Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended September 30, 2020, or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from                          to                         
Commission file number: 1-3754
ALLY FINANCIAL INC.
(Exact name of registrant as specified in its charter)

Delaware	 	38-0572512	
(State or other jurisdiction of
incorporation or organization)	 	(I.R.S. Employer
Identification No.)	
Ally Detroit Center
500 Woodward Ave.
Floor 10, Detroit, Michigan
48226
(Address of principal executive offices)
(Zip Code)
(866) 710-4623
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered	
Common Stock, par value $0.01 per share		ALLY		NYSE	
8.125% Fixed Rate/Floating Rate Trust Preferred Securities, Series 2 of GMAC Capital Trust I		ALLY PRA		NYSE	
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                    Yes ☑                    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                            Yes ☑                    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	  	Accelerated filer	☐	  	Non-accelerated filer	☐		Smaller reporting company	☐	
		  				Emerging growth company	☐	
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐                    No ☑
At October 30, 2020, the number of shares outstanding of the Registrant’s common stock was 373,857,264 shares.

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

		Page	
	Glossary of Abbreviations and Acronyms	3
	
Part I — Financial Information		
Item 1.	Financial Statements	5	
	Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the Three and Nine Months Ended September 30, 2020, and 2019	5	
	Condensed Consolidated Balance Sheet (unaudited) at September 30, 2020, and December 31, 2019	7	
	Condensed Consolidated Statement of Changes in Equity (unaudited)
for the Three and Nine Months Ended September 30, 2020, and 2019	9	
	Condensed Consolidated Statement of Cash Flows (unaudited)
for the Nine Months Ended September 30, 2020, and 2019	10	
	Notes to Condensed Consolidated Financial Statements (unaudited)	12	
	Note 1. Description of Business, Basis of Presentation, and Changes in Significant Accounting Policies	12	
	Note 2. Acquisitions	19	
	Note 3. Revenue from Contracts with Customers	19	
	Note 4. Other Income, Net of Losses	21	
	Note 5. Reserves for Insurance Losses and Loss Adjustment Expenses	22	
	Note 6. Other Operating Expenses	22	
	Note 7. Investment Securities	23	
	Note 8. Finance Receivables and Loans, Net	27	
	Note 9. Leasing	37	
	Note 10. Securitizations and Variable Interest Entities	40	
	Note 11. Other Assets	43	
	Note 12. Deposit Liabilities	44	
	Note 13. Debt	44	
	Note 14. Accrued Expenses and Other Liabilities	46	
	Note 15. Accumulated Other Comprehensive Income (Loss)	47	
	Note 16. Earnings per Common Share	50	
	Note 17. Regulatory Capital and Other Regulatory Matters	50	
	Note 18. Derivative Instruments and Hedging Activities	54	
	Note 19. Income Taxes	60	
	Note 20. Fair Value	61	
	Note 21. Offsetting Assets and Liabilities	67	
	Note 22. Segment Information	68	
	Note 23. Contingencies and Other Risks	71	
	Note 24. Subsequent Events	71	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	72	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	129	
Item 4.	Controls and Procedures	129	
Part II — Other Information	130	
Item 1.	Legal Proceedings	130	
Item 1A.	Risk Factors	130	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	132	
Item 3.	Defaults Upon Senior Securities	132	
Item 4.	Mine Safety Disclosures	132	
Item 5.	Other Information	132	
Item 6.	Exhibits	133	
Signatures	134	

Table of Contents
Index of Defined Terms
Ally Financial Inc. • Form 10-Q

Glossary of Abbreviations and Acronyms
The following is a list of abbreviations and acronyms that are used in this Quarterly Report on Form 10-Q.

Term		Definition	
A.M. Best		A.M. Best Company, Inc.	
ABS		Asset-backed securities	
	
ALCO		Asset-Liability Committee	
ALM		Asset Liability Management	
ASC		Accounting Standards Codification	
ASU		Accounting Standards Update	
BHC		Bank holding company	
Board		Ally Board of Directors	
CARES Act		Coronavirus Aid, Relief, and Economic Security Act	
CCAR		Comprehensive Capital Analysis and Review	
CD		Certificate of deposit	
CECL		Accounting Standards Update 2016-13 (and related Accounting Standards Updates), or Current expected credit loss	
Chrysler		Fiat Chrysler Automobiles US LLC	
	
COVID-19		Coronavirus disease 2019	
CRA		Community Reinvestment Act	
CSG		Commercial Services Group	
CVA		Credit valuation adjustment	
DTA		Deferred tax asset	
EAD		Exposure at default	
EGRRCP Act		Economic Growth, Regulatory Relief, and Consumer Protection Act	
ERMC		Enterprise Risk Management Committee	
F&I		Finance and insurance	
FASB		Financial Accounting Standards Board	
FDIC		Federal Deposit Insurance Corporation	
FHC		Financial holding company	
FHLB		Federal Home Loan Bank	
FRB		Federal Reserve Bank, or Board of Governors of the Federal Reserve System, as the context requires	
FSR		Financial Strength Rating	
FTP		Funds-transfer pricing	
GAP		Guaranteed asset protection	
GDP		Gross domestic product of the United States of America	
GM		General Motors Company	
IB Finance		IB Finance Holding Company, LLC	
ICR		Issuer Credit Rating	
IRA		Individual retirement account	
	
LGD		Loss given default	
LIBOR		London Interbank Offered Rate	
LIHTC		Low-income housing tax credit	
LMI		Low-to-moderate income	
LTV		Loan-to-value	
MBS		Mortgage-backed securities	
MD&A		Management's Discussion and Analysis of Financial Condition and Results of Operations	
MSA		Mortgage servicing asset	
OTC		Over-the-counter	

Table of Contents
Index of Defined Terms
Ally Financial Inc. • Form 10-Q

									
Term		Definition	
P&C		Property and casualty	
PD		Probability of default	
PPP		Paycheck Protection Program	
RC		Risk Committee of the Ally Board of Directors	
ROU		Right-of-use	
RV		Recreational vehicle	
RWA		Risk-weighted asset	
SBA		Small Business Administration	
SEC		U.S. Securities and Exchange Commission	
Series 2 TRUPS		8.125% Fixed Rate/Floating Rate Trust Preferred Securities, Series 2 of GMAC Capital Trust	
SPE		Special-purpose entity	
TDR		Troubled debt restructuring	
UPB		Unpaid principal balance	
U.S. Basel III		The rules implementing the 2010 Basel III capital framework in the United States	
U.S. GAAP		Accounting Principles Generally Accepted in the United States of America	
VIE		Variable interest entity	
VMC		Vehicle maintenance contract	
VSC		Vehicle service contract	
WAC		Weighted-average coupon	
wSTWF		Weighted short-term wholesale funding	

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

																											
		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Financing revenue and other interest income									
Interest and fees on finance receivables and loans		$	1,602 			$	1,859 			$	4,974 			$	5,526 		
Interest on loans held-for-sale		5 			8 			11 			13 		
Interest and dividends on investment securities and other earning assets		173 			237 			596 			721 		
Interest on cash and cash equivalents		5 			19 			23 			63 		
Operating leases		360 			368 			1,070 			1,092 		
Total financing revenue and other interest income		2,145 			2,491 			6,674 			7,415 		
Interest expense									
Interest on deposits		452 			658 			1,585 			1,901 		
Interest on short-term borrowings		9 			33 			39 			114 		
Interest on long-term debt		309 			378 			975 			1,204 		
Total interest expense		770 			1,069 			2,599 			3,219 		
Net depreciation expense on operating lease assets		175 			234 			675 			719 		
Net financing revenue and other interest income		1,200 			1,188 			3,400 			3,477 		
Other revenue									
Insurance premiums and service revenue earned		276 			280 			816 			802 		
Gain on mortgage and automotive loans, net		33 			10 			35 			22 		
(Loss) gain on extinguishment of debt		(49)			1 			(50)			(2)		
Other gain on investments, net		64 			27 			173 			174 		
Other income, net of losses		160 			95 			331 			278 		
Total other revenue		484 			413 			1,305 			1,274 		
Total net revenue		1,684 			1,601 			4,705 			4,751 		
Provision for credit losses		147 			263 			1,337 			722 		
Noninterest expense									
Compensation and benefits expense		342 			296 			1,036 			910 		
Insurance losses and loss adjustment expenses		85 			74 			301 			260 		
Goodwill impairment		— 			— 			50 			— 		
Other operating expenses		478 			468 			1,423 			1,379 		
Total noninterest expense		905 			838 			2,810 			2,549 		
Income from continuing operations before income tax expense		632 			500 			558 			1,480 		
Income tax expense from continuing operations		156 			119 			159 			140 		
Net income from continuing operations		476 			381 			399 			1,340 		
Loss from discontinued operations, net of tax		— 			— 			(1)			(3)		
Net income		476 			381 			398 			1,337 		
Other comprehensive (loss) income, net of tax		(120)			106 			572 			721 		
Comprehensive income		$	356 			$	487 			$	970 			$	2,058 		
Statement continues on the next page.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.
5

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

		Three months ended September 30,		Nine months ended September 30,	
(in dollars) (a)		2020		2019		2020		2019	
Basic earnings per common share									
Net income from continuing operations		$	1.27 			$	0.98 			$	1.06 			$	3.37 		
Loss from discontinued operations, net of tax		— 			— 			— 			(0.01)		
Net income		$	1.27 			$	0.97 			$	1.06 			$	3.36 		
Diluted earnings per common share									
Net income from continuing operations		$	1.26 			$	0.97 			$	1.06 			$	3.35 		
Loss from discontinued operations, net of tax		— 			— 			— 			(0.01)		
Net income		$	1.26 			$	0.97 			$	1.06 			$	3.35 		
Cash dividends declared per common share		$	0.19 			$	0.17 			$	0.57 			$	0.51 		
(a)Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.
Refer to Note 16 for additional earnings per share information. The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.
6

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

($ in millions, except share data)		September 30, 2020		December 31, 2019	
Assets					
Cash and cash equivalents					
Noninterest-bearing		$	719 			$	619 		
Interest-bearing		19,220 			2,936 		
Total cash and cash equivalents		19,939 			3,555 		
Equity securities		627 			616 		
Available-for-sale securities (refer to Note 7 for discussion of investment securities pledged as collateral)		29,989 			30,284 		
Held-to-maturity securities (fair value of $1,336 and $1,600)		1,255 			1,568 		
Loans held-for-sale, net		441 			158 		
Finance receivables and loans, net					
Finance receivables and loans, net of unearned income		118,028 			128,231 		
Allowance for loan losses		(3,379)			(1,263)		
Total finance receivables and loans, net		114,649 			126,968 		
Investment in operating leases, net		9,454 			8,864 		
Premiums receivable and other insurance assets		2,662 			2,558 		
Other assets		6,254 			6,073 		
Total assets		$	185,270 			$	180,644 		
Liabilities					
Deposit liabilities					
Noninterest-bearing		$	159 			$	119 		
Interest-bearing		134,779 			120,633 		
Total deposit liabilities		134,938 			120,752 		
Short-term borrowings		3,032 			5,531 		
Long-term debt		25,704 			34,027 		
Interest payable		748 			641 		
Unearned insurance premiums and service revenue		3,401 			3,305 		
Accrued expenses and other liabilities		3,321 			1,972 		
Total liabilities		171,144 			166,228 		
Contingencies (refer to Note 23)					
Equity					
Common stock and paid-in capital ($0.01 par value, shares authorized 1,100,000,000; issued 500,382,748 and 496,957,805; and outstanding 373,857,264 and 374,331,998)		21,517 			21,438 		
Accumulated deficit		(4,893)			(4,057)		
Accumulated other comprehensive income		695 			123 		
Treasury stock, at cost (126,525,484 and 122,625,807 shares)		(3,193)			(3,088)		
Total equity		14,126 			14,416 		
Total liabilities and equity		$	185,270 			$	180,644 		
Statement continues on the next page.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.
7

Table of Contents
Condensed Consolidated Balance Sheet (unaudited)
Ally Financial Inc. • Form 10-Q
The assets of consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and the liabilities of these entities for which creditors (or beneficial interest holders) do not have recourse to our general credit were as follows.

($ in millions)		September 30, 2020		December 31, 2019	
Assets					
Finance receivables and loans, net					
Finance receivables and loans, net of unearned income		$	14,779 			$	18,710 		
Allowance for loan losses		(349)			(153)		
Total finance receivables and loans, net		14,430 			18,557 		
	
Other assets		721 			787 		
Total assets		$	15,151 			$	19,344 		
Liabilities					
Long-term debt		$	5,869 			$	9,087 		
Accrued expenses and other liabilities		6 			11 		
Total liabilities		$	5,875 			$	9,098 		
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.
8

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

		Three months ended September 30,	
($ in millions)		Common stock and paid-in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Treasury stock		Total equity	
Balance at July 1, 2019		$	21,403 			$	(4,682)			$	84 			$	(2,489)			$	14,316 		
Net income				381 							381 		
Share-based compensation		14 									14 		
Other comprehensive income						106 					106 		
Common stock repurchases								(300)			(300)		
Common stock dividends ($0.17 per share)				(67)							(67)		
Balance at September 30, 2019		$	21,417 			$	(4,368)			$	190 			$	(2,789)			$	14,450 		
Balance at July 1, 2020		$	21,499 			$	(5,296)			$	815 			$	(3,192)			$	13,826 		
Net income				476 							476 		
Share-based compensation		18 									18 		
Other comprehensive loss						(120)					(120)		
Common stock repurchases								(1)			(1)		
Common stock dividends ($0.19 per share)				(73)							(73)		
Balance at September 30, 2020		$	21,517 			$	(4,893)			$	695 			$	(3,193)			$	14,126 		

		Nine months ended September 30,	
($ in millions)		Common stock and paid-in capital		Accumulated deficit		Accumulated other comprehensive (loss) income		Treasury stock		Total equity	

	

	
Balance at December 31, 2018		$	21,345 			$	(5,489)			$	(539)			$	(2,049)			$	13,268 		
Cumulative effect of changes in accounting principles, net of tax											
Adoption of Accounting Standards Update 2017-08				(10)			8 					(2)		
Balance at January 1, 2019		21,345 			(5,499)			(531)			(2,049)			13,266 		
Net income				1,337 							1,337 		
Share-based compensation		72 									72 		
Other comprehensive income						721 					721 		
Common stock repurchases								(740)			(740)		
Common stock dividends ($0.51 per share)				(206)							(206)		
Balance at September 30, 2019		$	21,417 			$	(4,368)			$	190 			$	(2,789)			$	14,450 		
Balance at December 31, 2019		$	21,438 			$	(4,057)			$	123 			$	(3,088)			$	14,416 		
Cumulative effect of changes in accounting principles, net of tax (a)											
Adoption of Accounting Standards Update 2016-13				(1,017)							(1,017)		
Balance at January 1, 2020		21,438 			(5,074)			123 			(3,088)			13,399 		
Net income				398 							398 		
Share-based compensation		79 									79 		
Other comprehensive income						572 					572 		
Common stock repurchases								(105)			(105)		
Common stock dividends ($0.57 per share)				(217)							(217)		
Balance at September 30, 2020		$	21,517 			$	(4,893)			$	695 			$	(3,193)			$	14,126 		
(a)Refer to the section titled Recently Adopted Accounting Standards in Note 1 for additional information.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.
9

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

Nine months ended September 30, ($ in millions)	2020		2019	
Operating activities				
Net income	$	398 			$	1,337 		
Reconciliation of net income to net cash provided by operating activities				
Depreciation and amortization	1,159 			1,136 		
Goodwill impairment	50 			— 		
Provision for credit losses	1,337 			722 		
Gain on mortgage and automotive loans, net	(35)			(22)		
Other gain on investments, net	(173)			(174)		
Loss on extinguishment of debt	50 			2 		
Originations and purchases of loans held-for-sale	(2,241)			(952)		
Proceeds from sales and repayments of loans held-for-sale	2,107 			788 		
	
Net change in				
	
Deferred income taxes	122 			86 		
Interest payable	107 			371 		
Other assets	(196)			(25)		
Other liabilities	(29)			(98)		
Other, net	(52)			(38)		
Net cash provided by operating activities	2,604 			3,133 		
Investing activities				
	
Purchases of equity securities	(816)			(301)		
Proceeds from sales of equity securities	936 			615 		
Purchases of available-for-sale securities	(12,013)			(11,214)		
Proceeds from sales of available-for-sale securities	6,350 			5,699 		
Proceeds from repayments of available-for-sale securities	7,846 			3,246 		
Purchases of held-to-maturity securities	— 			(514)		
Proceeds from repayments of held-to-maturity securities	306 			195 		
Purchases of finance receivables and loans held-for-investment	(5,188)			(3,322)		
Proceeds from sales of finance receivables and loans initially held-for-investment	122 			427 		
Originations and repayments of finance receivables and loans held-for-investment and other, net	14,745 			3,069 		
Purchases of operating lease assets	(3,226)			(2,937)		
Disposals of operating lease assets	1,946 			2,016 		
	
Net change in nonmarketable equity investments	305 			179 		
Other, net	(308)			(306)		
Net cash provided by (used in) investing activities	11,005 			(3,148)		
Statement continues on the next page.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.
10

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

Nine months ended September 30, ($ in millions)		2020		2019	
Financing activities					
Net change in short-term borrowings		(2,499)			(4,652)		
Net increase in deposits		14,168 			13,032 		
Proceeds from issuance of long-term debt		3,174 			5,438 		
Repayments of long-term debt		(11,887)			(14,114)		
Repurchase of common stock		(105)			(740)		
Dividends paid		(217)			(206)		
Net cash provided by (used in) financing activities		2,634 			(1,242)		
Effect of exchange-rate changes on cash and cash equivalents and restricted cash		(1)			2 		
Net increase (decrease) in cash and cash equivalents and restricted cash		16,242 			(1,255)		
Cash and cash equivalents and restricted cash at beginning of year		4,380 			5,626 		
Cash and cash equivalents and restricted cash at September 30,		$	20,622 			$	4,371 		
Supplemental disclosures					
Cash paid for					
Interest		$	2,414 			$	2,781 		
Income taxes		8 			31 		
Noncash items					
	
Loans held-for-sale transferred to finance receivables and loans held-for-investment		74 			125 		
Finance receivables and loans held-for-investment transferred to loans held-for-sale		128 			964 		
	
In-kind distribution from equity-method investee		126 			— 		
Equity consideration received in exchange for restructured loans		5 			— 		
Decrease in held-to-maturity securities due to the consolidation of a VIE		5 			— 		
Increase in held-for-investment loans and other, net due to the consolidation of a VIE		114 			— 		
Increase in collateralized borrowings, net due to the consolidation of a VIE		109 			— 		
The following table provides a reconciliation of cash and cash equivalents and restricted cash from the Condensed Consolidated Balance Sheet to the Condensed Consolidated Statement of Cash Flows.

	
September 30, ($ in millions)		2020		2019	
Cash and cash equivalents on the Condensed Consolidated Balance Sheet		$	19,939 			$	3,617 		
Restricted cash included in other assets on the Condensed Consolidated Balance Sheet (a)		683 			754 		
Total cash and cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows		$	20,622 			$	4,371 		
(a)Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 11 for additional details describing the nature of restricted cash balances.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.
11

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

1.    Description of Business, Basis of Presentation, and Changes in Significant Accounting Policies
Ally Financial Inc. (together with its consolidated subsidiaries unless the context otherwise requires, Ally, the Company, or we, us, or our) is a leading digital financial-services company. As a customer-centric company with passionate customer service and innovative financial solutions, we are relentlessly focused on “Doing It Right” and being a trusted financial-services provider to our consumer, commercial, and corporate customers. We are one of the largest full-service automotive finance operations in the country and offer a wide range of financial services and insurance products to automotive dealerships and consumers. Our award-winning online bank (Ally Bank, Member FDIC and Equal Housing Lender) offers mortgage lending, personal lending, and a variety of deposit and other banking products, including savings, money-market, and checking accounts, CDs, and IRAs. Additionally, we offer securities-brokerage and investment-advisory services through Ally Invest. Our robust corporate-finance business offers capital for equity sponsors and middle-market companies. We are a Delaware corporation and are registered as a BHC under the Bank Holding Company Act of 1956, as amended, and an FHC under the Gramm-Leach-Bliley Act of 1999, as amended.
Our accounting and reporting policies conform to U.S. 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 and disclosure of contingent assets and liabilities at the date of the financial statements and that affect income and expenses during the reporting period and related disclosures. 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. Our most significant estimates pertain to the allowance for loan losses, valuations of automotive lease assets and residuals, fair value of financial instruments, and the determination of the provision for income taxes.
The Condensed Consolidated Financial Statements at September 30, 2020, and for the three months and nine months ended September 30, 2020, and 2019, are unaudited but reflect all adjustments that are, in management’s opinion, necessary for the fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements (and the related Notes) included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed on February 25, 2020, with the SEC.
Significant Accounting Policies
On January 1, 2020, we adopted ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, using the modified retrospective approach, as further described in the section below titled Recently Adopted Accounting Standards. Adoption of the standard resulted in changes to our Investments, Finance Receivables and Loans, and Allowance for Loan Losses policies, as presented below. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K regarding additional significant accounting policies, including accounting policies in effect prior to the adoption of the CECL standard.
Investments
Our investment portfolio includes various debt and equity securities. Our debt securities include government securities, corporate bonds, ABS, and MBS. Debt securities are classified based on management’s intent to sell or hold the security. We classify debt securities as held-to-maturity only when we have both the intent and ability to hold the securities to maturity. We classify debt securities as trading when the securities are acquired for the purpose of selling or holding them for a short period of time. Debt securities not classified as either held-to-maturity or trading are classified as available-for-sale.
Our portfolio includes debt securities classified as available-for-sale and held-to-maturity. Our available-for-sale securities are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income, while our held-to-maturity securities are carried at amortized cost.
We establish an allowance for credit losses for lifetime expected credit losses on our held-to-maturity securities. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Accrued interest receivable on held-to-maturity securities is excluded from the estimate of credit losses. Our held-to-maturity securities portfolio is mostly comprised of residential mortgage-backed debt securities that are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major ratings agencies, and have a long history of zero credit losses.
We regularly assess our available-for-sale securities for impairment. When the cost of an available-for-sale security exceeds its fair value, the security is impaired. If we determine that we intend to sell, or it is more likely than not we will be required to sell the security before recovery of the amortized cost basis, any allowance for credit losses, if previously recorded, is written off and the security’s amortized cost basis is written down to fair value at the reporting date, with any incremental impairment recorded through earnings.
Alternatively, if we do not intend to sell, or it is not more likely than not that we will be required to sell the security before anticipated recovery of the amortized cost basis, we evaluate, among other factors, the magnitude of the decline in fair value, the financial health of and business outlook for the issuer, and the performance of the underlying assets for interests in securitized assets to determine if a credit loss has occurred.
12

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The present value of expected future cash flows are compared to the security’s amortized cost basis to measure the credit loss component of the impairment after determining a credit loss has occurred. If the present value of expected cash flows is less than the amortized cost basis, we record an allowance for credit losses for that difference. The amount of credit loss is limited to the difference between the security’s amortized cost basis and its fair value. Any remaining impairment is considered a noncredit loss and is recorded in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for, or reversal of, provision for credit losses.
Accrued interest receivable on available-for-sale securities is excluded from the estimate of credit losses.
Premiums and discounts on debt securities are generally amortized over the stated maturity of the security as an adjustment to investment yield. Premiums on debt securities that have non-contingent call features that are callable at fixed prices on preset dates are amortized to the earliest call date as an adjustment to investment yield.
A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days past due. The receivable for interest income that is accrued but not collected is reversed against interest income when the debt security is placed on nonaccrual status.
Our investments in equity securities include securities that are recognized at fair value with changes in the fair value recorded in earnings, and equity securities that are recognized using other measurement principles.
Equity securities that have a readily determinable fair value are recorded at fair value with changes in fair value recorded in earnings and reported in other gain on investments, net in our Condensed Consolidated Statement of Comprehensive Income. These investments, which are primarily attributable to the investment portfolio of our Insurance operations, are included in equity securities on our Condensed Consolidated Balance Sheet. We also hold certain equity investments that do not have a readily determinable fair value and are not eligible to be recognized using other measurement principles, that are held at fair value. Refer to Note 20 for further information on equity securities that are held at fair value.
Our equity securities recognized using other measurement principles include investments in FHLB and FRB stock held to meet regulatory requirements, equity investments related to LIHTCs and the CRA, which do not have a readily determinable fair value, and other equity investments that do not have a readily determinable fair value. Our LIHTC investments are accounted for using the proportional amortization method of accounting for qualified affordable housing investments. Our obligations related to unfunded commitments for our LIHTC investments are included in other liabilities. The majority of our other CRA investments are accounted for using the equity method of accounting. Our investments in LIHTCs and other CRA investments are included in investments in qualified affordable housing projects and equity-method investments, respectively, in other assets on our Condensed Consolidated Balance Sheet. Our investments in FHLB and FRB stock are carried at cost, less impairment. Our remaining investments in equity securities are recorded at cost, less impairment and adjusted for observable price changes under the measurement alternative provided under GAAP. These investments, along with our investments in FHLB and FRB stock, are included in nonmarketable equity investments in other assets on our Condensed Consolidated Balance Sheet. Investments recorded under the measurement alternative are also reviewed at each reporting period to determine if any adjustments are required for observable price changes in identical or similar securities of the same issuer. As conditions warrant, we review these investments for impairment and adjust the carrying value of the investment if it is deemed to be impaired. Adjustments related to observable price changes or impairment on securities using the measurement alternative are recorded in earnings and reported in other income, net in our Condensed Consolidated Statement of Comprehensive Income.
Realized gains and losses on the sale of debt securities and equity securities with a readily determinable fair value are determined using the specific identification method and are reported in other gain on investments, net in our Condensed Consolidated Statement of Comprehensive Income.
Finance Receivables and Loans
We initially classify finance receivables and loans as either loans held-for-sale or loans held-for-investment based on management’s assessment of our intent and ability to hold the loans for the foreseeable future or until maturity. Management’s view of the foreseeable future is based on the longest reasonably reliable net income, liquidity, and capital forecast period. Management’s intent and ability with respect to certain loans may change from time to time depending on a number of factors, for example economic, liquidity, and capital conditions. In order to reclassify loans to held-for-sale, management must have the intent to sell the loans and reasonably identify the specific loans to be sold.
Loans classified as held-for-sale are presented as loans held-for-sale, net on our Condensed Consolidated Balance Sheet and are carried at the lower of their net carrying value or fair value, unless the fair value option was elected, in which case those loans are carried at fair value. Loan origination fees and costs are included in the initial carrying value of loans originated as held-for-sale for which we have not elected the fair value option. Loan origination fees and costs are recognized in earnings when earned or incurred, respectively, for loans classified as held-for-sale for which we have elected the fair value option. We have elected the fair value option for conforming mortgage direct-to-consumer originations for which we have a commitment to sell. The interest rate lock commitment that we enter into for a mortgage loan originated as held-for-sale and certain forward commitments are considered derivatives, which are carried at fair value on our Condensed Consolidated Balance Sheet. We have elected the fair value option to measure our nonderivative forward commitments. Changes in the fair value of our interest rate lock commitments, derivative forward commitments, and nonderivative forward commitments related to mortgage loans originated as held-for-sale, as well as changes in the carrying value of loans classified as held-for-sale, are reported through gain on mortgage and automotive loans, net in our Condensed Consolidated Statement of Comprehensive Income. Interest income on our loans
13

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
classified as held-for-sale is recognized based upon the contractual rate of interest on the loan and the unpaid principal balance. We report accrued interest receivable on our loans classified as held-for-sale in other assets on our Condensed Consolidated Balance Sheet.
We have also elected the fair value option for certain loans acquired within our consumer other portfolio segment. Changes in fair value related to these loans are reported through other income, net of losses in our Condensed Consolidated Statement of Comprehensive Income.
Loans classified as held-for-investment are presented as finance receivables and loans, net on our Condensed Consolidated Balance Sheet. Finance receivables and loans are reported at their amortized cost basis, which includes the principal amount outstanding, net of unamortized deferred fees and costs on originated loans, unamortized premiums and discounts on purchased loans, unamortized basis adjustments arising from the designation of finance receivables and loans as the hedged item in qualifying fair value hedge relationships, and cumulative principal charge-offs. We refer to the amortized cost basis less the allowance for loan loss as the net carrying value in finance receivables and loans. Unearned rate support received from an automotive manufacturer on certain automotive loans, deferred origination fees and costs, and premiums and discounts on purchased loans, are amortized over the contractual life of the related finance receivable or loan using the effective interest method. We make various incentive payments for consumer automotive loan originations to automotive dealers and account for these payments as direct loan origination costs. Additionally, we make incentive payments to certain commercial automobile wholesale borrowers and account for these payments as a reduction to interest income in the period they are earned. Interest income on our finance receivables and loans is recognized based on the contractual rate of interest plus the amortization of deferred amounts using the effective interest method. We report accrued interest receivable on our finance receivables and loans in other assets on our Condensed Consolidated Balance Sheet. Loan commitment fees are generally deferred and amortized over the commitment period. For information on finance receivables and loans, refer to Note 8.
We have elected to exclude accrued interest receivable from the measurement of our allowance for credit losses for each class of financing receivables. We have also elected to write-off accrued interest receivable by reversing interest income when loans are placed on nonaccrual status for each class of financing receivable.
Our portfolio segments are based on the level at which we develop and document our methodology for determining the allowance for loan losses. Additionally, the classes of finance receivables are based on several factors including the method for monitoring and assessing credit risk, the method of measuring carrying value, and the risk characteristics of the finance receivable. Based on an evaluation of our process for developing the allowance for loan losses including the nature and extent of exposure to credit risk arising from finance receivables, we have determined our portfolio segments to be consumer automotive, consumer mortgage, consumer other, and commercial.
•Consumer automotive — Consists of retail automotive financing for new and used vehicles.
•Consumer mortgage — Consists of the following classes of finance receivables.
◦Mortgage Finance — Consists of consumer first-lien mortgages from our ongoing mortgage operations including bulk acquisitions, direct-to-consumer originations, and refinancing of high-quality jumbo mortgages and LMI mortgages.
◦Mortgage — Legacy — Consists of consumer mortgage assets originated prior to January 1, 2009, including first-lien mortgages, subordinate-lien mortgages, and home equity mortgages.
•Consumer other — Consists of unsecured consumer lending from point-of-sale financing.
•Commercial — Consists of the following classes of finance receivables.
◦Commercial and Industrial
▪Automotive — Consists of financing operations to fund dealer purchases of new and used vehicles through wholesale floorplan financing. Additional commercial offerings include automotive dealer term loans, revolving lines, and dealer fleet financing.
▪Other — Consists primarily of senior secured leveraged cash flow and asset-based loans related to our Corporate-Finance business.
◦Commercial Real Estate — Consists of term loans primarily secured by dealership land and buildings, and other commercial lending secured by real estate.
Nonaccrual Loans
Generally, we recognize loans of all classes as past due when they are 30 days delinquent on making a contractually required payment, and loans are placed on nonaccrual status when principal or interest has been delinquent for at least 90 days, or when full collection is not expected. Interest income recognition is suspended when finance receivables and loans are placed on nonaccrual status. Additionally, amortization of premiums and discounts and deferred fees and costs ceases when finance receivables and loans are placed on nonaccrual. Exceptions include commercial real estate loans that are placed on nonaccrual status when delinquent for 60 days or when full collection is not probable, if sooner. Additionally, our policy is to generally place all loans that have been modified in a TDR on nonaccrual status until the loan has been brought fully current, the collection of contractual principal and interest is reasonably assured, and six consecutive months of
14

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
repayment performance is achieved. In certain cases, if a borrower has been current up to the time of the modification and repayment of the debt subsequent to the modification is reasonably assured, we may choose to continue to accrue interest on the loan.
Nonperforming loans on nonaccrual status are reported in Note 8. The receivable for interest income that is accrued, but not collected, at the date finance receivables and loans are placed on nonaccrual status is reversed against interest income and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, where there is doubt regarding the ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Generally, finance receivables and loans are restored to accrual status only when contractually current and the collection of future payments is reasonably assured.
Troubled Debt Restructurings
When the terms of finance receivables or loans are modified, consideration must be given as to whether or not the modification results in a TDR. A modification is considered to be a TDR when both the borrower is experiencing financial difficulty and we grant a concession to the borrower. These considerations require significant judgment and vary by portfolio segment. In all cases, the cumulative impacts of all modifications are considered at the time of the most recent modification.
For consumer loans of all classes, various qualitative factors are utilized for assessing the financial difficulty of the borrower. These include, but are not limited to, the borrower’s default status on any of its debts, bankruptcy, and recent changes in financial circumstances (for instance, loss of job). A concession has been granted when as a result of the modification we do not expect to collect all amounts due under the original loan terms, including interest accrued at the original contract rate. Types of modifications that may be considered concessions include, but are not limited to, extensions of terms at a rate that does not constitute a market rate, a reduction, deferral or forgiveness of principal or interest owed and loans that have been discharged in a Chapter 7 Bankruptcy and have not been reaffirmed by the borrower.
In addition to the modifications noted above, in our consumer automotive portfolio segment of loans we also provide extensions or deferrals of payments to borrowers whom we deem to be experiencing only temporary financial difficulty. In these cases, there are limits within our operational policies to minimize the number of times a loan can be extended, as well as limits to the length of each extension, including a cumulative cap over the life of the loan. If these limits are breached, the modification is considered a TDR as noted in the following paragraph. Before offering an extension or deferral, we evaluate the capacity of the customer to make the scheduled payments after the deferral period. During the deferral period, we continue to accrue interest on the loan as part of the deferral agreement. We grant these extensions or deferrals when we expect to collect all amounts due including interest accrued at the original contract rate. However, in response to the COVID-19 pandemic, we offered broad-based deferral programs to all of our customers who requested assistance with their loans.
A restructuring that results in only a delay in payment that is deemed to be insignificant is not a concession and the modification is not considered to be a TDR. In order to assess whether a restructuring that results in a delay in payment is insignificant, we consider the amount of the restructured payments subject to delay in conjunction with the unpaid principal balance or the collateral value of the loan, whether or not the delay is significant with respect to the frequency of payments under the original contract, or the loan’s original expected duration. In the cases where payment extensions on our automotive loan portfolio cumulatively extend beyond 90 days and are more than 10% of the original contractual term or where the cumulative payment extension is beyond 180 days, we deem the delay in payment to be more than insignificant, and as such, classify these types of modifications as TDRs. Otherwise, we believe that the modifications do not represent a concessionary modification and accordingly, they are not classified as TDRs. Additionally, based on guidance issued by federal and state regulatory agencies, loan modifications made in response to the COVID-19 pandemic are not considered TDRs if accounts were considered current at the date the modification program was implemented. Refer to Note 8 for additional information.
For commercial loans of all classes, similar qualitative factors are considered when assessing the financial difficulty of the borrower. In addition to the factors noted above, consideration is also given to the borrower’s forecasted ability to service the debt in accordance with the contractual terms, possible regulatory actions, and other potential business disruptions (for example, the loss of a significant customer or other revenue stream). Consideration of a concession is also similar for commercial loans. In addition to the factors noted above, consideration is also given to whether additional guarantees or collateral have been provided.
For all loans, TDR classification typically results from our loss mitigation activities. For loans held-for-investment that are not carried at fair value and are TDRs, impairment is typically measured based on the difference between the amortized cost basis of the loan and the present value of the expected future cash flows of the loan. The present value is calculated using the loan’s original interest rate, as opposed to the interest rate specified within the restructuring. The loan may also be measured for impairment based on the fair value of the underlying collateral less costs to sell for loans that are collateral dependent. We recognize impairment by either establishing a valuation allowance or recording a charge-off.
The financial impacts of modifications that meet the definition of a TDR are reported in the period in which they are identified as TDRs. Additionally, if a loan that is classified as a TDR redefaults within 12 months of the modification, we are required to disclose the instances of redefault. For the purpose of this disclosure, we have determined that a loan is considered to have redefaulted when the loan meets the requirements for evaluation under our charge-off policy except for commercial loans where redefault is defined as 90 days past due. Nonaccrual loans may return to accrual status as discussed in the preceding nonaccrual loan section at which time, the normal accrual of interest income resumes.
15

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Net Charge-offs
We disclose the measurement of net charge-offs as the amount of gross charge-offs recognized less recoveries received. Gross charge-offs reflect the amount of the amortized cost basis directly written-off. Generally, we recognize recoveries when they are received and record them as an increase to the allowance for loan losses. As a general rule, consumer automotive loans are written down to estimated collateral value, less costs to sell, if repossession is assured and in process once a loan becomes 120 days past due. In our consumer mortgage portfolio segment, first-lien mortgages and a subset of our home equity portfolio that are secured by real estate in a first-lien position are written down to the estimated fair value of the collateral, less costs to sell, once a mortgage loan becomes 180 days past due. Consumer mortgage loans that represent second-lien positions are charged off at 180 days past due. Loans in our consumer other segment are charged off at 120 days past due. Within 60 days of receipt of notification of filing from the bankruptcy court, or within the time frames noted above, consumer automotive and first-lien consumer mortgage loans in bankruptcy are written down to their expected future cash flows, which is generally fair value of the collateral, less costs to sell, and second-lien consumer mortgage loans and consumer other loans are fully charged-off, unless it can be clearly demonstrated that repayment is likely to occur. Regardless of other timelines noted within this policy, loans are considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to only be through sale or operation of the collateral. Collateral dependent loans are charged-off to the estimated fair value of the underlying collateral, less costs to sell when foreclosure or repossession proceedings begin.
Commercial loans are individually evaluated and are written down to the estimated fair value of the collateral less costs to sell when collectability of the recorded balance is in doubt. Generally, all commercial loans are charged-off when it becomes unlikely that the borrower is willing or able to repay the remaining balance of the loan and any underlying collateral is not sufficient to recover the outstanding principal. Collateral dependent loans are charged-off to the fair market value of collateral less costs to sell when appropriate. Noncollateral dependent loans are fully written-off.
Allowance for Loan Losses
The allowance for loan losses (the allowance) is deducted from, or added to, the loan’s amortized cost basis to present the net amount expected to be collected from our lending portfolios. We estimate the allowance using relevant available information, which includes both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Additions to the allowance are charged to current period earnings through the provision for loan losses; amounts determined to be uncollectible are charged directly against the allowance, net of amounts recovered on previously charged-off accounts. Expected recoveries do not exceed the total of amounts previously charged-off and amounts expected to be charged-off.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions or renewals, unless the extension or renewal option is included in the original or modified contract at the reporting date and we are not able to unconditionally cancel the option. Expected loan modifications are also not included in the contractual term, unless we have a reasonable expectation at period end that a TDR will be executed with a borrower.
For the purpose of calculating portfolio-level reserves, we have grouped our loans into four portfolio segments: consumer automotive, consumer mortgage, consumer other, and commercial. The allowance for loan losses is measured on a collective basis using statistical models when loans have similar risk characteristics. These statistical models are designed to correlate certain macroeconomic variables to expected future credit losses. The macroeconomic data used in the models are based on forecasted factors for the next 12-months. These forecasted variables are derived from both internal and external sources. Beyond this forecast period, we revert each variable to a historical average. This reversion to the mean is performed on a straight-line basis over 24 months. The historical average is calculated using historical data beginning in January 2008 through the current period.
Loans that do not share similar risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation.
The allowance calculation is also supplemented with qualitative reserves that take into consideration current portfolio and asset-level factors, such as the impacts of changes in underwriting standards, collections and account management effectiveness, geographic concentrations, and economic events that have occurred but are not yet reflected in the quantitative model component. Qualitative adjustments are documented, reviewed, and approved through our established risk governance processes and follow regulatory guidance.
Management also considers the need for a reserve on unfunded nonderivative loan commitments across our portfolio segments, including lines of credit and standby letters of credit. We estimate expected credit losses over the contractual period in which we are exposed to credit risk, unless we have the option to unconditionally cancel the obligation. Expected credit losses include consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over the estimated life. The reserve for unfunded loan commitments is recorded within other liabilities on our Condensed Consolidated Balance Sheet. Refer to Note 28 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for information on our unfunded loan commitments.
Consumer Automotive
The allowance for loan losses within the consumer automotive portfolio segment is calculated using proprietary statistical models and other risk indicators applied to pools of loans with similar risk characteristics, including credit bureau score and LTV ratios.
The model generates projections of default rates, prepayment rates, loss severity rates, and recovery rates using macroeconomic and historical loan data. These projections are used to develop transition scenarios to predict the portfolio’s migration from the current past-due
16

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
status to various future states over the life of the loan. While the macroeconomic data that is used to calculate expected credit losses includes interest rate indices and national and state-level home price indices, national and state-level unemployment rates are the most impactful macroeconomic factors in calculating expected lifetime credit losses. The loss severity within the consumer automotive portfolio segment is impacted by the market values of vehicles that are repossessed. Vehicle market values are affected by numerous factors including vehicle supply, the condition of the vehicle upon repossession, the overall price and volatility of gasoline or diesel fuel, consumer preference related to specific vehicle segments, and other factors. The model output is then aggregated to calculate expected lifetime credit losses.
Consumer Mortgage
The allowance for loan losses within the consumer mortgage portfolio segment is calculated by using statistical models based on pools of loans with similar risk characteristics, including credit score, LTV, loan age, documentation type, product type, and loan purpose.
Expected losses are statistically derived based on a suite of behavioral based transition models. This transition framework predicts various stages of delinquency, default, and voluntary prepayment over the course of the life of the loan. The transition probability is a function of certain loan and borrower characteristics, including factors, such as loan balance and term, the borrower’s credit score, and loan-to-value ratios, and economic variables, as well as consideration of historical factors such as loss frequency and severity. When a default event is predicted, a severity model is applied to estimate future loan losses. Loss severity within the consumer mortgage portfolio segment is impacted by the market values of foreclosed properties, which is affected by numerous factors, including geographic considerations and the condition of the foreclosed property. Macroeconomic data that is used to calculate expected credit losses includes certain interest rates and home price indices. The model output is then aggregated to calculate expected lifetime credit losses.
Consumer Other
The allowance for loan losses within the consumer other portfolio segment is calculated by using a vintage analysis that analyzes historical performance for groups of loans with similar risk characteristics, including vintage level historical balance paydown rates and delinquency and roll rate behaviors by risk tier and product type, to arrive at an estimate of expected lifetime credit losses. The risk tier segmentation is based upon borrower risk characteristics, including credit score and past performance history, as well as certain loan specific characteristics, such as loan type and origination year.
Commercial Loans
The allowance for loan losses within the commercial loan portfolio segment is calculated using risk rating models that use historical loss experience, concentrations, macroeconomic factors, and performance trends. The determination of the allowance is influenced by numerous assumptions and factors that may materially affect estimates of loss, including changes to the PD, LGD, and EAD. PD factors are determined based on our historical performance data, which considers on-going reviews of the financial performance of the specific borrower, including cash flow, debt-service coverage ratio, and an assessment of the borrower’s industry and future prospects. The determination of PD also incorporates historical loss performance and, when necessary, macroeconomic information obtained from external sources. LGD factors consider the type of collateral, relative loan-to-value ratios, and historical loss information. In addition, LGD factors may be influenced by situations in which automotive manufacturers repurchase vehicles used as collateral to secure the loans in default situations. EAD factors are derived from outstanding balance levels, including estimated prepayment assumptions based on historical performance.
Refer to Note 8 for information on the allowance for loan losses.
Goodwill and Other Intangibles
On January 1, 2020, we adopted ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, on a prospective basis, resulting in an update to our accounting policy. Goodwill and intangible assets, net of accumulated amortization, are reported in other assets in our Condensed Consolidated Balance Sheet.
Our intangible assets primarily consist of acquired customer relationships and developed technology, and are amortized using a straight-line methodology over their estimated useful lives. We review intangible assets for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If it is determined the carrying amount of the asset is not recoverable, an impairment charge is recorded.
Goodwill represents the excess of the cost of an acquisition over the fair value of net assets acquired, including identifiable intangibles. We allocate goodwill to applicable reporting units based on the relative fair value of the other net assets allocated to those reporting units at the time of the acquisition. In the event we restructure our business, we may reallocate goodwill. We test goodwill for impairment annually, or more frequently if events and changes in circumstances indicate that it is more likely than not that impairment exists. Historically, our annual goodwill impairment test was performed as of August 31 of each year, however beginning in 2020, the testing date was moved forward to July 31 of each year. We do not consider this change to be material, and the change in assessment date did not delay, accelerate, or avoid a potential impairment charge. This change is within the same reporting period of our historic assessment and our testing methods and valuation inputs are not significantly different than they would be had we maintained our historic goodwill test date, resulting in consistent conclusions. In certain situations, we may perform a qualitative assessment to test goodwill for impairment. We may also decide to bypass the qualitative assessment and perform a quantitative assessment. If we perform the qualitative assessment to test goodwill for impairment and conclude that it is more likely than not that the reporting unit’s fair value is greater than its carrying value, then the quantitative assessment is not required. However, if we perform the qualitative assessment and determine that it is more likely than not that a reporting unit’s fair value is less than its carrying value, then we must perform the quantitative assessment. The quantitative assessment requires us to compare the fair
17

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
value of each of the reporting units to their respective carrying value. The fair value of the reporting units in our quantitative assessment is determined based on various analyses including discounted cash flow projections using assumptions a market participant would use. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, a goodwill impairment loss is recorded for the excess of the carrying value of the reporting unit over its fair value.
Income Taxes
In calculating the provision for interim income taxes, in accordance with ASC Topic 740, Income Taxes, we apply an estimated annual effective tax rate to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. This method differs from that described in Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K, which describes our annual significant income tax accounting policy and related methodology.
Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K regarding additional significant accounting policies.
Recently Adopted Accounting Standards
Financial Instruments—Credit Losses (ASU 2016-13)
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. The amendments in this update introduced a new accounting model to measure credit losses for financial assets measured at amortized cost. The FASB has also issued additional ASUs that clarified the scope and provided additional guidance for ASU 2016-13. Credit losses for financial assets measured at amortized cost will now be determined based on the total current expected credit losses over the life of the financial asset or group of financial assets. In effect, the financial asset or group of financial assets will be presented at the net amount expected to be collected. Credit losses are no longer recorded under the current incurred loss model for financial assets measured at amortized cost. The amendments also modified the accounting for available-for-sale securities whereby credit losses are now recorded through an allowance for credit losses rather than a write-down to the security’s cost basis, which allows for reversals of credit losses when estimated credit losses decline. Credit losses for available-for-sale securities are measured in a manner similar to current GAAP.
On January 1, 2020, we adopted ASU 2016-13 and all subsequent ASUs that modified ASU 2016-13 (collectively, the amendments to the credit loss standard), which have been codified under ASC 326, Financial Instruments - Credit Losses. We adopted this guidance using the modified retrospective approach, as required, and have not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance. While the standard modified the measurement of the allowance for credit losses, it did not alter the credit risk of our finance receivables and loan portfolio.
The adoption of the amendments resulted in a reduction to our opening retained earnings of approximately $1.0 billion, net of income taxes, resulting from a pretax increase to our allowance for credit losses of approximately $1.3 billion, primarily driven by our consumer automotive loan portfolio. The increase is primarily related to the difference between loss emergence periods previously utilized, as compared to estimating lifetime credit losses as required by the CECL standard. We did not experience a material impact to the allowance for loan losses from any of our other lending portfolios. Additionally, the adoption of CECL did not result in a material impact to our held-to-maturity securities portfolio, which is primarily composed of agency-backed mortgage securities, or our available-for-sale securities portfolio. We have elected to phase the estimated impact of CECL into regulatory capital in accordance with the interim final rule of the FRB and other U.S. banking agencies that became effective on March 31, 2020, and was subsequently clarified and adjusted in a final rule effective September 30, 2020. As a result, we will delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021. Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. Under the final rule, the estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as the entire day-one impact at adoption plus 25% of the subsequent change in allowance during the two-year deferral period. Refer to Note 17 for further details about the impact of CECL on regulatory capital.
Our quantitative allowance for loan loss estimates under CECL is impacted by certain forecasted economic factors. In order to estimate the quantitative portion of our allowance for loan losses under CECL, our modeling processes rely on a single forecast scenario for each macroeconomic factor incorporated. To derive macroeconomic assumptions in this single scenario, we have elected to forecast these macroeconomic factors over a 12-month period, which we have determined to be reasonable and supportable. After the 12-month reasonable and supportable forecast period, we have elected to revert on a straight-line basis over a 24-month period to a historical mean for each macroeconomic factor. The mean is calculated from historical data spanning from January 2008 through the most current period, and as a result, includes data points from the last recessionary period. In addition to our quantitative allowance for loan losses, we also incorporate qualitative adjustments that may relate to idiosyncratic risks, changes in current economic conditions that may not be reflected in quantitatively derived results, or other relevant factors to further inform our estimate of the allowance for credit losses.
Additionally, due to the expansion of the time horizon over which we are required to estimate future credit losses, we may experience increased volatility in our future provisions for credit losses. Factors that could contribute to such volatility include, but are not limited to, changes in the composition and credit quality of our financing receivables and loan portfolio and investment securities portfolios, economic conditions and forecasts, the allowance for credit loss models that are used, the data that is included in the models, the associated qualitative allowance framework, and our estimation techniques.
18

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Reference Rate Reform (ASU 2020-04)
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The amendments primarily include relief related to contract modifications and hedging relationships, as well as providing a one-time election for the sale or transfer of debt securities classified as held to maturity. The relief provided by this ASU does not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. However, hedging relationships that apply certain optional expedients prior to December 31, 2022, will be retained through the end of the hedging relationship, including for periods after December 31, 2022.
We adopted the amendments in ASU 2020-04 as of the March 12, 2020 issuance date, on a prospective basis. The adoption did not have an immediate direct impact to our financial statements. As contracts are modified through December 2022, we will assess the impact based on this guidance. We do not expect there will be a material impact to our financial statements.

2.    Acquisitions
On October 1, 2019, we acquired 100% of the equity of Credit Services Corporation, LLC, including its wholly owned subsidiary, Health Credit Services LLC (collectively Health Credit Services), a digital point-of-sale payment provider that offers financing to consumers for various healthcare procedures or services, for $177 million in cash. Health Credit Services operates as a wholly owned subsidiary of Ally. Beginning in October 2019, financial information related to Health Credit Services, which we renamed Ally Lending, is included within Corporate and Other. For further information on our acquisition of Health Credit Services, refer to Note 2 in our 2019 Annual Report on Form 10-K.
Additionally, in February 2020, we entered into a merger agreement to acquire Cardholder Management Services, Inc. and its subsidiaries, including CardWorks, Inc. and Merrick Bank Corporation (collectively, CardWorks). CardWorks is a nonprime credit-card and consumer-finance provider in the United States with servicing and merchant-service capabilities across the credit spectrum. On June 24, 2020, the parties to the merger agreement (other than the stockholders’ representative) mutually agreed to terminate it. We did not incur any termination or breakup fees as a result of the execution of the mutual termination agreement.

3.    Revenue from Contracts with Customers
Our primary revenue sources, which include financing revenue and other interest income, are addressed by other GAAP and are not in the scope of ASC Topic 606, Revenue from Contracts with Customers. As part of our Insurance operations, we recognize revenue from insurance contracts, which are addressed by other GAAP and are not included in the scope of this standard. Certain noninsurance contracts within our Insurance operations, including VSCs, GAP contracts, and VMCs, are included in the scope of this standard. All revenue associated with noninsurance contracts is recognized over the contract term on a basis proportionate to the anticipated cost emergence. Further, commissions and sales expense incurred to obtain these contracts are amortized over the terms of the related policies and service contracts on the same basis as premiums and service revenue are earned, and all advertising costs are recognized as expense when incurred.
19

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following tables present a disaggregated view of our revenue from contracts with customers included in other revenue that falls within the scope of the revenue recognition principles of ASC Topic 606, Revenue from Contracts with Customers. For further information regarding our revenue recognition policies and details about the nature of our respective revenue streams, refer to Note 1 and Note 3 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.

