Edgar Filing: Ally Financial Inc.

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010, or

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 1-3754

ALLY FINANCIAL INC.

(Exact name of registrant as specified in its charter)

Delaware

38-0572512

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

200 Renaissance Center

P.O. Box 200, Detroit, Michigan

48265-2000

(Address of principal executive offices)

(Zip Code)

(866) 710-4623

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing for the past 90 days.

Yes þ No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for a shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer þ	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

At August 5, 2010, the number of shares outstanding of the Registrant’s common stock was 799,120 shares.

ALLY FINANCIAL INC.

INDEX


		Page
Part I — Financial Information
Item 1.	Financial Statements	3
	Consolidated Statement of Income (unaudited) for the Three and Six Months Ended June 30, 2010 and 2009	3
	Consolidated Balance Sheet (unaudited) as of June 30, 2010, and December 31, 2009	4
	Consolidated Statement of Changes in Equity (unaudited) for the Six Months Ended June 30, 2010 and 2009	6
	Consolidated Statement of Cash Flows (unaudited) for the Six Months Ended June 30, 2010 and 2009	8
	Notes to Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	68
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	116
Item 4.	Controls and Procedures	116
Part II — Other Information
Item 1.	Legal Proceedings	117
Item 1A.	Risk Factors	117
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	119
Item 3.	Defaults Upon Senior Securities	119
Item 4.	(Removed and Reserved)	119
Item 5.	Other Information	119
Item 6.	Exhibits	119
Signatures		120
Index of Exhibits		121

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF INCOME (unaudited)


	Three months ended June 30,						Six months ended June 30,
($ in millions)	2010			2009			2010			2009
Financing revenue and other interest income
Finance receivables and loans
Consumer	$	1,128		$	1,175		$	2,258		$	2,408
Commercial		456			434			891			852
Notes receivable from General Motors		40			47			95			89

Total finance receivables and loans		1,624			1,656			3,244			3,349
Loans held-for-sale		156			84			371			168
Interest on trading securities		6			34			7			57
Interest and dividends on available-for-sale investment securities		91			55			191			113
Interest bearing cash		18			27			32			69
Other interest income, net		(4	)		30			—			55
Operating leases		1,011			1,503			2,174			3,105

Total financing revenue and other interest income		2,902			3,389			6,019			6,916
Interest expense
Interest on deposits		155			179			313			357
Interest on short-term borrowings		100			182			212			343
Interest on long-term debt		1,409			1,579			2,844			3,236

Total interest expense		1,664			1,940			3,369			3,936
Depreciation expense on operating lease assets		526			1,056			1,182			2,113

Net financing revenue		712			393			1,468			867
Other revenue
Servicing fees		384			393			769			797
Servicing asset valuation and hedge activities, net		(21	)		(225	)		(154	)		(577	)

Total servicing income, net		363			168			615			220
Insurance premiums and service revenue earned		477			496			945			991
Gain on mortgage and automotive loans, net		266			206			537			489
(Loss) gain on extinguishment of debt		(3	)		13			(121	)		657
Other gain on investments, net		95			97			235			83
Other income, net of losses		190			(113	)		275			(323	)

Total other revenue		1,388			867			2,486			2,117
Total net revenue		2,100			1,260			3,954			2,984
Provision for loan losses		220			1,117			366			1,863
Noninterest expense
Compensation and benefits expense		388			389			815			754
Insurance losses and loss adjustment expenses		224			261			435			546
Other operating expenses		822			1,076			1,711			2,081

Total noninterest expense		1,434			1,726			2,961			3,381
Income (loss) from continuing operations before income tax expense		446			(1,583	)		627			(2,260	)
Income tax expense from continuing operations		33			1,096			69			972

Net income (loss) from continuing operations		413			(2,679	)		558			(3,232	)

Income (loss) from discontinued operations, net of tax		152			(1,224	)		169			(1,346	)

Net income (loss)	$	565		$	(3,903	)	$	727		$	(4,578	)

The Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

CONSOLIDATED BALANCE SHEET (unaudited)


($ in millions)	June 30, 2010			December 31, 2009
Assets
Cash and cash equivalents
Noninterest bearing	$	820		$	1,840
Interest bearing		13,528			12,948

Total cash and cash equivalents		14,348			14,788
Trading securities		209			739
Investment securities
Available-for-sale		12,710			12,155
Held-to-maturity		—			3

Total investment securities		12,710			12,158
Loans held-for-sale ($4,167 and $5,545 fair value elected)		10,382			20,625
Finance receivables and loans, net of unearned income
Consumer ($2,345 and $1,303 fair value elected)		55,346			42,849
Commercial		37,005			33,941
Notes receivable from General Motors		365			911
Allowance for loan losses		(2,377	)		(2,445	)

Total finance receivables and loans, net		90,339			75,256
Investment in operating leases, net		11,895			15,995
Mortgage servicing rights		2,983			3,554
Premiums receivable and other insurance assets		2,251			2,720
Other assets		19,646			19,887
Assets of operations held-for-sale ($8,398 fair value elected at June 30, 2010)		12,039			6,584

Total assets	$	176,802		$	172,306

Liabilities
Deposit liabilities
Noninterest bearing	$	2,276		$	1,755
Interest bearing		32,938			30,001

Total deposit liabilities		35,214			31,756
Debt
Short-term borrowings		7,054			10,292
Long-term debt ($2,178 and $1,293 fair value elected)		85,205			88,021

Total debt		92,259			98,313
Interest payable		1,692			1,637
Unearned insurance premiums and service revenue		2,990			3,192
Reserves for insurance losses and loss adjustment expenses		962			1,215
Accrued expenses and other liabilities		11,575			10,456
Liabilities of operations held-for-sale ($7,857 fair value elected at June 30, 2010)		11,337			4,898

Total liabilities		156,029			151,467
Equity
Common stock and paid-in capital		13,829			13,829
Preferred stock held by U.S. Department of Treasury		10,893			10,893
Preferred stock		1,287			1,287
Accumulated deficit		(5,421	)		(5,630	)
Accumulated other comprehensive income		185			460

Total equity		20,773			20,839

Total liabilities and equity	$	176,802		$	172,306

ALLY FINANCIAL INC.

CONSOLIDATED BALANCE SHEET (unaudited)

The assets of consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and the liabilities of these entities for which creditors (or beneficial interest holders) do not have recourse to our general credit at June 30, 2010, were as follows.


($ in millions)
Assets
Cash and cash equivalents
Noninterest bearing	$	3
Loans held-for-sale		92
Finance receivables and loans, net of unearned income
Consumer ($2,345 fair value elected)		19,910
Commercial		12,418
Allowance for loan losses		(347	)

Total finance receivables and loans, net		31,981
Investment in operating leases, net		3,364
Other assets		4,304
Assets of operations held-for-sale		10,481

Total assets	$	50,225

Liabilities
Debt
Short-term borrowings	$	1,610
Long-term debt ($2,178 fair value elected)		26,654

Total debt		28,264
Interest payable		28
Accrued expenses and other liabilities		608
Liabilities of operations held-for-sale		10,547

Total liabilities	$	39,447

The Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six Months Ended June 30, 2010 and 2009


($ in millions)	Members’ interests		Preferred interests held by U.S. Department of Treasury		Preferred interests		Retained earnings			Accumulated other comprehensive (loss) income			Total equity			Comprehensive (loss) income
Balance at January 1, 2009	$	9,670	$	5,000	$	1,287	$	6,286		$	(389	)	$	21,854
Capital contributions (a)		1,247												1,247
Net loss								(4,578	)					(4,578	)	$	(4,578	)
Preferred interests dividends paid to the U.S. Department of Treasury								(160	)					(160	)
Preferred interests dividends								(195	)					(195	)
Dividends to members (a)								(119	)					(119	)
Issuance of preferred interests held by U.S. Department of Treasury				7,500										7,500
Other comprehensive income											497			497			497

Balance at June 30, 2009, before conversion from limited liability company to a corporation (b)	$	10,917	$	12,500	$	1,287	$	1,234		$	108		$	26,046		$	(4,081	)


($ in millions)	Common stock and paid-in capital		Preferred stock held by U.S. Department of Treasury		Preferred stock		Retained earnings			Accumulated other comprehensive income			Total equity			Comprehensive loss
Balance at June 30, 2009, after conversion from limited liability company to a corporation	$	10,917	$	12,500	$	1,287	$	1,234		$	108		$	26,046		$	(4,081	)

ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six Months Ended June 30, 2010 and 2009


($ in millions)	Common stock and paid-in capital		Preferred stock held by U.S. Department of Treasury		Preferred stock		Accumulated deficit			Accumulated other comprehensive income			Total equity			Comprehensive income (loss)
Balance at January 1, 2010, before cumulative effect of adjustments	$	13,829	$	10,893	$	1,287	$	(5,630	)	$	460		$	20,839
Cumulative effect of a change in accounting principle, net of tax (c)								(57	)		4			(53	)

Balance at January 1, 2010, after cumulative effect of adjustments	$	13,829	$	10,893	$	1,287	$	(5,687	)	$	464		$	20,786
Net income								727						727		$	727
Preferred stock dividends paid to the U.S. Department of Treasury								(386	)					(386	)
Preferred stock dividends (a)								(142	)					(142	)
Dividends to shareholders (a)								(7	)					(7	)
Other comprehensive loss											(279	)		(279	)		(279	)
Other (d)								74						74

Balance at June 30, 2010	$	13,829	$	10,893	$	1,287	$	(5,421	)	$	185		$	20,773		$	448

(a)	Refer to Note 17 to the Consolidated Financial Statements for further details.

