EX-99.2 8 dex992.htm CONSOLIDATED FINANCIAL STATEMENTS OF ALLY FINANCIAL INC. AND SUBSIDIARIES Consolidated Financial Statements of Ally Financial Inc. and subsidiaries

Exhibit 99.2

ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF INCOME (unaudited)

 

     Three months ended
June 30,
    Six months ended
June 30,
 
($ in millions)        2010             2009             2010             2009      

Financing revenue and other interest income

        

Finance receivables and loans

        

Consumer

   $ 1,128      $ 1,175      $ 2,258      $ 2,408   

Commercial

     456        434        891        852   

Notes receivable from General Motors

     40        47        95        89   
   

Total finance receivables and loans

     1,624        1,656        3,244        3,349   

Loans held-for-sale

     156        84        371        168   

Interest on trading securities

     6        34        7        57   

Interest and dividends on available-for-sale investment securities

     91        55        191        113   

Interest bearing cash

     18        27        32        69   

Other interest income, net

     (4     30               55   

Operating leases

     1,011        1,503        2,174        3,105   
   

Total financing revenue and other interest income

     2,902        3,389        6,019        6,916   

Interest expense

        

Interest on deposits

     155        179        313        357   

Interest on short-term borrowings

     100        182        212        343   

Interest on long-term debt

     1,409        1,579        2,844        3,236   
   

Total interest expense

     1,664        1,940        3,369        3,936   

Depreciation expense on operating lease assets

     526        1,056        1,182        2,113   
   

Net financing revenue

     712        393        1,468        867   

Other revenue

        

Servicing fees

     384        393        769        797   

Servicing asset valuation and hedge activities, net

     (21     (225     (154     (577
   

Total servicing income, net

     363        168        615        220   

Insurance premiums and service revenue earned

     477        496        945        991   

Gain on mortgage and automotive loans, net

     266        206        537        489   

(Loss) gain on extinguishment of debt

     (3     13        (121     657   

Other gain on investments, net

     95        97        235        83   

Other income, net of losses

     190        (113     275        (323
   

Total other revenue

     1,388        867        2,486        2,117   

Total net revenue

     2,100        1,260        3,954        2,984   

Provision for loan losses

     220        1,117        366        1,863   

Noninterest expense

        

Compensation and benefits expense

     388        389        815        754   

Insurance losses and loss adjustment expenses

     224        261        435        546   

Other operating expenses

     822        1,076        1,711        2,081   
   

Total noninterest expense

     1,434        1,726        2,961        3,381   

Income (loss) from continuing operations before income tax expense

     446        (1,583     627        (2,260

Income tax expense from continuing operations

     33        1,096        69        972   
   

Net income (loss) from continuing operations

     413        (2,679     558        (3,232
   

Income (loss) from discontinued operations, net of tax

     152        (1,224     169        (1,346
   

Net income (loss)

   $ 565      $ (3,903   $ 727      $ (4,578
   

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

 

1


ALLY FINANCIAL INC.

CONSOLIDATED BALANCE SHEET (unaudited)

 

($ in millions)   June 30, 2010     December 31, 2009  

Assets

   

Cash and cash equivalents

   

Noninterest bearing

  $ 820      $ 1,840   

Interest bearing

    13,528        12,948   
   

Total cash and cash equivalents

    14,348        14,788   

Trading securities

    209        739   

Investment securities

   

Available-for-sale

    12,710        12,155   

Held-to-maturity

           3   
   

Total investment securities

    12,710        12,158   

Loans held-for-sale ($4,167 and $5,545 fair value elected)

    10,382        20,625   

Finance receivables and loans, net of unearned income

   

Consumer ($2,345 and $1,303 fair value elected)

    55,346        42,849   

Commercial

    37,005        33,941   

Notes receivable from General Motors

    365        911   

Allowance for loan losses

    (2,377     (2,445
   

Total finance receivables and loans, net

    90,339        75,256   

Investment in operating leases, net

    11,895        15,995   

Mortgage servicing rights

    2,983        3,554   

Premiums receivable and other insurance assets

    2,251        2,720   

Other assets

    19,646        19,887   

Assets of operations held-for-sale ($8,398 fair value elected at June 30, 2010)

    12,039        6,584   
   

Total assets

  $ 176,802      $ 172,306   
   

Liabilities

   

Deposit liabilities

   

Noninterest bearing

  $ 2,276      $ 1,755   

Interest bearing

    32,938        30,001   
   

Total deposit liabilities

    35,214        31,756   

Debt

   

Short-term borrowings

    7,054        10,292   

Long-term debt ($2,178 and $1,293 fair value elected)

    85,205        88,021   
   

Total debt

    92,259        98,313   

Interest payable

    1,692        1,637   

Unearned insurance premiums and service revenue

    2,990        3,192   

Reserves for insurance losses and loss adjustment expenses

    962        1,215   

Accrued expenses and other liabilities

    11,575        10,456   

Liabilities of operations held-for-sale ($7,857 fair value elected at June 30, 2010)

    11,337        4,898   
   

Total liabilities

    156,029        151,467   

Equity

   

Common stock and paid-in capital

    13,829        13,829   

Preferred stock held by U.S. Department of Treasury

    10,893        10,893   

Preferred stock

    1,287        1,287   

Accumulated deficit

    (5,421     (5,630

Accumulated other comprehensive income

    185        460   
   

Total equity

    20,773        20,839   
   

Total liabilities and equity

  $ 176,802      $ 172,306   
   

 

2


ALLY FINANCIAL INC.

CONSOLIDATED BALANCE SHEET (unaudited)

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

 

($ in millions)        

Assets

  

Cash and cash equivalents

  

Noninterest bearing

   $ 3   

Loans held-for-sale

     92   

Finance receivables and loans, net of unearned income

  

Consumer ($2,345 fair value elected)

     19,910   

Commercial

     12,418   

Allowance for loan losses

     (347
   

Total finance receivables and loans, net

     31,981   

Investment in operating leases, net

     3,364   

Other assets

     4,304   

Assets of operations held-for-sale

     10,481   
   

Total assets

   $ 50,225   
   

Liabilities

  

Debt

  

Short-term borrowings

   $ 1,610   

Long-term debt ($2,178 fair value elected)

     26,654   
   

Total debt

     28,264   

Interest payable

     28   

Accrued expenses and other liabilities

     608   

Liabilities of operations held-for-sale

     10,547   
   

Total liabilities

   $ 39,447   
   

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

 

3


ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six Months Ended June 30, 2010 and 2009

 

