GJM 2013.9.30 10Q
Table of Contents

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, 2013, 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 o
  
Accelerated filer o
  
Non-accelerated filer þ
 
Smaller reporting company o
 
  
(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 4, 2013, the number of shares outstanding of the Registrant’s common stock was 1,330,970 shares.


Table of Contents
INDEX
Ally Financial Inc. Ÿ Form 10-Q

 
 
Page
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


 
PART I — FINANCIAL INFORMATION
 
 
 
Item 1. Financial Statements
Condensed Consolidated Statement of Comprehensive Income (unaudited)
Ally Financial Inc. • Form 10-Q



 
 
Three months ended September 30,
 
Nine months ended September 30,
($ in millions)
 
2013
 
2012
 
2013
 
2012
Financing revenue and other interest income
 
 
 
 
 
 
 
 
Interest and fees on finance receivables and loans
 
$
1,119

 
$
1,141

 
$
3,393

 
$
3,374

Interest on loans held-for-sale
 
—

 
23

 
19

 
74

Interest on trading assets
 
—

 
—

 
—

 
10

Interest and dividends on available-for-sale investment securities
 
85

 
64

 
229

 
215

Interest-bearing cash
 
3

 
8

 
8

 
19

Operating leases
 
832

 
631

 
2,354

 
1,699

Total financing revenue and other interest income
 
2,039

 
1,867

 
6,003

 
5,391

Interest expense
 
 
 
 
 
 
 
 
Interest on deposits
 
163

 
158

 
489

 
481

Interest on short-term borrowings
 
15

 
20

 
47

 
56

Interest on long-term debt
 
609

 
851

 
2,013

 
2,568

Total interest expense
 
787

 
1,029

 
2,549

 
3,105

Depreciation expense on operating lease assets
 
515

 
366

 
1,449

 
1,006

Net financing revenue
 
737

 
472

 
2,005

 
1,280

Other revenue
 
 
 
 
 
 
 
 
Servicing fees
 
13

 
91

 
114

 
326

Servicing asset valuation and hedge activities, net
 
—

 
134

 
(213
)
 
74

Total servicing income, net
 
13

 
225

 
(99
)
 
400

Insurance premiums and service revenue earned
 
251

 
262

 
768

 
793

Gain on mortgage and automotive loans, net
 
15

 
142

 
52

 
248

Loss on extinguishment of debt
 
(42
)
 
—

 
(42
)
 
—

Other gain (loss) on investments, net
 
41

 
(23
)
 
156

 
130

Other income, net of losses
 
93

 
169

 
324

 
523

Total other revenue
 
371

 
775

 
1,159

 
2,094

Total net revenue
 
1,108

 
1,247

 
3,164

 
3,374

Provision for loan losses
 
141

 
105

 
361

 
236

Noninterest expense
 
 
 
 
 
 
 
 
Compensation and benefits expense
 
245

 
257

 
782

 
830

Insurance losses and loss adjustment expenses
 
85

 
90

 
346

 
337

Other operating expenses
 
432

 
498

 
1,393

 
1,504

Total noninterest expense
 
762

 
845

 
2,521

 
2,671

Income from continuing operations before income tax expense (benefit)
 
205

 
297

 
282

 
467

Income tax expense (benefit) from continuing operations
 
28

 
46

 
(55
)
 
31

Net income from continuing operations
 
177

 
251

 
337

 
436

(Loss) income from discontinued operations, net of tax
 
(86
)
 
133

 
(80
)
 
(640
)
Net income (loss)
 
91

 
384

 
257

 
(204
)
Other comprehensive income (loss), net of tax
 
4

 
218

 
(494
)
 
199

Comprehensive income (loss)
 
$
95

 
$
602

 
$
(237
)
 
$
(5
)
Statement continues on the next page.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

3
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Condensed Consolidated Statement of Comprehensive Income (unaudited)
Ally Financial Inc. • Form 10-Q



 
 
Three months ended September 30,
 
Nine months ended September 30,
($ in millions except per share data)
 
2013
 
2012
 
2013
 
2012
Net (loss) income attributable to common shareholders
 
 
 
 
 
 
 
 
Net income from continuing operations
 
$
177

 
$
251

 
$
337

 
$
436

Preferred stock dividends — U.S. Department of Treasury
 
(134
)
 
(134
)
 
(401
)
 
(401
)
Preferred stock dividends
 
(67
)
 
(67
)
 
(200
)
 
(200
)
Net (loss) income from continuing operations attributable to common shareholders
 
(24
)
 
50

 
(264
)
 
(165
)
(Loss) income from discontinued operations, net of tax
 
(86
)
 
133

 
(80
)
 
(640
)
Net (loss) income attributable to common shareholders
 
$
(110
)
 
$
183

 
$
(344
)
 
$
(805
)
Basic weighted-average common shares outstanding
 
1,330,970

 
1,330,970

 
1,330,970

 
1,330,970

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

 
1,330,970

 
1,330,970

 
1,330,970

Basic earnings per common share
 
 
 
 
 
 
 
 
Net (loss) income from continuing operations
 
$
(18
)
 
$
38

 
$
(199
)
 
$
(124
)
(Loss) income from discontinued operations, net of tax
 
(64
)
 
100

 
(60
)
 
(481
)
Net (loss) income
 
$
(82
)
 
$
138

 
$
(259
)
 
$
(605
)
Diluted earnings per common share (a)
 
 
 
 
 
 
 
 
Net (loss) income from continuing operations
 
$
(18
)
 
$
38

 
$
(199
)
 
$
(124
)
(Loss) income from discontinued operations, net of tax
 
(64
)
 
100

 
(60
)
 
(481
)
Net (loss) income
 
$
(82
)
 
$
138

 
$
(259
)
 
$
(605
)
(a)
Due to the antidilutive effect of converting the Fixed Rate Cumulative Mandatorily Convertible Preferred Stock into common shares and the net (loss) income from continuing operations attributable to common shareholders for the three months and nine months ended September 30, 2013 and 2012, respectively, net (loss) income from continuing operations 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.