(b)

Effective June 30, 2009, we converted from a Delaware limited liability company into a Delaware corporation. Each unit of each class of common membership interest issued and outstanding immediately prior to the conversion was converted into an equivalent number of shares of common stock with substantially the same rights and preferences as the common membership interests. Upon conversion, holders of our preferred membership interests also received an equivalent number of preferred stock with substantially the same rights and preferences as the former preferred membership interests.

(c)

Cumulative effect of change in accounting principle, net of tax, due to adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.

(d)	Represents a reduction of the estimated payment accrued for tax distributions as a result of the completion of the GMAC LLC U.S. Return of Partnership Income for the tax period January 1, 2009, through June 30, 2009.

The Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)


Six months ended June 30, ($ in millions)	2010			2009
Operating activities
Net income (loss)	$	727		$	(4,578	)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation and amortization		2,249			3,302
Impairment of goodwill and other intangible assets		—			607
Other impairment		16			—
Amortization and valuation adjustments of mortgage servicing rights		944			(303	)
Provision for loan losses		382			2,007
(Gain) loss on sale of loans, net		(559	)		154
Net (gain) loss on investment securities		(256	)		55
Loss (gain) on extinguishment of debt		116			(657	)
Originations and purchases of loans held-for-sale		(27,600	)		(44,399	)
Proceeds from sales and repayments of loans held-for-sale		35,564			40,248
Net change in:
Trading securities		(28	)		698
Deferred income taxes		(198	)		1,115
Interest payable		61			179
Other assets		1,322			1,514
Other liabilities		375			673
Other, net		(1,532	)		1,666

Net cash provided by operating activities		11,583			2,281

Investing activities
Purchases of available-for-sale securities		(11,994	)		(8,080	)
Proceeds from sales of available-for-sale securities		9,854			2,722
Proceeds from maturities of available-for-sale securities		2,535			2,125
Net (increase) decrease in finance receivables and loans		(8,291	)		9,608
Proceeds from sales of finance receivables and loans		2,362			462
Change in notes receivable from GM		116			647
Purchases of operating lease assets		(1,491	)		(302	)
Disposals of operating lease assets		4,435			3,418
(Purchases) sales of mortgage servicing rights, net		(21	)		13
Sale of business unit, net (a)		(12	)		82
Other, net		1,699			(484	)

Net cash (used in) provided by investing activities		(808	)		10,211

ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)


Six months ended June 30, ($ in millions)	2010			2009
Financing activities
Net change in short-term debt		(3,827	)		(1,762	)
Net increase in bank deposits		2,720			5,460
Proceeds from issuance of long-term debt		20,996			14,813
Repayments of long-term debt		(32,307	)		(36,517	)
Proceeds from issuance of preferred interests held by U.S. Department of Treasury		—			7,500
Proceeds from issuance of common members’ interests		—			1,247
Dividends paid		(532	)		(448	)
Other, net		773			851

Net cash used in financing activities		(12,177	)		(8,856	)
Effect of exchange-rate changes on cash and cash equivalents		619			(132	)

Net (decrease) increase in cash and cash equivalents		(783	)		3,504
Adjustment for change in cash and cash equivalents of operations held-for-sale (a) (b)		343			—
Cash and cash equivalents at beginning of year		14,788			15,151

Cash and cash equivalents at June 30,	$	14,348		$	18,655

Supplemental disclosures
Cash paid for:
Interest	$	3,209		$	4,057
Income taxes		306			247
Noncash items:
Increase in finance receivables and loans due to a change in accounting principle (c)		17,990			—
Increase in long-term debt due to a change in accounting principle (c)		17,054			—
Loans held-for-sale transferred to finance receivables and loans		27			771
Finance receivables and loans transferred to loans-held-for sale		40			1,297
Finance receivables and loans transferred to other assets		125			255
Originations of mortgage servicing rights from sold loans		94			189
Other disclosures:
Proceeds from sales and repayments of mortgage loans held-for-investment originally designated as held-for-sale		249			328
Proceeds from sales of repossessed, foreclosed, and owned real estate		317			590
Consolidation of loans, net		—			1,410
Consolidation of collateralized borrowings		—			1,184

(a)	Net of cash and cash equivalents of $745 million of the business unit at the time of disposition.

(b)	Cash flows of operations held-for-sale are reflected within operating, investing, and financing activities in the Consolidated Statement of Cash Flows. The cash balance of these operations are reported as assets of operations held-for-sale on the Consolidated Balance Sheet.

(c)	Relates to the adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.

The Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.	Description of Business, Basis of Presentation, and Changes in Significant Accounting Policies

Ally Financial Inc. (formerly GMAC Inc. and referred to herein as Ally, we, our, or us) is one of the world’s largest automotive financial services companies. On December 24, 2008, we became a bank holding company under the Bank Holding Company Act of 1956, as amended (the BHC Act). Our primary banking subsidiary is Ally Bank, which is an indirect wholly owned subsidiary of Ally Financial Inc.

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and that affect income and expenses during the reporting period. In developing the estimates and assumptions, management uses all available evidence; however, actual results could differ because of uncertainties associated with estimating the amounts, timing, and likelihood of possible outcomes.

The Consolidated Financial Statements as of June 30, 2010, and for the three months and six months ended June 30, 2010 and 2009, are unaudited but reflect all adjustments that are, in management’s opinion, necessary for the fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements (and the related notes) included in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the U.S. Securities and Exchange Commission.

Residential Capital, LLC

Residential Capital, LLC (ResCap), one of our mortgage subsidiaries, was negatively impacted by the events and conditions in the mortgage banking industry and the broader economy. The market deterioration led to fewer sources of, and significantly reduced levels of, liquidity available to finance ResCap’s operations. ResCap is highly leveraged relative to its cash flow and previously recognized credit and valuation losses resulting in a significant deterioration in capital. ResCap’s consolidated tangible net worth, as defined, was $793 million as of June 30, 2010, and ResCap remained in compliance with all of its consolidated tangible net worth covenants. For this purpose, consolidated tangible net worth is defined as ResCap’s consolidated equity excluding intangible assets. There continues to be a risk that ResCap will not be able to meet its debt service obligations, will default on its financial debt covenants due to insufficient capital, and/or will be in a negative liquidity position in 2010 or future periods.

ResCap actively manages its liquidity and capital positions and is continually working on initiatives to address its debt covenant compliance and liquidity needs including debt maturing in the next twelve months and other risks and uncertainties. ResCap’s initiatives include, but are not limited to, the following: continuing to work with key credit providers to optimize all available liquidity options; continued reduction of assets and other restructuring activities; focusing production on government and prime conforming products; exploring strategic alternatives such as alliances, joint ventures, and other transactions with third parties; and continued exploration of opportunities for funding and capital support from Ally and its affiliates. The outcomes of most of these initiatives are to a great extent outside of ResCap’s control resulting in increased uncertainty as to their successful execution.

On December 30, 2009, we announced that as a result of our ongoing strategic review of how to best deploy Ally’s current and future capital liquidity, we decided to pursue strategic alternatives with respect to ResCap. These alternatives being considered include one or more sales, spin-offs, or other potential transactions. The timing and form of execution of any such transactions will depend on market conditions.

Coincident with this announcement, ResCap announced in 2009 its decision to commit to a plan to sell its U.K. and continental Europe platforms. On April 12, 2010, we reached agreements to sell our mortgage assets and businesses in the United Kingdom and continental Europe. We classified the U.K. and continental Europe operations as held-for-sale during the three months ended December 31, 2009. Refer to Note 2 for additional information.

In the future, Ally and ResCap may take additional actions with respect to ResCap as each party deems appropriate. These actions may include Ally providing or declining to provide additional liquidity and capital support for ResCap;

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

refinancing or restructuring some or all of ResCap’s existing debt; the purchase or sale of ResCap debt securities in the public or private markets for cash or other consideration; entering into derivative or other hedging or similar transactions with respect to ResCap or its debt securities; Ally purchasing assets from ResCap; or undertaking corporate transactions such as a tender offer or exchange offer for some or all of ResCap’s outstanding debt securities, a merger, sale, asset sales, consolidation, spin-off, distribution, or other business combination or reorganization or similar action with respect to all or part of ResCap and/or its affiliates. In this context, Ally and ResCap typically consider a number of factors to the extent applicable and appropriate including, without limitation, the financial condition, results of operations, and prospects of Ally and ResCap; ResCap’s ability to obtain third-party financing; tax considerations; the current and anticipated future trading price levels of ResCap’s debt instruments; conditions in the mortgage banking industry and general economic conditions; other investment and business opportunities available to Ally and/or ResCap; and any nonpublic information that ResCap may possess or that Ally receives from ResCap.

ResCap remains heavily dependent on Ally and its affiliates for funding and capital support, and there can be no assurance that Ally or its affiliates will continue such actions or that Ally will be successful in executing one or more sales, spin-offs, or other potential transactions with respect to ResCap.