($ in millions)   Members’
interests
 

Preferred
interests

held by

U.S.
Department
of Treasury

  Preferred
interests
  Retained
earnings
    Accumulated
other
comprehensive
(loss) income
    Total
equity
    Comprehensive
(loss) income
 

Balance at January 1, 2009

  $ 9,670   $ 5,000   $ 1,287   $ 6,286      $ (389   $ 21,854     

Capital contributions (a)

    1,247             1,247     

Net loss

          (4,578       (4,578   $ (4,578

Preferred interests dividends paid to the U.S. Department of Treasury

          (160       (160  

Preferred interests dividends

          (195       (195  

Dividends to members (a)

          (119       (119  

Issuance of preferred interests held by U.S. Department of Treasury

      7,500           7,500     

Other comprehensive income

            497        497        497   
   

Balance at June 30, 2009, before conversion from limited liability company to a corporation (b)

  $ 10,917   $ 12,500   $ 1,287   $ 1,234      $ 108      $ 26,046      $ (4,081
   
($ in millions)   Common
stock and
paid-in
capital
 

Preferred
stock

held by

U.S.
Department
of Treasury

  Preferred
stock
  Retained
earnings
    Accumulated
other
comprehensive
income
    Total
equity
    Comprehensive
loss
 

Balance at June 30, 2009, after conversion from limited liability company to a corporation

  $ 10,917   $ 12,500   $ 1,287   $ 1,234      $ 108      $ 26,046      $ (4,081
   

 

4


ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six Months Ended June 30, 2010 and 2009

 

($ in millions)   Common
stock
and
paid-in
capital
 

Preferred
stock

held by

U.S.
Department
of Treasury

  Preferred
stock
  Retained
earnings
    Accumulated
other
comprehensive
income
    Total
equity
    Comprehensive
loss
 

Balance at January 1, 2010, before cumulative effect of adjustments

  $ 13,829   $ 10,893   $ 1,287   $ (5,630   $ 460      $ 20,839     

Cumulative effect of a change in accounting principle, net of tax (c)

          (57     4        (53  
   

Balance at January 1, 2010, after cumulative effect of adjustments

  $ 13,829   $ 10,893   $ 1,287   $ (5,687   $ 464      $ 20,786     

Net income

          727          727      $ 727   

Preferred stock dividends paid to the U.S. Department of Treasury

          (386       (386  

Preferred stock dividends (a)

          (142       (142  

Dividends to shareholders (a)

          (7       (7  

Other comprehensive loss

            (279     (279     (279

Other (d)

          74          74     
   

Balance at June 30, 2010

  $ 13,829   $ 10,893   $ 1,287   $ (5,421   $ 185      $ 20,773      $ 448   
   
(a) Refer to Note 17 to the Consolidated Financial Statements for further details.
(b) Effective June 30, 2009, we converted from a Delaware limited liability company into a Delaware corporation. Each unit of each class of common membership interest issued and outstanding immediately prior to the conversion was converted into an equivalent number of shares of common stock with substantially the same rights and preferences as the common membership interests. Upon conversion, holders of our preferred membership interests also received an equivalent number of preferred stock with substantially the same rights and preferences as the former preferred membership interests.
(c) Cumulative effect of change in accounting principle, net of tax, due to adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.
(d) Represents a reduction of the estimated payment accrued for tax distributions as a result of the completion of the GMAC LLC U.S. Return of Partnership Income for the tax period January 1, 2009, through June 30, 2009.

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

 

5


ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

 

Six months ended June 30, ($ in millions)    2010     2009  

Operating activities

    

Net income (loss)

   $ 727      $ (4,578

Reconciliation of net income (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     2,249        3,302   

Impairment of goodwill and other intangible assets

            607   

Other impairment

     16          

Amortization and valuation adjustments of mortgage servicing rights

     944        (303

Provision for loan losses

     382        2,007   

(Gain) loss on sale of loans, net

     (559     154   

Net (gain) loss on investment securities

     (256     55   

Loss (gain) on extinguishment of debt

     116        (657

Originations and purchases of loans held-for-sale

     (27,600     (44,399

Proceeds from sales and repayments of loans held-for-sale

     35,564        40,248   

Net change in:

    

Trading securities

     (28     698   

Deferred income taxes

     (198     1,115   

Interest payable

     61        179   

Other assets

     1,322        1,514   

Other liabilities

     375        673   

Other, net

     (1,532     1,666   
   

Net cash provided by operating activities

     11,583        2,281   
   

Investing activities

    

Purchases of available-for-sale securities

     (11,994     (8,080

Proceeds from sales of available-for-sale securities

     9,854        2,722   

Proceeds from maturities of available-for-sale securities

     2,535        2,125   

Net (increase) decrease in finance receivables and loans

     (8,291     9,608   

Proceeds from sales of finance receivables and loans

     2,362        462   

Change in notes receivable from GM

     116        647   

Purchases of operating lease assets

     (1,491     (302

Disposals of operating lease assets

     4,435        3,418   

(Purchases) sales of mortgage servicing rights, net

     (21     13   

Sale of business unit, net (a)

     (12     82   

Other, net

     1,699        (484
   

Net cash (used in) provided by investing activities

     (808     10,211   
   

 

6


ALLY FINANCIAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

 

Six months ended June 30, ($ in millions)    2010     2009  

Financing activities

    

Net change in short-term debt

     (3,827     (1,762

Net increase in bank deposits

     2,720        5,460   

Proceeds from issuance of long-term debt

     20,996        14,813   

Repayments of long-term debt

     (32,307     (36,517

Proceeds from issuance of preferred interests held by U.S. Department of Treasury

            7,500   

Proceeds from issuance of common members’ interests

            1,247   

Dividends paid

     (532     (448

Other, net

     773        851   
   

Net cash used in financing activities

     (12,177     (8,856

Effect of exchange-rate changes on cash and cash equivalents

     619        (132
   

Net (decrease) increase in cash and cash equivalents

     (783     3,504   

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

     343          

Cash and cash equivalents at beginning of year

     14,788        15,151   
   

Cash and cash equivalents at June 30,

   $ 14,348      $ 18,655   
   

Supplemental disclosures

    

Cash paid for:

    

Interest

   $ 3,209      $ 4,057   

Income taxes

     306        247   

Noncash items:

    

Increase in finance receivables and loans due to a change in accounting principle (c)

     17,990          

Increase in long-term debt due to a change in accounting principle (c)

     17,054          

Loans held-for-sale transferred to finance receivables and loans

     27        771   

Finance receivables and loans transferred to loans-held-for sale

     40        1,297   

Finance receivables and loans transferred to other assets

     125        255   

Originations of mortgage servicing rights from sold loans

     94        189   

Other disclosures:

    

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

     249        328   

Proceeds from sales of repossessed, foreclosed, and owned real estate

     317        590   

Consolidation of loans, net

            1,410   

Consolidation of collateralized borrowings

            1,184   
   
(a) Net of cash and cash equivalents of $745 million of the business unit at the time of disposition.
(b) Cash flows of operations held-for-sale are reflected within operating, investing, and financing activities in the Consolidated Statement of Cash Flows. The cash balance of these operations are reported as assets of operations held-for-sale on the Consolidated Balance Sheet.
(c) Relates to the adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.

