modification and post-modification amount of $2 million at March 31, 2020.

---

(a)	Included in other assets on our Condensed Consolidated Balance Sheet.

(b)	Included in accrued expenses and other liabilities on our Condensed Consolidated Balance Sheet.

---

---

---

(a)	Asset values represent the current unpaid principal balance of outstanding consumer finance receivables and loans within the VIEs.

(b)	Includes $9.4 billion and $9.0 billion of assets that were not encumbered by VIE beneficial interests held by third parties at March 31, 2020, and December 31, 2019, respectively. Ally or consolidated affiliates hold the interests in these assets.

(c)	Includes $51 million and $21 million of liabilities that were not obligations to third-party beneficial interest holders at March 31, 2020, and December 31, 2019, respectively.

(d)

Represents retained notes and certificated residual interests, of which $17 million and $21 million were classified as held-to-maturity securities at March 31, 2020, and December 31, 2019, respectively, and $1 million and $2 million were classified as other assets at March 31, 2020, and December 31, 2019. These assets represent our five percent interest in the credit risk of the assets underlying asset-backed securitizations.

(e)

Maximum exposure to loss represents the current unpaid principal balance of outstanding loans, retained notes, certificated residual interests, as well as certain noncertificated interests retained from the sale of automotive finance receivables. This measure is based on the very unlikely event that all of our sold loans have defects that would trigger a representation, warranty, and covenant provision and the underlying collateral supporting the loans becomes worthless. This required disclosure is not an indication of our expected loss.

(f)	Amounts are classified as other assets.

(g)	Amounts are classified as accrued expenses and other liabilities.

(h)

For certain nonconsolidated affordable housing entities, maximum exposure to loss represents the yield we guaranteed investors through long-term guarantee contracts. The amount disclosed is based on the unlikely event that the yield delivered to investors in the form of low-income tax housing credits is recaptured. For nonconsolidated equity investments, maximum exposure to loss represents our outstanding investment, additional committed capital, and low-income housing tax credits subject to recapture. The amount disclosed is based on the unlikely event that our committed capital is funded, our investments become worthless, and the tax credits previously delivered to us are recaptured. This required disclosure is not an indication of our expected loss.

(i)

During the year ended December 31, 2019, we indicated our intent to exercise a clean-up call option related to a nonconsolidated securitization-related VIE. The option enables us to repurchase the remaining transferred financial assets at our discretion once the asset pool declines to a predefined level and redeem the related outstanding debt. As a result of this event, we became the primary beneficiary of the VIE, which included $48 million of consumer automotive loans and $45 million of related debt, and the VIE was consolidated on our Condensed Consolidated Balance Sheet. The related amounts were removed from assets sold to nonconsolidated VIEs and maximum exposure to loss in nonconsolidated VIEs.

---

(a)	Whole-loan sales are not part of a securitization transaction, but represent consumer automotive pools of loans sold to third-party investors.

---

(a)	Includes investments in FHLB stock of $793 million and $701 million at March 31, 2020, and December 31, 2019, respectively; FRB stock of $449 million at both March 31, 2020, and December 31, 2019; and equity securities without a readily determinable fair value of $82 million at both

(b)	Primarily represents the proceeds from the sale of investment securities that have not settled as of the balance sheet date.

(c)

Investment in qualified affordable housing projects are accounted for using the proportional amortization method of accounting and include $408 million and $372 million of unfunded commitments to provide additional capital contributions to investees at March 31, 2020, and December 31, 2019. Substantially all of the unfunded commitments at March 31, 2020 are expected to be paid out over the next five years.

(d)	Includes restricted cash collected from customer payments on securitized receivables, which are distributed by us to investors as payments on the related secured debt, and cash reserve deposits utilized as a form of credit enhancement for various securitization transactions.

(e)	Primarily relates to investments made in connection with our CRA program.

(f)	Includes gross intangible assets of $111 million at both March 31, 2020, and December 31, 2019, and accumulated amortization of $47 million and $42 million at March 31, 2020, and December 31, 2019, respectively.

(g)	Primarily represents a number of arrangements with third parties where certain restrictions are placed on balances we hold due to collateral agreements associated with operational processes with a third-party bank, or letter of credit arrangements and corresponding collateral requirements.

(h)	For additional information on derivative instruments and hedging activities, refer to Note 18.

(a)	Includes $153 million of goodwill arising from the acquisition of Health Credit Services and $193 million of goodwill associated with Ally Invest at both March 31, 2020, and December 31, 2019. For additional information on the acquisition of Health Credit Services, refer to Note 2.