4
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Condensed Consolidated Balance Sheet (unaudited)
Ally Financial Inc. • Form 10-Q

($ in millions)
 
September 30, 2013
 
December 31, 2012
Assets
 
 
 
 
Cash and cash equivalents
 
 
 
 
Noninterest-bearing
 
$
1,063

 
$
1,073

Interest-bearing
 
5,486

 
6,440

Total cash and cash equivalents
 
6,549

 
7,513

Investment securities
 
17,967

 
14,178

Loans held-for-sale, net ($63 and $2,490 fair value-elected)
 
82

 
2,576

Finance receivables and loans, net
 
 
 
 
Finance receivables and loans, net
 
95,281

 
99,055

Allowance for loan losses
 
(1,198
)
 
(1,170
)
Total finance receivables and loans, net
 
94,083

 
97,885

Investment in operating leases, net
 
17,254

 
13,550

Mortgage servicing rights
 
—

 
952

Premiums receivable and other insurance assets
 
1,649

 
1,609

Other assets
 
7,059

 
11,908

Assets of operations held-for-sale
 
5,913

 
32,176

Total assets
 
$
150,556

 
$
182,347

Liabilities
 
 
 
 
Deposit liabilities
 
 
 
 
Noninterest-bearing
 
$
66

 
$
1,977

Interest-bearing
 
51,965

 
45,938

Total deposit liabilities
 
52,031

 
47,915

Short-term borrowings
 
6,015

 
7,461

Long-term debt
 
60,701

 
74,561

Interest payable
 
978

 
932

Unearned insurance premiums and service revenue
 
2,332

 
2,296

Accrued expenses and other liabilities
 
4,836

 
6,585

Liabilities of operations held-for-sale
 
4,602

 
22,699

Total liabilities
 
131,495

 
162,449

Equity
 
 
 
 
Common stock and paid-in capital
 
19,669

 
19,668

Mandatorily convertible preferred stock held by U.S. Department of Treasury
 
5,685

 
5,685

Preferred stock
 
1,255

 
1,255

Accumulated deficit
 
(7,365
)
 
(7,021
)
Accumulated other comprehensive (loss) income
 
(183
)
 
311

Total equity
 
19,061

 
19,898

Total liabilities and equity
 
$
150,556

 
$
182,347

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

5
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Condensed Consolidated Balance Sheet (unaudited)
Ally Financial Inc. • Form 10-Q

The assets of consolidated variable interest entities, presented based upon the legal transfer of the underlying assets in order to reflect legal ownership, 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, 2013
 
December 31, 2012
Assets
 
 
 
 
Finance receivables and loans, net
 
 
 
 
Finance receivables and loans, net
 
$
28,308

 
$
31,510

Allowance for loan losses
 
(152
)
 
(144
)
Total finance receivables and loans, net
 
28,156

 
31,366

Investment in operating leases, net
 
5,316

 
6,060

Other assets
 
1,492

 
2,868

Assets of operations held-for-sale
 
149

 
12,139

Total assets
 
$
35,113

 
$
52,433

Liabilities
 
 
 
 
Short-term borrowings
 
$
500

 
$
400

Long-term debt
 
24,169

 
26,461

Interest payable
 
1

 
1

Accrued expenses and other liabilities
 
12

 
16

Liabilities of operations held-for-sale
 
149

 
9,686

Total liabilities
 
$
24,831

 
$
36,564

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

6
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Condensed Consolidated Statement of Changes in Equity (unaudited)
Ally Financial Inc. • Form 10-Q

($ 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 (loss)
 
Total
equity
Balance at January 1, 2012
$
19,668

 
$
5,685

 
$
1,255

 
$
(7,415
)
 
$
87

 
$
19,280

Net loss
 
 
 
 
 
 
(204
)
 
 
 
(204
)
Preferred stock dividends — U.S. Department of Treasury
 
 
 
 
 
 
(401
)
 
 
 
(401
)
Preferred stock dividends
 
 
 
 
 
 
(200
)
 
 
 
(200
)
Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
199

 
199

Balance at September 30, 2012
$
19,668

 
$
5,685

 
$
1,255

 
$
(8,220
)
 
$
286

 
$
18,674

Balance at January 1, 2013
$
19,668

 
$
5,685

 
$
1,255

 
$
(7,021
)
 
$
311

 
$
19,898

Net income
 
 
 
 
 
 
257

 
 
 
257

Preferred stock dividends — U.S. Department of Treasury
 
 
 
 
 
 
(401
)
 
 
 
(401
)
Preferred stock dividends
 
 
 
 
 
 
(200
)
 
 
 
(200
)
Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
(494
)
 
(494
)
Increase in paid-in capital
1

 
 
 
 
 
 
 
 
 
1

Balance at September 30, 2013
$
19,669

 
$
5,685

 
$
1,255

 
$
(7,365
)
 
$
(183
)
 
$
19,061

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

7
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Condensed Consolidated Statement of Cash Flows (unaudited)
Ally Financial Inc. • Form 10-Q

Nine months ended September 30, ($ in millions)
 