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

 

7


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

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

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

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

Residential Capital, LLC

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

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

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

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

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

 

8


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

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

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

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

Corporate Conversion

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

Recently Adopted Accounting Standards

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

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

 

9


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

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

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

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

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

Recently Issued Accounting Standards

Revenue Arrangements with Multiple Deliverables (ASU 2009-13)

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

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

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

 

10


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

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

 

2. Discontinued and Held-for-sale Operations

Discontinued Operations

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

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

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

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

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

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

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

 

11


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

Selected financial information of discontinued operations is summarized below.

 

     Three months ended
June  30,
    Six months ended
June  30,
 
($ in millions)        2010             2009             2010             2009      

Select Mortgage operations

        

Total net revenue (loss)

   $ 16      $ (576   $ 44      $ (586

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

     89        (638     102        (770

Tax (benefit) expense

     (9     1        (8       

Select Insurance operations

        

Total net revenue

   $ 61      $ 352      $ 300      $ 754   

Pretax (loss) including direct costs to transact a sale (a)

     (6     (575     (6     (552

Tax (benefit) expense

     (5     11        (1     14   

Select International operations

        

Total net revenue

   $ 36      $ 87      $ 73      $ 162   

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

     48        7        58        2   

Tax (benefit) expense

     (6     4        1        4   

Select Commercial Finance operations

        

Total net revenue

   $ 3      $ 8      $ 11      $ 15   

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

     (3     (2     7        (8

Tax (benefit)

     (4                     
   
(a) Includes certain income tax activity recognized by our Corporate and Other operations.

 

12


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

Held-for-sale Operations

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

 

($ in millions)   

Select

Mortgage

operations (a)

   

Select

Insurance

operations (b)

   

Select

International

operations (c)

   

Total

held-for-sale

operations

 

Assets

        

Cash and cash equivalents

        

Noninterest bearing

   $ 63      $ 14      $ 49      $ 126   

Interest bearing

     339        3        5        347   
   

Total cash and cash equivalents

     402        17        54        473   

Investment securities — available-for-sale

            466               466   

Loans held-for-sale

     180                      180   

Finance receivables and loans, net of unearned income

        

Consumer ($8,398 fair value elected)

     10,399               303        10,702   

Allowance for loan losses

     (17            (3     (20
   

Total finance receivables and loans, net

     10,382               300        10,682   

Investment in operating leases, net

                   369        369   

Premiums receivable and other insurance assets

            154               154   

Other assets

     512        135        43        690   

Impairment on assets of held-for-sale operations

     (606     (210     (159     (975
   

Total assets

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

Liabilities

        

Debt

        

Short-term borrowings

   $      $      $ 38      $ 38   

Long-term debt ($7,857 fair value elected)

     9,575               169        9,744   
   

Total debt

     9,575               207        9,782   

Interest payable

                   2        2   

Unearned insurance premiums and service revenue

            140               140   

Reserves for insurance losses and loss adjustment expenses

            358               358   

Accrued expenses and other liabilities

     964        31        60        1,055   
   

Total liabilities

   $ 10,539      $ 529      $ 269      $ 11,337   
   
(a) Includes operations of ResCap’s International Business Group in continental Europe and in the United Kingdom. Balances include assets and liabilities that were consolidated beginning on January 1, 2010, due to the adoption of ASU 2009-16 and ASU 2009-17. Refer to Note 1 for additional information.
(b) Includes the U.K. consumer property and casualty insurance business and certain international insurance operations.
(c) Includes the International Automotive Finance operations of Argentina, Ecuador, and Masterlease in the United Kingdom.

 

13


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

 

($ in millions)   

Select

Mortgage

operations (a)

   

Select

Insurance

operations (b)

   

Select

International

operations (c)

   

Select

Commercial

Finance Group

operations (d)

   

Total

held-for-sale

operations

 

Assets

          

Cash and cash equivalents

          

Noninterest bearing

   $ 4      $ 578      $ 33      $      $ 615   

Interest bearing

     151               11               162   
   

Total cash and cash equivalents

     155        578        44               777   

Trading securities

     36                             36   

Investment securities — available-for-sale

            794                      794   

Loans held-for-sale

     214                             214   

Finance receivables and loans, net of unearned income

          

Consumer

     2,650               400               3,050   

Commercial

                   246        233        479   

Notes receivable from General Motors

                   14               14   

Allowance for loan losses

     (89            (11            (100
   

Total finance receivables and loans, net

     2,561               649        233        3,443   

Investment in operating leases, net

                   885               885   

Mortgage servicing rights

     (26                          (26

Premiums receivable and other insurance assets

            1,126                      1,126   

Other assets

     512        176        135               823   

Impairment on assets of held-for-sale operations

     (903     (231     (324     (30     (1,488
   

Total assets

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

Liabilities

          

Debt

          

Short-term borrowings

   $      $ 34      $ 57      $      $ 91   

Long-term debt

     1,749               237               1,986   
   

Total debt

     1,749        34        294               2,077   

Interest payable

     3               1               4   

Unearned insurance premiums and service revenue

            517                      517   

Reserves for insurance losses and loss adjustment expenses

            1,471                      1,471   

Accrued expenses and other liabilities

     430        84        128        187        829   
   

Total liabilities

   $ 2,182      $ 2,106      $ 423      $ 187      $ 4,898   
   
(a) Includes the operations of ResCap’s International Business Group in continental Europe and in the United Kingdom.
(b) Includes the U.S. and U.K. consumer property and casualty insurance businesses.
(c) Includes the International Automotive Finance operations of Argentina, Ecuador, and Poland and Masterlease in Australia, Belgium, France, Poland, and the United Kingdom.
(d) Includes the North American-based factoring business of our Commercial Finance Group.