---

(a)	Refer to the section below titled Long-Term Debt for further details on assets restricted as collateral for payment of the related debt.

(a)	Includes basis adjustments related to the application of hedge accounting.

(b)	Includes $2.6 billion of trust preferred securities at both March 31, 2020, and December 31, 2019.

(c)	Includes advances net of hedge basis adjustment from the FHLB of Pittsburgh of $12.1 billion and $13.3 billion at March 31, 2020, and December 31, 2019, respectively.

---

(a)	Ally Bank is a component of the total column.

(b)	A portion of the restricted investment securities at March 31, 2020, was restricted under repurchase agreements. Refer to the section above titled Short-Term Borrowings for information on the repurchase agreements.

(c)

Ally Bank has an advance agreement with the FHLB, and had assets pledged to secure borrowings that were restricted as collateral to the FHLB totaling $25.2 billion and $24.8 billion at March 31, 2020, and December 31, 2019, respectively. These assets were composed primarily of consumer mortgage finance receivables and loans and investment securities. Ally Bank has access to the FRB Discount Window and had assets pledged and restricted as collateral to the FRB totaling $2.4 billion at both March 31, 2020, and December 31, 2019. These assets were composed of consumer automotive finance receivables and loans. Availability under these programs is only for the operations of Ally Bank and cannot be used to fund the operations or liabilities of Ally or its subsidiaries.

(d)	Excludes restricted cash and cash reserves for securitization trusts recorded within other assets on the Condensed Consolidated Balance Sheet. Refer to Note 11 for additional information.

(e)	Includes $7.1 billion and $3.0 billion of short-term borrowings at March 31, 2020, and December 31, 2019, respectively.

---

(a)	Funding from committed secured credit facilities is available on request in the event excess collateral resides in certain facilities or the extent incremental collateral is available and contributed to the facilities.

(a)	For additional information on derivative instruments and hedging activities, refer to Note 18.

(a)	Represents the after-tax difference between the fair value and amortized cost of our available-for-sale securities portfolio.

(b)	For additional information on derivative instruments and hedging activities, refer to Note 18.

(c)	Refer to the section titled Recently Adopted Accounting Standards in Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for additional information.

---

(a)	Includes gains reclassified to other gain on investments, net in our Condensed Consolidated Statement of Comprehensive Income.

(b)	Includes amounts reclassified to income tax expense from continuing operations in our Condensed Consolidated Statement of Comprehensive Income.

(c)	For additional information on derivative instruments and hedging activities, refer to Note 18.

(a)	Includes gains reclassified to other gain (loss) on investments, net in our Condensed Consolidated Statement of Comprehensive Income.

(b)	Includes amounts reclassified to income tax expense from continuing operations in our Condensed Consolidated Statement of Comprehensive Income.

(c)	For additional information on derivative instruments and hedging activities, refer to Note 18.

---

(a)	Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.

(b)	Includes shares related to share-based compensation that vested but were not yet issued.

(c)

Due to the antidilutive effect of the net loss from continuing operations for the three months ended March 31, 2020, basic weighted-average common shares outstanding was used to calculate basic and diluted earnings per share. During the three months ended March 31, 2020, there were 1.8 million in share-based awards excluded because their inclusion would have been antidilutive. There were no antidilutive shares during the three months ended March 31, 2019.

---

(a)	In addition to the minimum risk-based capital requirements for the Common Equity Tier 1 capital, Tier 1 capital, and total capital ratios, Ally and Ally Bank were required to maintain a minimum capital conservation buffer of 2.5% at both March 31, 2020, and December 31, 2019.

(b)	Currently, there is no ratio component for determining whether a BHC is “well-capitalized.”

(c)	Federal regulatory reporting guidelines require the calculation of adjusted quarterly average assets using a daily average methodology.

---

---

(a)	Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(b)	On March 17, 2020, we announced the voluntary suspension of our stock-repurchase program for the remaining period of the first quarter and for the second quarter of 2020. Refer to the discussion below for further details about this action.

(c)	On April 16, 2020, our Board declared a quarterly cash dividend of $0.19 per share on all common stock, payable on May 15, 2020. Refer to Note 24 for further information regarding this common stock dividend.

---

---

---

(a)	Represents the fair value hedging adjustment on qualifying hedges for which the hedging relationship was discontinued. This represents a subset of the amounts reported in the total hedging adjustment.

(b)

The carrying amount of hedged available-for-sale securities is presented above using amortized cost and includes $588 million and $230 million at March 31, 2020, and December 31, 2019, respectively, related to closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. Refer to Note 7 for a reconciliation of the amortized cost and fair value of available-for-sale securities.