2013
 
2012
Operating activities
 
 
 
 
Net income (loss)
 
$
257

 
$
(204
)
Reconciliation of net income to net cash provided by operating activities
 
 
 
 
Depreciation and amortization
 
2,106

 
1,758

Changes in fair value of mortgage servicing rights
 
102

 
654

Provision for loan losses
 
431

 
285

Gain on sale of loans, net
 
(52
)
 
(396
)
Net gain on investment securities
 
(156
)
 
(144
)
Loss on extinguishment of debt
 
42

 
—

Originations and purchases of loans held-for-sale
 
(6,234
)
 
(23,670
)
Proceeds from sales and repayments of loans held-for-sale
 
8,647

 
25,295

Impairment and settlement related to Residential Capital, LLC
 
1,350

 
1,192

Gain on sale of subsidiaries, net
 
(932
)
 
(28
)
Net change in
 
 
 
 
Trading assets
 
—

 
595

Deferred income taxes
 
(604
)
 
(199
)
Interest payable
 
51

 
168

Other assets
 
2,943

 
475

Other liabilities
 
(3,456
)
 
(761
)
Other, net
 
(130
)
 
(175
)
Net cash provided by operating activities
 
4,365

 
4,845

Investing activities
 
 
 
 
Purchases of available-for-sale securities
 
(12,747
)
 
(9,592
)
Proceeds from sales of available-for-sale securities
 
4,721

 
6,774

Proceeds from maturities and repayment of available-for-sale securities
 
3,893

 
4,940

Net decrease (increase) in finance receivables and loans
 
2,744

 
(7,925
)
Proceeds from sales of finance receivables and loans
 
—

 
2,329

Purchases of operating lease assets
 
(7,251
)
 
(5,612
)
Disposals of operating lease assets
 
2,080

 
1,303

Sale of mortgage servicing rights
 
911

 
—

Proceeds from sale of business units, net (a)
 
6,937

 
516

Net cash effect from deconsolidation of Residential Capital, LLC
 
—

 
(539
)
Net change in restricted cash
 
2,297

 
92

Other, net 
 
(55
)
 
(17
)
Net cash provided by (used in) investing activities
 
3,530

 
(7,731
)
Statement continues on the next page.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

8
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Condensed Consolidated Statement of Cash Flows (unaudited)
Ally Financial Inc. • Form 10-Q

Nine months ended September 30, ($ in millions)
 
2013
 
2012
Financing activities
 
 
 
 
Net change in short-term borrowings
 
(936
)
 
(1,673
)
Net increase in deposits
 
4,057

 
4,647

Proceeds from issuance of long-term debt
 
13,347

 
27,520

Repayments of long-term debt
 
(26,725
)
 
(22,908
)
Dividends paid
 
(601
)
 
(601
)
Net cash (used in) provided by financing activities
 
(10,858
)
 
6,985

Effect of exchange-rate changes on cash and cash equivalents
 
47

 
(1
)
Net (decrease) increase in cash and cash equivalents
 
(2,916
)
 
4,098

Adjustment for change in cash and cash equivalents of operations held-for-sale (a) (b)
 
1,952

 
24

Cash and cash equivalents at beginning of year
 
7,513

 
13,035

Cash and cash equivalents at September 30,
 
$
6,549

 
$
17,157

Supplemental disclosures
 
 
 
 
Cash paid for
 
 
 
 
Interest
 
$
2,890

 
$
3,705

Income taxes
 
67

 
291

Other disclosures
 
 
 
 
Proceeds from sales and repayments of mortgage loans held-for-investment originally designated as held-for-sale
 
43

 
116

(a)
The amounts are net of cash and cash equivalents of $1,418 million at September 30, 2013 and $147 million at September 30, 2012 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.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

9
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Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q