Although our continued actions through various funding and capital initiatives demonstrate support for ResCap, there are currently no commitments or assurances for future funding and/or capital support. Consequently, there remains substantial doubt about ResCap’s ability to continue as a going concern. Should we no longer continue to support the capital or liquidity needs of ResCap or should ResCap be unable to successfully execute other initiatives, it would have a material adverse effect on ResCap’s business, results of operations, and financial position.

Ally has extensive financing and hedging arrangements with ResCap that could be at risk of nonpayment if ResCap were to file for bankruptcy. As of June 30, 2010, we had approximately $2.2 billion in secured financing arrangements with ResCap of which approximately $1.4 billion in loans was utilized. Amounts outstanding under the secured financing and hedging arrangements fluctuate. If ResCap were to file for bankruptcy, ResCap’s repayments of its financing facilities, including those with us, could be slower. In addition, we could be an unsecured creditor of ResCap to the extent that the proceeds from the sale of our collateral are insufficient to repay ResCap’s obligations to us. It is possible that other ResCap creditors would seek to recharacterize our loans to ResCap as equity contributions or to seek equitable subordination of our claims so that the claims of other creditors would have priority over our claims. In addition, should ResCap file for bankruptcy, our $793 million investment related to ResCap’s equity position would likely be reduced to zero. If a ResCap bankruptcy were to occur and a substantial amount of our credit exposure is not repaid to us, it would have an adverse impact on our near-term net income and capital position, but we do not believe it would have a materially adverse impact on Ally’s consolidated financial position over the longer term.

Corporate Conversion

Effective June 30, 2009, we converted (the Conversion) from a Delaware limited liability company to a Delaware corporation pursuant to Section 18-216 of the Delaware Limited Liability Company Act and Section 265 of the Delaware General Corporation Law. In connection with the Conversion, each unit of each class of common and preferred membership interests issued and outstanding immediately prior to the Conversion was converted into shares of capital stock with substantially the same rights and preferences as such membership interests. Refer to Note 16 for additional information regarding the tax impact of the conversion.

Recently Adopted Accounting Standards

Accounting for Transfers of Financial Assets (ASU 2009-16)

As of January 1, 2010, we adopted ASU 2009-16 (formerly SFAS No. 166), which amended Accounting Standards Codification (ASC) Topic 860, Transfers and Servicing. This standard removed the concept of a qualifying special-purpose entity (QSPE) and created more stringent conditions for reporting a sale when a portion of a financial asset is transferred. To determine if a transfer is to be accounted for as a sale, the transferor must assess whether the transferor and all of the entities included in the transferor’s consolidated financial statements surrendered control of the assets. For partial asset transfers, the transferred portion must represent a pro rata component of the entire asset with no form of subordination. This standard is applied prospectively for transfers that occur on or after the effective date; however, the elimination of the QSPE concept required us to retrospectively assess all current off-balance sheet QSPE structures for consolidation under ASC Topic 810,

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Consolidation, and record a cumulative-effect adjustment to retained earnings for any consolidation change. Retrospective application of ASU 2009-16, specifically the QSPE removal, was assessed as part of the analysis required by ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to the section below for further information related to ASU 2009-17.

Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17)

As of January 1, 2010, we adopted ASU 2009-17 (formerly SFAS No. 167), which amended ASC Topic 810, Consolidation. This standard addresses the primary beneficiary assessment criteria for determining whether an entity is required to consolidate a variable interest entity (VIE). This standard requires an entity to determine whether it is the primary beneficiary by performing a qualitative assessment rather than using the quantitative-based model that was required under the previous accounting guidance. The qualitative assessment consists of determining whether the entity has both the power to direct the activities that most significantly impact the VIE’s economic performance and the right to receive benefits or obligation to absorb losses that could potentially be significant to the VIE. As a result of the implementation of ASU 2009-16 and ASU 2009-17, several of our securitization structures previously held off-balance sheet were recognized as consolidated entities resulting in a day-one increase of $17.6 billion to assets and liabilities on our Consolidated Balance Sheet ($10.1 billion of the increase related to operations classified as held-for-sale). As part of the day-one entry, there was an immaterial adjustment to our opening equity balance.

Expanded Disclosures about Fair Value Measurements (ASU 2010-06)

As of March 31, 2010, we adopted the majority of ASU 2010-06, which amends ASC Topic 820, Fair Value Measurements. The ASU requires fair value disclosures for each asset and liability class, disclosures related to inputs and valuation methods for measurements that use Level 2 or Level 3 inputs, disclosures of significant transfers between Levels 1 and 2, and the gross presentation of significant transfers into or out of Level 3 within the Level 3 rollforward. The ASU also requires the gross presentation of purchases, sales, issuances, and settlements within the Level 3 rollforward; however, this specific requirement will be effective for us during the three months ended March 31, 2011. The disclosure requirement by class is a higher level of disaggregation compared to the previous requirement, which was based on the major asset or liability category. While the adoption of ASU 2010-06 expanded our disclosures related to fair value measurements, it did not modify the accounting treatment or measurement of items at fair value and, as such, did not have a material impact on our financial statements.

Recently Issued Accounting Standards

Revenue Arrangements with Multiple Deliverables (ASU 2009-13)

In October 2009, the Financial Accounting Standards Board (FASB) issued ASU 2009-13, which amends ASC Topic 605, Revenue Recognition. The guidance significantly changes the accounting for revenue recognition in arrangements with multiple deliverables and eliminates the residual method, which allocated the discount of a multiple deliverable arrangement among the delivered items. Under the guidance, entities will be required to allocate the total consideration to all deliverables at inception using the relative selling price and to allocate any discount in the arrangement proportionally to each deliverable based on each deliverable’s selling price. ASU 2009-13 is effective for revenue arrangements that we enter into or materially modify on or after January 1, 2011. We do not expect the adoption to have a material impact to our consolidated financial condition or results of operation.

Derivatives and Hedging – Scope Exception Related to Embedded Credit Derivatives (ASU 2010-11)

In March 2010, the FASB issued ASU 2010-11, which clarifies that the transfer of credit risk that is only in the form of subordination of one financial instrument to another financial instrument (such as the subordination of one beneficial interest to another tranche of a securitization) is an embedded derivative feature. The embedded derivative feature should not be subject to potential bifurcation or separate accounting under ASC 815, Derivatives and Hedging. In addition, the ASU provides guidance on whether other embedded credit derivatives in financial instruments are subject to bifurcation and separate accounting. ASU 2010-11 will be effective for us on July 1, 2010, and we do not expect the adoption to have a material impact on our consolidated financial condition or results of operation.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20)

In July 2010, the FASB issued ASU 2010-20, which requires expanded disclosures related to the credit quality of finance receivables and loans. This disclosure will be effective for us during the December 31, 2010, reporting period. The ASU also requires a rollforward of the allowance for loan losses for each reporting period, which will be effective for us during the March 31, 2011, reporting period. Since the guidance relates only to disclosures, adoption will not have a material effect on our consolidated financial condition or results of operation.

2.	Discontinued and Held-for-sale Operations

Discontinued Operations

During 2009, we committed to sell certain operations of ResCap’s International Business Group (IBG). These operations include residential mortgage loan origination, acquisition, servicing, asset management, sale, and securitizations in the United Kingdom and continental Europe (the Netherlands and Germany). During the three months ended June 30, 2010, we classified the U.K. operations as discontinued. The continental Europe operations met the discontinued operations criteria during the three months ended December 31, 2009. We expect to complete the sale of these operations during 2010.

During 2009, we committed to sell the U.S. consumer property and casualty insurance business of our Insurance operations. These operations provided vehicle and home insurance in the United States through a number of distribution channels including independent agents, affinity groups, and the internet. The sale of our U.S. consumer property and casualty insurance business was completed during the first quarter of 2010. Additionally, during 2009, we committed to sell the U.K. consumer property and casualty insurance business. We expect to complete the sale during 2010.

During the three months ended June 30, 2010, we ceased to operate at our International Automotive Finance operations in Australia and Russia and classified them as discontinued.

During 2009, we committed to sell certain operations of our International Automotive Finance operations including our Argentina, Poland, and Ecuador operations and our Masterlease operations in Australia, Belgium, France, Italy, Mexico, the Netherlands, Poland, and the United Kingdom. Our Masterlease operations provide full-service individual leasing and fleet leasing products including maintenance, fleet, and accident management services as well as fuel programs, short-term vehicle rental, and title and licensing services. As of December 31, 2009, the sales of the Masterlease operations in Italy, Mexico, and the Netherlands were completed. During the three months ended June 30, 2010, we completed the sale of our Poland operations and our Masterlease operations in Australia, Poland, Belgium, and France. In July 2010, we completed the sale of our Argentina operations. We expect to complete the sale of our Ecuador operations and Masterlease operations in the United Kingdom during 2010.

During 2009, we committed to sell the North American-based factoring business of our Commercial Finance Group. On April 30, 2010, the sale of the North American-based factoring business was completed.

We classified these operations as discontinued operations using generally accepted accounting principles in the United States of America, as the associated operations and cash flows will be eliminated from our ongoing operations and we will not have any significant continuing involvement in their operations after the respective sale transactions. For all periods presented, all of the operating results for these operations were removed from continuing operations and are presented separately as discontinued operations, net of tax. The Notes to the Consolidated Financial Statements were adjusted to exclude discontinued operations unless otherwise noted.