 

14


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

Recurring Fair Value

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

 

     Recurring fair value measurements  
June 30, 2010 ($ in millions)    Level 1    Level 2     Level 3     Total  

Assets

         

Investment securities

         

Available-for-sale securities

         

Debt securities

         

Foreign government

   $ 323    $      $      $ 323   

Other

          143               143   
   

Total debt securities

     323      143               466   

Consumer mortgage finance receivables and loans, net of unearned income (a)

                 8,398        8,398   

Other assets

         

Fair value of derivative contracts in receivable position

         

Interest rate contracts

          7               7   

Foreign currency contracts

          49               49   
   

Total fair value of derivative contracts in receivable position

          56               56   
   

Total assets

   $ 323    $ 199      $ 8,398      $ 8,920   
   

Liabilities

         

Secured debt

         

On-balance sheet securitization debt (a)

   $    $      $ (7,857   $ (7,857

Accrued expenses and other liabilities

         

Fair value of derivative contracts in liability position

         

Interest rate contracts

          (774            (774
   

Total liabilities

   $    $ (774   $ (7,857   $ (8,631
   
(a) Carried at fair value due to fair value option elections.

 

15


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

     Recurring fair value measurements  
December 31, 2009 ($ in millions)    Level 1    Level 2     Level 3     Total  

Assets

         

Trading securities

         

Mortgage-backed

         

Residential

   $    $      $ 36      $ 36   
   

Total trading securities

                 36        36   

Investment securities

         

Available-for-sale securities

         

Debt securities

         

U.S. Treasury and federal agencies

     243      2               245   

States and political subdivisions

          24               24   

Foreign government

     329                    329   

Corporate debt securities

          7               7   

Other

          189               189   
   

Total debt securities

     572      222               794   

Mortgage servicing rights

                 (26     (26

Other assets

         

Interests retained in financial asset sales

                 153        153   

Fair value of derivative contracts in receivable position

         

Interest rate contracts

          60               60   
   

Total assets

   $ 572    $ 282      $ 163      $ 1,017   
   

Liabilities

         

Accrued expenses and other liabilities

         

Fair value of derivative contracts in liability position

         

Interest rate contracts

   $    $ (40   $      $ (40
   

Total liabilities

   $    $ (40   $      $ (40
   

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

 

    Level 3 recurring fair value measurements
($ in millions)  

Fair value

as of
April 1,

2010

   

Net realized/unrealized
gains included

in earnings (a)

 

Purchases,
issuances,

and

settlements,

net

   

Fair value

as of

June 30,

2010

   

Net unrealized

gains included

in earnings

still held as of

June 30,

2010 (a)

Assets

         

Consumer mortgage finance receivables and loans, net of unearned income (b)

  $ 9,180      $ 201   $ (983   $ 8,398      $ 71
 

Total assets

  $ 9,180      $ 201   $ (983   $ 8,398      $ 71
 

Liabilities

         

Secured debt

         

On-balance sheet securitization debt (b)

  $ (8,822   $ 59   $ 906      $ (7,857   $ 85
 

Total liabilities

  $ (8,822   $ 59   $ 906      $ (7,857   $ 85
 
(a) Reported as income (loss) from discontinued operations, net of tax, in the Consolidated Statement of Income.
(b) Carried at fair value due to fair value option elections.

 

16


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

    Level 3 recurring fair value measurements
($ in millions)  

Fair value

as of

January 1,

2010

   

Net realized/unrealized

gains included

in earnings (a)

 

Purchases,
issuances,

and

settlements,

net

   

Fair value

as of

June 30,

2010

   

Net unrealized

gains included

in earnings

still held as of

June 30,

2010 (a)

Assets

         

Trading securities

         

Mortgage-backed

         

Residential

  $ 36      $   $ (36   $      $
 

Total trading securities

    36            (36           

Consumer mortgage finance receivables and loans, net of unearned income (b)

           415     7,983        8,398        149

Mortgage servicing rights

    (26         26              

Other assets

         

Interests retained in financial asset sales

    153            (153           
 

Total assets

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

Liabilities

         

Secured debt

         

On-balance sheet securitization debt (b)

  $      $ 197   $ (8,054   $ (7,857   $ 255
 

Total liabilities

  $      $ 197   $ (8,054   $ (7,857   $ 255
 
(a) Reported as income (loss) from discontinued operations, net of tax, in the Consolidated Statement of Income.
(b) Carried at fair value due to fair value option elections.

 

3. Other Income, Net of Losses

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

 

     Three months ended
June  30,
    Six months ended
June  30,
 
($ in millions)        2010             2009             2010             2009      

Mortgage processing fees and other mortgage income

   $ 41      $ 9      $ 94      $ 15   

Remarketing fees

     36        38        67        71   

Late charges and other administrative fees (a)

     35        33        72        72   

Full-service leasing fees

     13        33        41        64   

Other equity method investments

     13        4        25        8   

Real estate services, net

     2        (224     9        (258

Fair value adjustment on certain derivatives (b)

     (2     96        (58     (61

Change due to fair value option elections, net (c)

     (56     (63     (129     (93

Other, net

     108        (39     154        (141
   

Total other income, net of losses

   $ 190      $ (113   $ 275      $ (323
   
(a) Includes nonmortgage securitization fees.
(b) Refer to Note 15 for a description of derivative instruments and hedging activities.
(c) Refer to Note 18 for a description of fair value option elections.

 

17


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

4. Other Operating Expenses

Details of other operating expenses were as follows.

 

     Three months ended
June 30,
   Six months ended
June 30,
($ in millions)        2010            2009            2010            2009    

Insurance commissions

   $ 150    $ 155    $ 296    $ 314

Technology and communications expense

     134      152      273      301

Mortgage representation and warranty expense, net

     97      237      146      410

Professional services

     63      119      120      205

Advertising and marketing

     50      36      74      74

Vehicle remarketing and repossession

     48      57      102      105

State and local non-income taxes

     36      36      61      55

Lease and loan administration

     35      43      66      81

Rent and storage

     26      23      51      51

Regulatory and licensing fees

     25      29      55      49

Premises and equipment depreciation

     20      20      38      44

Restructuring expenses

     14           56     

Full-service leasing vehicle maintenance costs

     6      32      36      65

Other

     118      137      337      327
 

Total other operating expenses

   $ 822    $ 1,076    $ 1,711    $ 2,081
 

 

5. Trading Securities

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

 

($ in millions)    June 30, 2010    December 31, 2009

Trading securities

     

U.S. Treasury

   $ 75    $

Mortgage-backed

     