Three months ended September 30, ($ in millions)		Automotive Finance operations		Insurance operations		Mortgage Finance operations		Corporate Finance operations		Corporate and Other		Consolidated	
2020													
Revenue from contracts with customers													
Noninsurance contracts (a) (b) (c)		$	— 			$	148 			$	— 			$	— 			$	— 			$	148 		
Remarketing fee income		20 			— 			— 			— 			— 			20 		
Brokerage commissions and other revenue		— 			— 			— 			— 			12 			12 		
Brokered/agent commissions		— 			4 			— 			— 			— 			4 		
Deposit account and other banking fees		— 			— 			— 			— 			4 			4 		
Other		3 			— 			— 			— 			— 			3 		
Total revenue from contracts with customers		23 			152 			— 			— 			16 			191 		
All other revenue		38 			186 			36 			9 			24 			293 		
Total other revenue (d)		$	61 			$	338 			$	36 			$	9 			$	40 			$	484 		
2019													
Revenue from contracts with customers													
Noninsurance contracts (a) (b) (c)		$	— 			$	138 			$	— 			$	— 			$	— 			$	138 		
Remarketing fee income		19 			— 			— 			— 			— 			19 		
Brokerage commissions and other revenue		— 			— 			— 			— 			16 			16 		
Brokered/agent commissions		— 			3 			— 			— 			— 			3 		
Deposit account and other banking fees		— 			— 			— 			— 			3 			3 		
Other		5 			— 			— 			— 			— 			5 		
Total revenue from contracts with customers		24 			141 			— 			— 			19 			184 		
All other revenue		35 			148 			10 			9 			27 			229 		
Total other revenue (d)		$	59 			$	289 			$	10 			$	9 			$	46 			$	413 		
(a)We had opening balances of $2.9 billion and $2.8 billion in unearned revenue associated with outstanding contracts at July 1, 2020, and July 1, 2019, respectively, and $218 million and $206 million of these balances were recognized as insurance premiums and service revenue earned in our Condensed Consolidated Statement of Comprehensive Income during the three months ended September 30, 2020, and September 30, 2019.
(b)At September 30, 2020, we had unearned revenue of $3.0 billion associated with outstanding contracts, and with respect to this balance we expect to recognize revenue of $210 million during the remainder of 2020, $779 million in 2021, $689 million in 2022, $568 million in 2023, and $722 million thereafter. At September 30, 2019, we had unearned revenue of $2.8 billion associated with outstanding contracts.
(c)We had deferred insurance assets of $1.8 billion at both July 1, 2020, and September 30, 2020, and recognized $125 million of expense during the three months ended September 30, 2020. We had deferred insurance assets of $1.6 billion and $1.7 billion at July 1, 2019, and September 30, 2019, respectively, and recognized $119 million of expense during the three months ended September 30, 2019.
(d)Represents a component of total net revenue. Refer to Note 22 for further information on our reportable operating segments.
20

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

Nine months ended September 30, ($ in millions)		Automotive Finance operations		Insurance operations		Mortgage Finance operations		Corporate Finance operations		Corporate and Other		Consolidated	
2020													
Revenue from contracts with customers													
Noninsurance contracts (a) (b)		$	— 			$	433 			$	— 			$	— 			$	— 			$	433 		
Remarketing fee income		52 			— 			— 			— 			— 			52 		
Brokerage commissions and other revenue		— 			— 			— 			— 			39 			39 		
Brokered/agent commissions		— 			12 			— 			— 			— 			12 		
Deposit account and other banking fees		— 			— 			— 			— 			9 			9 		
Other		11 			— 			— 			— 			— 			11 		
Total revenue from contracts with customers		63 			445 			— 			— 			48 			556 		
All other revenue		85 			468 			65 			28 			103 			749 		
Total other revenue (c)		$	148 			$	913 			$	65 			$	28 			$	151 			$	1,305 		
2019													
Revenue from contracts with customers													
Noninsurance contracts (a) (b)		$	— 			$	403 			$	— 			$	— 			$	— 			$	403 		
Remarketing fee income		56 			— 			— 			— 			— 			56 		
Brokerage commissions and other revenue		— 			— 			— 			— 			50 			50 		
Brokered/agent commissions		— 			10 			— 			— 			— 			10 		
Deposit account and other banking fees		— 			— 			— 			— 			12 			12 		
Other		15 			— 			— 			— 			— 			15 		
Total revenue from contracts with customers		71 			413 			— 			— 			62 			546 		
All other revenue		117 			522 			16 			30 			43 			728 		
Total other revenue (c)		$	188 			$	935 			$	16 			$	30 			$	105 			$	1,274 		
(a)We had opening balances of $2.9 billion and $2.6 billion in unearned revenue associated with outstanding contracts at January 1, 2020, and January 1, 2019, respectively, and $643 million and $607 million of these balances were recognized as insurance premiums and service revenue earned in our Condensed Consolidated Statement of Comprehensive Income during the nine months ended September 30, 2020, and September 30, 2019.
(b)We had deferred insurance assets of $1.7 billion and $1.8 billion at January 1, 2020, and September 30, 2020, respectively, and recognized $371 million of expense during the nine months ended September 30, 2020. We had deferred insurance assets of $1.5 billion and $1.7 billion at January 1, 2019, and September 30, 2019, respectively, and recognized $344 million of expense during the nine months ended September 30, 2019.
(c)Represents a component of total net revenue. Refer to Note 22 for further information on our reportable operating segments.
In addition to the components of other revenue presented above, as part of our Automotive Finance operations, we recognized net remarketing gains of $71 million and $62 million for the three months and nine months ended September 30, 2020, respectively, and $28 million and $66 million for the three months and nine months ended September 30, 2019, on the sale of off-lease vehicles. These gains are included in depreciation expense on operating lease assets in our Condensed Consolidated Statement of Comprehensive Income.

4.    Other Income, Net of Losses
Details of other income, net of losses, were as follows.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Income from equity-method investments		$	63 			$	7 			$	115 			$	19 		
Late charges and other administrative fees		28 			28 			65 			85 		
Remarketing fees		20 			19 			52 			56 		
	
Servicing fees		3 			4 			8 			14 		
Other, net		46 			37 			91 			104 		
Total other income, net of losses		$	160 			$	95 			$	331 			$	278 		
21

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
5.    Reserves for Insurance Losses and Loss Adjustment Expenses
The following table shows a rollforward of our reserves for insurance losses and loss adjustment expenses.

($ in millions)		2020		2019	
Total gross reserves for insurance losses and loss adjustment expenses at January 1,		$	122 			$	134 		
Less: Reinsurance recoverable		88 			96 		
Net reserves for insurance losses and loss adjustment expenses at January 1,		34 			38 		
Net insurance losses and loss adjustment expenses incurred related to:					
Current year		298 			259 		
Prior years (a)		3 			1 		
Total net insurance losses and loss adjustment expenses incurred		301 			260 		
Net insurance losses and loss adjustment expenses paid or payable related to:					
Current year		(271)			(227)		
Prior years		(27)			(29)		
Total net insurance losses and loss adjustment expenses paid or payable		(298)			(256)		
	
Net reserves for insurance losses and loss adjustment expenses at September 30,		37 			42 		
Plus: Reinsurance recoverable		88 			93 		
Total gross reserves for insurance losses and loss adjustment expenses at September 30,		$	125 			$	135 		
(a)There have been no material adverse changes to the reserve for prior years.

6.    Other Operating Expenses
Details of other operating expenses were as follows.

	Three months ended September 30,		Nine months ended September 30,	
($ in millions)	2020		2019		2020		2019	
Insurance commissions	$	130 			$	120 			$	383 			$	351 		
Technology and communications	77 			77 			236 			227 		
Lease and loan administration	57 			40 			141 			122 		
Advertising and marketing	36 			46 			112 			129 		
Property and equipment depreciation	34 			25 			102 			72 		
Professional services	28 			32 			87 			91 		
Regulatory and licensing fees	18 			29 			76 			85 		
Vehicle remarketing and repossession	17 			26 			51 			78 		
Occupancy	14 			14 			43 			43 		
Non-income taxes	9 			9 			23 			29 		
Amortization of intangible assets	4 			2 			14 			8 		
Other	54 			48 			155 			144 		
Total other operating expenses	$	478 			$	468 			$	1,423 			$	1,379 		
22

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
7.    Investment Securities
Our investment portfolio includes various debt and equity securities. Our debt securities, which are classified as available-for-sale or held-to-maturity, include government securities, corporate bonds, asset-backed securities, and mortgage-backed securities. The cost, fair value, and gross unrealized gains and losses on available-for-sale and held-to-maturity securities were as follows.

		September 30, 2020		December 31, 2019	
	
		Amortized cost		Gross unrealized		Fair value		Amortized cost		Gross unrealized		Fair value	
($ in millions)				gains		losses						gains		losses			
Available-for-sale securities																	
Debt securities																	
U.S. Treasury and federal agencies		$	784 			$	22 			$	— 			$	806 			$	2,059 			$	6 			$	(17)			$	2,048 		
U.S. States and political subdivisions		937 			40 			— 			977 			623 			19 			(1)			641 		
Foreign government		186 			10 			— 			196 			184 			3 			(1)			186 		
Agency mortgage-backed residential		19,887 			613 			(5)			20,495 			21,183 			257 			(36)			21,404 		
Mortgage-backed residential		2,982 			55 			(1)			3,036 			2,841 			20 			(11)			2,850 		
Agency mortgage-backed commercial		2,115 			131 			(2)			2,244 			1,344 			44 			(6)			1,382 		
Mortgage-backed commercial		— 			— 			— 			— 			41 			1 			— 			42 		
Asset-backed		384 			5 			— 			389 			365 			3 			— 			368 		
Corporate debt		1,763 			88 			(5)			1,846 			1,327 			37 			(1)			1,363 		
Total available-for-sale securities (a) (b) (c) (d) (e)		$	29,038 			$	964 			$	(13)			$	29,989 			$	29,967 			$	390 			$	(73)			$	30,284 		

Held-to-maturity securities																	
Debt securities																	
Agency mortgage-backed residential		$	1,249 			$	81 			$	— 			$	1,330 			$	1,547 			$	38 			$	(6)			$	1,579 		
Asset-backed retained notes		6 			— 			— 			6 			21 			— 			— 			21 		
Total held-to-maturity securities (e) (f) (g)		$	1,255 			$	81 			$	— 			$	1,336 			$	1,568 			$	38 			$	(6)			$	1,600 		

(a)Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $13 million and $12 million at September 30, 2020, and December 31, 2019, respectively.
(b)Certain available-for-sale securities are included in fair value hedging relationships. Refer to Note 18 for additional information.
(c)Available-for-sale securities with a fair value of $121 million and $1.9 billion at September 30, 2020, and December 31, 2019, respectively, were pledged to secure advances from the FHLB, repurchase agreements, other short-term borrowings, or for other purposes as required by contractual obligation or law. Under these agreements, we granted the counterparty the right to sell or pledge $121 million and $118 million of the underlying investment securities at September 30, 2020, and December 31, 2019, respectively.
(d)Totals do not include accrued interest receivable, which was $91 million and $98 million at September 30, 2020, and December 31, 2019, respectively. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.
(e)There was no allowance for credit losses recorded at September 30, 2020, as management determined that credit losses did not exist for our portfolio of available-for-sale and held-to-maturity securities.
(f)Held-to-maturity securities with a fair value of $915 million at December 31, 2019, were pledged to secure advances from the FHLB. We did not pledge any held-to-maturity securities at September 30, 2020.
(g)Totals do not include accrued interest receivable, which was $3 million at both September 30, 2020, and December 31, 2019. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.
23

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The maturity distribution of debt securities outstanding is summarized in the following tables based upon contractual maturities. Call or prepayment options may cause actual maturities to differ from contractual 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	
($ in millions)		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield	
September 30, 2020																					
Fair value of available-for-sale securities (a)																					
U.S. Treasury and federal agencies		$	806 			1.2 	%		$	11 			— 	%		$	712 			1.1 	%		$	83 			1.7 	%		$	— 			— 	%	
U.S. States and political subdivisions		977 			3.0 			33 			1.4 			103 			2.3 			201 			2.9 			640 			3.3 		
Foreign government		196 			1.8 			35 			0.5 			83 			2.3 			78 			1.9 			— 			— 		
Agency mortgage-backed residential		20,495 			3.2 			— 			— 			— 			— 			40 			2.0 			20,455 			3.2 		
Mortgage-backed residential		3,036 			3.2 			— 			— 			— 			— 			— 			— 			3,036 			3.2 		
Agency mortgage-backed commercial		2,244 			2.3 			— 			— 			3 			3.3 			1,234 			2.6 			1,007 			1.9 		
	
Asset-backed		389 			3.2 			— 			— 			336 			3.3 			21 			2.3 			32 			3.1 		
Corporate debt		1,846 			2.8 			157 			2.8 			633 			2.9 			1,008 			2.7 			48 			2.0 		
Total available-for-sale securities		$	29,989 			3.0 			$	236 			2.2 			$	1,870 			2.3 			$	2,665 			2.6 			$	25,218 			3.1 		
Amortized cost of available-for-sale securities		$	29,038 					$	234 					$	1,810 					$	2,488 					$	24,506 				
Amortized cost of held-to-maturity securities																					
Agency mortgage-backed residential		$	1,249 			3.2 	%		$	— 			— 	%		$	— 			— 	%		$	— 			— 	%		$	1,249 			3.2 	%	
Asset-backed retained notes		6 			2.5 			— 			— 			6 			2.5 			— 			— 			— 			— 		
Total held-to-maturity securities		$	1,255 			3.2 			$	— 			— 			$	6 			2.5 			$	— 			— 			$	1,249 			3.2 		
December 31, 2019																					
Fair value of available-for-sale securities (a)																					
U.S. Treasury and federal agencies		$	2,048 			1.5 	%		$	65 			2.1 	%		$	1,590 			1.4 	%		$	393 			1.7 	%		$	— 			— 	%	
U.S. States and political subdivisions		641 			3.1 			22 			2.7 			75 			2.3 			159 			2.8 			385 			3.4 		
Foreign government		186 			1.9 			35 			0.4 			65 			2.3 			86 			2.3 			— 			— 		
Agency mortgage-backed residential		21,404 			3.2 			— 			— 			— 			— 			47 			2.0 			21,357 			3.2 		
Mortgage-backed residential		2,850 			3.2 			— 			— 			— 			— 			— 			— 			2,850 			3.2 		
Agency mortgage-backed commercial		1,382 			2.9 			— 			— 			3 			3.2 			1,109 			3.0 			270 			2.4 		
Mortgage-backed commercial		42 			3.5 			— 			— 			— 			— 			— 			— 			42 			3.5 		
Asset-backed		368 			3.5 			— 			— 			317 			3.6 			5 			2.7 			46 			3.0 		
Corporate debt		1,363 			3.2 			125 			2.9 			580 			3.0 			649 			3.4 			9 			3.3 		
Total available-for-sale securities		$	30,284 			3.1 			$	247 			2.3 			$	2,630 			2.1 			$	2,448 			2.8 			$	24,959 			3.2 		
Amortized cost of available-for-sale securities		$	29,967 					$	246 					$	2,624 					$	2,378 					$	24,719 				
Amortized cost of held-to-maturity securities																					
Agency mortgage-backed residential		$	1,547 			3.2 	%		$	— 			— 	%		$	— 			— 	%		$	— 			— 	%		$	1,547 			3.2 	%	
Asset-backed retained notes		21 			2.2 			— 			— 			21 			2.2 			— 			— 			— 			— 		
Total held-to-maturity securities		$	1,568 			3.2 			$	— 			— 			$	21 			2.2 			$	— 			— 			$	1,547 			3.2 		
(a)Yield is calculated using the effective yield of each security at the end of the period, weighted based on the market value. The effective yield considers the contractual coupon and amortized cost, and excludes expected capital gains and losses.
The balances of cash equivalents were $32 million and $73 million at September 30, 2020, and December 31, 2019, respectively, and were composed primarily of money-market funds and short-term securities, including U.S. Treasury bills.
24

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table presents interest and dividends on investment securities.

	Three months ended September 30,		Nine months ended September 30,	
($ in millions)	2020		2019		2020		2019	
Taxable interest	$	154 			$	214 			$	536 			$	648 		
Taxable dividends	4 			4 			14 			10 		
Interest and dividends exempt from U.S. federal income tax	4 			3 			12 			12 		
Interest and dividends on investment securities	$	162 			$	221 			$	562 			$	670 		
The following table presents gross gains and losses realized upon the sales of available-for-sale securities, and net gains or losses on equity securities held during the period.

	Three months ended September 30,		Nine months ended September 30,	
($ in millions)	2020		2019		2020		2019	
Available-for-sale securities								
Gross realized gains	$	45 			$	30 			$	169 			$	64 		
Gross realized losses (a)	(2)			(3)			(2)			(4)		
	
Net realized gains on available-for-sale securities	43 			27 			167 			60 		
Net realized gain on equity securities	7 			12 			88 			51 		
Net unrealized gain (loss) on equity securities	14 			(12)			(82)			63 		
Other gain on investments, net	$	64 			$	27 			$	173 			$	174 		
(a)Certain available-for-sale securities were sold at a loss during the three months and nine months ended September 30, 2020, and September 30, 2019, as a result of identifiable market or credit events, or a loss was realized based on corporate actions outside of our control (such as a call by the issuer). Any such sales were made in accordance with our risk-management policies and practices.
The following table presents the credit quality of our held-to-maturity securities, based on the latest available information as of September 30, 2020. The credit ratings are sourced from nationally recognized statistical rating organizations, which include S&P, Moody’s, and Fitch, and represent a composite of the ratings or, where credit ratings cannot be sourced from the agencies, are presented based on the asset type. All our held-to-maturity securities were current in their payment of principal and interest as of September 30, 2020. We have not recorded any interest income reversals on our held-to-maturity securities during the nine months ended September 30, 2020.

		September 30, 2020	
($ in millions)		AAA		AA		Total (a)	
Debt securities							
Agency mortgage-backed residential		$	— 			$	1,249 			$	1,249 		
Asset-backed retained notes		6 			— 			6 		
Total held-to-maturity securities		$	6 			$	1,249 			$	1,255 		
(a)Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, which may include capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current operating, legislative, and regulatory environment. A credit rating is not a recommendation to buy, sell, or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency.
The following table summarizes held-to-maturity securities in an unrealized loss position at December 31, 2019, prior to the date of adoption of the amendments to the credit loss standard, and as defined by the previous accounting guidance in effect at that time.

		December 31, 2019	
	
		Less than 12 months		12 months or longer	
($ in millions)		Fair value		Unrealized loss		Fair value		Unrealized loss	
Held-to-maturity securities									
Debt securities									
Agency mortgage-backed residential		$	283 			$	(6)			$	— 			$	— 		
Asset-backed retained notes		— 			— 			3 			— 		
Total held-to-maturity debt securities		$	283 			$	(6)			$	3 			$	— 		
25

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The table below summarizes available-for-sale securities in an unrealized loss position, which we evaluated to determine if a credit loss exists requiring the recognition of an allowance for credit losses. For additional information on our methodology, refer to Note 1. As of September 30, 2020, we did not have the intent to sell the available-for-sale securities with an unrealized loss position and we do not believe it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. As a result of this evaluation, management determined that no credit reserves were required at September 30, 2020. We have not recorded any interest income reversals on our available-for-sale securities during the nine months ended September 30, 2020.

		September 30, 2020		December 31, 2019	
	
		Less than 12 months		12 months or longer		Less than 12 months		12 months or longer	
($ in millions)		Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss	
Available-for-sale securities																	
Debt securities																	
U.S. Treasury and federal agencies		$	— 			$	— 			$	— 			$	— 			$	1,267 			$	(11)			$	279 			$	(6)		
U.S. States and political subdivisions		63 			— 			— 			— 			72 			(1)			5 			— 		
Foreign government		4 			— 			— 			— 			40 			(1)			3 			— 		
Agency mortgage-backed residential		1,690 			(5)			7 			— 			4,606 			(23)			908 			(13)		
Mortgage-backed residential		258 			(1)			— 			— 			613 			(4)			203 			(7)		
Agency mortgage-backed commercial		188 			(2)			— 			— 			335 			(6)			— 			— 		
	
Asset-backed		9 			— 			— 			— 			8 			— 			11 			— 		
Corporate debt		307 			(4)			14 			(1)			71 			— 			41 			(1)		
Total available-for-sale securities		$	2,519 			$	(12)			$	21 			$	(1)			$	7,012 			$	(46)			$	1,450 			$	(27)		

	

We adopted ASU 2016-13 on January 1, 2020, on a modified retrospective basis, as further described in Note 1. Under the new guidance, once it is determined that a credit loss has occurred, an allowance for credit losses is established on our available-for-sale and held-to-maturity securities. Prior to adoption of this standard, when a decline in fair value of a debt security was determined to be other than temporary, an impairment charge for the credit component was recorded, and a new cost basis in the investment was established. During the nine months ended September 30, 2020, management determined that credit losses did not exist for securities in an unrealized loss position. This analysis considered a variety of factors including, but not limited to, performance indicators of the issuer, default rates, industry analyst reports, credit ratings, and other relevant information, which indicated that contractual cash flows are expected to occur.
26

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
8.    Finance Receivables and Loans, Net
The composition of finance receivables and loans reported at amortized cost basis was as follows.

($ in millions)		September 30, 2020		December 31, 2019	
Consumer automotive (a)		$	73,761 			$	72,390 		
Consumer mortgage					
Mortgage Finance (b)		15,168 			16,181 		
Mortgage — Legacy (c)		904 			1,141 		
Total consumer mortgage		16,072 			17,322 		
Consumer other (d)		327 			212 		
Total consumer		90,160 			89,924 		
Commercial					
Commercial and industrial					
Automotive		17,886 			28,332 		
Other		5,131 			5,014 		
Commercial real estate		4,851 			4,961 		
Total commercial		27,868 			38,307 		
Total finance receivables and loans (e) (f)		$	118,028 			$	128,231 		
(a)Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 18 for additional information.
(b)Includes loans originated as interest-only mortgage loans of $8 million and $11 million at September 30, 2020, and December 31, 2019, respectively. All of these loans have exited the interest-only period.
(c)Includes loans originated as interest-only mortgage loans of $156 million and $212 million at September 30, 2020, and December 31, 2019, respectively, of which 99% have exited the interest-only period.
(d)Includes $8 million and $11 million of finance receivables at September 30, 2020, and December 31, 2019, respectively, for which we have elected the fair value option.
(e)Totals include net unearned income, unamortized premiums and discounts, and deferred fees and costs of $2.1 billion at September 30, 2020.
(f)Totals do not include accrued interest receivable, which was $711 million and $488 million at September 30, 2020, and December 31, 2019, respectively. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.
The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans for the three and nine months ended September 30, 2020, and includes the cumulative effect of adopting ASU 2016-13.
																																	
Three months ended September 30, 2020 ($ in millions)		Consumer automotive		Consumer mortgage		Consumer other (a)		Commercial		Total	
Allowance at July 1, 2020		$	2,963 			$	42 			$	49 			$	300 			$	3,354 		
Charge-offs (b)		(269)			(4)			(2)			(4)			(279)		
Recoveries		152 			5 			— 			— 			157 		
Net charge-offs		(117)			1 			(2)			(4)			(122)		
Provision for credit losses		134 			(3)			20 			(4)			147 		
Other		2 			(1)			— 			(1)			— 		
Allowance at September 30, 2020		$	2,982 			$	39 			$	67 			$	291 			$	3,379 		
(a)Excludes $8 million of finance receivables at September 30, 2020, for which we have elected the fair value option.
(b)Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 for more information regarding our charge-off policies.
27

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

	
Nine months ended September 30, 2020 ($ in millions)		Consumer automotive		Consumer mortgage		Consumer other (a)		Commercial		Total	
Allowance at December 31, 2019		$	1,075 			$	46 			$	9 			$	133 			$	1,263 		
Cumulative effect of the adoption of Accounting Standards Update 2016-13		1,334 			(6)			16 			2 			1,346 		
Allowance at January 1, 2020		2,409 			40 			25 			135 			2,609 		
Charge-offs (b)		(887)			(9)			(11)			(47)			(954)		
Recoveries		371 			14 			1 			2 			388 		
Net charge-offs		(516)			5 			(10)			(45)			(566)		
Provision for credit losses		1,088 			(5)			51 			203 			1,337 		
	
Other		1 			(1)			1 			(2)			(1)		
Allowance at September 30, 2020		$	2,982 			$	39 			$	67 			$	291 			$	3,379 		

	

	

	
(a)Excludes $8 million and $11 million of finance receivables at September 30, 2020, and December 31, 2019, respectively, for which we have elected the fair value option.
(b)Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 for more information regarding our charge-off policies.
The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans for the three and nine months ended September 30, 2019, prior to the adoption of ASU 2016-13, as defined by the previous accounting guidance in effect at that time.

Three months ended September 30, 2019 ($ in millions)		Consumer automotive		Consumer mortgage		Commercial		Total	
Allowance at July 1, 2019		$	1,078 			$	49 			$	155 			$	1,282 		
Charge-offs (a)		(374)			(3)			(16)			(393)		
Recoveries		121 			5 			— 			126 		
Net charge-offs		(253)			2 			(16)			(267)		
Provision for loan losses		264 			(5)			4 			263 		
Other		1 			(2)			— 			(1)		
Allowance at September 30, 2019		$	1,090 			$	44 			$	143 			$	1,277 		
(a)Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.

Nine months ended September 30, 2019 ($ in millions)		Consumer automotive		Consumer mortgage		Commercial		Total	
	
Allowance at January 1, 2019		$	1,048 			$	53 			$	141 			$	1,242 		
Charge-offs (a)		(1,027)			(11)			(33)			(1,071)		
Recoveries		368 			17 			— 			385 		
Net charge-offs		(659)			6 			(33)			(686)		
Provision for credit losses		701 			(13)			34 			722 		
Other		— 			(2)			1 			(1)		
Allowance at September 30, 2019		$	1,090 			$	44 			$	143 			$	1,277 		
Allowance for loan losses at September 30, 2019									
Individually evaluated for impairment		$	37 			$	18 			$	32 			$	87 		
Collectively evaluated for impairment		1,053 			26 			111 			1,190 		
	
Finance receivables and loans at gross carrying value									
Ending balance		$	73,071 			$	17,010 			$	38,528 			$	128,609 		
Individually evaluated for impairment		514 			213 			179 			906 		
Collectively evaluated for impairment		72,557 			16,797 			38,349 			127,703 		
	
(a)Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.
28

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
During the second half of March 2020, the economy experienced a significant deterioration driven by the COVID-19 pandemic, which impacted our allowance for loan losses. During the three months ended March 31, 2020, we recorded an additional $602 million of provision expense for credit losses associated with the deterioration in the macroeconomic outlook from COVID-19. During the second quarter of 2020, we incurred total provision expense of $287 million, which included $128 million attributable to the macroeconomic environment and other factors aside from changes in portfolio size and incremental net charge-offs. During the third quarter of 2020, we incurred total provision expense of $147 million. Our provision expense for the quarter was composed of a replenishment of reserves due to incremental net charge-offs of $122 million, an increase in reserves of $59 million driven by an increase in portfolio size, and a reduction in reserves of $34 million attributable to the improving macroeconomic environment, predominately the unemployment rate, and other factors aside from changes in portfolio size and incremental net charge-offs.
The following table presents information about significant sales of finance receivables and loans and transfers of finance receivables and loans from held-for-investment to held-for-sale based on net carrying value.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Consumer automotive		$	— 			$	— 			$	— 			$	20 		
Consumer mortgage		128 			940 			128 			940 		

Total sales and transfers (a)		$	128 			$	940 			$	128 			$	960 		
(a)During the nine months ended September 30, 2019, we also sold $131 million of loans held-for-sale that were initially classified as finance receivables and loans held-for-investment and were transferred to held-for-sale during 2018, and transferred $79 million of finance receivables from held-for-sale to held-for-investment, both relating to equipment finance receivables from our commercial automotive business.
The following table presents information about significant purchases of finance receivables and loans based on unpaid principal balance at the time of purchase.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Consumer automotive		$	925 			$	92 			$	1,920 			$	409 		
Consumer mortgage		659 			811 			3,013 			2,724 		
	
Commercial		3 			13 			4 			16 		
Total purchases of finance receivables and loans		$	1,587 			$	916 			$	4,937 			$	3,149 		
29

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Nonaccrual and Impaired Loans
Following the adoption of CECL as of January 1, 2020, the definitions of impairment and related impaired loan disclosures were removed. Under CECL, we present the amortized cost of our finance receivables and loans on nonaccrual status including such loans with no allowance. The following table presents the amortized cost of our finance receivables and loans on nonaccrual status as of the beginning or end of the three months and nine months ended September 30, 2020. All consumer or commercial finance receivables and loans that were 90 days or more past due were on nonaccrual status as of September 30, 2020, and December 31, 2019.
																											
						September 30, 2020	
($ in millions)		Nonaccrual status at Jan. 1, 2020		Nonaccrual status at July 1, 2020		Nonaccrual status		Nonaccrual with no allowance (a)	
Consumer automotive		$	762 			$	1,250 			$	1,263 			$	627 		
Consumer mortgage									
Mortgage Finance		17 			27 			43 			8 		
Mortgage — Legacy		40 			36 			36 			28 		
Total consumer mortgage		57 			63 			79 			36 		
Consumer other		2 			1 			1 			— 		
Total consumer		821 			1,314 			1,343 			663 		
Commercial									
Commercial and industrial									
Automotive		73 			80 			30 			10 		
Other		138 			132 			114 			42 		
Commercial real estate		4 			6 			6 			5 		
Total commercial		215 			218 			150 			57 		
Total consumer and commercial finance receivables and loans		$	1,036 			$	1,532 			$	1,493 			$	720 		
(a)Represents a component of nonaccrual status at end of period.
During the three months and nine months ended September 30, 2020, we recorded interest income from cash payments of $2 million and $8 million, respectively, associated with finance receivables and loans in nonaccrual status.
The following table presents information about our impaired finance receivables and loans at December 31, 2019, prior to the date of adoption of the amendments to the credit loss standard and as defined by the previous accounting guidance in effect at that time.
																																	
December 31, 2019 ($ in millions)		Unpaid principal balance (a)		Gross carrying value		Impaired with no allowance		Impaired with an allowance		Allowance for impaired loans	
Consumer automotive		$	553 			$	538 			$	113 			$	425 			$	38 		
Consumer mortgage											
Mortgage Finance		14 			14 			6 			8 			— 		
Mortgage — Legacy		199 			194 			64 			130 			18 		
Total consumer mortgage		213 			208 			70 			138 			18 		
Total consumer		766 			746 			183 			563 			56 		
Commercial											
Commercial and industrial											
Automotive		73 			73 			1 			72 			12 		
Other		170 			138 			73 			65 			21 		
Commercial real estate		4 			4 			4 			— 			— 		
Total commercial		247 			215 			78 			137 			33 		
Total consumer and commercial finance receivables and loans		$	1,013 			$	961 			$	261 			$	700 			$	89 		
(a)Adjusted for charge-offs.
30

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table presents average balance and interest income for our impaired finance receivables and loans for the three months and nine months ended September 30, 2019, prior to the date of adoption of the amendments to the credit loss standard and as defined by the previous accounting guidance in effect at that time.

		Three months ended September 30, 2019		Nine months ended September 30, 2019	
($ in millions)		Average balance		Interest income		Average balance		Interest income	
Consumer automotive		$	505 			$	9 			$	502 			$	26 		
Consumer mortgage									
Mortgage Finance		14 			— 			15 			— 		
Mortgage — Legacy		203 			2 			208 			7 		
Total consumer mortgage		217 			2 			223 			7 		
Total consumer		722 			11 			725 			33 		
Commercial									
Commercial and industrial									
Automotive		76 			— 			124 			1 		
Other		115 			— 			118 			— 		
Commercial real estate		5 			— 			5 			— 		
Total commercial		196 			— 			247 			1 		
Total consumer and commercial finance receivables and loans		$	918 			$	11 			$	972 			$	34 		
Credit Quality Indicators
We evaluate the credit quality of our consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is generally based upon borrower payment activity, relative to the contractual terms of the loan. In accordance with regulatory guidance, if borrowers are less than 30 days past due on their loans and enter into loan modifications offered as a result of COVID-19, their loans generally continue to be considered performing loans and continue to accrue interest during the period of the loan modification. For borrowers who are 30 days or more past due when entering into loan modifications offered as a result of COVID-19, we evaluate the loan modifications under our existing troubled debt restructuring framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan is accounted for as a TDR and generally will not accrue interest. For all borrowers who enroll in loan modification programs offered as a result of COVID-19, the delinquency status of the borrowers is frozen as of the date immediately preceding the commencement of the program, resulting in a static delinquency metric during the deferral period. Upon exiting the deferral program, the measurement of loan delinquency resumes where it had left off upon entry into the program.
In response to the impacts caused by the COVID-19 pandemic, we have taken significant actions to support our customers with industry-leading relief programs, while prudently managing our credit risk exposure.
In our consumer automotive loan portfolio, existing customers had the option to elect to defer their payments for up to 120 days without late fees being incurred, but with finance charges continuing to accrue. This program was made available to all consumer automotive loan customers beginning March 18, 2020. The length of the deferral offering was reduced incrementally, until on June 21, 2020, we eliminated the offering and migrated back to our standard extension process. Approximately 1.2 million consumer automotive loan customers enrolled in the program, of which 99% had reached their scheduled expiration as of September 30, 2020. For these deferrals that had exited the program and remain outstanding, the following provides certain credit quality indicators as of September 30, 2020.
•92% were current;
•8% were 30+ days past due.
In our mortgage-lending business, existing customers experiencing financial hardship due to an interruption of income related to the COVID-19 pandemic were afforded the opportunity to defer their loan payments for up to 120 days, with an option for an additional 60 days, without late fees being incurred but with interest continuing to accrue. This program was made available to mortgage-lending customers from March 18, 2020, through July 31, 2020. Approximately 2,350 of our mortgage-lending customers enrolled in the program, which represented 7% of our total held-for-investment portfolio as of September 30, 2020. Of these customers, 40% had cancelled their deferrals ahead of schedule or paid their balances in full, 30% remain in active forbearance, and 30% had reached their scheduled expiration and had exited the pandemic-relief program as of September 30, 2020. For accounts that had reached the scheduled expiration of their forbearance program and remain outstanding, the following provides certain credit quality indicators as of September 30, 2020.
•87% of the loans were current, in a repayment plan, or subject to a modification;
•13% were past due or undergoing other loss mitigation efforts.
31

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
In our personal-lending business, existing customers experiencing financial hardship due to the COVID-19 pandemic had the opportunity to elect to defer their loan payments for up to 120 days without late fees being incurred or finance charges continuing to accrue. In addition to this program, we temporarily suspended late fees for all customers with current accounts. The loan-deferral program was made available to personal-lending customers from March 23, 2020, through June 30, 2020. Approximately 6,300 of our personal-lending customers were enrolled in the program, and 84% of these enrolled customers were current on their loans at the time of enrollment. As of September 30, 2020, 84% of the enrolled customers had exited the program, and the remaining accounts in active forbearance represent less than 1% of the total portfolio.
The following table presents the amortized cost basis of our consumer finance receivables and loans by credit quality indicator based on delinquency status at September 30, 2020, and origination year.

	Origination year		Revolving loans converted to term		
September 30, 2020 ($ in millions)	2020	2019	2018	2017	2016	2015 and prior	Revolving loans		Total	
Consumer automotive										
Current	$	21,216 		$	21,433 		$	13,802 		$	8,233 		$	4,433 		$	2,327 		$	— 		$	— 		$	71,444 		
30–59 days past due	156 		435 		366 		261 		171 		106 		— 		— 		1,495 		
60–89 days past due	34 		131 		111 		77 		47 		30 		— 		— 		430 		
90 or more days past due	15 		102 		105 		78 		54 		38 		— 		— 		392 		
Total consumer automotive	21,421 		22,101 		14,384 		8,649 		4,705 		2,501 		— 		— 		73,761 		
Consumer mortgage										
Mortgage Finance										
Current	2,811 		2,758 		2,014 		2,609 		1,141 		3,629 		— 		3 		14,965 		
30–59 days past due	56 		29 		18 		14 		7 		33 		— 		— 		157 		
60–89 days past due	5 		1 		5 		4 		— 		3 		— 		— 		18 		
90 or more days past due	— 		1 		5 		6 		3 		13 		— 		— 		28 		
Total Mortgage Finance	2,872 		2,789 		2,042 		2,633 		1,151 		3,678 		— 		3 		15,168 		
Mortgage — Legacy										
Current	— 		— 		— 		— 		— 		498 		265 		99 		862 		
30–59 days past due	— 		— 		— 		— 		— 		9 		2 		— 		11 		
60–89 days past due	— 		— 		— 		— 		— 		5 		— 		— 		5 		
90 or more days past due	— 		— 		— 		— 		— 		19 		5 		2 		26 		
Total Mortgage — Legacy	— 		— 		— 		— 		— 		531 		272 		101 		904 		
Total consumer mortgage	2,872 		2,789 		2,042 		2,633 		1,151 		4,209 		272 		104 		16,072 		
Consumer other										
Current	216 		73 		17 		5 		1 		— 		— 		— 		312 		
30–59 days past due	2 		2 		— 		— 		— 		— 		— 		— 		4 		
60–89 days past due	1 		1 		— 		— 		— 		— 		— 		— 		2 		
90 or more days past due	1 		— 		— 		— 		— 		— 		— 		— 		1 		
Total consumer other (a)	220 		76 		17 		5 		1 		— 		— 		— 		319 		
Total consumer	$	24,513 		$	24,966 		$	16,443 		$	11,287 		$	5,857 		$	6,710 		$	272 		$	104 		$	90,152 		
(a)Excludes $8 million of finance receivables at September 30, 2020, for which we have elected the fair value option.
32

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table presents an analysis of our past-due finance receivables and loans recorded at amortized cost basis at December 31, 2019.

	
($ in millions)		30–59 days past due		60–89 days past due		90 days or more past due		Total past due		Current		Total finance receivables and loans	

	

	

	

	

	

December 31, 2019													
Consumer automotive		$	2,185 			$	590 			$	367 			$	3,142 			$	69,248 			$	72,390 		
Consumer mortgage													
Mortgage Finance		56 			11 			9 			76 			16,105 			16,181 		
Mortgage — Legacy		25 			8 			28 			61 			1,080 			1,141 		
Total consumer mortgage		81 			19 			37 			137 			17,185 			17,322 		
Consumer other (a)		3 			2 			2 			7 			194 			201 		
Total consumer		$	2,269 			$	611 			$	406 			$	3,286 			$	86,627 			$	89,913 		

	

	
	
(a)Excludes $11 million of finance receivables at December 31, 2019, for which we have elected the fair value option.
We evaluate the credit quality of our commercial loan portfolio using regulatory risk ratings, which are based on relevant information about the borrower’s financial condition, including current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. We use the following definitions for risk rankings.
Special mention    Loans that have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.
Substandard    Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These loans have a well-defined weakness or weakness that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful    Loans that have all the weaknesses inherent in those classified as substandard, with the additional characteristic that the weaknesses make collection or liquidation in full, based on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
33

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The regulatory risk classification utilized is influenced by internal credit risk ratings, which are based on a variety of factors. A borrower’s internal credit risk rating is updated at least annually, and more frequently when a borrower’s credit profile changes, including when we become aware of potential credit deterioration. The following table presents the amortized cost basis of our commercial finance receivables and loans by credit quality indicator based on risk rating at September 30, 2020, and origination year.

	Origination year		Revolving loans converted to term		
September 30, 2020 ($ in millions)	2020	2019	2018	2017	2016	2015 and prior	Revolving loans		Total	
Commercial and industrial										
Automotive										
Pass	$	865 		$	250 		$	70 		$	98 		$	66 		$	43 		$	14,083 		$	— 		$	15,475 		
Special mention	63 		27 		65 		67 		32 		19 		2,070 		— 		2,343 		
Substandard	2 		2 		— 		— 		— 		— 		57 		— 		61 		
Doubtful	— 		— 		— 		2 		— 		— 		5 		— 		7 		
Total automotive	930 		279 		135 		167 		98 		62 		16,215 		— 		17,886 		
Other										
Pass	412 		658 		288 		276 		116 		52 		1,721 		79 		3,602 		
Special mention	27 		170 		271 		205 		93 		129 		322 		48 		1,265 		
Substandard	33 		— 		— 		70 		— 		125 		25 		11 		264 		
Doubtful	— 		— 		— 		— 		— 		— 		— 		— 		— 		
Total other	472 		828 		559 		551 		209 		306 		2,068 		138 		5,131 		
Commercial real estate										
Pass	789 		937 		798 		582 		656 		569 		— 		3 		4,334 		
Special mention	32 		143 		121 		69 		84 		55 		— 		— 		504 		
Substandard	— 		— 		— 		3 		— 		7 		— 		— 		10 		
Doubtful	— 		— 		— 		— 		2 		1 		— 		— 		3 		
Total commercial real estate	821 		1,080 		919 		654 		742 		632 		— 		3 		4,851 		
Total commercial	$	2,223 		$	2,187 		$	1,613 		$	1,372 		$	1,049 		$	1,000 		$	18,283 		$	141 		$	27,868 		
The following table presents historical credit quality indicators for our commercial finance receivables and loans at December 31, 2019, prior to the date of adoption of the amendments to the credit loss standard and as defined by the previous accounting guidance in effect at that time.

		December 31, 2019	
($ in millions)		Pass		Criticized (a)		Total	
Commercial and industrial							
Automotive		$	25,235 			$	3,097 			$	28,332 		
Other		4,225 			789 			5,014 		
Commercial real estate		4,620 			341 			4,961 		
Total commercial		$	34,080 			$	4,227 			$	38,307 		
(a)Includes loans classified as special mention, substandard, or doubtful. These classifications are based on regulatory definitions and generally represent loans within our portfolio that have a higher default risk or have already defaulted.
In response to the impacts caused by the COVID-19 pandemic, we have taken significant actions to support our commercial automotive customers while prudently managing our credit risk exposure. For our commercial dealer customers that were current on all payment obligations, we offered a waiver of curtailments on wholesale floorplan loans, an increase in floorplan advance rates, a deferral of interest and insurance charges on wholesale borrowings, and a deferral of term loan payments from April through July 2020. Approximately 2,290 or 73% of eligible dealers requested at least one form of this assistance for at least one month as part of this program. Approximately 32% of eligible wholesale dealers deferred wholesale interest and insurance payments during the third quarter of 2020, which represented a decline from the first and second quarters. Dealers that elected to defer wholesale interest and insurance payments have the option to repay such balances over a 4- or 12-month period without additional interest charges or fees. As of September 30, 2020, approximately 29% of these enrolled dealers had opted for 4-month repayment terms, 69% had opted for 12-month repayment terms, and 2% had paid all deferred charges in full. Of the dealers that had not yet paid in full, 100% were current on their repayment terms. We have collected over one-third of all deferred wholesale
34

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
interest and insurance charges through September 30, 2020, and in the aggregate, remittances from dealers exceed their scheduled repayment obligations.
The following table presents an analysis of our past-due commercial finance receivables and loans recorded at amortized cost basis.

	
($ in millions)		30–59 days past due		60–89 days past due		90 days or more past due		Total past due		Current		Total finance receivables and loans	
	
September 30, 2020													

	

	
	
Commercial													
Commercial and industrial													
Automotive		$	— 			$	— 			$	7 			$	7 			$	17,879 			$	17,886 		
Other		— 			— 			— 			— 			5,131 			5,131 		
Commercial real estate		— 			— 			3 			3 			4,848 			4,851 		
Total commercial		$	— 			$	— 			$	10 			$	10 			$	27,858 			$	27,868 		

December 31, 2019													

	

	
	
Commercial													
Commercial and industrial													
Automotive		$	34 			$	— 			$	28 			$	62 			$	28,270 			$	28,332 		
Other		— 			— 			17 			17 			4,997 			5,014 		
Commercial real estate		— 			— 			4 			4 			4,957 			4,961 		
Total commercial		$	34 			$	— 			$	49 			$	83 			$	38,224 			$	38,307 		
	
Troubled Debt Restructurings
TDRs are loan modifications where concessions were granted to borrowers experiencing financial difficulties. For consumer automotive loans, we may offer several types of assistance to aid our customers, including payment extensions and rewrites of the loan terms. Additionally, for mortgage loans, as part of certain programs, we offer mortgage loan modifications to qualified borrowers. These programs are in place to provide support to our mortgage customers in financial distress, including principal forgiveness, maturity extensions, delinquent interest capitalization, and changes to contractual interest rates. Total TDRs recorded at amortized cost were $1.7 billion and $867 million at September 30, 2020, and December 31, 2019, respectively.
In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as nonaccrual during the term of the modification. For borrowers who are 30 days or more past due when enrolling in a loan modification program related to the COVID-19 pandemic, we evaluate the loan modifications under our existing TDR framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan was accounted for as a TDR and will generally not accrue interest.
Total commitments to lend additional funds to borrowers whose terms had been modified in a TDR were $18 million and $17 million at September 30, 2020, and December 31, 2019, respectively. Refer to Note 1 for additional information.
35

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following tables present information related to finance receivables and loans recorded at amortized cost modified in connection with a TDR during the period.

		2020		2019	
Three months ended September 30, ($ in millions)		Number of loans		Pre-modification amortized cost basis		Post-modification amortized cost basis		Number of loans		Pre-modification amortized cost basis		Post-modification amortized cost basis	
	
Consumer automotive		30,794 			$	540 			$	525 			7,197 			$	124 			$	107 		
Consumer mortgage													
Mortgage Finance		2 			— 			— 			1 			— 			— 		
Mortgage — Legacy (a)		12 			1 			1 			8 			1 			1 		
Total consumer mortgage		14 			1 			1 			9 			1 			1 		
	
Total consumer		30,808 			541 			526 			7,206 			125 			108 		

	

	

	

	

	
	
Commercial													
Commercial and industrial													
Automotive		2 			7 			7 			1 			5 			5 		
Other		2 			58 			54 			1 			25 			25 		
	
Total commercial		4 			65 			61 			2 			30 			30 		
Total consumer and commercial finance receivables and loans		30,812 			$	606 			$	587 			7,208 			$	155 			$	138 		
(a)Includes 3 loans modified as a result of entering into a COVID-19 deferral program with both a pre-modification and post-modification amount of $1 million at September 30, 2020.

		2020		2019	
Nine months ended September 30, ($ in millions)		Number of loans		Pre-modification amortized cost basis		Post-modification amortized cost basis		Number of loans		Pre-modification amortized cost basis		Post-modification amortized cost basis	
	
Consumer automotive (a)		74,887 			$	1,203 			$	1,140 			20,222 			$	349 			$	303 		
Consumer mortgage													
Mortgage Finance (b)		31 			15 			15 			4 			— 			— 		
Mortgage — Legacy (c)		67 			8 			8 			46 			7 			7 		
Total consumer mortgage		98 			23 			23 			50 			7 			7 		
	
Total consumer		74,985 			1,226 			1,163 			20,272 			356 			310 		

	

	

	

	

	
	
Commercial													
Commercial and industrial													
Automotive		5 			45 			40 			7 			46 			46 		
Other		3 			81 			61 			2 			47 			31 		
	
Total commercial		8 			126 			101 			9 			93 			77 		
Total consumer and commercial finance receivables and loans		74,993 			$	1,352 			$	1,264 			20,281 			$	449 			$	387 		
(a)Includes 26,132 loans modified as a result of entering into a COVID-19 deferral program with both a pre-modification and post-modification amount of $369 million at September 30, 2020.
(b)Includes 27 loans modified as a result of entering into a COVID-19 deferral program with both a pre-modification and post-modification amount of $14 million at September 30, 2020.
(c)Includes 38 loans modified as a result of entering into a COVID-19 deferral program with both a pre-modification and post-modification amount of $5 million at September 30, 2020.
36

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following tables present information about finance receivables and loans recorded at amortized cost that have redefaulted during the reporting period and were within 12 months or less of being modified as a TDR. Redefault is when finance receivables and loans meet the requirements for evaluation under our charge-off policy (refer to Note 1 for additional information) except for commercial finance receivables and loans, where redefault is defined as 90 days past due.

		2020		2019	
Three months ended September 30, ($ in millions)		Number of loans		Amortized cost		Charge-off amount		Number of loans		Amortized cost		Charge-off amount	
	
Consumer automotive		5,195 			$	52 			$	37 			1,713 			$	18 			$	13 		

	
	
Total consumer finance receivables and loans		5,195 			$	52 			$	37 			1,713 			$	18 			$	13 		

	

	

	

	

		2020		2019	
Nine months ended September 30, ($ in millions)		Number of loans		Amortized cost		Charge-off amount		Number of loans		Amortized cost		Charge-off amount	
	
Consumer automotive		7,478 			$	76 			$	54 			5,674 			$	64 			$	41 		

	
	
Total consumer finance receivables and loans		7,478 			$	76 			$	54 			5,674 			$	64 			$	41 		

	

	

	

	

9.    Leasing
Ally as the Lessee
We have operating leases for our corporate facilities, which have remaining lease terms of 4 months to 8 years. Most of the property leases have fixed payment terms with annual fixed-escalation clauses and include options to extend the leases for periods that range from 3 months to 15 years. Some of those lease agreements also include options to terminate the leases in periods that range from 2 to 6 years after the commencement of the leases. We have not included any of these term extensions or termination provisions in our estimates of the lease term, as we do not consider it reasonably certain that the options will be exercised.
We also have operating leases for a fleet of vehicles that is used by our sales force for business purposes, with noncancelable lease terms of 367 days. Thereafter, the leases are month-to-month, up to a maximum of 48 months from inception.
The following table details our total investment in operating leases.

($ in millions)		September 30, 2020		December 31, 2019	
Assets					
Operating lease right-of-use assets (a)		$	140 			$	168 		

Liabilities					
Operating lease liabilities (b)		$	166 			$	196 		

(a)Included in other assets on our Condensed Consolidated Balance Sheet.
(b)Included in accrued expenses and other liabilities on our Condensed Consolidated Balance Sheet.
During both the three months and nine months ended September 30, 2020, and 2019, we paid $12 million and $37 million in cash for amounts included in the measurement of lease liabilities at September 30, 2020, and September 30, 2019, respectively. These amounts are included in net cash provided by operating activities in the Condensed Consolidated Statement of Cash Flows. During the nine months ended September 30, 2020, and September 30, 2019, we obtained $58 million and $41 million of ROU assets in exchange for new lease liabilities, respectively. As of September 30, 2020, the weighted-average remaining lease term of our operating lease portfolio was 6 years, and the weighted-average discount rate was 2.46%, compared to 7 years and 2.93% as of September 30, 2019.
37

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table presents future minimum rental payments we are required to make under operating leases that have commenced as of September 30, 2020, and that have noncancelable lease terms expiring after September 30, 2020.

($ in millions)			
2020		$	12 		
2021		45 		
2022		33 		
2023		23 		
2024		16 		
2025 and thereafter		50 		
Total undiscounted cash flows		179 		
Difference between undiscounted cash flows and discounted cash flows		(13)		
Total lease liability		$	166 		
In addition to the above, we entered into a forward-starting lease agreement in September 2017, for a new corporate facility in Charlotte, North Carolina, where we plan to consolidate several existing facilities into that location. The lessor and their agents are currently constructing the facilities at this location, with the lease scheduled to commence in April 2021 after construction is completed. The lease agreement will have a total of $290 million in undiscounted future lease payments over the 15-year term of the lease. We also have an option to purchase this facility after construction is completed, subject to certain terms and conditions.
The following table details the components of total net operating lease expense.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Operating lease expense		$	11 			$	11 			$	35 			$	34 		
	
Variable lease expense		2 			2 			6 			6 		
	
Total lease expense, net (a)		$	13 			$	13 			$	41 			$	40 		
(a)Included in other operating expenses in our Condensed Consolidated Statement of Comprehensive Income.
Ally as the Lessor
Investment in Operating Leases
We purchase consumer operating lease contracts and the associated vehicles from dealerships after those contracts are executed by the dealers and the consumers. The amount we pay a dealer for an operating lease contract is based on the negotiated price for the vehicle less vehicle trade-in, down payment from the consumer, and available automotive manufacturer incentives. Under the operating lease, the consumer is obligated to make payments in amounts equal to the amount by which the negotiated purchase price of the vehicle (less any trade-in value, down payment, or available manufacturer incentives) exceeds the contract residual value (including residual support) of the vehicle at lease termination, plus operating lease rental charges. The customer can terminate the lease at any point after commencement, subject to additional charges and fees. Both the consumer and the dealership have the option to purchase the vehicle at the end of the lease term, which can range from 24 to 60 months, at the residual value of the vehicle, however it is not reasonably certain this option will be exercised and accordingly our consumer leases are classified as operating leases. In addition to the charges described above, the consumer is generally responsible for certain charges related to excess mileage or excessive wear and tear on the vehicle. These charges are deemed variable lease payments and, as these payments are not based on a rate or index, they are recognized as net depreciation expense on operating lease assets in our Condensed Consolidated Statement of Comprehensive Income as incurred. Additionally, lease modifications made related to the COVID-19 pandemic are not considered a new lease contract, and the remaining lease payments will be recorded on a straight-line basis over the modified lease term.
To support our customers and help mitigate lease residual risk, we deferred lease payments without fees for up to 120 days for any consumer requesting assistance related to the COVID-19 pandemic. Approximately 55,000 of our lease customers enrolled in this lease modification program, and approximately 60% of these customers were granted a 120-day deferral at the time of enrollment. As of September 30, 2020, substantially all of these customers had exited the program and of these approximately 2,900 had paid in full and terminated their leases. Of the customers that had exited the program with outstanding lease obligations, 94% were current on their lease obligations as of September 30, 2020. We also provided a program for and, in some cases, incentivized customers nearing their scheduled lease-end dates to extend their leases for up to an additional 180 days. Eligible customers who opted into this program during the early part of the second quarter were not charged for the first month of the extension, and the following months of the extended lease were offered under the terms of the existing lease contract. Approximately 8,500 customers had opted into an extension requiring additional payments, and as of September 30, 2020, approximately 4,500 remained enrolled in the program.
38

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
When we acquire a consumer operating lease, we assume ownership of the vehicle from the dealer. We require that property damage, bodily injury, collision, and comprehensive insurance be obtained by the lessee on all consumer operating leases. Neither the consumer nor the dealer is responsible for the value of the vehicle at the time of lease termination. When vehicles are not purchased by customers or the receiving dealer at scheduled lease termination, the vehicle is returned to us for remarketing. We generally bear the risk of loss to the extent the value of a leased vehicle upon remarketing is below the expected residual value. At termination, our actual sales proceeds from remarketing the vehicle may be higher or lower than the estimated residual value resulting in a gain or loss on remarketing, which is included in net depreciation expense on operating lease assets in our Condensed Consolidated Statement of Comprehensive Income. Excessive mileage or excessive wear and tear on the vehicle during the lease may impact the sales proceeds received upon remarketing. As of September 30, 2020, and December 31, 2019, consumer operating leases with a carrying value, net of accumulated depreciation, of $384 million and $352 million, respectively, were covered by a residual value guarantee of 15% of the manufacturer’s suggested retail price.
The following table details our investment in operating leases.