The pretax income or loss recognized through June 30, 2010, for the discontinued operations, including the direct costs to transact a sale, could differ from the ultimate sales price due to the fluidity of ongoing negotiations, price volatility, changing interest rates, changing foreign currency rates, and future economic conditions.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Selected financial information of discontinued operations is summarized below.


	Three months ended June 30,						Six months ended June 30,
($ in millions)	2010			2009			2010			2009
Select Mortgage operations
Total net revenue (loss)	$	16		$	(576	)	$	44		$	(586	)
Pretax income (loss) including direct costs to transact a sale		89			(638	)		102			(770	)
Tax (benefit) expense		(9	)		1			(8	)		—
Select Insurance operations
Total net revenue	$	61		$	352		$	300		$	754
Pretax (loss) including direct costs to transact a sale (a)		(6	)		(575	)		(6	)		(552	)
Tax (benefit) expense		(5	)		11			(1	)		14
Select International operations
Total net revenue	$	36		$	87		$	73		$	162
Pretax income including direct costs to transact a sale (a)		48			7			58			2
Tax (benefit) expense		(6	)		4			1			4
Select Commercial Finance operations
Total net revenue	$	3		$	8		$	11		$	15
Pretax (loss) income including direct costs to transact a sale (a)		(3	)		(2	)		7			(8	)
Tax (benefit)		(4	)		—			—			—

(a)	Includes certain income tax activity recognized by our Corporate and Other operations.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Held-for-sale Operations

All of our discontinued operations were classified as held-for-sale except for our International Automotive Finance operations in Australia and Russia. During the three months ended June 30, 2010, we also classified certain international insurance operations that are part of our Insurance operations as held-for-sale. Since these operations did not qualify as discontinued operations, the results are reflected as a component of continuing operations. No impairment was recognized to present these held-for-sale operations at the lower of cost or fair value less costs to sell. We expect to complete the sale of these insurance operations within the next twelve months. The assets and liabilities held-for-sale at June 30, 2010, are summarized below.


($ in millions)	Select Mortgage operations (a)			Select Insurance operations (b)			Select International operations (c)			Total held-for-sale operations
Assets
Cash and cash equivalents
Noninterest bearing	$	63		$	14		$	49		$	126
Interest bearing		339			3			5			347

Total cash and cash equivalents		402			17			54			473
Investment securities — available-for-sale		—			466			—			466
Loans held-for-sale		180			—			—			180
Finance receivables and loans, net of unearned income
Consumer ($8,398 fair value elected)		10,399			—			303			10,702
Allowance for loan losses		(17	)		—			(3	)		(20	)

Total finance receivables and loans, net		10,382			—			300			10,682
Investment in operating leases, net		—			—			369			369
Premiums receivable and other insurance assets		—			154			—			154
Other assets		512			135			43			690
Impairment on assets of held-for-sale operations		(606	)		(210	)		(159	)		(975	)

Total assets	$	10,870		$	562		$	607		$	12,039

Liabilities
Debt
Short-term borrowings	$	—		$	—		$	38		$	38
Long-term debt ($7,857 fair value elected)		9,575			—			169			9,744

Total debt		9,575			—			207			9,782
Interest payable		—			—			2			2
Unearned insurance premiums and service revenue		—			140			—			140
Reserves for insurance losses and loss adjustment expenses		—			358			—			358
Accrued expenses and other liabilities		964			31			60			1,055

Total liabilities	$	10,539		$	529		$	269		$	11,337

(a)	Includes operations of ResCap’s International Business Group in continental Europe and in the United Kingdom. Balances include assets and liabilities that were consolidated beginning on January 1, 2010, due to the adoption of ASU 2009-16 and ASU 2009-17. Refer to Note 1 for additional information.

(b)	Includes the U.K. consumer property and casualty insurance business and certain international insurance operations.

(c)	Includes the International Automotive Finance operations of Argentina, Ecuador, and Masterlease in the United Kingdom.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The assets and liabilities of held-for-sale operations at December 31, 2009, are summarized below.


($ in millions)	Select Mortgage operations (a)			Select Insurance operations (b)			Select International operations (c)			Select Commercial Finance Group operations (d)			Total held-for-sale operations
Assets
Cash and cash equivalents
Noninterest bearing	$	4		$	578		$	33		$	—		$	615
Interest bearing		151			—			11			—			162

Total cash and cash equivalents		155			578			44			—			777
Trading securities		36			—			—			—			36
Investment securities — available-for-sale		—			794			—			—			794
Loans held-for-sale		214			—			—			—			214
Finance receivables and loans, net of unearned income
Consumer		2,650			—			400			—			3,050
Commercial		—			—			246			233			479
Notes receivable from General Motors		—			—			14			—			14
Allowance for loan losses		(89	)		—			(11	)		—			(100	)

Total finance receivables and loans, net		2,561			—			649			233			3,443
Investment in operating leases, net		—			—			885			—			885
Mortgage servicing rights		(26	)		—			—			—			(26	)
Premiums receivable and other insurance assets		—			1,126			—			—			1,126
Other assets		512			176			135			—			823
Impairment on assets of held-for-sale operations		(903	)		(231	)		(324	)		(30	)		(1,488	)

Total assets	$	2,549		$	2,443		$	1,389		$	203		$	6,584

Liabilities
Debt
Short-term borrowings	$	—		$	34		$	57		$	—		$	91
Long-term debt		1,749			—			237			—			1,986

Total debt		1,749			34			294			—			2,077
Interest payable		3			—			1			—			4
Unearned insurance premiums and service revenue		—			517			—			—			517
Reserves for insurance losses and loss adjustment expenses		—			1,471			—			—			1,471
Accrued expenses and other liabilities		430			84			128			187			829

Total liabilities	$	2,182		$	2,106		$	423		$	187		$	4,898

(a)	Includes the operations of ResCap’s International Business Group in continental Europe and in the United Kingdom.

(b)	Includes the U.S. and U.K. consumer property and casualty insurance businesses.

(c)	Includes the International Automotive Finance operations of Argentina, Ecuador, and Poland and Masterlease in Australia, Belgium, France, Poland, and the United Kingdom.

(d)	Includes the North American-based factoring business of our Commercial Finance Group.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Recurring Fair Value

The following tables display the assets and liabilities of our held-for-sale operations measured at fair value on a recurring basis including financial instruments where we elected the fair value option. We often economically hedge the fair value change of our assets or liabilities with derivatives and other financial instruments. The tables below display the hedges separately from the hedged items; therefore, they do not directly display the impact of our risk management activities. Refer to Note 18 for descriptions of valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to these models, and significant assumptions used.


	Recurring fair value measurements
June 30, 2010 ($ in millions)	Level 1		Level 2			Level 3			Total
Assets
Investment securities
Available-for-sale securities
Debt securities
Foreign government	$	323	$	—		$	—		$	323
Other		—		143			—			143

Total debt securities		323		143			—			466
Consumer mortgage finance receivables and loans, net of unearned income (a)		—		—			8,398			8,398
Other assets
Fair value of derivative contracts in receivable position
Interest rate contracts		—		7			—			7
Foreign currency contracts		—		49			—			49

Total fair value of derivative contracts in receivable position		—		56			—			56

Total assets	$	323	$	199		$	8,398		$	8,920

Liabilities
Secured debt
On-balance sheet securitization debt (a)	$	—	$	—		$	(7,857	)	$	(7,857	)
Accrued expenses and other liabilities
Fair value of derivative contracts in liability position
Interest rate contracts		—		(774	)		—			(774	)

Total liabilities	$	—	$	(774	)	$	(7,857	)	$	(8,631	)

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

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	Recurring fair value measurements
December 31, 2009 ($ in millions)	Level 1		Level 2			Level 3			Total
Assets
Trading securities
Mortgage-backed
Residential	$	—	$	—		$	36		$	36

Total trading securities		—		—			36			36
Investment securities
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies		243		2			—			245
States and political subdivisions		—		24			—			24
Foreign government		329		—			—			329
Corporate debt securities		—		7			—			7
Other		—		189			—			189

Total debt securities		572		222			—			794
Mortgage servicing rights		—		—			(26	)		(26	)
Other assets
Interests retained in financial asset sales		—		—			153			153
Fair value of derivative contracts in receivable position
Interest rate contracts		—		60			—			60

Total assets	$	572	$	282		$	163		$	1,017

Liabilities
Accrued expenses and other liabilities
Fair value of derivative contracts in liability position
Interest rate contracts	$	—	$	(40	)	$	—		$	(40	)

Total liabilities	$	—	$	(40	)	$	—		$	(40	)

The following tables present the reconciliation for all Level 3 assets and liabilities of our held-for-sale operations measured at fair value on a recurring basis. We often economically hedge the fair value change of our assets or liabilities with derivatives and other financial instruments. The Level 3 items presented below may be hedged by derivatives and other financial instruments that are classified as Level 1 or Level 2. Thus, the following tables do not fully reflect the impact of our risk management activities.