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, diversified, financial services firm. Founded in 1919, we are a leading automotive financial services company with over 90 years of experience providing a broad array of financial products and services to automotive dealers and their customers. 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 (internet, telephone, mobile, and mail) 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, 2013, and for the three months and nine months ended September 30, 2013, and 2012, 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, 2012, as filed on March 1, 2013, with the U.S. Securities and Exchange Commission (SEC) as revised by the Current Report on Form 8-K filed with the SEC on July 9, 2013 (referred to herein as 2012 Annual Report).
Residential Capital, LLC
Our mortgage operations were historically a significant portion of our operations and were conducted primarily through our Residential Capital, LLC (ResCap) subsidiary. On May 14, 2012, ResCap and certain of its wholly owned direct and indirect subsidiaries (collectively, the Debtors) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). As a result of the bankruptcy filing, effective May 14, 2012, we deconsolidated ResCap from our financial statements and recorded a charge of $442 million for the impairment of Ally's investment in ResCap. During the first quarter of 2013, we discontinued performing certain mortgage activities, which were required as part of the bankruptcy process until the sale of certain assets occurred. As a result of us discontinuing these activities, the operations of ResCap were classified as discontinued. Refer to Note 2 for further information.
On May 14, 2013, Ally Financial Inc., on behalf of itself and certain of its subsidiaries (collectively, AFI) entered into a Plan Support Agreement (the PSA) with the Debtors, the official committee of unsecured creditors appointed in the Debtors' Chapter 11 cases (the Creditors' Committee), and certain creditors (collectively, the Consenting Claimants). The PSA, which was approved by the Bankruptcy Court on June 26, 2013, requires the parties to support a Chapter 11 plan in the Debtors' Chapter 11 cases (the Plan) that, among other things, settles and provides AFI full releases for all existing and potential claims between AFI and the Debtors, including all representation and warranty claims that reside with the Debtors (the Debtor Releases), and shall include full releases for all pending and potential claims held by third parties related to the Debtors that could be brought against AFI (the Third Party Releases).
On July 3, 2013, the Debtors filed the Plan and related disclosure statement (the Disclosure Statement), with the Bankruptcy Court. The Bankruptcy Court entered an order approving the Disclosure Statement on August 23, 2013, and the Plan confirmation hearing is currently scheduled to commence on November 19, 2013. The Plan fully incorporates the terms of the PSA, including the Debtor Releases, as well as the Third Party Releases. As of the date hereof, AFI has agreed to settlements (the Settlements) with each of the Federal Housing Finance Agency (the FHFA) and the Federal Deposit Insurance Corporation, as receiver for certain failed banks (the FDIC), which provide, among other things, that in exchange for a monetary payment, the FHFA’s and FDIC’s pending litigation against AFI will be dismissed, and the claims will no longer be included as exceptions to the Third Party Releases. Also, the Plan will be amended to add Freddie Mac, and the FHFA as conservator for Freddie Mac and Fannie Mae, as exclusions from the Third Party Releases only with respect to certain ordinary-course representation and warranty repurchase claims against Ally Bank, as a former mortgage seller and servicer. The Settlements are not conditioned on the Plan becoming effective. It is possible that additional exceptions to the Third Party Releases could be added in the future with AFI’s consent. We recorded an additional pretax charge of $170 million to discontinued operations ($107 million net of tax) during the three months ended September 30, 2013, related to the Settlements. At September 30, 2013, we have accrued $520 million related to the Settlements.
The Plan also provides, among other things, that, on the effective date of the Plan (the Effective Date), AFI will contribute to the Debtors' estates $1.95 billion in cash or cash equivalents, and will further contribute $150 million received by AFI for claims it pursues against its insurance carriers related to the claims released in connection with the Plan, with such amount guaranteed by AFI to be paid no later than September 30, 2014 (collectively, the AFI Contribution) in exchange for the releases of AFI included in the Plan. These amounts have been appropriately reflected within our accrued expenses and other liabilities. Refer to Note 15 for additional information. The AFI Contribution and other assets of the Debtors' estates will be distributed to creditors under the Plan.

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Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


In addition, the Plan contemplates the payoff of AFI secured debt on or before the Effective Date. On June 13, 2013, the Debtors paid AFI approximately $1.1 billion in full satisfaction of the AFI revolving credit facility and line of credit. The payment to AFI was approved by the Bankruptcy Court with an express reservation of rights, claims and remedies against AFI and a reciprocal reservation of rights, claims and remedies for AFI's benefit in the event the Plan does not become effective.
The Plan also provides that the Debtors will remain responsible for all costs and obligations imposed on the Debtors under (i) the consent judgment among the United States Department of Justice, the Attorneys General of certain states, ResCap, GMAC Mortgage, LLC (GMACM) and Ally Financial Inc. entered by the District Court for the District of Columbia on February 9, 2012, (ii) the consent order among ResCap, GMACM, Ally Financial Inc., Ally Bank, the Federal Reserve Board (FRB) and the FDIC, dated April 13, 2011 (the Consent Order) and (iii) the order of assessment among ResCap, GMACM, Ally Financial Inc. and the Board of Governors of the Federal Reserve System, excluding certain obligations that are being performed by Ocwen Financial Corporation (Ocwen). Notably, on July 26, 2013, the Bankruptcy Court approved an amendment to the Consent Order (the Consent Order Amendment), which, among other things, required the Debtors to escrow approximately $230 million (the FRB Settlement Amount) in exchange for the FRB ceasing the foreclosure review mandated under the Consent Order (the FRB Foreclosure Review). As a result of the Consent Order Amendment, the Debtors are no longer responsible for the FRB Foreclosure Review, and the FRB Settlement Amount will be distributed to individual borrowers in full satisfaction of the Debtors' foreclosure review obligations.
Further, the Plan includes a settlement of insurance disputes between AFI and the Debtors under which the Debtors will relinquish in favor of AFI all of their rights to coverage under certain insurance policies. The PSA also requires that all litigation against AFI by the Debtors, the Creditors' Committee, and the Consenting Claimants be stayed so long as the PSA has not been terminated.
Under the terms of the Plan, the Effective Date must occur on or before the earlier of (i) 30 days after the Bankruptcy Court enters an order confirming the Plan (the Confirmation Order) or (ii) December 15, 2013. If this condition is not satisfied, the Plan allows AFI, the Debtors and/or the Creditors’ Committee to file a motion to vacate the Confirmation Order, which if approved, could result in the Plan becoming null and void.
Under the Plan, there are several remaining conditions to be satisfied or waived before the Plan can be effective, including, the following: (i) the Confirmation Order must have been entered by the Bankruptcy Court and provide for, among other things, the Debtor Releases and Third Party Releases; (ii) the Confirmation Order must not have been stayed, modified, or vacated on appeal; (iii) AFI must have funded the AFI Contribution; and (iv) AFI's secured claims against the Debtors must have been fully satisfied.
Moreover, the PSA includes a number of events that could result in the PSA being terminated, including the following: (i) the Bankruptcy Court enters an order appointing a Chapter 11 trustee; (ii) any of the Debtors' Chapter 11 cases are dismissed or converted to a case under Chapter 7 of the Bankruptcy Code; (iii) any court has entered a final, non-appealable judgment or order declaring any material portion of the PSA unenforceable; (iv) the releases set forth in the PSA are modified, amended, changed, severed or otherwise altered in the Plan or any other definitive document; and (v) the PSA ceases to be binding on AFI or the Creditors' Committee.
On June 4, 2012, Berkshire Hathaway Inc. filed a motion in the Bankruptcy Court for the appointment of an independent examiner to investigate, among other things, certain of the Debtors' transactions with AFI occurring prior to the Petition Date, any claims the Debtors may hold against AFI's officers and directors, and any claims the Debtors proposed to release under the Plan. On June 20, 2012, the Bankruptcy Court approved the appointment of an examiner and, subsequently, the United States Trustee for the Southern District of New York appointed former bankruptcy judge Arthur J. Gonzalez, Esq. as the examiner (the Examiner). Upon approving the PSA on June 26, 2013, the Bankruptcy Court unsealed the Examiner's investigative report. Under the terms of the PSA, the contents of the report may not be used by any party as a basis for terminating or modifying the PSA.
There can be no assurance that the conditions to effectiveness of the Plan will be satisfied or waived. The failure of the Plan to become effective could result in, among other consequences, the pursuit of an alternative form of reorganization or liquidation, which may be less favorable to AFI. Further, the termination of the PSA could result in, among other consequences, material modifications to the Plan, resulting in delay, significant expense and provisions that are less favorable to AFI. If AFI does not receive the releases described above, the Debtors and/or third party creditors are expected to assert substantial claims directly against AFI, which could have a material adverse impact on us.
Significant Accounting Policies
Income Taxes
In calculating the provision for interim income taxes, in accordance with Accounting Standards Codification (ASC) 740, Income Taxes, we apply an estimated annual effective tax rate to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. We exclude and record discretely the tax effect of unusual or infrequently occurring items, including, for example, changes in judgment about valuation allowances and effects of changes in tax law or rates. The provision for income taxes in tax jurisdictions with a projected full year or year-to-date loss for which a tax benefit cannot be realized is estimated using tax rates specific to that jurisdiction.
Refer to Note 1 to the Consolidated Financial Statements in our 2012 Annual Report regarding additional significant accounting policies.