	
($ in millions)		September 30, 2020		December 31, 2019	
Vehicles		$	11,015 			$	10,426 		
Accumulated depreciation		(1,561)			(1,562)		
Investment in operating leases, net		$	9,454 			$	8,864 		
The following table presents future minimum rental payments we have the right to receive under operating leases with noncancelable lease terms expiring after September 30, 2020.

($ in millions)			
2020		$	395 		
2021		1,277 		
2022		807 		
2023		365 		
2024		58 		
2025 and thereafter		4 		
Total lease payments from operating leases		$	2,906 		
We recognized operating lease revenue of $360 million and $1.1 billion and $368 million and $1.1 billion for the three months and nine months ended September 30, 2020, and 2019, respectively. Depreciation expense on operating lease assets includes remarketing gains recognized on the sale of operating lease assets. The following table summarizes the components of depreciation expense on operating lease assets.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
	
Depreciation expense on operating lease assets (excluding remarketing gains) (a)		$	246 			$	262 			$	737 			$	785 		
Remarketing gains, net		(71)			(28)			(62)			(66)		
Net depreciation expense on operating lease assets		$	175 			$	234 			$	675 			$	719 		
(a)Includes variable lease payments related to excess mileage and excessive wear and tear on vehicles of $6 million and $18 million during the three months and nine months ended September 30, 2020, respectively, and $5 million and $14 million during the three months and nine months ended September 30, 2019.
39

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Finance Leases
Our total gross investment in finance leases, which is included in finance receivables and loans, net, on our Condensed Consolidated Balance Sheet was $442 million and $472 million as of September 30, 2020, and December 31, 2019, respectively. This includes lease payment receivables of $429 million and $459 million at September 30, 2020, and December 31, 2019, respectively, and unguaranteed residual assets of $13 million at both September 30, 2020, and December 31, 2019. Interest income on finance lease receivables was $6 million and $17 million for the three and nine months ended September 30, 2020, respectively, and $7 million and $19 million for the three and nine months ended September 30, 2019, and is included in interest and fees on finance receivables and loans in our Condensed Consolidated Statement of Comprehensive Income.
The following table presents future minimum rental payments we have the right to receive under finance leases with noncancelable lease terms expiring after September 30, 2020.

($ in millions)			
2020		$	39 		
2021		150 		
2022		114 		
2023		84 		
2024		51 		
2025 and thereafter		39 		
Total undiscounted cash flows		477 		
Difference between undiscounted cash flows and discounted cash flows		(48)		
Present value of lease payments recorded as lease receivable		$	429 		

10.    Securitizations and Variable Interest Entities
We securitize, transfer, and service consumer and commercial automotive loans, and operating leases. We often securitize these loans and notes secured by operating leases (collectively referred to as financial assets) using SPEs. An SPE is a legal entity that is designed to fulfill a specified limited need of the sponsor. Our principal use of SPEs is to obtain liquidity by securitizing certain of our financial assets. SPEs are often VIEs and may or may not be included on our Condensed Consolidated Balance Sheet.
VIEs are legal entities that either have an insufficient amount of equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the ability to control the entity’s activities that most significantly impact economic performance through voting or similar rights, or do not have the obligation to absorb the expected losses or the right to receive expected residual returns of the entity.
The VIEs included on the Condensed Consolidated Balance Sheet represent SPEs where we are deemed to be the primary beneficiary, primarily due to our servicing activities and our beneficial interests in the VIE that could be potentially significant.
The nature, purpose, and activities of nonconsolidated SPEs are similar to those of our consolidated SPEs with the primary difference being the nature and extent of our continuing involvement. For nonconsolidated SPEs, the transferred financial assets are removed from our balance sheet provided the conditions for sale accounting are met. The financial assets obtained from the securitization are primarily reported as cash or retained interests (if applicable). Liabilities incurred as part of these securitizations, are recorded at fair value at the time of sale and are reported as accrued expenses and other liabilities on our Condensed 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. With respect to our ongoing right to service the assets we sell, the servicing fee we receive represents adequate compensation, and consequently, we do not recognize a servicing asset or liability.
There were no sales of financial assets into nonconsolidated VIEs for either the three months and nine months ended September 30, 2020, or September 30, 2019.
We provide long-term guarantee contracts to investors in certain nonconsolidated affordable housing entities and have extended a line of credit to provide liquidity. Since we do not have control over the entities or the power to make decisions, we do not consolidate the entities and our involvement is limited to the guarantee and the line of credit.
We are involved with various other nonconsolidated equity investments, including affordable housing entities and venture capital funds and loan funds. We do not consolidate these entities and our involvement is limited to our outstanding investment, additional capital committed to these funds plus any previously recognized low-income housing tax credits that are subject to recapture.
Refer to Note 1 and Note 11 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for further description of our securitization activities and our involvement with VIEs.
40

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table presents our involvement in consolidated and nonconsolidated VIEs in which we hold variable interests. For additional detail related to the assets and liabilities of consolidated variable interest entities refer to the Condensed Consolidated Balance Sheet.

($ in millions)		Carrying value of total assets	Carrying value of total liabilities	Assets sold to nonconsolidated VIEs (a)		Maximum exposure to loss in nonconsolidated VIEs	
September 30, 2020										
On-balance sheet variable interest entities										
Consumer automotive		$	18,926 		(b)	$	3,818 		(c)					
Commercial automotive		5,967 			2,151 							
Off-balance-sheet variable interest entities										
Consumer automotive (d)		7 		(e)	— 			$	121 			$	128 		(f)	
Commercial other		1,240 		(g)	459 		(h)	— 			1,618 		(i)	
Total		$	26,140 			$	6,428 			$	121 			$	1,746 			
December 31, 2019										
On-balance sheet variable interest entities										
Consumer automotive		$	20,376 		(b)	$	6,070 		(c)					
Commercial automotive		8,009 			3,049 							
Off-balance-sheet variable interest entities										
Consumer automotive (d)		23 		(e)	— 			$	417 			$	440 		(f)	
Commercial other		1,079 		(g)	378 		(h)	— 			1,397 		(i)	
Total		$	29,487 			$	9,497 			$	417 			$	1,837 			
(a)Asset values represent the current unpaid principal balance of outstanding consumer finance receivables and loans within the VIEs.
(b)Includes $9.7 billion and $9.0 billion of assets that were not encumbered by VIE beneficial interests held by third parties at September 30, 2020, and December 31, 2019, respectively. Ally or consolidated affiliates hold the interests in these assets.
(c)Includes $94 million and $21 million of liabilities that were not obligations to third-party beneficial interest holders at September 30, 2020, and December 31, 2019, respectively.
(d)During both the three months ended September 30, 2020, and the year ended December 31, 2019, respectively, we indicated our intent to exercise a clean-up call option related to nonconsolidated securitization-related VIEs. The option enables us to repurchase the remaining transferred financial assets at our discretion once the asset pool declines to a predefined level and redeem the related outstanding debt. As a result of these events, we became the primary beneficiary of the VIEs, which included principal balances of $103 million and $48 million of consumer automotive loans during the three months ended September 30, 2020, and the year ended December 31, 2019, respectively, and the VIEs were consolidated on our Condensed Consolidated Balance Sheet. The related amounts were removed from assets sold to nonconsolidated VIEs and maximum exposure to loss in nonconsolidated VIEs
(e)Represents retained notes and certificated residual interests, of which $6 million and $21 million were classified as held-to-maturity securities at September 30, 2020, and December 31, 2019, respectively, and $1 million and $2 million were classified as other assets at September 30, 2020, and December 31, 2019, respectively. These assets represent our five percent interest in the credit risk of the assets underlying asset-backed securitizations.
(f)Maximum exposure to loss represents the current unpaid principal balance of outstanding loans, retained notes, certificated residual interests, as well as certain noncertificated interests retained from the sale of automotive finance receivables. This measure is based on the very unlikely event that all of our sold loans have defects that would trigger a representation, warranty, and covenant provision and the underlying collateral supporting the loans becomes worthless. This required disclosure is not an indication of our expected loss.
(g)Amounts are classified as other assets.
(h)Amounts are classified as accrued expenses and other liabilities.
(i)For certain nonconsolidated affordable housing entities, maximum exposure to loss represents the yield we guaranteed investors through long-term guarantee contracts. The amount disclosed is based on the unlikely event that the yield delivered to investors in the form of low-income tax housing credits is recaptured. For nonconsolidated equity investments, maximum exposure to loss represents our outstanding investment, additional committed capital, and low-income housing tax credits subject to recapture. The amount disclosed is based on the unlikely event that our committed capital is funded, our investments become worthless, and the tax credits previously delivered to us are recaptured. This required disclosure is not an indication of our expected loss..
Cash Flows with Off-Balance-Sheet Securitization Entities
The following table summarizes cash flows received and paid related to SPEs and asset-backed financings where the transfer is accounted for as a sale and we have a continuing involvement with the transferred consumer automotive assets (for example, servicing) that were outstanding during the nine months ended September 30, 2020, and 2019. Additionally, this table contains information regarding cash flows received from and paid to nonconsolidated SPEs that existed during each period.
41

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

Nine months ended September 30, ($ in millions)		Consumer automotive	
2020			
	
Cash flows received on retained interests in securitization entities		$	11 		
Servicing fees		3 		
Cash disbursements for repurchases during the period		(2)		

2019			
	
Cash flows received on retained interests in securitization entities		$	18 		
Servicing fees		8 		
Cash disbursements for repurchases during the period		(2)		

	

	

Delinquencies and Net Credit Losses
The following tables present quantitative information about delinquencies and net credit losses for off-balance-sheet securitizations and whole-loan sales where we have continuing involvement.

	Total amount		Amount 60 days or more past due	
($ in millions)	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019	

	

	
Off-balance-sheet securitization entities								
Consumer automotive	$	121 			$	417 			$	2 			$	6 		
	
Whole-loan sales (a)								
Consumer automotive	— 			207 			— 			2 		
Total	$	121 			$	624 			$	2 			$	8 		
(a)Whole-loan sales are not part of a securitization transaction, but represent consumer automotive pools of loans sold to third-party investors.

		Net credit losses	
		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Off-balance-sheet securitization entities									
Consumer automotive		$	— 			$	1 			$	1 			$	5 		
	
Whole-loan sales (a)									
Consumer automotive		— 			— 			— 			1 		
Total		$	— 			$	1 			$	1 			$	6 		
(a)Whole-loan sales are not part of a securitization transaction, but represent consumer automotive pools of loans sold to third-party investors.
42

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
11.    Other Assets
The components of other assets were as follows.

($ in millions)		September 30, 2020		December 31, 2019	
Property and equipment at cost		$	1,485 			$	1,332 		
Accumulated depreciation		(780)			(686)		
Net property and equipment		705 			646 		
Investment in qualified affordable housing projects (a)		1,005 			830 		
Nonmarketable equity investments (b)		938 			1,232 		
Accrued interest, fees, and rent receivables		840 			589 		
Restricted cash held for securitization trusts (c)		608 			738 		
Equity-method investments (d)		362 			358 		
Goodwill		343 			393 		
Other accounts receivable		206 			117 		
Net deferred tax assets		104 			58 		
Restricted cash and cash equivalents (e)		75 			87 		
Net intangible assets (f)		55 			69 		
Fair value of derivative contracts in receivable position (g)		23 			64 		
Other assets		990 			892 		
Total other assets		$	6,254 			$	6,073 		
(a)Investment in qualified affordable housing projects are accounted for using the proportional amortization method of accounting and include $455 million and $372 million of unfunded commitments to provide additional capital contributions to investees at September 30, 2020, and December 31, 2019, respectively. Substantially all of the unfunded commitments at September 30, 2020, are expected to be paid out over the next five years.
(b)Includes investments in FHLB stock of $394 million and $701 million at September 30, 2020, and December 31, 2019, respectively; FRB stock of $449 million at both September 30, 2020, and December 31, 2019; and equity securities without a readily determinable fair value of $95 million and $82 million at September 30, 2020, and December 31, 2019, respectively, measured at cost with adjustments for impairment and observable changes in price. For both the three months and nine months ended September 30, 2020, we recorded $16 million of upward adjustments related to equity securities without a readily determinable fair value. During the three months and nine months ended September 30, 2020, we recorded $1 million and $6 million of impairments and downward adjustments related to equity securities without a readily determinable fair value, respectively. Through September 30, 2020, we recorded $25 million of cumulative upward adjustments and $12 million of cumulative impairments and downward adjustments related to equity securities without a readily determinable fair value held at September 30, 2020.
(c)Includes restricted cash collected from customer payments on securitized receivables, which are distributed by us to investors as payments on the related secured debt, and cash reserve deposits utilized as a form of credit enhancement for various securitization transactions.
(d)Primarily relates to investments made in connection with our CRA program.
(e)Primarily represents a number of arrangements with third parties where certain restrictions are placed on balances we hold due to collateral agreements associated with operational processes with a third-party bank, or letter of credit arrangements and corresponding collateral requirements.
(f)Includes gross intangible assets of $109 million and $111 million at September 30, 2020, and December 31, 2019, respectively, and accumulated amortization of $55 million and $42 million at September 30, 2020, and December 31, 2019.
(g)For additional information on derivative instruments and hedging activities, refer to Note 18.
The carrying balance of goodwill by reportable operating segment was as follows.

($ in millions)		Automotive Finance operations		Insurance operations		Corporate and Other (a)		Total	

	
Goodwill at December 31, 2019		$	20 			$	27 			$	346 			$	393 		
	
Impairment losses		— 			— 			(50)			(50)		
	
Goodwill at September 30, 2020		$	20 			$	27 			$	296 			$	343 		
(a)Includes $153 million of goodwill arising from the acquisition of Health Credit Services at both September 30, 2020, and December 31, 2019, and $143 million and $193 million of goodwill associated with Ally Invest at September 30, 2020, and December 31, 2019, respectively. For additional information on the acquisition of Health Credit Services, refer to Note 2.
During the nine months ended September 30, 2020, we recognized a $50 million impairment of goodwill at Ally Invest. The recognition of this impairment was the result of certain business developments that impacted the expected growth and timing of revenue at Ally Invest, which constituted a triggering event for goodwill testing purposes. We used a combination of valuation methodologies, including discounted cash flow and comparable transaction analyses, to determine the fair market value of Ally Invest as of the April 30, 2020, valuation date and determined that the carrying value exceeded fair market value, resulting in the impairment charge in the second quarter of 2020.
43

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
12.    Deposit Liabilities
Deposit liabilities consisted of the following.

($ in millions)		September 30, 2020		December 31, 2019	
Noninterest-bearing deposits		$	159 			$	119 		
Interest-bearing deposits					
Savings and money-market checking accounts		79,163 			62,486 		
Certificates of deposit		55,616 			58,146 		
Other deposits		— 			1 		
Total deposit liabilities		$	134,938 			$	120,752 		
At September 30, 2020, and December 31, 2019, certificates of deposit included $26.2 billion and $25.6 billion, respectively, of those in denominations of $100 thousand or more. At September 30, 2020, and December 31, 2019, certificates of deposit included $8.5 billion and $8.2 billion, respectively, of those in denominations in excess of $250 thousand federal insurance limits.

13.    Debt
Short-Term Borrowings
The following table presents the composition of our short-term borrowings portfolio.

		September 30, 2020		December 31, 2019	
($ in millions)		Unsecured		Secured (a)		Total		Unsecured		Secured (a)		Total	
Demand notes		$	2,532 			$	— 			$	2,532 			$	2,581 			$	— 			$	2,581 		
Federal Home Loan Bank		— 			500 			500 			— 			2,950 			2,950 		

Total short-term borrowings		$	2,532 			$	500 			$	3,032 			$	2,581 			$	2,950 			$	5,531 		
	
(a)Refer to the section below titled Long-Term Debt for further details on assets restricted as collateral for payment of the related debt.
We periodically enter into term repurchase agreements—short-term borrowing agreements in which we sell securities to one or more investors while simultaneously committing to repurchase them at a specified future date, at the stated price plus accrued interest. We had no securities sold under agreements to repurchase at either September 30, 2020, or December 31, 2019. Refer to Note 7 and Note 21 for further details.
The primary risk associated with these repurchase agreements is that the counterparty will be unable to perform under the terms of the contract. As the borrower, we are exposed to the excess market value of the securities pledged over the amount borrowed. Daily mark-to-market collateral management is designed to limit this risk to the initial margin. However, should a counterparty declare bankruptcy or become insolvent, we may incur additional delays and costs. In some instances, we may place or receive cash collateral with counterparties under collateral arrangements associated with our repurchase agreements. At both September 30, 2020, and December 31, 2019, we did not place or receive any collateral.
Long-Term Debt
The following table presents the composition of our long-term debt portfolio.

		September 30, 2020		December 31, 2019	
($ in millions)		Unsecured		Secured		Total		Unsecured		Secured		Total	
Long-term debt (a)													
Due within one year		$	618 			$	6,159 			$	6,777 			$	2,214 			$	7,005 			$	9,219 		
Due after one year		10,938 			7,989 			18,927 			8,990 			15,818 			24,808 		
Total long-term debt (b) (c)		$	11,556 			$	14,148 			$	25,704 			$	11,204 			$	22,823 			$	34,027 		
(a)Includes basis adjustments related to the application of hedge accounting.
(b)Includes $2.6 billion of trust preferred securities at both September 30, 2020, and December 31, 2019.
(c)Includes advances net of hedge basis adjustment from the FHLB of Pittsburgh of $8.3 billion and $13.3 billion at September 30, 2020, and December 31, 2019, respectively.
44

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table presents the scheduled remaining maturity of long-term debt at September 30, 2020, assuming no early redemptions will occur. The amounts below include adjustments to the carrying value resulting from the application of hedge accounting. The actual payment of secured debt may vary based on the payment activity of the related pledged assets.

($ in millions)		2020		2021		2022		2023		2024		2025 and thereafter		Total	
Unsecured															
Long-term debt		$	5 			$	699 			$	1,122 			$	1,654 			$	1,474 			$	7,686 			$	12,640 		
Original issue discount		(13)			(54)			(59)			(64)			(69)			(825)			(1,084)		
Total unsecured		(8)			645 			1,063 			1,590 			1,405 			6,861 			11,556 		
Secured															
Long-term debt		1,325 			6,683 			5,431 			598 			69 			42 			14,148 		
Total long-term debt		$	1,317 			$	7,328 			$	6,494 			$	2,188 			$	1,474 			$	6,903 			$	25,704 		
The following summarizes assets restricted as collateral for the payment of the related debt obligation, primarily arising from securitization transactions accounted for as secured borrowings and repurchase agreements.

		September 30, 2020		December 31, 2019	
($ in millions)		Total (a)		Ally Bank		Total (a)		Ally Bank	
Investment securities		$	— 			$	— 			$	2,698 			$	2,698 		
Mortgage assets held-for-investment and lending receivables		15,943 			15,943 			17,135 			17,135 		
Consumer automotive finance receivables		11,167 			10,519 			13,481 			11,534 		
Commercial automotive finance receivables		10,811 			10,811 			12,890 			12,890 		

Total assets restricted as collateral (b) (c)		$	37,921 			$	37,273 			$	46,204 			$	44,257 		
Secured debt		$	14,648 		(d)	$	14,092 			$	25,773 		(d)	$	24,069 		
(a)Ally Bank is a component of the total column.
(b)Ally Bank has an advance agreement with the FHLB, and had assets pledged to secure borrowings that were restricted as collateral to the FHLB totaling $20.9 billion and $24.8 billion at September 30, 2020, and December 31, 2019, respectively. These assets were composed primarily of consumer mortgage finance receivables and loans and investment securities. Ally Bank has access to the FRB Discount Window and had assets pledged and restricted as collateral to the FRB totaling $2.4 billion at both September 30, 2020, and December 31, 2019. These assets were composed of consumer automotive finance receivables and loans. Availability under these programs is only for the operations of Ally Bank and cannot be used to fund the operations or liabilities of Ally or its subsidiaries.
(c)Excludes restricted cash and cash reserves for securitization trusts recorded within other assets on the Condensed Consolidated Balance Sheet. Refer to Note 11 for additional information.
(d)Includes $500 million and $3.0 billion of short-term borrowings at September 30, 2020, and December 31, 2019, respectively.
Trust Preferred Securities
At both September 30, 2020, and December 31, 2019, we had issued and outstanding approximately $2.6 billion in aggregate liquidation preference of Series 2 TRUPS. Each Series 2 TRUPS security has a liquidation amount of $25. Distributions are cumulative and are payable until redemption at the applicable coupon rate. Distributions are payable at an annual rate equal to three-month London interbank offered rate plus 5.785% payable quarterly in arrears. Ally has the right to defer payments of interest for a period not exceeding 20 consecutive quarters. The Series 2 TRUPS have no stated maturity date, but must be redeemed upon the redemption or maturity of the related debentures (Debentures), which mature on February 15, 2040. Ally at any time may redeem the Series 2 TRUPS at a redemption price equal to 100% of the principal amount being redeemed, plus accrued and unpaid interest through the date of redemption. The Series 2 TRUPS are generally nonvoting, other than with respect to certain limited matters. During any period in which any Series 2 TRUPS remain outstanding but in which distributions on the Series 2 TRUPS have not been fully paid, none of Ally or its subsidiaries will be permitted to (i) declare or pay dividends on, make any distributions with respect to, or redeem, purchase, acquire or otherwise make a liquidation payment with respect to, any of Ally’s capital stock or make any guarantee payment with respect thereto; or (ii) make any payments of principal, interest, or premium on, or repay, repurchase or redeem, any debt securities or guarantees that rank on a parity with or junior in interest to the Debentures with certain specified exceptions in each case. The Series 2 TRUPS were issued prior to October 4, 2010, under the Emergency Economic Stabilization Act of 2008 and are not subject to phase-out from additional Tier 1 capital into Tier 2 capital. The amount of Series 2 TRUPS included in Ally’s Tier 1 capital was $2.5 billion at September 30, 2020. The amount represents the carrying amount of the Series 2 TRUPS less our common stock investment in the trust.
45

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Funding Facilities
We utilize both committed secured credit facilities and other collateralized funding vehicles. The debt outstanding under our various funding facilities is included on our Condensed Consolidated Balance Sheet.
The total capacity in our credit facilities is provided by banks through private transactions. The facilities can be revolving in nature, generally having an original tenor ranging from 364 days to two years, and allow for additional funding during the commitment period, or they can be amortizing and not allow for any further funding after the commitment period. At September 30, 2020, all of our $1.4 billion of capacity was revolving and of this balance, $550 million was from facilities with a remaining tenor greater than 364 days.
Committed Secured Credit Facilities

		Outstanding		Unused capacity (a)		Total capacity	
($ in millions)		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019	

Parent funding													
Secured		$	— 			$	450 			$	1,350 			$	2,050 			$	1,350 			$	2,500 		
	
Total committed secured credit facilities		$	— 			$	450 			$	1,350 			$	2,050 			$	1,350 			$	2,500 		
(a)Funding from committed secured credit facilities is available on request in the event excess collateral resides in certain facilities or the extent incremental collateral is available and contributed to the facilities.

14.    Accrued Expenses and Other Liabilities
The components of accrued expenses and other liabilities were as follows.

($ in millions)		September 30, 2020		December 31, 2019	
Accounts payable		$	1,761 			$	535 		
Unfunded commitments for investment in qualified affordable housing projects		455 			372 		
Employee compensation and benefits		271 			296 		
Reserves for insurance losses and loss adjustment expenses		125 			122 		
Deferred revenue		89 			36 		
Net deferred tax liabilities		27 			67 		
Cash collateral received from counterparties		17 			48 		
Fair value of derivative contracts in payable position (a)		4 			5 		
Other liabilities		572 			491 		
Total accrued expenses and other liabilities		$	3,321 			$	1,972 		
(a)For additional information on derivative instruments and hedging activities, refer to Note 18.
46

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
15.    Accumulated Other Comprehensive Income (Loss)
The following tables present changes, net of tax, in each component of accumulated other comprehensive income (loss).

	Three months ended September 30,	
($ in millions)	Unrealized gains (losses) on investment securities (a)		Translation adjustments and net investment hedges (b)		Cash flow hedges (b)		Defined benefit pension plans		Accumulated other comprehensive income (loss)	
Balance at July 1, 2019	$	133 			$	19 			$	28 			$	(96)			$	84 		
Net change	105 			— 			1 			— 			106 		
Balance at September 30, 2019	$	238 			$	19 			$	29 			$	(96)			$	190 		
Balance at July 1, 2020	$	783 			$	19 			$	116 			$	(103)			$	815 		
Net change	(103)			(1)			(16)			— 			(120)		
Balance at September 30, 2020	$	680 			$	18 			$	100 			$	(103)			$	695 		
(a)Represents the after-tax difference between the fair value and amortized cost of our available-for-sale securities portfolio.
(b)For additional information on derivative instruments and hedging activities, refer to Note 18.

	Nine months ended September 30,	
($ in millions)	Unrealized (losses) gains on investment securities (a)		Translation adjustments and net investment hedges (b)		Cash flow hedges (b)		Defined benefit pension plans		Accumulated other comprehensive (loss) income	
Balance at December 31, 2018	$	(481)			$	18 			$	19 			$	(95)			$	(539)		
Cumulative effect of changes in accounting principles, net of tax										
Adoption of Accounting Standards Update 2017-08 (c)	8 			— 			— 			— 			8 		
Balance at January 1, 2019	(473)			18 			19 			(95)			(531)		
Net change	711 			1 			10 			(1)			721 		
Balance at September 30, 2019	$	238 			$	19 			$	29 			$	(96)			$	190 		
Balance at December 31, 2019	$	208 			$	19 			$	2 			$	(106)			$	123 		
Net change	472 			(1)			98 			3 			572 		
Balance at September 30, 2020	$	680 			$	18 			$	100 			$	(103)			$	695 		
(a)Represents the after-tax difference between the fair value and amortized cost of our available-for-sale securities portfolio.
(b)For additional information on derivative instruments and hedging activities, refer to Note 18.
(c)Refer to the section titled Recently Adopted Accounting Standards in Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for additional information.
47

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following tables present the before- and after-tax changes in each component of accumulated other comprehensive income (loss).

Three months ended September 30, 2020 ($ in millions)	Before tax		Tax effect		After tax	
Investment securities						
Net unrealized losses arising during the period	$	(92)			$	22 			$	(70)		
Less: Net realized gains reclassified to income from continuing operations	43 		(a)	(10)		(b)	33 		
	
Net change	(135)			32 			(103)		
Translation adjustments						
Net unrealized gains arising during the period	3 			(1)			2 		

	
Net investment hedges (c)						
Net unrealized losses arising during the period	(4)			1 			(3)		

	
Cash flow hedges (c)						
	
Less: Net realized gains reclassified to income from continuing operations	21 			(5)			16 		

	

	
	
Other comprehensive loss	$	(157)			$	37 			$	(120)		
(a)Includes gains reclassified to other gain on investments, net in our Condensed Consolidated Statement of Comprehensive Income.
(b)Includes amounts reclassified to income tax expense from continuing operations in our Condensed Consolidated Statement of Comprehensive Income.
(c)For additional information on derivative instruments and hedging activities, refer to Note 18.

Three months ended September 30, 2019 ($ in millions)	Before tax		Tax effect		After tax	
Investment securities						
Net unrealized gains arising during the period	$	165 			$	(39)			$	126 		
Less: Net realized gains reclassified to income from continuing operations	27 		(a)	(6)		(b)	21 		
	
Net change	138 			(33)			105 		
Translation adjustments						
Net unrealized losses arising during the period	(2)			1 			(1)		

	
Net investment hedges (c)						
Net unrealized gains arising during the period	2 			(1)			1 		

	
Cash flow hedges (c)						
Net unrealized gains arising during the period	5 			(1)			4 		
Less: Net realized gains reclassified to income from continuing operations	3 			— 			3 		
	
Net change	2 			(1)			1 		

	

Other comprehensive income	$	140 			$	(34)			$	106 		
(a)Includes gains reclassified to other gain on investments, net in our Condensed Consolidated Statement of Comprehensive Income.
(b)Includes amounts reclassified to income tax expense from continuing operations in our Condensed Consolidated Statement of Comprehensive Income.
(c)For additional information on derivative instruments and hedging activities, refer to Note 18.
48

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

Nine months ended September 30, 2020 ($ in millions)	Before tax		Tax effect		After tax	
Investment securities						
Net unrealized gains arising during the period	$	785 			$	(184)			$	601 		
Less: Net realized gains reclassified to income from continuing operations	167 		(a)	(38)		(b)	129 		
	
Net change	618 			(146)			472 		
Translation adjustments						
Net unrealized losses arising during the period	(4)			1 			(3)		

	
Net investment hedges (c)						
Net unrealized gains arising during the period	3 			(1)			2 		

	
Cash flow hedges (c)						
Net unrealized gains arising during the period	169 			(41)			128 		
Less: Net realized gains reclassified to income from continuing operations	40 			(10)			30 		
	
Net change	129 			(31)			98 		
Defined benefit pension plans						
Net unrealized gains arising during the period	4 			(1)			3 		

	
Other comprehensive income	$	750 			$	(178)			$	572 		
(a)Includes gains reclassified to other gain on investments, net in our Condensed Consolidated Statement of Comprehensive Income.
(b)Includes amounts reclassified to income tax expense from continuing operations in our Condensed Consolidated Statement of Comprehensive Income.
(c)For additional information on derivative instruments and hedging activities, refer to Note 18.

Nine months ended September 30, 2019 ($ in millions)	Before tax		Tax effect		After tax	
Investment securities						
Net unrealized gains arising during the period	$	990 			$	(233)			$	757 		
Less: Net realized gains reclassified to income from continuing operations	60 		(a)	(14)		(b)	46 		
	
Net change	930 			(219)			711 		
Translation adjustments						
Net unrealized gains arising during the period	4 			(1)			3 		

	
Net investment hedges (c)						
Net unrealized losses arising during the period	(3)			1 			(2)		

	
Cash flow hedges (c)						
Net unrealized gains arising during the period	26 			(6)			20 		
Less: Net realized gains reclassified to income from continuing operations	12 			(2)			10 		
	
Net change	14 			(4)			10 		
Defined benefit pension plans						
Net unrealized losses arising during the period	(1)			— 			(1)		

	
Other comprehensive income	$	944 			$	(223)			$	721 		
(a)Includes gains reclassified to other gain on investments, net in our Condensed Consolidated Statement of Comprehensive Income.
(b)Includes amounts reclassified to income tax expense from continuing operations in our Condensed Consolidated Statement of Comprehensive Income.
(c)For additional information on derivative instruments and hedging activities, refer to Note 18.
49

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
16.    Earnings per Common Share
The following table presents the calculation of basic and diluted earnings per common share.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions, except per share data; shares in thousands) (a)		2020		2019		2020		2019	
Net income from continuing operations		$	476 			$	381 			$	399 			$	1,340 		
Loss from discontinued operations, net of tax		— 			— 			(1)			(3)		
Net income attributable to common stockholders		$	476 			$	381 			$	398 			$	1,337 		
Basic weighted-average common shares outstanding (b)		375,658 			390,205 			375,478 			397,427 		
Diluted weighted-average common shares outstanding (b) (c)		377,011 			392,604 			376,659 			399,442 		
Basic earnings per common share									
Net income from continuing operations		$	1.27 			$	0.98 			$	1.06 			$	3.37 		
Loss from discontinued operations, net of tax		— 			— 			— 			(0.01)		
Net income		$	1.27 			$	0.97 			1.06 			3.36 		
Diluted earnings per common share									
Net income from continuing operations		$	1.26 			$	0.97 			1.06 			3.35 		
Loss from discontinued operations, net of tax		— 			— 			— 			(0.01)		
Net income		$	1.26 			$	0.97 			$	1.06 			$	3.35 		
(a)Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.
(b)Includes shares related to share-based compensation that vested but were not yet issued.
(c)During the three months and nine months ended September 30, 2020, there were 0.4 million and 1.0 million, respectively, in shares underlying share-based awards excluded because their inclusion would have been antidilutive. There were no antidilutive shares during the three months and nine months ended September 30, 2019.

17.    Regulatory Capital and Other Regulatory Matters
Basel Capital Framework
The FRB and other U.S. banking agencies have adopted risk-based and leverage capital standards that establish minimum capital-to-asset ratios for BHCs, like Ally, and depository institutions, like Ally Bank. Ally and Ally Bank are subject to capital requirements issued by U.S. banking regulators that require us to maintain risk-based and leverage capital ratios above minimum levels. The risk-based capital ratios are based on a banking organization’s RWAs, which are generally determined under the standardized approach applicable to Ally and Ally Bank by (1) assigning on-balance-sheet exposures to broad risk-weight categories according to the counterparty or, if relevant, the guarantor or collateral (with higher risk weights assigned to categories of exposures perceived as representing greater risk), and (2) multiplying off-balance-sheet exposures by specified credit conversion factors to calculate credit equivalent amounts and assigning those credit equivalent amounts to the relevant risk-weight categories. The leverage ratio, in contrast, is based on an institution’s average unweighted on-balance-sheet exposures.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators that, if undertaken, could have a direct material effect on the Condensed Consolidated Financial Statements or the results of operations and financial condition of Ally and Ally Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Ally and Ally Bank must meet specific capital guidelines that involve quantitative measures of capital, assets, and certain off-balance-sheet items. These measures and related classifications, which are used in the calculation of our risk-based and leverage capital ratios and those of Ally Bank, are also subject to qualitative judgments by the regulators about the components of capital, the risk weightings of assets and other exposures, and other factors. The FRB also uses these ratios and guidelines as part of the capital planning and stress testing processes. In addition, in order for Ally to maintain its status as an FHC, Ally and its bank subsidiary, Ally Bank, must remain well capitalized and well managed, as defined under applicable laws. The well capitalized standard for insured depository institutions, such as Ally Bank, reflects the capital requirements under U.S. Basel III.
In October 2019, the FRB and other U.S. banking agencies issued final rules implementing targeted amendments to the Dodd-Frank Act and other financial-services laws that had been enacted in May 2018 through the EGRRCP Act. The final rules were effective on December 31, 2019, and established four risk-based categories of prudential standards and capital and liquidity requirements for banking organizations with $100 billion or more in total consolidated assets. Under the final rules, Ally was designated as a Category IV firm and, as such, is subject to supervisory stress testing on a two-year cycle, allowed to continue excluding accumulated other comprehensive income from regulatory capital, exempted from company-run capital stress testing, and allowed to remain exempted from the requirements of the supplementary leverage ratio and the countercyclical capital buffer. As a Category IV firm with average wSTWF under $50 billion, Ally is also exempted from the requirements of the liquidity coverage ratio and the net stable funding ratio. Refer to Note 20 to the Consolidated
50

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Financial Statements in our 2019 Annual Report on Form 10-K for additional details on our prudential standards tailoring framework and other capital and liquidity requirements we are subject to.
Under U.S. Basel III, Ally and Ally Bank must maintain a minimum Common Equity Tier 1 risk-based capital ratio of 4.5%, a minimum Tier 1 risk-based capital ratio of 6%, and a minimum total risk-based capital ratio of 8%. In addition to these minimum risk-based capital ratios, Ally and Ally Bank are subject to a capital conservation buffer requirement that was fixed at 2.5% as of September 30, 2020. Failure to maintain more than the full amount of the capital conservation buffer requirement would result in restrictions on the ability of Ally and Ally Bank to make capital distributions, including dividend payments and stock repurchases and redemptions, and to pay discretionary bonuses to executive officers. U.S. Basel III also subjects Ally and Ally Bank to a minimum Tier 1 leverage ratio of 4%.
In March 2020, the FRB issued a final rule to more closely align forward-looking stress testing results with the FRB’s non-stress regulatory capital requirements for BHCs with $100 billion or more in total consolidated assets and other specified companies. The final rule introduced a stress capital buffer requirement based on firm-specific stress test performance and planned dividends, which replaced the fixed 2.5% component of the capital conservation buffer requirement. The final rule also made several changes to the CCAR process, such as eliminating the CCAR quantitative objection, narrowing the set of planned capital actions assumed to occur in the stress scenario, assuming that a firm maintains a constant level of assets over the planning horizon, eliminating the 30% dividend payout ratio as a criterion for heightened scrutiny of a firm’s capital plan, and allowing a firm to make capital distributions in excess of those included in its capital plan if the firm is otherwise in compliance with the automatic distribution limits of the capital framework. The final rule became effective on May 18, 2020, and therefore applied to the 2020 CCAR process. For a Category IV firm like Ally, the stress capital buffer requirement will comprise its capital conservation buffer requirement. Under the final rule, Ally’s stress capital buffer requirement is the greater of 2.5% and the result of the following calculation: (1) the difference between Ally’s starting and minimum projected Common Equity Tier 1 capital ratios under the severely adverse scenario in the supervisory stress test, plus (2) the sum of the dollar amount of Ally’s planned common stock dividends for each of the fourth through seventh quarters of its nine-quarter capital planning horizon, as a percentage of risk-weighted assets. Ally Bank’s capital conservation buffer requirement will continue to be a fixed 2.5%.
Ally received its first preliminary stress capital buffer requirement from the FRB on June 25, 2020, which was determined under this new methodology to be 3.5%, was finalized on August 10, 2020, and became effective on October 1, 2020. On June 25, 2020, the FRB also announced its determination that changes in financial markets or the macroeconomic outlook could have a material effect on the risk profiles and financial conditions of firms subject to the capital-plan rule and that, as a result, the firms (including Ally) would be required to resubmit capital plans to the FRB within 45 days after receiving updated stress scenarios from the FRB. On September 17, 2020, the FRB released two updated scenarios—severely adverse and alternative severe. We updated our capital plan in light of firm-specific baseline and stress scenarios, as required, and submitted our updated plan to the FRB on November 2, 2020. It is possible that this resubmission process may result in a change in Ally’s stress capital buffer requirement.
Under the capital conservation buffer requirement, the maximum amount of capital distributions and discretionary bonus payments that can be made by a banking organization, such as Ally or Ally Bank, is a function of its eligible retained income. During the COVID-19 pandemic, the FRB and other U.S. banking agencies expressed a concern that the definition of eligible retained income would not limit distributions in the gradual manner intended but instead could do so in a sudden and severe manner even if a banking organization were to experience only a modest reduction in its capital ratios. As a result, to better allow a banking organization to use its capital buffer as intended and continue lending in adverse conditions, the U.S. banking agencies issued an interim final rule that became effective on March 20, 2020, and revised the definition of eligible retained income to the greater of (1) a banking organization’s net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (2) the average of a banking organization’s net income over the preceding four quarters. This interim final rule was adopted as final with no changes effective January 1, 2021.
Ally and Ally Bank are subject to the U.S. Basel III standardized approach for counterparty credit risk, but not to the U.S. Basel III advanced approaches for credit risk or operational risk. Ally is also not subject to the U.S. market-risk capital rule, which applies only to banking organizations with significant trading assets and liabilities.
51

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table summarizes our capital ratios under the U.S. Basel III capital framework.
																																							
		September 30, 2020		December 31, 2019		Required minimum (a)		Well-capitalized minimum	
($ in millions)		Amount		Ratio		Amount		Ratio					
Capital ratios													
Common Equity Tier 1 (to risk-weighted assets)													
Ally Financial Inc.		$	14,258 			10.36 	%		$	13,837 			9.54 	%		4.50 	%		(b)	
Ally Bank		17,585 			13.63 			16,627 			12.30 			4.50 			6.50 	%	
Tier 1 (to risk-weighted assets)													
Ally Financial Inc.		$	16,668 			12.11 	%		$	16,271 			11.22 	%		6.00 	%		6.00 	%	
Ally Bank		17,585 			13.63 			16,627 			12.30 			6.00 			8.00 		
Total (to risk-weighted assets)													
Ally Financial Inc.		$	19,337 			14.05 	%		$	18,506 			12.76 	%		8.00 	%		10.00 	%	
Ally Bank		19,201 			14.88 			17,854 			13.21 			8.00 			10.00 		
Tier 1 leverage (to adjusted quarterly average assets) (c)													
Ally Financial Inc.		$	16,668 			9.00 	%		$	16,271 			9.08 	%		4.00 	%		(b)	
Ally Bank		17,585 			10.07 			16,627 			10.01 			4.00 			5.00 	%	
(a)In addition to the minimum risk-based capital requirements for the Common Equity Tier 1 capital, Tier 1 capital, and total capital ratios, Ally and Ally Bank were required to maintain a minimum capital conservation buffer of 2.5% at both September 30, 2020, and December 31, 2019. Beginning October 1, 2020, Ally’s preliminary stress capital buffer requirement of 3.5% comprises its capital conservation buffer requirement. Ally’s capital conservation buffer was 5.86% and 4.76% at September 30, 2020, and December 31, 2019, respectively.
(b)Currently, there is no ratio component for determining whether a BHC is “well-capitalized.”
(c)Federal regulatory reporting guidelines require the calculation of adjusted quarterly average assets using a daily average methodology.
In December 2018, the FRB and other U.S. banking agencies approved a final rule to address the impact of CECL on regulatory capital by allowing BHCs and banks, including Ally, the option to phase in the day-one impact of CECL over a three-year period. In March 2020, the FRB and other U.S. banking agencies issued an interim final rule that became effective on March 31, 2020, and that provides BHCs and banks with an alternative option to temporarily delay an estimate of the impact of CECL, relative to the incurred loss methodology for estimating the allowance for loan losses, on regulatory capital. The interim final rule was clarified and adjusted in a final rule effective September 30, 2020. We have elected this alternative option instead of the one described in the December 2018 rule. As a result, under the final rule, we will delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021. Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. Under the final rule, the estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as the entire day-one impact at adoption plus 25% of the subsequent change in allowance during the two-year deferral period. As of September 30, 2020, the total deferred impact on Common Equity Tier 1 capital related to our adoption of CECL was $1.2 billion.
At September 30, 2020, and December 31, 2019, Ally and Ally Bank were “well-capitalized” and met all applicable capital requirements to which each was subject. Compliance with capital requirements is a strategic priority for Ally. We expect to be in compliance with all applicable requirements within the established timeframes.
Other Regulatory Developments
In September 2020, the FRB issued a proposal to align its capital plan rule, stress capital buffer requirements, and capital planning requirements with the tailoring framework adopted according to the EGRRCP Act. Under this proposal, unless otherwise directed by the FRB in specified circumstances, Ally and other Category IV firms would generally no longer be required to calculate forward-looking projections of revenues, losses, reserves, and pro forma capital levels under scenarios provided by the FRB. Each firm would continue to be required, however, to provide a forward-looking analysis of income and capital levels under expected and stressful conditions that are designed by the firm. In addition, for Category IV firms, the proposal would update the frequency of calculating the portion of the stress capital buffer that is calculated as the decline in the Common Equity Tier 1 capital ratio to every other year. These firms would have the ability to elect to participate in the supervisory stress test—and receive a correspondingly updated stress capital buffer requirement—in a year in which they would not generally be subject to the supervisory stress test. During a year in which a Category IV firm does not undergo a supervisory stress test, the firm would receive an updated stress capital buffer requirement that reflects its updated planned common-stock dividends. The proposal also includes reporting and other changes consistent with the tailoring framework. At this time, we continue to evaluate the impacts that the proposal may have on us.
In July 2019, the FRB and other U.S. banking agencies issued a final rule to simplify the capital treatment for MSAs, certain DTAs, and investments in the capital instruments of unconsolidated financial institutions (collectively, threshold items). Prior to the final rule taking effect, banking organizations deducted from capital amounts of threshold items that individually exceed 10% of Common Equity Tier 1
52

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
capital. The aggregate amount of threshold items not deducted under the 10% threshold deduction but that nonetheless exceeded 15% of Common Equity Tier 1 capital minus certain deductions from and adjustments to Common Equity Tier 1 capital were also deducted. Any amount of these MSAs and certain DTAs not deducted from Common Equity Tier 1 capital were risk weighted at 100%. The final rule removed the individual and aggregate deduction thresholds for threshold items and adopted a single 25% Common Equity Tier 1 capital deduction threshold for each item individually, and required that any of the threshold items not deducted be risk weighted at 250%. The final rule also simplified the calculation methodology for minority interests. These provisions took effect for us on April 1, 2020, and did not have a material impact on our capital position.
In December 2017, the Basel Committee on Banking Supervision approved revisions to the global Basel III capital framework (commonly known as Basel IV), many of which—if adopted in the United States—could heighten regulatory capital standards. In March 2020, to better allow banking organizations to focus their resources on navigating the COVID-19 pandemic, the implementation date of these revisions was delayed by the Basel Committee from January 1, 2022, to January 1, 2023. At this time, how the revisions will be harmonized and finalized in the United States is not clear or predictable, and we continue to evaluate the impacts that these revisions may have on us.
Refer to in Note 20 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for further discussion about other regulatory developments.
Capital Planning and Stress Tests
As a Category IV firm, we are subject to supervisory stress testing on a two-year cycle and are exempted from company-run capital stress testing. We are also required to submit an annual capital plan to the FRB. Our annual capital plan must include an assessment of our expected uses and sources of capital and a description of all planned capital actions over a nine-quarter planning horizon, including any issuance of a debt or equity capital instrument, any dividend or other capital distribution, and any similar action that the FRB determines could have an impact on our capital. The plan must also include a discussion of how we, under expected and stressful conditions, will maintain capital commensurate with our risks and above the minimum regulatory capital ratios, and will serve as a source of strength to Ally Bank. The FRB’s final rule introducing the stress capital buffer requirement, which is described above in the section titled Basel Capital Framework, made several changes to the CCAR process that applied beginning with the 2020 cycle.
The following table presents information related to our common stock and distributions to our common stockholders over the last six quarters.
																																	
		Common stock repurchased during period (a) (b)		Number of common shares outstanding		Cash dividends declared per common share (c)	
($ in millions, except per share data; shares in thousands)		Approximate dollar value		Number of shares		Beginning of period		End of period			

	

2019											
First quarter		$	211 			8,113 			404,900 			399,761 			$	0.17 		
Second quarter		229 			7,775 			399,761 			392,775 			0.17 		
Third quarter		300 			9,287 			392,775 			383,523 			0.17 		
Fourth quarter		299 			9,554 			383,523 			374,332 			0.17 		
2020											
First quarter		$	104 			3,838 			374,332 			373,155 			$	0.19 		
Second quarter		— 			53 			373,155 			373,837 			0.19 		
Third quarter		1 			9 			373,837 			373,857 			0.19 		
(a)Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.
(b)On March 17, 2020, we announced the voluntary suspension of our stock-repurchase program through its termination on June 30, 2020. Consistent with the FRB’s restrictions on common-stock repurchases for large firms such as Ally, described below, we do not currently plan to implement a new stock-repurchase program or repurchase shares of our common stock, except in connection with compensation plans, for the remainder of 2020. Refer to the discussion below for further details about this action.
(c)On October 6, 2020, our Board declared a quarterly cash dividend of $0.19 per share on all common stock, payable on November 13, 2020, to stockholders of record at the close of business on October 30, 2020. Refer to Note 24 for further information regarding this common stock dividend.
We received a non-objection to our 2018 capital plan in June 2018. We were not required to submit an annual capital plan to the FRB, participate in the supervisory stress test or CCAR, or conduct company-run capital stress tests during the 2019 cycle. Instead, our capital actions during the 2019 cycle were largely based on the results from our 2018 supervisory stress test. On April 1, 2019, our Board authorized an increase in our stock-repurchase program, permitting us to repurchase up to $1.25 billion of our common stock from time to time from the third quarter of 2019 through the second quarter of 2020. On March 17, 2020, in order to support the FRB's effort to mitigate the impact of the COVID-19 pandemic on the U.S. economy and the financial system, we announced the voluntary suspension of our stock-repurchase program through its termination on June 30, 2020. We do not currently plan to implement a new stock-repurchase program or repurchase shares of our common stock, except in connection with compensation plans, for the remainder of 2020 consistent with restrictions imposed by the FRB as described in the next paragraph. We retain the discretion, however, to implement such a program and repurchase common stock if
53

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
the FRB’s restrictions were to change. On October 6, 2020, our Board declared a quarterly cash dividend of $0.19 per share of our common stock. Refer to Note 24 for further information on the most recent dividend.
We submitted our 2020 capital plan on April 3, 2020, which included planned capital distributions to common stockholders through share repurchases and cash dividends over the nine-quarter planning horizon. On June 25, 2020, the FRB provided us with the results of the supervisory stress test, additional industry-wide sensitivity analyses conducted in light of the COVID-19 pandemic, and our preliminary stress capital buffer requirement. At the same time, the FRB announced its determination that changes in financial markets or the macroeconomic outlook could have a material effect on the risk profiles and financial conditions of firms subject to the capital-plan rule and that, as a result, the firms (including Ally) would be required to resubmit capital plans to the FRB within 45 days after receiving updated stress scenarios from the FRB. On September 17, 2020, the FRB released two updated scenarios—severely adverse and alternative severe. We updated our capital plan in light of firm-specific baseline and stress scenarios, as required, and submitted our updated plan to the FRB on November 2, 2020. On June 25, 2020, the FRB also announced several actions to ensure that large firms, such as Ally, remain resilient despite the economic uncertainty from the COVID-19 pandemic, including for the third quarter of 2020 (1) the suspension of repurchases by any firm of its common stock, except repurchases relating to issuances of common stock related to employee stock ownership plans, and (2) the disallowance of any increase by a firm in the amount of its common-stock dividends and the imposition of a common-stock dividend limit equal to the average of the firm’s net income for the four preceding calendar quarters. These restrictions have been extended for the fourth quarter of 2020 and may be further extended by the FRB on a quarter-by-quarter basis. Our ability to make capital distributions, including our ability to pay dividends or repurchase shares of our common stock, will continue to be subject to the FRB’s review and our internal governance requirements, including approval by our Board. The amount and size of any future dividends and share repurchases also will be subject to various factors, including Ally’s capital and liquidity positions, regulatory considerations, impacts related to the COVID-19 pandemic, any accounting standards that affect capital or liquidity (including CECL), financial and operational performance, alternative uses of capital, common-stock price, and general market conditions, and may be suspended or resumed at any time.