	Level 3 recurring fair value measurements
($ in millions)	Fair value as of April 1, 2010			Net realized/unrealized gains included in earnings (a)		Purchases, issuances, and settlements, net			Fair value as of June 30, 2010			Net unrealized gains included in earnings still held as of June 30, 2010 (a)
Assets
Consumer mortgage finance receivables and loans, net of unearned income (b)	$	9,180		$	201	$	(983	)	$	8,398		$	71

Total assets	$	9,180		$	201	$	(983	)	$	8,398		$	71

Liabilities
Secured debt
On-balance sheet securitization debt (b)	$	(8,822	)	$	59	$	906		$	(7,857	)	$	85

Total liabilities	$	(8,822	)	$	59	$	906		$	(7,857	)	$	85

(a)	Reported as income (loss) from discontinued operations, net of tax, in the Consolidated Statement of Income.

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

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	Level 3 recurring fair value measurements
($ in millions)	Fair value as of January 1, 2010			Net realized/unrealized gains included in earnings (a)		Purchases, issuances, and settlements, net			Fair value as of June 30, 2010			Net unrealized gains included in earnings still held as of June 30, 2010 (a)
Assets
Trading securities
Mortgage-backed
Residential	$	36		$	—	$	(36	)	$	—		$	—

Total trading securities		36			—		(36	)		—			—
Consumer mortgage finance receivables and loans, net of unearned income (b)		—			415		7,983			8,398			149
Mortgage servicing rights		(26	)		—		26			—			—
Other assets
Interests retained in financial asset sales		153			—		(153	)		—			—

Total assets	$	163		$	415	$	7,820		$	8,398		$	149

Liabilities
Secured debt
On-balance sheet securitization debt (b)	$	—		$	197	$	(8,054	)	$	(7,857	)	$	255

Total liabilities	$	—		$	197	$	(8,054	)	$	(7,857	)	$	255

(a)	Reported as income (loss) from discontinued operations, net of tax, in the Consolidated Statement of Income.

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

3.	Other Income, Net of Losses

Details of other income, net of losses, were as follows.


	Three months ended June 30,						Six months ended June 30,
($ in millions)	2010			2009			2010			2009
Mortgage processing fees and other mortgage income	$	41		$	9		$	94		$	15
Remarketing fees		36			38			67			71
Late charges and other administrative fees (a)		35			33			72			72
Full-service leasing fees		13			33			41			64
Other equity method investments		13			4			25			8
Real estate services, net		2			(224	)		9			(258	)
Fair value adjustment on certain derivatives (b)		(2	)		96			(58	)		(61	)
Change due to fair value option elections, net (c)		(56	)		(63	)		(129	)		(93	)
Other, net		108			(39	)		154			(141	)

Total other income, net of losses	$	190		$	(113	)	$	275		$	(323	)

(a)	Includes nonmortgage securitization fees.

(b)	Refer to Note 15 for a description of derivative instruments and hedging activities.

(c)	Refer to Note 18 for a description of fair value option elections.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

4.	Other Operating Expenses

Details of other operating expenses were as follows.


	Three months ended June 30,				Six months ended June 30,
($ in millions)	2010		2009		2010		2009
Insurance commissions	$	150	$	155	$	296	$	314
Technology and communications expense		134		152		273		301
Mortgage representation and warranty expense, net		97		237		146		410
Professional services		63		119		120		205
Advertising and marketing		50		36		74		74
Vehicle remarketing and repossession		48		57		102		105
State and local non-income taxes		36		36		61		55
Lease and loan administration		35		43		66		81
Rent and storage		26		23		51		51
Regulatory and licensing fees		25		29		55		49
Premises and equipment depreciation		20		20		38		44
Restructuring expenses		14		—		56		—
Full-service leasing vehicle maintenance costs		6		32		36		65
Other		118		137		337		327

Total other operating expenses	$	822	$	1,076	$	1,711	$	2,081

5.	Trading Securities

The fair value for our portfolio of trading securities by type was as follows.


($ in millions)	June 30, 2010		December 31, 2009
Trading securities
U.S. Treasury	$	75	$	—
Mortgage-backed
Residential		47		143
Asset-backed		87		596

Total trading securities	$	209	$	739

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

6.	Investment Securities

Our portfolio of securities includes bonds, equity securities, asset- and mortgage-backed securities, notes, interests in securitization trusts, and other investments. The cost, fair value, and gross unrealized gains and losses on available-for-sale and held-to-maturity securities were as follows.


	June 30, 2010									December 31, 2009
	Cost		Gross unrealized					Fair value		Cost		Gross unrealized					Fair value
($ in millions)	Cost		gains		losses			Fair value		Cost		gains		losses			Fair value
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	3,982	$	51	$	—		$	4,033	$	3,501	$	15	$	(6	)	$	3,510
States and political subdivisions		7		—		—			7		779		36		(4	)		811
Foreign government		1,195		32		(2	)		1,225		1,161		20		(8	)		1,173
Mortgage-backed
Residential (a)		3,451		69		(22	)		3,498		3,404		76		(19	)		3,461
Asset-backed		1,686		15		(1	)		1,700		1,000		7		(2	)		1,005
Corporate debt		1,252		52		(2	)		1,302		1,408		74		(9	)		1,473
Other		1		—		—			1		47		—		—			47

Total debt securities (b)		11,574		219		(27	)		11,766		11,300		228		(48	)		11,480
Equity securities		1,066		1		(123	)		944		631		52		(8	)		675

Total available-for-sale securities (c)	$	12,640	$	220	$	(150	)	$	12,710	$	11,931	$	280	$	(56	)	$	12,155

Held-to-maturity securities
Total held-to-maturity securities	$	—	$	—	$	—		$	—	$	3	$	—	$	—		$	3

(a)	Residential mortgage-backed securities include agency-backed bonds totaling $2,271 million and $2,248 million at June 30, 2010, and December 31, 2009, respectively.

(b)	In connection with certain borrowings and letters of credit relating to certain assumed reinsurance contracts, $153 million and $164 million of primarily U.K. Treasury securities were pledged as collateral as of June 30, 2010, and December 31, 2009, respectively.

(c)	Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $16 million and $15 million at June 30, 2010, and December 31, 2009, respectively.

The maturity distribution of available-for-sale debt securities outstanding is summarized in the following tables. Prepayments may cause actual maturities to differ from scheduled maturities.


	Total				Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years (a)
June 30, 2010 ($ in millions)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Fair value of available-for-sale debt securities (b)
U.S. Treasury and federal agencies	$	4,033	1.5	%	$	172	0.8	%	$	3,800	1.5	%	$	61	3.3	%	$	—	—	%
States and political subdivisions		7	5.9			—	—			3	6.2			—	—			4	5.7
Foreign government		1,225	3.9			87	0.5			925	4.2			213	4.4			—	—
Mortgage-backed
Residential		3,498	4.3			—	—			8	5.3			64	4.5			3,426	4.3
Asset-backed		1,700	2.5			21	4.7			1,197	2.4			360	2.7			122	3.4
Corporate debt		1,302	5.3			91	5.9			622	5.0			542	5.5			47	5.8
Other		1	—			—	—			—	—			—	—			1	—

Total available-for-sale debt securities	$	11,766	3.2	%	$	371	2.2	%	$	6,555	2.4	%	$	1,240	4.3	%	$	3,600	4.2	%

Amortized cost of available-for-sale debt securities	$	11,574			$	370			$	6,455			$	1,199			$	3,550

(a)	Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment options.

(b)	Yields on tax-exempt obligations are computed on a tax-equivalent basis.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	Total				Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years (a)
December 31, 2009 ($ in millions)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Fair value of available-for-sale debt securities (b)
U.S. Treasury and federal agencies	$	3,510	1.9	%	$	103	1.1	%	$	3,390	1.9	%	$	17	4.1	%	$	—	—	%
States and political subdivisions		811	7.0			9	7.0			175	7.2			147	7.0			480	6.9
Foreign government		1,173	3.8			66	1.7			872	3.8			229	4.5			6	5.3
Mortgage-backed
Residential		3,461	6.5			—	—			2	6.5			36	13.0			3,423	6.4
Asset-backed		1,005	2.5			34	5.2			735	2.3			186	2.6			50	3.9
Corporate debt		1,473	5.2			283	3.4			575	5.8			570	5.4			45	6.9
Other		47	3.6			—	—			32	3.4			15	4.0			—	—

Total available-for-sale debt securities	$	11,480	4.3	%	$	495	2.8	%	$	5,781	2.8	%	$	1,200	5.2	%	$	4,004	6.5	%

Amortized cost of available-for-sale debt securities	$	11,300			$	473			$	5,728			$	1,169			$	3,930

(a)	Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment options.

(b)	Yields on tax-exempt obligations are computed on a tax-equivalent basis.

Certain investment securities with an original maturity of 90 days or less are classified as cash equivalents and are composed primarily of money market accounts and short-term securities. The carrying value of cash equivalents approximates fair value. The balance of cash equivalents was $934 million and $1.8 billion at June 30, 2010, and December 31, 2009, respectively.

The following table presents gross gains and losses realized upon the sales of available-for-sale securities and other-than-temporary impairment.


	Three months ended June 30,						Six months ended June 30,
($ in millions)	2010			2009			2010			2009
Gross realized gains	$	125		$	91		$	277		$	140
Gross realized losses		(13	)		(34	)		(21	)		(63	)
Other-than-temporary impairment		(1	)		(1	)		(1	)		(47	)

Net realized gains	$	111		$	56		$	255		$	30

The following table presents interest and dividends on available-for-sale securities.