11
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


Recently Adopted Accounting Standards
Balance Sheet - Disclosures about Offsetting Assets and Liabilities (ASU 2011-11 and ASU 2013-01)
As of January 1, 2013, we adopted Accounting Standards Update (ASU) 2011-11, which amends ASC 210, Balance Sheet. This ASU contains new disclosure requirements regarding the nature of an entity's rights of offset and related arrangements associated with its financial instruments and derivative instruments. In addition, we adopted ASU 2013-01, which simply clarified the scope of ASU 2011-11. The new disclosures will give financial statement users information about both gross and net exposures. ASU 2011-11 and ASU 2013-01 were required to be applied retrospectively. Since the guidance relates only to disclosure of information, the adoption did not have an impact to our consolidated financial condition or results of operations.
Comprehensive Income - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02)
As of January 1, 2013, we adopted ASU 2013-02, which amends ASC 220, Comprehensive Income. The ASU contains new requirements related to the presentation and disclosure of items that are reclassified out of accumulated other comprehensive income. The new requirements provide financial statement users a more comprehensive view of items that are reclassified out of accumulated other comprehensive income. ASU 2013-02 was required to be applied prospectively. Since the guidance relates only to presentation and disclosure of information, the adoption did not have an impact to our consolidated financial condition or results of operations.
Derivatives and Hedging - Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (ASU 2013-10)
As of July 17, 2013, we adopted ASU 2013-10, which amends ASC 815, Derivatives and Hedging. The ASU established the Fed Funds Effective Swap Rate or Overnight Index Swap Rate (OIS) as an additional U.S. benchmark interest rate for hedge accounting purposes. Prior to the ASU's addition of the OIS as a benchmark rate, only interest rates on direct Treasury obligations and the LIBOR swap rate were considered to be such benchmarks. Amendments of the update also remove the restriction on using different benchmark rates for similar hedges. The amendments were effective prospectively when entering into new or redesignating existing hedging relationships on or after July 17, 2013. Since the new guidance simply allows for an additional hedge index to be utilized for hedge accounting purposes, the implementation of this guidance has not had a material effect on our consolidated financial condition or results of operations.
Recently Issued Accounting Standards
Liabilities - Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (ASU 2013-04)
In February 2013, the Financial Accounting Standards Board (FASB) issued ASU 2013-04. This ASU requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the following: (a) The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. It further requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. ASU 2013-04 will be effective for us on January 1, 2014, with retrospective application required. The adoption of this guidance is not expected to have a material effect on our consolidated financial condition or results of operations.
Foreign Currency Matters - Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05)
In March 2013, the FASB issued ASU 2013-05. This ASU requires a reporting entity that ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity to release any related cumulative translation adjustment (CTA) into net income. The CTA should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For an equity method investment that is a foreign entity, a pro rata portion of the CTA should be released into net income upon a partial sale of such an investment. This ASU clarifies that the sale of an investment in a foreign entity includes both events that result in the loss of a controlling financial interest in a foreign entity, irrespective of any retained investment, and events that result in step acquisition under which an acquirer obtains control of an acquiree in which it held an equity interest immediately before the acquisition date. Under these circumstances, the CTA should be released into net income upon their occurrence. ASU 2013-05 will be effective for us prospectively on January 1, 2014. Management is currently assessing the potential impact of the application of this guidance. However, since the guidance is prospective and we are in the process of exiting most of our international businesses, it is not expected to have a material effect on our consolidated financial condition or results of operations.
Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11)
In July 2013, the FASB issued ASU 2013-11. This ASU generally requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The guidance further includes an exception that if a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available to settle any additional income taxes that would result from the disallowance of a tax position at the reporting date, or the tax law of the applicable jurisdiction, does not require the entity to use them and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not

