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 September 30, 2011, 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 þ 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 November 3, 2011, the number of shares outstanding of the Registrant’s common stock was 1,330,970 shares.

ALLY FINANCIAL INC.

INDEX


		Page
Part I — Financial Information
Item 1.	Financial Statements		3
	Condensed Consolidated Statement of Income (unaudited) for the Three and Nine months Ended September 30, 2011 and 2010		3
	Condensed Consolidated Balance Sheet (unaudited) at September 30, 2011 and December 31, 2010		5
	Condensed Consolidated Statement of Changes in Equity (unaudited) for the Nine months Ended September 30, 2011 and 2010		7
	Condensed Consolidated Statement of Cash Flows (unaudited) for the Nine months Ended September 30, 2011 and 2010		8
	Notes to Condensed Consolidated Financial Statements (unaudited)		10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		91
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		158
Item 4.	Controls and Procedures		158
Part II — Other Information			159
Item 1.	Legal Proceedings		159
Item 1A.	Risk Factors		160
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		162
Item 3.	Defaults Upon Senior Securities		162
Item 4.	(Removed and Reserved)		162
Item 5.	Other Information		162
Item 6.	Exhibits		162
Signatures			163
Index of Exhibits			164

Item 1. Financial Statements

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME (unaudited)


	Three months ended September 30,						Nine months ended September 30,
($ in millions)	2011			2010			2011			2010
Financing revenue and other interest income
Interest and fees on finance receivables and loans	$	1,682		$	1,656		$	4,981		$	4,891
Interest on loans held-for-sale		113			153			319			524
Interest on trading securities		4			5			10			12
Interest and dividends on available-for-sale investment securities		103			86			315			275
Interest-bearing cash		14			22			41			54
Operating leases		549			855			1,849			3,029

Total financing revenue and other interest income		2,465			2,777			7,515			8,785
Interest expense
Interest on deposits		184			172			531			485
Interest on short-term borrowings		98			110			332			320
Interest on long-term debt		1,297			1,451			4,041			4,293

Total interest expense		1,579			1,733			4,904			5,098
Depreciation expense on operating lease assets		296			454			773			1,636

Net financing revenue		590			590			1,838			2,051
Other revenue
Servicing fees		351			404			1,075			1,173
Servicing asset valuation and hedge activities, net		(471	)		(27	)		(663	)		(181	)

Total servicing income, net		(120	)		377			412			992
Insurance premiums and service revenue earned		422			470			1,288			1,415
Gain on mortgage and automotive loans, net		83			326			290			863
Loss on extinguishment of debt		—			(2	)		(64	)		(123	)
Other gain on investments, net		75			100			251			355
Other income, net of losses		141			186			610			441

Total other revenue		601			1,457			2,787			3,943
Total net revenue		1,191			2,047			4,625			5,994
Provision for loan losses		49			9			213			371
Noninterest expense
Compensation and benefits expense		303			392			1,161			1,206
Insurance losses and loss adjustment expenses		190			229			620			664
Other operating expenses		772			1,092			2,460			2,806

Total noninterest expense		1,265			1,713			4,241			4,676
(Loss) income from continuing operations before income tax expense		(123	)		325			171			947
Income tax expense from continuing operations		87			48			101			117

Net (loss) income from continuing operations		(210	)		277			70			830

(Loss) income from discontinued operations, net of tax		—			(8	)		(21	)		166

Net (loss) income	$	(210	)	$	269		$	49		$	996

Statement continues on the next page.

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

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME (unaudited)


	Three months ended September 30,						Nine months ended September 30,
($ in millions except per share data)	2011			2010			2011			2010
Net (loss) income attributable to common shareholders
Net (loss) income from continuing operations	$	(210	)	$	277		$	70		$	830
Preferred stock dividends — U.S. Department of Treasury		(133	)		(257	)		(400	)		(643	)
Preferred stock dividends		(67	)		(70	)		(194	)		(212	)
Impact of preferred stock amendment		—			—			32			—

Net loss from continuing operations attributable to common shareholders (a)		(410	)		(50	)		(492	)		(25	)

(Loss) income from discontinued operations, net of tax		—			(8	)		(21	)		166

Net (loss) income attributable to common shareholders	$	(410	)	$	(58	)	$	(513	)	$	141

Basic weighted-average common shares outstanding		1,330,970			799,120			1,330,970			799,120

Diluted weighted-average common shares outstanding (a)		1,330,970			799,120			1,330,970			799,120

Basic earnings per common share
Net loss from continuing operations	$	(308	)	$	(63	)	$	(370	)	$	(31	)
(Loss) income from discontinued operations, net of tax		—			(10	)		(16	)		208

Net (loss) income	$	(308	)	$	(73	)	$	(386	)	$	177

Diluted earnings per common share (a)
Net loss from continuing operations	$	(308	)	$	(63	)	$	(370	)	$	(31	)
(Loss) income from discontinued operations, net of tax		—			(10	)		(16	)		208

Net (loss) income	$	(308	)	$	(73	)	$	(386	)	$	177

(a)

Due to the antidilutive effect of converting the Fixed Rate Cumulative Mandatorily Convertible Preferred Stock into common shares and the net loss attributable to common shareholders for the three and nine months ended September 30, 2011 and and the three months ended September 30, 2010, income attributable to common shareholders and basic weighted-average common shares outstanding were used to calculate basic and diluted earnings per share.