(c)

The amount that is identified as the last of layer in the open hedge relationship was $490 million as of March 31, 2020. The basis adjustment associated with the open last of layer relationship was a $20 million asset as of March 31, 2020, which would be allocated across the entire remaining pool upon termination, or maturity, of the hedge relationship. The amount that is identified as the last of layer in the discontinued hedge relationship was $200 million as of both March 31, 2020, and December 31, 2019. The basis adjustment associated with the discontinued last of layer relationship was a $2 million asset as of both March 31, 2020, and December 31, 2019, which was allocated across the entire remaining pool upon termination of the hedge relationship. There were no open last-of-layer relationships at December 31, 2019.

(d)

The hedged item represents the carrying value of the hedged portfolio of assets. The amount identified as the last of layer in the open hedge relationship was $10.2 billion at both March 31, 2020, and December 31, 2019. The basis adjustment associated with the open last-of-layer relationship was a $278 million asset as of March 31, 2020, and a $91 million asset as of December 31, 2019, which would be allocated across the entire remaining closed pool upon termination or maturity of the hedge relationship. The amount that is identified as the last of layer in the discontinued hedge relationship was $17.5 billion at March 31, 2020, and $12.8 billion at December 31, 2019, respectively. The basis adjustment associated with the discontinued last-of-layer relationship was a $92 million asset and $43 million asset as of March 31, 2020, and December 31, 2019, respectively, which was allocated across the entire remaining pool upon termination of the hedge relationship.

---

---

(a)	There were no amounts excluded from effectiveness testing for the three months ended March 31, 2020, or 2019.

(b)	Gains and losses reclassified from accumulated other comprehensive income (loss) are reported as other income, net of losses, in the Condensed Consolidated Statement of Comprehensive Income. There were no amounts reclassified for the three months ended March 31, 2020, or 2019.

---

Level 1	Inputs are quoted prices in active markets for identical assets or liabilities at the measurement date. Additionally, the entity must have the ability to access the active market, and the quoted prices cannot be adjusted by the entity.

Level 2

Inputs are other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full term of the assets or liabilities.

Level 3	Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.

•	Equity Securities — We hold various marketable equity securities measured at fair value with changes in fair value recognized in net income. Measurements based on observable market prices are classified as Level 1.

•

Available-for-sale securities — We carry our available-for-sale securities at fair value based on external pricing sources. We classify our securities as Level 1 when fair value is determined using quoted prices available for the same instruments trading in active markets. We classify our securities as Level 2 when fair value is determined using prices for similar instruments trading in active markets. We perform pricing validation procedures for our available-for-sale securities.

•

Interests retained in financial asset sales — We retain certain noncertificated interests retained from the sale of automotive finance receivables. Due to inactivity in the market, valuations are based on internally developed discounted cash flow models (an income approach) that use a market-based discount rate; therefore, we classified these assets as Level 3. The valuation considers recent market transactions, experience with similar assets, current business conditions, and analysis of the underlying collateral, as available. To estimate cash flows, we utilize various significant assumptions, including market observable inputs (for example, forward interest rates) and internally developed inputs (for example, prepayment speeds, delinquency levels, and credit losses).

•	Derivative instruments — We enter into a variety of derivative financial instruments as part of our risk-management strategies. Certain of these derivatives are exchange traded, such as equity options. To determine the fair value of these instruments, we utilize the quoted market prices for those particular derivative contracts; therefore, we classified these contracts as Level 1.

---

(a)	Our direct investment in any one industry did not exceed 8%.

(b)	Carried at fair value due to fair value option elections.

---

(a)	Our investment in any one industry did not exceed 13%.

(b)	Carried at fair value due to fair value option elections.

---

(a)	Reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.

(b)	Carried at fair value due to fair value option elections.

(c)	Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.

(d)	Reported as interest and fees on finance receivables and loans and other income, net of losses in the Condensed Consolidated Statement of Comprehensive Income.

(a)	Reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.

(b)	Carried at fair value due to fair value option elections.

(c)	Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.

---

(a)

We consider the applicable valuation allowance, loan loss allowance, or cumulative impairment to be the most relevant indicator of the impact on earnings caused by the fair value measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the respective valuation allowance, loan loss allowance, or cumulative impairment.

(b)	Represents the portion of the portfolio specifically impaired during 2020. The related valuation allowance represents the cumulative adjustment to fair value of those specific receivables.

(c)	The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.

(a)

We consider the applicable valuation allowance, loan loss allowance, or cumulative impairment to be the most relevant indicator of the impact on earnings caused by the fair value measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the respective valuation allowance, loan loss allowance, or cumulative impairment.