18.    Derivative Instruments and Hedging Activities
We enter into derivative instruments, which may include interest rate swaps, foreign-currency forwards, equity options, futures, and interest rate options in connection with our risk-management activities. Our primary objective for utilizing derivative financial instruments is to manage interest rate risk associated with our fixed- and variable-rate assets and liabilities, foreign exchange risks related to our foreign-currency denominated assets and liabilities, and other market risks related to our investment portfolio.
Interest Rate Risk
We monitor our mix of fixed- and variable-rate assets and liabilities and may enter into interest rate swaps, forwards, futures, options, and swaptions to achieve our desired mix of fixed- and variable-rate assets and liabilities. We execute these trades to modify our exposure to interest rate risk by converting certain fixed-rate instruments to a variable-rate and certain variable-rate instruments to a fixed-rate. We use a mix of both derivatives that qualify for hedge accounting treatment and economic hedges (which do not qualify for hedge accounting treatment).
Derivatives qualifying for hedge accounting treatment can include receive-fixed swaps designated as fair value hedges of specific fixed-rate unsecured debt obligations, receive-fixed swaps designated as fair value hedges of specific fixed-rate FHLB advances, pay-fixed swaps designated as fair value hedges of securities within our available-for-sale portfolio, and pay-fixed swaps designated as fair value hedges of closed portfolios of fixed-rate held-for-investment consumer automotive loan assets in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. Other derivatives qualifying for hedge accounting consist of pay-fixed swaps designated as cash flow hedges of the expected future cash flows in the form of interest payments on certain variable-rate borrowings and deposit liabilities, receive-fixed swaps designated as cash flow hedges of the expected future cash flows in the form of interest receipts on certain securities within our available-for-sale portfolio, as well as interest rate floor contracts designated as cash flow hedges of the expected future cash flows in the form of interest receipts on a portion of our dealer floorplan commercial loans.
We execute economic hedges, which may consist of interest rate swaps, interest rate caps, forwards, futures, options, and swaptions to mitigate interest rate risk.
We also enter into interest rate lock commitments and forward commitments that are executed as part of our mortgage business that meet the accounting definition of a derivative.
Foreign Exchange Risk
We enter into derivative financial instrument contracts to mitigate the risk associated with variability in cash flows related to our various foreign-currency exposures.
We enter into foreign-currency forwards with external counterparties as net investment hedges of foreign exchange exposure on our investment in foreign subsidiaries. Our equity is impacted by the cumulative translation adjustments resulting from the translation of foreign subsidiary results; this impact is reflected in our accumulated other comprehensive income. We also periodically enter into foreign-currency forwards to economically hedge any foreign-denominated debt, centralized lending, and foreign-denominated third-party loans. These foreign-currency forwards that are used as economic hedges are recorded at fair value with changes recorded as income or expense offsetting the gains and losses on the associated foreign-currency transactions.
54

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Investment Risk
We enter into equity options to mitigate the risk associated with our exposure to the equity markets.
Counterparty Credit Risk
Derivative financial instruments contain an element of credit risk if counterparties are unable to meet the terms of the agreements. Credit risk associated with derivative financial instruments is measured as the net replacement cost should the counterparties that owe us under the contract completely fail to perform under the terms of those contracts, assuming no recoveries of underlying collateral as measured by the market value of the derivative financial instrument.
We manage our risk to financial counterparties through internal credit analysis, limits, and monitoring. Additionally, derivatives and repurchase agreements are entered into with approved counterparties using industry standard agreements.
We execute certain OTC derivatives, such as interest rate caps and floors, using bilateral agreements with financial counterparties. Bilateral agreements generally require both parties to post collateral in the event the fair values of the derivative financial instruments meet posting thresholds established under the agreements. In the event that either party defaults on the obligation, the secured party may seize the collateral. Payments related to the exchange of collateral for OTC derivatives are recognized as collateral.
We also execute certain derivatives, such as interest rate swaps, with clearinghouses, which requires us to post and receive collateral. For these clearinghouse derivatives, these payments are recognized as settlements rather than collateral.
Certain derivative instruments contain provisions that require us to either post additional collateral or immediately settle any outstanding liability balances upon the occurrence of a specified credit-risk-related event. No such specified credit-risk-related events occurred during the nine months ended September 30, 2020, or 2019.
We placed noncash collateral totaling $121 million supporting our derivative positions at September 30, 2020, compared to $118 million of noncash collateral at December 31, 2019, in accounts maintained by counterparties. These amounts include collateral placed at clearinghouses and exclude cash and noncash collateral pledged under repurchase agreements. Refer to Note 13 for details on the repurchase agreements. The receivables for cash collateral placed are included on our Condensed Consolidated Balance Sheet in other assets.
We received cash collateral from counterparties totaling $5 million in accounts maintained by counterparties at September 30, 2020, compared to $40 million and $29 million of cash and noncash collateral at December 31, 2019. These amounts include collateral received from clearinghouses and exclude cash and noncash collateral pledged under repurchase agreements. Refer to Note 13 for details on repurchase agreements. The payables for cash collateral received are included on our Condensed Consolidated Balance Sheet in accrued expenses and other liabilities. Included in these amounts is noncash collateral where we have been granted the right to sell or pledge the underlying assets. We have not sold or pledged any of the noncash collateral received under these agreements.
55

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Balance Sheet Presentation
The following table summarizes the amounts of derivative instruments reported on our Condensed Consolidated Balance Sheet. The amounts are presented on a gross basis, are segregated by derivatives that are designated and qualifying as hedging instruments or those that are not, and are further segregated by type of contract within those two categories.
Derivative contracts in a receivable and payable position exclude open trade equity on derivatives cleared through central clearing counterparties. Any associated collateral exchanged with our central clearing counterparties are treated as settlements of the derivative exposure, rather than collateral. Such payments are recognized as settlements of the derivatives contracts in a receivable and payable position on our Condensed Consolidated Balance Sheet.
Notional amounts are reference amounts from which contractual obligations are derived and are not recorded on the balance sheet. In our view, derivative notional is not an accurate measure of our derivative exposure when viewed in isolation from other factors, such as market rate fluctuations and counterparty credit risk.

		September 30, 2020		December 31, 2019	
		Derivative contracts in a		Notional amount		Derivative contracts in a		Notional amount	
($ in millions)		receivable position		payable position				receivable position		payable position			
Derivatives designated as accounting hedges													
Interest rate contracts													
Swaps		$	— 			$	— 			$	12,465 			$	— 			$	— 			$	17,101 		
Purchased options		— 			— 			— 			62 			— 			14,100 		
	
Foreign exchange contracts													
Forwards		1 			— 			155 			— 			3 			157 		
Total derivatives designated as accounting hedges		1 			— 			12,620 			62 			3 			31,358 		
Derivatives not designated as accounting hedges													
Interest rate contracts													
	
Futures and forwards		1 			— 			305 			— 			— 			81 		
Written options		17 			— 			607 			2 			— 			522 		
Purchased options		— 			— 			— 			— 			— 			416 		
Total interest rate risk		18 			— 			912 			2 			— 			1,019 		
Foreign exchange contracts													
	
Futures and forwards		2 			— 			161 			— 			2 			112 		

Total foreign exchange risk		2 			— 			161 			— 			2 			112 		
Equity contracts													
	
Written options		— 			4 			1 			— 			— 			— 		
Purchased options		2 			— 			1 			— 			— 			— 		
Total equity risk		2 			4 			2 			— 			— 			— 		
Total derivatives not designated as accounting hedges		22 			4 			1,075 			2 			2 			1,131 		
Total derivatives		$	23 			$	4 			$	13,695 			$	64 			$	5 			$	32,489 		
56

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following table presents amounts recorded on our Condensed Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges.

($ in millions)		Carrying amount of the hedged items		Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items	
				Total		Discontinued (a)	
		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019	
Assets													
Available-for-sale securities (b) (c)		$	1,266 			$	1,217 			$	46 			$	18 			$	30 			$	18 		
Finance receivables and loans, net (d)		32,274 			33,312 			277 			135 			67 			44 		
Liabilities													
	
Long-term debt		$	8,877 			$	11,995 			$	202 			$	24 			$	200 			$	127 		
(a)Represents the fair value hedging adjustment on qualifying hedges for which the hedging relationship was discontinued. This represents a subset of the amounts reported in the total hedging adjustment.
(b)The carrying amount of hedged available-for-sale securities is presented above using amortized cost and includes $594 million and $230 million at September 30, 2020, and December 31, 2019, respectively, related to closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. Refer to Note 7 for a reconciliation of the amortized cost and fair value of available-for-sale securities.
(c)The amount that is identified as the last of layer in the open hedge relationship was $490 million as of September 30, 2020. The basis adjustment associated with the open last of layer relationship was a $1 million asset as of September 30, 2020, which would be allocated across the entire remaining pool upon termination, or maturity, of the hedge relationship. The amount that is identified as the last of layer in the discontinued hedge relationship was $690 million and $200 million as of September 30, 2020, and December 31, 2019, respectively. The basis adjustment associated with the discontinued last of layer relationship was a $21 million asset as of September 30, 2020, and a $2 million asset as of December 31, 2019, which was allocated across the entire remaining pool upon termination of the hedge relationship. There were no open last-of-layer relationships at December 31, 2019.
(d)The hedged item represents the carrying value of the hedged portfolio of assets. The amount identified as the last of layer in the open hedge relationship was $10.2 billion at both September 30, 2020, and December 31, 2019. The basis adjustment associated with the open last-of-layer relationship was a $210 million asset as of September 30, 2020, and a $91 million asset as of December 31, 2019, which would be allocated across the entire remaining closed pool upon termination or maturity of the hedge relationship. The amount that is identified as the last of layer in the discontinued hedge relationship was $17.5 billion at September 30, 2020, and $12.8 billion at December 31, 2019. The basis adjustment associated with the discontinued last-of-layer relationship was a $67 million asset and $43 million asset as of September 30, 2020, and December 31, 2019, respectively, which was allocated across the entire remaining pool upon termination of the hedge relationship.
Statement of Comprehensive Income Presentation
The following table summarizes the location and amounts of gains and losses on derivative instruments not designated as accounting hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Gain (loss) recognized in earnings									
Interest rate contracts									
Gain on mortgage and automotive loans, net		$	7 			$	— 			$	(8)			$	1 		
Other income, net of losses		(4)			— 			(27)			(7)		
Total interest rate contracts		3 			— 			(35)			(6)		
Foreign exchange contracts									
	
Other income, net of losses		(4)			1 			(1)			(2)		
	
Total foreign exchange contracts		(4)			1 			(1)			(2)		
Total (loss) gain recognized in earnings		$	(1)			$	1 			$	(36)			$	(8)		
57

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following tables summarize the location and amounts of gains and losses on derivative instruments designated as fair value and cash flow hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Interest and fees on finance receivables and loans		Interest and dividends on investment securities and other earning assets		Interest on deposits		Interest on long-term debt	
Three months ended September 30, ($ in millions)	2020	2019		2020	2019		2020	2019		2020	2019	
(Loss) gain on fair value hedging relationships												
Interest rate contracts												
Hedged fixed-rate unsecured debt	$	— 		$	— 			$	— 		$	— 			$	— 		$	— 			$	(2)		$	(36)		
Derivatives designated as hedging instruments on fixed-rate unsecured debt	— 		— 			— 		— 			— 		— 			2 		36 		

Hedged available-for-sale securities	— 		— 			(2)		17 			— 		— 			— 		— 		
Derivatives designated as hedging instruments on available-for-sale securities	— 		— 			2 		(17)			— 		— 			— 		— 		
Hedged fixed-rate consumer automotive loans	(45)		32 			— 		— 			— 		— 			— 		— 		
Derivatives designated as hedging instruments on fixed-rate consumer automotive loans	45 		(32)			— 		— 			— 		— 			— 		— 		
Total gain on fair value hedging relationships	— 		— 			— 		— 			— 		— 			— 		— 		
Gain (loss) on cash flow hedging relationships												
Interest rate contracts												
Hedged variable-rate commercial loans												
Reclassified from accumulated other comprehensive income into income	23 		— 			— 		— 			— 		— 			— 		— 		
Hedged deposit liabilities												
Reclassified from accumulated other comprehensive income into income	— 		— 			— 		— 			(2)		(2)			— 		— 		

Hedged variable-rate borrowings												
Reclassified from accumulated other comprehensive income into income	— 		— 			— 		— 			— 		— 			— 		4 		

Total gain (loss) on cash flow hedging relationships	$	23 		$	— 			$	— 		$	— 			$	(2)		$	(2)			$	— 		$	4 		
Total amounts presented in the Condensed Consolidated Statement of Comprehensive Income	$	1,602 		$	1,859 			$	173 		$	237 			$	452 		$	658 			$	309 		$	378 		
58

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

	Interest and fees on finance receivables and loans		Interest and dividends on investment securities and other earning assets		Interest on deposits		Interest on long-term debt	
Nine months ended September 30, ($ in millions)	2020	2019		2020	2019		2020	2019		2020	2019	
(Loss) gain on fair value hedging relationships												
Interest rate contracts												
Hedged fixed-rate unsecured debt	$	— 		$	— 			$	— 		$	— 			$	— 		$	— 			$	(172)		$	(55)		
Derivatives designated as hedging instruments on fixed-rate unsecured debt	— 		— 			— 		— 			— 		— 			172 		55 		

Hedged available-for-sale securities	— 		— 			43 		29 			— 		— 			— 		— 		
Derivatives designated as hedging instruments on available-for-sale securities	— 		— 			(43)		(29)			— 		— 			— 		— 		
Hedged fixed-rate consumer automotive loans	180 		173 			— 		— 			— 		— 			— 		— 		
Derivatives designated as hedging instruments on fixed-rate consumer automotive loans	(180)		(173)			— 		— 			— 		— 			— 		— 		
Total gain on fair value hedging relationships	— 		— 			— 		— 			— 		— 			— 		— 		
Gain (loss) on cash flow hedging relationships												
Interest rate contracts												
Hedged variable rate commercial loans												
Reclassified from accumulated other comprehensive income into income	48 		— 			— 		— 			— 		— 			— 		— 		
Hedged deposit liabilities												
Reclassified from accumulated other comprehensive income into income		— 			— 		— 			(7)		(1)			— 		— 		

Hedged variable-rate borrowings												
Reclassified from accumulated other comprehensive income into income	— 		— 			— 		— 			— 		— 			— 		12 		

Total gain (loss) on cash flow hedging relationships	$	48 		$	— 			$	— 		$	— 			$	(7)		$	(1)			$	— 		$	12 		
Total amounts presented in the Condensed Consolidated Statement of Comprehensive Income	$	4,974 		$	5,526 			$	596 		$	721 			$	1,585 		$	1,901 			$	975 		$	1,204 		
During the next 12 months, we estimate $79 million of gains will be reclassified into pretax earnings from derivatives designated as cash flow hedges.
The following tables summarize the location and amounts of gains and losses related to interest and amortization on derivative instruments designated as fair value and cash flow hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Interest and fees on finance receivables and loans		Interest and dividends on investment securities and other earning assets		Interest on long-term debt	
Three months ended September 30, ($ in millions)	2020	2019		2020	2019		2020	2019	
Gain (loss) on fair value hedging relationships									
Interest rate contracts									
Amortization of deferred unsecured debt basis adjustments	$	— 		$	— 			$	— 		$	— 			$	3 		$	6 		
	
Amortization of deferred secured debt basis adjustments (FHLB advances)	— 		— 			— 		— 			(5)		(6)		
	
Amortization of deferred basis adjustments of available-for-sale securities	— 		— 			(2)		(1)			— 		— 		
Interest for qualifying accounting hedges of available-for-sale securities	— 		— 			(2)		2 			— 		— 		
Amortization of deferred loan basis adjustments	(12)		(8)			— 		— 			— 		— 		
Interest for qualifying accounting hedges of consumer automotive loans held-for-investment	(37)		10 			— 		— 			— 		— 		
Total (loss) gain on fair value hedging relationships	$	(49)		$	2 			$	(4)		$	1 			$	(2)		$	— 		

	

59

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

	Interest and fees on finance receivables and loans		Interest and dividends on investment securities and other earning assets		Interest on long-term debt	
Nine months ended September 30, ($ in millions)	2020	2019		2020	2019		2020	2019	
Gain (loss) on fair value hedging relationships									
Interest rate contracts									
Amortization of deferred unsecured debt basis adjustments	$	— 		$	— 			$	— 		$	— 			$	11 		$	18 		
	
Amortization of deferred secured debt basis adjustments (FHLB advances)	— 		— 			— 		— 			(17)		(17)		
	
Amortization of deferred basis adjustments of available-for-sale securities	— 		— 			(5)		(2)			— 		— 		
Interest for qualifying accounting hedges of available-for-sale securities	— 		— 			(4)		2 			— 		— 		
Amortization of deferred loan basis adjustments	(38)		(21)			— 		— 			— 		— 		
Interest for qualifying accounting hedges of consumer automotive loans held-for-investment	(84)		27 			— 		— 			— 		— 		
	
Total (loss) gain on fair value hedging relationships	(122)		6 			(9)		— 			(6)		1 		
Gain on cash flow hedging relationships									
Interest rate contracts									
Interest for qualifying accounting hedges of variable-rate borrowings	1 		— 			— 		— 			— 		— 		

Total gain on cash flow hedging relationships	$	1 		$	— 			$	— 		$	— 			$	— 		$	— 		
The following table summarizes the effect of cash flow hedges on accumulated other comprehensive income.

	Three months ended September 30,		Nine months ended September 30,	
($ in millions)	2020		2019		2020		2019	
Interest rate contracts								
(Loss) gain recognized in other comprehensive income	$	(21)			$	2 			$	129 			$	14 		
The following table summarizes the effect of net investment hedges on accumulated other comprehensive income and the Condensed Consolidated Statement of Comprehensive Income.

	Three months ended September 30,		Nine months ended September 30,	
($ in millions)	2020		2019		2020		2019	
Foreign exchange contracts (a) (b)								
(Loss) gain recognized in other comprehensive income	$	(4)			$	2 			$	3 			$	(3)		
(a)There were no amounts excluded from effectiveness testing for the three months and nine months ended September 30, 2020, or 2019.
(b)Gains and losses reclassified from accumulated other comprehensive income are reported as other income, net of losses, in the Condensed Consolidated Statement of Comprehensive Income. There were no amounts reclassified for the three months and nine months ended September 30, 2020, or 2019.

19.    Income Taxes
We recognized total income tax expense from continuing operations of $156 million and $159 million for the three months and nine months ended September 30, 2020, respectively, compared to $119 million and $140 million for the same periods in 2019.
The increase in income tax expense for the three months ended September 30, 2020, compared to the same period in 2019, was primarily due to the tax effects of an increase in pretax earnings. The increase in income tax expense for the nine months ended September 30, 2020, compared to the same period in 2019, was primarily due to a nonrecurring tax benefit of approximately $200 million from the release of valuation allowance on foreign tax credit carryforwards during the second quarter of 2019, and a nondeductible goodwill impairment during the second quarter of 2020, offset by the tax effects of a decrease in pretax earnings. The valuation allowance release resulted in a significant variation in the customary relationship between pretax income and income tax expense for the nine months ended September 30, 2019.
60

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain foreign tax credit carryforwards and state net operating loss carryforwards will not be realized. In recognition of this risk, we continue to provide a partial valuation allowance on the deferred tax assets relating to these carryforwards and it is reasonably possible that the valuation allowance may change in the next 12 months.

20.    Fair Value
Fair Value Measurements
For purposes of this disclosure, fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date under current market conditions. Fair value is based on the assumptions we believe market participants would use when pricing an asset or liability. Additionally, entities are required to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring the fair value of a liability.
Judgment is used in estimating inputs to our internal valuation models used to estimate our Level 3 fair value measurements. Level 3 inputs such as interest rate movements, prepayment speeds, credit losses, and discount rates are inherently difficult to estimate. Changes to these inputs can have a significant effect on fair value measurements and amounts that could be realized.
GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels.
Level 1    Inputs are quoted prices in active markets for identical assets or liabilities at the measurement date. Additionally, the entity must have the ability to access the active market, and the quoted prices cannot be adjusted by the entity.
Level 2    Inputs are other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full term of the assets or liabilities.
Level 3    Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.
The following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models, and significant assumptions utilized.
•Equity Securities — We hold various marketable equity securities measured at fair value with changes in fair value recognized in net income. Measurements based on observable market prices are classified as Level 1.
•Available-for-sale securities — We carry our available-for-sale securities at fair value based on external pricing sources. We classify our securities as Level 1 when fair value is determined using quoted prices available for the same instruments trading in active markets. We classify our securities as Level 2 when fair value is determined using prices for similar instruments trading in active markets. We perform pricing validation procedures for our available-for-sale securities.
•Interests retained in financial asset sales — We retain certain noncertificated interests retained from the sale of automotive finance receivables. Due to inactivity in the market, valuations are based on internally developed discounted cash flow models (an income approach) that use a market-based discount rate; therefore, we classified these assets as Level 3. The valuation considers recent market transactions, experience with similar assets, current business conditions, and analysis of the underlying collateral, as available. To estimate cash flows, we utilize various significant assumptions, including market observable inputs (for example, forward interest rates) and internally developed inputs (for example, prepayment speeds, delinquency levels, and credit losses).
•Derivative instruments — We enter into a variety of derivative financial instruments as part of our risk-management strategies. Certain of these derivatives are exchange traded, such as equity options. To determine the fair value of these instruments, we utilize the quoted market prices for those particular derivative contracts; therefore, we classified these contracts as Level 1.
We also execute OTC and centrally cleared derivative contracts, such as interest rate swaps, swaptions, foreign-currency denominated forward contracts, caps, floors, and agency to-be-announced securities. We utilize third-party-developed valuation models that are widely accepted in the market to value these derivative contracts. The specific terms of the contract and market observable inputs (such as interest rate forward curves, interpolated volatility assumptions, or equity pricing) are used in the model. We classified these derivative contracts as Level 2 because all significant inputs into these models were market observable.
61

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
We also enter into interest rate lock commitments and forward-sale commitments that are executed as part of our mortgage business, certain of which meet the accounting definition of a derivative and therefore are recorded as derivatives on our Condensed Consolidated Balance Sheet. Because these derivatives are valued using internal pricing models with unobservable inputs, they are classified as Level 3.
We are required to consider all aspects of nonperformance risk, including our own credit standing, when measuring fair value of a liability. We reduce credit risk on the majority of our derivatives by entering into legally enforceable agreements that enable the posting and receiving of collateral associated with the fair value of our derivative positions on an ongoing basis. In the event that we do not enter into legally enforceable agreements that enable the posting and receiving of collateral, we will consider our credit risk and the credit risk of our counterparties in the valuation of derivative instruments through a CVA, if warranted. The CVA calculation would utilize the credit default swap spreads of the counterparty.
Recurring Fair Value
The following tables display the assets and liabilities measured at fair value on a recurring basis including financial instruments elected for 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.
																											
		Recurring fair value measurements	
September 30, 2020 ($ in millions)		Level 1		Level 2		Level 3		Total	
Assets									
Investment securities									
Equity securities (a)		$	621 			$	— 			$	6 			$	627 		
Available-for-sale securities									
Debt securities									
U.S. Treasury and federal agencies		806 			— 			— 			806 		
U.S. States and political subdivisions		— 			970 			7 			977 		
Foreign government		17 			179 			— 			196 		
Agency mortgage-backed residential		— 			20,495 			— 			20,495 		
Mortgage-backed residential		— 			3,036 			— 			3,036 		
Agency mortgage-backed commercial		— 			2,244 			— 			2,244 		
	
Asset-backed		— 			389 			— 			389 		
Corporate debt		— 			1,846 			— 			1,846 		
Total available-for-sale securities		823 			29,159 			7 			29,989 		
Mortgage loans held-for-sale (b)		— 			— 			156 			156 		
	
Finance receivables and loans, net									
Consumer other (b)		— 			— 			8 			8 		
	
Derivative contracts in a receivable position									
Interest rate		— 			— 			18 			18 		
Foreign currency		— 			3 			— 			3 		
Other		2 			— 			— 			2 		
Total derivative contracts in a receivable position		2 			3 			18 			23 		
	
Total assets		$	1,446 			$	29,162 			$	195 			$	30,803 		
Liabilities									
Accrued expenses and other liabilities									
Derivative contracts in a payable position									

Other		$	4 			— 			— 			$	4 		
Total derivative contracts in a payable position		4 			— 			— 			4 		
	
Total liabilities		$	4 			$	— 			$	— 			$	4 		
(a)Our direct investment in any one industry did not exceed 11%.
(b)Carried at fair value due to fair value option elections.
62

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

		Recurring fair value measurements	
December 31, 2019 ($ in millions)		Level 1		Level 2		Level 3		Total	
Assets									
Investment securities									
Equity securities (a)		$	608 			$	— 			$	8 			$	616 		
Available-for-sale securities									
Debt securities									
U.S. Treasury and federal agencies		2,047 			1 			— 			2,048 		
U.S. States and political subdivisions		— 			639 			2 			641 		
Foreign government		15 			171 			— 			186 		
Agency mortgage-backed residential		— 			21,404 			— 			21,404 		
Mortgage-backed residential		— 			2,850 			— 			2,850 		
Agency mortgage-backed commercial		— 			1,382 			— 			1,382 		
Mortgage-backed commercial		— 			42 			— 			42 		
Asset-backed		— 			368 			— 			368 		
Corporate debt		— 			1,363 			— 			1,363 		
Total available-for-sale securities		2,062 			28,220 			2 			30,284 		
Mortgage loans held-for-sale (b)		— 			— 			30 			30 		
Finance receivables and loans, net									
Consumer other (b)		— 			— 			11 			11 		
Interests retained in financial asset sales		— 			— 			2 			2 		
Derivative contracts in a receivable position									
Interest rate		— 			62 			2 			64 		

Total derivative contracts in a receivable position		— 			62 			2 			64 		
	
Total assets		$	2,670 			$	28,282 			$	55 			$	31,007 		
Liabilities									
Accrued expenses and other liabilities									
Derivative contracts in a payable position									
Foreign currency		$	— 			$	5 			$	— 			$	5 		

Total derivative contracts in a payable position		— 			5 			— 			5 		
Total liabilities		$	— 			$	5 			$	— 			$	5 		
(a)Our investment in any one industry did not exceed 13%.
(b)Carried at fair value due to fair value option elections.
63

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
The following tables present the reconciliation for all Level 3 assets and liabilities measured at fair value on a recurring basis. There were no transfers into or out of Level 3 in the periods presented. 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	
		Net realized/unrealized gains					Fair value at September 30, 2020	Net unrealized gains still held at September 30, 2020	
($ in millions)	Fair value at July 1, 2020	included in earnings		included in OCI	Purchases	Sales	Issuances	Settlements		included in earnings	included in OCI	
Assets												
Investment securities												
Equity securities	$	5 		$	1 		(a)	$	— 		$	— 		$	— 		$	— 		$	— 		$	6 		$	1 		$	— 		
Available-for-sale securities	5 		— 			— 		2 		— 		— 		— 		7 		— 		— 		
Mortgage loans held-for-sale (b)	91 		22 		(c)	— 		854 		(811)		— 		— 		156 		— 		— 		
Finance receivables and loans, net (b)	8 		2 		(d)	— 		5 		— 		— 		(7)		8 		— 		— 		
Other assets												
Interests retained in financial asset sales	1 		— 			— 		— 		— 		— 		(1)		— 		— 		— 		
Derivative assets	12 		6 		(c)	— 		— 		— 		— 		— 		18 		6 		— 		
Total assets	$	122 		$	31 			$	— 		$	861 		$	(811)		$	— 		$	(8)		$	195 		$	7 		$	— 		
(a)Reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.
(b)Carried at fair value due to fair value option elections.
(c)Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.
(d)Reported as interest and fees on finance receivables and loans and other income, net of losses, in the Condensed Consolidated Statement of Comprehensive Income.

	Level 3 recurring fair value measurements	
		Net realized/unrealized (losses) gains					Fair value at September 30, 2019	Net unrealized losses still held at September 30, 2019	
($ in millions)	Fair value at July 1, 2019	included in earnings		included in OCI	Purchases	Sales	Issuances	Settlements		included in earnings	included in OCI	
Assets												
	
Equity securities	$	9 		$	(1)		(a)	$	— 		$	— 		$	— 		$	— 		$	— 		$	8 		$	(1)		$	— 		
	
Mortgage loans held-for-sale (b)	22 		3 		(c)	— 		222 		(209)		— 		— 		38 		— 		— 		
	
Other assets												
Interests retained in financial asset sales	3 		— 			— 		— 		— 		— 		— 		3 		— 		— 		
Derivative assets, net of derivative liabilities	2 		— 			— 		— 		— 		— 		— 		2 		— 		— 		
Total assets	$	36 		$	2 			$	— 		$	222 		$	(209)		$	— 		$	— 		$	51 		$	(1)		$	— 		
(a)Reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.
(b)Carried at fair value due to fair value option elections.
(c)Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.
64

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

	Level 3 recurring fair value measurements	
		Net realized/unrealized (losses) gains					Fair value at September 30, 2020	Net unrealized (losses) gains still held at September 30, 2020	
($ in millions)	Fair value at Jan. 1, 2020	included in earnings		included in OCI	Purchases	Sales	Issuances	Settlements		included in earnings	included in OCI	
Assets												
Investment securities												
Equity securities	$	8 		$	(2)		(a)	$	— 		$	— 		$	— 		$	— 		$	— 		$	6 		$	(2)		$	— 		
Available-for-sale securities	2 		— 			— 		5 		— 		— 		— 		7 		— 		— 		
Mortgage loans held-for-sale (b)	30 		35 		(c)	— 		1,832 		(1,741)		— 		— 		156 		2 		— 		
Finance receivables and loans, net (b)	11 		2 		(d)	— 		14 		— 		— 		(19)		8 		— 		— 		
Other assets												
Interests retained in financial asset sales	2 		— 			— 		— 		— 		— 		(2)		— 		— 		— 		
Derivative assets	2 		16 		(c)	— 		— 		— 		— 		— 		18 		16 		— 		
Total assets	$	55 		$	51 			$	— 		$	1,851 		$	(1,741)		$	— 		$	(21)		$	195 		$	16 		$	— 		
(a)Reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.
(b)Carried at fair value due to fair value option elections.
(c)Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.
(d)Reported as interest and fees on finance receivables and loans and other income, net of losses in the Condensed Consolidated Statement of Comprehensive Income.

	Level 3 recurring fair value measurements	
		Net realized/unrealized gains					Fair value at September 30, 2019	Net unrealized gains still held at September 30, 2019	
($ in millions)	Fair value at Jan. 1, 2019	included in earnings		included in OCI	Purchases	Sales	Issuances	Settlements		included in earnings	included in OCI	
Assets												
	
Equity securities	$	7 		$	5 		(a)	$	— 		$	— 		$	— 		$	— 		$	(4)		$	8 		$	5 		$	— 		
	
Mortgage loans held-for-sale (b)	8 		7 		(c)	— 		468 		(445)		— 		— 		38 		— 		— 		
	
Other assets												
Interests retained in financial asset sales	4 		— 			— 		— 		— 		— 		(1)		3 		— 		— 		
Derivative assets, net of derivative liabilities	— 		2 		(c)	— 		— 		— 		— 		— 		2 		2 		— 		
Total assets	$	19 		$	14 			$	— 		$	468 		$	(445)		$	— 		$	(5)		$	51 		$	7 		$	— 		
(a)Reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.
(b)Carried at fair value due to fair value option elections.
(c)Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.
65

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Nonrecurring Fair Value
We may be required to measure certain assets and liabilities at fair value from time to time. These periodic fair value measures typically result from the application of lower-of-cost or fair value accounting or certain impairment measures. These items would constitute nonrecurring fair value measures.
The following tables display assets and liabilities measured at fair value on a nonrecurring basis and still held at September 30, 2020, and December 31, 2019, respectively. The amounts are generally as of the end of each period presented, which approximate the fair value measurements that occurred during each period.
																																										
		Nonrecurring fair value measurements		Lower-of-cost or fair value reserve, valuation reserve, or cumulative adjustments		Total gain (loss) included in earnings		
September 30, 2020 ($ in millions)		Level 1		Level 2		Level 3		Total						
Assets														

	
	
Loans held-for-sale, net		$	— 			$	— 			$	285 			$	285 			$	— 			n/m	(a)	

	

	
Commercial finance receivables and loans, net (b)														
Automotive		— 			— 			13 			13 			(11)			n/m	(a)	
Other		— 			— 			59 			59 			(13)			n/m	(a)	
Total commercial finance receivables and loans, net		— 			— 			72 			72 			(24)			n/m	(a)	
Other assets														
Nonmarketable equity investments		— 			21 			5 			26 			15 			n/m	(a)	
	
Repossessed and foreclosed assets (c)		— 			— 			6 			6 			(1)			n/m	(a)	
	
Total assets		$	— 			$	21 			$	368 			$	389 			$	(10)			n/m		
n/m = not meaningful
(a)We consider the applicable valuation allowance, loan loss allowance, or cumulative impairment to be the most relevant indicator of the impact on earnings caused by the fair value measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the respective valuation reserve, loan loss allowance, or cumulative adjustment.
(b)Represents the portion of the portfolio specifically impaired during 2020. The related valuation allowance represents the cumulative adjustment to fair value of those specific receivables.
(c)The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.

		Nonrecurring fair value measurements		Lower-of-cost or fair value reserve, valuation reserve, or cumulative adjustments		Total gain (loss) included in earnings		
December 31, 2019 ($ in millions)		Level 1		Level 2		Level 3		Total						
Assets														
Loans held-for-sale, net		$	— 			$	— 			$	128 			$	128 			$	— 			n/m	(a)	
Commercial finance receivables and loans, net (b)														
Automotive		— 			— 			64 			64 			(12)			n/m	(a)	
Other		— 			— 			45 			45 			(21)			n/m	(a)	
	
Total commercial finance receivables and loans, net		— 			— 			109 			109 			(33)			n/m	(a)	
Other assets														
Nonmarketable equity investments		— 			5 			7 			12 			— 			n/m	(a)	
Equity-method investments		— 			— 			4 			4 			(6)			n/m	(a)	
Repossessed and foreclosed assets (c)		— 			— 			12 			12 			(1)			n/m	(a)	
	
Total assets		$	— 			$	5 			$	260 			$	265 			$	(40)			n/m		
n/m = not meaningful
(a)We consider the applicable valuation allowance, loan loss allowance, or cumulative impairment to be the most relevant indicator of the impact on earnings caused by the fair value measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the respective valuation reserve, loan loss allowance, or cumulative adjustment.
(b)Represents the portion of the portfolio specifically impaired during 2019. The related valuation allowance represents the cumulative adjustment to fair value of those specific receivables.
(c)The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.
66

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Fair Value Option for Financial Assets
We elected the fair value option for an insignificant amount of conforming mortgage loans held-for-sale and certain acquired unsecured consumer finance receivables. We elected the fair value option for conforming mortgage loans held-for-sale to mitigate earnings volatility by better matching the accounting for the assets with the related derivatives. We elected the fair value option for certain acquired unsecured consumer finance receivables to mitigate the complexities of recording these loans at amortized cost. Our intent in electing fair value measurement was to mitigate a divergence between accounting gains or losses and economic exposure for certain assets and liabilities.
Fair Value of Financial Instruments
The following table presents the carrying and estimated fair value of financial instruments, except for those recorded at fair value on a recurring basis presented in the previous section of this note titled Recurring Fair Value. When possible, we use quoted market prices to determine fair value. Where quoted market prices are not available, the fair value is internally derived based on appropriate valuation methodologies with respect to the amount and timing of future cash flows and estimated discount rates. However, considerable judgment is required in interpreting current market data to develop the market assumptions and inputs necessary to estimate fair value. As such, the actual amount received to sell an asset or the amount paid to settle a liability could differ from our estimates. Fair value information presented herein was based on information available at September 30, 2020, and December 31, 2019.
																														
			Estimated fair value	
($ in millions)	Carrying value		Level 1		Level 2		Level 3		Total	
September 30, 2020										
Financial assets										
Held-to-maturity securities	$	1,255 			$	— 			$	1,336 			$	— 			$	1,336 		
Loans held-for-sale, net	285 			— 			— 			285 			285 		
Finance receivables and loans, net	114,641 			— 			— 			121,363 			121,363 		
FHLB/FRB stock (a)	843 			— 			843 			— 			843 		
Financial liabilities										
Deposit liabilities	$	57,616 			$	— 			$	— 			$	58,505 			$	58,505 		
Short-term borrowings	3,032 			— 			— 			3,033 			3,033 		
Long-term debt	25,704 			— 			19,763 			8,909 			28,672 		
December 31, 2019										
Financial assets										
Held-to-maturity securities	$	1,568 			$	— 			$	1,600 			$	— 			$	1,600 		
Loans held-for-sale, net	128 			— 			— 			128 			128 		
Finance receivables and loans, net	126,957 			— 			— 			130,837 			130,837 		
FHLB/FRB stock (a)	1,150 			— 			1,150 			— 			1,150 		
Financial liabilities										
Deposit liabilities	$	60,146 			$	— 			$	— 			$	60,678 			$	60,678 		
Short-term borrowings	5,531 			— 			— 			5,532 			5,532 		
Long-term debt	34,027 			— 			22,789 			14,138 			36,927 		
(a)Included in other assets on our Condensed Consolidated Balance Sheet.

21.    Offsetting Assets and Liabilities
Our derivative contracts and repurchase/reverse repurchase transactions are supported by qualifying master netting and master repurchase agreements. These agreements are legally enforceable bilateral agreements that (i) create a single legal obligation for all individual transactions covered by the agreement to the nondefaulting entity upon an event of default of the counterparty, including bankruptcy, insolvency, or similar proceeding, and (ii) provide the nondefaulting entity the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set off collateral promptly upon an event of default of the counterparty.
To further mitigate the risk of counterparty default related to derivative instruments, we maintain collateral agreements with certain counterparties. The agreements require both parties to maintain collateral in the event the fair values of the derivative financial instruments meet established thresholds. In the event that either party defaults on the obligation, the secured party may seize the collateral. Generally, our collateral arrangements are bilateral such that we and the counterparty post collateral for the obligation. Contractual terms provide for standard and customary exchange of collateral based on changes in the market value of the outstanding derivatives. A party posts additional collateral when their obligation rises or removes collateral when it falls, such that the net replacement cost of the nondefaulting party is covered in the event of counterparty default.
67

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
In certain instances, as it relates to our derivative instruments, we have the option to report derivative assets and liabilities as well as assets and liabilities associated with cash collateral received or delivered that is governed by a master netting agreement on a net basis as long as certain qualifying criteria are met. Similarly, for our repurchase/reverse repurchase transactions, we have the option to report recognized assets and liabilities subject to a master netting agreement on a net basis if certain qualifying criteria are met. At September 30, 2020, these instruments are reported as gross assets and gross liabilities on the Condensed Consolidated Balance Sheet. For additional information on derivative instruments and hedging activities, refer to Note 18.
The composition of offsetting derivative instruments, financial assets, and financial liabilities was as follows.

		Gross amounts of recognized assets/liabilities		Gross amounts offset on the Condensed Consolidated Balance Sheet		Net amounts of assets/liabilities presented on the Condensed Consolidated Balance Sheet		Gross amounts not offset on the Condensed Consolidated Balance Sheet			
($ in millions)								Financial instruments		Collateral (a) (b) (c)		Net amount	
September 30, 2020													
Assets													
Derivative assets in net asset positions		$	3 			$	— 			$	3 			$	— 			$	(3)			$	— 		
Derivative assets in net liability positions		2 			— 			2 			(2)			— 			— 		
Derivative assets with no offsetting arrangements		18 			— 			18 			— 			— 			18 		
Total assets		$	23 			$	— 			$	23 			$	(2)			$	(3)			$	18 		

Liabilities													
Derivative liabilities in net liability positions		$	4 			$	— 			$	4 			$	(2)			$	(1)			$	1 		

	
	
Total liabilities		$	4 			$	— 			$	4 			$	(2)			$	(1)			$	1 		
December 31, 2019													
Assets													
Derivative assets in net asset positions		$	62 			$	— 			$	62 			$	— 			$	(36)			$	26 		
Derivative assets with no offsetting arrangements		2 			— 			2 			— 			— 			2 		
Total assets		$	64 			$	— 			$	64 			$	— 			$	(36)			$	28 		
Liabilities													
Derivative liabilities in net liability positions		$	5 			$	— 			$	5 			$	— 			$	(4)			$	1 		
	
Total liabilities		$	5 			$	— 			$	5 			$	— 			$	(4)			$	1 		
(a)Financial collateral received/pledged shown as a balance based on the sum of all net asset and liability positions between Ally and each individual derivative counterparty.
(b)Amounts disclosed are limited to the financial asset or liability balance and, accordingly, exclude excess collateral received or pledged and noncash collateral received. There was $29 million of noncash derivative collateral pledged to us that was excluded at December 31, 2019. We do not record such collateral received on our Condensed Consolidated Balance Sheet unless certain conditions are met.
(c)Certain agreements grant us the right to sell or pledge the noncash assets we receive as collateral. Noncash collateral pledged to us where the agreement grants us the right to sell or pledge the underlying assets had a fair value of $29 million at December 31, 2019. We have not sold or pledged any of the noncash collateral received under these agreements.
(d)For additional information on securities sold under agreements to repurchase, refer to Note 13.

22.    Segment Information
Operating segments are defined as components of an enterprise that engage in business activity from which revenues are earned and expenses incurred for which discrete financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance.
We report our results of operations on a business-line basis through four operating segments: Automotive Finance operations, Insurance operations, Mortgage Finance operations, and Corporate Finance operations, with the remaining activity reported in Corporate and Other. The operating segments are determined based on the products and services offered, and reflect the manner in which financial information is currently evaluated by management. The following is a description of each of our reportable operating segments.
Automotive Finance operations — One of the largest full-service automotive finance operations in the United States providing automotive financing services to consumers, automotive dealers, companies, and municipalities. Our automotive finance services
68

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
include providing retail installment sales contracts, loans and operating leases, offering term loans to dealers, financing dealer floorplans and other lines of credit to dealers, warehouse lines to automotive retailers, fleet financing, providing financing to companies and municipalities for the purchase or lease of vehicles, and vehicle-remarketing services.
Insurance operations — A complementary automotive-focused business offering both consumer finance protection and insurance products sold primarily through the automotive dealer channel, and commercial insurance products sold directly to dealers. As part of our focus on offering dealers a broad range of consumer financial and insurance products, we provide VSCs, VMCs, and GAP products. We also underwrite select commercial insurance coverages, which primarily insure dealers’ vehicle inventory.
Mortgage Finance operations — Consists of the management of held-for-investment and held-for sale consumer mortgage loan portfolios. Our held-for-investment loan portfolio includes bulk purchases of high-quality jumbo and LMI mortgage loans originated by third parties. Our direct-to-consumer mortgage offering, referred to as Ally Home, consists of a variety of jumbo and conforming fixed- and adjustable-rate mortgage products with the assistance of a third-party fulfillment provider. Jumbo mortgage loans are generally held on our balance sheet and are accounted for as held-for-investment. Conforming mortgage loans are generally originated as held-for-sale and then sold to the fulfillment provider, and we retain no mortgage servicing rights associated with those loans that are sold.
Corporate Finance operations — Primarily provides senior secured leveraged cash flow and asset-based loans to mostly U.S.-based middle-market companies, with a focus on businesses owned by private equity sponsors. These loans are typically used for leveraged buyouts, mergers and acquisitions, debt refinancing, restructurings, and working capital. We also provide nonbank wholesale-funded managers with partial funding for their direct-lending activities, which is principally leveraged loans. Additionally, we offer a commercial real estate product to serve companies in the healthcare industry.
Corporate and Other primarily consists of centralized corporate treasury activities, such as management of the cash and corporate investment securities and loan portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments, original issue discount, and the residual impacts of our corporate FTP and treasury ALM activities. Corporate and Other also includes certain equity investments, which primarily consist of FHLB and FRB stock, the management of our legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, and reclassifications and eliminations between the reportable operating segments. Financial results related to Ally Invest, our online brokerage operations, are currently included within Corporate and Other. Additionally, beginning in October 2019 with the acquisition of Health Credit Services, financial information related to Ally Lending, our point-of-sale financing business, is included within Corporate and Other.
We utilize an FTP methodology for the majority of our business operations. The FTP methodology assigns charge rates and credit rates to classes of assets and liabilities based on expected duration and the benchmark rate curve plus an assumed credit spread. Matching duration allocates interest income and interest expense to these reportable segments so their respective results are insulated from interest rate risk. This methodology is consistent with our ALM practices, which includes managing interest rate risk centrally at a corporate level. The net residual impact of the FTP methodology is included within the results of Corporate and Other.
The information presented in our reportable operating segments is based in part on internal allocations, which involve management judgment.
69

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
Financial information for our reportable operating segments is summarized as follows.

Three months ended September 30, ($ in millions)		Automotive Finance operations		Insurance operations		Mortgage Finance operations		Corporate Finance operations		Corporate and Other		Consolidated (a)	
2020													
Net financing revenue (loss) and other interest income		$	1,102 			$	8 			$	30 			$	75 			$	(15)			$	1,200 		
Other revenue		61 			338 			36 			9 			40 			484 		
Total net revenue		1,163 			346 			66 			84 			25 			1,684 		
Provision for credit losses		128 			— 			— 			1 			18 			147 		
Total noninterest expense		469 			268 			40 			23 			105 			905 		
Income (loss) from continuing operations before income tax expense		$	566 			$	78 			$	26 			$	60 			$	(98)			$	632 		
Total assets		$	103,366 			$	8,944 			$	15,503 			$	5,995 			$	51,462 			$	185,270 		
2019													
Net financing revenue (loss) and other interest income		$	1,078 			$	14 			$	39 			$	60 			$	(3)			$	1,188 		
Other revenue		59 			289 			10 			9 			46 			413 		
Total net revenue		1,137 			303 			49 			69 			43 			1,601 		
Provision for credit losses		265 			— 			— 			3 			(5)			263 		
Total noninterest expense		443 			247 			38 			22 			88 			838 		
Income (loss) from continuing operations before income tax expense		$	429 			$	56 			$	11 			$	44 			$	(40)			$	500 		
Total assets		$	115,096 			$	8,478 			$	16,583 			$	5,275 			$	36,053 			$	181,485 		

	

	

(a)Net financing revenue and other interest income after the provision for credit losses totaled $1.1 billion and $925 million for the three months ended September 30, 2020, and September 30, 2019, respectively.

Nine months ended September 30, ($ in millions)		Automotive Finance operations		Insurance operations		Mortgage Finance operations		Corporate Finance operations		Corporate and Other		Consolidated (a)	
2020													
Net financing revenue (loss) and other interest income		$	3,131 			$	34 			$	98 			$	220 			$	(83)			$	3,400 		
Other revenue		148 			913 			65 			28 			151 			1,305 		
Total net revenue		3,279 			947 			163 			248 			68 			4,705 		
Provision for credit losses		1,150 			— 			4 			140 			43 			1,337 		
Total noninterest expense		1,407 			846 			113 			84 			360 			2,810 		
Income (loss) from continuing operations before income tax expense		$	722 			$	101 			$	46 			$	24 			$	(335)			$	558 		
Total assets		$	103,366 			$	8,944 			$	15,503 			$	5,995 			$	51,462 			$	185,270 		
2019													
Net financing revenue and other interest income		$	3,080 			$	41 			$	135 			$	175 			$	46 			$	3,477 		
Other revenue		188 			935 			16 			30 			105 			1,274 		
Total net revenue		3,268 			976 			151 			205 			151 			4,751 		
Provision for credit losses		707 			— 			2 			29 			(16)			722 		
Total noninterest expense		1,344 			775 			111 			73 			246 			2,549 		
Income (loss) from continuing operations before income tax expense		$	1,217 			$	201 			$	38 			$	103 			$	(79)			$	1,480 		
Total assets		$	115,096 			$	8,478 			$	16,583 			$	5,275 			$	36,053 			$	181,485 		

	

	

(a)Net financing revenue and other interest income after the provision for credit losses totaled $2.1 billion and $2.8 billion for the nine months ended September 30, 2020, and September 30, 2019, respectively.
70

Table of Contents
Notes to Condensed Consolidated Financial Statements (unaudited)
Ally Financial Inc. • Form 10-Q
23.    Contingencies and Other Risks
Ally and its subsidiaries, including Ally Bank, are or may be subject to potential liability in connection with pending or threatened legal proceedings and other matters. These legal matters may be formal or informal and include litigation and arbitration with one or more identified claimants, certified or purported class actions with yet-to-be-identified claimants, and regulatory or other governmental information-gathering requests, examinations, investigations, and enforcement proceedings. Our legal matters exist in varying stages of adjudication, arbitration, negotiation, or investigation and span our business lines and operations. Claims may be based in law or equity—such as those arising under contracts or in tort and those involving banking, consumer-protection, securities, tax, employment, and other laws—and some can present novel legal theories and allege substantial or indeterminate damages.
Ally and its subsidiaries, including Ally Bank, also are or may be subject to potential liability under other contingent exposures, including indemnification, tax, self-insurance, and other miscellaneous contingencies.
We accrue for a legal matter or other contingent exposure when a loss becomes probable and the amount of loss can be reasonably estimated. Accruals are evaluated each quarter and may be adjusted, upward or downward, based on our best judgment after consultation with counsel. No assurance exists that our accruals will not need to be adjusted in the future. When a probable or reasonably possible loss on a legal matter or other contingent exposure could be material to our consolidated financial condition, results of operations, or cash flows, we provide disclosure in this note as prescribed by ASC Topic 450, Contingencies. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for additional information related to our policy for establishing accruals.
The course and outcome of legal matters are inherently unpredictable. This is especially so when a matter is still in its early stages, the damages sought are indeterminate or unsupported, significant facts are unclear or disputed, novel questions of law or other meaningful legal uncertainties exist, a request to certify a proceeding as a class action is outstanding or granted, multiple parties are named, or regulatory or other governmental entities are involved. Other contingent exposures and their ultimate resolution are similarly unpredictable for reasons that can vary based on the circumstances.
As a result, we often are unable to determine how or when threatened or pending legal matters and other contingent exposures will be resolved and what losses may be incrementally and ultimately incurred. Actual losses may be higher or lower than any amounts accrued or estimated for those matters and other exposures, possibly to a significant degree.
Subject to the foregoing, based on our current knowledge and after consultation with counsel, we do not believe that the ultimate outcomes of currently threatened or pending legal matters and other contingent exposures are likely to be material to our consolidated financial condition after taking into account existing accruals. In light of the uncertainties inherent in these matters and other exposures, however, one or more of them could be material to our results of operations or cash flows during a particular reporting period, depending on factors such as the amount of the loss or liability and the level of our income for that period.
Descriptions of certain of our legal matters follow. We do not believe, however, that an estimate of reasonably possible losses or a range of reasonably possible losses—whether in excess of any related accrual or where no accrual exists—can be made for any of these matters for some or all of the reasons identified in the preceding paragraphs.
Purported and Certified Class Actions
In March 2016, Ally filed an action against two buyers of a motor vehicle—Ally Financial Inc. v. Alberta Haskins and David Duncan, Case No. 16JE-AC01713-01, in the Circuit Court of Jefferson County, Missouri—for the purpose of collecting the deficiency that remained due under the retail installment sales contract after the buyers had defaulted and the vehicle had been repossessed and disposed of. In March 2017, the buyers filed a second amended answer and counterclaim on behalf of nationwide and Missouri classes, arguing that Ally’s pre- and post-disposition notices had violated Article 9 of the Uniform Commercial Code as adopted in each State and other applicable jurisdiction. The request for relief included an indeterminate amount of actual, statutory, and punitive damages as well as fees, costs, interest, and other remedies. In May 2018, the circuit court certified the nationwide and Missouri classes and denied Ally’s motion for partial summary judgment. In September 2018, the case was reassigned to a different circuit-court judge, and in February 2019, Ally filed a motion to decertify the nationwide and Missouri classes. In November 2019, the circuit court denied Ally’s motion to decertify. In December 2019, Ally filed a petition with the Missouri Court of Appeals and then with the Missouri Supreme Court for a writ prohibiting the circuit court from taking further action other than vacating the order denying decertification, but each of those petitions was denied. In June 2020, the buyers on behalf of the certified nationwide and Missouri classes filed a motion for partial summary judgment on liability and damages, including statutory damages, the waiver of amounts due, and prejudgment interest. These damages, if awarded by the court, could be significant. In August 2020, Ally filed a petition for a writ of certiorari with the United States Supreme Court—Ally Financial Inc. v. Alberta Haskins et al., No. 20-177—requesting review of the Missouri Supreme Court’s order denying Ally’s petition for a writ of prohibition. We intend to vigorously defend against the claims made by the buyers, including their measure of alleged damages, and the circuit court’s certification of nationwide and Missouri classes.