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

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)


($ in millions)	September 30, 2011			December 31, 2010
Assets
Cash and cash equivalents
Noninterest-bearing	$	1,517		$	1,714
Interest-bearing		14,885			9,956

Total cash and cash equivalents		16,402			11,670
Trading securities		503			240
Investment securities		13,981			14,846
Loans held-for-sale, net ($3,204 and $6,424 fair value-elected)		8,745			11,411
Finance receivables and loans, net
Finance receivables and loans, net ($841 and $1,015 fair value-elected)		108,712			102,413
Allowance for loan losses		(1,621	)		(1,873	)

Total finance receivables and loans, net		107,091			100,540
Investment in operating leases, net		9,052			9,128
Mortgage servicing rights		2,663			3,738
Premiums receivable and other insurance assets		2,026			2,181
Other assets		21,493			18,254

Total assets	$	181,956		$	172,008

Liabilities
Deposit liabilities
Noninterest-bearing	$	2,704		$	2,131
Interest-bearing		41,622			36,917

Total deposit liabilities		44,326			39,048
Short-term borrowings		5,933			7,508
Long-term debt ($831 and $972 fair value-elected)		90,546			86,612
Interest payable		1,712			1,829
Unearned insurance premiums and service revenue		2,757			2,854
Reserves for insurance losses and loss adjustment expenses		690			862
Accrued expenses and other liabilities ($28 and $— fair value-elected)		16,260			12,806

Total liabilities		162,224			151,519
Equity
Common stock and paid-in capital		19,668			19,668
Mandatorily convertible preferred stock held by U.S. Department of Treasury		5,685			5,685
Preferred stock		1,255			1,287
Accumulated deficit		(6,918	)		(6,410	)
Accumulated other comprehensive income		42			259

Total equity		19,732			20,489

Total liabilities and equity	$	181,956		$	172,008

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

ALLY FINANCIAL INC.

CONDENSED 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 were as follows.


($ in millions)	September 30, 2011			December 31, 2010
Assets
Loans held-for-sale, net	$	9		$	21
Finance receivables and loans, net
Finance receivables and loans, net ($841 and $1,015 fair value-elected)		38,152			33,483
Allowance for loan losses		(245	)		(238	)

Total finance receivables and loans, net		37,907			33,245
Investment in operating leases, net		4,356			1,065
Other assets		3,207			3,279

Total assets	$	45,479		$	37,610

Liabilities
Short-term borrowings	$	811		$	964
Long-term debt ($831 and $972 fair value-elected)		31,864			24,466
Interest payable		14			15
Accrued expenses and other liabilities		291			397

Total liabilities	$	32,980		$	25,842

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

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Nine months Ended September 30, 2011 and 2010


($ in millions)	Common stock and paid-in capital		Mandatorily convertible 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 (a)									(57	)		4			(53	)

Balance at January 1, 2010, after cumulative effect of adjustments	$	13,829	$	10,893	$	1,287		$	(5,687	)	$	464		$	20,786
Capital contributions		9													9
Net income									996						996		$	996
Preferred stock dividends paid to the U.S. Department of Treasury									(643	)					(643	)
Preferred stock dividends									(212	)					(212	)
Dividends to shareholders									(8	)					(8	)
Other comprehensive loss												(25	)		(25	)		(25	)
Other (b)									74						74

Balance at September 30, 2010	$	13,838	$	10,893	$	1,287		$	(5,480	)	$	439		$	20,977		$	971

Balance at January 1, 2011	$	19,668	$	5,685	$	1,287		$	(6,410	)	$	259		$	20,489
Net income									49						49		$	49
Preferred stock dividends paid to the U.S. Department of Treasury									(400	)					(400	)
Preferred stock dividends									(194	)					(194	)
Series A preferred stock amendment (c)						(32	)		32
Other comprehensive loss												(217	)		(217	)		(217	)
Other (b)									5						5

Balance at September 30, 2011	$	19,668	$	5,685	$	1,255		$	(6,918	)	$	42		$	19,732		$	(168	)

(a)	Cumulative effect of change in accounting principle, net of tax, due to adoption of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.

(b)	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.

(c)	Refer to Note 16 to the Condensed Consolidated Financial Statements for further details.

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

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)


Nine months ended September 30, ($ in millions)	2011			2010
Operating activities
Net income	$	49		$	996
Reconciliation of net income to net cash provided by operating activities
Depreciation and amortization		2,100			3,246
Other impairment		8			58
Changes in fair value of mortgage servicing rights		1,327			1,466
Provision for loan losses		211			397
Gain on sale of loans, net		(299	)		(861	)
Net gain on investment securities		(275	)		(357	)
Loss on extinguishment of debt		64			123
Originations and purchases of loans held-for-sale		(42,467	)		(48,828	)
Proceeds from sales and repayments of loans held-for-sale		44,417			55,046
Net change in:
Trading securities		(339	)		(22	)
Deferred income taxes		(99	)		(186	)
Interest payable		(99	)		176
Other assets		(324	)		976
Other liabilities		1,374			698
Other, net		133			(1,388	)

Net cash provided by operating activities		5,781			11,540

Investing activities
Purchases of available-for-sale securities		(15,020	)		(15,902	)
Proceeds from sales of available-for-sale securities		12,093			13,380
Proceeds from maturities of available-for-sale securities		3,725			3,646
Net increase in finance receivables and loans		(10,705	)		(12,422	)
Proceeds from sales of finance receivables and loans		2,868			2,554
Purchases of operating lease assets		(5,332	)		(2,405	)
Disposals of operating lease assets		4,862			6,719
Proceeds from sale of business units, net (a)		50			(331	)
Other, net		633			1,158

Net cash used in investing activities		(6,826	)		(3,603	)

Statement continues on the next page.

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

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)


Nine months ended September 30, ($ in millions)	2011			2010
Financing activities
Net change in short-term borrowings		(1,263	)		(4,856	)
Net increase in bank deposits		4,454			4,776
Proceeds from issuance of long-term debt		36,900			32,235
Repayments of long-term debt		(34,576	)		(43,827	)
Dividends paid		(619	)		(862	)
Other, net		962			1,255

Net cash provided by (used in) financing activities		5,858			(11,279	)
Effect of exchange-rate changes on cash and cash equivalents		(45	)		501

Net increase (decrease) in cash and cash equivalents		4,768			(2,841	)
Adjustment for change in cash and cash equivalents of operations held-for-sale (a) (b)		(36	)		642
Cash and cash equivalents at beginning of year		11,670			14,788

Cash and cash equivalents at September 30,	$	16,402		$	12,589

Supplemental disclosures
Cash paid for
Interest	$	4,303		$	4,055
Income taxes		454			377
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
Transfer of mortgage servicing rights into trading securities through certification		266			—
Other disclosures
Proceeds from sales and repayments of mortgage loans held-for-investment originally designated as held-for-sale		179			437

(a)	The amounts are net of cash and cash equivalents of $88 million at September 30, 2011, and $1.1 billion at September 30, 2010, of business units at the time of disposition.