(b)	Represents the portion of the portfolio specifically impaired during 2019. The related valuation allowance represents the cumulative adjustment to fair value of those specific receivables.

(c)	The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.

---

(a)	Included in other assets on our Condensed Consolidated Balance Sheet.

---

(a)	Financial collateral received/pledged shown as a balance based on the sum of all net asset and liability positions between Ally and each individual derivative counterparty.

(b)

Amounts disclosed are limited to the financial asset or liability balance and, accordingly, exclude excess collateral received or pledged and noncash collateral received. There was $29 million of noncash derivative collateral pledged to us that was excluded at December 31, 2019. We do not record such collateral received on our Condensed Consolidated Balance Sheet unless certain conditions are met.

(c)	Certain agreements grant us the right to sell or pledge the noncash assets we receive as collateral. Noncash collateral pledged to us where the agreement grants us the right to sell or pledge the underlying assets had a fair value of $29 million at December 31, 2019. We have not sold or pledged any of the noncash collateral received under these agreements as of December 31, 2019.

(d)	For additional information on securities sold under agreements to repurchase, refer to Note 13.

---

---

(a)	Net financing revenue and other interest income after the provision for credit losses totaled $243 million and $850 million for the three months ended March 31, 2020, and March 31, 2019, respectively.

---

---

•	evolving local, regional, national, or international business, economic, or political conditions;

•	changes in laws or the regulatory or supervisory environment, including as a result of recent financial services legislation, regulation, or policies or changes in government officials or other personnel;

•	changes in monetary, fiscal, or trade laws or policies, including as a result of actions by government agencies, central banks, or supranational authorities;

•	changes in accounting standards or policies, including ASU 2016-13, Financial Instruments—Credit Losses;

•	changes in the automotive industry or the markets for new or used vehicles, including the rise of vehicle sharing and ride hailing, the development of autonomous and alternative-energy vehicles, and the impact of demographic shifts on attitudes and behaviors toward vehicle ownership and use;

•	disruptions or shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including financial or systemic shocks and volatility or changes in market liquidity, interest or currency rates, or valuations;

•	uncertainty about the future of LIBOR and any negative impacts that could result;

•	changes in business or consumer sentiment, preferences, or behavior, including spending, borrowing, or saving by businesses or households;

•	changes in our corporate or business strategies, the composition of our assets, or the way in which we fund those assets;

•	our ability to execute our business strategy for Ally Bank, including its digital focus;

•	our ability to optimize our automotive finance and insurance businesses and to continue diversifying into and growing other consumer and commercial business lines, including mortgage lending, personal lending, corporate finance, brokerage, and wealth management;

•	our ability to develop capital plans that will be approved by the FRB and our ability to implement them, including any payment of dividends or share repurchases;

•	our ability to effectively manage capital or liquidity consistent with evolving business or operational needs, risk-management standards, and regulatory or supervisory requirements;

•	our ability to cost-effectively fund our business and operations, including through deposits and the capital markets;

•	changes in any credit rating assigned to Ally, including Ally Bank;

•	adverse publicity or other reputational harm to us or our senior officers;

•	our ability to develop, maintain, or market our products or services or to absorb unanticipated costs or liabilities associated with those products or services;

•	our ability to innovate, to anticipate the needs of current or future customers, to successfully compete, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures;

---

•	the continuing profitability and viability of our dealer-centric automotive finance and insurance businesses, especially in the face of competition from captive finance companies and their automotive manufacturing sponsors and challenges to the dealer’s role as intermediary between manufacturers and purchasers;

•	our ability to appropriately underwrite loans that we originate or purchase and to otherwise manage credit risk;

•	changes in the credit, liquidity, or other financial condition of our customers, counterparties, service providers, or competitors;

•	our ability to effectively deal with economic, business, or market slowdowns or disruptions;

•	judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to, us or the financial services industry;

•	our ability to address stricter or heightened regulatory or supervisory requirements and expectations;

•	the performance and availability of third-party service providers on whom we rely in delivering products and services to our customers and otherwise conducting our business and operations;

•	our ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or infrastructure, including our capacity to withstand cyberattacks;

•	the adequacy of our corporate governance, risk-management framework, compliance programs, or internal controls over financial reporting, including our ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk;

•	the efficacy of our methods or models in assessing business strategies or opportunities or in valuing, measuring, estimating, monitoring, or managing positions or risk;

•	our ability to keep pace with changes in technology that affect us or our customers, counterparties, service providers, or competitors;

•	our ability to successfully make and integrate acquisitions, including our planned acquisition of Cardholder Management Services, Inc. and its subsidiaries, including CardWorks, Inc. and Merrick Bank Corporation;

•	the adequacy of our succession planning for key executives or other personnel and our ability to attract or retain qualified employees;

•	natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as adverse effects of the COVID-19 pandemic on us and our customers, counterparties, employees, and third-party service providers); or

•

other assumptions, risks, or uncertainties described in the Risk Factors (Part II, Item 1A herein), Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item 2 herein), or the Notes to the Condensed Consolidated Financial Statements (Part I, Item 1 herein) in this Quarterly Report on Form 10-Q or described in any of the Company’s annual, quarterly or current reports.