24.    Subsequent Events
Declaration of Quarterly Dividend
On October 6, 2020, our Board declared a quarterly cash dividend of $0.19 per share on all common stock. The dividend is payable on November 13, 2020, to stockholders of record at the close of business on October 30, 2020.
71

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Notice about Forward-Looking Statements and Other Terms
From time to time we have made, and in the future will make, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “pursue,” “seek,” “continue,” “estimate,” “project,” “outlook,” “forecast,” “potential,” “target,” “objective,” “trend,” “plan,” “goal,” “initiative,” “priorities,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, or results.
This report, including any information incorporated by reference in this report, contains forward-looking statements. We also may make forward-looking statements in other documents that are filed or furnished with the SEC. In addition, we may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others.
All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. While no list of assumptions, risks, or uncertainties could be complete, some of the factors that may cause actual results or other future events or circumstances to differ from those in forward-looking statements include:
•evolving local, regional, national, or international business, economic, or political conditions;
•changes in laws or the regulatory or supervisory environment, including as a result of recent financial services legislation, regulation, or policies or changes in government officials or other personnel;
•changes in monetary, fiscal, or trade laws or policies, including as a result of actions by government agencies, central banks, or supranational authorities;
•changes in accounting standards or policies, including ASU 2016-13, Financial Instruments—Credit Losses;
•changes in the automotive industry or the markets for new or used vehicles, including the rise of vehicle sharing and ride hailing, the development of autonomous and alternative-energy vehicles, and the impact of demographic shifts on attitudes and behaviors toward vehicle ownership and use;
•disruptions or shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including financial or systemic shocks and volatility or changes in market liquidity, interest or currency rates, or valuations;
•uncertainty about the future of LIBOR and any negative impacts that could result;
•changes in business or consumer sentiment, preferences, or behavior, including spending, borrowing, or saving by businesses or households;
•changes in our corporate or business strategies, the composition of our assets, or the way in which we fund those assets;
•our ability to execute our business strategy for Ally Bank, including its digital focus;
•our ability to optimize our automotive finance and insurance businesses and to continue diversifying into and growing other consumer and commercial business lines, including mortgage lending, personal lending, corporate finance, brokerage, and wealth management;
•our ability to develop capital plans that will be approved by the FRB and our ability to implement them, including any payment of dividends or share repurchases;
•our ability to effectively manage capital or liquidity consistent with evolving business or operational needs, risk-management standards, and regulatory or supervisory requirements;
•our ability to cost-effectively fund our business and operations, including through deposits and the capital markets;
•changes in any credit rating assigned to Ally, including Ally Bank;
•adverse publicity or other reputational harm to us or our senior officers;
•our ability to develop, maintain, or market our products or services or to absorb unanticipated costs or liabilities associated with those products or services;
•our ability to innovate, to anticipate the needs of current or future customers, to successfully compete, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures;
72

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
•the continuing profitability and viability of our dealer-centric automotive finance and insurance businesses, especially in the face of competition from captive finance companies and their automotive manufacturing sponsors and challenges to the dealer’s role as intermediary between manufacturers and purchasers;
•our ability to appropriately underwrite loans that we originate or purchase and to otherwise manage credit risk;
•changes in the credit, liquidity, or other financial condition of our customers, counterparties, service providers, or competitors;
•our ability to effectively deal with economic, business, or market slowdowns or disruptions;
•judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to, us or the financial services industry;
•our ability to address stricter or heightened regulatory or supervisory requirements and expectations;
•the performance and availability of third-party service providers on whom we rely in delivering products and services to our customers and otherwise conducting our business and operations;
•our ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or infrastructure, including our capacity to withstand cyberattacks;
•the adequacy of our corporate governance, risk-management framework, compliance programs, or internal controls over financial reporting, including our ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk;
•the efficacy of our methods or models in assessing business strategies or opportunities or in valuing, measuring, estimating, monitoring, or managing positions or risk;
•our ability to keep pace with changes in technology that affect us or our customers, counterparties, service providers, or competitors;
•our ability to successfully make and integrate acquisitions;
•the adequacy of our succession planning for key executives or other personnel and our ability to attract or retain qualified employees;
•natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as adverse effects of the COVID-19 pandemic on us and our customers, counterparties, employees, and third-party service providers); or
•other assumptions, risks, or uncertainties described in the Risk Factors (Part II, Item 1A herein), Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item 2 herein), or the Notes to the Condensed Consolidated Financial Statements (Part I, Item 1 herein) in this Quarterly Report on Form 10-Q or described in any of the Company’s annual, quarterly or current reports.
Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.
Unless the context otherwise requires, the following definitions apply. The term “loans” means the following consumer and commercial products associated with our direct and indirect financing activities: loans, retail installment sales contracts, lines of credit, and other financing products excluding operating leases. The term “operating leases” means consumer- and commercial-vehicle lease agreements where Ally is the lessor and the lessee is generally not obligated to acquire ownership of the vehicle at lease-end or compensate Ally for the vehicle’s residual value. The terms “lend,” “finance,” and “originate” mean our direct extension or origination of loans, our purchase or acquisition of loans, or our purchase of operating leases as applicable. The term “consumer” means all consumer products associated with our loan and operating-lease activities and all commercial retail installment sales contracts. The term “commercial” means all commercial products associated with our loan activities, other than commercial retail installment sales contracts. The term “partnerships” means business arrangements rather than partnerships as defined by law.
73

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Selected Financial Data
The selected historical financial information set forth below should be read in conjunction with the MD&A, and our Condensed Consolidated Financial Statements and the notes thereto. The historical financial information presented may not be indicative of our future performance.
The following table presents selected Condensed Consolidated Statement of Comprehensive Income and earnings per common share data.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions, except per share data; shares in thousands)		2020		2019		2020		2019	
Total financing revenue and other interest income		$	2,145 			$	2,491 			$	6,674 			$	7,415 		
Total interest expense		770 			1,069 			2,599 			3,219 		
Net depreciation expense on operating lease assets		175 			234 			675 			719 		
Net financing revenue and other interest income		1,200 			1,188 			3,400 			3,477 		
Total other revenue		484 			413 			1,305 			1,274 		
Total net revenue		1,684 			1,601 			4,705 			4,751 		
Provision for credit losses		147 			263 			1,337 			722 		
Total noninterest expense		905 			838 			2,810 			2,549 		
Income from continuing operations before income tax expense		632 			500 			558 			1,480 		
Income tax expense from continuing operations		156 			119 			159 			140 		
Net income from continuing operations		476 			381 			399 			1,340 		
Loss from discontinued operations, net of tax		— 			— 			(1)			(3)		
Net income		$	476 			$	381 			$	398 			$	1,337 		
Basic earnings per common share (a):									
Net income from continuing operations		$	1.27 			$	0.98 			$	1.06 			$	3.37 		
Net income		1.27 			0.97 			1.06 			3.36 		
Weighted-average common shares outstanding		375,658 			390,205 			375,478 			397,427 		

	

	
Diluted earnings per common share (a):									
Net income from continuing operations		$	1.26 			$	0.97 			$	1.06 			$	3.35 		
Net income		1.26 			0.97 			1.06 			3.35 		
Weighted-average common shares outstanding		377,011 			392,604 			376,659 			399,442 		
Common share information:									
Cash dividends declared per common share		$	0.19 			$	0.17 			$	0.57 			$	0.51 		
Period-end common shares outstanding		373,857 			383,523 			373,857 			383,523 		
	
(a)Includes shares related to share-based compensation that vested but were not yet issued.
74

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following tables present selected Condensed Consolidated Balance Sheet and ratio data.

September 30, ($ in millions)		2020		2019	
Selected period-end balance sheet data:					
Total assets		$	185,270 			$	181,485 		
Total deposit liabilities		$	134,938 			$	119,230 		
Long-term debt		$	25,704 			$	35,730 		
	
Total equity		$	14,126 			$	14,450 		

		Three months ended September 30,		Nine months ended September 30,	
		2020		2019		2020		2019	
Financial ratios:									
Return on average assets (a)		1.02 	%		0.84 	%		0.29 	%		1.00 	%	
Return on average equity (a)		13.41 	%		10.51 	%		3.77 	%		12.91 	%	
Equity to assets (a)		7.62 	%		7.97 	%		7.75 	%		7.71 	%	
Common dividend payout ratio (b)		14.96 	%		17.53 	%		53.77 	%		15.18 	%	
Net interest spread (a) (c)		2.49 	%		2.48 	%		2.39 	%		2.45 	%	
Net yield on interest-earning assets (a) (d)		2.65 	%		2.70 	%		2.57 	%		2.68 	%	
(a)The ratios were based on average assets and average equity using a combination of monthly and daily average methodologies.
(b)The common dividend payout ratio was calculated using basic earnings per common share.
(c)Net interest spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities, excluding discontinued operations for the periods shown.
(d)Net yield on interest-earning assets represents annualized net financing revenue and other interest income as a percentage of total interest-earning assets.
75

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
As of January 1, 2015, Ally became subject to the rules implementing the U.S. Basel III, which reflect new and higher capital requirements, capital buffers, and new regulatory capital definitions, deductions and adjustments. Refer to Note 17 to the Condensed Consolidated Financial Statements for further information. The following table presents selected regulatory capital data under U.S Basel III as subject to transitional provisions primarily related to deductions and adjustments impacting Common Equity Tier 1 capital and Tier 1 capital.

		September 30,	

($ in millions)		2020		2019	
Common Equity Tier 1 capital ratio		10.36 	%		9.56 	%	
Tier 1 capital ratio		12.11 	%		11.22 	%	
Total capital ratio		14.05 	%		12.76 	%	
Tier 1 leverage ratio (to adjusted quarterly average assets) (a)		9.00 	%		9.12 	%	
Total equity		$	14,126 			$	14,450 		
CECL phase-in adjustment (b)		1,212 			— 		
Goodwill and certain other intangibles		(387)			(279)		
Deferred tax assets arising from net operating loss and tax credit carryforwards (c)		(17)			(38)		
Other adjustments		(676)			(172)		
Common Equity Tier 1 capital		14,258 			13,961 		
Trust preferred securities		2,498 			2,495 		
	
Other adjustments		(88)			(62)		
Tier 1 capital		16,668 			16,394 		
Qualifying subordinated debt and other instruments qualifying as Tier 2		1,035 			1,033 		
Qualifying allowance for credit losses and other adjustments		1,634 			1,216 		
Total capital		$	19,337 			$	18,643 		
Risk-weighted assets (d)		$	137,594 			$	146,052 		
(a)Tier 1 leverage ratio equals Tier 1 capital divided by adjusted quarterly average total assets, which both reflect adjustments for disallowed goodwill, certain intangible assets, and disallowed deferred tax assets.
(b)We have elected to delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021. Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. Refer to Note 17 to the Condensed Consolidated Financial Statements for further information.
(c)Contains deferred tax assets required to be deducted from capital under U.S. Basel III.
(d)Risk-weighted assets are defined by regulation and are generally determined by allocating assets and specified off-balance-sheet exposures to various risk categories.
76

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Overview
Ally Financial Inc. (together with its consolidated subsidiaries unless the context otherwise requires, Ally, the Company, or we, us, or our) is a leading digital financial-services company. As a customer-centric company with passionate customer service and innovative financial solutions, we are relentlessly focused on “Doing It Right” and being a trusted financial-services provider to our consumer, commercial, and corporate customers. We are one of the largest full-service automotive finance operations in the country and offer a wide range of financial services and insurance products to automotive dealerships and consumers. Our award-winning online bank (Ally Bank, Member FDIC and Equal Housing Lender) offers mortgage lending, personal lending, and a variety of deposit and other banking products, including savings, money-market, and checking accounts, CDs, and IRAs. Additionally, we offer securities-brokerage and investment-advisory services through Ally Invest. Our robust corporate-finance business offers capital for equity sponsors and middle-market companies. We are a Delaware corporation and are registered as a BHC under the Bank Holding Company Act of 1956, as amended, and an FHC under the Gramm-Leach-Bliley Act of 1999, as amended.

Primary Business Lines
Dealer Financial Services, which includes our Automotive Finance and Insurance operations, Mortgage Finance, and Corporate Finance are our primary business lines. The following table summarizes the operating results excluding discontinued operations of each business line. Operating results for each of the business lines are more fully described in the MD&A sections that follow.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		Favorable/(unfavorable) % change		2020		2019		Favorable/(unfavorable) % change	
Total net revenue													
Dealer Financial Services													
Automotive Finance		$	1,163 			$	1,137 			2		$	3,279 			$	3,268 			—	
Insurance		346 			303 			14		947 			976 			(3)	
Mortgage Finance		66 			49 			35		163 			151 			8	
Corporate Finance		84 			69 			22		248 			205 			21	
Corporate and Other		25 			43 			(42)		68 			151 			(55)	
Total		$	1,684 			$	1,601 			5		$	4,705 			$	4,751 			(1)	
Income from continuing operations before income tax expense													
Dealer Financial Services													
Automotive Finance		$	566 			$	429 			32		$	722 			$	1,217 			(41)	
Insurance		78 			56 			39		101 			201 			(50)	
Mortgage Finance		26 			11 			136		46 			38 			21	
Corporate Finance		60 			44 			36		24 			103 			(77)	
Corporate and Other		(98)			(40)			(145)		(335)			(79)			n/m	
Total		$	632 			$	500 			26		$	558 			$	1,480 			(62)	
n/m = not meaningful
•Our Dealer Financial Services business is one of the largest full-service automotive finance operations in the country and offers a wide range of financial services and insurance products to automotive dealerships and their customers. Dealer Financial Services comprises our Automotive Finance and Insurance segments.
Our Automotive Finance operations include purchasing retail installment sales contracts and operating leases from dealers, extending automotive loans directly to consumers, offering term loans to dealers, financing dealer floorplans and providing other lines of credit to dealers, offering automotive-fleet financing, providing financing to companies and municipalities for the purchase or lease of vehicles, and supplying vehicle-remarketing services. Our dealer-focused business model, value-added products and services, full-spectrum financing, and business expertise proven over many credit cycles make us a premier automotive finance company. Our success as an automotive finance provider is driven by the consistent and broad range of products and services we offer to dealers. The automotive marketplace is dynamic and evolving, and we are focused on meeting the needs of both our dealer and consumer customers and continuing to strengthen and expand upon the approximately 4.5 million consumer accounts in our portfolio and 18,700 dealer relationships we have. Clearlane, our online automotive lender exchange, expands our direct-to-consumer capabilities and provides a digital platform for consumers seeking financing. Clearlane further enhances our automotive financing offerings, dealer relationships, and digital capabilities. Additionally, we continue to identify and cultivate relationships with automotive retailers including those with leading eCommerce platforms. We believe these actions will enable us to respond to the growing trends for a more streamlined and digital automotive financing process to serve both dealers and consumers.
77

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The Growth channel was established to focus on developing dealer relationships beyond those relationships that primarily were developed through our role as a captive finance company for GM and Chrysler. The Growth channel was expanded to include direct-to-consumer financing through Clearlane and other channels and our arrangements with online automotive retailers. We have established relationships with thousands of Growth channel dealers through our customer-centric approach and specialized incentive programs designed to drive loyalty amongst dealers to our products and services. The success of the Growth channel has been a key enabler to converting our business model from a focused captive finance company to a leading market competitor. In this channel, we currently have approximately 12,300 dealer relationships, of which approximately 86% are franchised dealers (including brands such as Ford, Nissan, Kia, Hyundai, Toyota, Honda, and others), or used vehicle only retailers with a national presence.
Our Insurance operations offer both consumer finance protection and insurance products sold primarily through the automotive dealer channel, and commercial insurance products sold directly to dealers. We serve approximately 2.5 million consumers nationwide across F&I and P&C products. In addition, we offer F&I products in Canada, where we serve more than 400,000 consumers and are the VSC and protection plan provider for GM Canada. As part of our focus on offering dealers a broad range of consumer financial and insurance products, we offer VSCs, VMCs, and GAP products. We also underwrite selected commercial insurance coverages, which primarily insure dealers’ wholesale vehicle inventory. Ally Premier Protection is our flagship VSC offering, which provides coverage for new and used vehicles of virtually all makes and models. We also offer ClearGuard on the SmartAuction platform, which is a protection product designed to minimize the risk to dealers from arbitration claims for eligible vehicles sold at auction.
•Our Mortgage Finance operations consist of the management of held-for-investment and held-for-sale consumer mortgage loan portfolios. Our held-for-investment portfolio includes bulk purchases of high-quality jumbo and LMI mortgage loans originated by third parties, and our direct-to-consumer Ally Home mortgage offering.
Through the bulk loan channel, we purchase loans from several qualified sellers including direct originators and large aggregators who have the financial capacity to support strong representations and warranties and the industry knowledge and experience to originate high-quality assets. Bulk purchases are made on a servicing-released basis, allowing us to directly oversee servicing activities and manage refinancing through our direct-to-consumer channel. During the three and nine months ended September 30, 2020, we purchased $659 million and $3.0 billion of mortgage loans that were originated by third parties. Our mortgage loan purchases are held-for-investment.
Through our direct-to-consumer channel, which was introduced late in 2016, we offer a variety of competitively priced jumbo and conforming fixed- and adjustable-rate mortgage products through a third-party fulfillment provider. Under our current arrangement, our direct-to-consumer conforming mortgages are originated as held-for-sale and sold, while jumbo and LMI mortgages are originated as held-for-investment. Loans originated in the direct-to-consumer channel are sourced by existing Ally customer marketing, prospect marketing on third-party websites, and email or direct mail campaigns. In April 2019, we announced a strategic partnership with Better.com, which delivers an enhanced end-to-end digital mortgage experience for our customers through our direct-to-consumer channel. Through this partnership, Better.com conducts the sales, processing, underwriting, and closing for Ally’s digital mortgage offerings in a highly innovative, scalable, and cost-efficient manner, while Ally retains control of all the marketing and advertising strategies and loan pricing. During the three and nine months ended September 30, 2020, we originated $1.3 billion and $3.2 billion of mortgage loans through our direct-to-consumer channel.
The combination of our bulk portfolio purchase program and our direct-to-consumer strategy provides the capacity to expand revenue sources and further grow and diversify our finance receivable portfolio with an attractive asset class while also deepening relationships with existing Ally customers.
•Our Corporate Finance operations primarily provides senior secured leveraged cash flow and asset-based loans to mostly U.S.-based middle-market companies owned by private equity sponsors, and loans to asset managers that primarily provide leveraged loans. We believe our growing deposit-based funding model coupled with our expanded product offerings and deep industry relationships provide an advantage over our competition, which includes other banks as well as publicly and privately held finance companies. Our corporate finance lending portfolio is generally composed of first-lien, first-out loans. Our primary focus is on businesses owned by private equity sponsors with loans typically used for leveraged buyouts, mergers and acquisitions, debt refinancing, expansions, restructurings, and working capital. Additionally, our Lender Finance business provides asset managers with partial funding for their direct-lending activities. The portfolio is well diversified across multiple industries including manufacturing, distribution, services, and other specialty sectors. These specialty sectors include our Technology Finance and Healthcare verticals. Our Technology Finance vertical provides financing solutions to venture capital-backed, technology-based companies. The Healthcare vertical provides financing across the healthcare spectrum including services, pharmaceuticals, manufacturing, and medical devices and supplies. We also provide a commercial real estate product focused on lending to skilled nursing facilities, senior housing, medical office buildings, and hospitals.
•Corporate and Other primarily consists of centralized corporate treasury activities, such as management of the cash and corporate investment securities and loan portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments, original issue discount, and the residual impacts of our corporate FTP and treasury ALM activities. Corporate and Other also includes activity related to certain equity investments, which primarily consist of FHLB and FRB stock, the management of our
78

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, and reclassifications and eliminations between the reportable operating segments.
Corporate and Other also includes the results of Ally Invest, our digital brokerage and wealth management offering, which enables us to complement our competitive deposit products with low-cost investing. The digital wealth management business aligns with our strategy to create a premier digital financial services company and provides additional sources of fee income through asset management and certain other fees, with minimal balance sheet utilization. This business also provides an additional source of low-cost brokered deposits through arrangements with Ally Invest’s clearing broker.
Additionally, beginning in October 2019 with the acquisition of Health Credit Services, financial information related to our consumer unsecured financing is included within Corporate and Other. The Health Credit Services business has been renamed Ally Lending and currently serves medical and home improvement service providers by enabling promotional and fixed rate installment-loan products through a highly digital application process at point-of-sale. The home improvement segment was launched in the second quarter of 2020, now represents approximately 20% of new originations, and is expected to grow. We believe the market outlook for point-of-sale lending provides attractive opportunities for future diversification, including in the automotive servicing and vehicle upfit space. Point-of-sale lending broadens our capabilities, and expands our product offering into consumer unsecured lending, all while helping to further meet the financial needs of our customers. Refer to Note 2 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for additional details on the acquisition of Health Credit Services.
Significant Business Developments Related to COVID-19
The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deteriorations in household, business, economic, and market conditions, including in the United States where we conduct nearly all of our business. Although several leading measures, such as labor conditions and the rate of growth as measured by GDP, indicate that an economic rebound has begun to occur ahead of initial expectations, COVID-19 has not yet been contained and could continue to affect significantly more households and businesses.
Many governmental and nongovernmental authorities initially responded to COVID-19 by curtailing household and business activity as a containment measure while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses. Although this response slowed the rate of spread of COVID-19 and supported economic stability, the number of cases has risen meaningfully at times, and the potential exists for further resurgences to occur, especially during the upcoming cold-and-flu season. In addition, while monetary policy remains highly accommodative, a number of stimulative fiscal programs and actions have expired or been exhausted without renewal. National, regional, and local economies and markets could suffer further disruptions that are lasting.
While we have experienced improvements in our business during the three months ended September 30, 2020, the COVID-19 pandemic has negatively impacted us and our customers, counterparties, employees, and third-party service providers since its spread began to accelerate in March 2020. At this time, we cannot yet be confident in the extent of this negative impact or the trajectory of the macroeconomic outlook—especially with the recent resurgence of COVID-19 in much of the United States and ongoing uncertainties around the efficacy, availability, and acceptance of medical treatments and potential vaccines—and the adverse effects on our business, financial position, results of operations, and prospects could be significant. For further information on these risks and uncertainties, refer to the section titled Risk Factors in Part II, Item 1A of this report.
During the pandemic, we have consistently prioritized the health and well-being of our employees, offered industry-leading support and relief to our customers, and strived to make a difference in the communities where we operate. These actions reflect our relentless “Do It Right” philosophy.
•Credit-risk management — Our credit performance has been directly impacted by the pandemic. Prior to the pandemic, the national unemployment rate was below 4% for an extended period and was projected to sustain those levels into the foreseeable future. Additionally, most widely available forecasts assumed that a moderate rate of growth would continue throughout 2020. The impact of the lockdowns, stay-in-place directives, and other restrictive actions issued and enforced by state and local officials as a result of the pandemic, contributed to a significant increase in the national unemployment rate, which rose to a peak of 14.7% in April before moderating at a faster-than-expected-pace to 7.9% as of September 30, 2020. Similarly, the rate of economic growth, as measured by GDP, declined sharply on a quarter-over-quarter seasonally adjusted annualized rate basis in the second quarter by 31.7%, and rebounded in the third quarter of 2020 as the economy grew by 33.1% quarter-over-quarter based on this measure.
In response to the impacts caused by the COVID-19 pandemic, we have taken significant actions to support our customers with industry-leading relief programs, while prudently managing our credit risk exposure. In our consumer automotive loan portfolio, existing customers had the option to elect to defer their payments for up to 120 days without late fees being incurred, but with finance charges continuing to accrue. This program was made available to all consumer automotive loan customers beginning March 18, 2020. The length of the deferral offering was reduced incrementally, until on June 21, 2020, we eliminated the offering and migrated back to our standard extension process. Following the termination of the program, we have continued to work with impacted customers in accordance with our established credit risk management policies and practices. We have invested significant resources, including introducing enhanced digital capabilities and new communication tools, to support customers who continue to experience hardships after the initial deferrals expire. Additionally, our scaled staffing model and resource capabilities have allowed
79

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
for a nimble response to augment staffing to support these efforts. For our commercial dealer customers that were current on all payment obligations, we offered a waiver of curtailments on wholesale floorplan loans, an increase in floorplan advance rates, a deferral of interest and insurance charges on wholesale borrowings, and a deferral of term loan payments from April through July 2020. In our mortgage-lending business, existing customers experiencing financial hardship due to an interruption of income related to the COVID-19 pandemic were afforded the opportunity to defer their loan payments for up to 120 days, with an option for an additional 60 days, without late fees being incurred but with interest continuing to accrue. In our personal-lending business, existing customers experiencing financial hardship due to the COVID-19 pandemic had the opportunity to elect to defer their loan payments for up to 120 days without late fees being incurred or finance charges continuing to accrue. For more detail and further discussion about relief programs, refer to the section titled Credit Quality Indicators in Note 8 to the Condensed Consolidated Financial Statements and to the section titled Risk Management within this MD&A.
In addition to the support that we have provided to our customers, governments have taken unprecedented steps to partially mitigate the adverse effects of their actions to contain the spread of COVID-19. For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S. economy. One component of the CARES Act is the PPP, which is a guaranteed, unsecured loan program administered by the SBA. Loans under the PPP are fully guaranteed and may be forgiven by the SBA and can be obtained by small businesses and other entities to cover payroll costs and other expenses, including mortgage payments, rents, and utilities. At September 30, 2020, we had 921 loans with a carrying value of $719 million outstanding to our commercial dealer customers under the PPP. As these loans are guaranteed by the SBA, we are exposed to limited to no incremental credit risk and do not maintain an allowance for loan losses under CECL for this portfolio. Among its other provisions, the CARES Act significantly expanded eligibility for, and the amount of, unemployment benefits, created and funded the advance payment of a refundable tax credit for 2020, and appropriated $500 billion to the Treasury Secretary to support U.S. air carriers and other U.S. businesses that have not otherwise received adequate economic relief as well as states and municipalities. A number of stimulus programs under the CARES Act have expired, including the provision of enhanced unemployment benefits. It is unclear whether Congress will renew these programs or create new ones and how our customers will be impacted.
The pandemic has significantly impacted our provision for credit losses. During the second half of March 2020, the economy experienced a significant deterioration driven by the COVID-19 pandemic, which impacted our allowance for loan losses. During the three months ended March 31, 2020, we recorded an additional $602 million of provision expense for credit losses associated with the deterioration in the macroeconomic outlook from COVID-19. During the second quarter of 2020, we incurred total provision expense of $287 million, which included $128 million attributable to the macroeconomic environment and other factors aside from changes in portfolio size and incremental net charge-offs. During the third quarter of 2020, we incurred total provision expense of $147 million. Our provision expense for the quarter was composed of a replenishment of reserves due to incremental net charge-offs of $122 million, an increase in reserves of $59 million driven by an increase in portfolio size, and a reduction in reserves of $34 million attributable to the improving macroeconomic environment, predominately the unemployment rate, and other factors aside from changes in portfolio size and incremental net charge-offs. Additionally, provision expense for credit losses was favorably impacted by lower net charge-offs in our consumer automotive portfolio as losses decreased $136 million for the three months ended September 30, 2020, compared to the prior period in 2019. The significant decrease in net charge-offs in our consumer automotive portfolio for the three months ended September 30, 2020, was attributable to strong payment performance and delinquency trends through the pandemic. Personal income and savings levels have increased as lenders, including us, have provided significant support in the form of loan modifications and fee waivers, which is in addition to the fiscal and monetary stimulus actions detailed above. Similarly, consumer discretionary spending levels have decreased significantly during the pandemic, most notably in the first and second quarters of 2020, driven by reductions in spending on services as a result of stay-in-place orders and decreased travel. Net charge-offs in our consumer automotive portfolio also continue to benefit from strong used vehicle prices. In the third quarter of 2020, used vehicle prices, as well as our off-lease gain per unit, reached the highest level since January 2010, which reduced the realized loss impact in instances of default. Our provision expense for credit losses increased $615 million to $1.3 billion for the nine months ended September 30, 2020. While the macroeconomic environment has rebounded and improved during the quarter, the increase in provision expense year-over-year reflects the significant deterioration observed since the inception of the pandemic. The deterioration in the macroeconomic environment drove a significant increase in our allowance for loan losses during 2020, as compared to 2019.
While we are encouraged by the positive signs in performance observed during the three months ended September 30, 2020, the degree to which our actions and those of governments and others will directly or indirectly assist our customers, and the economy generally, is not yet clear.
•Liquidity management, funding, and capital markets — Our retail deposit business has remained a source of strength for us through the pandemic. To support our retail deposit customers, we waived fees for overdrafts, excessive transactions, and expedited shipping of checks and debit cards through July 31, 2020. Through September 30, 2020, we refunded fees of approximately $6 million on excess transactions and overdrafts. For our brokerage customers, we waived fees for broker-assisted trades, paper statements, and overnight outbound check processing through July 31, 2020. In our retail deposits business, we continue to monitor several key items in light of a highly uncertain macroeconomic outlook, including elevated competitive pressures on the direct-banking industry given the low rate environment, overall health of the consumer and potential impacts of the pandemic, uncertainty around further stimulus measures, and how customers deploy elevated savings levels over time. Our deposits franchise recorded strong growth in retail deposits during both the three months and nine months ended September 30, 2020. During the three months
80

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
ended September 30, 2020, we grew retail deposits by approximately $5 billion to $120.8 billion, representing 19% growth year-over-year, despite declines in online savings account yields, as well as significant outflows as customers remitted tax payments to governmental authorities, which typically occurs earlier in the year. For the nine months ended September 30, 2020, we grew retail deposits over $17 billion, led by an approximate $10 billion increase in the second quarter of 2020. Our retail deposit customer retention rate remained steady through the third quarter at 96% while we grew our mix of total deposit funding to 82%, with the remainder through secured, unsecured, and FHLB borrowings. For additional discussions surrounding our liquidity positions and related risks, refer to the section titled Liquidity Management, Funding, and Regulatory Capital in this MD&A.
In addition to the significant injection of fiscal stimulus by the federal government, the FRB has taken decisive and sweeping actions. Since March 15, 2020, these actions have included a reduction in the target range for the federal funds rate to zero to 0.25 percent, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, and numerous facilities to support the flow of credit to households and businesses, such as the Municipal Liquidity Facility, the Main Street Lending Program, the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Securities Loan Facility, the Money Market Mutual Fund Liquidity Facility, and the Commercial Paper Funding Facility. We continue to execute opportunistic liability management actions and secure additional liquidity at Ally Financial Inc. through the unsecured debt capital markets. On April 6, 2020, and June 1, 2020, we issued $750 million aggregate principal amount of 5.8% senior unsecured notes due 2025 and $800 million aggregate principal amount of 3.05% senior unsecured notes due 2023, respectively. Additionally, we issued $750 million aggregate principal amount of 1.45% senior unsecured notes due 2023 on September 16, 2020. To more cost-effectively manage liquidity at Ally Bank, we elected during the third quarter of 2020 to prepay and early terminate 13 FHLB advances with an aggregate principal balance of $2.5 billion. In doing so, we recognized a loss on early repayment of FHLB borrowings of $48 million on this transaction during the three months ended September 30, 2020. We continue to assess liability management opportunities utilizing our deposit funding at Ally Bank.
Public equity markets have experienced significant volatility as a result of the pandemic, which has impacted our investment securities portfolio. For the three and nine months ended September 30, 2020, we recognized net realized gains on equity securities of $7 million and $88 million, respectively. For the three months ended September 30, 2020, we recognized net unrealized gains on equity securities of $14 million, as compared to net unrealized losses on equity securities of $82 million for the nine months ended September 30, 2020. Given the unpredictability of COVID-19 and its direct and indirect effects on market conditions, it is possible that unusual volatility in the equity markets could continue to positively or negatively impact our results.
•Regulatory capital and stress testing — We continue to carefully monitor our capital and liquidity positions. On March 17, 2020, in order to support the FRB's effort to mitigate the impact of the COVID-19 pandemic on the U.S. economy and the financial system, we announced the voluntary suspension of our stock-repurchase program through its termination on June 30, 2020. Consistent with the FRB’s restrictions on common-stock repurchases by large firms such as Ally, described below, we do not currently plan to implement a new stock-repurchase program or repurchase shares of our common stock, except in connection with compensation plans, for the remainder of 2020.
We have elected to phase the estimated impact of CECL into regulatory capital in accordance with the interim final rule of the FRB and other U.S. banking agencies that became effective on March 31, 2020, and that was subsequently clarified and adjusted in a final rule effective September 30, 2020. As further described in Note 17 to the Condensed Consolidated Financial Statements, we will delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021. Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. As of September 30, 2020, the total deferred impact on Common Equity Tier 1 capital related to our adoption of CECL was $1.2 billion.
We submitted our 2020 capital plan to the FRB in April 2020. In June 2020, the FRB provided us with the results of the supervisory stress test, additional industry-wide sensitivity analyses conducted in light of the COVID-19 pandemic, and our preliminary stress capital buffer requirement. At the same time, the FRB announced its determination that changes in financial markets or the macroeconomic outlook could have a material effect on the risk profiles and financial conditions of firms subject to the capital-plan rule and that, as a result, the firms (including Ally) would be required to resubmit capital plans to the FRB within 45 days after receiving updated stress scenarios from the FRB. Also at the same time, the FRB announced the suspension of nearly all common-stock repurchases and restrictions on common-stock dividends for large firms such as Ally during the third quarter of 2020. In September 2020, the FRB released its updated scenarios and extended the limitations on common-stock repurchases and common-stock dividends for the fourth quarter of 2020. We updated our capital plan in light of firm-specific baseline and stress scenarios, as required, and submitted our updated plan to the FRB on November 2, 2020. Refer to Note 17 to the Condensed Consolidated Financial Statements for further discussion about regulatory capital, capital planning, and stress testing.
At September 30, 2020, Ally and Ally Bank were “well-capitalized” and met all applicable regulatory capital requirements, including with Common Equity Tier 1 capital ratios of 10.36% and 13.63%, respectively, compared to the minimum requirement of 4.50%. We continue to anticipate that we will have sufficient capital levels to meet all of these requirements.
•Dealer Financial Services — Our lending and finance receivable balances have been impacted by the pandemic. Through the second quarter of 2020, as governments acted to temporarily close or restrict the operations of businesses, including automotive
81

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
dealers, and as many consumers and businesses changed their behavior in response to governmental mandates and advisories to sharply restrain commercial and social interactions, we experienced significant reductions in our consumer automotive loan applications. In addition, we observed downward pressure on the automotive sales and other operating results of our dealer customers, on their capacity to accept the return of leased vehicles, and on used-vehicle auction activity and values. Many automotive manufacturers and their suppliers also had taken measures to slow or shut down production in response to the pandemic, which negatively affected dealer inventory levels and sales and significantly reduced wholesale floorplan lending business to dealers. As consumers and businesses adapted to changed conditions and many governmental authorities relaxed their restrictions later in the second quarter, we began to observe a recovery in quality loan application volume and resulting booked originations. In addition, automotive manufacturers and suppliers restarted production, albeit at reduced levels, and in August 2020 we experienced our first month-over-month increase in wholesale floorplan balances since the pandemic was declared. For the three months ended September 30, 2020, we decisioned 3.2 million consumer automotive financing applications, consistent with prior year levels, and funded balances of approximately $9.8 billion, as compared to 3.1 million in applications and $7.2 billion in originations for the three months ended June 30, 2020. In the three months ended September 30, 2020, booked contracts from our used segment totaled over $5.4 billion. Our commercial automotive assets increased approximately $146 million in the third quarter of 2020. Refer to the section titled Automotive Financing Volume in this MD&A for a further discussion regarding the impacts of COVID-19 on our business.
In our Insurance operations, we similarly experienced significantly reduced F&I written premiums in late March and early in the second quarter and then a gradual recovery since that time. Total F&I written premiums were $269 million in the third quarter of 2020, which was down slightly from $274 million during the same period in the prior year. Written insurance premiums from our property and casualty business declined during the three months and nine months ended September 30, 2020, as a result of lower vehicle inventory levels due primarily to impacts of COVID-19.
•Other consumer and commercial products — Within our Corporate Finance business, we experienced higher draws on commercial customer lines of credit during the second half of March 2020, but this trend abated in April. Through the second and third quarters of 2020, we experienced significant pay-downs on draws that had been taken at the outset of the pandemic. Our balance of unfunded commitments increased from $2.5 billion at the end of the first quarter of 2020 to $3.5 billion and $3.8 billion at the end of the second and third quarters, respectively.
In our Mortgage Finance business, refinance volume and prepayment activity increased through the third quarter of 2020, driven by lower market interest rates.
In Ally Invest, we observed a significant increase in self-directed accounts to 400 thousand through the third quarter of 2020. While we experienced a significant outflow of deposits to brokerage accounts after the pandemic had been declared, Ally Invest was able to capture approximately one-third of these outflows. Net customer assets reached $11.1 billion as of September 30, 2020, and we experienced higher than usual daily trade volume throughout the pandemic.
In our personal lending business, we originated $167 million of personal loans during the three months ended September 30, 2020, almost double the amount originated during the prior quarter.
•General operations — The COVID-19 pandemic and related governmental mandates and advisories have necessitated changes in the way we operate our business. We activated our business continuity plan in late February 2020 and, since then, have migrated nearly all our workforce off-site or to work-from-home arrangements to mitigate health risks. We are also carefully monitoring the activities of our vendors and other third-party service providers to manage the risks associated with any potential service disruptions. The length of time we may be required to operate under these circumstances, as well as the potential for them to worsen or for significant disruptions to occur, remains uncertain. While we have not yet experienced material adverse disruptions to our internal operations or third-party services due to the COVID-19 pandemic, we continue to review evolving risks and developments.
•Employees and communities — To support our employees during the pandemic, we have provided a range of financial-assistance offerings and enhanced benefits, including a $1,200 payment for those earning less than $100,000. In May, we launched the Ally Employee Relief Fund with a $250 thousand contribution. Through the end of the third quarter, this fund has been augmented by over $100 thousand in additional employee donations and has helped over 400 of our employees. In August, recognizing the continuing difficulties caused by the pandemic, we paid 50% of the 2020 incentive-compensation targets for most of our non-executive employees. These payments were not incremental but rather were an advance of expected year-end amounts.
Consistent with our culture and “Do it Right” philosophy, we have pledged financial support to our communities for emergency needs, such as food, health care, emergency housing, and childcare. For example, on September 24, 2020, we announced our commitment to invest $30 million in communities across our geographic footprint over the next three years. We also announced the creation of the Ally Charitable Foundation, which will deploy grants to support economic mobility in the communities we serve with a focus on affordable housing, financial literacy, workplace preparedness, and other initiatives.
We are committed to driving financial and social inclusion as part of our ‘Do it Right’ philosophy. This means engaging with stakeholders—including our customers, communities, employees, and suppliers— to improve economic mobility. Most recently, in October 2020, we, alongside the Thurgood Marshall College Fund and Sean Anderson Foundation, held our second annual Moguls
82

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
in the Making entrepreneurial competition to help foster opportunities for young, up-and-coming entrepreneurs from our nation’s publicly-supported historically Black colleges and universities.
83

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Consolidated Results of Operations
The following table summarizes our consolidated operating results excluding discontinued operations for the periods shown. Refer to the operating segment sections of the MD&A that follows for a more complete discussion of operating results by business line.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		Favorable/(unfavorable) % change		2020		2019		Favorable/(unfavorable) % change	
Net financing revenue and other interest income													
Total financing revenue and other interest income		$	2,145 			$	2,491 			(14)		$	6,674 			$	7,415 			(10)	
Total interest expense		770 			1,069 			28		2,599 			3,219 			19	
Net depreciation expense on operating lease assets		175 			234 			25		675 			719 			6	
Net financing revenue and other interest income		1,200 			1,188 			1		3,400 			3,477 			(2)	
Other revenue													
Insurance premiums and service revenue earned		276 			280 			(1)		816 			802 			2	
Gain on mortgage and automotive loans, net		33 			10 			n/m		35 			22 			59	
(Loss) gain on extinguishment of debt		(49)			1 			n/m		(50)			(2)			n/m	
Other gain on investments, net		64 			27 			137		173 			174 			(1)	
Other income, net of losses		160 			95 			68		331 			278 			19	
Total other revenue		484 			413 			17		1,305 			1,274 			2	
Total net revenue		1,684 			1,601 			5		4,705 			4,751 			(1)	
Provision for credit losses		147 			263 			44		1,337 			722 			(85)	
Noninterest expense													
Compensation and benefits expense		342 			296 			(16)		1,036 			910 			(14)	
Insurance losses and loss adjustment expenses		85 			74 			(15)		301 			260 			(16)	
Goodwill impairment		— 			— 			—		50 			— 			n/m	
Other operating expenses		478 			468 			(2)		1,423 			1,379 			(3)	
Total noninterest expense		905 			838 			(8)		2,810 			2,549 			(10)	
Income from continuing operations before income tax expense		632 			500 			26		558 			1,480 			(62)	
Income tax expense from continuing operations		156 			119 			(31)		159 			140 			(14)	
Net income from continuing operations		$	476 			$	381 			25		$	399 			$	1,340 			(70)	
n/m = not meaningful
We earned net income from continuing operations of $476 million and $399 million for the three months and nine months ended September 30, 2020, respectively, compared to $381 million and $1.3 billion for the three months and nine months ended September 30, 2019. During the three months ended September 30, 2020, results were favorably impacted by lower provision for credit losses, driven by lower net charge-offs within our consumer automotive portfolio. Results were also favorably impacted by higher other revenue and net financing revenue and other interest income, which more than offset the increase in noninterest expense. During the nine months ended September 30, 2020, results were unfavorably impacted by higher provision for credit losses, driven by economic disruption as a result of the COVID-19 pandemic. Results were also unfavorably impacted by lower net financing revenue and other interest income driven by decreases in our commercial automotive revenue due to lower outstanding floorplan assets and lower benchmark interest rates, lower income from cash balances and investment securities, and higher prepayment activity within our mortgage finance operations as well as higher noninterest expense.
Net financing revenue and other interest income increased $12 million for the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, and decreased $77 million for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. The increase in net financing revenue and other interest income during the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, was driven by increased consumer automotive financing revenue within our Automotive Finance operations, primarily due to improved portfolio yields, excluding the unfavorable impact of hedges, as a result of our continued focus on expanding risk-adjusted returns. The decrease in net financing revenue and other interest income during the nine months ended September 30, 2020, as compared to the same period in 2019, was negatively impacted by a decrease of $549 million in our commercial automotive financing revenue, primarily due to lower outstanding floorplan assets as a result of vehicle inventory declines that have resulted from lower automotive production levels due to COVID-19 and the GM strike which occurred in September 2019 and as a result of lower benchmark interest rates. Results were also unfavorably impacted by lower income from our investment securities portfolio,
84

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
lower interest income from cash balances due to a lower interest rate environment, and higher prepayment activity within our Mortgage Finance operations. This decrease was partially offset by a 19% decrease in total interest expense for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, which was driven by lower market interest rates, which drove a decrease in our deposit rates, and our continued shift to more cost-efficient deposit funding. Our total deposit liabilities increased $15.7 billion to $134.9 billion as of September 30, 2020, as compared to September 30, 2019.
The loss on extinguishment of debt increased $50 million and $48 million for the three months and nine months ended September 30, 2020, respectively, as compared to the three months and nine months ended September 30, 2019. During the three months ended September 30, 2020, we recognized a loss on early repayment of FHLB borrowings of $48 million, as we elected during the third quarter of 2020 to prepay and early terminate 13 FHLB advances with an aggregate principal balance of $2.5 billion to more cost-effectively manage liquidity at Ally Bank.
Other gain on investments was $64 million and $173 million for the three months and nine months ended September 30, 2020, respectively, compared to $27 million and $174 million for the three months and nine months ended September 30, 2019. The increase in gain on investments for the three months ended September 30, 2020, was primarily driven by favorable equity markets conditions during the quarter.
The provision for credit losses was $147 million and $1.3 billion for the three months and nine months ended September 30, 2020, respectively, compared to $263 million and $722 million for the same periods in 2019. The decrease in provision for credit losses during the three months ended September 30, 2020, was primarily driven by lower net charge-offs within our consumer automotive portfolio. The increase in provision for credit losses for the nine months ended September 30, 2020, was primarily driven by reserve increases associated with the broad macroeconomic impact resulting from the COVID-19 pandemic. Additionally, the provision for credit losses for the nine months ended September 30, 2020, increased as a result of higher provisions for specific loan exposures within our Corporate Finance operations. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.
Noninterest expense increased $67 million and $261 million for the three months and nine months ended September 30, 2020, respectively, as compared to the three months and nine months ended September 30, 2019. The increases for the three months and nine months ended September 30, 2020, were driven by higher compensation and benefits expense from the acquisition of Health Credit Services, which we renamed Ally Lending during the three months ended December 31, 2019, and increased expenses to support the growth of our consumer product suite, as we continue to make investments in our technology platform to enhance the customer experience and expand our digital capabilities and portfolio of products. The increase for the nine months ended September 30, 2020, was also driven by an impairment charge of $50 million related to the goodwill at Ally Invest. The recognition of this impairment was the result of certain business developments that impacted the expected growth and timing of revenue at Ally Invest. Refer to Note 11 to the Condensed Consolidated Financial Statements for further information.
We recognized total income tax expense from continuing operations of $156 million and $159 million for the three months and nine months ended September 30, 2020, respectively, compared to $119 million and $140 million for the same periods in 2019. The increase in income tax expense for the three months ended September 30, 2020, compared to the same period in 2019, was primarily due to the tax effects of an increase in pretax earnings. The increase in income tax expense for the nine months ended September 30, 2020, compared to the same period in 2019, was primarily due to a nonrecurring tax benefit of approximately $200 million from the release of valuation allowance on foreign tax credit carryforwards during the second quarter of 2019, and a nondeductible goodwill impairment during the second quarter of 2020, offset by the tax effects of a decrease in pretax earnings. The valuation allowance release resulted in a significant variation in the customary relationship between pretax income and income tax expense for the nine months ended September 30, 2019.
85

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Dealer Financial Services
Results for Dealer Financial Services are presented by reportable segment, which includes our Automotive Finance and Insurance operations.

Automotive Finance
Results of Operations
The following table summarizes the operating results of our Automotive Finance operations. The amounts presented are before the elimination of balances and transactions with our other reportable segments.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		Favorable/(unfavorable) % change		2020		2019		Favorable/(unfavorable) % change	
Net financing revenue and other interest income													
Consumer		$	1,253 			$	1,227 			2		$	3,670 			$	3,541 			4	
Commercial		153 			385 			(60)		670 			1,219 			(45)	
Loans held-for-sale		— 			— 			—		— 			1 			(100)	
Operating leases		360 			368 			(2)		1,070 			1,092 			(2)	
Other interest income		1 			3 			(67)		4 			7 			(43)	
Total financing revenue and other interest income		1,767 			1,983 			(11)		5,414 			5,860 			(8)	
Interest expense		490 			671 			27		1,608 			2,061 			22	
Net depreciation expense on operating lease assets (a)		175 			234 			25		675 			719 			6	
Net financing revenue and other interest income		1,102 			1,078 			2		3,131 			3,080 			2	
Other revenue													
Gain on automotive loans, net		— 			— 			—		— 			8 			(100)	
Other income		61 			59 			3		148 			180 			(18)	
Total other revenue		61 			59 			3		148 			188 			(21)	
Total net revenue		1,163 			1,137 			2		3,279 			3,268 			—	
Provision for credit losses		128 			265 			52		1,150 			707 			(63)	
Noninterest expense													
Compensation and benefits expense		134 			128 			(5)		415 			391 			(6)	
Other operating expenses		335 			315 			(6)		992 			953 			(4)	
Total noninterest expense		469 			443 			(6)		1,407 			1,344 			(5)	
Income from continuing operations before income tax expense		$	566 			$	429 			32		$	722 			$	1,217 			(41)	
Total assets		$	103,366 			$	115,096 			(10)		$	103,366 			$	115,096 			(10)	
(a)Includes net remarketing gains of $71 million and $62 million for the three months and nine months ended September 30, 2020, respectively, compared to remarketing gains of $28 million and $66 million for the three months and nine months ended September 30, 2019.
86

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table presents the average balance and yield of the loan and operating lease portfolios of our Automotive Financing operations.

		Three months ended September 30,		Nine months ended September 30,	
		2020		2019		2020		2019	
($ in millions)		Average balance (a)	Yield		Average balance (a)	Yield		Average balance (a)	Yield		Average balance (a)	Yield	
Finance receivables and loans, net (b)													
Consumer automotive (c)		$	72,999 		6.56 	%		$	73,162 		6.66 	%		$	72,605 		6.53 	%		$	72,147 		6.57 	%	
Commercial													
Wholesale floorplan (c)		15,385 		3.02 			27,520 		4.57 			20,226 		3.55 			28,838 		4.72 		
Other commercial automotive (d)		5,880 		4.04 			5,753 		4.69 			5,705 		4.24 			5,681 		4.71 		
Investment in operating leases, net (e)		9,317 		7.89 			8,525 		6.24 			9,155 		5.76 			8,428 		5.92 		
(a)Average balances are calculated using a combination of monthly and daily average methodologies.
(b)Nonperforming finance receivables and loans are included in the average balances. For information on our accounting policies regarding nonperforming status, refer to Note 1 to the Condensed Consolidated Financial Statements.
(c)Includes the effects of derivative financial instruments designated as hedges, which is included within Corporate and Other.
(d)Consists primarily of automotive dealer term loans, including those to finance dealership land and buildings, and dealer fleet financing.
(e)Yield includes gains on the sale of off-lease vehicles of $71 million and $62 million for the three months and nine months ended September 30, 2020, respectively, compared to $28 million and $66 million for the three months and nine months ended September 30, 2019. Excluding these gains on sale, the annualized yield was 4.88% and 4.86% for the three months and nine months ended September 30, 2020, respectively, compared to 4.93% and 4.87% for the three months and nine months ended September 30, 2019.
Our Automotive Finance operations earned income from continuing operations before income tax expense of $566 million and $722 million for the three months and nine months ended September 30, 2020, respectively, compared to income earned of $429 million and $1.2 billion for the three months and nine months ended September 30, 2019. For the three months ended September 30, 2020, the increase was due primarily to lower provision for credit losses due to lower retail net charge-offs, and higher net financing revenue, partially offset by higher noninterest expense. For the nine months ended September 30, 2020, the decrease was due primarily to higher provision for credit losses as a result of the macroeconomic impact resulting from COVID-19 pandemic, and higher noninterest expense.
Consumer automotive loan financing revenue increased $26 million and $129 million for the three months and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The increases were primarily due to improved portfolio yields, excluding the unfavorable impact of hedges, as a result of our continued focus on expanding risk-adjusted returns. For the nine months ended September 30, 2020, higher average consumer assets contributed to the increase in revenue as a result of a continued focus on the used-vehicle portfolio primarily through franchised dealers and growth in application volume from our dealer network. Through these actions, we continue to optimize our origination mix and achieve greater portfolio diversification.
Commercial loan financing revenue decreased $232 million and $549 million for the three months and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The decreases were primarily due to lower outstanding floorplan assets as a result of vehicle inventory declines that have resulted from lower automotive production levels due to COVID-19 and the GM strike which occurred in September 2019, as well as a reduction in the number of GM dealer relationships due to the competitive environment across the automotive lending market. The decreases were also due to lower yields resulting from lower average benchmark interest rates.
Interest expense was $490 million and $1.6 billion for the three months and nine months ended September 30, 2020, respectively, compared to $671 million and $2.1 billion for the three months and nine months ended September 30, 2019. The decreases were primarily due to lower market interest rates, which drove a decrease in our deposit rates, and our continued shift to more cost-efficient deposit funding. The decreases were also due to lower funding costs due to lower asset levels.
Other income increased 3% and decreased 18% for the three months and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. For the nine months ended September 30, 2020, the decrease was primarily due to a decline in late fee income, attributed to a temporary suppression of late fees as a result of the implementation of our new technology platform for our consumer automotive loans and operating leases. In addition, for customers who elected to defer their payments as part of our COVID-19 relief efforts, late fees were not incurred during the deferral period, as further described in the Risk Management section of this MD&A. The declines were also attributable to decreases in remarketing fee income as a result of disruptions to vehicle sale activities associated with COVID-19 during the first six months of 2020.
Total net operating lease revenue increased $51 million and $22 million for the three months and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. We recognized remarketing gains of $71 million and $62 million for the three months and nine months ended September 30, 2020, respectively, compared to $28 million and $66 million for the same periods in 2019. The increase for the three months ended September 30, 2020, was primarily driven by continued new vehicle supply constraints and an increase in demand for used vehicles. The increase for the nine months ended September 30, 2020, was primarily driven by asset growth and favorable
87

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
performance and mix in our outstanding lease portfolio, which also partially contributed to the increase for the three months ended September 30, 2020. Refer to the Operating Lease Residual Risk Management section of this MD&A for further discussion.
The provision for credit losses was $128 million and $1.2 billion for the three months and nine months ended September 30, 2020, respectively, compared to $265 million and $707 million for the same periods in 2019. The decrease for provision expense for the three months ended September 30, 2020, was primarily driven by lower net charge-offs within our consumer automotive portfolio. For the nine months ended September 30, 2020, the increase in our consumer automotive provision was primarily driven by reserve increases associated with macroeconomic deterioration from the COVID-19 pandemic, which was partially offset by lower net charge-offs. Additionally, a provision expense increase in our commercial automotive portfolio was primarily driven by reserve increases associated with macroeconomic deterioration from the COVID-19 pandemic, which was partially offset by reserve decreases driven by $11.5 billion of lower assets primarily within our floorplan balances. Refer to the Risk Management section of this MD&A for further discussion.
Other operating expenses were $335 million and $992 million for the three months and nine months ended September 30, 2020, respectively, compared to $315 million and $953 million for the same periods in 2019. For the three and nine months ended September 30, 2020, we incurred higher costs associated with the implementation of our new technology platform during the first quarter of 2020 for our consumer automotive loans and operating leases.
88

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Automotive Financing Volume
Consumer Automotive Financing
Our portfolio yield for consumer automotive loans, excluding the impact of hedging activities, increased approximately 17 and 19 basis points for the three months and nine months ended September 30, 2020, respectively, relative to the same periods in 2019. We set our buy rates using a granular, risk-based methodology factoring in several variables including interest costs, projected net average annualized loss rates at the time of origination, anticipated operating costs, and targeted return on equity. Our underwriting capabilities allow us to manage our risk tolerance levels to quickly react to major changes in the economy, including the current pandemic environment. Over the past several years, we have continued to focus on optimizing pricing relative to market interest rates as well as portfolio diversification and the used-vehicle segment, primarily through franchised dealers, which has contributed to higher yields on our consumer automotive loan portfolio. Commensurate with this shift in origination mix, we continue to maintain consistent, disciplined underwriting within our new and used consumer automotive loan originations. The carrying value of our nonprime consumer automotive loans before allowance for loan losses was $8.8 billion, or approximately 11.9%, of our total consumer automotive loans at September 30, 2020, as compared to $8.4 billion, or approximately 11.6% of our total consumer automotive loans at December 31, 2019.
The following table presents retail loan originations by credit tier and product type.