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

(c)	Relates to the adoption of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.

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

ALLY FINANCIAL INC.

NOTES TO CONDENSED

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 a leading, independent, globally diversified, financial services firm. Founded in 1919, we are a leading automotive financial services company with over 90 years experience providing a broad array of financial products and services to automotive dealers and their customers. We are also one of the largest residential mortgage companies in the United States. We became a bank holding company on December 24, 2008, under the Bank Holding Company Act of 1956, as amended. Our banking subsidiary, Ally Bank, is an indirect wholly owned subsidiary of Ally Financial Inc. and a leading franchise in the growing direct (online and telephonic) banking market.

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 Condensed Consolidated Financial Statements at September 30, 2011, and for the three months and nine months ended September 30, 2011, and 2010, 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 Condensed 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, 2010, as filed on February 25, 2011, with the U.S. Securities and Exchange Commission (SEC).

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 beginning in 2007. 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 may also be negatively impacted by exposure to representation and warranty obligations, adverse outcomes with respect to current or future litigation, fines, penalties, or settlements related to our mortgage-related activities and additional expenses to address regulatory requirements. ResCap is required to maintain consolidated tangible net worth, as defined, of $250 million at the end of each month, under the terms of certain of its credit facilities. For this purpose, consolidated tangible net worth is defined as ResCap’s consolidated equity excluding intangible assets. ResCap’s consolidated tangible net worth, as defined, was $331 million at September 30, 2011, and ResCap remained in compliance with all of its consolidated tangible net worth covenants. There continues to be a risk that ResCap may not be able to meet its debt service obligations, may default on its financial debt covenants due to insufficient capital, and/or may be in a negative liquidity position in future periods.

ResCap seeks to manage its liquidity and capital positions and explores 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 could include, but are not limited to, the following: continuing to work with key credit providers to optimize all available liquidity options; possible further reductions in assets and other restructuring activities; focusing production on conforming and government-insured residential mortgage loans; 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.

During 2009 and 2010, we performed a strategic review of our mortgage business. As a result of this, we effectively exited the European mortgage market through the sale of our U.K. and continental Europe operations. We also completed the sale of certain higher-risk legacy mortgage assets and settled representation and warranty claims with certain counterparties.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The ongoing focus of our Mortgage Origination and Servicing operations will be predominately the origination and sale of conforming and government-insured residential mortgages and mortgage servicing.

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; 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, asset sales, or other business reorganization or similar action with respect to all or part of ResCap and/or its affiliates. In this context, Ally and ResCap each typically consider a number of factors to the extent applicable and appropriate including, without limitation, its financial condition, results of operations, and prospects; 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 choose to execute any further strategic transactions with respect to ResCap or that any transactions undertaken will be successful.

Although our continued actions through various funding and capital initiatives demonstrate support for ResCap, there can be no assurances for future 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. At September 30, 2011, we had $1.9 billion in secured financing arrangements with ResCap of which $1.2 billion in loans was utilized. At September 30, 2011, the hedging arrangements were fully collateralized. 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 $331 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 could 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.

Relationship and Transactions with General Motors Company

General Motors Company (GM), GM dealers, and GM-related employees compose a significant portion of our customer base, and our Global Automotive Services operations are highly dependent on GM production and sales volume. As a result, a significant adverse change in GM’s business, including significant adverse changes in GM’s liquidity position and access to the capital markets, the production or sale of GM vehicles, the quality or resale value of GM vehicles, the use of GM marketing incentives, GM’s relationships with its key suppliers, GM’s relationship with the United Auto Workers and other labor unions, and other factors impacting GM or its employees could have a significant adverse effect on our profitability and financial condition.

GM is no longer considered a related party for purposes of applicable disclosure within the Notes to Condensed Consolidated Financial Statements, as it beneficially owns less than 10% of the voting interests in Ally and does not control or have the ability to significantly influence the management and policies of Ally. In addition, the Federal Reserve has determined that GM is no longer considered an “affiliate” of Ally Bank for purposes of Sections 23A and 23B of the Federal Reserve Act, which impose limitations on transactions between banks and their affiliates.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Refer to Note 26 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K for a summary of related party transactions with GM during 2010.

Significant Accounting Policies

Earnings per Common Share

We compute earnings (loss) per common share by dividing net income (loss) (after deducting dividends on preferred stock) by the weighted-average number of common shares outstanding during the period. We compute diluted earnings (loss) per common share by dividing net income (loss) (after deducting dividends on preferred stock) by the weighted-average number of common shares outstanding during the period plus the dilution resulting from the conversion of convertible preferred stock, if applicable.

Refer to Note 1 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K regarding additional significant accounting policies.

Recently Adopted Accounting Standards

Receivables — A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (ASU 2011-02)

As of July 1, 2011, we adopted Accounting Standards Update (ASU) 2011-02, which amends Accounting Standards Codification (ASC) 310, Receivables. ASU 2011-02 clarifies which loan modifications constitute a troubled debt restructuring (TDR). It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. The ASU must be applied retrospectively to modifications made subsequent to the beginning of the annual period of adoption, which for us is January 1, 2011.

Effective September 30, 2011, ASU 2011-02 also required us to disclose the total amount of receivables and the allowance for credit losses related to those receivables that are newly considered impaired for which impairment was previously measured under ASC 450-20, Contingencies — Loss Contingencies. Refer to Note 8 to the Condensed Consolidated Financial Statements for additional information regarding TDRs.