---

(a)	Includes shares related to share-based compensation that vested but were not yet issued.

(b)	Due to the antidilutive effect of the net loss from continuing operations for the three months ended March 31, 2020, basic weighted-average common shares outstanding was used to calculate basic and diluted earnings per share. Refer to Note 16 to the Condensed Consolidated Financial Statements for further information.

---

(a)	The ratios were based on average assets and average equity using a combination of monthly and daily average methodologies.

(b)	During the three months ended March 31, 2020, we paid dividends of $0.19 per share and incurred a loss of $0.85 per share. Due to the relationship of this calculation and the net loss incurred, this ratio is not meaningful for the three months ended March 31, 2020. During the three months ended March 31, 2019, the common dividend payout ratio was calculated using basic earnings per common share.

(c)	Net interest spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities, excluding discontinued operations for the periods shown.

(d)	Net yield on interest-earning assets represents net financing revenue and other interest income as a percentage of total interest-earning assets.

---

(a)	Tier 1 leverage ratio equals Tier 1 capital divided by adjusted quarterly average total assets, which both reflect adjustments for disallowed goodwill, certain intangible assets, and disallowed deferred tax assets.

(b)

We have elected to delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021. Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. Refer to Note 17 to the Condensed Consolidated Financial Statements for further information.

(c)	Contains deferred tax assets required to be deducted from capital under U.S. Basel III.

(d)	Risk-weighted assets are defined by regulation and are generally determined by allocating assets and specified off-balance-sheet exposures to various risk categories.

---

•	Our Dealer Financial Services business is one of the largest full-service automotive finance operations in the country and offers a wide range of financial services and insurance products to automotive dealerships and their customers. Dealer Financial Services comprises our Automotive Finance and Insurance segments.

---

•	Our Mortgage Finance operations consist of the management of held-for-investment and held-for-sale consumer mortgage loan portfolios. Our held-for-investment portfolio includes bulk purchases of high-quality jumbo and LMI mortgage loans originated by third parties, and our direct-to-consumer Ally Home mortgage offering.

•

Our Corporate Finance operations primarily provides senior secured leveraged cash flow and asset-based loans to mostly U.S.-based middle-market companies owned by private equity sponsors, and loans to asset managers that primarily provide leveraged loans. We believe our growing deposit-based funding model coupled with our expanded product offerings and deep industry relationships provide an advantage over our competition, which includes other banks as well as publicly and privately held finance companies. Our corporate finance lending portfolio is generally composed of first-lien, first-out loans. Our primary focus is on businesses owned by private equity sponsors with loans typically used for leveraged buyouts, mergers and acquisitions, debt refinancing, expansions, restructurings, and working capital. Additionally, our Lender Finance business provides asset managers with partial funding for their direct-lending activities. The portfolio is well diversified across multiple industries including manufacturing, distribution, services, and other specialty sectors. These specialty sectors include our Technology Finance and Healthcare verticals. Our Technology Finance vertical provides financing solutions to venture capital-backed, technology-based companies. The Healthcare vertical provides financing across the healthcare spectrum including services, pharmaceuticals, manufacturing, and medical devices and supplies. We also provide a commercial real estate product focused on lending to skilled nursing facilities, senior housing, medical office buildings, and hospitals.

•	Corporate and Other primarily consists of centralized corporate treasury activities such as management of the cash and corporate investment securities and loan portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments,

---

---

---

---

---

(a)	Includes net remarketing gains of $2 million and $15 million for the three months ended March 31, 2020, and 2019, respectively.

---

(a)	Average balances are calculated using a combination of monthly and daily average methodologies.

(b)	Nonperforming finance receivables and loans are included in the average balances. For information on our accounting policies regarding nonperforming status, refer to Note 1 to the Condensed Consolidated Financial Statements.

(c)	Includes the effects of derivative financial instruments designated as hedges.

(d)	Consists primarily of automotive dealer term loans, including those to finance dealership land and buildings, and dealer fleet financing.