		Used retail		New retail	
Credit Tier (a)		Volume
($ in billions)		% Share of volume		Average FICO®		Volume
($ in billions)		% Share of volume		Average FICO®	
Three months ended September 30, 2020													
S		$	1.3 			24 			736 			$	1.4 			47 			735 		
A		2.6 			48 			682 			1.3 			43 			679 		
B		1.0 			19 			639 			0.3 			10 			645 		
C		0.3 			6 			578 			— 			— 			609 		
D		0.1 			2 			517 			— 			— 			607 		
E		0.1 			1 			495 			— 			— 			575 		
Total retail originations		$	5.4 			100 			677 			$	3.0 			100 			699 		
Three months ended September 30, 2019													
S		$	1.2 			26 			738 			$	1.5 			44 			744 		
A		1.9 			41 			679 			1.3 			38 			676 		
B		1.2 			26 			647 			0.5 			15 			644 		
C		0.3 			7 			616 			0.1 			3 			615 		
	
Total retail originations		$	4.6 			100 			681 			$	3.4 			100 			699 		
Nine months ended September 30, 2020													
S		$	3.5 			24 			736 			$	3.6 			46 			735 		
A		6.9 			47 			681 			3.3 			42 			676 		
B		3.1 			21 			643 			0.9 			11 			645 		
C		0.9 			6 			601 			0.1 			1 			612 		
D		0.2 			1 			541 			— 			— 			593 		
E		0.1 			1 			515 			— 			— 			572 		
Total retail originations		$	14.7 			100 			679 			$	7.9 			100 			697 		
Nine months ended September 30, 2019													
S		$	3.9 			26 			738 			$	4.5 			45 			744 		
A		6.2 			42 			678 			3.8 			38 			676 		
B		3.7 			24 			645 			1.3 			14 			644 		
C		1.1 			7 			611 			0.3 			3 			613 		
D		0.1 			1 			545 			— 			— 			572 		
Total retail originations		$	15.0 			100 			680 			$	9.9 			100 			699 		

	

	
	
(a)Represents Ally’s internal credit score, incorporating numerous borrower and structure attributes including: severity and aging of delinquency; number of credit inquiries; LTV ratio; and payment-to-income ratio. We periodically update our underwriting scorecard, which can have an impact on our credit tier scoring.
89

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table presents the percentage of total retail loan originations, in dollars, by the loan term in months.

		Three months ended September 30,		Nine months ended September 30,	
		2020		2019		2020		2019	
0–71		20 	%		19 	%		19 	%		20 	%	
72–75		63 			65 			64 			65 		
76 +		17 			16 			17 			15 		
Total retail originations (a)		100 	%		100 	%		100 	%		100 	%	
(a)Excludes RV loans.
Retail originations with a term of 76 months or more represented 17% of total retail originations for both the three months and nine months ended September 30, 2020, compared to 16% and 15% for the three months and nine months ended September 30, 2019, respectively. Substantially all of the loans originated with a term of 76 months or more during the three months and nine months ended September 30, 2020, and 2019, were considered to be prime and in credit tiers S, A, or B. We define prime consumer automotive loans primarily as those loans with a FICO® Score (or an equivalent score) at origination of 620 or greater.
The following table presents the percentage of total outstanding retail loans by origination year.

September 30,		2020		2019	
Pre-2016		3 	%		8 	%	
2016		6 			12 		
2017		12 			19 		
2018		20 			29 		
2019		30 			32 		
2020		29 			— 		
Total		100 	%		100 	%	
The 2020, 2019, and 2018 vintages compose 79% of the overall retail portfolio as of September 30, 2020, and have higher average buy rates than older vintages.
The following tables present the total retail loan and operating lease origination dollars and percentage mix by product type and by channel.

		Consumer automotive financing originations		% Share of Ally originations	
Three months ended September 30, ($ in millions)		2020		2019		2020		2019	
Used retail		$	5,416 			$	4,621 			55 			50 		
New retail standard		2,980 			3,332 			31 			36 		
Lease		1,364 			1,255 			14 			13 		
New retail subvented		28 			52 			— 			1 		
Total consumer automotive financing originations (a)		$	9,788 			$	9,260 			100 			100 		
(a)Includes CSG originations of $992 million and $969 million for the three months ended September 30, 2020, and 2019, respectively.

		Consumer automotive financing originations		% Share of Ally originations	
Nine months ended September 30, ($ in millions)		2020		2019		2020		2019	
Used retail		$	14,656 			$	15,032 			57 			53 		
New retail standard		7,863 			9,749 			30 			35 		
Lease		3,442 			3,198 			13 			11 		
New retail subvented		84 			175 			— 			1 		
Total consumer automotive financing originations (a)		$	26,045 			$	28,154 			100 			100 		
(a)Includes CSG originations of $2.7 billion and $3.0 billion for the nine months ended September 30, 2020, and 2019, respectively.
90

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q

		Consumer automotive financing originations		% Share of Ally originations	
Three months ended September 30, ($ in millions)		2020		2019		2020		2019	
Growth channel		$	4,918 			$	4,239 			50 			46 		
Chrysler dealers		2,841 			2,602 			29 			28 		
GM dealers		2,029 			2,419 			21 			26 		
Total consumer automotive financing originations		$	9,788 			$	9,260 			100 			100 		

		Consumer automotive financing originations		% Share of Ally originations	
Nine months ended September 30, ($ in millions)		2020		2019		2020		2019	
Growth channel		$	13,079 			$	13,592 			50 			48 		
Chrysler dealers		7,145 			7,338 			28 			26 		
GM dealers		5,821 			7,224 			22 			26 		
Total consumer automotive financing originations		$	26,045 			$	28,154 			100 			100 		
Total consumer automotive loan and operating lease originations increased $528 million and decreased $2.1 billion for the three months and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The increase for the three months ended September 30, 2020, compared to prior year, was primarily driven by higher used retail originations, the majority of which was sourced from diversified channels. The decrease for the nine months ended September 30, 2020, compared to prior year, was primarily due to decreased originations across all channels, driven by impacts of the COVID-19 pandemic including the temporary shutdown or restriction of front end operations of automotive dealers during the second quarter of 2020. These restrictions, along with the industry-wide halt of new vehicle production, drove a significant decrease in industry automotive light vehicle sales.
Our lending and finance receivable balances have been impacted by the pandemic. Through the second quarter of 2020, as governments acted to temporarily close or restrict the operations of businesses, including automotive dealers, and as many consumers and businesses changed their behavior in response to governmental mandates and advisories to sharply restrain commercial and social interactions, we experienced significant reductions in our consumer automotive loan applications. As consumers and businesses adapted to changed conditions and many governmental authorities relaxed their restrictions later in the second quarter, we began to observe a recovery in quality loan application volume and resulting booked originations. For the three months ended September 30, 2020, we decisioned 3.2 million consumer automotive financing applications, consistent with prior year levels, and funded balances of approximately $9.8 billion, as compared to 3.1 million in applications and $7.2 billion in originations for the three months ended June 30, 2020.
We have included origination metrics by loan term and FICO® Score within this MD&A. However, the proprietary way we evaluate risk is based on multiple inputs as described in the section titled Automotive Financing Volume—Acquisition and Underwriting within the MD&A in our 2019 Annual Report on Form 10-K.
The following tables present the percentage of retail loan and operating lease originations, in dollars, by FICO® Score and product type.

		Used retail		New retail		Lease	
Three months ended September 30,		2020		2019		2020		2019		2020		2019	
740 +		19 	%		18 	%		22 	%		24 	%		46 	%		46 	%	
660–739		40 			39 			40 			34 			38 			37 		
620–659		23 			25 			20 			20 			12 			11 		
540–619		12 			13 			5 			7 			3 			4 		
< 540		3 			1 			— 			1 			— 			— 		
Unscored (a)		3 			4 			13 			14 			1 			2 		
Total consumer automotive financing originations		100 	%		100 	%		100 	%		100 	%		100 	%		100 	%	

	

	

	

	

	
	
(a)Unscored are primarily CSG contracts with business entities that have no FICO® Score.
91

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q

		Used retail		New retail		Lease	
Nine months ended September 30,		2020		2019		2020		2019		2020		2019	
740 +		19 	%		18 	%		22 	%		24 	%		46 	%		48 	%	
660–739		40 			39 			38 			34 			37 			35 		
620–659		24 			25 			20 			20 			12 			11 		
540–619		12 			12 			6 			7 			4 			5 		
< 540		2 			2 			— 			1 			— 			— 		
Unscored (a)		3 			4 			14 			14 			1 			1 		
Total consumer automotive financing originations		100 	%		100 	%		100 	%		100 	%		100 	%		100 	%	

	

	

	

	

	
	
(a)Unscored are primarily CSG contracts with business entities that have no FICO® Score.
Originations with a FICO® Score of less than 620 (considered nonprime) represented 10% and 11% of total consumer loan and operating lease originations for the three months and nine months ended September 30, 2020, respectively, and 10% and 11% for the three months and nine months ended September 30, 2019. Consumer loans and operating leases with FICO® Scores of less than 540 composed only 2% and 1% of total originations for the three months and nine months ended September 30, 2020, respectively, and 1% for both the three months and nine months ended September 30, 2019. Nonprime applications that are not automatically declined by our proprietary credit-scoring models for risk reasons are manually reviewed and decisioned by an experienced underwriting team. Nonprime applications are subject to more stringent underwriting criteria (for example, minimum payment-to-income ratio and vehicle mileage, and maximum amount financed), and our nonprime loan portfolio generally does not include any loans with a term of 76 months or more. For discussion of our credit-risk-management practices and performance, refer to the section titled Risk Management.
During the third quarter of 2020, we expanded our relationship with Carvana, a leading e-commerce platform for buying and selling used vehicles. Specifically, we increased our committed facility from $2.0 billion to $3.0 billion to support Carvana’s continued growth.
For discussion of manufacturer marketing incentives, refer to the section titled Automotive Financing Volume—Manufacturer Marketing Incentives within the MD&A in our 2019 Annual Report on Form 10-K.
Commercial Wholesale Financing Volume
The following table presents the percentage of average balance of our commercial wholesale floorplan finance receivables, in dollars, by product type and by channel.
																											
		Average balance	
		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
GM new vehicles		33 	%		43 	%		34 	%		41 	%	
Chrysler new vehicles		34 			31 			33 			32 		
Growth new vehicles		16 			13 			16 			14 		
Used vehicles		17 			13 			17 			13 		
Total		100 	%		100 	%		100 	%		100 	%	
Total commercial wholesale finance receivables		$	15,385 			$	27,520 			$	20,226 			$	28,838 		
Average commercial wholesale financing receivables outstanding decreased $12.1 billion and $8.6 billion during the three months and nine months ended September 30, 2020, respectively, compared to same periods in 2019. The decreases were primarily driven by a reduction or temporary shutdown in manufacturer production as a result of the COVID-19 pandemic and the GM strike which occurred in September 2019, coupled with ongoing retail automotive sales, which reduced dealer stock levels. The declines were also impacted by a reduction in the number of GM dealer relationships due to the competitive environment across the automotive lending market. Dealer inventory levels are dependent on a number of factors, including manufacturer production schedules and vehicle mix, sales incentives, and industry sales. Manufacturer production and corresponding dealer stock levels, as well as dealer penetration levels, may continue to influence our future wholesale balances during 2020 and 2021. While manufacturer production generally resumed later in the second quarter, it is not currently clear what impacts the pandemic may have on future production levels and how that may ultimately impact new vehicle sales, commercial floorplan receivables and the overall health of our dealer customers.
In addition to the increased loan purchase commitment executed with Carvana during the quarter, we have also increased our commitment to provide funding through Carvana’s inventory floorplan from $950 million to $1.25 billion and have extended the facility from October 2020 through March 2023.
92

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Other Commercial Automotive Financing
We also provide other forms of commercial financing for the automotive industry including automotive dealer term and revolving loans and automotive fleet financing. Automotive dealer term and revolving loans are loans that we make to dealers to finance other aspects of the dealership business, including acquisitions. These loans are usually secured by real estate or other dealership assets and are typically personally guaranteed by the individual owners of the dealership. Additionally, these loans generally include cross-collateral and cross-default provisions. Automotive fleet financing credit lines may be obtained by dealers, their affiliates, and other independent companies that are used to purchase vehicles, which they lease or rent to others. The average balances of other commercial automotive loans increased $127 million and $24 million for the three months and nine months ended September 30, 2020, respectively, compared to the same periods in 2019, to averages of $5.9 billion and $5.7 billion.
93

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Insurance
Results of Operations
The following table summarizes the operating results of our Insurance operations. The amounts presented are before the elimination of balances and transactions with our other reportable segments.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		Favorable/(unfavorable) % change		2020		2019		Favorable/(unfavorable) % change	
Insurance premiums and other income													
Insurance premiums and service revenue earned		$	276 			$	280 			(1)		$	816 			$	802 			2	
Interest and dividends on investment securities and cash and cash equivalents, net (a)		8 			14 			(43)		34 			41 			(17)	
Other gain on investments, net (b)		59 			6 			n/m		89 			124 			(28)	
Other income		3 			3 			—		8 			9 			(11)	
Total insurance premiums and other income		346 			303 			14		947 			976 			(3)	
Expense													
Insurance losses and loss adjustment expenses		85 			74 			(15)		301 			260 			(16)	
Acquisition and underwriting expense													
Compensation and benefits expense		21 			19 			(11)		62 			60 			(3)	
Insurance commissions expense		130 			120 			(8)		383 			351 			(9)	
Other expenses		32 			34 			6		100 			104 			4	
Total acquisition and underwriting expense		183 			173 			(6)		545 			515 			(6)	
Total expense		268 			247 			(9)		846 			775 			(9)	
Income from continuing operations before income tax expense		$	78 			$	56 			39		$	101 			$	201 			(50)	
Total assets		$	8,944 			$	8,478 			5		$	8,944 			$	8,478 			5	
Insurance premiums and service revenue written		$	333 			$	357 			(7)		$	917 			$	976 			(6)	
Combined ratio (c)		96.1 	%		87.5 	%				102.6 	%		95.6 	%			
n/m = not meaningful
(a)Includes interest expense of $21 million and $60 million for the three months and nine months ended September 30, 2020, respectively, and $20 million and $58 million for the three months and nine months ended September 30, 2019.
(b)Includes net unrealized gains on equity securities of $13 million and net unrealized losses of $80 million for the three months and nine months ended September 30, 2020, respectively, compared to net unrealized losses of $10 million for the three months ended September 30, 2019, and net unrealized gains of $59 million for the nine months ended September 30, 2019.
(c)Management uses a combined ratio as a primary measure of underwriting profitability. Underwriting profitability is indicated by a combined ratio under 100% and is calculated as the sum of all incurred losses and expenses (excluding interest and income tax expense) divided by the total of premiums and service revenues earned and other income.
Our Insurance operations earned income from continuing operations before income tax expense of $78 million and $101 million for the three months and nine months ended September 30, 2020, respectively, compared to $56 million and $201 million for the three months and nine months ended September 30, 2019. The increase for the three months ended September 30, 2020, was primarily driven by $59 million of net gains on investments, compared to $6 million for the three months ended September 30, 2019, partially offset by an $11 million increase in insurance losses and loss adjustment expenses. The decrease for the nine months ended September 30, 2020, was primarily driven by a $41 million increase in insurance losses and loss adjustment expenses and a $35 million decrease in net gains on investments.
Insurance premiums and service revenue earned was $276 million and $816 million for the three months and nine months ended September 30, 2020, respectively, compared to $280 million and $802 million for the three months and nine months ended September 30, 2019. The increase for the nine months ended September 30, 2020, was primarily due to higher earned revenue within our F&I portfolio, as revenue is earned over the life of the contracts on a basis proportionate to the anticipated cost pattern. The increase was partially offset by lower dealer vehicle inventory levels within our P&C business.
Insurance losses and loss adjustment expenses totaled $85 million and $301 million for the three months and nine months ended September 30, 2020, respectively, compared to $74 million and $260 million for the same periods in 2019. The increases for the three months and nine months ended September 30, 2020, were primarily driven by higher weather-related losses. Total acquisition and underwriting expense increased $10 million and $30 million for the three months and nine months ended September 30, 2020, respectively. These increases were primarily due to increases in insurance commissions expense, commensurate with higher earned premiums in our F&I portfolio. Higher
94

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
weather losses and expenses drove an increase in the combined ratio to 96.1% and 102.6% for the three months and nine months ended September 30, 2020, respectively, compared to 87.5% and 95.6% for the three months and nine months ended September 30, 2019. In April 2020, we renewed our annual reinsurance program and continue to utilize this coverage to manage our risk of weather-related loss.
Premium and Service Revenue Written
The following table summarizes premium and service revenue written by product, net of premiums, ceded to reinsurers. VSC and GAP revenue are earned over the life of the service contract on a basis proportionate to the anticipated cost pattern. Refer to Note 3 to the Condensed Consolidated Financial Statements for further discussion of this revenue stream.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Finance and insurance products									
Vehicle service contracts		$	232 			$	241 			$	642 			$	683 		
Guaranteed asset protection and other finance and insurance products (a)		37 			33 			103 			90 		
Total finance and insurance products		269 			274 			745 			773 		
Property and casualty insurance (b)		64 			83 			172 			203 		
Total		$	333 			$	357 			$	917 			$	976 		
(a)Other products include VMCs, ClearGuard, and other ancillary products.
(b)P&C insurance include vehicle inventory insurance and dealer ancillary products.
Insurance premiums and service revenue written was $333 million and $917 million for the three months and nine months ended September 30, 2020, respectively, compared to $357 million and $976 million for the same periods in 2019. The decrease for the three months and nine months ended September 30, 2020, were primarily due to lower F&I volume and lower dealer vehicle inventory levels due to the economic impact of COVID-19, as further described in the section titled Significant Business Developments Related to COVID-19 within the MD&A. While this significantly reduced our F&I written premiums in late March and early in the second quarter, we have experienced gradual recoveries since that time, with total F&I written premiums of $269 million in the third quarter of 2020, which was down slightly from $274 million during the same period in the prior year. Written insurance premiums from our property and casualty business have declined during the three months and nine months ended September 30, 2020, as a result of lower vehicle inventory levels due primarily to impacts of COVID-19.
Cash and Investments
A significant aspect of our Insurance operations is the investment of proceeds from premiums and other revenue sources. We use these investments to satisfy our obligations related to future claims at the time these claims are settled. Our Insurance operations have an Investment Committee, which develops guidelines and strategies for these investments. The guidelines established by this committee reflect our risk appetite, liquidity requirements, regulatory requirements, and rating agency considerations, among other factors.
The following table summarizes the composition of our Insurance operations cash and investment portfolio at fair value.

($ in millions)		September 30, 2020		December 31, 2019	
Cash					
Noninterest-bearing cash		$	237 			$	95 		
Interest-bearing cash		1,541 			1,230 		
Total cash		1,778 			1,325 		
Equity securities		621 			608 		
Available-for-sale securities					
Debt securities					
U.S. Treasury and federal agencies		55 			528 		
U.S. States and political subdivisions		598 			530 		
Foreign government		196 			186 		
Agency mortgage-backed residential		859 			1,132 		
Mortgage-backed residential		53 			70 		

Corporate debt		1,846 			1,363 		
Total available-for-sale securities		3,607 			3,809 		
Total cash and securities		$	6,006 			$	5,742 		
95

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Mortgage Finance
Results of Operations
The following table summarizes the activities of our Mortgage Finance operations. The amounts presented are before the elimination of balances and transactions with our reportable segments.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		Favorable/(unfavorable) % change		2020		2019		Favorable/(unfavorable) % change	
Net financing revenue and other interest income													
Total financing revenue and other interest income		$	121 			$	144 			(16)		$	386 			$	440 			(12)	
Interest expense		91 			105 			13		288 			305 			6	
Net financing revenue and other interest income		30 			39 			(23)		98 			135 			(27)	
Gain on mortgage loans, net		34 			10 			n/m		60 			14 			n/m	
Other income, net of losses		2 			— 			n/m		5 			2 			150	
Total other revenue		36 			10 			n/m		65 			16 			n/m	
Total net revenue		66 			49 			35		163 			151 			8	
Provision for credit losses		— 			— 			—		4 			2 			(100)	
Noninterest expense													
Compensation and benefits expense		6 			7 			14		17 			24 			29	
Other operating expenses		34 			31 			(10)		96 			87 			(10)	
Total noninterest expense		40 			38 			(5)		113 			111 			(2)	
Income from continuing operations before income tax expense		$	26 			$	11 			136		$	46 			$	38 			21	
Total assets		$	15,503 			$	16,583 			(7)		$	15,503 			$	16,583 			(7)	
n/m = not meaningful
Our Mortgage Finance operations earned income from continuing operations before income tax expense of $26 million and $46 million for the three months and nine months ended September 30, 2020, respectively, compared to $11 million and $38 million for the three months and nine months ended September 30, 2019. The increase for the three months and nine months ended September 30, 2020, was primarily due to higher net gains on the sale of mortgage loans, which was partially offset by lower net financing revenue and other interest income, which was driven by higher prepayment activity.
Net financing revenue and other interest income was $30 million and $98 million for the three months and nine months ended September 30, 2020, respectively, compared to $39 million and $135 million for the three months and nine months ended September 30, 2019. The decreases in net financing revenue and other interest income for the three months and nine months ended September 30, 2020, were primarily due to accelerated premium amortization of purchased loans due to higher prepayment activity, driven by a lower interest rate environment. Amortization was $35 million and $88 million for the three months and nine months ended September 30, 2020, respectively, compared to $21 million and $46 million for the three months and nine months ended September 30, 2019. During the three months and nine months ended September 30, 2020, we purchased $659 million and $3.0 billion of mortgage loans that were originated by third parties, respectively, compared to $811 million and $2.7 billion for the three months and nine months ended September 30, 2019, and originated $441 million and $1.4 billion of mortgage loans held-for-investment, compared to $556 million and $1.2 billion, during the three months and nine months ended September 30, 2019.
Gain on sale of mortgage loans, net, was $34 million and $60 million for the three months and nine months ended September 30, 2020, respectively, compared to $10 million and $14 million for the three months and nine months ended September 30, 2019. The increases were driven by higher direct-to-consumer mortgage originations and the subsequent sale of these loans to our fulfillment provider during the three months and nine months ended September 30, 2020. During the three months and nine months ended September 30, 2020, we originated $845 million and $1.8 billion of loans held-for-sale, respectively, compared to $220 million and $464 million during the three months and nine months ended September 30, 2019.
The provision for credit losses remained flat for the three months ended September 30, 2020, compared to the three months ended September 30, 2019, and increased $2 million for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, as a result of reserve increases associated with broad macroeconomic impacts resulting from the COVID-19 pandemic.
96

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table presents the total UPB of purchases and originations of consumer mortgages held-for-investment, by FICO® Score at the time of acquisition.

FICO® Score		Volume
($ in millions)		% Share of volume	
Three months ended September 30, 2020					
740 +		$	929 			84 		
720–739		95 			9 		
700–719		68 			6 		
680–699		6 			1 		
660–679		2 			— 		
Total consumer mortgage financing volume		$	1,100 			100 		
Three months ended September 30, 2019					
740 +		$	1,148 			84 		
720–739		120 			9 		
700–719		91 			6 		
680–699		8 			1 		
	
Total consumer mortgage financing volume		$	1,367 			100 		
Nine months ended September 30, 2020					
740 +		$	3,769 			85 		
720–739		399 			9 		
700–719		251 			6 		
680–699		17 			— 		
660–679		2 			— 		
Total consumer mortgage financing volume		$	4,438 			100 		
Nine months ended September 30, 2019					
740 +		$	3,198 			81 		
720–739		402 			10 		
700–719		313 			8 		
680–699		25 			1 		
	
Total consumer mortgage financing volume		$	3,938 			100 		

	

	
	
The following table presents the net UPB, net UPB as a percentage of total, WAC, premium net of discounts, LTV, and FICO® Scores for the products in our Mortgage Finance held-for-investment loan portfolio.

Product		Net UPB (a) ($ in millions)		% of total net UPB		WAC		Net premium ($ in millions)		Average refreshed LTV (b)		Average refreshed FICO® (c)	
September 30, 2020													
Adjustable-rate		$	1,065 			7 			3.37 	%		$	12 			50.74 	%		774 		
Fixed-rate		13,903 			93 			3.90 			188 			60.99 			776 		
Total		$	14,968 			100 			3.86 			$	200 			60.26 			776 		
December 31, 2019													
Adjustable-rate		$	1,715 			11 			3.46 	%		$	22 			51.59 	%		774 		
Fixed-rate		14,200 			89 			4.07 			244 			61.39 			774 		
Total		$	15,915 			100 			4.01 			$	266 			60.33 			774 		
(a)Represents UPB, net of charge-offs.
(b)Updated home values were derived using a combination of appraisals, broker price opinions, automated valuation models, and metropolitan statistical area level house price indices.
(c)Updated to reflect changes in credit score since loan origination.
97

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Corporate Finance
Results of Operations
The following table summarizes the activities of our Corporate Finance operations. The amounts presented are before the elimination of balances and transactions with our reportable segments.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		Favorable/(unfavorable) % change		2020		2019		Favorable/(unfavorable) % change	
Net financing revenue and other interest income													
Interest and fees on finance receivables and loans		$	81 			$	90 			(10)		$	263 			$	274 			(4)	
Interest on loans held-for-sale		3 			3 			—		8 			6 			33	
Interest expense		9 			33 			73		51 			105 			51	
Net financing revenue and other interest income		75 			60 			25		220 			175 			26	

	
Total other revenue		9 			9 			—		28 			30 			(7)	
Total net revenue		84 			69 			22		248 			205 			21	
Provision for credit losses		1 			3 			67		140 			29 			n/m	
Noninterest expense													
Compensation and benefits expense		13 			13 			—		48 			45 			(7)	
Other operating expenses		10 			9 			(11)		36 			28 			(29)	
Total noninterest expense		23 			22 			(5)		84 			73 			(15)	
Income from continuing operations before income tax expense		$	60 			$	44 			36		$	24 			$	103 			(77)	
Total assets		$	5,995 			$	5,275 			14		$	5,995 			$	5,275 			14	
n/m = not meaningful
Our Corporate Finance operations earned income from continuing operations before income tax expense of $60 million and $24 million for the three months and nine months ended September 30, 2020, respectively, compared to income earned of $44 million and $103 million for the three months and nine months ended September 30, 2019. The increase for the three months ended September 30, 2020, is due to higher net financing revenue and other interest income resulting primarily from higher asset levels and the benefits of interest rate floors on the majority of the portfolio offsetting the impact of lower base rates. The decrease for the nine months ended September 30, 2020, is due to higher reserve build for potential COVID-19-related credit losses partially offset by higher net financing revenue and other interest income resulting from asset growth.
Net financing revenue and other interest income was $75 million and $220 million for the three months and nine months ended September 30, 2020, respectively, compared to $60 million and $175 million for the three months and nine months ended September 30, 2019. The increases were primarily due to the growth of our loan portfolio, represented by a 17% increase in the amortized cost of our finance receivables and loans. Growth in the portfolio was primarily driven by asset-based lending, mostly through our lender finance vertical, which provides asset managers with partial funding for their direct lending activities.
The provision for credit losses decreased $2 million and increased $111 million for the three months and nine months ended September 30, 2020, respectively, compared to the three months and nine months ended September 30, 2019. The increase for the nine months ended September 30, 2020, was primarily driven by $85 million of incremental reserves associated with the broad macroeconomic impact resulting from the COVID-19 pandemic. Additionally, for the nine months ended September 30, 2020, provision expense increased as a result of higher provisions for specific loan exposures. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.
Total noninterest expense was $23 million and $84 million for the three months and nine months ended September 30, 2020, respectively, compared to $22 million and $73 million for the three months and nine months ended September 30, 2019. The increases were primarily due to higher compensation and benefits expense and other noninterest costs associated with growth in the business.
98

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Credit Portfolio
The following table presents loans held-for-sale, the amortized cost of finance receivables and loans outstanding, unfunded commitments to lend, and total serviced loans of our Corporate Finance operations.

($ in millions)		September 30, 2020		December 31, 2019	
Loans held-for-sale, net		$	207 			$	100 		
Finance receivables and loans		$	5,883 			$	5,688 		
Unfunded lending commitments (a)		$	3,839 			$	2,682 		
Total serviced loans		$	7,504 			$	6,380 		
(a)Includes unused revolving credit line commitments for loans held-for-sale and finance receivables and loans, signed commitment letters, and standby letter of credit facilities, which are issued on behalf of clients and may contingently require us to make payments to a third-party beneficiary in the event of a draw by the beneficiary thereunder. As many of these commitments are subject to borrowing base agreements and other restrictive covenants or may expire without being fully drawn, the stated amounts of these unfunded commitments are not necessarily indicative of future cash requirements.
The following table presents the percentage of total finance receivables and loans of our Corporate Finance operations by industry concentration. The finance receivables and loans are reported at amortized cost.

		September 30, 2020		December 31, 2019	
	
Industry					
Health services		22.4 	%		25.8 	%	
Services		20.9 			19.8 		
Financial services		19.3 			13.0 		
Automotive and transportation		11.0 			11.4 		
Machinery, equipment, and electronics		6.5 			7.0 		
Chemicals and metals		4.0 			5.9 		
Other manufactured products		3.1 			3.1 		
Wholesale		2.9 			3.4 		
Food and beverages		2.8 			3.9 		
Lumber and wood		2.1 			1.1 		
Paper, printing, and publishing		1.4 			1.7 		
Construction		1.3 			1.3 		
Other		2.3 			2.6 		
Total finance receivables and loans		100.0 	%		100.0 	%	
99

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Corporate and Other
The following table summarizes the activities of Corporate and Other, which primarily consist of centralized corporate treasury activities such as management of the cash and corporate investment securities and loan portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments, original issue discount, and the residual impacts of our corporate FTP and treasury ALM activities. Corporate and Other also includes certain equity investments, which primarily consist of FHLB and FRB stock, the management of our legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, the activity related to Ally Invest and Ally Lending, and reclassifications and eliminations between the reportable operating segments.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		Favorable/(unfavorable) % change		2020		2019		Favorable/(unfavorable) % change	
Net financing revenue and other interest income													
Interest and fees on finance receivables and loans (a)		$	(4)			$	17 			(124)		$	(11)			$	58 			(119)	
Interest on loans held-for-sale		1 			1 			—		1 			2 			(50)	
Interest and dividends on investment securities and other earning assets		148 			209 			(29)		515 			637 			(19)	
Interest on cash and cash equivalents		1 			13 			(92)		10 			48 			(79)	
Other, net		(2)			(3)			33		(6)			(9)			33	
Total financing revenue and other interest income		144 			237 			(39)		509 			736 			(31)	
Interest expense													
Original issue discount amortization (b)		12 			11 			(9)		34 			31 			(10)	
Other interest expense (c)		147 			229 			36		558 			659 			15	
Total interest expense		159 			240 			34		592 			690 			14	
Net financing (loss) revenue and other interest income		(15)			(3)			n/m		(83)			46 			n/m	
Other revenue													
Loss on mortgage and automotive loans, net		(1)			— 			n/m		(25)			— 			n/m	
(Loss) gain on extinguishment of debt		(49)			1 			n/m		(50)			(2)			n/m	
Other gain on investments, net		5 			22 			(77)		87 			45 			93	
Other income, net of losses		85 			23 			n/m		139 			62 			124	
Total other revenue		40 			46 			(13)		151 			105 			44	
Total net revenue		25 			43 			(42)		68 			151 			(55)	
Provision for credit losses		18 			(5)			n/m		43 			(16)			n/m	
Total noninterest expense (d)		105 			88 			(19)		360 			246 			(46)	
Loss from continuing operations before income tax expense		$	(98)			$	(40)			(145)		$	(335)			$	(79)			n/m	
Total assets		$	51,462 			$	36,053 			43		$	51,462 			$	36,053 			43	
n/m = not meaningful
(a)Primarily related to impacts associated with hedging activities within our automotive loan portfolio, financing revenue from our legacy mortgage portfolio, and consumer unsecured lending activity.
(b)Amortization is included as interest on long-term debt in the Condensed Consolidated Statement of Comprehensive Income.
(c)Includes the residual impacts of our FTP methodology and impacts of hedging activities of certain debt obligations.
(d)Includes reductions of $234 million and $732 million for the three months and nine months ended September 30, 2020, respectively, and $225 million and $673 million for the three months and nine months ended September 30, 2019, related to the allocation of corporate overhead expenses to other segments. The receiving segments record their allocation of corporate overhead expense within other operating expense.
100

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table presents the scheduled remaining amortization of the original issue discount at September 30, 2020.

Year ended December 31, ($ in millions)		2020		2021		2022		2023		2024		2025 and thereafter (a)		Total	
Original issue discount															
Outstanding balance at year end		$	1,071 			$	1,017 			$	958 			$	894 			$	825 			$	— 				
Total amortization (b)		13 			54 			59 			64 			69 			825 			$	1,084 		
(a)The maximum annual scheduled amortization for any individual year is $143 million in 2030.
(b)The amortization is included as interest on long-term debt in the Condensed Consolidated Statement of Comprehensive Income.
Corporate and Other incurred a loss from continuing operations before income tax expense of $98 million and $335 million for the three months and nine months ended September 30, 2020, respectively, compared to a loss of $40 million and $79 million for the three months and nine months ended September 30, 2019. The increases in loss were primarily driven by a decrease in total financing revenue and other interest income from our investment securities portfolio and hedging activities, loss on extinguishment of debt from the early repayment of FHLB debt, partially offset by lower interest expense. Additionally, for the nine months ended September 30, 2020, the increase in loss was also attributable to a $50 million goodwill impairment at Ally Invest that occurred in the second quarter of 2020.
Financing revenue and other interest income was $144 million and $509 million for the three months and nine months ended September 30, 2020, respectively, compared to $237 million and $736 million for the three months and nine months ended September 30, 2019. The decreases were primarily driven by the impacts of a lower interest rate environment on the investment securities portfolio and hedging activities.
Total interest expense decreased $81 million and $98 million for the three months and nine months ended September 30, 2020, respectively, compared to the three and nine months ended September 30, 2019. The decreases were primarily driven by lower market interest rates, which drove a decrease in our deposit rates, and our continued shift to more cost-efficient deposit funding.
Total other revenue was $40 million and $151 million for the three months and nine months ended September 30, 2020, respectively, compared to $46 million and $105 million for the three months and nine months ended September 30, 2019. The decrease for the three months ended September 30, 2020, was primarily due to a loss on early repayment of FHLB debt of $48 million in the current period and lower realized investment gains. The increase for the nine months ended September 30, 2020, was driven by increased realized investment gains.
The provision for credit losses increased $23 million and $59 million for the three months and nine months ended September 30, 2020, respectively, compared to the three months and nine months ended September 30, 2019. The increases in provision expense for the three months and nine months ended September 30, 2020, were primarily driven by reserve increases in the Ally Lending portfolio from continued growth within the portfolio. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.
Total assets were $51.5 billion as of September 30, 2020, compared to $36.1 billion as of September 30, 2019. This increase was primarily the result of growth in our interest-bearing cash and cash equivalents and available-for-sale securities portfolio. The increase was partially offset by a decline in our held-to-maturity securities portfolio and the continued runoff of our legacy mortgage portfolio. At September 30, 2020, the amortized cost of the legacy mortgage portfolio was $904 million, compared to $1.2 billion at September 30, 2019.
101

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Cash and Securities
The following table summarizes the composition of the cash and securities portfolio at fair value for Corporate and Other.

($ in millions)		September 30, 2020		December 31, 2019	
Cash					
Noninterest-bearing cash		$	459 			$	501 		
Interest-bearing cash		17,679 			1,706 		
Total cash		18,138 			2,207 		
Available-for-sale securities					
Debt securities					
U.S. Treasury and federal agencies		751 			1,520 		
U.S. States and political subdivisions		379 			111 		
Agency mortgage-backed residential		19,636 			20,272 		
Mortgage-backed residential		2,983 			2,780 		
Agency mortgage-backed commercial		2,244 			1,382 		
Mortgage-backed commercial		— 			42 		
Asset-backed		389 			368 		

	
Total available-for-sale securities		26,382 			26,475 		
Held-to-maturity securities					
Debt securities					
Agency mortgage-backed residential		1,330 			1,579 		
Asset-backed retained notes		6 			21 		
Total held-to-maturity securities		1,336 			1,600 		
Total cash and securities		$	45,856 			$	30,282 		
Ally Invest
Ally Invest is our digital brokerage and wealth management offering, which enables us to complement our competitive deposit products with low-cost and commission-free investing. The following table presents trading days and average customer trades per day, the number of funded accounts, total net customer assets, and total customer cash balances as of the end of each of the last five quarters.

	3rd quarter 2020		2nd quarter 2020		1st quarter 2020		4th quarter 2019		3rd quarter 2019	
Trading days (a)	64.0 			63.0 			62.0 			63.0 			63.5 		
Average customer trades per day (in thousands)	58.7 			60.7 			43.9 			21.2 			17.7 		
Funded accounts (b) (in thousands)	400 			388 			373 			347 			346 		
Total net customer assets ($ in millions)	$	11,061 			$	9,603 			$	7,489 			$	7,850 			$	7,151 		
Total customer cash balances ($ in millions)	$	1,882 			$	1,891 			$	1,856 			$	1,376 			$	1,272 		
(a)Represents the number of days the New York Stock Exchange and other U.S. stock exchange markets are open for trading. A half day represents a day when the U.S. markets close early.
(b)Represents open and funded brokerage accounts.
During the three months ended September 30, 2020, continued market volatility resulting from the COVID-19 pandemic generated increased account openings and trade activity. Total funded accounts increased 3% from the prior quarter and increased 16% from the third quarter of 2019. Average customer trades per day decreased 3% from the prior quarter and increased 231% from third quarter of 2019, driven primarily by market volatility. Additionally, net customer assets increased 15% in the third quarter of 2020, as a result of equity market appreciation and increased customer account openings.
102

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Risk Management
Managing the risk/reward trade-off is a fundamental component of operating our businesses, and all employees are responsible for managing risk. We use multiple layers of defense to identify, monitor, and manage current and emerging risks.
•Business lines — Responsible for owning and managing all of the risks that emanate from their risk-taking activities, including business units and support functions.
•Independent risk management — Operates independent of the business lines and is responsible for establishing and maintaining our risk-management framework and promulgating it enterprise-wide. Independent risk management also provides an objective, critical assessment of risks and—through oversight, effective challenge, and other means—evaluates whether Ally remains aligned with its risk appetite.
•Internal audit — Provides its own independent assessments of the effectiveness of our risk management, internal controls, and governance; and independent assessments regarding the quality of our loan portfolios. Internal audit includes Audit Services and the Loan Review Group.
Our risk-management framework is overseen by the RC. The RC sets the risk appetite across our company while risk-oriented management committees, the executive leadership team, and our associates identify and monitor current and emerging risks and manage those risks within our risk appetite. For more information on our risk management process, refer to the Risk Management MD&A section of our 2019 Annual Report on Form 10-K.
Loan and Operating Lease Exposure
The following table summarizes the exposures from our loan and operating-lease activities.

($ in millions)		September 30, 2020		December 31, 2019	
Finance receivables and loans					
Automotive Finance		$	95,615 			$	104,880 		
Mortgage Finance		15,168 			16,181 		
Corporate Finance		5,883 			5,688 		
Corporate and Other (a)		1,362 			1,482 		
Total finance receivables and loans		118,028 			128,231 		
Loans held-for-sale					
	
Mortgage Finance (b)		156 			28 		
Corporate Finance		207 			100 		
Corporate and Other		78 			30 		
Total loans held-for-sale		441 			158 		
Total on-balance-sheet loans		118,469 			128,389 		
Off-balance-sheet securitized loans					
Automotive Finance (c)		121 			417 		
	
Whole-loan sales					
Automotive Finance (c)		— 			207 		
Total off-balance-sheet loans		121 			624 		
Operating lease assets					
Automotive Finance		9,454 			8,864 		
	
Total loan and operating lease exposure		$	128,044 			$	137,877 		

	

	
(a)Includes $904 million and $1.1 billion of consumer mortgage loans in our legacy mortgage portfolio at September 30, 2020, and December 31, 2019, respectively.
(b)Represents the current balance of conforming mortgages originated directly to the held-for-sale portfolio.
(c)Represents the current unpaid principal balance of outstanding loans, which are subject to our customary representation, warranty, and covenant provisions.
The risks inherent in our loan and operating lease exposures are largely driven by changes in the overall economy, used vehicle and housing prices, unemployment levels, and their impact on our borrowers. The potential financial statement impact of these exposures varies depending on the accounting classification and future expected disposition strategy. We retain the majority of our consumer automotive loans as they complement our core business model, but we do sell loans from time to time on an opportunistic basis. We ultimately manage the associated risks based on the underlying economics of the exposure. Our operating lease residual risk may be more volatile than credit risk in
103

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
stressed macroeconomic scenarios. While all operating leases are exposed to potential reductions in used vehicle values, only loans where we take possession of the vehicle are affected by potential reductions in used vehicle values.
Credit Risk
Credit risk is defined as the risk of loss arising from an obligor not meeting its contractual obligations to us. Credit risk includes consumer credit risk, commercial credit risk, and counterparty credit risk.
Credit risk is a major source of potential economic loss to us. Credit risk is monitored by the RCs, executive leadership team, and our associates. Together, they oversee credit decisioning, account servicing activities, and credit-risk-management processes, and manage credit risk exposures within our risk appetite. In addition, our Loan Review Group provides an independent assessment of the quality of our credit portfolios and credit-risk-management practices, and reports its findings to the RC on a regular basis.
To mitigate risk, we have implemented specific policies and practices across business lines, utilizing both qualitative and quantitative analyses. This reflects our commitment to maintaining an independent and ongoing assessment of credit risk and credit quality. Our policies require an objective and timely assessment of the overall quality of the consumer and commercial loan and operating lease portfolios. This includes the identification of relevant trends that affect the collectability of the portfolios, segments of the portfolios that are potential problem areas, loans and operating leases with potential credit weaknesses, and the assessment of the adequacy of internal credit risk policies and procedures. Our consumer and commercial loan and operating lease portfolios are subject to regular stress tests that are based on plausible, but unexpected, economic scenarios to assess how the portfolios may perform in a severe economic downturn. In addition, we establish and maintain underwriting policies and limits across our portfolios and higher risk segments (for example, nonprime) based on our risk appetite.
Another important aspect to managing credit risk involves the need to carefully monitor and manage the performance and pricing of our loan products with the aim of generating appropriate risk-adjusted returns. When considering pricing, various granular risk-based factors are considered such as expected loss rates, loss volatility, anticipated operating costs, and targeted returns on equity. We carefully monitor credit losses and trends in credit losses relative to expected credit losses at contract inception. We closely monitor our loan performance and profitability in light of forecasted economic conditions and manage credit risk and expectations of losses in the portfolio.
We manage credit risk based on the risk profile of the borrower, the source of repayment, the underlying collateral, and current market conditions. We monitor the credit risk profile of individual borrowers, various segmentations (for example, geographic region, product type, industry segment), as well as the aggregate portfolio. We perform quarterly analyses of the consumer automotive, consumer mortgage, consumer other, and commercial portfolios using a range of indicators to assess the adequacy of the allowance for loan losses based on historical and current trends. Refer to Note 8 to the Condensed Consolidated Financial Statements for additional information.
Additionally, we utilize numerous collection strategies to mitigate loss and provide ongoing support to customers in financial distress. For consumer automotive loans, we work with customers when they become delinquent on their monthly payment. In lieu of repossessing their vehicle, we may offer several types of assistance to aid our customers based on their willingness and ability to repay their loan. Loss mitigation may include payment extensions and rewrites of the loan terms. For mortgage loans, as part of certain programs, we offer mortgage loan modifications to qualified borrowers. These programs are in place to provide support to our mortgage customers in financial distress, including principal forgiveness, maturity extensions, delinquent interest capitalization, and changes to contractual interest rates.
Furthermore, we manage our credit exposure to financial counterparties based on the risk profile of the counterparty. Within our policies we have established standards and requirements for managing counterparty risk exposures in a safe and sound manner. Counterparty credit risk is derived from multiple exposure types including derivatives, securities trading, securities financing transactions, and certain cash balances. For more information on derivative counterparty credit risk, refer to Note 18 to the Condensed Consolidated Financial Statements.
We employ an internal team of economists to enhance our planning and forecasting capabilities. This team conducts industry and market research, monitors economic risks, and helps support various forms of scenario planning. This group closely monitors macroeconomic trends given the nature of our business and the potential impacts on our exposure to credit risk. The U.S. economy has started to recover from shutdowns that resulted from the COVID-19 pandemic. After peaking at 14.7% in April, the unemployment rate declined to 7.9% as of September 30, 2020. As a result of the economic disruption from COVID-19, sales of light motor vehicles fell to an annual pace of 8.7 million in April, a 49-year low, before rising to a 16.3 million annual pace as of September 30, 2020. Elevated unemployment may limit further gains on used vehicle values through the remainder of 2020 despite this strengthening in values.
Consumer Credit Portfolio
During the three months and nine months ended September 30, 2020, the credit performance of the consumer loan portfolio reflected our underwriting strategy to originate a diversified portfolio of consumer automotive loan assets, including new, used, prime and nonprime finance receivables and loans, as well as high-quality jumbo and LMI mortgage loans that are acquired through bulk loan purchases and direct-to-consumer mortgage originations. We also further diversified our consumer portfolio to include personal lending through the acquisition of Health Credit Services during the fourth quarter of 2019. The carrying value of our nonprime consumer automotive loans before allowance for loan losses represented approximately 11.9% and 11.6% of our total consumer automotive loans at September 30, 2020, and December 31, 2019, respectively. For information on our consumer credit risk practices and policies regarding delinquencies, nonperforming status, and charge-offs, refer to Note 1 to the Condensed Consolidated Financial Statements.
104

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table includes consumer finance receivables and loans recorded at amortized cost.

		Outstanding		Nonperforming (a)		Accruing past due 90 days or more (b)	
	
($ in millions)		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019	
Consumer automotive (c) (d)		$	73,761 			$	72,390 			$	1,263 			$	762 			$	— 			$	— 		
Consumer mortgage													
Mortgage Finance		15,168 			16,181 			43 			17 			— 			— 		
Mortgage — Legacy		904 			1,141 			36 			40 			— 			— 		
Total consumer mortgage		16,072 			17,322 			79 			57 			— 			— 		
Consumer other (e)		319 			201 			1 			2 			— 			— 		
Total consumer finance receivables and loans		$	90,152 			$	89,913 			$	1,343 			$	821 			$	— 			$	— 		
(a)Includes nonaccrual TDR loans of $748 million and $252 million at September 30, 2020, and December 31, 2019, respectively.
(b)Loans are generally in nonaccrual status when principal or interest has been delinquent for 90 days or more, or when full collection is not expected. Refer to Note 1 to the Condensed Consolidated Financial Statements for a description of our accounting policies for finance receivables and loans.
(c)Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 18 to the Condensed Consolidated Financial Statements for additional information.
(d)Includes outstanding CSG loans of $8.1 billion and $8.2 billion at September 30, 2020, and December 31, 2019, respectively, and RV loans of $1.1 billion and $1.3 billion at September 30, 2020, and December 31, 2019.
(e)Excludes $8 million of finance receivables at September 30, 2020, and $11 million at December 31, 2019, for which we have elected the fair value option.
Total consumer finance receivables and loans increased $239 million at September 30, 2020, compared with December 31, 2019. The increase consists of $1.4 billion of consumer automotive finance receivables and loans, and $118 million of consumer other finance receivables and loans, largely offset by a decrease of $1.3 billion of consumer mortgage finance receivables and loans. The increase in consumer automotive finance receivables and loans was primarily related to continued momentum in our used vehicle lending. The increase in consumer other finance receivables and loans was primarily related to Ally Lending loan originations which outpaced portfolio runoff. These increases were largely offset by lower consumer mortgage finance receivables and loans as a result of loan pay-offs which exceeded bulk loan purchases and direct-to-consumer origination volume.
Total consumer nonperforming finance receivables and loans at September 30, 2020, increased $522 million to $1.3 billion from December 31, 2019. The increase was primarily due to our consumer automotive and consumer mortgage loan portfolios as a result of the COVID-19 pandemic. Refer to Note 8 to the Condensed Consolidated Financial Statements for additional information. Nonperforming consumer finance receivables and loans as a percentage of total outstanding consumer finance receivables and loans were 1.5% at September 30, 2020, and 0.9% at December 31, 2019.
Total consumer TDRs outstanding at September 30, 2020, increased $798 million since December 31, 2019, to $1.5 billion. Results primarily reflect an $811 million increase in our consumer automotive loan portfolio, driven by the impact of our loan modification program offered to borrowers affected by the COVID-19 pandemic, as well as an increase in business as usual deferrals offered to customers subsequent to a COVID deferral, where the loan modification in connection with other factors resulted in a TDR classification. Refer to Note 8 to the Condensed Consolidated Financial Statements for additional information.
Consumer automotive loans accruing and past due 30 days or more decreased $958 million to $1.7 billion at September 30, 2020, compared to December 31, 2019, driven primarily by the impact of our loan modification program offered to borrowers affected by the COVID-19 pandemic and normal seasonal trends for borrowers not in deferral programs. We experienced a higher level of borrowers who entered nonaccrual status as result of a TDR classification primarily based on our evaluation of the loan under our TDR framework which included a number of loans that entered into a loan modification.
In response to the impacts caused by the COVID-19 pandemic, we have taken significant actions to support our customers with industry-leading relief programs, while prudently managing our credit risk exposure.
In our consumer automotive loan portfolio, existing customers had the option to elect to defer their payments for up to 120 days without late fees being incurred, but with finance charges continuing to accrue. This program was made available to all consumer automotive loan customers beginning March 18, 2020. The length of the deferral offering was reduced incrementally, until on June 21, 2020, we eliminated the offering and migrated back to our standard extension process. Approximately 1.2 million consumer automotive loan customers enrolled in the program, of which 99% had reached their scheduled expiration as of September 30, 2020. For these deferrals that had exited the program and remain outstanding, the following provides certain credit quality indicators as of September 30, 2020.
•92% were current;
•8% were 30+ days past due.
105

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table presents the delinquency status for outstanding consumer automotive loans that have exited the COVID-19 deferral program as of September 30, 2020, as compared to the delinquency status of the borrowers that were frozen as of the date immediately preceding the commencement of the program and reported as such during the deferral period.

		Delinquency status as of September 30, 2020 (units in thousands)					
		Current		30–59 days past due		60–89 days past due		90 or more days past due		Total	
Delinquency status during deferral period		Units		% of total		Units		% of total		Units		% of total		Units		% of total		Units		% of total	
Consumer automotive																					
Current		976		94 			41		4 			11		1 			6		1 			1,034		100 		
30–59 days past due		57 			71 			15 			19 			5 			6 			3 			4 			80		100 		
60–89 days past due		11 			58 			4 			21 			2 			11 			2 			10 			19		100 		
90 or more days past due		2 			40 			1 			20 			1 			20 			1 			20 			5		100 		
Total consumer automotive (a)		1,046 					61 					19 					12 					1,138 				
(a)As of September 30, 2020, 4% of all loans that have exited the COVID-19 deferral program have been written down to estimated collateral value, less costs to sell. Refer to Note 1 to the Condensed Consolidated Financial Statements for more information regarding our charge-off policies.
Of the 1.1 million accounts that had exited the program and were active and outstanding as of September 30, 2020, 89 thousand had received a subsequent extension through our standard process, of which 88% had been current at the time of the enrollment in the deferral program. The geographic concentration of our automotive borrowers that have exited the program as of September 30, 2020, is generally consistent with our overall automotive loan portfolio, as further described in this section of the MD&A. While the cumulative enrollment in this program was unprecedented, loan extensions and modifications have historically been used successfully to help manage credit losses. We have previously been effective in administering large-scale loan extensions and modifications in targeted areas following certain natural disasters such as hurricanes and floods in recent years. We continue to carefully monitor the performance of our borrowers and have taken proactive steps to expand staffing levels in order to maximize collections and work with borrowers who may not be able to make their contractual payments upon exiting the deferral program. To date, current behaviors and payment activity have outperformed our initial expectations as well as historical payment performance for accounts with previously deferred payments. The future performance of these loans will be subject to a number of factors, including future economic conditions, the amount of additional Federal stimulus provided, and the level of impact that the COVID-19 pandemic may have.
In our mortgage-lending business, existing customers experiencing financial hardship due to an interruption of income related to the COVID-19 pandemic were afforded the opportunity to defer their loan payments for up to 120 days, with an option for an additional 60 days, without late fees being incurred but with interest continuing to accrue. This program was made available to mortgage-lending customers from March 18, 2020, through July 31, 2020. Approximately 2,350 of our mortgage-lending customers enrolled in the program, which represented 7% of our total held-for-investment portfolio as of September 30, 2020. Of these customers, 40% had cancelled their deferrals ahead of schedule or paid their balances in full, 30% remain in active forbearance, and 30% had reached their scheduled expiration and had exited the pandemic-relief program as of September 30, 2020. For accounts that had reached the scheduled expiration of their forbearance program and remain outstanding, the following provides certain credit quality indicators as of September 30, 2020.
•87% of the loans were current, in a repayment plan, or subject to a modification;
•13% were past due or undergoing other loss mitigation efforts.
In our personal-lending business, existing customers experiencing financial hardship due to the COVID-19 pandemic had the opportunity to elect to defer their loan payments for up to 120 days without late fees being incurred or finance charges continuing to accrue. In addition to this program, we temporarily suspended late fees for all customers with current accounts. The loan-deferral program was made available to personal-lending customers from March 23, 2020, through June 30, 2020. Approximately 6,300 of our personal-lending customers were enrolled in the program, and 84% of these enrolled customers were current on their loans at the time of enrollment. As of September 30, 2020, 84% of the enrolled customers had exited the program, and the remaining accounts in active forbearance represent less than 1% of the total portfolio.
In accordance with regulatory guidance, if borrowers are less than 30 days past due on their loans and enter into loan modifications offered as a result of COVID-19, their loans generally continue to be considered performing loans and continue to accrue interest during the period of the loan modification. For borrowers who are 30 days or more past due when entering into loan modifications offered as a result of COVID-19, we evaluate the loan modifications under our existing troubled debt restructuring framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan is accounted for as a TDR and generally will not accrue interest. For all borrowers who enroll in loan modification programs offered as a result of COVID-19, the delinquency status of the borrowers is frozen as of the date immediately preceding the commencement of the program, resulting in a static delinquency metric during the deferral period. Upon exiting the deferral program, the measurement of loan delinquency resumes where it had left off upon entry into the program.
106

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table includes consumer net charge-offs from finance receivables and loans at amortized cost and related ratios.