	Three months ended June 30,				Six months ended June 30,
($ in millions)	2010		2009		2010		2009
Taxable interest	$	84	$	45	$	173	$	93
Taxable dividends		4		3		8		3
Interest and dividends exempt from U.S. federal income tax		3		7		10		17

Total interest and dividends	$	91	$	55	$	191	$	113

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The table below summarizes available-for-sale securities in an unrealized loss position in accumulated other comprehensive income. Based on the methodology described below that was applied to these securities, we believe that the unrealized losses relate to factors other than credit losses in the current market environment. As of June 30, 2010, we do not have the intent to sell the debt securities with an unrealized loss position in accumulated other comprehensive income, and it is not more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. As of June 30, 2010, we had the ability and intent to hold equity securities with an unrealized loss position in accumulated other comprehensive income. As a result, we believe that the securities with an unrealized loss position in accumulated other comprehensive income are not considered to be other-than-temporarily impaired as of June 30, 2010.


	June 30, 2010										December 31, 2009
	Less than 12 months					12 months or longer					Less than 12 months							12 months or longer
($ in millions)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	3	$	—		$	—	$	—		$	1,430	$	(6	)	$	—	$	—
States and political subdivisions		—		—			—		—			82		(2	)		8		(2	)
Foreign government securities		96		(2	)		—		—			536		(8	)		—		—
Mortgage-backed securities		637		(20	)		10		(2	)		811		(14	)		6		(5	)
Asset-backed securities		77		(1	)		8		—			202		(1	)		22		(1	)
Corporate debt securities		64		(1	)		20		(1	)		47		(1	)		120		(8	)
Other		—		—			—		—			7		—			—		—

Total temporarily impaired debt securities		877		(24	)		38		(3	)		3,115		(32	)		156		(16	)
Temporarily impaired equity securities		882		(123	)		—		—			115		(5	)		52		(3	)

Total temporarily impaired available-for-sale securities	$	1,759	$	(147	)	$	38	$	(3	)	$	3,230	$	(37	)	$	208	$	(19	)

We employ a systematic methodology that considers available evidence in evaluating potential other-than-temporary impairment of our investments classified as available-for-sale. If the cost of an investment exceeds its fair value, we evaluate, among other factors, the magnitude and duration of the decline in fair value, the financial health of and business outlook for the issuer, changes to the rating of the security by a rating agency, the performance of the underlying assets for interests in securitized assets, whether we intend to sell the investment, and whether it is more likely than not we will be required to sell the debt security before recovery of its amortized cost basis. We had other-than-temporary impairment write-downs of $1 million for both the three months and six months ended June 30, 2010, compared to $1 million and $47 million for the three months and six months ended June 30, 2009, respectively. The $1 million impairment for the three months ended June 30, 2010, related to corporate debt securities that we have the intent to sell and was accordingly recognized in earnings.

7.	Loans Held-for-sale

The composition of loans held-for-sale was as follows.


	June 30, 2010						December 31, 2009
($ in millions)	Domestic		Foreign		Total		Domestic		Foreign		Total
Consumer
Automobile	$	1,298	$	167	$	1,465	$	9,417	$	184	$	9,601
1st Mortgage		7,771		152		7,923		9,269		530		9,799
Home equity		989		—		989		1,068		—		1,068

Total consumer (a)		10,058		319		10,377		19,754		714		20,468
Commercial
Commercial and industrial
Other		—		5		5		—		157		157

Total loans held-for-sale	$	10,058	$	324	$	10,382	$	19,754	$	871	$	20,625

(a)	Domestic residential mortgages include $4.2 billion and $5.5 billion at fair value as a result of fair value option elections as of June 30, 2010, and December 31, 2009, respectively. Refer to Note 18 for additional information.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

8.	Finance Receivables and Loans, Net of Unearned Income

The composition of finance receivables and loans, net of unearned income outstanding, before allowance for loan losses, was as follows.


	June 30, 2010						December 31, 2009
($ in millions)	Domestic		Foreign		Total		Domestic		Foreign		Total
Consumer
Automobile	$	26,450	$	15,265	$	41,715	$	12,514	$	17,731	$	30,245
1st Mortgage		8,435		939		9,374		7,960		405		8,365
Home equity		4,257		—		4,257		4,238		1		4,239

Total consumer (a)		39,142		16,204		55,346		24,712		18,137		42,849

Commercial
Commercial and industrial
Automobile		21,776		8,107		29,883		19,601		7,035		26,636
Mortgage		1,803		75		1,878		1,572		96		1,668
Resort finance		644		—		644		843		—		843
Other		1,778		401		2,179		1,845		437		2,282
Commercial real estate
Automobile		2,090		208		2,298		2,008		221		2,229
Mortgage		5		118		123		121		162		283

Total commercial		28,096		8,909		37,005		25,990		7,951		33,941

Notes receivable from General Motors		—		365		365		3		908		911

Total finance receivables and loans (b)	$	67,238	$	25,478	$	92,716	$	50,705	$	26,996	$	77,701

(a)	Residential mortgages include $2.3 billion and $1.3 billion at fair value as a result of fair value option elections as of June 30, 2010, and December 31, 2009, respectively. Refer to Note 18 for additional information.

(b)	Totals are net of unearned income of $2.6 billion and $2.5 billion at June 30, 2010, and December 31, 2009, respectively.

The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans, net of unearned income.


	Three months ended June 30,
	2010									2009
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total
Allowance at April 1,	$	1,754		$	726		$	2,480		$	2,758		$	887		$	3,645
Provision for loan losses		216			4			220			729			388			1,117
Charge-offs
Domestic		(228	)		(91	)		(319	)		(835	)		(305	)		(1,140	)
Foreign		(50	)		(49	)		(99	)		(549	)		(9	)		(558	)

Total charge-offs		(278	)		(140	)		(418	)		(1,384	)		(314	)		(1,698	)

Recoveries
Domestic		78			5			83			59			4			63
Foreign		19			9			28			15			—			15

Total recoveries		97			14			111			74			4			78

Net charge-offs		(181	)		(126	)		(307	)		(1,310	)		(310	)		(1,620	)
Other		(10	)		(6	)		(16	)		130			29			159

Allowance at June 30,	$	1,779		$	598		$	2,377		$	2,307		$	994		$	3,301

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	Six months ended June 30,
	2010									2009
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total
Allowance at January 1,	$	1,664		$	781		$	2,445		$	2,536		$	897		$	3,433
Provision for loan losses		344			22			366			1,294			569			1,863
Charge-offs
Domestic		(546	)		(152	)		(698	)		(1,240	)		(473	)		(1,713	)
Foreign		(111	)		(53	)		(164	)		(615	)		(18	)		(633	)

Total charge-offs		(657	)		(205	)		(862	)		(1,855	)		(491	)		(2,346	)

Recoveries
Domestic		185			9			194			110			7			117
Foreign		36			9			45			29			1			30

Total recoveries		221			18			239			139			8			147

Net charge-offs		(436	)		(187	)		(623	)		(1,716	)		(483	)		(2,199	)
Addition of allowance due to change in accounting principle (a)		222			—			222			—			—			—
Other		(15	)		(18	)		(33	)		193			11			204

Allowance at June 30,	$	1,779		$	598		$	2,377		$	2,307		$	994		$	3,301

(a)	Effect of change in accounting principle due to adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.

The following tables present information about our impaired finance receivables and loans.


	June 30, 2010						December 31, 2009
($ in millions)	Consumer		Commercial		Total		Consumer		Commercial		Total
Impaired finance receivables and loans
With an allowance	$	365	$	1,194	$	1,559	$	252	$	1,760	$	2,012
Without an allowance		33		342		375		16		296		312

Total impaired loans	$	398	$	1,536	$	1,934	$	268	$	2,056	$	2,324

Allowance for impaired loans	$	102	$	488	$	590	$	80	$	488	$	568


	Three months ended June 30,
	2010						2009
($ in millions)	Consumer		Commercial		Total		Consumer		Commercial		Total
Average balance of impaired loans	$	367	$	1,694	$	2,061	$	636	$	2,726	$	3,362
Interest income recognized on impaired loans	$	4	$	2	$	6	$	8	$	6	$	14


	Six months ended June 30,
	2010						2009
($ in millions)	Consumer		Commercial		Total		Consumer		Commercial		Total
Average balance of impaired loans	$	327	$	1,817	$	2,144	$	511	$	2,721	$	3,232
Interest income recognized on impaired loans	$	7	$	4	$	11	$	16	$	20	$	36

At June 30, 2010, and December 31, 2009, commercial commitments to lend additional funds to debtors owing receivables whose terms had been modified in troubled debt restructuring were $15 million and $12 million, respectively.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

9.	Off-balance Sheet Securitizations

We sell pools of automotive and residential mortgage loans via securitization transactions, which provide permanent funding and facilitates asset and liability management. In executing the securitization transactions, we typically sell the pools to wholly owned special-purpose entities (SPEs), which then sell the loans to a separate, transaction-specific, bankruptcy-remote SPE (a securitization trust) for cash, servicing rights, and in some transactions, retained interests. The securitization trust issues and sells interests to investors that are collateralized by the secured loans and entitle the investors to specified cash flows generated from the securitized loans.