(e)	Yield includes gains on the sale of off-lease vehicles of $2 million and $15 million for the three months ended March 31, 2020, and 2019, respectively. Excluding these gains on sale, the annualized yield would be 5.11% and 4.83% for the three months ended March 31, 2020, and 2019, respectively.

---

(a)

Represents Ally’s internal credit score, incorporating numerous borrower and structure attributes including: severity and aging of delinquency; number of credit inquiries; LTV ratio; and payment-to-income ratio. We periodically update our underwriting scorecard, which can have an impact on our credit tier scoring. We originated an insignificant amount of retail loans classified below Tier C during the periods presented.

(a)	Excludes RV loans.

---

(a)	Includes CSG originations of $992 million and $976 million for the three months ended March 31, 2020, and 2019, respectively.

---

(a)	Unscored are primarily CSG contracts with business entities that have no FICO® Score.

---

(a)	Includes interest expense of $20 million and $19 million, for the three months ended March 31, 2020, and 2019, respectively.

(b)	Includes net unrealized losses on equity securities of $182 million for the three months ended March 31, 2020, compared to net unrealized gains of $65 million for the three months ended March 31, 2019.

(c)	Management uses a combined ratio as a primary measure of underwriting profitability. Underwriting profitability is indicated by a combined ratio under 100% and is calculated as the sum of all incurred losses and expenses (excluding interest and income tax expense) divided by the total of premiums and service revenues earned and other income.

---

(a)	Other products include VMCs, ClearGuard, and other ancillary products.

(b)	P&C insurance include vehicle inventory insurance and dealer ancillary products.

---

---

(a)	Represents UPB, net of charge-offs.

(b)	Updated home values were derived using a combination of appraisals, broker price opinions, automated valuation models, and metropolitan statistical area level house price indices.

(c)	Updated to reflect changes in credit score since loan origination.

---

---

(a)

Includes unused revolving credit line commitments for loans held-for-sale and finance receivables and loans, signed commitment letters, and standby letter of credit facilities, which are issued on behalf of clients and may contingently require us to make payments to a third-party beneficiary in the event of a draw by the beneficiary thereunder. As many of these commitments are subject to borrowing base agreements and other restrictive covenants or may expire without being fully drawn, the stated amounts of these unfunded commitments are not necessarily indicative of future cash requirements.

---

(a)	Primarily related to impacts associated with hedging activities within our consumer automotive loan portfolio, financing revenue from our legacy mortgage portfolio, and consumer unsecured lending activity.

(b)	Amortization is included as interest on long-term debt in the Condensed Consolidated Statement of Comprehensive Income.

(c)	Includes the residual impacts of our FTP methodology and impacts of hedging activities of certain debt obligations.

(d)	Includes reductions of $256 million and $229 million for the three months ended March 31, 2020, and 2019, respectively, related to the allocation of corporate overhead expenses to other segments. The receiving segments record their allocation of corporate overhead expense within other operating expense.

(a)	The maximum annual scheduled amortization for any individual year is $143 million in 2030.

(b)	The amortization is included as interest on long-term debt in the Condensed Consolidated Statement of Comprehensive Income.

---

---

(a)	Represents the number of days the New York Stock Exchange and other U.S. stock exchange markets are open for trading. A half day represents a day when the U.S. markets close early.

(b)	Represents open and funded brokerage accounts.

---

•	Business lines — Responsible for owning and managing all of the risks that emanate from their risk-taking activities, including business units and support functions.

•	Independent risk management — Operates independent of the business lines and is responsible for establishing and maintaining our risk-management framework and promulgating it enterprise-wide. Independent risk management also provides an objective, critical assessment of risks and—through oversight, effective challenge, and other means—evaluates whether Ally remains aligned with its risk appetite.

•	Internal audit — Provides its own independent assessments of the effectiveness of our risk management, internal controls, and governance; and independent assessments regarding the quality of our loan portfolios. Internal audit includes Audit Services and the Loan Review Group.

(a)	Includes $1.1 billion of consumer mortgage loans in our legacy mortgage portfolio at both March 31, 2020, and December 31, 2019.

(b)	Represents the current balance of conforming mortgages originated directly to the held-for-sale portfolio.

(c)	Represents the current unpaid principal balance of outstanding loans, which are subject to our customary representation, warranty, and covenant provisions.

---

---

(a)	Includes nonaccrual TDR loans of $496 million and $252 million at March 31, 2020, and December 31, 2019, respectively.