		Three months ended September 30,		Nine months ended September 30,	
		Net charge-offs (recoveries)		Net charge-off ratios (a)		Net charge-offs (recoveries)		Net charge-off ratios (a)	
($ in millions)		2020		2019		2020		2019		2020		2019		2020		2019	
Consumer automotive		$	117 			$	253 			0.6 	%		1.4 	%		$	516 			$	659 			0.9 	%		1.2 	%	
Consumer mortgage																	
Mortgage Finance		1 			— 			— 			— 			1 			— 			— 			— 		
Mortgage — Legacy		(2)			(2)			(0.6)			(0.6)			(6)			(6)			(0.7)			(0.6)		
Total consumer mortgage		(1)			(2)			— 			— 			(5)			(6)			— 			— 		
Consumer other		2 			— 			3.4 			— 			10 			— 			5.6 			— 		
Total consumer finance receivables and loans		$	118 			$	251 			0.5 			1.1 			$	521 			$	653 			0.8 			1.0 		
(a)Net charge-off ratios are calculated as net charge-offs divided by average outstanding finance receivables and loans excluding loans measured at fair value and loans held-for-sale during the period for each loan category.
Our net charge-offs from total consumer finance receivables and loans were $118 million and $521 million for the three months and nine months ended September 30, 2020, respectively, compared to $251 million and $653 million for the three months and nine months ended September 30, 2019. Net charge-offs for our consumer automotive portfolio decreased by $136 million and $143 million for the three months and nine months ended September 30, 2020. The decreases were primarily driven by strong payment performance and delinquency trends through the pandemic, as well as a lower number of loans migrating to charge-off as a result of the COVID-19 loan deferral program. In addition, our net charge-offs continue to benefit from strong used vehicle prices which has reduced the realized loss impact in instances of default. Through much of the first quarter, our consumer automotive loan portfolio experienced strong overall credit performance, driven by favorable macroeconomic conditions including low unemployment and continued disciplined underwriting. During the second half of March and continuing into the second quarter economic conditions deteriorated as a result of COVID-19. While economic conditions have improved later in the second quarter and into the third quarter, and we have taken a number of actions including the utilization of loan modification programs to support our customers and manage credit risk, we may incur higher charge-offs in future periods as a result of continued economic dislocation resulting from the impacts of COVID-19.
The following table summarizes total consumer loan originations for the periods shown. Total consumer loan originations include loans classified as finance receivables and loans and loans held-for-sale during the period.

		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Consumer automotive		$	8,425 			$	8,005 			$	22,604 			$	24,956 		
Consumer mortgage (a)		1,286 			775 			3,241 			1,678 		
Consumer other (b)		181 			— 			326 			— 		
Total consumer loan originations		$	9,892 			$	8,780 			$	26,171 			$	26,634 		
(a)Excludes bulk loan purchases associated with our Mortgage Finance operations, and includes $845 million and $1.8 billion of loans originated as held-for-sale for the three months and nine months ended September 30, 2020, respectively, and $220 million and $464 million for the three months and nine months ended September 30, 2019.
(b)Amounts relate to originations from our Ally Lending business, following the acquisition of Health Credit Services during the fourth quarter of 2019.
Total consumer loan originations increased $1.1 billion and decreased $463 million for the three months and nine months ended September 30, 2020, compared to the three months and nine months ended September 30, 2019. The increase for the three months ended September 30, 2020, was primarily due to growth in the direct-to-consumer mortgage business driven by the lower interest rate environment, and higher used automotive originations, the majority of which was sourced from the Growth channel. The decrease for the nine months ended September 30, 2020, was primarily due to decreased originations across all consumer automotive channels driven by the impacts from the COVID-19 pandemic, including the temporary shutdown or restriction of front end operations of automotive dealers during the second quarter of 2020. These restrictions, along with the industry-wide halt of new vehicle production, drove a significant decrease in industry automotive light vehicle sales. This decrease was partially offset by growth in the direct-to-consumer mortgage business driven by the lower interest rate environment, as well as origination volume from Ally Lending.
107

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table shows the percentage of consumer automotive and consumer mortgage finance receivables and loans by state concentration based on amortized cost. Total consumer automotive loans were $73.8 billion and $72.4 billion at September 30, 2020, and December 31, 2019, respectively. Total consumer mortgage loans were $16.1 billion and $17.3 billion at September 30, 2020, and December 31, 2019, respectively.

		September 30, 2020 (a)		December 31, 2019	
		Consumer automotive		Consumer mortgage		Consumer automotive		Consumer mortgage	
California		8.6 	%		35.5 	%		8.5 	%		35.1 	%	
Texas		12.4 			7.0 			12.4 			6.5 		
Florida		8.8 			5.3 			8.8 			5.1 		
Pennsylvania		4.6 			1.9 			4.6 			1.9 		
Illinois		4.0 			2.7 			4.1 			2.6 		
North Carolina		4.0 			2.2 			4.0 			2.0 		
Georgia		3.8 			2.7 			3.9 			2.8 		
New York		3.1 			3.5 			3.1 			3.0 		
Ohio		3.6 			0.5 			3.6 			0.5 		
New Jersey		2.9 			2.4 			2.8 			2.3 		
Other United States		44.2 			36.3 			44.2 			38.2 		
Total consumer loans		100.0 	%		100.0 	%		100.0 	%		100.0 	%	
(a)Presentation is in descending order as a percentage of total consumer finance receivables and loans at September 30, 2020.
We monitor our consumer loan portfolio for concentration risk across the states in which we lend. The highest concentrations of consumer loans are in California and Texas, which represented an aggregate of 24.8% and 24.9% of our total outstanding consumer finance receivables and loans at September 30, 2020, and December 31, 2019, respectively. Our consumer mortgage loan portfolio concentration within California, which is primarily composed of high-quality jumbo mortgage loans, generally aligns to the California share of jumbo mortgages nationally.
Repossessed and Foreclosed Assets
We classify an asset as repossessed or foreclosed, which is included in other assets on our Condensed Consolidated Balance Sheet, when physical possession of the collateral is taken. We dispose of the acquired collateral in a timely fashion in accordance with regulatory requirements. For more information on repossessed and foreclosed assets, refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.
Repossessed consumer automotive loan assets in our Automotive Finance operations decreased $13 million from December 31, 2019, to $134 million at September 30, 2020. Foreclosed mortgage assets decreased $7 million from December 31, 2019, to $2 million at September 30, 2020, primarily due to the foreclosure moratorium that is currently in place.
Commercial Credit Portfolio
During the three months and nine months ended September 30, 2020, the credit performance of the commercial portfolio remained stable as nonperforming finance receivables and loans decreased, and our net charge-offs remained low. For information on our commercial credit risk practices and policies regarding delinquencies, nonperforming status, and charge-offs, refer to Note 1 to the Condensed Consolidated Financial Statements.
108

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table includes total commercial finance receivables and loans reported at amortized cost.

	Outstanding		Nonperforming (a)		Accruing past due 90 days or more (b)	
	
($ in millions)	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019	
Commercial and industrial												
Automotive	$	17,886 			$	28,332 			$	30 			$	73 			$	— 			$	— 		
Other (c)	5,131 			5,014 			114 			138 			— 			— 		
Commercial real estate	4,851 			4,961 			6 			4 			— 			— 		
Total commercial finance receivables and loans	$	27,868 			$	38,307 			$	150 			$	215 			$	— 			$	— 		
(a)Includes nonaccrual TDR loans of $125 million and $114 million at September 30, 2020, and December 31, 2019, respectively.
(b)Loans are generally in nonaccrual status when principal or interest has been delinquent for 90 days or more, or when full collection is not expected. Refer to Note 1 to the Condensed Consolidated Financial Statements for a description of our accounting policies for finance receivables and loans.
(c)Other commercial and industrial primarily includes senior secured commercial lending largely associated with our Corporate Finance operations.
Total commercial finance receivables and loans outstanding decreased $10.4 billion from December 31, 2019, to $27.9 billion at September 30, 2020. Results primarily reflect a $10.6 billion decrease in our commercial automotive loan portfolio due to lower dealer inventory levels, driven by lower automotive production levels due to COVID-19 and the GM strike which occurred in September 2019. However, as new vehicle inventories have started to recover, our commercial automotive finance receivables and loans have increased $146 million during the third quarter of 2020. This decrease was partially offset by $195 million of growth in our Corporate Finance portfolio that was primarily driven by asset-based lending, mostly through our lender finance vertical, which provides asset managers with partial funding for their direct lending activities.
Total commercial nonperforming finance receivables and loans were $150 million at September 30, 2020, reflecting a decrease of $65 million when compared to December 31, 2019. The decrease was primarily due to no new automotive dealership defaults or impairments during the third quarter of 2020, and lower dealer inventory levels, as well as the upgrade of one exposure within our Corporate Finance portfolio to accrual status. Nonperforming commercial finance receivables and loans as a percentage of outstanding commercial finance receivables and loans decreased to 0.5% at September 30, 2020, compared to 0.6% at December 31, 2019.
In response to the impacts caused by the COVID-19 pandemic, we have taken significant actions to support our commercial automotive customers while prudently managing our credit risk exposure. For our commercial dealer customers that were current on all payment obligations, we offered a waiver of curtailments on wholesale floorplan loans, an increase in floorplan advance rates, a deferral of interest and insurance charges on wholesale borrowings, and a deferral of term loan payments from April through July 2020. Approximately 2,290 or 73% of eligible dealers requested at least one form of this assistance for at least one month as part of this program. Approximately 32% of eligible wholesale dealers deferred wholesale interest and insurance payments during the third quarter of 2020, which represented a decline from the first and second quarters. Dealers that elected to defer wholesale interest and insurance payments have the option to repay such balances over a 4- or 12-month period without additional interest charges or fees. As of September 30, 2020, approximately 29% of these enrolled dealers had opted for 4-month repayment terms, 69% had opted for 12-month repayment terms, and 2% had paid all deferred charges in full. Of the dealers that had not yet paid in full, 100% were current on their repayment terms. We have collected over one-third of all deferred wholesale interest and insurance charges through September 30, 2020, and in the aggregate, remittances from dealers exceed their scheduled repayment obligations.
Total commercial TDRs outstanding at September 30, 2020, increased $79 million since December 31, 2019, to $200 million. The increase was primarily driven by the restructuring of three exposures within our Corporate Finance portfolio. Refer to Note 8 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for additional information.
The following table includes total commercial net charge-offs from finance receivables and loans at amortized cost and related ratios.

		Three months ended September 30,		Nine months ended September 30,	
		Net charge-offs		Net charge-off ratios (a)		Net charge-offs		Net charge-off ratios (a)	
($ in millions)		2020		2019		2020		2019		2020		2019		2020		2019	
Commercial and industrial																	
Automotive		$	4 			$	1 			0.1 	%		— 	%		$	7 			$	2 			— 	%		— 	%	
Other		— 			15 			— 			1.4 			38 			31 			0.9 			0.9 		
	
Total commercial finance receivables and loans		$	4 			$	16 			0.1 			0.2 			$	45 			$	33 			0.2 			0.1 		
(a)Net charge-off ratios are calculated as net charge-offs divided by average outstanding finance receivables and loans excluding loans measured at fair value and loans held-for-sale during the period for each loan category.
109

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Our net charge-offs from total commercial finance receivables and loans were $4 million and $45 million for the three months and nine months ended September 30, 2020, respectively, compared to net charge-offs of $16 million and $33 million for the three months and nine months ended September 30, 2019. The decrease for the three months ended September 30, 2020, was primarily driven by the partial charge-off of a single exposure in our Corporate Finance portfolio during the three months ended September 30, 2019, that did not reoccur. This decrease was partially offset by the charge-offs of two exposures in our commercial automotive portfolio. The increase for the nine months ended September 30, 2020, was primarily driven by our Corporate Finance portfolio and included charge-offs related to two exposures, including the full charge-off of one exposure during the nine months ended September 30, 2020. These charge-offs were larger than the total charge-offs related to three exposures recognized during the nine months ended September 30, 2019. This increase was also impacted by the charge-offs of two exposures in our commercial automotive portfolio.
Commercial Real Estate
The commercial real estate portfolio consists of finance receivables and loans issued primarily to automotive dealers. Commercial real estate finance receivables and loans were $4.9 billion and $5.0 billion at September 30, 2020, and December 31, 2019, respectively.
The following table presents the percentage of total commercial real estate finance receivables and loans by state concentration based on amortized cost.

	
		September 30, 2020		December 31, 2019	
Texas		13.0 	%		15.0 	%	
Florida		12.4 			11.6 		
California		8.0 			7.2 		
Michigan		8.0 			8.2 		
New York		5.8 			5.9 		
North Carolina		5.7 			4.6 		
Georgia		3.9 			3.5 		
South Carolina		2.6 			2.8 		
Illinois		2.5 			2.4 		
Utah		2.3 			2.3 		
Other United States		35.8 			36.5 		
Total commercial real estate finance receivables and loans		100.0 	%		100.0 	%	
Commercial Criticized Exposure
Finance receivables and loans classified as special mention, substandard, or doubtful are reported as criticized. These classifications are based on regulatory definitions and generally represent finance receivables and loans within our portfolio that have a higher default risk or have already defaulted. These finance receivables and loans require additional monitoring and review including specific actions to mitigate our potential loss.
Total criticized exposures increased $229 million from December 31, 2019, to $4.5 billion at September 30, 2020. The increase was primarily due to an increase in special mention accounts within our Corporate Finance portfolio. The increase was mainly driven by the impact of COVID-19 on the operations of borrowers in several different industries. This increase was largely offset by lower dealer inventory levels in our commercial automotive portfolio driven by COVID-19-related production shutdowns during the second quarter of 2020, as well as continued lower production levels as automotive manufacturers work to return to pre-pandemic levels.
The following table presents the percentage of total commercial criticized finance receivables and loans by industry concentration based on amortized cost.

	
		September 30, 2020		December 31, 2019	
Industry					
Automotive		64.6 	%		81.7 	%	
Services		12.3 			5.4 		
Health/Medical		4.8 			2.9 		
Other		18.3 			10.0 		
Total commercial criticized finance receivables and loans		100.0 	%		100.0 	%	
110

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Allowance for Loan Losses
Implementation of CECL
We adopted CECL on January 1, 2020, as further described in Note 1 to the Condensed Consolidated Financial Statements. Upon implementation of CECL, we recognized a reduction to our opening retained earnings balance of approximately $1.0 billion, net of income tax, which reflects a pre-tax increase to the allowance for loan losses of approximately $1.3 billion. This increase is almost exclusively driven by our consumer automotive loan portfolio.
We have elected to phase the estimated impact of CECL into regulatory capital in accordance with the interim final rule of the FRB and other U.S. banking agencies that became effective on March 31, 2020, and was subsequently clarified and adjusted in a final rule effective September 30, 2020. As a result, we will delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021. Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. Refer to Note 17 to the Condensed Consolidated Financial Statements for further details about the impact of CECL on regulatory capital.
The CECL standard introduced a new accounting model to measure credit losses for financial assets measured at amortized costs. In contrast to the previous incurred loss model, CECL requires credit losses for financial assets measured at amortized cost to be determined based on the total current expected credit losses over the life of the financial asset or group of assets.
Under CECL, our modeling processes incorporate the following considerations:
•a single forecast scenario for macroeconomic factors incorporated into the modeling process;
•a 12-month reasonable and supportable forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 24-month period; and
•data from the historical mean will be calculated from January 2008 through the most current period which includes data points from the most recent recessionary period.
Our quantitatively determined allowance under CECL is impacted by certain forecasted economic factors as further described in Note 1 to the Condensed Consolidated Financial Statements. For example, macroeconomic variables that our consumer automotive allowance for loan losses is most sensitive to include national and state unemployment levels. Our process for determining the allowance for loan losses considers a borrower’s willingness and ability to pay and considers other factors, including loan modification programs. In addition to our quantitative allowance for credit losses, we also incorporate qualitative adjustments that may relate to idiosyncratic risks, changes in current economic conditions that may not be reflected in quantitatively derived results such as the impacts associated with COVID-19.
COVID-19 Impacts
During the second half of March 2020, the economy experienced a significant deterioration in the macroeconomic environment driven by the COVID-19 pandemic resulting in notable adverse changes to forecasted economic variables that are utilized in our modeling processes. Given the fact that the macroeconomic information utilized in our quantitative allowance processes did not fully reflect the rapidly evolving economic changes resulting from the COVID-19 pandemic, we utilized our qualitative allowance framework to ensure the total reserve under CECL reflected the most current forecast of the broader macroeconomic environment.
To help inform our forecast, we considered publicly published, broadly available stressed macroeconomic data including the Moody’s forecast from March 27, 2020, that reflected the most recent available information that considered the evolving impacts of developments from the COVID-19 pandemic as of March 31, 2020, in order to support the qualitative adjustments incorporated into our total allowance. Stressed macroeconomic variables that we utilized as of March 31, 2020, include the following, among others: unemployment rate approaching 10%, significant GDP contraction quarter-over-quarter, and declining new light vehicle sales. Our qualitatively determined allowance associated with deterioration in the macroeconomic outlook from COVID-19 resulted in provision expense of $602 million which was incremental to our modeled reserves.
Through June 2020, forecasted economic variables utilized in our allowance modeling processes were updated to reflect the current macroeconomic environment and our future expectations which included (but were not limited to) the following: the unemployment rate rising to a peak of approximately 14%, declining to approximately 9% by the end of 2020, before subsequently migrating to our historical mean of approximately 6% by the middle of 2023, significant near-term GDP contraction, and a continuation of lower levels of new light vehicle sales. The updated economic forecast resulted in an increase in the allowance for loan losses informed through our modeling process as compared to the period ending March 31, 2020. Using our qualitative allowance framework, we reassessed and adjusted levels to reflect our current estimate of credit losses in our portfolios which considered among other things, idiosyncratic risks as well as performance of our portfolio subject to our deferral programs.
Through September 2020, forecasted economic variables utilized in our allowance modeling processes were updated to reflect the current macroeconomic environment and our future expectations which included (but were not limited to) the following: the unemployment rate moderating to approximately 9% in September 2020 after reaching year-to-date highs of nearly 15% in April 2020, declining to approximately 8% by the end of 2020, before migrating downward to our historical mean of approximately 7% by the third quarter of 2023, a
111

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
significant near term recovery in GDP as measured on a quarter-over-quarter seasonally adjusted annualized rate basis, and a recovery of new light vehicle sales on a seasonally adjusted annualized rate basis of approximately 15 million units by the end of 2020. In addition to updating the macroeconomic variables for our quantitative processes, we reassessed reserves under our qualitative framework for potential adjustment during the quarter ended September 30, 2020. The improvement in the macroeconomic outlook through our modeling processes resulted in a decrease in reserves that was more than offset by other factors, specifically the significant increase in end of period balances in our consumer automotive portfolio. As a result, our overall allowance for loan losses increased $25 million from the prior quarter to $3.4 billion at September 30, 2020, representing 2.9% as a percentage of total finance receivables and loans, compared to 2.8% as of June 30, 2020, and compared to 2.5% as of March 31, 2020.
The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans for the three and nine months ended September 30, 2020, and includes the cumulative effect of adopting ASU 2016-13.

Three months ended September 30, 2020 ($ in millions)		Consumer automotive		Consumer mortgage		Consumer other		Total consumer		Commercial		Total	
Allowance at July 1, 2020		$	2,963 			$	42 			$	49 			$	3,054 			$	300 			$	3,354 		
Charge-offs (a)		(269)			(4)			(2)			(275)			(4)			(279)		
Recoveries		152 			5 			— 			157 			— 			157 		
Net charge-offs		(117)			1 			(2)			(118)			(4)			(122)		
Provision due to change in portfolio size		45 			(3)			18 			60 			(1)			59 		
Provision due to incremental charge-offs		117 			(1)			2 			118 			4 			122 		
Provision due to all other factors (b)		(28)			1 			— 			(27)			(7)			(34)		
Total provision for credit losses (c)		134 			(3)			20 			151 			(4)			147 		
Other		2 			(1)			— 			1 			(1)			— 		
Allowance at September 30, 2020		$	2,982 			$	39 			$	67 			$	3,088 			$	291 			$	3,379 		
	
Net charge-offs to average finance receivables and loans outstanding for the three months ended September 30, 2020		0.6 	%		— 	%		3.4 	%		0.5 	%		0.1 	%		0.4 	%	
	
Ratio of allowance for loan losses to annualized net charge-offs at September 30, 2020		6.4 			(10.1)			7.1 			6.5 			18.3 			6.9 		
(a)Represents the amount of the amortized cost directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Condensed Consolidated Financial Statements for more information regarding our charge-off policies.
(b)Amounts include provision expense associated with the impacts of COVID-19, as further described in the section above.
(c)Consumer mortgage provision expense includes a provision benefit of $3 million related to our legacy mortgage portfolio. Commercial provision expense includes $2 million related to commercial other within the commercial and industrial portfolio class, and a provision benefit of $6 million related to commercial real estate.
112

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q

Nine months ended September 30, 2020 ($ in millions)		Consumer automotive		Consumer mortgage		Consumer other		Total consumer		Commercial		Total	
Allowance at December 31, 2019		$	1,075 			$	46 			$	9 			$	1,130 			$	133 			$	1,263 		
Cumulative effect of the adoption of Accounting Standards Update 2016-13		1,334 			(6)			16 			1,344 			2 			1,346 		
Allowance at January 1, 2020		$	2,409 			$	40 			$	25 			$	2,474 			$	135 			$	2,609 		
Charge-offs (a)		(887)			(9)			(11)			(907)			(47)			(954)		
Recoveries		371 			14 			1 			386 			2 			388 		
Net charge-offs		(516)			5 			(10)			(521)			(45)			(566)		
Provision due to change in portfolio size		49 			(3)			22 			68 			(15)			53 		
Provision due to incremental charge-offs		516 			(5)			10 			521 			45 			566 		
Provision due to all other factors (b)		523 			3 			19 			545 			173 			718 		
Total provision for credit losses (c)		1,088 			(5)			51 			1,134 			203 			1,337 		
Other		1 			(1)			1 			1 			(2)			(1)		
Allowance at September 30, 2020		$	2,982 			$	39 			$	67 			$	3,088 			$	291 			$	3,379 		
Net charge-offs to average finance receivables and loans outstanding for the nine months ended September 30, 2020		0.9 	%		— 	%		5.6 	%		0.8 	%		0.2 	%		0.6 	%	
Ratio of allowance for loan losses to annualized net charge-offs at September 30, 2020		4.3 			(6.1)			5.0 			4.5 			4.8 			4.5 		
(a)Represents the amount of the amortized cost directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Condensed Consolidated Financial Statements for more information regarding our charge-off policies.
(b)Amounts include provision expense associated with the impacts of COVID-19, as further described in the section above.
(c)Consumer mortgage provision expense includes $4 million related to Mortgage Finance and a provision benefit of $9 million related to our legacy mortgage portfolio. Commercial provision expense includes $40 million related to commercial automotive and $141 million related to commercial other within the commercial and industrial portfolio class, and $22 million related to commercial real estate.
The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans for the three and nine months ended September 30, 2019, prior to the adoption of ASU 2016-13, as defined by the previous accounting guidance in effect at that time.

Three months ended September 30, 2019 ($ in millions)		Consumer automotive		Consumer mortgage		Total consumer		Commercial		Total	
Allowance at July 1, 2019		$	1,078 			$	49 			$	1,127 			$	155 			$	1,282 		
Charge-offs (a)		(374)			(3)			(377)			(16)			(393)		
Recoveries		121 			5 			126 			— 			126 		
Net charge-offs		(253)			2 			(251)			(16)			(267)		
Provision for loan losses (b)		264 			(5)			259 			4 			263 		
Other		1 			(2)			(1)			— 			(1)		
Allowance at September 30, 2019		$	1,090 			$	44 			$	1,134 			$	143 			$	1,277 		
Net charge-offs to average finance receivables and loans outstanding for the three months ended September 30, 2019		1.4 	%		— 	%		1.1 	%		0.2 	%		0.8 	%	
Ratio of allowance for loan losses to annualized net charge-offs at September 30, 2019		1.1 			n/m		1.1 			2.2 			1.2 		
n/m = not meaningful
(a)Represents the amount of the gross carrying value directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the gross carrying value of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.
(b)Consumer mortgage provision expense includes a provision benefit of $5 million related to our legacy mortgage portfolio. Commercial provision expense includes $1 million related to commercial automotive and $3 million related to commercial other within the commercial and industrial portfolio class.
113

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q

Nine months ended September 30, 2019 ($ in millions)		Consumer automotive		Consumer mortgage		Total consumer		Commercial		Total	
Allowance at January 1, 2019		$	1,048 			$	53 			$	1,101 			$	141 			$	1,242 		
Charge-offs (a)		(1,027)			(11)			(1,038)			(33)			(1,071)		
Recoveries		368 			17 			385 			— 			385 		
Net charge-offs		(659)			6 			(653)			(33)			(686)		
Provision for credit losses (b)		701 			(13)			688 			34 			722 		
Other		— 			(2)			(2)			1 			(1)		
Allowance at September 30, 2019		$	1,090 			$	44 			$	1,134 			$	143 			$	1,277 		
Net charge-offs to average finance receivables and loans outstanding for the nine months ended September 30, 2019		1.2 	%		— 	%		1.0 	%		0.1 	%		0.7 	%	
Ratio of allowance for loan losses to annualized net charge-offs at September 30, 2019		1.2		n/m		1.3		3.3		1.4	
n/m = not meaningful
(a)Represents the amount of the amortized cost directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.
(b)Consumer mortgage provision expense includes $2 million related to Mortgage Finance and a provision benefit of $15 million related to our legacy mortgage portfolio. Commercial provision expense includes $7 million related to commercial automotive and $28 million related to commercial other within the commercial and industrial portfolio class, and $1 million in provision benefit related to commercial real estate.

($ in millions)		Consumer automotive		Consumer mortgage		Consumer other		Total consumer		Commercial		Total	
September 30, 2020													
Allowance for loan losses to finance receivables and loans outstanding (a)		4.0 	%		0.2 	%		20.9 	%		3.4 	%		1.0 	%		2.9 	%	
Allowance for loan losses to total nonperforming finance receivables and loans (a)		236.2 	%		49.3 	%		n/m		230.0 	%		193.8 	%		226.3 	%	
September 30, 2019													
Allowance for loan losses to finance receivables and loans outstanding (a)		1.5 	%		0.3 	%		— 	%		1.3 	%		0.4 	%		1.0 	%	
Allowance for loan losses to total nonperforming finance receivables and loans (a)		157.5 	%		75.8 	%		— 	%		151.1 	%		80.0 	%		137.4 	%	
n/m = not meaningful
(a)Coverage percentages are based on the allowance for loan losses related to finance receivables and loans excluding those loans held at fair value as a percentage of the gross carrying value.
The allowance for consumer loan losses at September 30, 2020, increased $2.0 billion compared to September 30, 2019, reflecting increases of $1.9 billion in the consumer automotive allowance and $67 million in the consumer other allowance, partially offset by a decrease of $5 million in the consumer mortgage allowance. The increase in our consumer allowance was primarily driven by our adoption of CECL, which resulted in a $1.3 billion increase to the allowance for loan losses. Additionally, our consumer allowance for loan losses increased as a result of the broad macroeconomic impact resulting from the COVID-19 pandemic. The decrease in the consumer mortgage allowance was primarily driven by the decrease in finance receivables of $938 million at September 30, 2020, compared to September 30, 2019.
The allowance for commercial loan losses increased $148 million at September 30, 2020, compared to September 30, 2019. The increase was primarily driven by our commercial automotive and Corporate Finance portfolios due to reserve increases associated with higher expected losses due to COVID-19 driven market deterioration, partially offset by reserve decreases driven by approximately $11.5 billion of lower commercial automotive balances.
The provision for consumer loan losses was $151 million and $1.1 billion for the three months and nine months ended September 30, 2020, respectively, compared to $259 million and $688 million for the three months and nine months ended September 30, 2019. The decrease in provision expense for the three months ended September 30, 2020, was primarily driven by lower net charge-offs within our consumer automotive portfolio. For the nine months ended September 30, 2020, the increase in provision for credit losses was primarily driven by consumer automotive reserve increases associated with higher expected losses due to the broad macroeconomic impact resulting from the COVID-19 pandemic, which were partially offset by lower net charge-offs within our consumer automotive portfolio.
The provision for commercial loan losses decreased $8 million and increased $169 million for the three months and nine months ended September 30, 2020, respectively, compared to the three months and nine months ended September 30, 2019. For the three months ended September 30, 2020, the decrease in provision for credit losses was primarily driven by reserve releases within our commercial automotive
114

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
portfolio associated with favorable movement in macroeconomic factors. The increase in provision expense for the nine months ended September 30, 2020, was primarily driven by reserve increases in our commercial portfolios associated with the broad macroeconomic impact resulting from the COVID-19 pandemic, which were partially offset by reserve decreases driven by $11.5 billion of lower assets primarily within our floorplan balances.
Allowance for Loan Losses by Type
The following table summarizes the allocation of the allowance for loan losses by product type.

		2020		2019	
September 30, ($ in millions)		Allowance for credit losses		Allowance as a % of loans outstanding		Allowance as a % of total allowance for credit losses		Allowance for loan losses		Allowance as a % of loans outstanding		Allowance as a % of total allowance for loan losses	
Consumer													
Consumer automotive		$	2,982 			4.0 	%		88.2 	%		$	1,090 			1.5 	%		85.4 	%	
Consumer mortgage													
Mortgage Finance		20 			0.1 			0.6 			17 			0.1 			1.3 		
Mortgage — Legacy		19 			2.1 			0.6 			27 			2.2 			2.1 		
Total consumer mortgage		39 			0.2 			1.2 			44 			0.3 			3.4 		
Consumer other		67 			20.9 			2.0 			— 			— 			— 		
Total consumer loans		3,088 			3.4 			91.4 			1,134 			1.3 			88.8 		
Commercial													
Commercial and industrial													
Automotive		59 			0.3 			1.8 			40 			0.1 			3.1 		
Other		181 			3.5 			5.3 			76 			1.7 			6.0 		
Commercial real estate		51 			1.1 			1.5 			27 			0.5 			2.1 		
Total commercial loans		291 			1.0 			8.6 			143 			0.4 			11.2 		
Total allowance for loan losses		$	3,379 			2.9 			100.0 	%		$	1,277 			1.0 			100.0 	%	
Market Risk
Our financing, investing, and insurance activities give rise to market risk, or the potential change in the value of our assets (including securities, assets held-for-sale, loans and operating leases) and liabilities (including deposits and debt) due to movements in market variables, such as interest rates, credit spreads, foreign-exchange rates, equity prices, and off-lease vehicle prices.
The impact of changes in benchmark interest rates on our assets and liabilities (interest rate risk) represents an exposure to market risk. We primarily use interest rate derivatives to manage our interest rate risk exposure.
The fair value of our credit-sensitive assets is also exposed to credit spread risk. Credit spread is the amount of additional return over the benchmark interest rates that an investor would demand for taking exposure to the credit risk of an instrument. Generally, an increase in credit spreads would result in a decrease in a fair value measurement.
We are also exposed to foreign-currency risk arising from foreign-currency denominated assets and liabilities, primarily in Canada. We enter into hedges to mitigate foreign exchange risk.
We also have exposure to changes in the value of equity securities. We have exposure to equity securities with readily determinable fair values primarily related to our Insurance operations. For such equity securities, we use equity derivatives to manage our exposure to equity price fluctuations. In addition, we are exposed to changes in the value of other equity investments without readily determinable fair market values. Refer to Note 11 to the Condensed Consolidated Financial Statements for additional information. We may experience changes in the valuation of these investments, which may cause volatility in our earnings.
The composition of our balance sheet, including shorter-duration consumer automotive loans and variable-rate commercial loans, coupled with the continued funding shift toward retail deposits, partially mitigates market risk. Additionally, we maintain risk-management controls that measure and monitor market risk using a variety of analytical techniques including market value, sensitivity analysis, and value at risk models. Refer to Note 18 to the Condensed Consolidated Financial Statements for additional information.
LIBOR Transition
LIBOR is an important interest rate benchmark that is expected to be discontinued by the end of 2021. We recognize the significance of LIBOR cessation, and have devoted numerous resources throughout all levels of the organization since 2018 to actively identify, assess, monitor, and mitigate risks associated with this transition. Our LIBOR cessation program is also subject to the governance and oversight of
115

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
our Board through the RC and certain executive committees including the ALCO and the ERMC. For a more detailed discussion of our planned transition away from LIBOR, refer to the section titled Risk Management—LIBOR Transition in our 2019 Annual Report on Form 10-K.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as further described in Note 1 to the Condensed Consolidated Financial Statements. The final guidance issued by the FASB is intended to help facilitate the market transition from existing reference interest rates to alternative reference interest rates. This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The amendments primarily include relief related to contract modifications, hedging relationships, and it also provides a one-time election for the sale or transfer of debt securities classified as held-to-maturity. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2022. We are currently in the process of evaluating the amendments and we anticipate the final guidance will allow for greater flexibility in the transition away from LIBOR.
Net Financing Revenue Sensitivity Analysis
Interest rate risk represents one of our most significant exposures to market risk. We actively monitor the level of exposure to movements in interest rates and take actions to mitigate adverse impacts these movements may have on future earnings. We use a sensitivity analysis of net financing revenue as our primary metric to measure and manage the interest rate risk of our financial instruments.
We prepare forward-looking baseline forecasts of net financing revenue taking into consideration anticipated future business growth, asset/liability positioning, and interest rates based on the implied forward curve. The analysis is highly dependent upon a variety of assumptions including the repricing characteristics of retail deposits with both contractual and non-contractual maturities. We continually monitor industry and competitive repricing activity along with other market factors when contemplating deposit pricing actions.
Simulations are then used to assess changes in net financing revenue in multiple interest rate scenarios relative to the baseline forecast. The changes in net financing revenue relative to the baseline are defined as the sensitivity. Our simulations incorporate contractual cash flows and repricing characteristics for all assets, liabilities, and off-balance-sheet exposures and incorporate the effects of changing interest rates on the prepayment and attrition rates of certain assets and liabilities. Our simulation does not assume any specific future actions are taken to mitigate the impacts of changing interest rates.
The net financing revenue sensitivity tests measure the potential change in our pretax net financing revenue over the following 12 months. We test a number of alternative rate scenarios, including immediate and gradual parallel shocks to the implied market forward curve. Management also evaluates nonparallel shocks to interest rates and stresses to certain term points on the yield curve in isolation to capture and monitor a number of risk types. Relative to our baseline forecast, which is based on the implied forward curve, our net financing revenue over the next 12 months would increase by $3 million if interest rates remain unchanged.
The following table presents the pretax dollar impact to forecasted net financing revenue over the next 12 months assuming various shocks to the implied market forward curve as of September 30, 2020, and December 31, 2019.

	
		Gradual (a)		Instantaneous	
Change in interest rates		($ in millions)	
September 30, 2020					
+200 basis points		$	171 			$	221 		
+100 basis points		88 			181 		
-25 basis points (b)		(1)			(36)		
December 31, 2019					
+200 basis points		$	2 			$	(136)		
+100 basis points		(1)			7 		
-100 basis points		17 			67 		
(a)Gradual changes in interest rates are recognized over 12 months.
(b)With rates at or near historical lows across the curve, a scenario with rates declining 25 basis points is being utilized, which management believes is more meaningful to understand exposure to lower rates in the current market rate environment rather than the down 100 basis point scenario. Our models currently assume rates do not go below zero.
The implied forward rate curve was significantly lower across all tenors compared to December 31, 2019, as interest rates were at or near historical lows across the curve. The impact of this change is reflected in our baseline net financing revenue projections. As of September 30, 2020, the expected benefit of an upward instantaneous interest rate shock scenario has increased, primarily due to changes to our derivative hedging position, higher cash balances, as well as our continued shift in funding to retail deposits.
The exposure in the downward instantaneous interest rate shock scenario is largely driven by mortgage prepayment risk and is muted as our models assume rates do not go below zero.
116

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Our risk position is influenced by the impact of hedging activity which primarily consists of interest rate swaps designated as fair value hedges of certain fixed-rate assets and fixed-rate debt instruments, and pay-fixed interest rate swaps designated as cash flow hedges of certain floating-rate debt instruments. We also have the ability to utilize interest rate floor contracts designated as cash flow hedges on certain floating-rate assets. The size, maturity, and mix of our hedging activities are adjusted as our balance sheet, ALM objectives, and interest rate environment evolve over time.
Operating Lease Residual Risk Management
We are exposed to residual risk on vehicles in the consumer operating lease portfolio. This operating lease residual risk represents the possibility that the actual proceeds realized upon the sale of returned vehicles will be lower than the projection of these values used in establishing the pricing at lease inception. However, certain automotive manufacturers have provided their guarantee for portions of our residual exposure, as further described in Note 9 to the Condensed Consolidated Financial Statements. Our operating lease portfolio, net of accumulated depreciation was $9.5 billion and $8.9 billion as of September 30, 2020, and December 31, 2019, respectively. The expected lease residual value of our operating lease portfolio at scheduled termination was $7.8 billion and $7.2 billion as of September 30, 2020, and December 31, 2019, respectively. For information on our valuation of automotive operating lease residuals including periodic revisions through adjustments to depreciation expense based on current and forecasted market conditions, refer to the section titled Critical Accounting Estimates—Valuation of Automotive Operating Lease Assets and Residuals within the MD&A in our 2019 Annual Report on Form 10-K.
Operating Lease Vehicle Terminations and Remarketing
The following table summarizes the volume of operating lease terminations and average gain per vehicle, as well as our methods of vehicle sales at lease termination, stated as a percentage of total operating lease vehicle disposals.
																											
		Three months ended September 30,		Nine months ended September 30, 2020	
		2020		2019		2020		2019	
Off-lease vehicles terminated (in units)		28,917 			29,985 			76,121 			85,282 		
Average gain per vehicle ($ per unit)		$	2,437 			$	944 			$	810 			$	773 		
Method of vehicle sales									
Auction									
Internet		53 	%		54 	%		57 	%		53 	%	
Physical		8 			14 			10 			15 		
Sale to dealer, lessee, and other		39 			32 			33 			32 		
We recognized an average gain per vehicle of $2,437 and $810 for the three months and nine months ended September 30, 2020, respectively, compared to an average gain per vehicle of $944 and $773 for the same periods in 2019. The increases in remarketing performance were primarily due to continued new vehicle supply constraints and an increase in demand for used vehicles. The number of off-lease vehicles remarketed during the three months and nine months ended September 30, 2020, decreased 4% and 11%, respectively, compared to the same periods in 2019, primarily due to reduced early termination activity resulting from continued new vehicle supply constraints.
To support our customers and help mitigate lease residual risk, we deferred lease payments without fees for up to 120 days for any consumer requesting assistance related to the COVID-19 pandemic. Approximately 55,000 of our lease customers enrolled in this lease modification program, and approximately 60% of these customers were granted a 120-day deferral at the time of enrollment. As of September 30, 2020, substantially all of these customers had exited the program and of these approximately 2,900 had paid in full and terminated their leases. Of the customers that had exited the program with outstanding lease obligations, 94% were current on their lease obligations as of September 30, 2020. We also provided a program for and, in some cases, incentivized customers nearing their scheduled lease-end dates to extend their leases for up to an additional 180 days. Eligible customers who opted into this program during the early part of the second quarter were not charged for the first month of the extension, and the following months of the extended lease were offered under the terms of the existing lease contract. Approximately 8,500 customers had opted into an extension requiring additional payments, and as of September 30, 2020, approximately 4,500 remained enrolled in the program.
For more information on our investment in operating leases, refer to Note 9 to the Condensed Consolidated Financial Statements and Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.
117

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Operating Lease Portfolio Mix
We monitor the concentration of our outstanding operating leases. The following table presents the mix of operating lease assets by vehicle type, based on volume of units outstanding.

September 30,		2020		2019	
Sport utility vehicle		57 	%		59 	%	
Truck		34 			31 		
Car		9 			10 		
As a result of the runoff of our legacy GM operating lease portfolio, our exposure to Chrysler vehicles represented approximately 90% and 93% of our operating lease units as of September 30, 2020, and 2019, respectively.
118

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Liquidity Management, Funding, and Regulatory Capital
Overview
The purpose of liquidity management is to enable us to meet loan and operating lease demand, debt maturities, deposit withdrawals, and other cash commitments under both normal operating conditions as well as periods of economic or financial stress. Our primary objective is to maintain cost-effective, stable and diverse sources of funding capable of sustaining the organization throughout all market cycles. Sources of funding include both retail and brokered deposits and secured and unsecured market-based funding across various maturity, interest rate, and investor profiles. Additional liquidity is available through a pool of unencumbered highly liquid securities, committed secured credit facilities, repurchase agreements, and advances from the FHLB of Pittsburgh.
We define liquidity risk as the risk that an institution’s financial condition or overall safety and soundness is adversely affected by the actual or perceived inability to liquidate assets or obtain adequate funding or to easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions. Liquidity risk can arise from a variety of institution-specific or market-related events that could have a negative impact on cash flows available to the organization. Effective management of liquidity risk positions an organization to meet cash flow obligations caused by unanticipated events. Managing liquidity needs and contingent funding exposures has proven essential to the solvency of financial institutions.
The ALCO, chaired by the Corporate Treasurer, is responsible for overseeing our funding and liquidity strategies. Corporate Treasury is responsible for managing our liquidity positions within limits approved by ALCO and the RC. As part of managing liquidity risk, Corporate Treasury prepares periodic forecasts depicting anticipated funding needs and sources of funds, executes our funding strategies, and manages liquidity under normal as well as more severely stressed macroeconomic environments. Oversight and monitoring of liquidity risk are provided by Independent Risk Management.
Funding Strategy
Liquidity and ongoing profitability are largely dependent on the timely and cost-effective access to retail deposits and funding in various segments of the capital markets. We focus on maintaining diversified funding sources across a broad base of depositors, lenders, and investors to meet liquidity needs throughout different economic cycles, including periods of financial distress. These funding sources include retail and brokered deposits, committed secured credit facilities, public and private asset-backed securitizations, unsecured debt, FHLB advances, whole-loan sales, demand notes, and repurchase agreements. Our access to diversified funding sources enhances funding flexibility and results in a more cost-effective funding strategy over the long term. We evaluate funding markets on an ongoing basis to achieve an appropriate balance of unsecured and secured funding sources and maturity profiles.
We manage our funding to achieve a well-balanced portfolio across a spectrum of risk, maturity, and cost-of-funds characteristics. Optimizing funding at Ally Bank continues to be a key part of our long-term liquidity strategy. We optimize our funding sources at Ally Bank by growing retail deposits, maintaining active public and private securitization programs, managing a prudent maturity profile of our brokered deposit portfolio, utilizing repurchase agreements, and continuing to access funds from the FHLB.
Essentially all asset originations are directed to Ally Bank to reduce parent company exposures and funding requirements, and to utilize our growing consumer deposit-taking capabilities. This allows us to use bank funding for an increasing proportion of our automotive finance and other assets and to provide a sustainable long-term funding channel for the business, while also improving the cost of funds for the enterprise.
Liquidity Risk Management
Multiple metrics are used to measure liquidity risk, manage the liquidity position, identify related trends, and monitor such trends and metrics against established limits. These metrics include comprehensive stress tests that measure the sufficiency of the liquidity portfolio over stressed horizons ranging from overnight to 12 months, stability ratios that measure longer-term structural liquidity, and concentration ratios that enable prudent funding diversification. In addition, we have established internal management routines designed to review all aspects of liquidity and funding plans, evaluate the adequacy of liquidity buffers, review stress testing results, and assist management in the execution of its funding strategy and risk-management accountabilities.
Our liquidity stress testing is designed to allow us to operate our businesses and to meet our contractual and contingent obligations, including unsecured debt maturities, for at least 12 months, assuming our normal access to funding is disrupted by severe market-wide and enterprise-specific events. We maintain available liquidity in the form of cash, unencumbered highly liquid securities, and available committed secured credit facility capacity. This available liquidity is held at various legal entities, and is subject to regulatory restrictions and tax implications that may limit our ability to transfer funds across entities.
119

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following table summarizes our cash, U.S. Treasury and agency securities, and committed credit facilities.

($ in millions)		September 30, 2020		December 31, 2019	
Unencumbered highly liquid U.S. federal government and U.S. agency securities		$	23,008 			$	24,713 		
Liquid cash and equivalents		19,296 			3,136 		
Committed secured credit facilities					
Total capacity		1,350 			2,500 		
Outstanding		— 			450 		
Unused capacity (a)		1,350 			2,050 		
Total available liquidity		$	43,654 			$	29,899 		
(a)Funding from committed secured credit facilities is available on request in the event excess collateral resides in certain facilities or the extent incremental collateral is available and contributed to the facilities.
Recent Funding Developments
During March 2020, the spread of COVID-19 was declared a pandemic. This global health crisis has resulted in economic disruption and volatility in the capital markets. While credit spreads for longer-term funding sources such as unsecured debt and ABS issuance increased significantly initially, FRB actions in response to the disruptions reduced credit spreads and improved market liquidity. These actions included providing significant quantitative-easing programs, expanding the Money Market Mutual Fund Liquidity Facility to include a wider range of securities, broadening the Commercial Paper Funding Facility, launching new funds and facilities to support employers, consumers and businesses, and establishing the Term Asset-Backed Loan Facility to facilitate ABS issuance of student, automotive, credit card, and small business loans guaranteed by the Small Business Administration. We continue to closely monitor market conditions, and actions taken by banking agencies to support general market liquidity. In recent years, we have become less reliant on market-based funding and believe we have adequate liquidity to meet our near-term funding needs. However, it is not currently clear to what degree the COVID-19 pandemic will impact our future funding profile if market dislocation recurs.
Key funding highlights from January 1, 2020, to date were as follows:
•For the nine months ended September 30, 2020, we accessed the unsecured debt capital markets and raised $2.3 billion through the issuance of senior notes, which provided additional liquidity at Ally Financial Inc.
•We elected during the third quarter of 2020 to prepay and early terminate 13 FHLB advances with an aggregate principal balance of $2.5 billion to more cost-effectively manage liquidity at Ally Bank.
•Our total capacity in committed secured credit facilities was reduced by $1.2 billion during the nine months ended September 30, 2020, as we continue to shift our overall funding toward a greater mix of cost-effective deposit funding.
Funding Sources
The following table summarizes our sources of funding and the amount outstanding under each category for the periods shown.
																											
		September 30, 2020		December 31, 2019	
($ in millions)		On-balance sheet funding		% Share of funding		On-balance sheet funding		% Share of funding	

Deposits		$	134,938 			82 			120,752 			75 		
Debt									
Secured financings		14,648 			9 			25,773 			16 		
Institutional term debt		11,222 			7 			10,933 			7 		
Retail debt programs (a)		2,866 			2 			2,852 			2 		
Total debt (b)		28,736 			18 			39,558 			25 		
Total on-balance-sheet funding		$	163,674 			100 			160,310 			100 		
(a)Includes $334 million and $271 million of retail term notes at September 30, 2020, and December 31, 2019, respectively.
(b)Includes hedge basis adjustment as described in Note 18 to the Condensed Consolidated Financial Statements.
Refer to Note 13 to the Condensed Consolidated Financial Statements for a summary of the scheduled maturity of long-term debt at September 30, 2020.
Deposits
Ally Bank is a direct bank with no branch network that obtains retail deposits directly from customers through internet, telephone, mobile, and mail channels. These retail deposits provide our Automotive Finance, Mortgage Finance, and Corporate Finance operations as
120

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
well as Ally Lending with a stable and low-cost funding source. Retail deposits are a key driver of funding cost optimization and reduced reliance on capital markets-based funding. We believe retail deposits are less sensitive to interest rate changes, market volatility, or changes in credit ratings when compared to other funding sources. We have continued to expand our deposit gathering efforts through both direct and indirect marketing channels. Current retail deposit offerings consist of a variety of products including CDs, savings accounts, money-market accounts, IRA deposit products, as well as an interest checking product. In addition, we utilize brokered deposits, which are obtained through third-party intermediaries, including a deposit related to Ally Invest customer cash balances.
The following table shows Ally Bank’s number of accounts and deposit balances as of the end of each of the last five quarters.
																		