Residential

     47      143

Asset-backed

     87      596
 

Total trading securities

   $ 209    $ 739
 

 

18


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

6. Investment Securities

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

 

     June 30, 2010    December 31, 2009
     Cost    Gross unrealized     Fair
value
   Cost    Gross unrealized     Fair
value
($ in millions)       gains    losses           gains    losses    

Available-for-sale securities

                     

Debt securities

                     

U.S. Treasury and federal agencies

   $ 3,982    $ 51    $      $ 4,033    $ 3,501    $ 15    $ (6   $ 3,510

States and political subdivisions

     7                  7      779      36      (4     811

Foreign government

     1,195      32      (2     1,225      1,161      20      (8     1,173

Mortgage-backed

                     

Residential (a)

     3,451      69      (22     3,498      3,404      76      (19     3,461

Asset-backed

     1,686      15      (1     1,700      1,000      7      (2     1,005

Corporate debt

     1,252      52      (2     1,302      1,408      74      (9     1,473

Other

     1                  1      47                  47
 

Total debt securities (b)

     11,574      219      (27     11,766      11,300      228      (48     11,480

Equity securities

     1,066      1      (123     944      631      52      (8     675
 

Total available-for-sale securities (c)

   $ 12,640    $ 220    $ (150   $ 12,710    $ 11,931    $ 280    $ (56   $ 12,155
 

Held-to-maturity securities

                     

Total held-to-maturity securities

   $    $    $      $    $ 3    $    $      $ 3
 
(a) Residential mortgage-backed securities include agency-backed bonds totaling $2,271 million and $2,248 million at June 30, 2010, and December 31, 2009, respectively.
(b) In connection with certain borrowings and letters of credit relating to certain assumed reinsurance contracts, $153 million and $164 million of primarily U.K. Treasury securities were pledged as collateral as of June 30, 2010, and December 31, 2009, respectively.
(c) Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $16 million and $15 million at June 30, 2010, and December 31, 2009, respectively.

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

 

    Total     Due in
one year
or less
    Due after
one year
through
five years
    Due after
five years
through
ten years
    Due after
ten years (a)
 
June 30, 2010 ($ in millions)   Amount   Yield     Amount   Yield     Amount   Yield     Amount   Yield     Amount   Yield  

Fair value of available-for-sale debt securities (b)

                   

U.S. Treasury and federal agencies

  $ 4,033   1.5   $ 172   0.8   $ 3,800   1.5   $ 61   3.3   $  

States and political subdivisions

    7   5.9                 3   6.2                 4   5.7   

Foreign government

    1,225   3.9        87   0.5        925   4.2        213   4.4            

Mortgage-backed

                   

Residential

    3,498   4.3                 8   5.3        64   4.5        3,426   4.3   

Asset-backed

    1,700   2.5        21   4.7        1,197   2.4        360   2.7        122   3.4   

Corporate debt

    1,302   5.3        91   5.9        622   5.0        542   5.5        47   5.8   

Other

    1                                     1     
   

Total available-for-sale debt securities

  $ 11,766   3.2   $ 371   2.2   $ 6,555   2.4   $ 1,240   4.3   $ 3,600   4.2
   

Amortized cost of available-for-sale debt securities

  $ 11,574     $ 370     $ 6,455     $ 1,199     $ 3,550  
   
(a) Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment options.
(b) Yields on tax-exempt obligations are computed on a tax-equivalent basis.

 

19


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

    Total     Due in
one year
or less
    Due after
one year
through
five years
    Due after
five years
through
ten years
    Due after
ten years (a)
 
December 31, 2009 ($ in millions)   Amount   Yield     Amount   Yield     Amount   Yield     Amount   Yield     Amount   Yield  

Fair value of available-for-sale debt securities (b)

                   

U.S. Treasury and federal agencies

  $ 3,510   1.9   $ 103   1.1   $ 3,390   1.9   $ 17   4.1   $  

States and political subdivisions

    811   7.0        9   7.0        175   7.2        147   7.0        480   6.9   

Foreign government

    1,173   3.8        66   1.7        872   3.8        229   4.5        6   5.3   

Mortgage-backed

                   

Residential

    3,461   6.5                 2   6.5        36   13.0        3,423   6.4   

Asset-backed

    1,005   2.5        34   5.2        735   2.3        186   2.6        50   3.9   

Corporate debt

    1,473   5.2        283   3.4        575   5.8        570   5.4        45   6.9   

Other

    47   3.6                 32   3.4        15   4.0            
   

Total available-for-sale debt securities

  $ 11,480   4.3   $ 495   2.8   $ 5,781   2.8   $ 1,200   5.2   $ 4,004   6.5
   

Amortized cost of available-for-sale debt securities

  $ 11,300     $ 473     $ 5,728     $ 1,169     $ 3,930  
   
(a) Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment options.
(b) Yields on tax-exempt obligations are computed on a tax-equivalent basis.

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

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

 

     Three months ended
June 30,
    Six months ended
June 30,
 
($ in millions)        2010             2009             2010             2009      

Gross realized gains

   $ 125      $ 91      $ 277      $ 140   

Gross realized losses

     (13     (34     (21     (63

Other-than-temporary impairment

     (1     (1     (1     (47
   

Net realized gains

   $ 111      $ 56      $ 255      $ 30   
   

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

 

     Three months ended
June 30,
   Six months ended
June 30,
($ in millions)        2010            2009            2010            2009    

Taxable interest

   $ 84    $ 45    $ 173    $ 93

Taxable dividends

     4      3      8      3

Interest and dividends exempt from U.S. federal income tax

     3      7      10      17
 

Total interest and dividends

   $ 91    $ 55    $ 191    $ 113
 

 

20


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

 

    June 30, 2010     December 31, 2009  
    Less than
12 months
    12 months
or longer
    Less than
12 months
  12 months
or longer
 
($ in millions)   Fair
value
  Unrealized
loss
    Fair
value
  Unrealized
loss
    Fair
value
  Unrealized
loss
    Fair
value
  Unrealized
loss
 

Available-for-sale securities

               

Debt securities

               

U.S. Treasury and federal agencies

  $ 3   $      $   $      $ 1,430   $ (6   $   $   

States and political subdivisions

                          82     (2     8     (2

Foreign government securities

    96     (2                536     (8           

Mortgage-backed securities

    637     (20     10     (2     811     (14     6     (5

Asset-backed securities

    77     (1     8            202     (1     22     (1

Corporate debt securities

    64     (1     20     (1     47     (1     120     (8

Other

                          7                  
   

Total temporarily impaired debt securities

    877     (24     38     (3     3,115     (32     156     (16

Temporarily impaired equity securities

    882     (123                115     (5     52     (3
   

Total temporarily impaired available-for-sale securities

  $ 1,759   $ (147   $ 38   $ (3   $ 3,230   $ (37   $ 208   $ (19
   

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

 