Our securitization transactions are accounted for under the requirements of ASC 810, Consolidation, and ASC 860, Transfers and Servicing. ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amended ASC 810 and ASC 860, became effective on January 1, 2010, and required the prospective consolidation of certain securitization assets and liabilities that were previously held off-balance sheet. We reflected our economic interest in these newly consolidated structures primarily through loans and secured debt rather than as interests held in off-balance sheet securitization trusts. Refer to Note 1 for additional information related to the adoption of ASU 2009-16 and ASU 2009-17. Refer to Note 19 for additional information related to the consolidation of certain securitization trusts due to the adoption of the new standards.

The following discussion and related information is only applicable to the transfers of finance receivables and loans that qualify for off-balance sheet treatment.

Each securitization is governed by various legal documents that limit and specify the activities of the securitization vehicle. The securitization vehicle is generally allowed to acquire the loans being sold to it, to issue interests to investors to fund the acquisition of the loans, and to enter into derivatives or other yield maintenance contracts to hedge or mitigate certain risks related to the asset pool or debt securities. Additionally, the securitization vehicle is required to service the assets it holds and the debt or interest it issues. A servicer appointed within the underlying legal documents performs these functions. Servicing functions include, but are not limited to, collecting payments from borrowers, performing escrow functions, monitoring delinquencies, liquidating assets, investing funds until distribution, remitting payments to investors, and accounting for and reporting information to investors.

As part of our off-balance sheet securitizations, we typically retain servicing responsibilities and, in some cases, other insignificant retained interests. Accordingly, our servicing responsibilities result in continued involvement in the form of servicing the underlying asset (primary servicing) and/or servicing the bonds resulting from the securitization transactions (master servicing) through servicing platforms. Certain securitizations require the servicer to advance scheduled principal and interest payments due on the pool regardless of whether they are received from borrowers. Accordingly, we are required to provide these servicing advances when applicable. Typically, we conclude that the fee we are paid for servicing retail automotive finance receivables represents adequate compensation, and consequently, we do not recognize a servicing asset or liability. Refer to Note 1 to the Consolidated Financial Statements in our 2009 Annual Report on Form 10-K regarding the valuation of servicing rights.

Subsequent to the adoption of ASU 2009-16 and ASU 2009-17 as of January 1, 2010, we generally do not hold significant or potentially significant retained interests in our securitization trusts that qualify for off-balance sheet treatment under ASU 2009-17.

Generally, the assets initially transferred into the securitization vehicle are the sole funding source to the investors in the securitization trust and the various other parties that perform services for the transaction, such as the servicer or the trustee. In certain transactions, a liquidity provider or facility may exist to provide temporary liquidity to the structure. The liquidity provider generally is reimbursed prior to other parties in subsequent distribution periods. Bond insurance may also exist to cover certain shortfalls to certain investors. As noted above, in certain securitizations, the servicer is required to advance scheduled principal and interest payments due on the pool regardless of whether they were received from the borrowers. The servicer is allowed to reimburse itself for these servicing advances. Additionally, certain securitization transactions may allow for the acquisition of additional loans subsequent to the initial loan. Principal collections on other loans and/or the issuance of new interests, such as variable funding notes, generally fund these loans; we are often contractually required to invest in these new interests. Lastly, we provide certain guarantees as discussed in Note 30 to the Consolidated Financial Statements in our 2009 Annual Report on Form 10-K.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The investors and/or securitization trusts have no recourse to us with the exception of market customary representation and warranty repurchase provisions and, in certain transactions, early payment default provisions. Representation and warranty repurchase provisions generally require us to repurchase loans to the extent it is subsequently determined that the loans were ineligible or were otherwise defective at the time of sale. Due to market conditions, early payment default provisions are included in certain securitization transactions that require us to repurchase loans if the borrower is delinquent in making certain specific payments subsequent to the sale.

We generally hold certain conditional repurchase options that allow us to repurchase assets from the securitization. The majority of the securitizations provide us, as servicer, with a call option that allows us to repurchase the remaining assets or outstanding debt once the asset pool reaches a predefined level, which represents the point where servicing is burdensome rather than beneficial. Such an option is referred to as a clean-up call. As servicer, we are able to exercise this option at our discretion anytime after the asset pool size falls below the predefined level. The repurchase price for the loans is typically par plus accrued interest. Additionally, we may hold other conditional repurchase options that allow us to repurchase the asset if certain events, outside our control, are met. The typical conditional repurchase option is a delinquent loan repurchase option that gives us the option to purchase the loan if it exceeds a certain prespecified delinquency level. We have complete discretion regarding when or if we will exercise these options, but generally, we would do so when it is in our best interest.

The loans sold into off-balance sheet securitization transactions are removed from our balance sheet. The assets obtained from the securitization are primarily reported as cash, servicing rights, or (if retained) retained interests. We elected fair value treatment for our existing mortgage servicing rights portfolio. Liabilities incurred as part of the transaction, such as representation and warranty provisions, are recorded at fair value at the time of sale and are reported as accrued expenses and other liabilities on our Consolidated Balance Sheet. Upon the sale of the loans, we recognize a gain or loss on sale for the difference between the assets recognized, the assets derecognized, and the liabilities recognized as part of the transaction.

The following summarizes the pretax gains and losses recognized on the types of loans sold into off-balance sheet securitization transactions.


	Three months ended June 30,				Six months ended June 30,
($ in millions)	2010		2009		2010		2009
Retail finance receivables	$	—	$	—	$	—	$	—
Automotive wholesale loans		—		38		—		102
Mortgage loans		1		—		4		(4	)

Total pretax gain on off-balance sheet activities	$	1	$	38	$	4	$	98

The following summarizes the type and amount of loans held by the securitization trusts in transactions that qualified for off-balance sheet treatment.


($ in billions)	June 30, 2010		December 31, 2009
Retail finance receivables	$	—	$	7.5
Automotive wholesale loans		—		—
Mortgage loans (a)		80.2		99.6

Total off-balance sheet activities	$	80.2	$	107.1

(a)	Excludes $168 million and $237 million of delinquent loans held by securitization trusts as of June 30, 2010, and December 31, 2009, respectively, that we have the option to repurchase as they are included in consumer finance receivables and loans and mortgage loans held-for-sale.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

10.

Mortgage Servicing Rights

The following tables summarize activity related to MSRs carried at fair value. Sufficient market inputs exist to determine the fair value of our recognized servicing assets and servicing liabilities.


	Three months ended June 30,
($ in millions)	2010			2009
Estimated fair value at April 1,	$	3,543		$	2,587
Additions obtained from sales of financial assets		167			254
Additions from purchases of servicing assets		20			6
Subtractions from sales of servicing assets		—			(19	)
Changes in fair value
Due to changes in valuation inputs or assumptions used in the valuation model		(543	)		1,035
Other changes in fair value (a)		(206	)		(352	)
Other changes that affect the balance		2			(2	)

Estimated fair value at June 30,	$	2,983		$	3,509

(a)	Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and the economic runoff of the portfolio.


	Six months ended June 30,
($ in millions)	2010			2009
Estimated fair value at January 1,	$	3,554		$	2,848
Additions obtained from sales of financial assets		369			373
Additions from purchases of servicing assets		21			6
Subtractions from sales of servicing assets		—			(19	)
Changes in fair value
Due to changes in valuation inputs or assumptions used in the valuation model		(494	)		995
Other changes in fair value (a)		(450	)		(692	)
Decrease due to change in accounting principle (b)		(19	)		—
Other changes that affect the balance		2			(2	)

Estimated fair value at June 30,	$	2,983		$	3,509

(a)	Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and the economic runoff of the portfolio.

(b)	The effect of change in accounting principle was due to the adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.

We pledged MSRs of $1.5 billion as collateral for borrowings at both June 30, 2010, and December 31, 2009.

Changes in fair value due to changes in valuation inputs or assumptions used in the valuation models include all changes due to revaluation by a model or by a benchmarking exercise. Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and the economic runoff of the portfolio, foreign currency translation adjustments, and the extinguishment of MSRs related to the exercise of clean-up calls of securitization transactions.

Key assumptions we use in valuing our MSRs are as follows.


	June 30,
	2010	2009
Range of prepayment speeds	9.2–42.0%	0.7–49.0%
Range of discount rates	2.9–24.8%	3.3–130.3%

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The primary risk of our servicing rights is interest rate risk and the resulting impact on prepayments. A significant decline in interest rates could lead to higher-than-expected prepayments, which could reduce the value of the MSRs. We have economically hedged the income statement impact of these risks with both derivative and nonderivative financial instruments. These instruments include interest rate swaps, caps and floors, options to purchase these items, futures, and forward contracts and/or purchasing or selling U.S. Treasury and principal-only securities. The net fair value of derivative financial instruments used to mitigate these risks amounted to $855 million and $443 million at June 30, 2010 and 2009, respectively. The changes in fair value of the derivative financial instruments amounted to a gain of $790 million and a loss of $902 million for the six months ended June 30, 2010 and 2009, respectively, and were included in servicing asset valuation and hedge activities, net, in the Consolidated Statement of Income.

The components of mortgage servicing fees were as follows.


	Three months ended June 30,				Six months ended June 30,
($ in millions)	2010		2009		2010		2009
Contractual servicing fees, net of guarantee fees and including subservicing	$	266	$	275	$	524	$	553
Late fees		19		21		38		45
Ancillary fees		43		38		90		74

Total	$	328	$	334	$	652	$	672

Our Mortgage operations that conduct primary and master servicing activities are required to maintain certain servicer ratings in accordance with master agreements entered into with government-sponsored entities. At June 30, 2010, our Mortgage operations were in compliance with the servicer-rating requirements of the master agreements.