	3rd quarter 2020	2nd quarter 2020	1st quarter 2020	4th quarter 2019	3rd quarter 2019	
Number of retail bank accounts (in thousands)	4,425 		4,335 		4,185 		4,006 		3,908 		
Deposits ($ in millions)						
Retail	$	120,789 		$	115,813 		$	106,068 		$	103,734 		$	101,295 		
Brokered (a)	13,990 		15,088 		16,116 		16,898 		17,778 		
Other (b)	159 		135 		140 		120 		157 		
Total deposits	$	134,938 		$	131,036 		$	122,324 		$	120,752 		$	119,230 		
(a)Brokered deposit balances include a deposit related to Ally Invest customer cash balances deposited at Ally Bank by a third party of $1.8 billion as of both September 30, 2020, and June 30, 2020, $1.5 billion as of March 31, 2020, $1.3 billion as of December 31, 2019, and $1.1 billion as of September 30, 2019.
(b)Other deposits include mortgage escrow and other deposits.
During the first nine months of 2020, our total deposit base grew $14.2 billion, driven by continued growth in retail deposits, which was partially offset by a reduction in brokered deposits. Total retail deposits increased $17.1 billion, primarily within our online savings product, as we added approximately 242,000 retail deposit customers during the nine months ended September 30, 2020, and ended with more than 2.2 million total retail deposit customers at September 30, 2020. Strong retention rates and customer acquisition, reflecting the strength of the brand, continue to drive growth in retail deposits. During the third quarter of 2020, our retail deposit franchise continued to see robust quarterly growth, as we recorded the third largest quarterly balance growth and fourth largest quarterly customer growth in our history. Balance growth was driven by customers’ persistent desire to build and maintain liquidity amidst economic uncertainty, as well as by broad economic stimulus measures and muted spending. This growth was partially offset by seasonal, tax-related outflows during the quarter. We continue to enhance our suite of online and mobile banking features, as we introduced a collection of smart savings tools to our online savings product in February 2020. In June 2020, Kiplinger named Ally Bank the “Best Internet Bank” for the fourth consecutive year, and in October 2020, MONEY Magazine named Ally the “Best Online Bank” for the third consecutive year. For additional information on our deposit funding by type, refer to Note 12 to the Condensed Consolidated Financial Statements.
Securitizations and Secured Financings
While we primarily fund our business through deposits, we also utilize securitizations and secured funding to further diversify our funding sources. Securitizations and secured funding transactions, collectively referred to as securitization transactions, allow us to convert our automotive finance receivables and operating leases into cash earlier than what would have occurred in the normal course of business. We continue to remain active in the well-established securitization markets. Additionally, for consumer automotive loans and operating leases, the term structure of the transaction locks in funding for a specified pool of loans and operating leases, which creates an effective tool for managing interest rate and liquidity risk. For additional details surrounding our securitization activities, refer to the section titled Liquidity Management, Funding, and Regulatory Capital in our 2019 Annual Report on Form 10-K.
During the first nine months of 2020, we raised $48 million through the completion of a term securitization transaction backed by consumer automotive loans.
We manage securitization execution risk by maintaining a diverse domestic and foreign investor base and available capacity from committed secured credit facilities provided by banks. Our ability to access the unused capacity in these facilities depends on the availability of eligible assets to collateralize the incremental funding and, in some instances, on the execution of interest rate hedges. We maintain bilateral facilities, which fund our Automotive Finance operations. The facilities can be revolving in nature—generally having an original tenor ranging from 364 days to two years and allowing for additional funding during the commitment period—or they can be amortizing and not allow for any further funding after the commitment period. At September 30, 2020, all of our $1.4 billion of capacity was revolving and of this balance, $550 million was from facilities with a remaining tenor greater than 364 days.
Our securitizations of commercial automotive loans are issued through a single master trust and include credit-enhancement triggers as well as early-repayment triggers, referred to as early amortization events. Following an early amortization event, principal collections on the loans in the applicable securitizations are applied to repay principal of the trust's asset-backed securities rather than to purchase newly originated loans. One of the early amortization events is based on the rates of inventory turnover at our dealer customers, referred to as payment rates. Because the COVID-19 pandemic is placing downward pressure on the automotive sales of dealers and therefore their rate of inventory turnover, an increased risk exists that an early amortization event could occur. In such a case, our ability to issue new securitizations out of this trust would be constrained or eliminated and our ability to fund commercial automotive loans through the securitization market
121

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
could be delayed while we establish a new trust. In addition, the mere occurrence of an early amortization event could impair our ability to access the securitization market or increase our cost to do so. At this time, none of these securitizations have experienced an early amortization event.
The majority of our securitizations, including our secured bilateral financing facilities, involve consumer automotive loans. We retain exposure to the nonperformance of these loans through subordinated retained interests in the securitizations as well as obligations to repurchase loans affected by breaches of representations, warranties, or covenants. The secured bilateral financing facilities also include credit-enhancement triggers and revolving period termination events based on the nonperformance of loans. With the COVID-19 pandemic adversely affecting some of our consumer automotive customers and with a significant number of them having enrolled in our loan-deferral program, these securitizations may become more likely to experience a deterioration in loan performance and downgrades by rating agencies. In addition, the secured bilateral financing facilities may become more likely to experience the activation of credit-enhancement triggers and revolving period termination events. Any of these outcomes could have negative impacts on noteholders and us, including in our case a potential for higher pricing and less market access for future securitizations.
We also have access to funding through advances with the FHLB. These advances are primarily secured by consumer mortgage finance receivables and loans and investment securities. As of September 30, 2020, we had pledged $20.9 billion of assets to the FHLB resulting in $16.5 billion in total funding capacity with $8.8 billion of debt outstanding.
At September 30, 2020, $37.9 billion of our total assets were restricted as collateral for the payment of debt obligations accounted for as secured borrowings. Refer to Note 13 to the Condensed Consolidated Financial Statements for further discussion.
Unsecured Financings
We obtain unsecured funding from the sale of floating-rate demand notes under our Demand Notes program. The holder has the option to require us to redeem these notes at any time without restriction. Demand Notes outstanding were $2.5 billion at September 30, 2020. We also have short-term and long-term unsecured debt outstanding from retail term note programs. These programs are composed of callable fixed-rate instruments with fixed-maturity dates and floating-rate notes. There were $334 million of retail term notes outstanding at September 30, 2020. The remainder of our unsecured debt is composed of institutional term debt. In April 2020, June 2020, and September 2020, we accessed the unsecured debt capital markets and raised $750 million, $800 million, and $750 million, respectively, through the issuance of senior notes. Refer to Note 13 to the Condensed Consolidated Financial Statements for additional information about our outstanding short-term borrowings and long-term unsecured debt.
Other Secured and Unsecured Short-term Borrowings
We have access to repurchase agreements. A repurchase agreement is a transaction in which the firm sells financial instruments to a buyer, typically in exchange for cash, and simultaneously enters into an agreement to repurchase the same or substantially the same financial instruments from the buyer at a stated price plus accrued interest at a future date. The securities sold in repurchase agreements include U.S. government and federal agency obligations. As of September 30, 2020, we had no debt outstanding under repurchase agreements.
Additionally, we have access to the FRB Discount Window and can borrow funds to meet short-term liquidity demands. However, the FRB is not a primary source of funding for day-to-day business. Instead, it is a liquidity source that can be accessed in stressed environments or periods of market disruption. We had assets pledged and restricted as collateral to the FRB totaling $2.4 billion as of September 30, 2020. We had no debt outstanding with the FRB as of September 30, 2020.
Guaranteed Securities
Certain senior notes (collectively, the Guaranteed Notes) issued by Ally Financial Inc. (referred to within this section as the Parent) are unconditionally guaranteed on a joint and several basis by IB Finance, a subsidiary of the Parent and the direct parent of Ally Bank, and Ally US LLC, a subsidiary of the Parent (together, the Guarantors, and the guarantee provided by each such Guarantor, the Note Guarantees). The Guarantors are primary obligors with respect to payment when due, whether at maturity, by acceleration or otherwise, of all payment obligations of the Parent in respect of the Guaranteed Notes pursuant to the terms of the applicable indenture. At September 30, 2020, and December 31, 2019, the outstanding principal balance of the Guaranteed Notes was $2.0 billion and $2.9 billion, respectively, with the last scheduled maturity to take place in 2031.
The Note Guarantees rank equally in right of payment with the applicable Guarantor’s existing and future unsubordinated unsecured indebtedness and are subordinate to any secured indebtedness of the applicable Guarantor to the extent of the value of the assets securing such indebtedness. The Note Guarantees are structurally subordinate to indebtedness and other liabilities (including trade payables and lease obligations, and in the case of Ally Bank, its deposits) of any nonguarantor subsidiaries of the applicable Guarantor to the extent of the value of the assets of such subsidiaries.
The Note Guarantees and all other obligations of the Guarantors will terminate and be of no further force or effect (i) upon a permissible sale, disposition, or other transfer (including through merger or consolidation) of a majority of the equity interests (including any sale, disposition or other transfer following which the applicable Guarantor is no longer a subsidiary of the Parent), of the applicable Guarantor, or (ii) upon the discharge of the Parent’s obligations related to the Guaranteed Notes.
122

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
The following tables present summarized financial data for the Parent and the Guarantors on a combined basis. The Guarantors, both of which the Parent is deemed to possess control over, are fully consolidated after eliminating intercompany balances and transactions. Summarized financial data for nonguarantor subsidiaries is excluded.
																											
		Three months ended September 30,		Nine months ended September 30,	
($ in millions)		2020		2019		2020		2019	
Net financing loss and other interest income		$	(261)			$	(280)			$	(793)			$	(844)		
Dividends from bank subsidiaries		— 			550 			400 			1,450 		
Dividends from nonbank subsidiaries		19 			52 			60 			188 		
Total other revenue		77 			75 			210 			272 		
Total net (loss) revenue		(165)			397 			(123)			1,066 		
Provision for credit losses		(28)			3 			(56)			35 		
Total noninterest expense		160 			133 			471 			468 		
(Loss) income from continuing operations before income tax expense		(297)			261 			(538)			563 		
Income tax benefit from continuing operations		(71)			(117)			(220)			(467)		
Net (loss) income from continuing operations		(226)			378 			(318)			1,030 		
Income (loss) from discontinued operations, net of tax		1 			1 			— 			(2)		
Net (loss) income (a)		$	(225)			$	379 			$	(318)			$	1,028 		
(a)Excludes the Parent’s and Guarantors’ share of income of all nonguarantor subsidiaries.

($ in millions)		September 30, 2020		December 31, 2019	
Total assets (a)		$	7,427 			$	6,749 		
Total liabilities		$	16,461 			$	15,822 		
(a)Excludes investments in all nonguarantor subsidiaries.
Cash Flows
The following summarizes the activity reflected in the Condensed Consolidated Statement of Cash Flows. While this information may be helpful to highlight certain macro trends and business strategies, the cash flow analysis may not be as helpful when analyzing changes in our net earnings and net assets. We believe that in addition to the traditional cash flow analysis, the discussion related to liquidity, dividends, and ALM herein may provide more useful context in evaluating our liquidity position and related activity.
Net cash provided by operating activities was $2.6 billion and $3.1 billion for the nine months ended September 30, 2020, and 2019, respectively. Activity fell year-over-year, as results were negatively impacted by the COVID-19 pandemic.
Net cash provided by investing activities was $11.0 billion for the nine months ended September 30, 2020, compared to net cash used in investing activities of $3.1 billion for the same period in 2019. The increase was primarily due to a $11.7 billion increase in cash inflows related to originations and repayments of finance receivables and loans held-for-investment and other. During the nine months ended September 30, 2020, commercial wholesale financing receivables outstanding decreased due to a reduction or temporary shutdown in manufacturer production as a result of the COVID-19 pandemic, coupled with ongoing retail automotive sales, which reduced dealer stock levels.
Net cash provided by financing activities for the nine months ended September 30, 2020, was $2.6 billion, compared to net cash used in financing activities of $1.2 billion for the same period in 2019. The change was primarily attributable a decrease of $2.2 billion in net cash outflows related to repayments of long-term debt, and a decrease of $2.2 billion in net cash outflows related to short-term borrowings. These decreases were partially offset by a decrease in cash proceeds received from the issuance of long-term debt, consistent with our continued shift to more cost-efficient deposit funding.
Capital Planning and Stress Tests
As a Category IV firm, we are subject to supervisory stress testing on a two-year cycle and are exempted from company-run capital stress testing. We are also required to submit an annual capital plan to the FRB. Our annual capital plan must include an assessment of our expected uses and sources of capital and a description of all planned capital actions over a nine-quarter planning horizon, including any issuance of a debt or equity capital instrument, any dividend or other capital distribution, and any similar action that the FRB determines could have an impact on our capital. The plan must also include a discussion of how we, under expected and stressful conditions, will maintain capital commensurate with our risks and above the minimum regulatory capital ratios, and will serve as a source of strength to Ally Bank. The FRB’s final rule introducing the stress capital buffer requirement, which is described in Note 17 to the Condensed Consolidated Financial Statements, made several changes to the CCAR process that applied beginning with the 2020 cycle.
123

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
We received a non-objection to our 2018 capital plan in June 2018. We were not required to submit an annual capital plan to the FRB, participate in the supervisory stress test or CCAR, or conduct company-run capital stress tests during the 2019 cycle. Instead, our capital actions during the 2019 cycle were largely based on the results from our 2018 supervisory stress test. On April 1, 2019, our Board authorized an increase in our stock-repurchase program, permitting us to repurchase up to $1.25 billion of our common stock from time to time from the third quarter of 2019 through the second quarter of 2020. On March 17, 2020, in order to support the FRB's effort to mitigate the impact of the COVID-19 pandemic on the U.S. economy and the financial system, we announced the voluntary suspension of our stock-repurchase program through its termination on June 30, 2020. Consistent with the FRB’s restrictions on common-stock repurchases for large firms such as Ally, described below, we do not currently plan to implement a new stock-repurchase program or repurchase shares of our common stock, except in connection with compensation plans, for the remainder of 2020. We repurchased $105 million of common stock during the first nine months of 2020. We retain the discretion, however, to implement such a program and repurchase common stock, subject to the FRB’s restrictions as summarized below. On October 6, 2020, our Board declared a quarterly cash dividend of $0.19 per share of our common stock. Refer to Note 24 to the Condensed Consolidated Financial Statements for further information on the most recent dividend.
We submitted our 2020 capital plan on April 3, 2020, which included planned capital distributions to common stockholders through share repurchases and cash dividends over the nine-quarter planning horizon. On June 25, 2020, the FRB provided us with the results of the supervisory stress test, additional industry-wide sensitivity analyses conducted in light of the COVID-19 pandemic, and our preliminary stress capital buffer requirement. At the same time, the FRB announced its determination that changes in financial markets or the macroeconomic outlook could have a material effect on the risk profiles and financial conditions of firms subject to the capital-plan rule and that, as a result, the firms (including Ally) would be required to resubmit capital plans to the FRB within 45 days after receiving updated stress scenarios from the FRB. On September 17, 2020, the FRB released two updated scenarios—severely adverse and alternative severe. We updated our capital plan in light of firm-specific baseline and stress scenarios, as required, and submitted our updated plan to the FRB on November 2, 2020. On June 25, 2020, the FRB also announced several actions to ensure that large firms, such as Ally, remain resilient despite the economic uncertainty from the COVID-19 pandemic, including for the third quarter of 2020 (1) the suspension of repurchases by any firm of its common stock, except repurchases relating to issuances of common stock related to employee stock ownership plans, and (2) the disallowance of any increase by a firm in the amount of its common-stock dividends and the imposition of a common-stock dividend limit equal to the average of the firm’s net income for the four preceding calendar quarters. These restrictions have been extended for the fourth quarter of 2020 and may be further extended by the FRB on a quarter-by-quarter basis. Our ability to make capital distributions, including our ability to pay dividends or repurchase shares of our common stock, will continue to be subject to the FRB’s review and our internal governance requirements, including approval by our Board. The amount and size of any future dividends and share repurchases also will be subject to various factors, including Ally’s capital and liquidity positions, regulatory considerations, impacts related to the COVID-19 pandemic, any accounting standards that affect capital or liquidity (including CECL), financial and operational performance, alternative uses of capital, common-stock price, and general market conditions, and may be suspended or resumed at any time.
Regulatory Capital
Refer to Note 17 to the Condensed Consolidated Financial Statements and the section titled Selected Financial Data within this MD&A.
Credit Ratings
The cost and availability of unsecured financing are influenced by credit ratings, which are intended to be an indicator of the creditworthiness of a particular company, security, or obligation. Lower ratings result in higher borrowing costs and reduced access to capital markets. This is particularly true for certain institutional investors whose investment guidelines require investment-grade ratings on term debt and the two highest rating categories for short-term debt (particularly money-market investors).
124

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Nationally recognized statistical rating organizations rate substantially all our debt. The following table summarizes our current ratings and outlook by the respective nationally recognized rating agencies.
																											
Rating agency		Short-term		Senior unsecured debt		Outlook		Date of last action	
Fitch		F3		BBB-		Negative		August 12, 2020 (a)	
Moody’s		Not Prime		Ba1		Stable		May 12, 2020 (b)	
S&P		A-3		BBB-		Negative		May 4, 2020 (c)	
DBRS		R-3		BBB (Low)		Negative		April 21, 2020 (d)	
(a)Fitch affirmed our senior unsecured debt rating of BBB- and short-term rating of F3, and changed the outlook to Negative from Negative Watch on August 12, 2020.
(b)Moody's affirmed our senior unsecured debt rating of Ba1, affirmed our short-term rating of Not Prime, and maintained a Stable outlook on May 12, 2020. Effective December 1, 2014, we determined to not renew our contractual arrangement with Moody's related to their providing of our issuer, senior unsecured debt, and short-term ratings. Notwithstanding this, Moody's has determined to continue to provide these ratings on a discretionary basis. However, Moody's has no obligation to continue to provide these ratings, and could cease doing so at any time.
(c)Standard & Poor's affirmed our senior unsecured debt rating of BBB-, affirmed our short-term rating of A-3, and changed the outlook to Negative from Stable on May 4, 2020.
(d)DBRS affirmed our senior unsecured debt rating of BBB (Low), affirmed our short-term rating of R-3, and changed the outlook to Negative from Positive on April 21, 2020.
Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, which may include capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current operating, legislative, and regulatory environment. Rating agencies themselves could make or be required to make substantial changes to their ratings policies and practices—particularly in response to legislative and regulatory changes. Potential changes in rating methodology, as well as in the legislative and regulatory environment, and the timing of those changes could impact our ratings, which as noted above could increase our borrowing costs and reduce our access to capital.
A credit rating is not a recommendation to buy, sell, or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.
Insurance Financial Strength Ratings
Substantially all of our Insurance operations have an FSR and an ICR from A.M. Best. The FSR is intended to be an indicator of the ability of the insurance company to meet its senior most obligations to policyholders. Lower ratings generally result in fewer opportunities to write business, as insureds, particularly large commercial insureds, and insurance companies purchasing reinsurance have guidelines requiring high FSR ratings. On September 25, 2020, A.M. Best affirmed the FSR for Ally Insurance Group of A- (excellent), affirmed the ICR of a-, and maintained a Stable outlook.

Off-Balance-Sheet Arrangements
Refer to Note 10 to the Condensed Consolidated Financial Statements.

Critical Accounting Estimates
We identified critical accounting estimates that, as a result of judgments, uncertainties, uniqueness, and complexities of the underlying accounting standards and operations involved could result in material changes to our financial condition, results of operations, or cash flows under different conditions or using different assumptions.
Our most critical accounting estimates are as follows:
•Allowance for loan losses
•Valuation of automotive lease assets and residuals
•Fair value of financial instruments
•Determination of provision for income taxes
On January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses. This guidance replaced the incurred loss methodology, which was used to calculate the allowance for loan losses as described in the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K, with an expected lifetime loss methodology, as described in the Allowance for Loan Losses section below.
During 2020, we did not substantively change any material aspect of our overall methodologies and processes used in developing the remaining critical accounting estimates from what was described in the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.
Refer to Note 1 to the Condensed Consolidated Financial Statements for further discussion regarding the methodology used in calculating the provision for income taxes for interim financial reporting.
125

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Allowance for Loan Losses
We maintain an allowance for loan losses (the allowance) to reflect the net amount expected to be collected from our lending portfolios. The allowance is maintained at a level that management considers to be adequate based upon ongoing quarterly assessments and evaluations using relevant available information, which includes both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. Additions and reductions to the allowance are charged to current period earnings through the provision for credit losses; amounts determined to be uncollectible are charged directly against the allowance, net of amounts recovered on previously charged-off accounts. Expected recoveries do not exceed the total of amounts charged-off or expected to be charged-off. The allowance is measured using statistical models that are designed to correlate certain macroeconomic variables to expected future credit losses. The macroeconomic data used in the models is based on forecasted variables for the next 12 months. Beyond this forecast period, we revert to a historical average for each of the variables on a straight-line basis over 24 months. The allowance reflects management’s estimate of expected credit losses over the contractual term of our lending portfolio and involves significant judgment, which could materially affect the provision for credit losses and, therefore, net income. For additional information regarding our portfolio segments and classes, refer to Note 8 to the Condensed Consolidated Financial Statements.
The consumer portfolio segments consist of smaller-balance, homogeneous loans within our Automotive Finance operations, Mortgage Finance operations, and consumer unsecured lending operations which is included within Corporate and Other. The allowance model for each consumer portfolio segment is calculated using proprietary statistical models and other risk indicators applied to pools of loans that share similar risk characteristics. Loans that do not share similar risk characteristics are evaluated individually. For additional information regarding the allowance calculation for the consumer portfolio segments, refer to Note 1 to the Condensed Consolidated Financial Statements.
The commercial portfolio segment is primarily composed of larger-balance, nonhomogeneous exposures within our Automotive Finance operations and Corporate Finance operations. These loans generally do not have similar risk characteristics and, as a result, are primarily evaluated individually. Management establishes specific allowances for commercial loans based on the present value of expected future cash flows, discounted at the loans’ effective interest rate, or the observable market price or the fair value of collateral, whichever is determined to be the most appropriate. Estimated costs to sell the collateral on an undiscounted basis are included in the impairment measurement, when appropriate. Loans that share similar risk characteristics are pooled and evaluated collectively. For additional information regarding the allowance calculation for the commercial portfolio segment, refer to Note 1 to the Condensed Consolidated Financial Statements.
The determination of the allowance is influenced by numerous assumptions and many factors that may materially affect estimates of loss, including changes in LGD, PD, and rating migration. The critical assumptions underlying the allowance include: (i) segmentation of each portfolio based on common risk characteristics; (ii) the development of reasonable and supportable forecasts of future macroeconomic conditions; and (iii) evaluation by management of borrower, collateral, and geographic information. Management monitors the adequacy of the allowance and makes adjustments as the assumptions in the underlying analyses change to reflect an estimate of expected lifetime loan losses at the reporting date, based on the best information available at that time.
126

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Statistical Table
The accompanying supplemental information should be read in conjunction with the more detailed information, including our Condensed Consolidated Financial Statements and the notes thereto, which appears elsewhere in this Quarterly Report.
Net Interest Margin Table
The following tables present an analysis of net yield on interest-earning assets (or net interest margin) excluding discontinued operations for the periods shown.

		2020		2019		Increase (decrease) due to	
Three months ended September 30, ($ in millions)		Average balance (a)		Interest income/interest expense		Yield/rate		Average balance (a)		Interest income/interest expense		Yield/rate		Volume		Yield/rate		Total	
Assets																			
Interest-bearing cash and cash equivalents		$	20,719 			$	5 			0.11 	%		$	3,539 			$	19 			2.13 	%		$	92 			$	(106)			$	(14)		

Investment securities (b)		31,085 			162 			2.07 			31,525 			221 			2.78 			(3)			(56)			(59)		
Loans held-for-sale, net		472 			5 			4.33 			745 			8 			4.26 			(3)			— 			(3)		
Finance receivables and loans, net (b) (c)		117,546 			1,602 			5.42 			128,799 			1,859 			5.73 			(162)			(95)			(257)		
Investment in operating leases, net (d)		9,317 			185 			7.89 			8,525 			134 			6.24 			12 			39 			51 		
Other earning assets		974 			11 			4.07 			1,183 			16 			5.37 			(3)			(2)			(5)		
Total interest-earning assets		180,113 			1,970 			4.35 			174,316 			2,257 			5.14 							(287)		
Noninterest-bearing cash and cash equivalents		536 							391 												
Other assets		8,137 							7,012 												
Allowance for loan losses		(3,371)							(1,287)												
Total assets		$	185,415 							$	180,432 												
Liabilities and equity																			
Interest-bearing deposit liabilities (b)		$	132,807 			$	452 			1.35 	%		$	117,489 			$	658 			2.22 	%		$	86 			$	(292)			$	(206)		
Short-term borrowings		3,343 			9 			1.08 			5,550 			33 			2.36 			(13)			(11)			(24)		
Long-term debt		28,512 			309 			4.31 			36,395 			378 			4.12 			(82)			13 			(69)		
Total interest-bearing liabilities		164,662 			770 			1.86 			159,434 			1,069 			2.66 							(299)		
Noninterest-bearing deposit liabilities		157 							149 												
Total funding sources		164,819 			770 			1.86 			159,583 			1,069 			2.66 								
Other liabilities		6,472 							6,468 												
Total liabilities		171,291 							166,051 												
Total equity		14,124 							14,381 												
Total liabilities and equity		$	185,415 							$	180,432 												
Net financing revenue and other interest income				$	1,200 							$	1,188 									$	12 		
Net interest spread (e)						2.49 	%						2.48 	%							

Net yield on interest-earning assets (f)						2.65 	%						2.70 	%							
(a)Average balances are calculated using a combination of monthly and daily average methodologies.
(b)Includes the effects of derivative financial instruments designated as hedges. Refer to Note 18 to the Condensed Consolidated Financial Statements for further information about the effects of our hedging activities.
(c)Nonperforming finance receivables and loans are included in the average balances. For information on our accounting policies regarding nonperforming status, refer to Note 1 to the Condensed Consolidated Financial Statements.
(d)Yield includes gains on the sale of off-lease vehicles of $71 million and $28 million for the three months ended September 30, 2020, and 2019, respectively. Excluding these gains on sale, the annualized yield was 4.88% and 4.93% for the three months ended September 30, 2020, and 2019, respectively.
(e)Net interest spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities.
(f)Net yield on interest-earning assets represents annualized net financing revenue and other interest income as a percentage of total interest-earning assets.
127

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q

		2020		2019		Increase (decrease) due to	
Nine months ended September 30, ($ in millions)		Average balance (a)		Interest income/interest expense		Yield/rate		Average balance (a)		Interest income/interest expense		Yield/rate		Volume		Yield/rate		Total	
Assets																			
Interest-bearing cash and cash equivalents		$	12,719 			$	23 			0.24 	%		$	3,846 			$	63 			2.19 	%		$	145 			$	(185)			$	(40)		

Investment securities (b)		31,278 			562 			2.40 			30,707 			670 			2.92 			12 			(120)			(108)		
Loans held-for-sale, net		320 			11 			4.59 			376 			13 			4.62 			(2)			— 			(2)		
Finance receivables and loans, net (b) (c)		122,190 			4,974 			5.44 			129,138 			5,526 			5.72 			(297)			(255)			(552)		
Investment in operating leases, net (d)		9,155 			395 			5.76 			8,428 			373 			5.92 			32 			(10)			22 		
Other earning assets		1,039 			34 			4.38 			1,205 			51 			5.66 			(7)			(10)			(17)		
Total interest-earning assets		176,701 			5,999 			4.53 			173,700 			6,696 			5.15 							(697)		
Noninterest-bearing cash and cash equivalents		462 							459 												
Other assets		7,991 							6,740 												
Allowance for loan losses		(3,077)							(1,273)												
Total assets		$	182,077 							$	179,626 												
Liabilities and equity																			
Interest-bearing deposit liabilities (b)		$	126,942 			$	1,585 			1.67 	%		$	113,670 			$	1,901 			2.24 	%		$	222 			$	(538)			$	(316)		
Short-term borrowings		4,181 			39 			1.24 			6,158 			114 			2.48 			(37)			(38)			(75)		
Long-term debt		30,721 			975 			4.24 			39,649 			1,204 			4.06 			(271)			42 			(229)		
Total interest-bearing liabilities		161,844 			2,599 			2.14 			159,477 			3,219 			2.70 							(620)		
Noninterest-bearing deposit liabilities		144 							140 												
Total funding sources		161,988 			2,599 			2.14 			159,617 			3,219 			2.70 								
Other liabilities		5,986 							6,167 												
Total liabilities		167,974 							165,784 												
Total equity		14,103 							13,842 												
Total liabilities and equity		$	182,077 							$	179,626 												
Net financing revenue and other interest income				$	3,400 							$	3,477 									$	(77)		
Net interest spread (e)						2.39 	%						2.45 	%							

Net yield on interest-earning assets (f)						2.57 	%						2.68 	%							
(a)Average balances are calculated using a combination of monthly and daily average methodologies.
(b)Includes the effects of derivative financial instruments designated as hedges. Refer to Note 18 to the Condensed Consolidated Financial Statements for further information about the effects of our hedging activities.
(c)Nonperforming finance receivables and loans are included in the average balances. For information on our accounting policies regarding nonperforming status, refer to Note 1 to the Condensed Consolidated Financial Statements.
(d)Yield includes gains on the sale of off-lease vehicles of $62 million and $66 million for the nine months ended September 30, 2020, and 2019, respectively. Excluding these gains on sale, the annualized yield was 4.86% and 4.87% for the nine months ended September 30, 2020, and 2019, respectively.
(e)Net interest spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities.
(f)Net yield on interest-earning assets represents annualized net financing revenue and other interest income as a percentage of total interest-earning assets.
128

Table of Contents
Management’s Discussion and Analysis
Ally Financial Inc. • Form 10-Q
Recently Issued Accounting Standards
Refer to Note 1 to the Condensed Consolidated Financial Statements.

Item 3.     Quantitative and Qualitative Disclosures about Market Risk
Refer to the Market Risk section of Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4.     Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the specified time periods. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of internal control including the possibility of human error or the circumvention or overriding of controls through individual actions or collusion. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
As of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) and concluded that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
In the normal course of business, we review our controls and procedures and make enhancements or modifications intended to support the quality of our financial reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2020, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
129

Table of Contents
PART II — OTHER INFORMATION
Ally Financial Inc. • Form 10-Q

Item 1.    Legal Proceedings
Refer to Note 23 to the Condensed Consolidated Financial Statements (incorporated herein by reference) for a discussion related to our legal proceedings which supplements the discussion of legal proceedings set forth in Note 29 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.

Item 1A.    Risk Factors
The section titled Risk Factors in Part I, Item 1A of our 2019 Annual Report on Form 10-K includes a discussion of the many risks and uncertainties we face, any one or more of which could have a material adverse effect on our business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in Ally. The section titled Risk Factors in Part II, Item 1A of our Form 10-Q for the quarter ended June 30, 2020, includes updates to these risks and uncertainties. The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in our 2019 Annual Report on Form 10-K and our Form 10-Q for the quarter ended June 30, 2020. Except as presented below, there have been no material changes to the risk factors described in our 2019 Annual Report on Form 10-K and our Form 10-Q for the quarter ended June 30, 2020.
The COVID-19 pandemic is adversely affecting us and our customers, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects could be significant.
The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deteriorations in household, business, economic, and market conditions, including in the United States where we conduct nearly all of our business. The extent of the impact of the COVID-19 pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects will depend on a number of evolving factors, including:
•The duration, extent, and severity of the pandemic. COVID-19 has not yet been contained and could continue to affect significantly more households and businesses. The duration and severity of the pandemic remain impossible to predict.
•The response of governmental and nongovernmental authorities and the effect on economies and markets. Many governmental and nongovernmental authorities initially responded to COVID-19 by curtailing household and business activity as a containment measure while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses. Although this response slowed the rate of spread of COVID-19 and supported economic stability, the number of cases has risen meaningfully at times, and the potential exists for further resurgences to occur, especially during the upcoming cold-and-flu season. In addition, while monetary policy remains highly accommodative, a number of stimulative fiscal programs and actions have expired or been exhausted without renewal. National, regional, and local economies and markets could suffer further disruptions that are lasting.
•The effect on our customers, counterparties, employees, and third-party service providers. COVID-19 and its associated consequences and uncertainties are affecting individuals, households, and businesses differently and unevenly. Many, however, have changed their behavior in response to governmental mandates and advisories to restrict or alter commercial and social interactions. As a result, our credit, operational, and other risks have generally been elevated and are expected to remain so—if not increase further—for the foreseeable future.
During the nine months ended September 30, 2020, the most notable impact to our results of operations was higher provision expense for credit losses. Our provision expense was $1.3 billion for the nine months ended September 30, 2020, compared to $722 million during the same period in 2019, with the increase primarily driven by incremental reserves associated with a deterioration in macroeconomic variables such as unemployment during the nine months ended September 30, 2020. For more detail and further discussion, refer to the section titled COVID-19 Impacts within the MD&A. Given the unpredictability of COVID-19 and its direct and indirect effects, however, our forecast of macroeconomic conditions and operating results—including expected lifetime credit losses on our loan portfolio—is subject to meaningful uncertainty.
Through the second quarter of 2020, as governments acted to temporarily close or restrict the operations of businesses, including automotive dealers, and as many consumers and businesses changed their behavior in response, we experienced significant reductions in our consumer automotive loan applications. In addition, we observed downward pressure on the automotive sales and other operating results of our dealer customers, on their capacity to accept the return of leased vehicles, and on used-vehicle auction activity and values. Many automotive manufacturers and their suppliers also had taken measures to slow or shut down production in response to the pandemic, which negatively affected dealer inventory levels and sales and significantly reduced wholesale floorplan lending business to dealers. As consumers and businesses adapted to changed conditions and many governmental authorities relaxed their restrictions later in the second quarter, we began to observe a recovery in quality loan application volume and resulting booked originations. In addition, automotive manufacturers and suppliers restarted production, albeit at reduced levels, and we experienced our first month-over-month increase in wholesale floorplan balances in August since the pandemic began. For more detail and further discussion, including in connection with our non-automotive businesses, refer to the section titled Significant Business Developments Related to COVID-19 within the MD&A. We cannot yet be confident in the sustainability of these improvements in our business or the trajectory of the macroeconomic outlook—especially with the recent resurgence of COVID-19 in much of the United States and ongoing uncertainties around the efficacy, availability, and acceptance of medical
130

Table of Contents

Ally Financial Inc. • Form 10-Q
treatments and potential vaccines—and the adverse effects on our business, financial position, results of operations, and prospects could be significant as time goes on.
Governments have taken unprecedented steps to partially mitigate the adverse effects of their actions to contain the spread of COVID-19. For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S. economy. The FRB has taken decisive and sweeping actions as well. Since March 15, 2020, these actions have included a reduction in the target range for the federal funds rate to zero to 0.25 percent, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, and numerous facilities to support the flow of credit to households and businesses. Still, while monetary policy has remained highly accommodative since the declaration of the pandemic, fiscal stimulus has waned as a meaningful economic rebound developed over the summer and the political environment became more unstable with the approach of the 2020 elections. It is not yet clear whether the political environment will become more salutary after the 2020 elections or whether further stimulative fiscal-policy measures will be implemented.
We also acted swiftly to support our customers with industry-leading relief programs, while prudently managing our credit risk exposure. For example, in our consumer automotive loan portfolio, existing customers had the option to elect to defer their payments for up to 120 days without late fees being incurred, but with finance charges continuing to accrue. This program was made available to all consumer automotive loan customers beginning March 18, 2020. The length of the deferral offering was reduced incrementally, until on June 21, 2020, we eliminated the offering and migrated back to our standard extension process. Approximately 1.2 million consumer automotive loan customers enrolled in the program, of which 99% had reached their scheduled expiration as of September 30, 2020. For our commercial dealer customers that were current on all payment obligations, we offered a waiver of curtailments on wholesale floorplan loans, an increase in floorplan advance rates, a deferral of interest and insurance charges on wholesale borrowings, and a deferral of term loan payments from April through July 2020. Approximately 2,290 or 73% of eligible dealers requested at least one form of this assistance for at least one month as part of this program. Approximately 32% of eligible wholesale dealers deferred wholesale interest and insurance payments during the third quarter of 2020, which represented a decline from the first and second quarters. Dealers that elected to defer wholesale interest and insurance payments have the option to repay such balances over a 4- or 12-month period without additional interest charges or fees. For more detail and further discussion, refer to the section titled Credit Quality Indicators in Note 8 to the Condensed Consolidated Financial Statements and to the section titled Risk Management within the MD&A.
The degree to which our actions and those of governments and others will directly or indirectly assist our customers, counterparties, and third-party service providers and advance our business and the economy generally is not yet clear. For example, while our loan-deferral programs may better position customers to resume their regular payments to us in the future and enhance our brand and customer loyalty, these programs may negatively impact our performance and not be as successful as we expect in managing our credit risk. In addition, while the FRB’s accommodative monetary policy may benefit us to some degree by supporting economic activity among our customers, this policy and sudden shifts in it may inhibit our ability to grow or sustain net interest income and effectively manage interest-rate and market risks. Further, while extraordinary governmental intervention in the economy and markets has created stability, the scale of these actions inevitably heightens political, reputational, litigation, and similar risks for financial intermediaries like us. Also, while governmental stimulus and relief programs may have supported the financial condition of some of our customers, many of these programs and actions have expired or been exhausted and may not be renewed or replaced.
We are unable to estimate the near-term and ultimate impacts of COVID-19 on our business and operations at this time. The pandemic and its direct and indirect effects could cause us to experience higher credit losses in our lending portfolio, additional increases in our allowance for credit losses, impairment of our goodwill and other financial assets, heightened volatility in and diminished access to capital markets and other funding sources, further reduced demand for our products and services, and other negative impacts on our financial position, results of operations, and prospects. In addition, while we continue to anticipate that our capital and liquidity positions will be sufficient, sustained adverse effects may impair these positions, prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, and result in downgrades in our credit ratings. The COVID-19 pandemic and related governmental mandates and advisories also have necessitated changes in the way we and our third-party service providers continue operations, and we may face heightened security, information-technology, operational, and similar risks as a result. The length of time we and our third-party service providers may be required to operate under these circumstances, as well as the potential for conditions to worsen or for significant disruptions to occur, remains unpredictable. All of these risks and uncertainties can be expected to persist at least until the pandemic is demonstrably and sustainably contained, authorities cease curbing household and business activity, and consumer and business confidence recover.
131

Table of Contents

Ally Financial Inc. • Form 10-Q
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
We did not have any unregistered sales of equity securities during the three months ended September 30, 2020.
Purchases of Equity Securities by the Issuer
The following table presents repurchases of our common stock, by month, for the three months ended September 30, 2020.

Three months ended September 30, 2020		Total number of shares repurchased (a) (b) (in thousands)		Weighted-average price paid per share (a) (b) (in dollars)	
July 2020		— 			$	20.95 		
August 2020		8 			22.64 		
September 2020		1 			24.80 		
Total		9 			22.93 		
(a)Consists of shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.
(b)On March 17, 2020, we announced the voluntary suspension of our stock-repurchase program through its termination on June 30, 2020. Consistent with the FRB’s restrictions on common-stock repurchases for large firms such as Ally, described in Note 17 to the Condensed Consolidated Financial Statements, we do not currently plan to implement a new stock-repurchase program or repurchase shares of our common stock, except in connection with compensation plans, for the remainder of 2020. Refer to Note 17 to the Condensed Consolidated Financial Statements for further details.

Item 3.    Defaults upon Senior Securities
None.

Item 4.    Mine Safety Disclosures
Not applicable.

Item 5.    Other Information
None.
132

Table of Contents

Ally Financial Inc. • Form 10-Q
Item 6.    Exhibits
The exhibits listed on the following index of exhibits are filed as a part of this report.

Exhibit	Description	Method of Filing	
			
10.2	Form of Award Agreement related to the issuance of Incentive Compensation Awards	Filed herewith.	
			
10.3	Form of Award Agreement related to the issuance of Performance Stock Units	Filed herewith.	
			
22.1	Subsidiary Guarantors	Filed as Exhibit 22 to the Company’s Quarterly Report for the period ended March 31, 2020, on Form 10-Q (File No. 1-3754), incorporated herein by reference.	
			
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)	Filed herewith.	
			
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)	Filed herewith.	
			
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350	Filed herewith.	
			
101	The following information from our Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL: (i) Condensed Consolidated Statement of Comprehensive Income (unaudited), (ii) Condensed Consolidated Balance Sheet (unaudited), (iii) Condensed Consolidated Statement of Changes in Equity (unaudited), (iv) Condensed Consolidated Statement of Cash Flows (unaudited), and (v) the Notes to the Condensed Consolidated Financial Statements (unaudited)	Filed herewith.	
			
104	The cover page of our Form 10-Q for the quarter ended September 30, 2020, (formatted in Inline XBRL and contained in Exhibit 101)	Filed herewith.	
133

Table of Contents
Signatures
Ally Financial Inc. • Form 10-Q
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized, this 3rd day of November, 2020.

		
	Ally Financial Inc.
(Registrant)	
		
	/S/ JENNIFER A. LACLAIR	
	Jennifer A. LaClair
Chief Financial Officer	

		
	/S/ DAVID J. DEBRUNNER	
	David J. DeBrunner
Vice President, Chief Accounting Officer, and
Corporate Controller	
134

Exhibit 10.2
Ally Financial Inc.

Ally Financial Inc.
500 Woodward Avenue, MC : MI-01-10-HR Detroit, MI 48226

<DATE>

<NAME>

Re: Ally Financial Inc. Incentive Compensation Plan Award

Dear <FIRST NAME>:

1.You have been granted an Award under the Ally Financial Inc. Incentive Compensation Plan (the “Plan”). A copy of the Plan is included on the Shareworks website. Capitalized terms not defined in this Award Agreement will have the meaning set forth in the Plan.

2.Your Award is granted to you as a matter of separate inducement and is not in lieu of salary or other compensation for your services. By accepting this Award, you consent to any and all Plan amendments, vesting restrictions, and revisions to any other term or condition of this Award Agreement that may be required to comply with federal law or regulation governing compensation, whether such amendments, restrictions, or revisions are applied prospectively or retroactively to this or prior Awards. By accepting this Award, you also acknowledge and agree that it is subject to all of the requirements set forth in the Enterprise Compensation Policy and that you are subject to all of the restrictive covenants set forth in Section 13 of the Plan (i.e., non-solicit, confidentiality, non-disparagement).

3.Your Award is being made in the form of Restricted Stock Units. Your Award is comprised of the following:

Grant Date: [INSERT]
Total Award: [INSERT]
Vesting Date(s): [INSERT]
Settlement Date(s): [INSERT]

4.This Award Agreement will become effective after you have electronically accepted it via the Shareworks website. If you do not accept this Award Agreement within 45 days of notification, you will be deemed to have rejected the Award and this Award Agreement will be null and void and without any further force or effect.

5.Subject to requirements of any federal laws or regulations and Ally policy that govern compensation, see paragraph 2 above, your Award will vest and be settled as soon as practical after the date(s) noted above. If and when a change to the vesting date(s) noted above is required, you will be notified in writing.

6.If on the Grant Date you are considered a material risk taker (“MRT”), in connection with regulatory guidance and in support of its corporate governance principles, to the extent that any portion of the Award remains unpaid, Ally reserves the right to adjust downward the amount of this Award without your consent to reflect adverse outcomes attributable to inappropriate, excessive, or imprudent risk taking in which you participated and which was the basis for this Award. Your Award is also subject to cancellation, recovery, forfeiture, or repayment consistent with Ally’s recoupment policy contained in the Enterprise Compensation Policy.

Exhibit 10.2
Ally Financial Inc.

7.[If your employment is terminated by the Company without Cause, then any unvested tranches of your Award will Vest and be Paid as determined by the schedule above. Otherwise,] Section 11 of the Plan governs the effect of a Termination of Service on your Award.

8.If the Company pays a dividend on Shares prior to the Vesting Date, you will be entitled to a dividend equivalent payment in the same amount as the dividend you would have received if you held the number of Shares, if any, as earned and vested as of the Vesting Date. These dividends will vest and be paid to you on the Settlement Date (or such other vesting and settlement date applicable under this Award), subject to the vesting of your Award. No dividends or dividend equivalents will be paid to you with respect to any portion of your Award that is canceled or forfeited. The Company will decide on the form of payment and may pay dividends or dividend equivalents in Shares, in cash or in a combination thereof, subject to applicable law.

9.The restrictions in Section 13(a) of the Plan on your ability to solicit any Ally client, customer, or employee for 24 months following your Termination of Service is grounded in Ally’s significant investment of time, effort, and expense in establishing client, customer, and employee relationships across Ally’s lines of business. As this applies to you, the scope of the restriction on your ability to solicit Ally clients or customers will run commensurate with the scope of your responsibilities while employed by Ally. That is, the terms “client or customer” as used in Section 13(a) (i.e., “(i) solicit any client or customer of the Company or any Affiliate with respect to a Competitive Activity”) mean those clients or customers (whether current or prospective): (i) with whom you had direct or indirect personal contact within the last 12 months of your employment with Ally; or (ii) about whom you learned confidential or proprietary information (including trade secrets) by virtue of your employment with Ally during the last 12 months of your employment with Ally. The term “solicit” also will include any communication or other interaction between you and a client or customer (whether current or prospective) that takes place to make sales to, perform services for, or otherwise further the business relationship with that client or customer (whether current or prospective). Notwithstanding Section 21 of the Plan, Section 13(a) is governed by Michigan law without regard to its conflict of laws provision. An action to enforce or seek damages for breach of Section 13(a) may only be brought in a federal or state court of competent jurisdiction in Michigan.

10.You may designate a beneficiary using the Shareworks website. If no beneficiary is designated, or if the Ally determines that the beneficiary designation is unclear, or that the designated beneficiary cannot be located, any settlement as a result of your death will be made to your estate. The Shareworks website may also be used for any subsequent change in your beneficiary designation.

11.By accepting this Award, you understand and acknowledge that your Award is subject to the rules under Internal Revenue Code Section 409A and Section 19 of the Plan, and agree and accept all risks (including increased taxes and penalties) resulting from Internal Revenue Code Section 409A.

12.Except as prohibited by any federal law or regulation that governs compensation, see paragraph 2 above, your Award is subject to and governed by the terms and conditions of this Award Agreement and the Plan.

13.By accepting this Award, as evidenced by your signature below, you agree to abide by the terms and conditions of this Award Agreement and the Plan.

                                Sincerely yours,

                                 Kathleen Patterson    
                                Chief HR Officer
                                <DATE>

Exhibit 10.2
Ally Financial Inc.

I HAVE READ THE PLAN DOCUMENT AND THIS AWARD AGREEMENT AND I ACCEPT THE AWARD REFERENCED ABOVE SUBJECT TO THE TERMS AND CONDITIONS OF THIS AWARD AGREEMENT AND THE ALLY FINANCIAL INC. INCENTIVE COMPENSATION PLAN.

															
			
Participant Signature (Required)		Date (Required)	

Last Four Digits of SSN or National ID (Required)			

Exhibit 10.3
Ally Financial Inc.

Ally Financial Inc.
500 Woodward Avenue, MC : MI-01-10-HR Detroit, MI 48226

<DATE>

<NAME>

Re: Ally Financial Inc. Incentive Compensation Plan - PSU Award

Dear <FIRST NAME>:

1.You have been granted an Award under the Ally Financial Inc. Incentive Compensation Plan (the “Plan”). A copy of the Plan is included on the Shareworks website. Capitalized terms not defined in this Award Agreement will have the meaning set forth in the Plan.

2.Your Award is granted to you as a matter of separate inducement and is not in lieu of salary or other compensation for your services. By accepting this Award, you consent to any and all Plan amendments, vesting restrictions, and revisions to any other term or condition of this Award Agreement that may be required to comply with federal law or regulation governing compensation, whether such amendments, restrictions, or revisions are applied prospectively or retroactively to this or prior Awards. By accepting this Award, you also acknowledge and agree that it is subject to all of the requirements set forth in the Enterprise Compensation Policy and that you are subject to all of the restrictive covenants set forth in Section 13 of the Plan (i.e., non-solicit, confidentiality, non-disparagement).

3.Your Award is initially being made in the form of Performance Stock Units (“PSUs”). Your Award will vest on the following vesting schedule: [INSERT] ([each, a] [the] “Vesting Date”), subject to your continued employment with the Company or one of its Affiliates through the [applicable] Vesting Date (or as otherwise set forth herein or in the Plan); provided, that the actual number of PSUs vesting [(such number of PSUs to be within a range of •% to •% of the number of the Target PSUs (as defined below))] (the “Adjusted PSUs”) will be determined based on the achievement of the Performance Metrics (as defined in Exhibit A attached hereto) during the Performance Period (as defined below). For purposes of this Award Agreement, the “Performance Period” means the period commencing on [DATE(s)] and ending on [DATE(s)]. Immediately following the end of the Performance Period, your Adjusted PSUs may, at the discretion of the Company, convert into [cash, Shares of Restricted Stock, other Awards, or other property] equal to the number of Adjusted PSUs. Your Adjusted PSUs or [cash, Shares of Restricted Stock, other Awards, or other property] (as the case may be) will remain subject to your continued employment with the Company and its Affiliates through the [applicable] Vesting Date and will be forfeited and cancelled if you do not remain employed with the Company and its Affiliates through the [applicable] Vesting Date, except as otherwise explicitly provided below.

Grant Date:    «Date»
Number of Target PSUs Granted: «Total_Shares» (“Target PSUs”)

4.This Award Agreement will become effective after you have electronically accepted it via the Shareworks website. If you do not accept this Award Agreement within 45 days of notification, you will be deemed to have rejected the Award and this Award Agreement will be null and void and without any further force or effect.

Exhibit 10.3
Ally Financial Inc.

5.Subject to requirements of any federal laws or regulations and Ally policy that govern compensation (see paragraph 2 above), and subject to the terms of the Plan and this Agreement, the Company will deliver the Shares earned with respect to the Adjusted PSUs or will remove the restrictions imposed on any Shares of Restricted Stock delivered in respect of your Adjusted PSUs as of the Vesting Date, in accordance with paragraph 3 above.

6.If on the Grant Date you are considered a material risk taker (“MRT”), in connection with regulatory guidance and in support of its corporate governance principles, to the extent that any portion of the Award remains unpaid, Ally reserves the right to adjust downward the amount of this Award without your consent to reflect adverse outcomes attributable to inappropriate, excessive, or imprudent risk taking in which you participated and which was the basis for this Award. Your Award is also subject to cancellation, recovery, forfeiture, or repayment consistent with Ally’s recoupment policy contained in the Enterprise Compensation Policy.

7.Sections 11 and 12 of the Plan provide for the treatment of Awards in the event of a Termination of Service or Change in Control; provided, however:

    If you experience a Termination of Service without Cause by the Company or a Qualifying Termination (whether as a result of a Sale of your Business Unit or otherwise), in each case, other than in connection with a Change in Control, [all][INSERT portion] of your unvested PSUs or Shares of Restricted Stock under this Award (as the case may be) will become nonforfeitable on the date of such Termination of Service and your Award will continue to be earned and vest in accordance with paragraph 3 of this Award Agreement based on the achievement of the Performance Metrics (even though you are not employed by the Company or one of its Affiliates on the [applicable] Vesting Date) and will be settled as of the [applicable] Vesting Date in accordance with paragraph 5 above; provided, however, that if, as of the [applicable] Vesting Date, the number of Shares underlying the Adjusted PSUs or the number of Shares of Restricted Stock that you hold under this Award (as the case may be) exceeds the number of Shares underlying the Target PSUs (the number of such excess Shares, the “Above Target Shares”), then the number of Above Target Shares that will be delivered to you will be determined by multiplying (a) the number of Above Target Shares by (b) a fraction, (i) the numerator of which is the number of calendar days during the [applicable] Performance Period prior the date your termination of employment and (ii) the denominator of which is the number of calendar days during the [applicable] Performance Period and any PSUs or Shares under this Award in excess of this amount will be forfeited and cancelled (the “Excess Adjustment”).
        
8.If the Company pays a dividend on Shares prior to the Vesting Date, you will be entitled to a dividend equivalent payment in the same amount as the dividend you would have received if you held the number of Shares, if any, as earned and vested as of the Vesting Date. These dividends will vest and be paid to you on the Settlement Date (or such other vesting and settlement date applicable under paragraph 7 (above), subject to the vesting of your Award. No dividends or dividend equivalents will be paid to you with respect to any portion of your Award that is canceled or forfeited. The Company will decide on the form of payment and may pay dividends or dividend equivalents in Shares, in cash or in a combination thereof, subject to applicable law.

9.You will have no voting rights with respect to the Shares underlying your Award unless and until you become the record owner of the Shares underlying your Award.

10.You may designate a beneficiary using the Shareworks website. If no beneficiary is designated, or if the Ally determines that the beneficiary designation is unclear or that the designated beneficiary cannot be located, any settlement as a result of your death will be made to your estate. The Shareworks website may also be used for any subsequent change in your beneficiary designation.

11.The restrictions in Section 13(a) of the Plan on your ability to solicit any Ally client, customer, or employee for 24 months following your Termination of Service is grounded in Ally’s significant investment of time, effort, and expense in establishing client, customer, and employee relationships across Ally’s lines of

Exhibit 10.3
Ally Financial Inc.

business. As this applies to you, the scope of the restriction on your ability to solicit Ally clients or customers will run commensurate with the scope of your responsibilities while employed by Ally. That is, the terms “client or customer” as used in Section 13(a) (i.e., “(i) solicit any client or customer of the Company or any Affiliate with respect to a Competitive Activity”) will mean those clients or customers (whether current or prospective): (i) with whom you had direct or indirect personal contact within the last 12 months of your employment with Ally; or (ii) about whom you learned confidential or proprietary information (including trade secrets) by virtue of your employment with Ally during the last 12 months of your employment with Ally. The term “solicit” also will include any communication or other interaction between you and a client or customer (whether current or prospective) that takes place to make sales to, perform services for, or otherwise further the business relationship with that client or customer (whether current or prospective). Notwithstanding Section 21 of the Plan, Section 13(a) is governed by Michigan law without regard to its conflict of laws provision. An action to enforce or seek damages for breach of Section 13(a) may only be brought in a federal or state court of competent jurisdiction in Michigan.

12.By accepting this Award, you understand and acknowledge that your Award is subject to the rules under Internal Revenue Code Section 409A and Section 19 of the Plan, and agree and accept all risks (including increased taxes and penalties) resulting from Internal Revenue Code Section 409A.

13.Except as prohibited by any federal law or regulation that governs compensation, see paragraph 2 above, your Award is subject to and governed by the terms and conditions of this Award Agreement and the Plan.

14.By accepting this Award, as evidenced by your signature below, you agree to abide by the terms and conditions of this Award Agreement and the Plan.

                                Sincerely yours,

                                 Kathleen Patterson    
                                Chief HR Officer
                                «Date»

I HAVE READ THE PLAN DOCUMENT AND THIS AWARD AGREEMENT AND I ACCEPT THE AWARD REFERENCED ABOVE SUBJECT TO THE TERMS AND CONDITIONS OF THIS AWARD AGREEMENT AND THE ALLY FINANCIAL INC. INCENTIVE COMPENSATION PLAN.

															
			
Participant Signature (Required)		Date (Required)	

Last Four Digits of SSN or National ID (Required)			

Exhibit 10.3
Ally Financial Inc.

EXHIBIT A

PERFORMANCE METRICS

Exhibit 31.1
Ally Financial Inc. 
 
I, Jeffrey J. Brown, certify that:
1.I have reviewed this report on Form 10-Q of Ally Financial Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 3, 2020

/S/ JEFFREY J. BROWN		
Jeffrey J. Brown
Chief Executive Officer		

Exhibit 31.2
Ally Financial Inc.

I, Jennifer A. LaClair, certify that: 
1.I have reviewed this report on Form 10-Q of Ally Financial Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 3, 2020

/S/ JENNIFER A. LACLAIR		
Jennifer A. LaClair
Chief Financial Officer		

Exhibit 32
Ally Financial Inc.

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350
In connection with the Quarterly Report of Ally Financial Inc. (the Company) on Form 10-Q for the period ending September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ JEFFREY J. BROWN		
Jeffrey J. Brown		
Chief Executive Officer		
November 3, 2020		
		
/S/ JENNIFER A. LACLAIR		
Jennifer A. LaClair		
Chief Financial Officer		
November 3, 2020		
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Ally Financial Inc. and will be furnished to the Securities and Exchange Commission or its staff upon request.