The adoption did not have a material impact to our consolidated financial condition or results of operations.

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

Beginning with the three months ended September 30, 2011 and in conjunction with the requirements of ASU 2011-02, ASU 2010-20 required us to expand disclosures related to TDRs. Beginning with the three months ended March 31, 2011, ASU 2010-20 required us to disclose a rollforward of the allowance for loan losses, additional activity-based disclosures for both financing receivables, and the allowance for each reporting period. Refer to Note 8 to the Condensed Consolidated Financial Statements for additional information regarding TDRs. We early adopted the rollforward requirement during the December 31, 2010, reporting period. Since the guidance relates only to disclosures, adoption did not have a material impact on our consolidated financial condition or results of operations.

Revenue Recognition — Multiple-Deliverable Revenue Arrangements (ASU 2009-13)

As of January 1, 2011, we adopted ASU 2009-13, which amends ASC 605, Revenue Recognition. The guidance significantly changed the accounting for revenue recognition in arrangements with multiple deliverables and eliminated the residual method, which allocated the discount of a multiple deliverable arrangement among the delivered items. The guidance requires entities 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. The adoption did not have a material impact to our consolidated financial condition or results of operations.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Recently Issued Accounting Standards

Financial Services — Insurance — Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (ASU 2010-26)

In October 2010, the FASB issued ASU 2010-26, which amends ASC 944, Financial Services — Insurance. The amendments in this ASU specify which costs incurred in the acquisition of new and renewal insurance contracts should be capitalized. All other acquisition-related costs should be expensed as incurred. If the initial application of the amendments in this ASU results in the capitalization of acquisition costs that had not been previously capitalized, an entity may elect not to capitalize those types of costs. The ASU will be effective for us on January 1, 2012 and will be applied prospectively. Both retrospective application and early adoption are permitted. We do not expect the adoption to have a material impact to our consolidated financial condition or results of operations.

Fair Value Measurement — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS) (ASU 2011-04)

In May 2011, the FASB issued ASU 2011-04, which amends ASC 820, Fair Value Measurements. The amendments in this ASU clarify how to measure fair value. It is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with GAAP and IFRS. The ASU will be effective for us on January 1, 2012, and must be applied prospectively. Early adoption is not permitted. We do not expect the adoption to have a material impact to our consolidated financial condition or results of operations.

Comprehensive Income — Presentation of Comprehensive Income (ASU 2011-05)

In June 2011, the FASB issued ASU 2011-05, which amends ASC 220, Comprehensive Income. The amendments will increase the prominence of items reported in other comprehensive income and facilitate convergence between GAAP and IFRS. This ASU will require that nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The ASU will be effective for us on January 1, 2012. Early adoption is permitted. Since the guidance relates only to disclosures, the adoption will have no impact to our consolidated financial condition or results of operations.

2.	Discontinued Operations

We classified certain operations as discontinued when 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 Condensed Consolidated Financial Statements were adjusted to exclude discontinued operations unless otherwise noted.

Select Insurance Operations

During the second quarter of 2011, we completed the sale of our U.K. consumer property and casualty insurance business.

Select International Automotive Finance Operations

We completed the sale of our Ecuador operations during the first quarter of 2011. We expect to complete the sale of our Venezuela operations by December 31, 2011.

Select Financial Information

The pretax income or loss recognized 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 CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Selected financial information of discontinued operations is summarized below.


	Three months ended September 30,					Nine months ended September 30,
($ in millions)	2011		2010			2011			2010
Select Insurance operations
Total net revenue	$	—	$	57		$	96		$	357
Pretax income (loss) including direct costs to transact a sale (a)		—		3			13			(3	)
Tax (benefit)		—		—			—			(1	)
Select International operations
Total net revenue	$	3	$	28		$	13		$	108
Pretax income (loss) including direct costs to transact a sale (a)		—		35			(34	)		98
Tax (benefit)		—		(4	)		—			(3	)
Select Mortgage — Legacy and Other operations
Total net revenue	$	—	$	25		$	—		$	69
Pretax (loss) income including direct costs to transact a sale		—		(46	)		—			56
Tax expense (benefit)		—		5			—			(3	)
Select Commercial Finance operations
Total net revenue	$	—	$	—		$	—		$	11
Pretax income including direct costs to transact a sale (a)		—		1			—			8
Tax expense		—		—			—			—

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

3.	Other Income, Net of Losses

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


	Three months ended September 30,						Nine months ended September 30,
($ in millions)	2011			2010			2011			2010
Mortgage processing fees and other mortgage income	$	53		$	63		$	141		$	157
Late charges and other administrative fees		30			35			87			107
Remarketing fees		24			37			92			104
Income from equity-method investments		21			15			64			40
Securitization income (loss)		19			22			168			(25	)
Real estate services, net		15			—			15			8
Full-service leasing fees		7			17			32			58
Change due to fair value option elections (a)		(44	)		(52	)		(83	)		(181	)
Fair value adjustment on derivatives (b)		(55	)		(57	)		(134	)		(115	)
Other, net		71			106			228			288

Total other income, net of losses	$	141		$	186		$	610		$	441

(a)	Refer to Note 21 for a description of fair value option elections.

(b)	Refer to Note 19 for a description of derivative instruments and hedging activities.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

4.	Other Operating Expenses

Details of other operating expenses were as follows.


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2011		2010		2011		2010
Technology and communications	$	128	$	117	$	365	$	390
Insurance commissions		119		150		368		446
Professional services		85		82		231		201
Mortgage representation and warranty, net		70		344		280		490
Advertising and marketing		47		49		142		123
Lease and loan administration		47		40		136		106
Vehicle remarketing and repossession		32		42		105		144
Regulatory and licensing fees		32		32		103		87
State and local non-income taxes		29		31		95		91
Occupancy		26		22		72		73
Premises and equipment depreciation		24		24		74		62
Restructuring		9		4		12		60
Full-service leasing vehicle maintenance costs		8		14		29		50
Other		116		141		448		483

Total other operating expenses	$	772	$	1,092	$	2,460	$	2,806

5.	Trading Securities

The composition of trading securities was as follows.