12
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. ASU 2013-11 will be effective for us prospectively on January 1, 2014. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Early adoption and retrospective application are permitted. The adoption of this guidance is not expected to have a material affect on our consolidated financial condition or results of operations.
2.     Discontinued and Held-for-sale Operations
Discontinued Operations
We classify operations as discontinued when operations and cash flows will be eliminated from our ongoing operations and we do not expect to retain any significant continuing involvement in their operations after the respective sale transactions. For all periods presented, the operating results for these discontinued operations have been removed from continuing operations and presented separately as discontinued operations, net of tax, in the Condensed Consolidated Statement of Comprehensive Income. The Notes to the Condensed Consolidated Financial Statements have been adjusted to exclude discontinued operations unless otherwise noted.
Select Mortgage Operations
During the first quarter of 2013, the operations of ResCap were classified as discontinued. During the second quarter of 2012, we sold the Canadian mortgage operations of ResMor Trust.
Select Insurance Operations
During the second quarter of 2013, we sold our Mexican insurance business, ABA Seguros. During the first quarter of 2013, we completed the sale of our U.K.-based operations.
Select Automotive Finance Operations
During the fourth quarter of 2012, we committed to sell our automotive finance operations in Europe and Latin America to General Motors Financial Company, Inc. (GM Financial). On the same date, we entered into an agreement with GM Financial to acquire our 40% interest in a motor vehicle finance joint venture in China. During the second quarter of 2013, we completed the sale of our operations in Europe and the majority of Latin America. The transaction included European operations in Germany, the United Kingdom, Italy, Sweden, Switzerland, Austria, Belgium, France and the Netherlands, and Latin American operations in Mexico, Chile, and Colombia. On October 1, 2013, we completed the sale of the remaining Latin American operations in Brazil. Refer to Note 27 for further detail. We expect to complete the sale of the joint venture in China during 2013 or possibly 2014.
During the first quarter of 2013, we sold our Canadian automotive finance operations, Ally Credit Canada Limited and ResMor Trust. During the first quarter of 2012, we completed the sale of our Venezuela operations.
Select Corporate and Other Operations
During the fourth quarter of 2012, we ceased operations at our Commercial Finance Group's European division and classified it as discontinued.

13
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


Select Financial Information
Select financial information of discontinued operations is summarized below. The pretax income or loss, including direct costs to transact a sale, includes any impairment recognized to present the operations at the lower-of-cost or fair value. Fair value was based on the estimated sales price, which could differ from the ultimate sales price due to price volatility, changing interest rates, changing foreign-currency rates, and future economic conditions.
 
Three months ended September 30,
 
Nine months ended September 30,
($ in millions)
2013
 
2012
 
2013
 
2012
Select Mortgage operations
 
 
 
 
 
 
 
Total net revenue
$
—

 
$
—

 
$
—

 
$
440

Pretax loss including direct costs to transact a sale (a) (b)
(158
)
 
(33
)
 
(1,762
)
 
(1,198
)
Tax (benefit) expense (c)
(40
)
 
(17
)
 
(573
)
 
7

Select Insurance operations
 
 
 
 
 
 
 
Total net revenue
$
—

 
$
157

 
$
190

 
$
462

Pretax income including direct costs to transact a sale (a)
5

 
13

 
319

(d)
48

Tax expense (benefit) (c)
3

 
6

 
(12
)
 
24

Select Automotive Finance operations
 
 
 
 
 
 
 
Total net revenue
$
119

 
$
347

 
$
544

 
$
1,119

Pretax income including direct costs to transact a sale (a)
58

 
185

 
752

(e)
611

Tax expense (benefit) (c)
28

 
47

 
(25
)
 
105

Select Corporate and Other operations
 
 
 
 
 
 
 
Total net revenue
$
—

 
$
1

 
$
—

 
$
10

Pretax income
—

 
5

 
1

 
37

Tax expense
—

 
1

 
—

 
2

(a)
Includes certain treasury and other corporate activity recognized by Corporate and Other.
(b)
Includes the results of ResCap. Refer to Note 1 for more information regarding the Debtors' bankruptcy.
(c)
Includes certain income tax activity recognized by Corporate and Other.
(d)
Includes recognized pretax gain of $274 million in connection with the sale of our Mexican insurance business, ABA Seguros.
(e)
Includes recognized pretax loss of $371 million in connection with the sale of our European and the majority of our Latin American automotive finance operations and pretax gain of $888 million in connection with the sale of our Canadian automotive finance operations, Ally Credit Canada Limited and ResMor Trust.

14
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


Held-for-sale Operations
The assets and liabilities of operations held-for-sale are summarized below.
September 30, 2013 ($ in millions)
Select
Automotive Finance
operations (a)
Assets
 
Cash and cash equivalents
 
Noninterest-bearing
$
35

Interest-bearing
158

Total cash and cash equivalents
193

Finance receivables and loans, net
 
Finance receivables and loans, net
4,308

Allowance for loan losses
(94
)
Total finance receivables and loans, net
4,214

Other assets
1,506

Total assets
$
5,913

Liabilities
 
Short-term borrowings
$
521

Long-term debt
3,455

Interest payable
117

Accrued expenses and other liabilities
509

Total liabilities
$
4,602

(a)
Includes Brazil and our joint venture in China that are being sold to GM Financial.