(b)	Loans are generally in nonaccrual status when principal or interest has been delinquent for 90 days or more, or when full collection is not expected. Refer to Note 1 to the Condensed Consolidated Financial Statements for a description of our accounting policies for finance receivables and loans.

(c)	Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 18 to the Condensed Consolidated Financial Statements for additional information.

(d)	Includes outstanding CSG loans of $8.3 billion and $8.2 billion at March 31, 2020, and December 31, 2019, respectively, and RV loans of $1.3 billion at both March 31, 2020, and December 31, 2019.

(e)	Excludes $10 million of finance receivables at March 31, 2020, and $11 million at December 31, 2019, for which we have elected the fair value option.

---

(a)	Net charge-off ratios are calculated as net charge-offs divided by average outstanding finance receivables and loans excluding loans measured at fair value and loans held-for-sale during the period for each loan category.

(a)	Excludes bulk loan purchases associated with our Mortgage Finance operations, and includes $300 million and $89 million of loans originated as held-for-sale for the three months ended March 31, 2020, and March 31, 2019, respectively.

(b)	Amounts relate to originations from our Ally Lending business, following the acquisition of Health Credit Services during the fourth quarter of 2019.

---

(a)	Presentation is in descending order as a percentage of total consumer finance receivables and loans at March 31, 2020.

---

(a)	Includes nonaccrual TDR loans of $125 million and $114 million at March 31, 2020, and December 31, 2019, respectively.

(b)	Loans are generally in nonaccrual status when principal or interest has been delinquent for 90 days or more, or when full collection is not expected. Refer to Note 1 to the Condensed Consolidated Financial Statements for a description of our accounting policies for finance receivables and loans.

(c)	Other commercial and industrial primarily includes senior secured commercial lending largely associated with our Corporate Finance operations.

(a)	Net charge-off ratios are calculated as net charge-offs divided by average outstanding finance receivables and loans excluding loans measured at fair value and loans held-for-sale during the period for each loan category.

---

---

•	a single forecast scenario for macroeconomic factors incorporated into the modeling process;

•	a 12-month reasonable and supportable forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 24-month period; and

•	data from the historical mean will be calculated from January 2008 through the most current period which includes data points from the most recent recessionary period.

(a)	The qualitative allowance adjustment due to COVID-19 for commercial includes $73 million related to commercial automotive within our Automotive Finance operations, $69 million within our Corporate Finance operations, and $1 million within Corporate and Other.

(b)	Included as a component of total provision for credit losses.

---

(a)

Represents the amount of the amortized cost directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.

(b)	Amounts include provision expense associated with the impacts of COVID-19, as further described in the section above.

(c)	Consumer mortgage provision expense includes $1 million related to Mortgage Finance and a provision benefit of $4 million related to our legacy mortgage portfolio. Commercial provision expense includes $56 million related to commercial automotive and $115 million related to commercial other within the commercial and industrial portfolio class, and $25 million related to commercial real estate.

(d)	Coverage percentages are based on the allowance for loan losses related to finance receivables and loans excluding those loans held at fair value as a percentage of the amortized cost.

---

(a)

Represents the amount of the amortized cost directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.

(b)

Consumer mortgage provision expense includes $2 million related to Mortgage Finance and a provision benefit of $5 million related to our legacy mortgage portfolio. Commercial provision expense includes $6 million related to commercial automotive and $23 million related to commercial other within the commercial and industrial portfolio class, and $1 million in provision benefit related to commercial real estate.

(c)	Coverage percentages are based on the allowance for loan losses related to finance receivables and loans excluding those loans held at fair value as a percentage of the amortized cost.

---

---

(a)	Gradual changes in interest rates are recognized over 12 months.

(b)	The impact of the downward rate shocks is impacted by the current low interest rate environment, which limits absolute declines in rates.

---

---

---

(a)	Funding from committed secured credit facilities is available on request in the event excess collateral resides in certain facilities or the extent incremental collateral is available and contributed to the facilities.

•	In April 2020, we accessed the unsecured debt capital markets and raised $750 million through the issuance of senior notes, which provided additional parent company liquidity, and further mitigated the risk of potential market volatility in future periods.

•	Our total capacity in committed secured credit facilities was reduced by $950 million during the three months ended March 31, 2020, as we continue to shift our overall funding toward a greater mix of cost-effective deposit funding.

(a)	Includes $256 million and $271 million of retail term notes at March 31, 2020, and December 31, 2019, respectively.

(b)	Includes hedge basis adjustment as described in Note 18 to the Condensed Consolidated Financial Statements.