($ in millions)	September 30, 2011		December 31, 2010
U.S. Treasury	$	—	$	77
Mortgage-backed residential		503		69
Asset-backed		—		94

Total trading securities	$	503	$	240

ALLY FINANCIAL INC.

NOTES TO CONDENSED

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 securities were as follows.


	September 30, 2011									December 31, 2010
	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	$	1,041	$	6	$	(2	)	$	1,045	$	3,307	$	22	$	(11	)	$	3,318
States and political subdivisions		1		—		—			1		3		—		(1	)		2
Foreign government		894		33		—			927		1,231		19		(2	)		1,248
Mortgage-backed residential (a)		6,624		96		(36	)		6,684		5,844		60		(79	)		5,825
Asset-backed		2,423		36		(6	)		2,453		1,934		15		(1	)		1,948
Corporate debt		1,210		14		(29	)		1,195		1,537		34		(13	)		1,558
Other		564		1		—			565		152		—		(1	)		151

Total debt securities (b)		12,757		186		(73	)		12,870		14,008		150		(108	)		14,050
Equity securities		1,334		39		(262	)		1,111		766		60		(30	)		796

Total available-for-sale securities (c)	$	14,091	$	225	$	(335	)	$	13,981	$	14,774	$	210	$	(138	)	$	14,846

(a)	Residential mortgage-backed securities include agency-backed bonds totaling $5,533 million and $4,503 million at September 30, 2011, and December 31, 2010, respectively.

(b)	In connection with certain borrowings and letters of credit relating to certain assumed reinsurance contracts, $56 million and $153 million of primarily U.K. Treasury securities were pledged as collateral at September 30, 2011, and December 31, 2010, respectively.

(c)	Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $12 million at both September 30, 2011, and December 31, 2010, respectively.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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)
($ in millions)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
September 30, 2011
Fair value of available-for-sale debt securities (b)
U.S. Treasury and federal agencies	$	1,045		1.4	%	$	219		1.1	%	$	824		2.3	%	$	2		3.2	%	$	—		—	%
States and political subdivisions		1		5.5			—		—			—		—			—		—			1		5.5
Foreign government		927		4.1			49		5.2			633		4.4			234		3.2			11		3.7
Mortgage-backed residential		6,684		2.6			—		—			2		6.3			263		1.8			6,419		2.6
Asset-backed		2,453		2.1			—		—			1,553		2.1			461		1.3			439		3.0
Corporate debt		1,195		5.1			12		5.1			483		4.9			557		5.5			143		4.0
Other		565		1.6			554		1.5			—		—			11		4.9			—		—


Total available-for-sale debt securities	$	12,870		2.7		$	834		1.6		$	3,495		3.1		$	1,528		2.6		$	7,013		2.7

Amortized cost of available-for-sale debt securities	$	12,757				$	834				$	3,461				$	1,520				$	6,942

December 31, 2010
Fair value of available-for-sale debt securities (b)
U.S. Treasury and federal agencies	$	3,318		1.4	%	$	124		1.2	%	$	3,094		1.3	%	$	100		3.7	%	$	—		—	%
States and political subdivisions		2		8.7			—		—			—		—			—		—			2		8.7
Foreign government		1,248		3.1			7		2.2			1,092		3.1			149		3.5			—		—
Mortgage-backed residential		5,825		3.8			—		—			57		3.2			64		4.4			5,704		3.8
Asset-backed		1,948		2.5			—		—			1,146		2.2			500		2.4			302		4.0
Corporate debt		1,558		3.9			22		5.7			811		3.5			593		4.3			132		4.0
Other		151		1.5			151		1.5			—		—			—		—			—		—


Total available-for-sale debt securities	$	14,050		3.0		$	304		1.7		$	6,200		2.1		$	1,406		3.5		$	6,140		3.8

Amortized cost of available-for-sale debt securities	$	14,008				$	305				$	6,152				$	1,388				$	6,163

(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.

The balances of cash equivalents were $8.2 billion and $5.3 billion at September 30, 2011, and December 31, 2010, respectively, and were composed primarily of money market accounts and short-term securities, including U.S. Treasury bills.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents gross gains and losses realized upon the sales of available-for-sale securities. During the three months and nine months ended September 30, 2011, we did not recognize other-than-temporary impairment on available-for-sale securities.


	Three months ended September 30,						Nine months ended September 30,
($ in millions)	2011			2010			2011			2010
Gross realized gains	$	90		$	102		$	288		$	381
Gross realized losses		(15	)		(2	)		(37	)		(25	)
Other-than-temporary impairment		—			—			—			(1	)

Net realized gains	$	75		$	100		$	251		$	355

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


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2011		2010		2011		2010
Taxable interest	$	97	$	81	$	298	$	252
Taxable dividends		6		5		17		13
Interest and dividends exempt from U.S. federal income tax		—		—		—		10

Total interest and dividends on available-for-sale securities	$	103	$	86	$	315	$	275

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 September 30, 2011, we did 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 September 30, 2011, 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 at September 30, 2011. Refer to Note 1 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K for additional information related to investment securities and our methodology for evaluating potential other-than-temporary impairments.