15
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


December 31, 2012 ($ in millions)
 
Select
Insurance
operations (a)
 
Select
Automotive Finance
operations (b)
 
Total
held-for-sale
operations
Assets
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
 
Noninterest-bearing
 
$
8

 
$
100

 
$
108

Interest-bearing
 
119

 
1,918

 
2,037

Total cash and cash equivalents
 
127

 
2,018

 
2,145

Investment securities
 
576

 
424

 
1,000

Finance receivables and loans, net
 
 
 
 
 
 
Finance receivables and loans, net
 
—

 
25,835

 
25,835

Allowance for loan losses
 
—

 
(208
)
 
(208
)
Total finance receivables and loans, net
 
—

 
25,627

 
25,627

Investment in operating leases, net
 
—

 
144

 
144

Premiums receivable and other insurance assets
 
277

 
—

 
277

Other assets
 
94

 
2,942

 
3,036

Impairment on assets of held-for-sale operations
 
(53
)
 
—

 
(53
)
Total assets
 
$
1,021

 
$
31,155

 
$
32,176

Liabilities
 
 
 
 
 
 
Interest-bearing deposit liabilities
 
$
—

 
$
3,907

 
$
3,907

Short-term borrowings
 
—

 
2,800

 
2,800

Long-term debt
 
—

 
13,514

 
13,514

Interest payable
 
—

 
177

 
177

Unearned insurance premiums and service revenue
 
506

 
—

 
506

Accrued expenses and other liabilities
 
297

 
1,498

 
1,795

Total liabilities
 
$
803

 
$
21,896

 
$
22,699

(a)
Includes our U.K.-based operations and ABA Seguros.
(b)
Includes our Canadian operations sold to Royal Bank of Canada and international entities being sold to GM Financial.
Recurring Fair Value
There were no assets or liabilities for our held-for-sale operations measured at fair value on a recurring basis as of September 30, 2013. The December 31, 2012 balances can be found on the Consolidated Financial Statements in our 2012 Annual Report. Refer to Note 22 for descriptions of valuation methodologies used to measure material assets at fair value and details of the valuation models, key inputs to these models, and significant assumptions used.
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)
2013
 
2012
 
2013
 
2012
Late charges and other administrative fees
$
25

 
$
24

 
$
71

 
$
66

Fair value adjustment on derivatives (a)
21

 
(2
)
 
31

 
(36
)
Remarketing fees
20

 
15

 
59

 
47

Mortgage processing fees and other mortgage income
—

 
105

 
81

 
335

Other, net
27

 
27

 
82

 
111

Total other income, net of losses
$
93

 
$
169

 
$
324

 
$
523

(a)
Refer to Note 20 for a description of derivative instruments and hedging activities.

16
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


4.     Other Operating Expenses
Details of other operating expenses were as follows.
 
Three months ended September 30,
 
Nine months ended September 30,
($ in millions)
2013
 
2012
 
2013
 
2012
Insurance commissions
$
93

 
$
93

 
$
278

 
$
286

Technology and communications
87

 
68

 
250

 
237

Professional services
38

 
43

 
140

 
113

Advertising and marketing
33

 
37

 
96

 
104

Lease and loan administration
29

 
89

 
141

 
200

Regulatory and licensing fees
25

 
30

 
87

 
94

Mortgage representation and warranty obligation, net (a)
22

 
30

 
103

 
171

Premises and equipment depreciation
20

 
20

 
61

 
56

Vehicle remarketing and repossession
15

 
11

 
42

 
39

Occupancy
12

 
12

 
34

 
38

Other
58

 
65

 
161

 
166

Total other operating expenses
$
432

 
$
498

 
$
1,393

 
$
1,504

(a)
Refer to Note 26 for further details on representation and warranty obligation.
5.     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, 2013
 
December 31, 2012
 
 
Amortized cost
 
Gross unrealized
 
Fair
value
 
Amortized cost
 
Gross unrealized
 
Fair
value
($ in millions)
 
gains  
 
losses  
 
gains  
 
losses  
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies
 
$
2,075

 
$
1

 
$
(54
)
 
$
2,022

 
$
2,212

 
$
3

 
$
(1
)
 
$
2,214

U.S. States and political subdivisions
 
178

 
1

 
—

 
179

 
—

 
—

 
—

 
—

Foreign government
 
299

 
4

 
(3
)
 
300

 
295

 
8

 
—

 
303

Mortgage-backed residential (a)
 
11,444

 
78

 
(316
)
 
11,206

 
6,779

 
130

 
(3
)
 
6,906

Mortgage-backed commercial
 
20

 
—

 
—

 
20

 
—

 
—

 
—

 
—

Asset-backed
 
2,251

 
17

 
(3
)
 
2,265

 
2,309

 
32

 
(1
)
 
2,340

Corporate debt
 
1,047

 
20

 
(9
)
 
1,058

 
1,209

 
57

 
(3
)
 
1,263

Total debt securities 
 
17,314

 
121

 
(385
)
 
17,050

 
12,804

 
230

 
(8
)
 
13,026

Equity securities
 
929

 
32

 
(44
)
 
917

 
1,193

 
32

 
(73
)
 
1,152

Total available-for-sale securities (b)
 
$
18,243

 
$
153

 
$
(429
)
 
$
17,967

 
$
13,997

 
$
262

 
$
(81
)
 
$
14,178

(a)
Residential mortgage-backed securities include agency-backed bonds totaling $8,702 million and $4,983 million at September 30, 2013, and December 31, 2012, respectively.
(b)
Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $15 million and $15 million at September 30, 2013, and December 31, 2012, respectively.