---

(a)	Brokered deposit balances include a deposit related to Ally Invest customer cash balances deposited at Ally Bank by a third party of $1.5 billion as of March 31, 2020, $1.3 billion as of December 31, 2019, and $1.1 billion as September 30, 2019, June 30, 2019, and March 31, 2019.

(b)	Other deposits include mortgage escrow and other deposits.

---

---

(a)	Excludes the Parent’s and Guarantors’ share of income of all nonguarantor subsidiaries.

(a)	Excludes investments in all nonguarantor subsidiaries.

---

(a)	Fitch upgraded our senior unsecured debt rating to BBB- from BB+, upgraded our short-term rating to F3 from B, and changed the outlook to Stable from Positive on August 19, 2019.

(b)

Moody’s upgraded our senior unsecured debt rating to Ba1 from Ba2, affirmed our short-term rating of Not Prime, and maintained a Stable outlook on December 19, 2019. Effective December 1, 2014, we determined to not renew our contractual arrangement with Moody’s related to their providing of our issuer, senior unsecured debt, and short-term ratings. Notwithstanding this, Moody’s has determined to continue to provide these ratings on a discretionary basis. However, Moody’s has no obligation to continue to provide these ratings, and could cease doing so at any time.

(c)	Standard & Poor’s upgraded our senior unsecured debt rating to BBB- from BB+, upgraded our short-term rating to A-3 from B, and changed the outlook to Stable from Positive on October 16, 2019.

(d)	DBRS affirmed our senior unsecured debt rating of BBB (Low), affirmed our short-term rating of R-3, and changed the outlook to Negative from Positive on April 21, 2020.

---

•	Allowance for loan losses

•	Valuation of automotive lease assets and residuals

•	Fair value of financial instruments

•	Determination of provision for income taxes

---

(a)	Average balances are calculated using a combination of monthly and daily average methodologies.

(b)	Includes the effects of derivative financial instruments designated as hedges. Refer to Note 18 to the Condensed Consolidated Financial Statements for further information about the effects of our hedging activities.

(c)	Nonperforming finance receivables and loans are included in the average balances. For information on our accounting policies regarding nonperforming status, refer to Note 1 to the Condensed Consolidated Financial Statements.

(d)	Yield includes gains on the sale of off-lease vehicles of $2 million and $15 million for the three months ended March 31, 2020, and 2019, respectively. Excluding these gains on sale, the annualized yield would be 5.11% and 4.83% for the three months ended March 31, 2020, and 2019, respectively.

(e)	Net interest spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities.

(f)	Net yield on interest-earning assets represents annualized net financing revenue and other interest income as a percentage of total interest-earning assets.

---

---

---

•	The duration, extent, and severity of the pandemic. COVID-19 has not yet been contained and could affect significantly more households and businesses. The duration and severity of the pandemic continue to be impossible to predict, as is the potential for a seasonal or other resurgence after its initial containment.

•

The response of governmental and nongovernmental authorities. Many of their actions have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses. These actions are not always coordinated or consistent across jurisdictions but, in general, have rapidly expanded in scope and intensity. For example, in many jurisdictions, governments have acted to temporarily close or restrict the operations of automotive dealers, and as a result, we have recently experienced a significant decline in our origination of consumer automotive loans and leases.

•

The effect on our customers, counterparties, employees, and third-party service providers. COVID-19 and its associated consequences and uncertainties are affecting individuals, households, and businesses differently and unevenly. Many, however, have already changed their behavior in response to governmental mandates and advisories to sharply restrain commercial and social interactions. As a result, in the near term, our credit, operational, and other risks have generally increased and, for the foreseeable future, are expected to remain elevated or increase further.

•

The effect on economies and markets. Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear. National, regional, and local economies and markets could suffer disruptions that are lasting. A prolonged economic slowdown, for example, could result in more severe and enduring declines in new and used vehicle sales and downward pressure on used vehicle values, which could adversely affect our origination of consumer automotive loans and leases and the performance of our existing loans and leases for a significant period of time. In addition, governmental actions are meaningfully influencing the interest-rate environment and financial-market activity, which could adversely affect our results of operations and financial condition.

---

(a)	Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(b)	Excludes brokerage commissions.

(c)	On April 1, 2019, we announced a common stock-repurchase program of up to $1.25 billion. The program commenced in the third quarter of 2019 and will expire on June 30, 2020. Refer to Note 17 to the Condensed Consolidated Financial Statements for further details.

(d)	On March 17, 2020, we announced the voluntary suspension of our stock-repurchase program for the remaining period of the first quarter and for the second quarter of 2020. Refer to Note 17 to the Condensed Consolidated Financial Statements for further details.

---

---

---