	September 30, 2011										December 31, 2010
	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	$	288	$	(2	)	$	—	$	—		$	702	$	(11	)	$	—	$	—
States and political subdivisions		—		—			—		—			2		(1	)		—		—
Foreign government		58		—			—		—			323		(2	)		—		—
Mortgage-backed residential		2,005		(35	)		6		(1	)		3,159		(77	)		11		(2	)
Asset-backed		463		(6	)		1		—			238		(1	)		2		—
Corporate debt		628		(29	)		14		—			653		(13	)		5		—
Other		57		—			—		—			80		(1	)		—		—

Total temporarily impaired debt securities		3,499		(72	)		21		(1	)		5,157		(106	)		18		(2	)
Temporarily impaired equity securities		964		(262	)		—		—			250		(27	)		26		(3	)

Total temporarily impaired available-for-sale securities	$	4,463	$	(334	)	$	21	$	(1	)	$	5,407	$	(133	)	$	44	$	(5	)

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

7.	Loans Held-for-sale, Net

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


	September 30, 2011						December 31, 2010
($ in millions)	Domestic		Foreign		Total		Domestic		Foreign		Total
Consumer automobile	$	464	$	—	$	464	$	—	$	—	$	—
Consumer mortgage
1st Mortgage		6,961		528		7,489		10,191		364		10,555
Home equity		765		—		765		856		—		856

Total consumer mortgage (a)		7,726		528		8,254		11,047		364		11,411

Commercial and industrial
Other		27		—		27		—		—		—

Total loans held-for-sale (b)	$	8,217	$	528	$	8,745	$	11,047	$	364	$	11,411

(a)	Fair value option-elected domestic consumer mortgages were $3.2 billion and $6.4 billion at September 30, 2011, and December 31, 2010, respectively. Refer to Note 21 for additional information.

(b)	Totals are net of unamortized premiums and discounts and deferred fees and costs. Included in the totals are net unamortized discounts of $218 million and $161 million at September 30, 2011, and December 31, 2010, respectively.

The following table summarizes held-for-sale mortgage loans reported at carrying value by higher-risk loan type.


($ in millions)	September 30, 2011		December 31, 2010
High original loan-to-value (greater than 100%) mortgage loans	$	295	$	331
Payment-option adjustable-rate mortgage loans		9		16
Interest-only mortgage loans		410		481
Below-market rate (teaser) mortgages		145		151

Total (a)	$	859	$	979

(a)	The majority of these loans are held by our Mortgage Legacy Portfolio and Other operations at September 30, 2011, and December 31, 2010.

8.	Finance Receivables and Loans, Net

The composition of finance receivables and loans, net, reported at carrying value before allowance for loan losses was as follows.


	September 30, 2011						December 31, 2010
($ in millions)	Domestic		Foreign		Total		Domestic		Foreign		Total
Consumer automobile	$	43,293	$	16,412	$	59,705	$	34,604	$	16,650	$	51,254
Consumer mortgage
1st Mortgage		6,833		257		7,090		6,917		390		7,307
Home equity		3,179		—		3,179		3,441		—		3,441

Total consumer mortgage		10,012		257		10,269		10,358		390		10,748
Commercial
Commercial and industrial
Automobile		24,227		8,163		32,390		24,944		8,398		33,342
Mortgage		1,592		24		1,616		1,540		41		1,581
Other		1,303		240		1,543		1,795		312		2,107
Commercial real estate
Automobile		2,137		185		2,322		2,071		216		2,287
Mortgage		—		26		26		1		78		79

Total commercial		29,259		8,638		37,897		30,351		9,045		39,396
Loans at fair value (a)		593		248		841		663		352		1,015

Total finance receivables and loans (b)	$	83,157	$	25,555	$	108,712	$	75,976	$	26,437	$	102,413

(a)	Includes domestic consumer mortgages at fair value as a result of fair value option election. Refer to Note 21 for additional information.

(b)	Totals are net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $2.8 billion and $2.9 billion at September 30, 2011, and December 31, 2010, respectively.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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


Three months ended September 30, 2011 ($ in millions)	Consumer automobile			Consumer mortgage			Commercial			Total
Allowance at July 1, 2011	$	911		$	558		$	270		$	1,739
Charge-offs
Domestic		(97	)		(54	)		(6	)		(157	)
Foreign		(37	)		(2	)		(7	)		(46	)

Total charge-offs		(134	)		(56	)		(13	)		(203	)

Recoveries
Domestic		45			4			4			53
Foreign		18			1			8			27

Total recoveries		63			5			12			80

Net charge-offs		(71	)		(51	)		(1	)		(123	)
Provision for loan losses		53			25			(29	)		49
Other		(42	)		—			(2	)		(44	)

Allowance at September 30, 2011	$	851		$	532		$	238		$	1,621


Three months ended September 30, 2010 ($ in millions)	Consumer automobile			Consumer mortgage			Commercial			Total
Allowance at July 1, 2010	$	1,120		$	659		$	598		$	2,377
Charge-offs
Domestic		(179	)		(69	)		(98	)		(346	)
Foreign		(45	)		(1	)		(38	)		(84	)

Total charge-offs		(224	)		(70	)		(136	)		(430	)

Recoveries
Domestic		65			6			4			75
Foreign		19			—			2			21

Total recoveries		84			6			6			96

Net charge-offs		(140	)		(64	)		(130	)		(334	)
Provision for loan losses		58			28			(77	)		9
Discontinued operations		—			—			(1	)		(1	)
Other		12			1			(10	)		3

Allowance at September 30, 2010	$	1,050		$	624		$	380		$	2,054

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Nine months ended September 30, 2011 ($ in millions)	Consumer automobile			Consumer mortgage			Commercial			Total
Allowance at January 1, 2011	$	970		$	580		$	323		$	1,873
Charge-offs
Domestic		(331	)		(162	)		(24	)		(517	)
Foreign		(112	)		(4	)		(55	)		(171	)

Total charge-offs		(443	)		(166	)		(79	)		(688	)

Recoveries
Domestic		146			13			16			175
Foreign		54			1			25			80

Total recoveries		200			14			41			255

Net charge-offs		(243	)		(152	)		(38	)		(433	)
Provision for loan losses		157			104			(48	)		213
Other		(33	)		—			1			(32	)