7. Loans Held-for-sale

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

 

     June 30, 2010    December 31, 2009
($ in millions)    Domestic    Foreign    Total    Domestic    Foreign    Total

Consumer

                 

Automobile

   $ 1,298    $ 167    $ 1,465    $ 9,417    $ 184    $ 9,601

1st Mortgage

     7,771      152      7,923      9,269      530      9,799

Home equity

     989           989      1,068           1,068
 

Total consumer (a)

     10,058      319      10,377      19,754      714      20,468

Commercial

                 

Commercial and industrial

                 

Other

          5      5           157      157
 

Total loans held-for-sale

   $ 10,058    $ 324    $ 10,382    $ 19,754    $ 871    $ 20,625
 
(a) Domestic residential mortgages include $4.2 billion and $5.5 billion at fair value as a result of fair value option elections as of June 30, 2010, and December 31, 2009, respectively. Refer to Note 18 for additional information.

 

21


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

8. Finance Receivables and Loans, Net of Unearned Income

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

 

     June 30, 2010    December 31, 2009
($ in millions)    Domestic    Foreign    Total    Domestic    Foreign    Total

Consumer

                 

Automobile

   $ 26,450    $ 15,265    $ 41,715    $ 12,514    $ 17,731    $ 30,245

1st Mortgage

     8,435      939      9,374      7,960      405      8,365

Home equity

     4,257           4,257      4,238      1      4,239
 

Total consumer (a)

     39,142      16,204      55,346      24,712      18,137      42,849
 

Commercial

                 

Commercial and industrial

                 

Automobile

     21,776      8,107      29,883      19,601      7,035      26,636

Mortgage

     1,803      75      1,878      1,572      96      1,668

Resort finance

     644           644      843           843

Other

     1,778      401      2,179      1,845      437      2,282

Commercial real estate

                 

Automobile

     2,090      208      2,298      2,008      221      2,229

Mortgage

     5      118      123      121      162      283
 

Total commercial

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

Notes receivable from General Motors

          365      365      3      908      911
 

Total finance receivables and loans (b)

   $ 67,238    $ 25,478    $ 92,716    $ 50,705    $ 26,996    $ 77,701
 
(a) Residential mortgages include $2.3 billion and $1.3 billion at fair value as a result of fair value option elections as of June 30, 2010, and December 31, 2009, respectively. Refer to Note 18 for additional information.
(b) Totals are net of unearned income of $2.6 billion and $2.5 billion at June 30, 2010, and December 31, 2009, respectively.

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

 

     Three months ended June 30,  
     2010     2009  
($ in millions)    Consumer     Commercial     Total     Consumer     Commercial     Total  

Allowance at April 1,

   $ 1,754      $ 726      $ 2,480      $ 2,758      $ 887      $ 3,645   

Provision for loan losses

     216        4        220        729        388        1,117   

Charge-offs

            

Domestic

     (228     (91     (319     (835     (305     (1,140

Foreign

     (50     (49     (99     (549     (9     (558
   

Total charge-offs

     (278     (140     (418     (1,384     (314     (1,698
   

Recoveries

            

Domestic

     78        5        83        59        4        63   

Foreign

     19        9        28        15               15   
   

Total recoveries

     97        14        111        74        4        78   
   

Net charge-offs

     (181     (126     (307     (1,310     (310     (1,620

Other

     (10     (6     (16     130        29        159   
   

Allowance at June 30,

   $ 1,779      $ 598      $ 2,377      $ 2,307      $ 994      $ 3,301   
   

 

22


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

     Six months ended June 30,  
     2010     2009  
($ in millions)    Consumer     Commercial     Total     Consumer     Commercial     Total  

Allowance at January 1,

   $ 1,664      $ 781      $ 2,445      $ 2,536      $ 897      $ 3,433   

Provision for loan losses

     344        22        366        1,294        569        1,863   

Charge-offs

            

Domestic

     (546     (152     (698     (1,240     (473     (1,713

Foreign

     (111     (53     (164     (615     (18     (633
   

Total charge-offs

     (657     (205     (862     (1,855     (491     (2,346
   

Recoveries

            

Domestic

     185        9        194        110        7        117   

Foreign

     36        9        45        29        1        30   
   

Total recoveries

     221        18        239        139        8        147   
   

Net charge-offs

     (436     (187     (623     (1,716     (483     (2,199

Addition of allowance due to change in accounting principle (a)

     222               222                        

Other

     (15     (18     (33     193        11        204   
   

Allowance at June 30,

   $ 1,779      $ 598      $ 2,377      $ 2,307      $ 994      $ 3,301   
   
(a) Effect of change in accounting principle due to adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.

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

 

     June 30, 2010    December 31, 2009
($ in millions)    Consumer    Commercial    Total    Consumer    Commercial    Total

Impaired finance receivables and loans

                 

With an allowance

   $ 365    $ 1,194    $ 1,559    $ 252    $ 1,760    $ 2,012

Without an allowance

     33      342      375      16      296      312
 

Total impaired loans

   $ 398    $ 1,536    $ 1,934    $ 268    $ 2,056    $ 2,324
 

Allowance for impaired loans

   $ 102    $ 488    $ 590    $ 80    $ 488    $ 568
 

 

     Three months ended June 30,
     2010    2009
($ in millions)    Consumer    Commercial    Total    Consumer    Commercial    Total

Average balance of impaired loans

   $ 367    $ 1,694    $ 2,061    $ 636    $ 2,726    $ 3,362

Interest income recognized on impaired loans

   $ 4    $ 2    $ 6    $ 8    $ 6    $ 14
 

 

     Six months ended June 30,
     2010    2009
($ in millions)    Consumer    Commercial    Total    Consumer    Commercial    Total

Average balance of impaired loans

   $ 327    $ 1,817    $ 2,144    $ 511    $ 2,721    $ 3,232

Interest income recognized on impaired loans

   $ 7    $ 4    $ 11    $ 16    $ 20    $ 36
 

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

 

23


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

9. Off-balance Sheet Securitizations

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

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

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

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

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

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

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

 

24


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

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

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

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

 

     Three months ended
June 30,
   Six months ended
June 30,
 
($ in millions)    2010    2009    2010    2009  

Retail finance receivables

   $    $    $    $   

Automotive wholesale loans

          38           102   

Mortgage loans

     1           4      (4
   

Total pretax gain on off-balance sheet activities

   $ 1    $ 38    $ 4    $ 98   
   

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

 

($ in billions)    June 30, 2010    December 31, 2009

Retail finance receivables

   $    $ 7.5

Automotive wholesale loans

         

Mortgage loans (a)

     80.2      99.6
 

Total off-balance sheet activities

   $ 80.2    $ 107.1
 
(a) Excludes $168 million and $237 million of delinquent loans held by securitization trusts as of June 30, 2010, and December 31, 2009, respectively, that we have the option to repurchase as they are included in consumer finance receivables and loans and mortgage loans held-for-sale.