11.

Other Assets

The components of other assets were as follows.


($ in millions)	June 30, 2010			December 31, 2009
Property and equipment at cost	$	1,282		$	1,416
Accumulated depreciation		(922	)		(1,080	)

Net property and equipment		360			336
Fair value of derivative contracts in receivable position		4,848			2,654
Restricted cash collections for securitization trusts (a)		2,346			3,654
Servicer advances		2,007			2,180
Restricted cash and cash equivalents		1,966			1,590
Cash reserve deposits held-for-securitization trusts (b)		1,303			1,594
Collateral placed with counterparties		844			1,760
Other accounts receivable		844			573
Debt issuance costs		810			829
Prepaid expenses and deposits		662			749
Goodwill		524			526
Interests retained in financial asset sales		465			471
Investment in used vehicles held-for-sale		450			522
Accrued interest and rent receivable		307			326
Real estate and other investments		270			340
Repossessed and foreclosed assets, net, at lower of cost or fair value		243			336
Other assets		1,397			1,447

Total other assets	$	19,646		$	19,887

(a)	Represents cash collection from customer payments on securitized receivables. These funds are distributed to investors as payments on the related secured debt.

(b)	Represents credit enhancement in the form of cash reserves for various securitization transactions.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The changes in the carrying amounts of goodwill for the periods shown were as follows.


($ in millions)	International Automotive Finance operations		Insurance operations			Total
Goodwill at December 31, 2009	$	469	$	57		$	526
Transfer to assets of discontinued operations held-for-sale		—		6			6
Foreign currency translation effect		—		(8	)		(8	)

Goodwill at June 30, 2010	$	469	$	55		$	524

12.

Deposit Liabilities

Deposit liabilities consisted of the following.


($ in millions)	June 30, 2010		December 31, 2009
Domestic deposits
Noninterest-bearing deposits	$	2,262	$	1,755
NOW and money market checking accounts		7,948		7,213
Certificates of deposit		20,597		19,861
Dealer deposits		1,257		1,041

Total domestic deposits		32,064		29,870

Foreign deposits
Noninterest-bearing deposits		14		—
NOW and money market checking accounts		541		165
Certificates of deposit		2,350		1,555
Dealer deposits		245		166

Total foreign deposits		3,150		1,886

Total deposit liabilities	$	35,214	$	31,756

Noninterest bearing deposits primarily represent third-party escrows associated with our Mortgage operations’ loan servicing portfolio. The escrow deposits are not subject to an executed agreement and can be withdrawn without penalty at any time. At June 30, 2010, and December 31, 2009, certificates of deposit included $5.4 billion and $4.8 billion, respectively, of domestic certificates of deposit in denominations of $100 thousand or more.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

13.

Debt

The following table presents the composition of our debt portfolio at June 30, 2010, and December 31, 2009.


	June 30, 2010						December 31, 2009
($ in millions)	Unsecured		Secured		Total		Unsecured		Secured		Total
Short-term debt
Commercial paper	$	—	$	—	$	—	$	8	$	—	$	8
Demand notes		1,596		—		1,596		1,311		—		1,311
Bank loans and overdrafts		1,789		—		1,789		1,598		—		1,598
Repurchase agreements and other (a)		345		3,324		3,669		348		7,027		7,375

Total short-term debt		3,730		3,324		7,054		3,265		7,027		10,292

Long-term debt
Due within one year		6,203		13,734		19,937		7,429		18,898		26,327
Due after one year (b)		39,453		25,020		64,473		38,331		22,834		61,165

Total long-term debt (c)		45,656		38,754		84,410		45,760		41,732		87,492

Fair value adjustment (d)		795		—		795		529		—		529

Total debt	$	50,181	$	42,078	$	92,259	$	49,554	$	48,759	$	98,313

(a)	Repurchase agreements consist of secured financing arrangements with third parties at our Mortgage operations. Other primarily includes nonbank secured borrowings and notes payable to GM. Refer to Note 17 for additional information.

(b)	Includes $7.4 billion at both June 30, 2010, and December 31, 2009, guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP).

(c)	Secured long-term debt includes $2.2 billion and $1.3 billion at fair value as of June 30, 2010, and December 31, 2009, respectively, as a result of fair value option elections. Refer to Note 18 for additional information.

(d)	Amount represents the hedge accounting adjustment on fixed rate debt.

The following table presents the scheduled maturity of long-term debt at June 30, 2010, assuming that no early redemptions occur. The actual payment of secured debt may vary based on the payment activity of the related pledged assets.


Year ended December 31, ($ in millions)	Unsecured (a)			Secured (b)		Total
2010	$	2,149		$	7,466	$	9,615
2011		9,393			13,279		22,672
2012		12,610			5,923		18,533
2013		1,889			5,725		7,614
2014		1,967			1,723		3,690
2015 and thereafter		21,405			1,706		23,111
Original issue discount (c)		(3,757	)		—		(3,757	)
Troubled debt restructuring concession (d)		—			396		396

Long-term debt		45,656			36,218		81,874
Collateralized borrowings in securitization trusts (e)		—			2,536		2,536

Total long-term debt	$	45,656		$	38,754	$	84,410

(a)	Scheduled maturities of ResCap unsecured long-term debt are as follows: $419 million in 2010; $208 million in 2011; $340 million in 2012; $529 million in 2013; $97 million in 2014; and $112 million in 2015 and thereafter. These maturities exclude ResCap debt held by Ally.

(b)

Scheduled maturities of ResCap secured long-term debt are as follows: $661 million in 2010; $508 million in 2011; $0 million in 2012; $707 million in 2013; $707 million in 2014; and $910 million in 2015 and thereafter. These maturities exclude ResCap debt held by Ally and collateralized borrowings in securitization trusts.

(c)	Scheduled remaining amortization of original issue discount is as follows: $640 million in 2010; $967 million in 2011; $342 million in 2012; $255 million in 2013; $183 million in 2014; and $1,370 million in 2015 and thereafter.

(d)

In the second quarter of 2008, ResCap executed an exchange offer that resulted in a concession being recognized as an adjustment to the carrying value of certain new secured notes. This concession is being amortized over the life of the new notes through a reduction to interest expense using an effective yield methodology. Scheduled remaining amortization of the troubled debt restructuring concession is as follows: $49 million in 2010; $101 million in 2011; $105 million in 2012; $82 million in 2013; $46 million in 2014; and $13 million in 2015 and thereafter.

(e)	Collateralized borrowings in securitization trusts represent mortgage-lending-related debt that is repaid on the principal payments of the underlying assets.

ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following summarizes assets restricted as collateral for the payment of the related debt obligation primarily arising from secured financing arrangements, securitization transactions accounted for as secured borrowings, and repurchase agreements.


	June 30, 2010				December 31, 2009
($ in millions)	Assets		Related secured debt (a)		Assets		Related secured debt (a)
Loans held-for-sale	$	2,646	$	749	$	1,420	$	454
Mortgage assets held-for-investment and lending receivables		2,832		2,509		1,946		1,673
Retail automotive finance receivables (b)		22,436		19,246		19,203		13,597
Wholesale automotive finance receivables		12,095		6,745		16,352		8,565
Investment securities		39		—		63		—
Investment in operating leases, net		5,365		3,711		13,323		9,208
Real estate investments and other assets		3,940		4,141		4,468		5,129
Ally Bank (c)		19,155		4,977		24,276		10,133

Total	$	68,508	$	42,078	$	81,051	$	48,759

(a)	Included as part of secured debt are repurchase agreements of $979 million and $26 million at June 30, 2010, and December 31, 2009, respectively. Assets approximating the value of the debt were pledged as collateral for both periods.

(b)	Included as part of retail automotive finance receivables are $13.3 billion of assets and $8.8 billion of secured debt related to Ally Bank.

(c)

Ally Bank has an advance agreement with the Federal Home Loan Bank of Pittsburgh (FHLB) and access to the Federal Reserve Bank Discount Window. Ally Bank had assets pledged and restricted as collateral to the FHLB and Federal Reserve Bank totaling $15.2 billion and $22.4 billion as of June 30, 2010, and December 31, 2009, respectively. Furthermore, under the advance agreement, the FHLB has a blanket lien on certain Ally Bank assets including approximately $11.6 billion and $11.5 billion in real estate-related finance receivables and loans and $3.2 billion and $2.7 billion in other assets as of June 30, 2010, and December 31, 2009, respectively. Availability under these programs is generally only for the operations of Ally Bank and cannot be used to fund the operations or liabilities of Ally or its subsidiaries.

Funding Facilities

The following table highlights credit capacity under our secured and unsecured funding facilities as of June 30, 2010, and December 31, 2009. We utilize both committed and uncommitted credit facilities. The financial institutions providing the uncommitted facilities are not legally obligated to advance funds under them. The amounts in the outstanding column in the table below are generally included on our Consolidated Balance Sheet.

Total capacity

Unused capacity (a)

Outstanding

($ in billions)

June 30,
2010

Dec 31,
2009

June 30,
2010

Dec 31,
2009

June 30,
2010

Dec 31,
2009

Committed unsecured

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