17
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


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, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of available-for-sale debt securities (b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies
 
$
2,022

 
0.9
%
 
$
588

 
0.1
%
 
$
505

 
1.2
%
 
$
929

 
1.3
%
 
$
—

 
—
%
U.S. States and political subdivisions
 
179

 
3.4

 
—

 
—

 
—

 
—

 
86

 
2.6

 
93

 
4.2

Foreign government
 
300

 
3.5

 
5

 
6.1

 
111

 
3.8

 
179

 
3.3

 
5

 
4.1

Mortgage-backed residential
 
11,206

 
2.7

 
—

 
—

 
—

 
—

 
101

 
2.1

 
11,105

 
2.7

Mortgage-backed commercial
 
20

 
1.3

 
—

 
—

 
—

 
—

 
—

 
—

 
20

 
1.3

Asset-backed
 
2,265

 
1.9

 
—

 
—

 
1,580

 
1.9

 
540

 
1.9

 
145

 
2.5

Corporate debt
 
1,058

 
4.3

 
16

 
5.1

 
511

 
3.3

 
449

 
5.1

 
82

 
5.7

Total available-for-sale debt securities
 
$
17,050

 
2.5

 
$
609

 
0.2

 
$
2,707

 
2.1

 
$
2,284

 
2.4

 
$
11,450

 
2.7

Amortized cost of available-for-sale debt securities
 
$
17,314

 
 
 
$
609

 
 
 
$
2,694

 
 
 
$
2,323

 
 
 
$
11,688

 
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of available-for-sale debt securities (b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies
 
$
2,214

 
0.9
%
 
$
422

 
—
%
 
$
682

 
0.7
%
 
$
1,110

 
1.4
%
 
$
—

 
—
%
Foreign government
 
303

 
2.5

 
1

 
2.2

 
136

 
1.8

 
166

 
3.0

 
—

 
—

Mortgage-backed residential
 
6,906

 
2.7

 
—

 
—

 
—

 
—

 
35

 
4.3

 
6,871

 
2.7

Asset-backed
 
2,340

 
2.1

 
—

 
—

 
1,543

 
2.0

 
510

 
1.7

 
287

 
3.3

Corporate debt
 
1,263

 
5.1

 
9

 
3.2

 
560

 
4.0

 
596

 
6.0

 
98

 
5.8

Total available-for-sale debt securities
 
$
13,026

 
2.4

 
$
432

 
0.1

 
$
2,921

 
2.0

 
$
2,417

 
2.6

 
$
7,256

 
2.6

Amortized cost of available-for-sale debt securities
 
$
12,804

 
 
 
$
431

 
 
 
$
2,880

 
 
 
$
2,369

 
 
 
$
7,124

 
 
(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 $3.2 billion and $3.4 billion at September 30, 2013, and December 31, 2012, respectively, and were composed primarily of money market accounts and short-term securities, including U.S. Treasury bills.
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 September 30,
 
Nine months ended September 30,
($ in millions)
2013
 
2012
 
2013
 
2012
Gross realized gains
$
59

 
$
52

 
$
196

 
$
217

Gross realized losses
(7
)
 
(19
)
 
(21
)
 
(31
)
Other-than-temporary impairment
(11
)
 
(56
)
 
(19
)
 
(56
)
Other gain (loss) on investments, net
$
41

 
$
(23
)
 
$
156

 
$
130


18
Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q


The following table presents interest and dividends on available-for-sale securities.
 
Three months ended September 30,
 
Nine months ended September 30,
($ in millions)
2013
 
2012
 
2013
 
2012
Taxable interest
$
79

 
$
58

 
$
210

 
$
197

Taxable dividends
6

 
6

 
19

 
18

Interest and dividends on available-for-sale securities
$
85

 
$
64

 
$
229

 
$
215

Certain available-for-sale securities were sold at a loss in 2013 and 2012 as a result of market conditions. 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, 2013, 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, 2013, 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, 2013. Refer to Note 1 to the Consolidated Financial Statements in our 2012 Annual Report for additional information related to investment securities and our methodology for evaluating potential other-than-temporary impairments.
 
 
September 30, 2013
 
December 31, 2012
 
 
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
 
$
1,419

 
$
(54
)
 
$
—

 
$
—

 
$
244

 
$
(1
)
 
$
—

 
$
—

U.S. States and political subdivisions
 
32

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Foreign government
 
113

 
(3
)
 
—

 
—

 
11

 
—

 
—

 
—

Mortgage-backed
 
6,688

 
(316
)
 
3

 
—

 
493

 
(2
)
 
23

 
(1
)
Asset-backed
 
438

 
(3
)
 
1

 
—

 
143

 
(1
)
 
1

 
—

Corporate debt
 
316

 
(9
)
 
—

 
—

 
120

 
(2
)
 
15

 
(1
)
Total temporarily impaired debt securities
 
9,006

 
(385
)
 
4

 
—

 
1,011

 
(6
)
 
39

 
(2
)
Temporarily impaired equity securities
 
380

 
(29
)
 
90

 
(15
)
 
380

 
(39
)
 
218

 
(34
)
Total temporarily impaired available-for-sale securities
 
$
9,386

 
$
(414
)
 
$
94

 
$
(15
)
 
$
1,391

 
$
(45
)
 
$
257

 
$
(36
)
6.     Loans Held-for-Sale, Net
The composition of loans held-for-sale, net, was as follows.
($ in millions)
 
September 30, 2013
 
December 31, 2012
Consumer mortgage