 

25


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

10. Mortgage Servicing Rights

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

 

     Three months ended
June 30,
 
($ in millions)        2010             2009      

Estimated fair value at April 1,

   $ 3,543      $ 2,587   

Additions obtained from sales of financial assets

     167        254   

Additions from purchases of servicing assets

     20        6   

Subtractions from sales of servicing assets

            (19

Changes in fair value

    

Due to changes in valuation inputs or assumptions used in the valuation model

     (543     1,035   

Other changes in fair value (a)

     (206     (352

Other changes that affect the balance

     2        (2
   

Estimated fair value at June 30,

   $ 2,983      $ 3,509   
   
(a) Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and the economic runoff of the portfolio.

 

     Six months ended
June 30,
 
($ in millions)        2010             2009      

Estimated fair value at January 1,

   $ 3,554      $ 2,848   

Additions obtained from sales of financial assets

     369        373   

Additions from purchases of servicing assets

     21        6   

Subtractions from sales of servicing assets

            (19

Changes in fair value

    

Due to changes in valuation inputs or assumptions used in the valuation model

     (494     995   

Other changes in fair value (a)

     (450     (692

Decrease due to change in accounting principle (b)

     (19       

Other changes that affect the balance

     2        (2
   

Estimated fair value at June 30,

   $ 2,983      $ 3,509   
   
(a) Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and the economic runoff of the portfolio.
(b) The effect of change in accounting principle was due to the adoption of ASU 2009-16, Accounting for Transfers of Financial Assets, and ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. Refer to Note 1 for additional information.

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

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

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

 

     June 30,
      2010    2009

Range of prepayment speeds

   9.2–42.0%    0.7–49.0%

Range of discount rates

   2.9–24.8%    3.3–130.3%
 

 

26


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

The components of mortgage servicing fees were as follows.

 

     Three months ended
June 30,
   Six months ended
June 30,
($ in millions)    2010    2009    2010    2009

Contractual servicing fees, net of guarantee fees and including subservicing

   $ 266    $ 275    $ 524    $ 553

Late fees

     19      21      38      45

Ancillary fees

     43      38      90      74
 

Total

   $ 328    $ 334    $ 652    $ 672
 

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

 

11. Other Assets

The components of other assets were as follows.

 

($ in millions)    June 30, 2010     December 31, 2009  

Property and equipment at cost

   $ 1,282      $ 1,416   

Accumulated depreciation

     (922     (1,080
   

Net property and equipment

     360        336   

Fair value of derivative contracts in receivable position

     4,848        2,654   

Restricted cash collections for securitization trusts (a)

     2,346        3,654   

Servicer advances

     2,007        2,180   

Restricted cash and cash equivalents

     1,966        1,590   

Cash reserve deposits held-for-securitization trusts (b)

     1,303        1,594   

Collateral placed with counterparties

     844        1,760   

Other accounts receivable

     844        573   

Debt issuance costs

     810        829   

Prepaid expenses and deposits

     662        749   

Goodwill

     524        526   

Interests retained in financial asset sales

     465        471   

Investment in used vehicles held-for-sale

     450        522   

Accrued interest and rent receivable

     307        326   

Real estate and other investments

     270        340   

Repossessed and foreclosed assets, net, at lower of cost or fair value

     243        336   

Other assets

     1,397        1,447   
   

Total other assets

   $ 19,646      $ 19,887   
   
(a) Represents cash collection from customer payments on securitized receivables. These funds are distributed to investors as payments on the related secured debt.
(b) Represents credit enhancement in the form of cash reserves for various securitization transactions.

 

27


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

 

($ in millions)    International
Automotive Finance
operations
   Insurance
operations
    Total  

Goodwill at December 31, 2009

   $ 469    $ 57      $ 526   

Transfer to assets of discontinued operations held-for-sale

          6        6   

Foreign currency translation effect

          (8     (8
   

Goodwill at June 30, 2010

   $ 469    $ 55      $ 524   
   

 

12. Deposit Liabilities

Deposit liabilities consisted of the following.

 

($ in millions)    June 30, 2010    December 31, 2009

Domestic deposits

     

Noninterest-bearing deposits

   $ 2,262    $ 1,755

NOW and money market checking accounts

     7,948      7,213

Certificates of deposit

     20,597      19,861

Dealer deposits

     1,257      1,041
 

Total domestic deposits

     32,064      29,870
 

Foreign deposits

     

Noninterest-bearing deposits

     14     

NOW and money market checking accounts

     541      165

Certificates of deposit

     2,350      1,555

Dealer deposits

     245      166
 

Total foreign deposits

     3,150      1,886
 

Total deposit liabilities

   $ 35,214    $ 31,756
 

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

 

28


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

13. Debt

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

 

     June 30, 2010    December 31, 2009
($ in millions)    Unsecured    Secured    Total    Unsecured    Secured    Total

Short-term debt

                 

Commercial paper

   $    $    $    $ 8    $    $ 8

Demand notes

     1,596           1,596      1,311           1,311

Bank loans and overdrafts

     1,789           1,789      1,598           1,598

Repurchase agreements and other (a)

     345      3,324      3,669      348      7,027      7,375
 

Total short-term debt

     3,730      3,324      7,054      3,265      7,027      10,292
 

Long-term debt

                 

Due within one year

     6,203      13,734      19,937      7,429      18,898      26,327

Due after one year (b)

     39,453      25,020      64,473      38,331      22,834      61,165
 

Total long-term debt (c)

     45,656      38,754      84,410      45,760      41,732      87,492
 

Fair value adjustment (d)

     795           795      529           529
 

Total debt

   $ 50,181    $ 42,078    $ 92,259    $ 49,554    $ 48,759    $ 98,313
 
(a) Repurchase agreements consist of secured financing arrangements with third parties at our Mortgage operations. Other primarily includes nonbank secured borrowings and notes payable to GM. Refer to Note 17 for additional information.
(b) Includes $7.4 billion at both June 30, 2010, and December 31, 2009, guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP).
(c) Secured long-term debt includes $2.2 billion and $1.3 billion at fair value as of June 30, 2010, and December 31, 2009, respectively, as a result of fair value option elections. Refer to Note 18 for additional information.
(d) Amount represents the hedge accounting adjustment on fixed rate debt.