Allowance at September 30, 2011	$	851		$	532		$	238		$	1,621

Allowance for loan losses
Individually evaluated for impairment	$	2		$	125		$	49		$	176
Collectively evaluated for impairment		839			407			189			1,435
Loans acquired with deteriorated credit quality		10			—			—			10
Finance receivables and loans at historical cost
Ending balance		59,705			10,269			37,897			107,871
Individually evaluated for impairment		52			600			698			1,350
Collectively evaluated for impairment		59,549			9,669			37,199			106,417
Loans acquired with deteriorated credit quality		104			—			—			104


Nine months ended September 30, 2010 ($ in millions)	Consumer automobile			Consumer mortgage			Commercial			Total
Allowance at January 1, 2010	$	1,024		$	640		$	781		$	2,445
Cumulative effect of change in accounting principles (a)		222			—			—			222
Charge-offs
Domestic		(616	)		(179	)		(250	)		(1,045	)
Foreign		(154	)		(3	)		(91	)		(248	)

Total charge-offs		(770	)		(182	)		(341	)		(1,293	)

Recoveries
Domestic		242			15			12			269
Foreign		54			—			11			65

Total recoveries		296			15			23			334

Net charge-offs		(474	)		(167	)		(318	)		(959	)
Provision for loan losses		285			142			(56	)		371
Discontinued operations		5			—			(3	)		2
Other		(12	)		9			(24	)		(27	)

Allowance at September 30, 2010	$	1,050		$	624		$	380		$	2,054

Allowance for loan losses
Individually evaluated for impairment	$	—		$	105		$	175		$	280
Collectively evaluated for impairment		1,023			519			205			1,747
Loans acquired with deteriorated credit quality		27			—			—			27
Finance receivables and loans at historical cost
Ending balance		46,094			11,143			38,533			95,770
Individually evaluated for impairment		—			470			1,429			1,899
Collectively evaluated for impairment		45,898			10,673			37,104			93,675
Loans acquired with deteriorated credit quality		196			—			—			196

(a)	Effect of change in accounting principle due to adoption of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents information about significant sales of finance receivables and loans recorded at historical cost and transfers of finance receivables and loans from held-for-investment to held-for-sale.


($ in millions)	Three months ended September 30, 2011		Nine months ended September 30, 2011
Consumer automobile	$	1,961	$	3,279
Consumer mortgage		7		100
Commercial		27		33

Total sales and transfers	$	1,995	$	3,412

The following table presents an analysis of our past due finance receivables and loans recorded at historical cost reported at carrying value before allowance for loan losses.


($ in millions)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total finance receivables and loans
September 30, 2011
Consumer automobile	$	733	$	148	$	169	$	1,050	$	58,655	$	59,705
Consumer mortgage
1st Mortgage		102		39		168		309		6,781		7,090
Home equity		23		13		12		48		3,131		3,179

Total consumer mortgage		125		52		180		357		9,912		10,269
Commercial
Commercial and industrial
Automobile		—		12		127		139		32,251		32,390
Mortgage		—		—		1		1		1,615		1,616
Other		—		—		1		1		1,542		1,543
Commercial real estate
Automobile		2		4		35		41		2,281		2,322
Mortgage		—		—		23		23		3		26

Total commercial		2		16		187		205		37,692		37,897

Total consumer and commercial	$	860	$	216		536	$	1,612	$	106,259	$	107,871

December 31, 2010
Consumer automobile	$	828	$	175	$	197	$	1,200	$	50,054	$	51,254
Consumer mortgage
1st Mortgage		115		67		205		387		6,920		7,307
Home equity		20		12		13		45		3,396		3,441

Total consumer mortgage		135		79		218		432		10,316		10,748
Commercial
Commercial and industrial
Automobile		21		19		85		125		33,217		33,342
Mortgage		—		36		4		40		1,541		1,581
Other		—		—		20		20		2,087		2,107
Commercial real estate
Automobile		—		4		78		82		2,205		2,287
Mortgage		—		—		71		71		8		79

Total commercial		21		59		258		338		39,058		39,396

Total consumer and commercial	$	984	$	313	$	673	$	1,970	$	99,428	$	101,398

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents the carrying value before allowance for loan losses of our finance receivables and loans recorded at historical cost on nonaccrual status.


($ in millions)	September 30, 2011		December 31, 2010
Consumer automobile	$	210	$	207
Consumer mortgage
1st Mortgage		305		500
Home equity		60		61

Total consumer mortgage		365		561
Commercial
Commercial and industrial
Automobile		225		296
Mortgage		25		40
Other		49		134
Commercial real estate
Automobile		80		199
Mortgage		23		71

Total commercial		402		740

Total consumer and commercial	$	977	$	1,508

Management performs a quarterly analysis of the consumer automobile, consumer mortgage, and commercial portfolios using a range of credit quality indicators to assess the adequacy of the allowance based on historical and current trends. The tables below present the population of loans by quality indicators for our consumer automobile, consumer mortgage, and commercial portfolios.

The following table presents performing and nonperforming credit quality indicators in accordance with our internal accounting policies for our consumer finance receivables and loans recorded at historical cost reported at carrying value before allowance for loan losses.


	September 30, 2011						December 31, 2010
($ in millions)	Performing		Nonperforming		Total		Performing		Nonperforming		Total
Consumer automobile	$	59,495	$	210	$	59,705	$	51,047	$	207	$	51,254
Consumer mortgage
1st Mortgage		6,785		305		7,090		6,807		500		7,307
Home equity		3,119		60		3,179		3,380		61		3,441

Total consumer mortgage	$	9,904	$	365	$	10,269	$	10,187	$	561	$	10,748

The following table presents pass and criticized credit quality indicators based on regulatory definitions for our commercial finance receivables and loans recorded at historical cost reported at carrying value before allowance for loan losses.