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

 

Year ended December 31, ($ in millions)    Unsecured (a)     Secured (b)    Total  

2010

   $ 2,149      $ 7,466    $ 9,615   

2011

     9,393        13,279      22,672   

2012

     12,610        5,923      18,533   

2013

     1,889        5,725      7,614   

2014

     1,967        1,723      3,690   

2015 and thereafter

     21,405        1,706      23,111   

Original issue discount (c)

     (3,757          (3,757

Troubled debt restructuring concession (d)

            396      396   
   

Long-term debt

     45,656        36,218      81,874   

Collateralized borrowings in securitization trusts (e)

            2,536      2,536   
   

Total long-term debt

   $ 45,656      $ 38,754    $ 84,410   
   
(a) Scheduled maturities of ResCap unsecured long-term debt are as follows: $419 million in 2010; $208 million in 2011; $340 million in 2012; $529 million in 2013; $97 million in 2014; and $112 million in 2015 and thereafter. These maturities exclude ResCap debt held by Ally.
(b) Scheduled maturities of ResCap secured long-term debt are as follows: $661 million in 2010; $508 million in 2011; $0 million in 2012; $707 million in 2013; $707 million in 2014; and $910 million in 2015 and thereafter. These maturities exclude ResCap debt held by Ally and collateralized borrowings in securitization trusts.
(c) Scheduled remaining amortization of original issue discount is as follows: $640 million in 2010; $967 million in 2011; $342 million in 2012; $255 million in 2013; $183 million in 2014; and $1,370 million in 2015 and thereafter.
(d) In the second quarter of 2008, ResCap executed an exchange offer that resulted in a concession being recognized as an adjustment to the carrying value of certain new secured notes. This concession is being amortized over the life of the new notes through a reduction to interest expense using an effective yield methodology. Scheduled remaining amortization of the troubled debt restructuring concession is as follows: $49 million in 2010; $101 million in 2011; $105 million in 2012; $82 million in 2013; $46 million in 2014; and $13 million in 2015 and thereafter.
(e) Collateralized borrowings in securitization trusts represent mortgage-lending-related debt that is repaid on the principal payments of the underlying assets.

 

29


ALLY FINANCIAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

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

 

     June 30, 2010    December 31, 2009
($ in millions)    Assets    Related secured
debt (a)
   Assets    Related secured
debt (a)

Loans held-for-sale

   $ 2,646    $ 749    $ 1,420    $ 454

Mortgage assets held-for-investment and lending receivables

     2,832      2,509      1,946      1,673

Retail automotive finance receivables (b)

     22,436      19,246      19,203      13,597

Wholesale automotive finance receivables

     12,095      6,745      16,352      8,565

Investment securities

     39           63     

Investment in operating leases, net

     5,365      3,711      13,323      9,208

Real estate investments and other assets

     3,940      4,141      4,468      5,129

Ally Bank (c)

     19,155      4,977      24,276      10,133
 

Total

   $ 68,508    $ 42,078    $ 81,051    $ 48,759
 
(a) Included as part of secured debt are repurchase agreements of $979 million and $26 million at June 30, 2010, and December 31, 2009, respectively. Assets approximating the value of the debt were pledged as collateral for both periods.
(b) Included as part of retail automotive finance receivables are $13.3 billion of assets and $8.8 billion of secured debt related to Ally Bank.
(c) Ally Bank has an advance agreement with the Federal Home Loan Bank of Pittsburgh (FHLB) and access to the Federal Reserve Bank Discount Window. Ally Bank had assets pledged and restricted as collateral to the FHLB and Federal Reserve Bank totaling $15.2 billion and $22.4 billion as of June 30, 2010, and December 31, 2009, respectively. Furthermore, under the advance agreement, the FHLB has a blanket lien on certain Ally Bank assets including approximately $11.6 billion and $11.5 billion in real estate-related finance receivables and loans and $3.2 billion and $2.7 billion in other assets as of June 30, 2010, and December 31, 2009, respectively. Availability under these programs is generally only for the operations of Ally Bank and cannot be used to fund the operations or liabilities of Ally or its subsidiaries.

Funding Facilities

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

 

     Total capacity    Unused capacity (a)    Outstanding
($ in billions)    June 30,
2010
   Dec 31,
2009
   June 30,
2010
   Dec 31,
2009
   June 30,
2010
   Dec 31,
2009

Committed unsecured

                 

Automotive Finance operations

   $ 0.8    $ 0.8    $ 0.1    $ 0.1    $ 0.7    $ 0.7

Committed secured

                 

Automotive Finance operations and other

     29.9      36.0      17.2      12.2      12.7      23.8

Mortgage operations

     1.7      2.1      0.3      0.4      1.4      1.7
 

Total committed facilities

     32.4      38.9      17.6      12.7      14.8      26.2
 

Uncommitted unsecured

                 

Automotive Finance operations

     1.1      0.9      0.2      0.1      0.9      0.8

Uncommitted secured

                 

Automotive Finance operations (b)

     3.4      5.7      3.1      2.0      0.3      3.7

Mortgage operations (c) (d)

     7.1      8.6      2.1      1.9      5.0      6.7
 

Total uncommitted facilities

     11.6      15.2      5.4      4.0      6.2      11.2
 

Total facilities

     44.0      54.1      23.0      16.7      21.0      37.4

Whole-loan forward flow agreements (e)

     1.5      9.4      1.5      9.4          
 

Total commitments

   $ 45.5    $ 63.5    $ 24.5    $ 26.1    $ 21.0    $ 37.4
 
(a) Funding for committed secured facilities is generally available on request as excess collateral resides in certain facilities or to the extent incremental collateral is available and contributed to the facilities.
(b) Included $3.0 billion and $5.3 billion of capacity from Federal Reserve Bank advances with $0.0 billion and $3.4 billion outstanding as of June 30, 2010, and December 31, 2009, respectively.
(c) Included $0.8 billion and $2.5 billion of capacity from Federal Reserve Bank advances with $0.0 billion and $1.6 billion outstanding as of June 30, 2010, and December 31, 2009, respectively.