	September 30, 2011						December 31, 2010
($ in millions)	Pass		Criticized (a)		Total		Pass		Criticized (a)		Total
Commercial
Commercial and industrial
Automobile	$	30,176	$	2,214	$	32,390	$	31,254	$	2,088	$	33,342
Mortgage		1,549		67		1,616		1,504		77		1,581
Other		1,100		443		1,543		1,041		1,066		2,107
Commercial real estate
Automobile		2,084		238		2,322		2,013		274		2,287
Mortgage		—		26		26		—		79		79

Total commercial	$	34,909	$	2,988	$	37,897	$	35,812	$	3,584	$	39,396

(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.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Impaired Loans and Troubled Debt Restructurings

Impaired Loans

Loans are considered impaired when we determine it is probable that we will be unable to collect all amounts due according to the terms of the loan agreement. For more information on our impaired finance receivables and loans, refer to Note 1 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K.

The following table presents information about our impaired finance receivables and loans recorded at historical cost.


($ in millions)	Unpaid principal balance		Carrying value before allowance		Impaired with no allowance		Impaired with an allowance		Allowance for impaired loans
September 30, 2011 (a)
Consumer automobile	$	52	$	52	$	—	$	52	$	2
Consumer mortgage
1st Mortgage		513		507		81		426		91
Home equity		93		93		4		89		34

Total consumer mortgage		606		600		85		515		125
Commercial
Commercial and industrial
Automobile		224		225		78		147		15
Mortgage		25		25		1		24		5
Other		52		49		30		19		5
Commercial real estate
Automobile		80		80		42		38		20
Mortgage		23		23		3		20		4

Total commercial		404		402		154		248		49

Total consumer and commercial	$	1,062	$	1,054	$	239	$	815	$	176

December 31, 2010 (a)
Consumer automobile	$	—	$	—	$	—	$	—	$	—
Consumer mortgage
1st Mortgage		410		404		—		404		59
Home equity		82		83		—		83		40

Total consumer mortgage		492		487		—		487		99
Commercial
Commercial and industrial
Automobile		340		356		33		323		23
Mortgage		44		40		—		40		14
Other		135		133		20		113		51
Commercial real estate
Automobile		206		197		108		89		29
Mortgage		71		71		28		43		10

Total commercial		796		797		189		608		127

Total consumer and commercial	$	1,288	$	1,284	$	189	$	1,095	$	226

(a)	ASU 2011-02, Receivables: A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, was effective July 1, 2011.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following tables present average balance and interest income for our impaired finance receivables and loans.


	2011 (a)				2010
Three months ended September 30, ($ in millions)	Average balance		Interest income		Average balance		Interest income
Consumer automobile	$	56	$	1	$	—	$	—
Consumer mortgage
1st Mortgage		476		5		362		5
Home equity		93		1		73		1

Total consumer mortgage		569		6		435		6
Commercial
Commercial and industrial
Automobile		306		6		313		6
Mortgage		2		1		48		—
Other		54		—		590		—
Commercial real estate
Automobile		104		4		263		2
Mortgage		31		—		104		—

Total commercial		497		11		1,318		8

Total consumer and commercial	$	1,122	$	18	$	1,753	$	14

(a)	ASU 2011-02, Receivables: A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, was effective July 1, 2011.


	2011 (a)				2010
Nine months ended September 30, ($ in millions)	Average balance		Interest income		Average balance		Interest income
Consumer automobile	$	23	$	1	$	—	$	—
Consumer mortgage
1st Mortgage		449		13		304		10
Home equity		89		3		59		3

Total consumer mortgage		538		16		363		13
Commercial
Commercial and industrial
Automobile		321		7		332		7
Mortgage		26		6		56		—
Other		95		1		801		1
Commercial real estate
Automobile		141		4		295		3
Mortgage		47		1		149		1

Total commercial		630		19		1,633		12

Total consumer and commercial	$	1,191	$	36	$	1,996	$	25

(a)	ASU 2011-02, Receivables: A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, was effective July 1, 2011.

Troubled Debt Restructurings

Troubled debt restructurings are loan modifications where economic concessions are granted to borrowers experiencing financial difficulties. Numerous initiatives are in place to provide support to customers in financial distress, including the Home Affordable Modification Program (HAMP). Additionally for automobile loans, we offer several types of assistance to aid our customers including changing the due date, extending payments, and rewriting the loan terms. Total TDRs recorded at historical cost and reported at carrying value before allowance for loan losses at September 30, 2011, increased $199 million to $709 million from December 31, 2010.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following tables present information related to finance receivables and loans recorded at historical cost modified in connection with a troubled debt restructuring during the period.


Three months ended September 30, 2011 ($ in millions)	Number of loans		Pre-modification carrying value before allowance		Post-modification carrying value before allowance
Consumer automobile		1,629	$	21	$	21
Consumer mortgage
1st Mortgage		80		30		29
Home equity		213		12		11

Total consumer mortgage		293		42		40
Commercial
Commercial real estate
Automobile		1		2		2
Mortgage		1		3		2

Total commercial		2		5		4

Total consumer and commercial		1,924	$	68	$	65


Nine months ended September 30, 2011 ($ in millions)	Number of loans		Pre-modification carrying value before allowance		Post-modification carrying value before allowance
Consumer automobile		4,407	$	58	$	58
Consumer mortgage
1st Mortgage		309		111		110
Home equity		695		39		36

Total consumer mortgage		1,004		150		146
Commercial
Commercial and industrial
Automobile		1		3		3
Mortgage		1		38		28
Other		2		11		10
Commercial real estate
Automobile		2		6		4
Mortgage		2		4		3

Total commercial		8		62		48

Total consumer and commercial		5,419	$	270	$	252

The following tables present information about finance receivables and loans recorded at historical cost that have defaulted during the reporting period and were within 12 months or less of being modified as a troubled debt restructuring.


Three months ended September 30, 2011 ($ in millions)	Number of loans		Carrying value before allowance		Charge-off amount
Consumer automobile		88	$	1	$	—
Consumer mortgage
1st Mortgage		—		—		—
Home equity		9		1		1

Total consumer mortgage		9		1		1
Commercial
Commercial and industrial
Automobile		—		—		—

Total commercial		—		—

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents