---

---

---

•

Permitted Activities — Under the BHC Act, BHCs and their subsidiaries are generally limited to the business of banking and to closely related activities that are incident to banking. The GLB Act amended the BHC Act and created a regulatory framework for FHCs, which are BHCs that meet certain qualifications and elect FHC status. FHCs, directly or indirectly through their nonbank subsidiaries, are generally permitted to engage in a broader range of financial and related activities than those that are permissible for BHCs—for example, (1) underwriting, dealing in, and making a market in securities; (2) providing financial, investment, and economic advisory services; (3) underwriting insurance; and (4) merchant banking activities. The FRB regulates, supervises, and examines FHCs, as it does all BHCs, but insurance and securities activities conducted by an FHC or any of its nonbank subsidiaries are also regulated, supervised, and examined by functional regulators such as state insurance commissioners, the SEC, or FINRA. Ally’s status as an FHC allows us to provide insurance products and services, to deliver our SmartAuction finder services and a number of related vehicle-remarketing services for third parties, and to offer a range of brokerage and advisory services. To remain eligible to conduct these broader financial and related activities, Ally and Ally Bank must remain “well-capitalized” and “well-

---

•

Enhanced Prudential Standards — Ally is currently subject to enhanced prudential standards that have been established by the FRB under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). In May 2018, targeted amendments to the Dodd-Frank Act and other financial-services laws were enacted through the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act), including amendments that affect whether and, if so, how the FRB applies enhanced prudential standards to BHCs like us with $100 billion or more but less than $250 billion in total consolidated assets. In October 2019, the FRB and other U.S. banking agencies issued final rules implementing these amendments. The final rules establish four risk-based categories of prudential standards and capital and liquidity requirements for banking organizations with $100 billion or more in total consolidated assets. The most stringent standards and requirements apply to U.S. global systemically important BHCs, which are assigned to Category I. The assignment of other banking organizations to the remaining three categories is based on measures of size and four other risk-based indicators: cross-jurisdictional activity, weighted short-term wholesale funding (wSTWF), nonbank assets, and off-balance-sheet exposure. Under the final rules, Ally is designated as a Category IV firm and, as such, is (1) made subject to supervisory stress testing on a two-year cycle rather than the previously required one-year cycle, (2) required to continue submitting an annual capital plan to the FRB, (3) allowed to continue excluding accumulated other comprehensive income (AOCI) from regulatory capital, (4) required to continue maintaining a buffer of unencumbered highly liquid assets to meet projected net stressed cash outflows over a 30-day planning horizon, (5) required to conduct liquidity stress tests on a quarterly basis rather than the previously required monthly basis, (6) allowed to engage in more tailored liquidity risk management, including monthly rather than weekly calculations of collateral positions, the elimination of limits for activities that are not relevant to the firm, and fewer required elements of monitoring of intraday liquidity exposures, (7) exempted from company-run capital stress testing, (8) exempted from the modified liquidity coverage ratio (LCR) and the proposed modified net stable funding ratio provided that wSTWF remains under $50 billion, and (9) allowed to remain exempted from the supplementary leverage ratio, the countercyclical capital buffer, and single-counterparty credit limits. The final rules went in effect on December 31, 2019.

•	Capital Adequacy Requirements — Ally and Ally Bank are subject to various capital adequacy requirements. Refer to Note 20 to the Consolidated Financial Statements and the section below titled Basel Capital Frameworks for additional information.

•

Capital Planning and Stress Tests — Under the final rules described earlier in Enhanced Prudential Standards, Ally is (1) made subject to supervisory stress testing on a two-year cycle rather than the previously required one-year cycle, (2) required to continue submitting an annual capital plan to the FRB, (3) allowed to continue excluding AOCI from regulatory capital, (4) exempted from company-run capital stress testing, and (5) allowed to remain exempted from the supplementary leverage ratio and the countercyclical capital buffer. Ally’s 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 Ally, under expected and stressful conditions, will maintain capital commensurate with its risks and above the minimum regulatory capital ratios and will serve as a source of strength to Ally Bank. The FRB will either object to the plan, in whole or in part, or provide a notice of non-objection. If the FRB objects to the plan, or if certain material events occur after submission of the plan, Ally must submit a revised plan to the FRB within 30 days.

•

Resolution Planning — Under rules of the FDIC, Ally Bank is required to periodically submit to the FDIC a resolution plan (commonly known as a living will) that would enable the FDIC, as receiver, to resolve Ally Bank in the event of its insolvency under the FDI Act in a manner that ensures that depositors receive access to their insured deposits within one business day of Ally Bank’s failure (two business days if the failure occurs on a day other than Friday), maximizes the net present value return from the sale or disposition of its assets, and minimizes the amount of any loss realized by the creditors in the resolution. If the FDIC

---

•

Limitations on Bank and BHC Dividends and Other Capital Distributions — Federal and Utah law place a number of conditions, limits, and other restrictions on dividends and other capital distributions that may be paid by Ally Bank to IB Finance and thus indirectly to Ally. In addition, even if the FRB does not object to our capital plan, Ally and IB Finance may be precluded from or limited in paying dividends or other capital distributions without the FRB’s approval under certain circumstances—for example, if Ally or IB Finance were to not meet minimum regulatory capital ratios after giving effect to the distributions. FRB supervisory guidance also directs BHCs like us to consult with the FRB prior to increasing dividends, implementing common-stock-repurchase programs, or redeeming or repurchasing capital instruments. Further, the U.S. banking agencies are authorized to prohibit an insured depository institution, like Ally Bank, or a BHC, like Ally, from engaging in unsafe or unsound banking practices and, depending upon the circumstances, could find that paying a dividend or other capital distribution would constitute an unsafe or unsound banking practice. On April 1, 2019, our Board of Directors 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. For additional information on our capital actions, including our stock-repurchase program and dividends on our common stock, refer to Note 20 to the Consolidated Financial Statements. 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 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, any accounting standards that affect capital or liquidity (including Accounting Standards Update 2016-13, Financial Instruments - Credit Losses), financial and operational performance, alternative uses of capital, common-stock price, and general market conditions, and may be suspended at any time.

•

Transactions with Affiliates — Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W prevent Ally and its nonbank subsidiaries from taking undue advantage of the benefits afforded to Ally Bank as a depository institution, including its access to federal deposit insurance and the FRB’s discount window. Pursuant to these laws, “covered transactions”—including Ally Bank’s extensions of credit to and asset purchases from its affiliates—are generally subject to meaningful restrictions. For example, unless otherwise exempted, (1) covered transactions are limited to 10% of Ally Bank’s capital stock and surplus in the case of any individual affiliate and 20% of Ally Bank’s capital stock and surplus in the case of all affiliates; (2) Ally Bank’s credit transactions with an affiliate are generally subject to stringent collateralization requirements; (3) with few exceptions, Ally Bank may not purchase any “low quality asset” from an affiliate; and (4) covered transactions must be conducted on terms and conditions that are consistent with safe and sound banking practices (collectively, Affiliate Transaction Restrictions). In addition, transactions between Ally Bank and an affiliate must be on terms and conditions that are either substantially the same as or more beneficial to Ally Bank than those prevailing at the time for comparable transactions with or involving nonaffiliates.

•

Source of Strength — The Dodd-Frank Act codified the FRB’s policy requiring a BHC, like Ally, to serve as a source of financial strength for a depository-institution subsidiary, like Ally Bank, and to commit resources to support the subsidiary in circumstances when Ally might not otherwise elect to do so. The functional regulator of any nonbank subsidiary of Ally, however, may prevent that subsidiary from directly or indirectly contributing its financial support, and if that were to preclude Ally from serving as an adequate source of financial strength, the FRB may instead require the divestiture of Ally Bank and impose operating restrictions pending such a divestiture.

•

Single-Point-of-Entry Resolution Authority — Under the Dodd-Frank Act, a BHC whose failure would have serious adverse effects on the financial stability of the United States may be subjected to an FDIC-administered resolution regime called the orderly liquidation authority as an alternative to bankruptcy. If Ally were to be placed into receivership under the orderly liquidation authority, the FDIC as receiver would have considerable rights and powers in liquidating and winding up Ally, including the ability to assign assets and liabilities without the need for creditor consent or prior court review and the ability to differentiate and determine priority among creditors. In doing so, moreover, the FDIC’s primary goal would be a liquidation that mitigates risk to the

---

•

Enforcement Authority — The FRB possesses extensive authorities and powers to regulate and supervise the conduct of Ally’s businesses and operations. If the FRB were to take the position that Ally or any of its subsidiaries have violated any law or commitment or engaged in any unsafe or unsound practice, formal or informal enforcement and other supervisory actions could be taken by the FRB against Ally, its subsidiaries, and institution-affiliated parties (such as directors, officers, and agents). The UDFI and the FDIC have similarly expansive authorities and powers over Ally Bank and its subsidiaries. For example, any of these governmental authorities could order us to cease and desist from engaging in specified activities or practices or could affirmatively compel us to correct specified violations or practices. Some or all of these government authorities also would have the power, as applicable, to issue administrative orders against us that can be judicially enforced, to direct us to increase capital and liquidity, to limit our dividends and other capital distributions, to restrict or redirect the growth of our assets, businesses, and operations, to assess civil money penalties against us, to remove our officers and directors, to require the divestiture or the retention of assets or entities, to terminate deposit insurance, or to force us into bankruptcy, conservatorship, or receivership. These actions could directly affect not only Ally, its subsidiaries, and institution-affiliated parties but also Ally’s counterparties, stockholders, and creditors and its commitments, arrangements, and other dealings with them.

---

---

---

•

Privacy and Data Security — The GLB Act and related regulations impose obligations on financial institutions to safeguard specified consumer information maintained by them, to provide notice of their privacy practices to consumers in specified circumstances, and to allow consumers to opt out of specified kinds of information sharing with unaffiliated parties. Related regulatory guidance also directs financial institutions to notify consumers in specified cases of unauthorized access to sensitive consumer information. In addition, most states have enacted laws requiring notice of specified cases of unauthorized access to information. In February 2017, the NYDFS adopted expansive cybersecurity regulations that require regulated entities to establish cybersecurity programs and policies, to designate chief information security officers, to comply with notice and reporting obligations, and to take other actions in connection with the security of their information. On January 1, 2020, a comprehensive privacy law went into effect in the State of California, requiring regulated entities to establish measures to identify, manage, secure, track, produce, and delete personal information.

•

Volcker Rule — Under the Dodd-Frank Act and implementing regulations of the CFTC, the FDIC, the FRB, the Office of the Comptroller of the Currency, and the SEC (collectively, the Volcker Rule), insured depository institutions and their affiliates are prohibited from (1) engaging in “proprietary trading,” and (2) investing in or sponsoring certain types of funds (covered funds) subject to limited exceptions. The final rules contain exemptions for market-making, hedging, underwriting, and trading in U.S. government and agency obligations and also permit the retention of ownership interests in certain types of funds and the offering and sponsoring of funds under certain conditions. In early 2017, the FRB granted us a five-year extension to conform with requirements related to certain covered fund activities. In late 2019, the regulatory agencies amended the Volcker Rule to simplify and streamline compliance requirements for firms that do not have significant trading activity, such as Ally.

---

•

Fair Lending Laws — The Equal Credit Opportunity Act, the Fair Housing Act, and similar fair-lending laws (collectively, Fair Lending Laws) generally prohibit a creditor from discriminating against an applicant or borrower in any aspect of a credit transaction on the basis of specified characteristics known as “prohibited bases,” such as race, gender, and religion. Creditors are also required under the Fair Lending Laws to follow a number of highly prescriptive rules, including rules requiring credit decisions to be made promptly, notices of adverse actions to be given, and, in the case of mortgage lenders of a certain size, anonymized data and information about mortgage applicants and credit decisions to be gathered and made publicly available.

•

Fair Credit Reporting Act — The Fair Credit Reporting Act regulates the dissemination of credit reports by credit reporting agencies, requires users of credit reports to provide specified notices to the subjects of those reports, imposes standards on the furnishing of information to credit reporting agencies, obligates furnishers to maintain reasonable procedures to deal with the risk of identity theft, addresses the sharing of specified kinds of information with affiliates and third parties, and regulates the use of credit reports to make preapproved offers of credit and insurance to consumers.

•

Truth in Lending Act — The Truth in Lending Act (TILA) and Regulation Z, which implements TILA, require lenders to provide borrowers with uniform, understandable information about the terms and conditions in certain credit transactions. These rules apply to Ally and its subsidiaries when they extend credit to consumers and require, in the case of certain loans, conspicuous disclosure of the finance charge and annual percentage rate, as applicable. In addition, if an advertisement for credit states specific credit terms, Regulation Z requires that the advertisement state only those terms that actually are or will be arranged or offered by the creditor together with specified notices. The CFPB in recent years has issued substantial amendments to the mortgage requirements under Regulation Z, and additional changes are likely in the future. Amendments to Regulation Z and Regulation X, which implements the Real Estate Settlement Procedures Act, require integrated mortgage loan disclosures to be provided for applications received on or after October 3, 2015.

•

Sarbanes-Oxley Act — The Sarbanes-Oxley Act of 2002 implemented a broad range of corporate-governance and accounting measures designed to improve the accuracy, reliability, and transparency of corporate financial reporting and disclosures and to reinforce the importance of corporate ethical standards. Among other things, this law provided for (1) the creation of an independent accounting oversight board; (2) auditor independence provisions that restrict non-audit services that accountants may provide to their audit clients; (3) additional corporate governance and responsibility measures including the requirement that the principal executive and financial officers certify financial statements; (4) the potential forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer’s securities by directors and senior officers in the 12 month period following initial publication of any financial statements that later require restatement; (5) an increase in the oversight and enhancement of certain requirements relating to audit committees and how they interact with the independent auditors; (6) requirements that audit committee members must be independent and are barred from accepting consulting, advisory, or other compensatory fees from the issuer; (7) requirements that companies disclose whether at least one member of the audit committee is a “financial expert” (as defined by the SEC) and, if not, why the audit committee does not have a financial expert; (8) a prohibition on personal loans to directors and officers, except certain loans made by insured financial institutions, on nonpreferential terms and in compliance with other bank regulatory requirements; (9) disclosure of a code of ethics; (10) requirements that management assess the effectiveness of internal control over financial reporting and that the independent registered public accounting firm attest to the assessment; and (11) a range of enhanced penalties for fraud and other violations.

•

USA PATRIOT Act/Anti-Money-Laundering Requirements — In 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) was signed into law. Title III of the USA PATRIOT Act amends the Bank Secrecy Act and contains provisions designed to detect and prevent the use of the U.S. financial system for money laundering and terrorist financing activities. The Bank Secrecy Act, as amended by the USA PATRIOT Act, requires banks, certain other financial institutions, and, in certain cases, BHCs to undertake activities including maintaining an anti-money-laundering program, verifying the identity of clients, monitoring for and reporting on suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to certain requests for information by regulatory authorities and law enforcement agencies.

•

Community Reinvestment Act — Under the CRA, a bank has a continuing and affirmative obligation, consistent with the safe and sound operation of the institution, to help meet the credit needs of its entire community, including low- and moderate-income persons and neighborhoods. While the CRA does not establish specific lending requirements or programs, banks are rated on their performance in meeting the needs of their communities. In its most recent performance evaluation in 2017, Ally Bank received an “Outstanding” rating. In January 2020, Ally Bank began operating under a new three-year CRA strategic plan approved by the FRB. Failure by Ally Bank to maintain a “Satisfactory” or better rating under the CRA may adversely affect our ability to expand our financial and related activities as an FHC or make acquisitions. Refer to Bank Holding Company, Financial Holding Company, and Depository Institution Status earlier in this section.

---

---

---

---

---

---

•	increase the cost or decrease the availability of deposits or other variable-rate funding instruments;

•	reduce the return on or demand for loans or increase the prepayment speed of loans;

•	increase customer or counterparty delinquencies or defaults;

•	negatively impact our ability to remarket off-lease and repossessed vehicles; and

•	reduce the value of our loans, retained interests in securitizations, and fixed-income securities in our investment portfolio and the efficacy of our hedging strategies.

---

---

---

---

---

---

---

•	limiting the liability of our directors and providing indemnification to our directors and officers; and

•	limiting the ability of our stockholders to call and bring business before special meetings of stockholders by requiring any requesting stockholders to hold at least 25% of our common stock in the aggregate.

---

---

---

(a)	Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(b)	Excludes brokerage commissions.

(c)	On April 1, 2019, we announced a common stock-repurchase program of up to $1.25 billion. The program commenced in the third quarter of 2019 and will expire on June 30, 2020. Refer to Note 20 to the Consolidated Financial Statements for further details.

---

(a)	As a result of the Tax Cuts and Jobs Act of 2017 (the Tax Act), an additional $119 million of tax expense was incurred during 2017. Additionally, during the second quarter of 2019, we realized an income tax benefit of approximately $200 million from the release of valuation allowance on foreign tax credit carry forwards.

(b)

Includes shares related to share-based compensation that vested but were not yet issued. Earnings per common share is reflected net of preferred stock dividends, which included $2.4 billion for the year ended December 31, 2015, recognized in connection with the partial redemption of the Series G Preferred Stock and the repurchase of the Series A Preferred Stock. These dividends represent an additional return to preferred stockholders calculated as the excess consideration paid over the carrying amount derecognized.

(c)	Due to antidilutive effect of the net loss from continuing operations attributable to common stockholders for the year ended December 31, 2015, basic weighted-average common shares outstanding was used to calculate basic and diluted earnings per share.

---

(a)	The ratios were based on average assets and average equity using a combination of monthly and daily average methodologies.

(b)	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 net financing revenue and other interest income as a percentage of total interest-earning assets.

---

(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)	Contains deferred tax assets required to be deducted from capital under U.S. Basel III.

(c)	Risk-weighted assets are defined by regulation and are generally determined by allocating assets and specified off-balance-sheet exposures to various risk categories.

---

•	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 governmental agencies, central banks, or supranational authorities;

•	changes in accounting standards or policies, including Accounting Standards Update (ASU) 2016-13, Financial Instruments — Credit Losses (CECL);

•	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 the London Interbank Offered Rate (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 finance, corporate finance, personal lending, brokerage, and wealth management;

•	our ability to develop capital plans that will receive non-objection from the Board of Governors of the Federal Reserve System (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;

---

•	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;

•	our ability to maintain appropriate environmental, social, and governance practices and disclosures; or

•	other assumptions, risks, or uncertainties described in the Risk Factors (Item 1A), Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7), or the Notes to the Consolidated Financial Statements (Item 8) in this Annual Report on Form 10-K or described in any of the Company’s annual, quarterly or current reports.

---

---

---

---

---

---

---

---

---

---

---

(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 Consolidated Financial Statements.

(c)	Includes the effects of derivative financial instruments designated as hedges.

(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 $69 million, $90 million, and $124 million for the years ended December 31, 2019, 2018, and 2017, respectively. Excluding these gains on sale, the yield would be 4.93%, 4.35%, and 5.10% for the years ended December 31, 2019, 2018, and 2017, respectively.

---

---

---

(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. We originated an insignificant amount of retail loans classified below Tier C during the years ended December 31, 2018, and 2017.

---

(a)	Excludes recreational vehicle (RV) loans. RV lending was discontinued in 2018.

(a)	Includes CSG originations of $4.0 billion, $3.7 billion, and $3.8 billion for the years ended December 31, 2019, 2018, and 2017, respectively, and RV originations of $238 million and $459 million for the years ended December 31, 2018, and 2017, respectively.

---

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

---

•	Sale to dealer — After the lessee declines an option to purchase the off-lease vehicle, the dealer who accepts it has the opportunity to purchase it directly from us at a price we define.

•	Internet auctions — Once the lessee and the dealer decline to purchase the off-lease vehicle, we offer it to dealers and other third parties through our proprietary internet site (SmartAuction). Through SmartAuction, we seek to maximize the net sales proceeds from an off-lease vehicle by reducing the time between vehicle return and ultimate disposition, reducing holding costs, and

---

•	Physical auctions — We dispose of an off-lease vehicle not purchased at termination by the lessee or dealer or sold on SmartAuction through traditional third-party, physical auctions. We are responsible for handling decisions at the auction including arranging for inspections, authorizing repairs and reconditioning, and determining whether bids received at auction should be accepted.

---

---

(a)	Includes interest expense of $79 million, $67 million, and $50 million for the years ended December 31, 2019, 2018, and 2017, respectively.

(b)	Includes net unrealized gains of $88 million for the year ended December 31, 2019, compared to net unrealized losses of $112 million for the year ended December 31, 2018. These net unrealized gains and losses are included in net income as a result of the adoption of ASU 2016-01 on January 1, 2018.

(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.

---

(a)	Other products include VMCs, ClearGuard, and other ancillary products.

(b)	P&C insurance include vehicle inventory insurance and dealer ancillary products.

---

---

(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.

---

---

(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.

---

(a)	Primarily related to financing revenue from our legacy mortgage portfolio, impacts associated with hedging activities within our consumer automotive loan portfolio, and consumer unsecured lending activity.

(b)	Amortization is included as interest on long-term debt in the Consolidated Statement of Income.

(c)	Includes the residual impacts of our FTP methodology and impacts of hedging activities of certain debt obligations.

(d)	Includes reductions of $899 million, $854 million, and $804 million for the years ended December 31, 2019, 2018, and 2017, respectively, 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.

(a)	The maximum annual scheduled amortization for any individual year is $145 million in 2030.

(b)	The amortization is included as interest on long-term debt in the Consolidated Statement of Income.

---

---

(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.

---

•	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.

•	Credit risk — The risk of loss arising from an obligor not meeting its contractual obligations to us.

•	Insurance/underwriting risk — The risk of loss or of adverse change in the value of insurance liabilities, due to inadequate pricing and provisioning assumptions.

•

Liquidity risk — The risk that our 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. Refer to discussion in the section titled Liquidity Management, Funding, and Regulatory Capital within this MD&A.

•	Market risk — The risk that movements in market variables such as benchmark interest rates, investors’ required risk premium, foreign-exchange rates, equity prices, and used car prices may adversely affect our earnings, capital, or economic value. Market risk includes interest rate risk, investment risk, and lease residual risk.

•	Business/strategic risk — The risk resulting from the pursuit of business plans that turn out to be unsuccessful due to a variety of factors.

•	Reputation risk — The risk arising from negative public opinion on our business practices, whether true or not, that could cause a decline in the customer base, litigation, or revenue reductions.

•	Operational risk — The risk of loss or harm arising from inadequate or failed processes or systems, human factors, or external events.

•	Information technology/security risk — The risk resulting from the failure of, or insufficiency in, information technology (for example, a system outage) or intentional or accidental unauthorized access, sharing, removal, tampering, or disposal of company and customer data or records.

•	Compliance risk — The risk of legal or regulatory sanctions, financial loss, or damage to reputation resulting from failure to comply with laws, regulations, rules, other regulatory requirements, or codes of conduct and other standards of self-regulatory organizations applicable to the banking organization (applicable rules and standards).

•	Conduct risk — The risk of customer harm, employee harm, reputational damage, regulatory sanction, or financial loss resulting from the behavior of our employees and contractors toward customers, counterparties, other employees and contractors, or the markets in which we operate.

---

(a)	Includes $1.1 billion and $1.5 billion of consumer mortgage loans in our legacy mortgage portfolio at December 31, 2019, and December 31, 2018, 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.

•

Finance receivables and loans — Loans that we have the intent and ability to hold for the foreseeable future or until maturity, or loans associated with an on-balance-sheet securitization classified as secured borrowing. Finance receivables and loans are reported at their gross carrying value, 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 gross carrying value less the allowance for loan loss as the net carrying value in finance receivables and loans. We manage the economic risks of these exposures, including credit risk, by adjusting underwriting standards and risk limits, augmenting our servicing and collection activities (including loan modifications and restructurings), and optimizing

---

•

Loans held-for-sale — Loans that we do not have the intent and ability to hold for the foreseeable future or until maturity. These loans are recorded on our balance sheet at the lower of their net carrying value or fair market value and are evaluated by portfolio and product type. Changes in the recorded value are recognized in a valuation allowance and reflected in current period earnings. We manage the economic risks of these exposures, including market and credit risks, in various ways including the use of market-based instruments, such as derivatives.

•	Off-balance-sheet securitized loans — Loans that we transfer off-balance sheet to nonconsolidated variable interest entities. Our exposure is primarily limited to customary representation, warranty, and covenant provisions. Similar to finance receivables and loans, we manage the economic risks of these exposures through activities including servicing and collections.

•	Whole-loan sales — Loans that we transfer off-balance sheet to third-party investors. Our exposure is primarily limited to customary representation, warranty and covenant provisions. Similar to finance receivables and loans, we manage the economic risks of these exposures through activities including servicing and collections.

•

Operating lease assets — The net book value of the automotive assets we lease includes the expected residual values upon remarketing the vehicles at the end of the lease and is reported net of accumulated depreciation. We are exposed to fluctuations in the expected residual value upon remarketing the vehicle at the end of the lease, and as such at contract inception, we determine pricing based on the projected residual value of the leased vehicle. This evaluation is primarily based on a proprietary model, which includes variables such as age, expected mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle, automotive manufacturer incentives, and shifts in used vehicle supply. This internally generated data is compared against third-party, independent data for reasonableness. Periodically, we revise the projected value of the leased vehicle at termination based on current market conditions and adjust depreciation expense appropriately over the remaining life of the contract. 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 recorded through depreciation expense. The balance sheet reflects both the operating lease asset as well as any associated rent receivables. The operating lease rent receivable is accrued when collection is reasonably assured and presented as a component of other assets. The operating lease asset is reviewed for impairment in accordance with applicable accounting standards.

---

---

(a)	Includes nonaccrual TDR loans of $252 million and $257 million at December 31, 2019, and December 31, 2018, 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 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 21 to the Consolidated Financial Statements for additional information.

(d)	Includes outstanding CSG loans of $8.2 billion and $7.9 billion at December 31, 2019, and December 31, 2018, respectively, and RV loans of $1.3 billion and $1.7 billion at December 31, 2019, and December 31, 2018, respectively.

(e)	Excludes $11 million of finance receivables at December 31, 2019, for which we have elected the fair value option.

---

(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.

(a)	Excludes bulk loan purchases associated with our Mortgage Finance operations, and includes $738 million and $302 million of loans originated as held-for-sale for the years ended December 31, 2019, and 2018, respectively.

(b)	Amounts relate to originations from our Ally Lending business, following the acquisition of Health Credit Services during the fourth quarter of 2019.

---

(a)	Presentation is in descending order as a percentage of total consumer finance receivables and loans at December 31, 2019.

---

(a)	Includes nonaccrual TDR loans of $114 million and $86 million at December 31, 2019, and December 31, 2018, 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 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.

(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.

---

(a)	Includes loans with revolving terms (for example, wholesale floorplan loans).

(b)	Loan maturities are based on the remaining maturities under contractual terms.

---

(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 for more information regarding our charge-off policies.

(b)	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.

(c)	Ratios for the consumer other portfolio segment are presented on an annualized basis, as a result of our acquisition of Health Credit Services on October 1, 2019. Refer to Note 2 to our Consolidated Financial Statements for more information.

(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 for more information regarding our charge-off policies.

(b)	Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

(c)	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.

---

---

•	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;

•	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.

---

---

(a)	Refer to the section below titled Net Financing Revenue Sensitivity Analysis for information on the interest rate sensitivity of our financial instruments.

(a)	Gradual changes in interest rates are recognized over 12 months.

---

•

Priced residual value projections — At contract inception, we determine pricing based on the projected residual value of the leased vehicle. This evaluation uses a proprietary model, which includes variables such as age, expected mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle, automotive manufacturer incentives, and unanticipated shifts in used vehicle supply, as well as expert judgment. This internally generated data is compared against third-party, independent data for reasonableness. Periodically, we revise the projected value of the leased vehicle at termination based on current market conditions and adjust depreciation expense over the remaining life of the contract as necessary. 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 recorded through depreciation expense.

•

Remarketing abilities — Our ability to efficiently process and effectively market off-lease vehicles affects the disposal costs and the proceeds realized from vehicle sales. Vehicles can be remarketed through auction (internet and physical), sale to dealer, sale to lessee, and other methods. The results within these channels vary, with physical auction typically resulting in the lowest-priced outcome.

•	Manufacturer vehicle and marketing programs — Automotive manufacturers influence operating lease residual results in the following ways:

◦	The brand image of automotive manufacturers and consumer demand for their products affects residual risk.

◦	Automotive manufacturer marketing programs may influence the used vehicle market for those vehicles through programs such as incentives on new vehicles, programs designed to encourage lessees to terminate their operating leases early in conjunction with the acquisition of a new vehicle (referred to as pull-ahead programs), and special rate used vehicle programs.

•	Used vehicle market — We have exposure to changes in used vehicle prices. General economic conditions, used vehicle supply and demand, and new vehicle market prices heavily influence used vehicle prices.

---

•	Business disruption risk — The risk of significant disruption to our operations resulting from natural disasters, external technology outages, or other external events.

---

•	Fraud risk — The risk from deliberate misrepresentation or concealment of information material to a transaction with the intent to deceive another and that is reasonably relied on or used in decision making. Fraud can occur internally (for example, employees) or externally (for example, criminal activity, third-party suppliers).

•	Human capital risk — The risk caused by high turnover, inadequate or improper staffing levels, departure/unavailability of key personnel, or inadequate training and includes our exposure to worker’s compensation and employment litigation.

•	Legal risk — The risk arising from the potential that unenforceable contracts, lawsuits, or adverse judgments can disrupt or otherwise negatively affect our operations or condition.

•	Model risk — The potential for adverse consequences from decisions based on incorrect or misused model assumptions, inputs, outputs, and reports. This risk may include fundamental errors within the model that produce inaccurate outputs or that the model is used incorrectly or inappropriately.

•	Process execution and management risk — The risk caused by failure to execute or adhere to policies, standards, procedures, processes, controls, and activities as designed and documented.

•	Supplier (third party) risk — The risk associated with third-party suppliers and their delivery of products or services and effect on overall business performance. This includes a supplier’s failure to comply with information technology requirements, information and physical security, laws, rules, regulations, and legal agreements.

---

---

---

(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.

•	During the year ended December 31, 2019, we raised $3.6 billion through securitizations backed by consumer automotive loans.

•	In May 2019, we accessed the unsecured debt capital markets and raised $750 million through the issuance of senior notes.

•	Our total capacity in committed secured credit facilities was reduced by $6.1 billion during the year ended December 31, 2019, as we continue to shift our overall funding toward a greater mix of cost-effective deposit funding.

(a)	Includes $271 million and $347 million of retail term notes at December 31, 2019, and December 31, 2018, respectively.

(b)	Includes hedge basis adjustment as described in Note 21 to the Consolidated Financial Statements.

---

(a)	Brokered deposit balances include a deposit related to Ally Invest customer cash balances deposited at Ally Bank by a third party of $1.3 billion as of December 31, 2019, $1.1 billion as September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, and $1.2 billion as of September 30, 2018, June 30, 2018, and March 31, 2018.

(b)	Other deposits include mortgage escrow and other deposits.

---

---

(a)	Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(b)	On January 13, 2020, our Board declared a quarterly cash dividend of $0.19 per share on all common stock, payable on February 14, 2020. Refer to Note 31 to the Consolidated Financial Statements for further information regarding this common stock dividend.

---

(a)	Fitch upgraded our senior unsecured debt rating to BBB- from BB+, upgraded our short-term rating to F3 from B, and changed the outlook to Stable from Positive on August 19, 2019.

(b)

Moody’s upgraded our senior unsecured debt rating to Ba1 from Ba2, affirmed our short-term rating of Not Prime, and maintained a Stable outlook on December 19, 2019. 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 upgraded our senior unsecured debt rating to BBB- from BB+, upgraded our short-term rating to A-3 from B, and changed the outlook to Stable from Positive on October 16, 2019.

(d)	DBRS affirmed our senior unsecured debt rating of BBB (Low), affirmed our short-term rating of R-3, and changed the outlook to Positive from Stable on May 20, 2019.

---

(a)	Total long-term debt amount reflects the remaining principal obligation and excludes net original issue discount of $1.1 billion, unamortized debt issuance costs of $86 million, and a favorable hedge basis adjustment of $24 million related to fixed-rate debt previously designated as a hedged item.

(b)	Estimated using a forecasted variable interest model, when available, or the applicable variable interest rate as of the most recent reset date prior to December 31, 2019. For additional information on derivative instruments and hedging activities, refer to Note 21 to the Consolidated Financial Statements.

(c)	Excludes a forward-starting lease agreement for a new corporate facility in Charlotte, North Carolina, scheduled to commence in April 2021. The lease agreement will have a total of $290 million in undiscounted future lease payments over the 15-year term of the lease.

(d)	Amounts presented exclude unamortized commissions paid to brokers.

(e)	Deposits exclude estimated interest payments.

(f)	Deposits without a stated maturity are payable on demand and include savings and money market checking, mortgage escrow, dealer, and other deposits; and are classified above as due in less than one year.

---

---

---

---

(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 21 to the 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 Consolidated Financial Statements.

(d)	Yield includes gains on the sale of off-lease vehicles of $69 million, $90 million, and $124 million, for the years ended December 31, 2019, 2018, and 2017, respectively. Excluding these gains on sale, the yield would be 4.93%, 4.35%, and 5.10% for the years ended December 31, 2019, 2018, and 2017, 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 net financing revenue and other interest income as a percentage of total interest-earning assets.

---

(a)	Changes in interest not solely due to volume or yield/rate are allocated in proportion to the absolute dollar amount of change in volume and yield/rate.

---

(a)	Interest revenue that would have been accrued on total consumer finance receivables and loans at original contractual rates was $67 million during the year ended December 31, 2019. Interest income recorded for these loans was $31 million during the year ended December 31, 2019.

(b)	Interest revenue that would have been accrued on total commercial finance receivables and loans at original contractual rates was $18 million during the year ended December 31, 2019. Interest income recorded for these loans was $5 million during the year ended December 31, 2019.

(c)	Repossessed assets exclude repossessed operating leases of $6 million at both December 31, 2019, and 2018, $9 million at December 31, 2017, and $8 million at both December 31, 2016, and 2015.

(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 for more information regarding our charge-off policies.

(b)	Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

---

(a)	Average balances are calculated using a combination of monthly and daily average methodologies.

---

---

---

•	We tested the effectiveness of controls over the Company’s (1) model methodology, (2) model accuracy, (3) selection of relevant risk characteristics and assumptions, (4) interpretation of results, and (5) use of qualitative adjustments.

•	With the assistance of our credit specialists, we evaluated the reasonableness of the (1) model methodology, (2) model accuracy, (3) selection of relevant risk characteristics and assumptions, (4) interpretation of the results, and (5) use of qualitative adjustments.

•	We tested the Company’s model performance evaluation methods and computational accuracy of the model.

---

•	We tested the Company’s loss emergence period analysis.

•	We tested the accuracy and completeness of key risk characteristics input into the model by agreeing to source information.

•	We evaluated the Company’s method for determining qualitative adjustments to the model estimate by testing on a sample basis (and, where applicable, recalculating) the (1) key assumptions, (2) input data, and (3) the reasonableness of any changes in assumptions compared to prior periods made by management.

•	We tested the effectiveness of management’s controls over (1) key assumptions and judgments, (2) the CECL estimation model for consumer automotive loans, (3) selection and application of new accounting policies, and (4) disclosure of the estimated impact of adoption disclosed in Note 1 to the Financial Statements.

•	We evaluated the completeness of the Company’s disclosure related to the adoption of ASU 2016-13.

•	We evaluated the appropriateness of the Company’s accounting policies, methodologies, and elections involved in the adoption of the CECL standard.

•	We tested the CECL estimation model for consumer automotive loans, including the inputs, and the reconciliation of relevant inputs to the general ledger.

•	We involved credit specialists to assist us in evaluating the reasonableness and conceptual soundness of the methodology, as applied in the CECL estimation model for consumer automotive loans, including key assumptions and judgments in estimating expected credit losses.

---

---

---

(a)	Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.

---

---

---

---

(a)	Refer to the section titled Recently Adopted Accounting Standards in Note 1 for additional information.

---

---

(a)	Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 13 for additional details describing the nature of restricted cash balances.

---

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, certificates of deposit (CDs), and individual retirement accounts (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 bank holding company (BHC) under the Bank Holding Company Act of 1956, as amended, and a financial holding company (FHC) under the Gramm-Leach-Bliley Act of 1999, as amended.

Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of the parent and its consolidated subsidiaries, of which it is deemed to possess control, after eliminating intercompany balances and transactions, and include all variable interest entities (VIEs) in which we are the primary beneficiary. Refer to Note 11 for further details on our VIEs. Other entities in which we have invested and have the ability to exercise significant influence over operating and financial policies of the investee, but upon which we do not possess control, are accounted for by the equity method of accounting within the financial statements and they are therefore not consolidated. Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Certain reclassifications may have been made to the prior periods’ financial statements and notes to conform to the current period’s presentation, which did not have a material impact on our Consolidated Financial Statements.

In the past, we have operated our international subsidiaries in a similar manner as we operate in the United States of America (U.S. or United States), subject to local laws or other circumstances that may cause us to modify our procedures accordingly. The financial statements of subsidiaries that operate outside of the United States generally are measured using the local currency as the functional currency. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates. The resulting translation adjustments are recorded in accumulated other comprehensive income until the foreign subsidiaries are sold or substantially liquidated at which point the accumulated translation adjustments are recognized directly in earnings as part of the gain or loss on sale or liquidation. Income and expense items are translated at average exchange rates prevailing during the reporting period. Other than our Canadian Insurance operations, the majority of our international operations have ceased and are included in discontinued operations.

Use of Estimates and Assumptions

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 operating lease assets and residuals, fair value of financial instruments, and the determination of the provision for income taxes.

Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash on deposit at other financial institutions, cash items in process of collection, and certain highly liquid investments with original maturities of three months or less from the date of purchase. The book value of cash equivalents approximates fair value because of the short maturities of these instruments and the insignificant risk they present to changes in value with respect to changes in interest rates. Certain securities with original maturities of three months or less from the date of purchase that are held as a portion of longer-term investment portfolios, primarily held by our Insurance operations, are classified as investment securities. Cash and cash equivalents with legal restrictions limiting our ability to withdraw and use the funds are considered restricted cash and restricted cash equivalents and are presented as other assets on our Consolidated Balance Sheet.

Investments

Our investment portfolio includes various debt and equity securities. Our debt securities include government securities, corporate bonds, asset-backed securities (ABS), and mortgage-backed securities (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 debt securities are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income and are assessed for potential impairment. Our held-to-maturity debt securities are carried at amortized cost and are assessed for potential impairment.

---

We assess our available-for-sale and held-to-maturity debt securities for potential other-than-temporary impairment. We employ a methodology that considers available evidence in evaluating potential other-than-temporary impairment of our debt securities. If the cost of an investment exceeds its fair value, we evaluate, among other factors, the magnitude and duration of the decline in fair value. We also evaluate the financial health of and business outlook for the issuer, the performance of the underlying assets for interests in securitized assets, and, for debt securities classified as available-for-sale, our intent and ability to hold the investment through recovery of its amortized cost basis.

Once a decline in fair value of a debt security is determined to be other-than-temporary, an impairment charge for the credit component is recorded to other gain on investments, net, in our Consolidated Statement of Income, and a new cost basis in the investment is established. The noncredit loss component of a debt security continues to be recorded in other comprehensive income when we do not intend to sell the security and it is not more likely than not that we will have to sell the security prior to the security’s anticipated recovery. Both the credit and noncredit loss components are recorded in earnings when we intend to sell the security or it is more likely than not that we will have to sell the security prior to the security’s anticipated recovery. Subsequent increases and decreases to the fair value of available-for-sale debt securities are included in other comprehensive income, so long as they are not attributable to another other-than-temporary impairment.

Premiums on debt securities that have noncontingent call features that are callable at fixed prices on preset dates are amortized to the earliest call date as an adjustment to investment yield. All other premiums and discounts on debt securities are amortized over the stated maturity of the security as an adjustment to investment yield.

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.

Effective January 1, 2018, 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 Consolidated Statement of Income. These investments, which are primarily attributable to the investment portfolio of our Insurance operations, are included in equity securities on our 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 8 for further information on these equity securities that have a readily determinable market value.

Our equity securities recognized using other measurement principles include investments in Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock held to meet regulatory requirements, equity investments related to low-income housing tax credits and the Community Reinvestment Act (CRA), which do not have a readily determinable fair value, and other equity investments that do not have a readily determinable fair value. Our low-income housing tax credit investments are accounted for using the proportional amortization method of accounting for qualified affordable housing investments. Our obligations related to unfunded commitments for our low-income housing tax credit 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 low-income housing tax credits and other CRA investments are included in investments in qualified affordable housing projects and equity-method investments, respectively, in other assets on our Consolidated Balance Sheet. Our investments in FHLB and FRB stock are carried at cost, less impairment. Our remaining investment 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 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.

Realized gains and losses on the sale of securities are determined using the specific identification method and are reported in other gain on investments, net in our Consolidated Statement of 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 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 to sell mortgage loans are considered derivative instruments, which are carried at fair value on our Consolidate Balance Sheet. We have elected the fair value option to measure our non-derivative forward commitments. Changes in the fair value of our interest rate lock commitments, derivative forward commitments, and non-derivative 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 Consolidated Statement of Income. Interest income on our loans 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 the 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 Consolidated Statement of Income.

Loans classified as held-for-investment are presented as finance receivables and loans, net on our Consolidated Balance Sheet. Finance receivables and loans are reported at their gross carrying value, 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 gross carrying value 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 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 9.

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 low-to-moderate income (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 troubled debt restructurings (TDRs) 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 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.

---

Loans on nonaccrual status are reported as nonperforming loans in Note 9. 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.

Impaired Loans

Loans of all classes are considered impaired when we determine it is probable that we will be unable to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

For all classes of consumer loans, impaired loans include all loans that have been modified in TDRs.

Commercial loans of all classes are considered impaired on an individual basis and reported as impaired when we determine it is probable that we will be unable to collect all amounts due according to the terms of the loan agreement.

With the exception of certain consumer TDRs that have been returned to accruing status, for all classes of impaired loans, income recognition is consistent with that of nonaccrual loans discussed above. Impaired loans may return to accrual status as discussed in the preceding nonaccrual loan section at which time, the normal accrual of interest income resumes. For collateral dependent loans, if the recorded investment in the impaired loans exceeds the fair value of the collateral, a charge-off is recorded consistent with the TDR discussion below.

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 (loss of job, etc.). 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 and collect 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.

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.

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 gross carrying value of the loan and the present value of the expected future cash flows of the loan. 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. Impaired loans may return to accrual status as discussed in the preceding nonaccrual loan section at which time, the normal accrual of interest income resumes.

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 gross carrying value 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, 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 once foreclosure or repossession proceedings begin and are charged-off to the estimated fair value of the underlying collateral, less costs to sell at that time.

Commercial loans are individually evaluated and 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 management’s estimate of incurred losses in the lending portfolios. We determine the amount of the allowance required for each of our portfolio segments based on its relative risk characteristics. The evaluation of these factors for both consumer and commercial finance receivables and loans involves quantitative analysis combined with sound management judgment. 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.

The allowance is composed of two components: specific reserves established for individual loans evaluated as impaired and portfolio-level reserves established for large groups of typically smaller balance homogeneous loans that are collectively evaluated for impairment. We evaluate the adequacy of the allowance based on the combined total of these two components. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions.

Measurement of impairment for specific reserves is generally determined on a loan-by-loan basis. Loans determined to be specifically impaired are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, an observable market price, or the estimated fair value of the collateral less estimated costs to sell when appropriate, whichever is determined to be the most appropriate. When these measurement values are lower than the net carrying value of that loan, impairment is recognized. Loans that are not identified as individually impaired are pooled with other loans with similar risk characteristics for evaluation of impairment for the portfolio-level allowance.

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 consists of the combination of a quantitative assessment component based on statistical models for consumer automotive, consumer mortgage, and commercial, and a vintage analysis for consumer other, a retrospective evaluation of actual loss information to loss forecasts, and includes a qualitative component based on management judgment. Management takes into consideration relevant qualitative factors, including external and internal trends such as the impacts of changes in underwriting standards, collections and account management effectiveness, geographic concentrations, and economic events, among other factors, that have occurred but are not yet reflected in the quantitative assessment 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 non-derivative loan commitments across our portfolio segments, including lines of credit and standby letters of credit, using similar procedures and methodologies used to determine the allowance for loan losses while also considering historical loss ratios and potential usage levels. The reserve for unfunded loan commitments is recorded within other liabilities on our Consolidated Balance Sheet and the related expense is reported as other noninterest expense in our Consolidated Statement of Income. Refer to Note 28 for information on our unfunded loan commitments.

During 2019, we did not substantively change any material aspect of our overall approach used to determine the allowance for loan losses for our portfolio segments. There were no material changes in criteria or estimation techniques as compared to prior periods that impacted the determination of the current period allowance for loan losses for our portfolio segments. However, during 2019, we acquired

---

Health Credit Services and assumed their lending operations, which created our consumer other portfolio segment. The methodology used for the consumer other portfolio segment is described below.

Refer to Note 9 for information on the allowance for loan losses.

Consumer Loans

Our consumer automotive, consumer mortgage, and consumer other portfolio segments are reviewed for impairment based on an analysis of loans that are grouped into common risk categories. We perform periodic and systematic detailed reviews of our lending portfolios to identify inherent risks and to assess the overall collectability of those portfolios. Loss models are utilized for these portfolios, which consider a variety of credit quality indicators including, but not limited to, historical loss experience, current economic conditions, credit scores, and expected loss factors by loan type.

Consumer Automotive Portfolio Segment

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 loan-to-value (LTV) ratios to arrive at an estimate of incurred losses in the portfolio. These statistical loss forecasting models are utilized to estimate incurred losses and consider a variety of factors including, but not limited to, historical loss experience, estimated defaults based on portfolio trends, and general economic and business trends. These statistical models predict forecasted losses inherent in the portfolio.

The forecasted losses consider historical factors such as frequency (the number of contracts that we expect to default) and loss severity (the loss amount of contracts we expect to default). 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 quantitative assessment component of the allowance may be supplemented with qualitative reserves based on management’s determination that such adjustments provide a better estimate of credit losses. This qualitative assessment takes into consideration relevant internal and external factors that have occurred, but are not yet reflected in the forecasted losses, and may affect the performance of the portfolio.

Consumer Mortgage Portfolio Segment

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, to arrive at an estimate of incurred losses in the portfolio. These statistical loss forecasting models are utilized to estimate incurred losses and consider a variety of factors including, but not limited to, historical loss experience, estimated foreclosures or defaults based on portfolio trends, delinquencies, and general economic and business trends.

The forecasted 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 the loan and borrower characteristics and economic variables and considers historical factors such as frequency and loss 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.

The quantitative assessment component of the allowance may be supplemented with qualitative reserves based on management’s determination that such adjustments provide a better estimate of credit losses. This qualitative assessment takes into consideration relevant internal and external factors that have occurred, but are not yet reflected in the forecasted losses, and may affect the performance of the portfolio.

Consumer Other Portfolio Segment

The allowance for loan losses within the consumer other portfolio segment is calculated by using a vintage analysis that analyzes charge-offs in pools where the loans share the same origination period and similar risk characteristics to arrive at an estimate of incurred losses in the portfolio.

The forecasted losses consider monthly vintage level historical balance paydown rates, delinquency and roll rate behaviors by risk tier and product type. The risk tier segmentation is based upon borrower risk characteristics at the time of origination.

The quantitative assessment component of the allowance may be supplemented by qualitative reserves based on management’s determination that such adjustments provide a better estimate of credit losses. This qualitative assessment takes into consideration relevant internal and external factors that have occurred, but are not yet reflected in the vintage analysis, and may affect the performance of the portfolio.

---

Commercial Loans

The allowance for loan losses within the commercial portfolio is composed of reserves established for specific loans evaluated as impaired and portfolio-level reserves based on nonimpaired loans grouped into pools based on similar risk characteristics and collectively evaluated.

A commercial loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on current information and events. These loans are primarily evaluated individually and are risk-rated based on borrower, collateral, and industry-specific information that management believes is relevant in determining the occurrence of a loss event and measuring impairment. Management establishes specific allowances for commercial loans determined to be individually impaired based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, observable market prices, or the fair value of collateral—whichever is determined to be the most appropriate. Estimated costs to sell or realize the value of the collateral on a discounted basis are included in the impairment measurement, when appropriate.

Loans not identified as impaired are grouped into pools based on similar risk characteristics and collectively evaluated. Our risk rating models use historical loss experience, concentrations, current economic conditions, and performance trends. The commercial historical loss experience is updated quarterly to incorporate the most recent data reflective of the current economic environment. The determination of the allowance is influenced by numerous assumptions and many factors that may materially affect estimates of loss, including volatility of loss given default, probability of default, and rating migration. In assessing the risk rating of a particular loan, several factors are considered including an evaluation of historical and current information involving subjective assessments and interpretations. In addition, the allowance related to the commercial portfolio segment could be influenced by situations in which automotive manufacturers may repurchase vehicles used as collateral to secure the loans in default situations.

The quantitative assessment component of the allowance may be supplemented with qualitative reserves based on management’s determination that such adjustments provide a better estimate of credit losses. This qualitative assessment takes into consideration relevant internal and external factors that have occurred, but are not yet reflected in the forecasted losses, and may affect the performance of the portfolio.

Variable Interest Entities and Securitizations

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 equity investment at risk lack the ability to direct 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.

For all VIEs in which we are involved, we assess whether we are the primary beneficiary of the VIE on an ongoing basis. In circumstances where we have both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, we would conclude that we are the primary beneficiary of the VIE, and would consolidate the VIE (also referred to as on-balance sheet). In situations where we are not deemed to be the primary beneficiary of the VIE, we do not consolidate the VIE and only recognize our interests in the VIE (also referred to as off-balance sheet).

We are involved in securitizations that typically involve the use of VIEs. For information regarding the company’s securitization activities, refer to Note 11.

In the case of a consolidated on-balance-sheet VIE used for a securitization, the underlying assets remain on our Consolidated Balance Sheet with the corresponding obligations to third party beneficial interest holders reflected as debt. We recognize income on the assets, interest expense on the debt issued by the VIE, and losses on the assets as incurred. Consolidation of the VIE precludes us from recording an accounting sale on the transaction.

In securitizations where we are not determined to be the primary beneficiary of the VIE, we must determine whether we achieve a sale for accounting purposes. To achieve a sale for accounting purposes, the financial assets being transferred must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond our control. We would deem the transaction to be an off-balance-sheet securitization if the preceding three criteria for sale accounting are met. If we were to fail any of these three criteria for sale accounting, the transfer would be accounted for as a secured borrowing consistent with the preceding paragraph regarding on-balance sheet VIEs.

The gain or loss recognized on off-balance-sheet securitizations take into consideration any assets received or liabilities assumed, including any retained interests, and servicing assets or liabilities (if applicable), which are initially recorded at fair value at the date of sale. Upon the sale of the financial assets, we recognize a gain or loss on sale for the difference between the assets and liabilities recognized, and the assets derecognized. The financial assets obtained from off-balance-sheet securitizations are primarily reported as cash or if applicable, retained interests. Retained interests are classified as securities or as other assets depending on their form and structure. The estimate of the fair value of the retained interests and servicing requires us to exercise significant judgment about the timing and amount of future cash flows from the interests. For a discussion on fair value estimates, refer to Note 24.

Gains or losses on off-balance-sheet securitizations are reported in gain on mortgage and automotive loans, net, in our Consolidated Statement of Income.

---

We retain the right to service our consumer and commercial automotive loan and operating lease securitizations. We may receive servicing fees for off-balance-sheet securitizations based on the securitized asset balances and certain ancillary fees, all of which are reported in servicing fees in the Consolidated Statement of Income. Typically, the fee we are paid for servicing represents adequate compensation, and consequently, does not result in the recognition of a servicing asset or liability.

Repossessed and Foreclosed Assets

Assets securing our finance receivables and loans are classified as repossessed and foreclosed and included in other assets when physical possession of the collateral is taken, which includes the transfer of title through foreclosure or other similar proceedings. Repossessed and foreclosed assets are initially recognized at the lower of the outstanding balance of the loan at the time of repossession or foreclosure or the fair value of the asset less estimated costs to sell. Losses on the initial revaluation of repossessed and foreclosed assets (and generally, declines in value shortly after repossession or foreclosure) are recognized as a charge-off of the allowance for loan losses. Subsequent declines in value are charged to other operating expenses.

Lease Accounting

On January 1, 2019, we adopted Accounting Standards Update (ASU) 2016-02, Leases, using the modified retrospective approach, as further described in the section below titled Recently Adopted Accounting Standards. At contract inception, we determine whether the contract is or contains a lease based on the terms and conditions of the contract. Refer to Investments in Operating Leases below for leases in which we are the lessor. Lease contracts for which we are the lessee are recognized on our Consolidated Balance Sheet as right-of-use (ROU) assets and lease liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of the future lease payments over the expected lease term. We utilize our incremental borrowing rate, which is the rate we would incur to borrow on a collateralized basis over a similar term on an amount equal to the lease payments in a similar economic environment since the interest rate implicit in the lease contract is typically not readily determinable. The ROU asset also includes initial direct costs paid less lease incentives received from the lessor. Our lease contracts are generally classified as operating and, as a result, we recognize a single lease cost within other operating expenses on the income statement on a straight-line basis over the lease term.

Our leases primarily consist of property-leases and fleet vehicle leases. Our property-lease agreements generally contain a lease component, which includes the right to use the real estate, and non-lease components, which generally include utilities and common area maintenance services. We elected the practical expedient to account for the lease and non-lease components in our property leases as a single lease component for recognition and measurement of our ROU assets and lease liabilities. Our property leases include variable-rent payments made during the lease term which are not based on a rate or index and are excluded from the measurement of the ROU assets and lease liabilities are recognized as a component of variable lease expense as incurred. We have elected not to recognize ROU assets and lease liabilities on property-leases with terms of one year or less. Our fleet vehicle leases also include a lease component, which includes the right to use the vehicle, and non-lease components, which include maintenance, fuel, and administrative services. However, we’ve elected to account for the lease and non-lease components in our fleet vehicle leases separately. As such, the non-lease components are excluded from the measurement of the ROU asset and lease liability and are recognized as other operating expenses as incurred.

Investment in Operating Leases

Investment in operating leases, net, represents the vehicles that are underlying our automotive operating lease contracts and is reported at cost, less accumulated depreciation and net of impairment charges and origination fees or costs. Depreciation of vehicles is recorded on a straight-line basis to an estimated residual value over the lease term. Manufacturer support payments that we receive upfront are treated as a reduction to the cost-basis in the underlying operating lease asset, which has the effect of reducing depreciation expense over the life of the contract. We periodically evaluate our depreciation rate for leased vehicles based on expected residual values and adjust depreciation expense over the remaining life of the lease if deemed necessary. Income from operating lease assets that includes lease origination fees, net of lease origination costs, is recognized as operating lease revenue on a straight-line basis over the scheduled lease term. We have elected to exclude sales taxes collected from the lessee from our consideration in the lease contract and from variable lease payments not included in contract consideration.

We have significant investments in the residual values of the assets in our operating lease portfolio. The residual values represent an estimate of the values of the assets at the end of the lease contracts. At contract inception, we determine pricing based on the projected residual value of the leased vehicle. This evaluation is primarily based on a proprietary model, which includes variables such as age, expected mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle, automotive manufacturer incentives, and shifts in used vehicle supply. This internally generated data is compared against third-party, independent data for reasonableness. Realization of the residual values is dependent on our future ability to market the vehicles under the prevailing market conditions. Over the life of the lease, we evaluate the adequacy of our estimate of the residual value and make adjustments to the depreciation rates to the extent the expected value of the vehicle at lease termination changes. In addition to estimating the residual value at lease termination, we also evaluate the current value of the operating lease asset and test for impairment to the extent necessary when there is an indication of impairment based on market considerations and portfolio characteristics. Impairment is determined to exist if fair value of the leased asset is less than carrying value and it is determined that the net carrying value is not recoverable. The net carrying value of a leased asset is not recoverable if it exceeds the sum of the undiscounted expected future cash flows expected to result from the operating lease payments and the estimated residual value upon eventual disposition. If our operating lease assets are considered to be impaired, the impairment is measured as the amount by which the carrying amount of the assets exceeds the fair value as estimated by discounted cash flows. No impairment was recognized in 2019, 2018, or 2017. We accrue rental income on our operating leases when collection is reasonably assured. We generally discontinue the accrual of revenue on operating leases at the time an account is determined to be uncollectible, which we determine to be the earliest of (i) the time of

---

repossession, (ii) within 60 days of bankruptcy notification, unless it can be clearly demonstrated that repayment is likely to occur, or (iii) greater than 120 days past due.

When a leased vehicle is returned to us, either at the end of the lease term or through repossession, the asset is reclassified from investment in operating leases, net, to other assets and recorded at the lower-of-cost or estimated fair value, less costs to sell, on our Consolidated Balance Sheet. Any losses recognized at this time are recorded as depreciation expense. Subsequent decline in value and any gain or loss recognized at the time of sale is recognized as a remarketing gain or loss and presented as a component of depreciation expense.

Impairment of Long-lived Assets

The net carrying values of long-lived assets (including property and equipment) are evaluated for impairment whenever events or changes in circumstances indicate that their net carrying values may not be recoverable from the estimated undiscounted future cash flows expected to result from their use and eventual disposition. Recoverability of assets to be held and used is measured by a comparison of their net carrying amount to future net undiscounted cash flows expected to be generated by the assets. If these assets are considered to be impaired, the impairment is measured as the amount by which the net carrying amount of the assets exceeds the fair value estimated using a discounted cash flow method. No material impairment was recognized in 2019, 2018, or 2017.

An impairment test on an asset group to be sold or otherwise disposed of is performed upon occurrence of a triggering event or when certain criteria are met (for example, the asset is planned to be disposed of within 12 months, appropriate levels of authority have approved the sale, there is an active program to locate a buyer, etc.), which cause the disposal group to be classified as held-for-sale. Long-lived assets held-for-sale are recorded at the lower of their carrying amount or estimated fair value less cost to sell. If the net carrying value of the assets held-for-sale exceeds the fair value less cost to sell, we recognize an impairment loss based on the excess of the net carrying amount over the fair value of the assets less cost to sell.

Property and Equipment

Property and equipment stated at cost, net of accumulated depreciation and amortization, are reported in other assets on our Consolidated Balance Sheet. Included in property and equipment are certain buildings, furniture and fixtures, leasehold improvements, IT hardware and software, capitalized software costs, and assets under construction. We begin depreciating these assets when they are ready for their intended use. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets, which generally ranges from three to thirty years depending on the asset class. Capitalized software is generally amortized on a straight-line basis over its useful life, which generally ranges from three to five years. Capitalized software that is not expected to provide substantive service potential or for which development costs significantly exceed the amount originally expected is considered impaired and written down to fair value. Software expenditures that are considered general, administrative, or of a maintenance nature are expensed as incurred.

Goodwill and Other Intangibles

Goodwill and intangible assets, net of accumulated amortization, are reported in other assets.

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. Our annual goodwill impairment test is performed as of August 31 of each year. 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 uses a two-step process. The first step of the assessment requires us to compare the fair 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 carrying value is less than the fair value, no impairment exists, and the second step does not need to be completed. If the carrying value is greater than the fair value or there is an indication that impairment may exist, a second step must be performed where we determine the implied value of goodwill based on the individual fair values of the reporting unit’s assets and liabilities, including unrecognized intangibles, to compute the amount of the impairment.

Unearned Insurance Premiums and Service Revenue

Insurance premiums, net of premiums ceded to reinsurers, and service revenue are earned over the terms of the policies. The portion of premiums and service revenue written applicable to the unexpired terms of the policies is recorded as unearned insurance premiums or unearned service revenue. For vehicle service and maintenance contracts, premiums and service revenues are earned on a basis proportionate

---

to the anticipated cost emergence. For additional information related to these contracts, refer to Note 3. For other short duration contracts, premiums and service revenue are earned on a pro rata basis. For further information, refer to Note 4.

Deferred Insurance Policy Acquisition Costs

Certain incremental direct costs incurred to originate a policy are deferred and recorded in other assets. These costs primarily include commissions paid to dealers to originate these policies and vary with the production of business. Deferred policy acquisition costs are amortized over the terms of the related policies and service contracts on the same basis as premiums and service revenue are earned. We group costs incurred for acquiring like contracts and consider anticipated investment income in determining the recoverability of these costs.

Reserves for Insurance Losses and Loss Adjustment Expenses

Reserves for insurance losses and loss adjustment expenses are reported in accrued expenses and other liabilities on our Consolidated Balance Sheet. They are established for the unpaid cost of insured events that have occurred as of a point in time. More specifically, the reserves for insurance losses and loss adjustment expenses represent the accumulation of estimates for both reported losses and those incurred, but not reported, including loss adjustment expenses relating to direct insurance and assumed reinsurance agreements.

We use a combination of methods commonly used in the insurance industry, including the chain ladder development factor, expected loss, Bornhuetter Ferguson (BF), and frequency and severity methods to determine the ultimate losses for an individual business line as well as accident year basis depending on the maturity of the accident period and business-line specifics. These methodologies are based on different assumptions and use various inputs to develop alternative estimates of losses. The chain ladder development factor is used for more mature years while the expected loss, BF, and frequency and severity methods are used for less mature years. Both paid and incurred loss and loss adjustment expenses are reviewed where available and a weighted average of estimates or a single method may be considered in selecting the final estimate for an individual accident period. We did not change our methodology for developing reserves for insurance losses for the year ended December 31, 2019.

Estimates for salvage and subrogation recoverable are recognized at the time losses are incurred and netted against the provision for insurance losses and loss adjustment expenses. Reserves are established for each business at the lowest meaningful level of homogeneous data. Since the reserves are based on estimates, the ultimate liability may vary from such estimates. The estimates are regularly reviewed and adjustments, which can potentially be significant, are included in earnings in the period in which they are deemed necessary.

Legal and Regulatory Reserves

Reserves for legal and regulatory matters are established when those matters present loss contingencies that are both probable and estimable, with a corresponding amount recorded to other operating expense. In cases where we have an accrual for losses, it is our policy to include an estimate for probable and estimable legal expenses related to the case. If, at the time of evaluation, the loss contingency related to a legal or regulatory matter is not both probable and estimable, we do not establish a liability for the contingency. We continue to monitor legal and regulatory matters for further developments that could affect the requirement to establish a liability or that may impact the amount of a previously established liability. There may be exposure to loss in excess of any amounts recognized. For certain other matters where the risk of loss is determined to be reasonably possible, estimable, and material to the financial statements, disclosure regarding details of the matter and an estimated range of loss is required. The estimated range of possible loss does not represent our maximum loss exposure. We also disclose matters that are deemed probable or reasonably possible, material to the financial statements, but for which an estimated range of loss is not possible to determine. While we believe our reserves are adequate, the outcome of legal and regulatory proceedings is extremely difficult to predict, and we may settle claims or be subject to judgments for amounts that differ from our estimates. For information regarding the nature of all material contingencies, refer to Note 29.

Earnings per Common Share

We compute basic earnings per common share by dividing net income from continuing operations attributable to common stockholders after deducting dividends on preferred stock by the weighted-average number of common shares outstanding during the period. We compute diluted earnings per common share by dividing net income from continuing operations after deducting dividends on preferred stock by the weighted-average number of common shares outstanding during the period plus the dilution resulting from incremental shares that would have been outstanding if dilutive potential common shares had been issued (assuming it does not have the effect of antidilution), if applicable.

Derivative Instruments and Hedging Activities

We use derivative instruments primarily for risk management purposes. We do not use derivative instruments for speculative purposes. Certain of our derivative instruments are designated as accounting hedges in qualifying relationships, whereas other derivative instruments have not been designated as accounting hedges. In accordance with applicable accounting standards, all derivative instruments, whether designated as accounting hedges or not, are recorded on the balance sheet as assets or liabilities and measured at fair value. We have elected to report the fair value of derivative assets and liabilities on a gross basis—including the fair value for the right to reclaim cash collateral or the obligation to return cash collateral—arising from instruments executed with the same counterparty under a master netting arrangement where we do not have the intent to offset. For additional information on derivative instruments and hedging activities, refer to Note 21.

At the inception of a qualifying hedge accounting relationship, we designate each qualifying hedge relationship as a hedge of the fair value of a specifically identified asset or liability (fair value hedge); as a hedge of the variability of cash flows to be received or paid, or forecasted to be received or paid, related to a recognized asset or liability (cash flow hedge); or as a hedge of the foreign-currency exposure of a net investment in a foreign operation (net investment hedge). We formally document all relationships between hedging instruments and

---

hedged items, as well as the risk management objectives for undertaking such hedge transactions. Both at hedge inception and on an ongoing basis, we formally assess whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in fair values or cash flows of hedged items.

Changes in the fair value of derivative instruments qualifying as fair value hedges, along with the gain or loss on the hedged asset or liability attributable to the hedged risk, are recorded in current period earnings. For qualifying cash flow hedges, changes in the fair value of the derivative financial instruments are recorded in accumulated other comprehensive income, and recognized in the income statement when the hedged cash flows affect earnings. For a qualifying net investment hedge, the gain or loss is reported in accumulated other comprehensive income as part of the cumulative translation adjustment.

Hedge accounting treatment is no longer applied if a derivative financial instrument is terminated, the hedge designation is removed, or the derivative instrument is assessed to be no longer highly effective. For terminated fair value hedges, any changes to the hedged asset or liability remain as part of the basis of the hedged asset or liability and are recognized into income over the remaining life of the asset or liability. For terminated cash flow hedges, unless it is probable that the forecasted cash flows will not occur within a specified period, any changes in fair value of the derivative financial instrument previously recognized remain in accumulated other comprehensive income, and are reclassified into earnings in the same period that the hedged cash flows affect earnings. Any previously recognized gain or loss for a net investment hedge continues to remain in accumulated other comprehensive income until earnings are impacted by sale or liquidation of the associated foreign operation. In all instances, after hedge accounting is no longer applied, any subsequent changes in fair value of the derivative instrument will be recorded into earnings.

Changes in the fair value of derivative financial instruments held for risk management purposes that are not designated as accounting hedges under GAAP are reported in current period earnings.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes predominantly in the United States. Significant judgments and estimates are required in determining the consolidated income tax expense.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise we consider all available positive and negative evidence including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies.

We use the portfolio method with respect to reclassification of stranded income tax effects in accumulated other comprehensive income.

We recognize the financial statement effects of uncertain income tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Also, we recognize accrued interest and penalties related to liabilities for uncertain income tax positions in interest expense and other operating expenses, respectively. For additional information regarding our provision for income taxes, refer to Note 22.

Share-based Compensation

Our compensation and benefits expenses include the cost of share-based awards issued to employees. For equity classified share-based awards, compensation cost is ratably charged to expense based on the grant date fair value of the awards over the applicable service periods. For liability classified share-based awards, the associated liability is measured quarterly at fair value based on our share price and services rendered at the time of measurement until the awards are paid, with changes in fair value charged to compensation expense in the period in which the change occurs. We have made an accounting policy election to account for forfeitures of share-based awards as they occur. Refer to Note 23 for a discussion of our share-based compensation plans.

Foreign Exchange

Foreign-denominated assets and liabilities resulting from foreign-currency transactions are valued using period-end foreign-exchange rates and the results of operations and cash flows are determined using approximate weighted average exchange rates for the period. Translation adjustments are related to foreign subsidiaries using local currency as their functional currency and are reported as a separate component of accumulated other comprehensive income. Translation gains or losses are reclassified to earnings upon the substantial sale or liquidation of our investments in foreign operations. We may elect to enter into foreign-currency derivatives to mitigate our exposure to changes in foreign-exchange rates. Refer to the Derivative Instruments and Hedging Activities section above for a discussion of our hedging activities of the foreign-currency exposure of a net investment in a foreign operation.

Recently Adopted Accounting Standards

Leases (ASU 2016-02)

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02. The amendments in this update primarily replaced the existing accounting requirements for operating leases for lessees. Lessee accounting requirements for finance leases (previously

---

referred to as capital leases) and lessor accounting requirements for operating leases and sales type and direct financing leases were largely unchanged. The amendments require the lessee of an operating lease to record a balance sheet gross-up upon lease commencement by recognizing a ROU asset and lease liability equal to the present value of the lease payments. The ROU asset and lease liability should be derecognized in a manner that effectively yields a straight-line lease expense over the lease term. In addition to the changes to the lessee operating lease accounting requirements, the amendments also changed the types of costs that can be capitalized related to a lease agreement for both lessees and lessors. The amendments also require additional disclosures for all lease types for both lessees and lessors. The FASB issued additional ASUs to clarify the guidance and provide certain practical expedients and an additional transition option. We adopted ASU 2016-02 and the subsequent ASUs that modified ASU 2016-02 (collectively, the amendments) on January 1, 2019. This includes the early adoption of ASU 2019-01, which was issued in March 2019 to amend certain provisions included in ASU 2016-02.

We adopted this guidance using the modified retrospective approach on January 1, 2019, and have not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous lease accounting guidance. We have elected certain practical expedients permitted within the amendments that allowed us to not reassess (i) current lease classifications, (ii) whether existing contracts meet the definition of a lease under the amendments to the lease guidance, and (iii) whether current initial direct costs meet the new criteria for capitalization, for all existing leases as of the adoption date. We made an accounting policy election to calculate the impact of adoption using the remaining minimum lease payments and remaining lease term for each contract that was identified as a lease, discounted at our incremental borrowing rate as of the adoption date. The adoption of the amendments resulted in a ROU asset of approximately $161 million from operating leases for our various corporate facilities, a $29 million reduction to accrued expenses and other liabilities for accrued rent and unamortized tenant improvement allowances, and a lease liability of approximately $190 million. The adoption did not change our previously reported Consolidated Statements of Comprehensive Income and did not result in a cumulative catch-up adjustment to opening retained earnings.

Receivables—Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities (ASU 2017-08)

In March 2017, the FASB issued ASU 2017-08. The amendments in this update require premiums on purchased callable debt securities to be amortized to the security’s earliest call date. Prior to this ASU, premiums and discounts on purchased callable debt securities were generally required to be amortized to the security’s maturity date. The amendments do not require an accounting change for securities held at a discount. We adopted the amendments on January 1, 2019, on a modified retrospective basis, which resulted in an increase to our accumulated deficit of $10 million, net of income taxes, partially offset by an $8 million decrease to accumulated other comprehensive loss, net of income taxes.

Recently Issued Accounting Standards

Financial Instruments — Credit Losses (ASU 2016-13)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (CECL). The amendments in this update introduce a new accounting model to measure credit losses for financial assets measured at amortized cost. The FASB has also issued additional ASUs to clarify the scope and provide additional guidance for ASU 2016-13. Credit losses for financial assets measured at amortized cost should 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 should be presented at the net amount expected to be collected. Credit losses will no longer be recorded under the current incurred loss model for financial assets measured at amortized cost. The amendments also modify the accounting for available-for-sale debt securities whereby credit losses will be 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 debt securities should be measured in a manner similar to current GAAP.

The amendments are effective on January 1, 2020, and must be applied using a modified retrospective approach with a cumulative-effect adjustment through retained earnings as of the beginning of the fiscal year upon adoption as required. While the standard modifies the measurement of the allowance for credit losses, it does not alter the credit risk of our finance receivables and loan portfolio.

Upon adoption of the amendments on January 1, 2020, we expect to recognize 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 currently utilized, as compared to estimating lifetime credit losses as required by the CECL standard and we do not expect a material impact to the allowance for loan losses from any of our other lending portfolios. Additionally, we do not expect the adoption of CECL to 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 debt securities portfolio. We currently expect to phase in the day-one impact of CECL into regulatory capital as prescribed by regulatory capital rules which permit us to phase in 25% of the capital impact of CECL in 2020 and an additional 25% each subsequent year until fully phased in by the first quarter of 2023.

Our quantitative allowance for credit loss estimates under CECL are impacted by certain forecasted economic factors. In order to estimate the quantitative portion of our allowance for credit 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 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, 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.

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. We applied the acquisition method of accounting to this transaction, which generally requires the initial recognition of assets acquired, including identifiable intangible assets, and liabilities assumed at their respective fair value. Goodwill is recognized as the excess of the acquisition price after the recognition of the net assets, including the identifiable intangible assets. Beginning in October 2019, financial information related to Health Credit Services, which we renamed Ally Lending, is included within Corporate and Other.

The following table summarizes the allocation of cash consideration paid for Health Credit Services and the amounts of the identifiable assets acquired and liabilities assumed recognized at the acquisition date.

($ in millions)
Purchase price
Cash consideration	$	177
Allocation of purchase price to net assets acquired
Finance receivables and loans	75
Intangible assets (a)	23
Cash and short-term investments	6
Other assets	6
Debt	(62		)
Employee compensation and benefits	(5		)
Other liabilities	(19		)
Goodwill	$	153

(a)	The weighted average amortization period on the acquired intangible assets was 3 years. Refer to Note 1 for further information on our intangible assets.

The goodwill of $153 million arising from the acquisition consists largely of expected growth of the business as we leverage the Ally brand and our marketing capabilities to scale the acquired point-of-sale payment provider and expand the suite of financial products we offer to our existing growing customer base. The goodwill recognized is expected to be amortized for income tax purposes over a 15-year period. Refer to Note 13 for the carrying amount of goodwill at the beginning and end of the reporting period.

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 vehicle service contracts (VSCs), guaranteed asset protection (GAP) contracts, and vehicle maintenance contracts (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.

The following is a description of our primary revenue sources that are derived from contracts with customers. Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to our customers, and in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. For information regarding our revenue recognition policies outside the scope of the amendments to the revenue recognition principles of ASC Topic 606, Revenue from Contracts with Customers, refer to Note 1.

•	Noninsurance contracts — We sell VSCs that offer owners mechanical repair protection and roadside assistance for new and used vehicles beyond the manufacturer’s new vehicle limited warranty. We sell GAP contracts that protect the customer against having to pay certain amounts to a lender above the fair market value of their vehicle if the vehicle is damaged and declared a total loss or

---

stolen. We also sell VMCs that provide coverage for certain agreed-upon services, such as oil changes and tire rotations, over the coverage period. We receive payment in full at the inception of each of these contracts. Our performance obligation for these contracts is satisfied over the term of the contract and we recognize revenue over the contract term on a basis proportionate to the anticipated incurrence of costs, as we believe this is the most appropriate method to measure progress towards satisfaction of the performance obligation.

•

Sale of off-lease vehicles — When a customer’s vehicle lease matures, the customer has the option of purchasing or returning the vehicle. If the vehicle is returned to us, we obtain possession with the intent to sell through SmartAuction—our online auction platform, our dealer channel, or through various other physical auctions. Our performance obligation is satisfied and the remarketing gain or loss is recognized when control of the vehicle has passed to the buyer, which coincides with the sale date. 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 recorded through depreciation expense on operating lease assets in our Consolidated Statement of Income.

•

Remarketing fee income — In addition to using SmartAuction as a remarketing channel for our returned lease vehicles, we maintain the internet auction site and administer the auction process for third-party use. We earn a service fee from dealers for every third-party vehicle sold through SmartAuction. Our performance obligation is to provide the online marketplace for used vehicle transactions to be consummated. This obligation is satisfied and revenue is recognized when control of the vehicle has passed to the buyer, which coincides with the sale date. This revenue is recorded as remarketing fees within other income in our Consolidated Statement of Income.

•

Brokerage commissions and other revenues through Ally Invest — We charge fees to customers related to their use of certain services on our Ally Invest digital wealth management and online brokerage platform. These fees include commissions on low-priced securities, option contracts, other security types, account service fees, account management fees on professional portfolio management services, and other ancillary fees. Commissions on customer-directed trades and account service fees are based on published fee schedules and are generated from a customer option to purchase the services offered under the contract. These options do not represent a material right and are only considered a contract when the customer executes their option to purchase these services. Based on this, the term of the contract does not extend beyond services provided, and as such revenue is recognized upon the completion of our performance obligation, which we view as the successful execution of the trade or service. Revenue on professional portfolio management services is calculated monthly based upon a fixed percentage of the client’s assets under management. Due to the fact that this revenue stream is composed of variable consideration that is based on factors outside of our control, we have deemed this revenue as constrained and we are unable to estimate the initial transaction price at the inception of the contract. We have elected to use the practical expedient under GAAP to recognize revenue monthly based on the amount we are able to invoice the customer. We also earn revenue from a fee-sharing agreement with our clearing broker related to the interest income the clearing broker earns on customer cash balances and margin loans made to our customers. We concluded the initial transaction price is exclusively variable consideration and, based on the nature of our performance obligation to allow the clearing broker to collect interest income from cash deposits and customer loans from our customers, we are unable to determine the amount of revenue to be recognized until the total customer cash balance or the total interest income recognized on margin loans has been determined, which occurs monthly. These revenue streams are recorded as other income in our Consolidated Statement of Income.

•

Brokered/agent commissions through Insurance operations — We have agreements with third parties to offer various vehicle protection products to consumers. We also have agreements with third-party insurers to offer various insurance coverages to dealers. Our performance obligation for these arrangements is satisfied when a customer or dealer has purchased a vehicle protection product or an insurance policy through the third-party provider. In determining the initial transaction price for these agreements, we noted that revenue on brokered/agent commissions is based on the volume of vehicle protection product contracts sold or a percentage of insurance premium written, which is not known to us at the inception of the agreements with these third-party providers. As such, we believe the initial transaction price is exclusively variable consideration and, based on the nature of the performance obligation, we are unable to determine the amount of revenue we will record until the customer purchases a vehicle protection product or a dealer purchases an insurance policy from the third-party provider. Once we are notified of vehicle protection product sales or insurance policies issued by the third-party providers, we record the commission earned as insurance premiums and service revenues earned in our Consolidated Statement of Income.

•

Deposit account and other banking fees — We charge depositors various account service fees including those for outgoing wires, excessive transactions, overdrafts, stop payments, and returned deposits. These fees are generated from a customer option to purchase services offered under the contract. These options do not represent a material right and are only considered a contract in accordance with the amendments to the revenue recognition principles when the customer exercises their option to purchase these account services. Based on this, the term for our contracts with customers is considered day-to-day, and the contract does not extend beyond the services already provided. Revenue derived from deposit account fees is recorded at the point in time we perform the requested service, and is recorded as other income in our Consolidated Statement of Income. As a debit card issuer, we also generate interchange fee income from merchants during debit card transactions and incur certain corresponding charges from merchant card networks. Our performance obligation is satisfied when we have initiated the payment of funds from a customer’s account to a merchant through our contractual agreements with the merchant card networks. Interchange fees are reported on a net basis as other income in our Consolidated Statement of Income.

---

•	Other revenue — Other revenue primarily includes service revenue related to various account management functions and fee income derived from third-party loans arranged through Clearlane—our online automotive lender exchange. These revenue streams are recorded as other income in our Consolidated Statement of Income.

The following table presents 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.

Year ended December 31, ($ in millions)		Automotive Finance operations				Insurance operations				Mortgage Finance operations				Corporate Finance operations				Corporate and Other				Consolidated
2019
Revenue from contracts with customers
Noninsurance contracts (a) (b) (c)		$	—			$	542			$	—			$	—			$	—			$	542
Remarketing fee income		74				—				—				—				—				74
Brokerage commissions and other revenue		—				—				—				—				61				61
Deposit account and other banking fees		—				—				—				—				16				16
Brokered/agent commissions		—				14				—				—				—				14
Other		19				1				—				—				—				20
Total revenue from contracts with customers		93				557				—				—				77				727
All other revenue		156				717				22				45				94				1,034
Total other revenue (d)		$	249			$	1,274			$	22			$	45			$	171			$	1,761
2018
Revenue from contracts with customers
Noninsurance contracts (a) (b) (c)		$	—			$	506			$	—			$	—			$	—			$	506
Remarketing fee income		79				—				—				—				—				79
Brokerage commissions and other revenue		—				—				—				—				62				62
Deposit account and other banking fees		—				—				—				—				13				13
Brokered/agent commissions		—				15				—				—				—				15
Other		13				1				—				—				—				14
Total revenue from contracts with customers		92				522				—				—				75				689
All other revenue		177				459				7				38				44				725
Total other revenue (d)		$	269			$	981			$	7			$	38			$	119			$	1,414

(a)	We had opening balances of $2.6 billion and $2.5 billion in unearned revenue associated with outstanding contracts at January 1, 2019, and January 1, 2018, respectively, and $816 million and $786 million of these balances were recognized as insurance premiums and service revenue earned in our Consolidated Statement of Income during the year ended December 31, 2019, and December 31, 2018.

(b)	At December 31, 2019, we had unearned revenue of $2.9 billion associated with outstanding contracts, and with respect to this balance we expect to recognize revenue of $768 million in 2020, $682 million in 2021, $569 million in 2022, $433 million in 2023, and $417 million thereafter. At December 31, 2018, we had unearned revenue of $2.6 billion associated with outstanding contracts.

(c)

We had deferred insurance assets of $1.5 billion and $1.7 billion at January 1, 2019, and December 31, 2019, respectively, and recognized $463 million of expense during the year ended December 31, 2019. We had deferred insurance assets of $1.4 billion and $1.5 billion at January 1, 2018, and December 31, 2018, respectively, and recognized $427 million of expense during the year ended December 31, 2018.

(d)	Represents a component of total net revenue. Refer to Note 26 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 $69 million for the year ended December 31, 2019, and $90 million for the year ended December 31, 2018, on the sale of off-lease vehicles. These gains are included in depreciation expense on operating lease assets in our Consolidated Statement of Income.

---

The following table is a summary of insurance premiums and service revenue written and earned.

	2019								2018								2017
Year ended December 31, ($ in millions)	Written				Earned				Written				Earned				Written				Earned
Insurance premiums
Direct	$	491			$	464			$	420			$	414			$	384			$	364
Assumed	—				2				—				4				2				5
Gross insurance premiums	491				466				420				418				386				369
Ceded	(232		)		(209		)		(219		)		(197		)		(254		)		(188		)
Net insurance premiums	259				257				201				221				132				181
Service revenue	1,051				830				973				801				864				792
Insurance premiums and service revenue written and earned	$	1,310			$	1,087			$	1,174			$	1,022			$	996			$	973

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

Year ended December 31, ($ in millions)		2019				2018				2017
Late charges and other administrative fees		$	114			$	110			$	102
Remarketing fees		74				79				104
Income from equity-method investments		62				46				14
Servicing fees		17				27				51
Other, net		136				155				130
Total other income, net of losses		$	403			$	417			$	401

The following table shows incurred claims and allocated loss adjustment expenses, net of reinsurance.

	For the years ended December 31, ($ in millions)																								December 31, 2019 ($ in millions)
Accident year (a)	2012 (b)			2013 (b)			2014 (b)			2015 (b)			2016			2017			2018		2019				Total of incurred-but-not-reported liabilities plus expected development on reported claims (c)				Cumulative number of reported claims (c)
2012	$	435		$	430		$	423		$	423		$	423		$	422		422		$	421			$	—			772,549
2013				376			365			370			370			369			368		368				—				672,278
2014							390			389			388			388			388		388				—				525,298
2015										274			271			272			272		272				—				342,267
2016													326			327			328		328				—				476,034
2017																310			314		315				—				481,646
2018																			271		272				—				505,982
2019																					303				23				515,689
Total																					$	2,667

(a)	Due to the discontinuation of various product lines and sale of certain international operations, information prior to 2012 has been excluded from the table in order to appropriately reflect the number of years for which claims are typically outstanding. In addition, given the short tail of our insurance contracts, the table above reflects the combined presentation of all business lines.

(b)	Information presented for the years 2012 through 2015 is unaudited supplementary information.

(c)	Claims are reported on a claimant basis. Claimant is defined as one vehicle for GAP products, one repair for VSCs and VMCs, one dealership for dealer inventory products, and per individual/coverage for run-off personal automotive products.

---

The following table shows cumulative paid claims and allocated loss adjustment expenses, net of reinsurance.

	For the years ended December 31, ($ in millions)
Accident year (a)	2012 (b)			2013 (b)			2014 (b)			2015 (b)			2016			2017			2018			2019
2012	$	391		$	412		$	416		$	418		$	419		$	421		$	421		$	421
2013				347			364			366			368			368			368			368
2014							369			388			388			388			388			388
2015										252			272			272			272			272
2016													302			327			328			328
2017																289			315			315
2018																			245			273
2019																						278
Total																						$	2,643
All outstanding liabilities for loss and allocated loss adjustment expenses before 2012, net of reinsurance																						8
Reserves for insurance losses and allocated loss adjustment expenses, net of reinsurance																						$	32

(a)	Due to the discontinuation of various product lines and sale of certain international operations, information prior to 2012 has been excluded from the table in order to appropriately reflect the number of years for which claims are typically outstanding. In addition, given the short tail of our insurance contracts, the table above reflects the combined presentation of all business lines.

(b)	Information presented for the years 2012 through 2015 is unaudited supplementary information.

The following table shows the average annual percentage payout of incurred claims by age, net of reinsurance. The information presented is unaudited supplementary information.

Year		1		2		3		4		5		6		7		8
Percentage payout of incurred claims		92.6	%	6.6	%	0.4	%	0.2	%	0.1	%	0.1	%	0.1	%	—	%

The following table shows a reconciliation of the disclosures of incurred and paid claims development to the reserves for insurance losses and loss adjustment expenses.

December 31, ($ in millions)		2019				2018				2017
Reserves for insurance losses and loss adjustment expenses, net of reinsurance		$	32			$	35			$	30
Total reinsurance recoverable on unpaid claims		88				96				108
Unallocated loss adjustment expenses		2				3				2
Total gross reserves for insurance losses and loss adjustment expenses		$	122			$	134			$	140

---

The following table shows a rollforward of our reserves for insurance losses and loss adjustment expenses.

($ in millions)		2019				2018				2017
Total gross reserves for insurance losses and loss adjustment expenses at January 1,		$	134			$	140			$	149
Less: Reinsurance recoverable		96				108				108
Net reserves for insurance losses and loss adjustment expenses at January 1,		38				32				41
Net insurance losses and loss adjustment expenses incurred related to:
Current year		321				291				332
Prior years (a)		—				4				—
Total net insurance losses and loss adjustment expenses incurred		321				295				332
Net insurance losses and loss adjustment expenses paid or payable related to:
Current year		(295		)		(263		)		(309		)
Prior years		(30		)		(26		)		(32		)
Total net insurance losses and loss adjustment expenses paid or payable		(325		)		(289		)		(341		)
Net reserves for insurance losses and loss adjustment expenses at December 31,		34				38				32
Plus: Reinsurance recoverable		88				96				108
Total gross reserves for insurance losses and loss adjustment expenses at December 31,		$	122			$	134			$	140

(a)	There have been no material adverse changes to the reserve for prior years.

Details of other operating expenses were as follows.

Year ended December 31, ($ in millions)	2019				2018				2017
Insurance commissions	$	475			$	440			$	415
Technology and communications	311				299				284
Advertising and marketing	180				172				133
Lease and loan administration	172				164				159
Professional services	126				133				113
Regulatory and licensing fees	115				121				113
Vehicle remarketing and repossession	105				111				110
Property and equipment depreciation	96				87				89
Occupancy	57				45				46
Non-income taxes	34				29				21
Amortization of intangible assets	13				11				11
Other	202				202				189
Total other operating expenses	$	1,886			$	1,814			$	1,683

---

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 debt securities were as follows.

		2019																2018
		Amortized cost				Gross unrealized								Fair value				Amortized cost				Gross unrealized								Fair value
December 31, ($ in millions)						gains				losses												gains				losses
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies		$	2,059			$	6			$	(17	)		$	2,048			$	1,911			$	—			$	(60	)		$	1,851
U.S. States and political subdivisions		623				19				(1		)		641				816				3				(17		)		802
Foreign government		184				3				(1		)		186				145				1				(1		)		145
Agency mortgage-backed residential (a)		21,183				257				(36		)		21,404				17,486				47				(395		)		17,138
Mortgage-backed residential		2,841				20				(11		)		2,850				2,796				1				(111		)		2,686
Agency mortgage-backed commercial		1,344				44				(6		)		1,382				3				—				—				3
Mortgage-backed commercial		41				1				—				42				715				1				(2		)		714
Asset-backed		365				3				—				368				723				2				(2		)		723
Corporate debt		1,327				37				(1		)		1,363				1,286				1				(46		)		1,241
Total available-for-sale securities (b) (c) (d)		$	29,967			$	390			$	(73	)		$	30,284			$	25,881			$	56			$	(634	)		$	25,303
Held-to-maturity securities
Debt securities
Agency mortgage-backed residential (a) (e)		$	1,547			$	38			$	(6	)		$	1,579			$	2,319			$	6			$	(61	)		$	2,264
Asset-backed retained notes		21				—				—				21				43				—				—				43
Total held-to-maturity securities		$	1,568			$	38			$	(6	)		$	1,600			$	2,362			$	6			$	(61	)		$	2,307

(a)

During the year ended December 31, 2019, agency mortgage-backed residential securities with an amortized cost of $943 million and a fair value of $945 million were transferred from held-to-maturity to available-for-sale, which resulted in the establishment of a $2 million net unrealized gain at the time of transfer. The transfer was made following the issuance of the final rules by banking agencies implementing provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act) as further described in the section titled Regulation and Supervision in Part I, Item 1, of this report. Under the final rules, Ally is no longer subject to liquidity coverage ratio requirements.

(b)	Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $12 million at both December 31, 2019, and December 31, 2018.

(c)	Certain available-for-sale securities are included in fair value hedging relationships. Refer to Note 21 for additional information.

(d)

Available-for-sale securities with a fair value of $1.9 billion and $9.2 billion at December 31, 2019, and December 31, 2018, respectively, were pledged to secure advances from the FHLB, short-term borrowings or repurchase agreements, or for other purposes as required by contractual obligation or law. Under these agreements, we granted the counterparty the right to sell or pledge $118 million and $821 million of the underlying investment securities at December 31, 2019, and December 31, 2018, respectively.

(e)	Held-to-maturity securities with a fair value of $915 million and $1.2 billion at December 31, 2019, and December 31, 2018, respectively, were pledged to secure advances from the FHLB.

---

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
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
December 31, 2018
Fair value of available-for-sale securities (a)
U.S. Treasury and federal agencies		$	1,851			1.9	%		$	12			1.0	%		$	1,277			1.8	%		$	562			2.0	%		$	—			—	%
U.S. States and political subdivisions		802				3.0			49				1.9			43				2.3			252				2.6			458				3.4
Foreign government		145				2.4			18				3.1			60				2.3			67				2.4			—				—
Agency mortgage-backed residential		17,138				3.3			—				—			—				—			54				1.9			17,084				3.3
Mortgage-backed residential		2,686				3.3			—				—			—				—			—				—			2,686				3.3
Agency mortgage-backed commercial		3				3.1			—				—			3				3.1			—				—			—				—
Mortgage-backed commercial		714				3.8			—				—			—				—			46				3.9			668				3.8
Asset-backed		723				3.5			—				—			478				3.4			121				4.0			124				3.3
Corporate debt		1,241				3.1			144				2.8			496				2.9			581				3.3			20				5.5
Total available-for-sale securities		$	25,303			3.2			$	223			2.6			$	2,357			2.4			$	1,683			2.8			$	21,040			3.3
Amortized cost of available-for-sale securities		$	25,881						$	224						$	2,405						$	1,743						$	21,509
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential		$	2,319			3.2	%		$	—			—	%		$	—			—	%		$	—			—	%		$	2,319			3.2	%
Asset-backed retained notes		43				2.0			—				—			42				2.0			1				3.3			—				—
Total held-to-maturity securities		$	2,362			3.2			$	—			—			$	42			2.0			$	1			3.3			$	2,319			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 $73 million and $35 million at December 31, 2019, and December 31, 2018, respectively, and were composed primarily of money-market accounts and short-term securities, including U.S. Treasury bills.

---

The following table presents interest and dividends on investment securities.

Year ended December 31, ($ in millions)	2019				2018				2017
Taxable interest	$	858			$	690			$	534
Taxable dividends	14				14				12
Interest and dividends exempt from U.S. federal income tax	15				25				22
Interest and dividends on investment securities	$	887			$	729			$	568

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. There were no other-than-temporary impairments of available-for-sale securities for the periods presented.

Year ended December 31, ($ in millions)	2019				2018				2017
Available-for-sale securities
Gross realized gains	$	82			$	12			$	106
Gross realized losses (a)	(4		)		(1		)		(4		)
Net realized gains on available-for-sale securities	78				11				102
Net realized gain on equity securities	73				60
Net unrealized gain (loss) on equity securities	92				(121		)
Other gain (loss) on investments, net	$	243			$	(50	)		$	102

(a)	Certain available-for-sale securities were sold at a loss in 2019, 2018, and 2017 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 table below summarizes available-for-sale and held-to-maturity securities in an unrealized loss position, which we evaluated for other than temporary impairment. For additional information on our methodology, refer to Note 1. As of December 31, 2019, we did not have the intent to sell the available-for-sale or held-to-maturity 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, we believe that the securities with an unrealized loss position are not considered to be other-than-temporarily impaired at December 31, 2019.

		2019																2018
		Less than 12 months								12 months or longer								Less than 12 months								12 months or longer
December 31, ($ 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	)		$	31			$	—			$	1,758			$	(60	)
U.S. States and political subdivisions		72				(1		)		5				—				259				(3		)		317				(14		)
Foreign government		40				(1		)		3				—				6				—				74				(1		)
Agency mortgage-backed residential		4,606				(23		)		908				(13		)		5,537				(94		)		7,808				(301		)
Mortgage-backed residential		613				(4		)		203				(7		)		1,024				(20		)		1,360				(91		)
Agency mortgage-backed commercial		335				(6		)		—				—				—				—				—				—
Mortgage-backed commercial		—				—				—				—				347				(1		)		36				(1		)
Asset-backed		8				—				11				—				294				(1		)		124				(1		)
Corporate debt		71				—				41				(1		)		576				(19		)		569				(27		)
Total temporarily impaired available-for-sale securities		$	7,012			$	(46	)		$	1,450			$	(27	)		$	8,074			$	(138	)		$	12,046			$	(496	)
Held-to-maturity securities
Debt securities
Agency mortgage-backed residential		$	283			$	(6	)		$	—			$	—			$	457			$	(6	)		$	1,376			$	(55	)
Asset-backed retained notes		—				—				3				—				16				—				19				—
Total held-to-maturity debt securities		$	283			$	(6	)		$	3			$	—			$	473			$	(6	)		$	1,395			$	(55	)

---

The composition of finance receivables and loans reported at gross carrying value was as follows.

December 31, ($ in millions)		2019				2018
Consumer automotive (a)		$	72,390			$	70,539
Consumer mortgage
Mortgage Finance (b)		16,181				15,155
Mortgage — Legacy (c)		1,141				1,546
Total consumer mortgage		17,322				16,701
Consumer other (d)		212				—
Total consumer		89,924				87,240
Commercial
Commercial and industrial
Automotive		28,332				33,672
Other		5,014				4,205
Commercial real estate		4,961				4,809
Total commercial		38,307				42,686
Total finance receivables and loans (e)		$	128,231			$	129,926

(a)	Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 21 for additional information.

(b)	Includes loans originated as interest-only mortgage loans of $11 million and $18 million at December 31, 2019, and December 31, 2018, respectively, 47% of which are expected to start principal amortization in 2020. The remainder of these loans have exited the interest-only period.

(c)	Includes loans originated as interest-only mortgage loans of $212 million and $341 million at December 31, 2019, and December 31, 2018, respectively, of which 99% have exited the interest-only period.

(d)	Includes $11 million of finance receivables at December 31, 2019, 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 $503 million and $587 million at December 31, 2019, and December 31, 2018, respectively.

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

($ in millions)		Consumer automotive				Consumer mortgage				Consumer other (a)				Commercial				Total
Allowance at January 1, 2019		$	1,048			$	53			$	—			$	141			$	1,242
Charge-offs (b)		(1,423		)		(13		)		(5		)		(49		)		(1,490		)
Recoveries		493				21				—				—				514
Net charge-offs		(930		)		8				(5		)		(49		)		(976		)
Provision for loan losses		957				(13		)		14				40				998
Other		—				(2		)		—				1				(1		)
Allowance at December 31, 2019		$	1,075			$	46			$	9			$	133			$	1,263
Allowance for loan losses at December 31, 2019
Individually evaluated for impairment		$	38			$	18			$	—			$	33			$	89
Collectively evaluated for impairment		1,037				28				9				100				1,174
Finance receivables and loans at gross carrying value
Ending balance		$	72,390			$	17,322			$	201			$	38,307			$	128,220
Individually evaluated for impairment		538				208				—				215				961
Collectively evaluated for impairment		71,852				17,114				201				38,092				127,259

(a)	Excludes $11 million of finance receivables at December 31, 2019, for which we have elected the fair value option.

(b)	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 for more information regarding our charge-off policies.

---

($ in millions)		Consumer automotive				Consumer mortgage				Commercial				Total
Allowance at January 1, 2018		$	1,066			$	79			$	131			$	1,276
Charge-offs (a)		(1,383		)		(35		)		(15		)		(1,433		)
Recoveries		456				25				7				488
Net charge-offs		(927		)		(10		)		(8		)		(945		)
Provision for loan losses		911				(15		)		22				918
Other (b)		(2		)		(1		)		(4		)		(7		)
Allowance at December 31, 2018		$	1,048			$	53			$	141			$	1,242
Allowance for loan losses at December 31, 2018
Individually evaluated for impairment		$	44			$	23			$	56			$	123
Collectively evaluated for impairment		1,004				30				85				1,119
Finance receivables and loans at gross carrying value
Ending balance		$	70,539			$	16,701			$	42,686			$	129,926
Individually evaluated for impairment		495				231				349				1,075
Collectively evaluated for impairment		70,044				16,470				42,337				128,851

(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 for more information regarding our charge-off policies.

(b)	Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

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.

Year ended December 31, ($ in millions)		2019				2018
Consumer automotive		$	20			$	578
Consumer mortgage		940				10
Commercial		—				238
Total sales and transfers (a)		$	960			$	826

(a)

During the year ended December 31, 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.

Year ended December 31, ($ in millions)		2019				2018
Consumer automotive		$	531			$	896
Consumer mortgage		3,451				4,446
Consumer other (a)		117				—
Commercial		46				15
Total purchases of finance receivables and loans		$	4,145			$	5,357

(a)	During the year ended December 31, 2019, we also obtained $75 million of finance receivables and loans from our acquisition of Health Credit Services. For additional information on our acquisition, refer to Note 2.

---

The following table presents an analysis of our past-due finance receivables and loans recorded at gross carrying value.

December 31, ($ 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
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
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
Total consumer and commercial		$	2,303			$	611			$	455			$	3,369			$	124,851			$	128,220
2018
Consumer automotive		$	2,107			$	537			$	296			$	2,940			$	67,599			$	70,539
Consumer mortgage
Mortgage Finance		67				5				4				76				15,079				15,155
Mortgage — Legacy		30				10				42				82				1,464				1,546
Total consumer mortgage		97				15				46				158				16,543				16,701
Total consumer		2,204				552				342				3,098				84,142				87,240
Commercial
Commercial and industrial
Automotive		—				1				31				32				33,640				33,672
Other		—				4				16				20				4,185				4,205
Commercial real estate		—				—				1				1				4,808				4,809
Total commercial		—				5				48				53				42,633				42,686
Total consumer and commercial		$	2,204			$	557			$	390			$	3,151			$	126,775			$	129,926

(a)	Excludes $11 million of finance receivables at December 31, 2019, for which we have elected the fair value option.

---

The following table presents the gross carrying value of our finance receivables and loans on nonaccrual status.

December 31, ($ in millions)		2019				2018
Consumer automotive		$	762			$	664
Consumer mortgage
Mortgage Finance		17				9
Mortgage — Legacy		40				70
Total consumer mortgage		57				79
Consumer other		2				—
Total consumer		821				743
Commercial
Commercial and industrial
Automotive		73				203
Other		138				142
Commercial real estate		4				4
Total commercial		215				349
Total consumer and commercial finance receivables and loans		$	1,036			$	1,092

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

The following table presents performing and nonperforming credit quality indicators in accordance with our internal accounting policies for our consumer finance receivables and loans recorded at gross carrying value. Nonperforming loans include finance receivables and loans on nonaccrual status when the principal or interest has been delinquent for 90 days or more, or when full collection is not expected. Refer to Note 1 for additional information.

		2019												2018
December 31, ($ in millions)		Performing				Nonperforming				Total				Performing				Nonperforming				Total
Consumer automotive		$	71,628			$	762			$	72,390			$	69,875			$	664			$	70,539
Consumer mortgage
Mortgage Finance		16,164				17				16,181				15,146				9				15,155
Mortgage — Legacy		1,101				40				1,141				1,476				70				1,546
Total consumer mortgage		17,265				57				17,322				16,622				79				16,701
Consumer other (a)		199				2				201				—				—				—
Total consumer		$	89,092			$	821			$	89,913			$	86,497			$	743			$	87,240

(a)	Excludes $11 million of finance receivables at December 31, 2019, for which we have elected the fair value option.

The following table presents pass and criticized credit quality indicators based on regulatory definitions for our commercial finance receivables and loans recorded at gross carrying value.

		2019												2018
December 31, ($ in millions)		Pass				Criticized (a)				Total				Pass				Criticized (a)				Total
Commercial and industrial
Automotive		$	25,235			$	3,097			$	28,332			$	30,799			$	2,873			$	33,672
Other		4,225				789				5,014				3,373				832				4,205
Commercial real estate		4,620				341				4,961				4,538				271				4,809
Total commercial		$	34,080			$	4,227			$	38,307			$	38,710			$	3,976			$	42,686

(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.

---

Impaired Loans and Troubled Debt Restructurings

Impaired Loans

Loans are considered impaired when we determine it is probable that we will be unable to collect all amounts due according to the terms of the loan agreement. For more information on our impaired finance receivables and loans, refer to Note 1.

The following table presents information about our impaired finance receivables and loans.

December 31, ($ in millions)		Unpaid principal balance (a)				Gross carrying value				Impaired with no allowance				Impaired with an allowance				Allowance for impaired loans
2019
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
2018
Consumer automotive		$	503			$	495			$	105			$	390			$	44
Consumer mortgage
Mortgage Finance		15				15				6				9				1
Mortgage — Legacy		221				216				65				151				22
Total consumer mortgage		236				231				71				160				23
Total consumer		739				726				176				550				67
Commercial
Commercial and industrial
Automotive		203				203				112				91				10
Other		159				142				40				102				46
Commercial real estate		4				4				4				—				—
Total commercial		366				349				156				193				56
Total consumer and commercial finance receivables and loans		$	1,105			$	1,075			$	332			$	743			$	123

(a)	Adjusted for charge-offs.

---

The following table presents average balance and interest income for our impaired finance receivables and loans.

		2019								2018								2017
Year ended December 31, ($ in millions)		Average balance				Interest income				Average balance				Interest income				Average balance				Interest income
Consumer automotive		$	510			$	35			$	478			$	28			$	391			$	21
Consumer mortgage
Mortgage Finance		14				1				11				1				8				—
Mortgage — Legacy		206				9				218				10				234				10
Total consumer mortgage		220				10				229				11				242				10
Total consumer		730				45				707				39				633				31
Commercial
Commercial and industrial
Automotive		113				2				93				4				49				2
Other		121				—				84				—				69				9
Commercial real estate		5				—				5				1				5				—
Total commercial		239				2				182				5				123				11
Total consumer and commercial finance receivables and loans		$	969			$	47			$	889			$	44			$	756			$	42

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 gross carrying value were $867 million, $812 million, and $712 million at December 31, 2019, 2018, and 2017, respectively.

Total commitments to lend additional funds to borrowers whose terms had been modified in a TDR were $17 million, $4 million, and $6 million at December 31, 2019, 2018, and 2017, respectively. Refer to Note 1 for additional information.

---

The following tables present information related to finance receivables and loans recorded at gross carrying value modified in connection with a TDR during the period.

Year ended December 31, ($ in millions)		Number of loans			Pre-modification gross carrying value				Post-modification gross carrying value
2019
Consumer automotive		27,623			$	476			$	413
Consumer mortgage
Mortgage Finance		8			1				1
Mortgage — Legacy		61			8				8
Total consumer mortgage		69			9				9
Total consumer finance receivables and loans		27,692			$	485			$	422
2018
Consumer automotive		26,748			$	426			$	378
Consumer mortgage
Mortgage Finance		23			9				9
Mortgage — Legacy		204			30				29
Total consumer mortgage		227			39				38
Total consumer finance receivables and loans		26,975			$	465			$	416
2017
Consumer automotive		26,156			$	380			$	333
Consumer mortgage
Mortgage Finance		4			1				1
Mortgage — Legacy		122			21				21
Total consumer mortgage		126			22				22
Total consumer finance receivables and loans		26,282			$	402			$	355

Year ended December 31, ($ in millions)		Number of loans			Pre-modification gross carrying value				Post-modification gross carrying value
2019
Commercial and industrial
Automotive		7			$	46			$	46
Other		3			82				46
Total commercial finance receivables and loans		10			$	128			$	92
2018
Commercial and industrial
Automotive		3			$	4			$	4
Other		3			85				82
Total commercial finance receivables and loans		6			$	89			$	86
2017
Commercial and industrial
Automotive		4			$	16			$	15
Other		—			44				44
Commercial real estate		2			3				3
Total commercial finance receivables and loans		6			$	63			$	62

---

The following table presents information about finance receivables and loans recorded at gross carrying value 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.

Year ended December 31, ($ in millions)		Number of loans			Gross carrying value				Charge-off amount
2019
Consumer automotive		7,215			$	81			$	52
Total consumer finance receivables and loans		7,215			$	81			$	52
2018
Consumer automotive		9,711			$	111			$	73
Consumer mortgage
Mortgage — Legacy		2			—				—
Total consumer finance receivables and loans		9,713			$	111			$	73
2017
Consumer automotive		8,829			$	102			$	71
Consumer mortgage
Mortgage Finance		1			1				—
Mortgage — Legacy		2			—				—
Total consumer finance receivables and loans		8,832			$	103			$	71

Concentration Risk

Consumer

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 24.9% and 25.4% of our total outstanding consumer finance receivables and loans at December 31, 2019, and December 31, 2018, respectively.

The following table shows the percentage of consumer automotive and consumer mortgage finance receivables and loans by state concentration based on gross carrying value.

		2019 (a)						2018
December 31,		Consumer automotive			Consumer mortgage			Consumer automotive			Consumer mortgage
California		8.5	%		35.1	%		8.4	%		36.9	%
Texas		12.4			6.5			12.8			6.2
Florida		8.8			5.1			8.8			4.7
Pennsylvania		4.6			1.9			4.5			1.4
Illinois		4.1			2.6			4.1			3.0
Georgia		3.9			2.8			4.1			2.8
North Carolina		4.0			2.0			3.9			1.7
New York		3.1			3.0			3.1			2.4
Ohio		3.6			0.5			3.5			0.4
New Jersey		2.8			2.3			2.7			2.1
Other United States		44.2			38.2			44.1			38.4
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 December 31, 2019.

---

Commercial Real Estate

The commercial real estate portfolio consists of finance receivables and loans issued primarily to automotive dealers. The following table presents the percentage of total commercial real estate finance receivables and loans by state concentration based on gross carrying value.

December 31,		2019			2018
Texas		15.0	%		15.5	%
Florida		11.6			11.6
Michigan		8.2			6.8
California		7.2			8.3
New York		5.9			4.8
North Carolina		4.6			3.6
Georgia		3.5			4.0
New Jersey		2.9			3.1
South Carolina		2.8			3.4
Illinois		2.4			2.0
Other United States		35.9			36.9
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.

The following table presents the percentage of total commercial criticized finance receivables and loans by industry concentration based on gross carrying value.

December 31,		2019			2018
Automotive		81.7	%		80.6	%
Services		5.4			5.0
Electronics		3.7			2.3
Other		9.2			12.1
Total commercial criticized finance receivables and loans		100.0	%		100.0	%

On January 1, 2019, we adopted the amendments to the lease accounting principles. Refer to the section titled Recently Adopted Accounting Standards in Note 1 for additional information.

Ally as the Lessee

We have operating leases for our corporate facilities, which have remaining lease terms of 8 months to 12 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)		December 31, 2019				January 1, 2019 (a)
Assets
Operating lease right-of-use assets (b)		$	168			$	161
Liabilities
Operating lease liabilities (c)		$	196			$	190

(a)	Date of adoption.

(b)	Included in other assets on our Consolidated Balance Sheet.

(c)	Included in accrued expenses and other liabilities on our Consolidated Balance Sheet.

During the year ended December 31, 2019, we paid $49 million, in cash for amounts included in the measurement of lease liabilities at December 31, 2019. This amount is included in net cash provided by operating activities in the Consolidated Statement of Cash Flows. During the year ended December 31, 2019, we obtained $52 million of ROU assets in exchange for new operating lease liabilities. As of December 31, 2019, the weighted-average remaining lease term of our operating lease portfolio was 7 years, and the weighted-average discount rate was 2.85%.

The following table presents future minimum rental payments we are required to make under operating leases that have commenced as of December 31, 2019, and that have noncancelable lease terms expiring after December 31, 2019.

Year ended December 31, ($ in millions)
2020		$	50
2021		43
2022		29
2023		18
2024		14
2025 and thereafter		62
Total undiscounted cash flows		216
Difference between undiscounted cash flows and discounted cash flows		(20		)
Total lease liability		$	196

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.

Future minimum rental payments required under operating leases as of December 31, 2018, prior to the date of adoption and as defined by the previous lease accounting guidance, with noncancelable lease terms expiring after December 31, 2018, were as follows.

Year ended December 31, ($ in millions)
2019		$	48
2020		47
2021		46
2022		37
2023		31
2024 and thereafter		294
Total minimum payments required		$	503

---

The following table details the components of total net operating lease expense.

Year ended December 31, ($ in millions)	2019				2018				2017
Operating lease expense	$	45			$	43			$	42
Variable lease expense	8				7				7
Total lease expense, net (a)	$	53			$	50			$	49

(a) Included in other operating expenses in our Consolidated Statement of 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 Consolidated Statement of Income as incurred.

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 Consolidated Statement of Income. Excessive mileage or excessive wear and tear on the vehicle during the lease may impact the sales proceeds received upon remarketing. As of December 31, 2019, consumer operating leases with a carrying value, net of accumulated depreciation, of $352 million 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.

Year ended December 31, ($ in millions)		2019				2018
Vehicles		$	10,426			$	9,995
Accumulated depreciation		(1,562		)		(1,578		)
Investment in operating leases, net		$	8,864			$	8,417

The following table presents future minimum rental payments we have the right to receive under operating leases with noncancelable lease terms expiring after December 31, 2019.

Year ended December 31, ($ in millions)
2020		$	1,339
2021		851
2022		383
2023		86
2024		6
2025 and thereafter		—
Total lease payments from operating leases		$	2,665

---

We recognized operating lease revenue of $1.5 billion for both the years ended December 31, 2019, and 2018, and $1.9 billion for the year ended December 31, 2017. Depreciation expense on operating lease assets includes remarketing gains and losses recognized on the sale of operating lease assets. The following table summarizes the components of depreciation expense on operating lease assets.

Year ended December 31, ($ in millions)		2019				2018				2017
Depreciation expense on operating lease assets (excluding remarketing gains) (a)		$	1,050			$	1,115			$	1,368
Remarketing gains, net		(69		)		(90		)		(124		)
Net depreciation expense on operating lease assets		$	981			$	1,025			$	1,244

(a) Includes variable lease payments related to excess mileage and excessive wear and tear on vehicles of $19 million during the year ended December 31, 2019, $24 million during the year ended December 31, 2018, and $32 million during the year ended December 31, 2017.

Finance Leases

Our total gross investment in finance leases, which is included in finance receivables and loans, net, on our Consolidated Balance Sheet was $472 million and $439 million as of December 31, 2019, and December 31, 2018, respectively. This includes lease payment receivables of $459 million and $425 million at December 31, 2019, and December 31, 2018, respectively, and unguaranteed residual assets of $13 million and $14 million at December 31, 2019, and December 31, 2018, respectively. Interest income on finance lease receivables was $25 million for the year ended December 31, 2019, $22 million for the year ended December 31, 2018, and $22 million for the year ended December 31, 2017, and is included in interest and fees on finance receivables and loans in our Consolidated Statement of Income.

The following table presents future minimum rental payments we have the right to receive under finance leases with noncancelable lease terms expiring after December 31, 2019.

Year ended December 31, ($ in millions)
2020		$	167
2021		142
2022		94
2023		60
2024		32
2025 and thereafter		19
Total undiscounted cash flows		514
Difference between undiscounted cash flows and discounted cash flows		(55		)
Present value of lease payments recorded as lease receivable		$	459

Overview

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 special purpose entities (SPEs). SPEs are often VIEs and may or may not be included on our Consolidated Balance Sheet.

Securitizations

In executing a securitization, we typically sell pools of financial assets to a wholly owned, bankruptcy-remote SPE, which then transfers the financial assets to a separate, transaction-specific SPE for cash, and typically, other retained interests. The SPE is funded through the issuance of beneficial interests, which could take the form of notes or residual interests and can be sold to investors or retained by us. We typically hold retained beneficial interests in our securitizations including, but not limited to, retained notes, certificated residual interests, as well as certain noncertificated interests retained from the sale of automotive finance receivables. If sold, the beneficial interests only entitle the investors to specified cash flows generated from the underlying securitized assets. If retained, the interests provide credit enhancement to the SPE as they may absorb credit losses or other cash shortfalls and may represent a form of significant continuing economic interests. In addition to providing a source of liquidity and cost-efficient funding, securitizing these financial assets also reduces our credit exposure to the borrowers beyond any economic interest we may retain.

The SPEs are limited to specific activities by their respective legal documents, but are generally allowed to acquire the financial assets, to issue beneficial interests to investors to fund the acquisition of the financial assets, and to enter into interest rate hedges to mitigate certain risks related to the financial assets or beneficial interests of the entity. A servicer, who is generally us, is appointed pursuant to the underlying legal documents to service the assets the SPE holds and the beneficial interests it issues. Servicing functions include, but are not limited to, general collections activity on current and noncurrent accounts, loss mitigation efforts including repossession and sale of collateral, as well as preparing and furnishing statements summarizing the asset and beneficial interest performance. These servicing responsibilities constitute continued involvement in the transferred financial assets.

---

Cash flows from the securitized financial assets represent the sole source for payment of distributions on the beneficial interests issued by the SPE and for payments to the parties that perform services for the SPE, such as the servicer or the trustee.

We generally hold certain conditional repurchase options specific to securitizations that allow us to repurchase assets from the securitization entity. The majority of the securitizations provide us, as servicer, with a call option that allows us to repurchase the remaining transferred financial assets or redeem outstanding beneficial interests at our discretion once the asset pool reaches a predefined level, which represents the point where servicing becomes administratively burdensome (a clean-up call option). The repurchase price is typically the discounted securitization balance of the assets plus accrued interest when applicable. We generally have discretion regarding when or if we will exercise these options, but we would do so only when it is in our best interest.

Other than our customary representation, warranty, and covenant provisions, these securitizations are nonrecourse to us, thereby transferring the risk of future credit losses to the extent the beneficial interests in the SPEs are held by third parties. Representation, warranty, and certain covenant provisions generally require us to repurchase assets or indemnify the investor or other party for incurred losses to the extent it is determined that the assets were ineligible or were otherwise defective at the time of sale, or otherwise not in compliance with the ongoing covenant obligations. We did not provide any non-contractual financial support to any of these entities during 2019, 2018, or 2017.

Variable Interest Entities

The VIEs included on the Consolidated Balance Sheet represent separate entities 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. We determine whether we have a potentially significant beneficial interest in the VIE based on the consideration of both qualitative and quantitative factors regarding the nature, size, and form of our involvement in the VIE. The third-party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to us, except for the customary representation, warranty, and covenant provisions. In addition, the cash flows from the assets are restricted only to pay such liabilities. Thus, our economic exposure to loss from outstanding third-party financing related to consolidated VIEs is limited to the carrying value of the consolidated VIE assets. Generally, all assets of consolidated VIEs are restricted for the beneficial interest holders. For additional information regarding our significant accounting policies for consolidated VIEs, refer to the Securitizations and Variable Interest Entities section of Note 1.

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 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 the year ended December 31, 2019. There was a pretax gain of $1 million for the year ended December 31, 2018, and a pretax gain of $2 million for the year ended December 31, 2017, from sales of financial assets into nonconsolidated VIEs. For additional information regarding the company’s significant accounting policies for nonconsolidated VIEs, refer to the Variable Interest Entities and Securitizations section of Note 1.

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.

---

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 Consolidated Balance Sheet.

December 31, ($ 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
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
2018
On-balance sheet variable interest entities
Consumer automotive		$	16,255		(b)	$	6,573		(c)
Commercial automotive		11,089				3,946
Off-balance-sheet variable interest entities
Consumer automotive		45			(e)	—				$	1,235			$	1,280		(f)
Commercial other		806			(g)	326			(h)	—				1,054			(i)
Total		$	28,195			$	10,845			$	1,235			$	2,334

(a)	Asset values represent the current unpaid principal balance of outstanding consumer finance receivables and loans within the VIEs.

(b)	Includes $9.0 billion and $8.4 billion of assets that were not encumbered by VIE beneficial interests held by third parties at December 31, 2019, and December 31, 2018, respectively. Ally or consolidated affiliates hold the interests in these assets.

(c)	Includes $21 million and $25 million of liabilities that were not obligations to third-party beneficial interest holders at December 31, 2019, and December 31, 2018, respectively.

(d)

During the year ended December 31, 2019, we indicated our intent to exercise clean-up call option related to a nonconsolidated securitization-related VIE. 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 this event, we became the primary beneficiary of the VIE, which included $48 million of consumer automotive loans and $45 million of related debt, and the VIE was consolidated on our 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 $21 million and $43 million were classified as held-to-maturity securities at December 31, 2019, and December 31, 2018, respectively, and $2 million were classified as other assets at both December 31, 2019, and December 31, 2018. 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.

---

On-balance Sheet Variable Interest Entities

The assets of consolidated VIEs that can be used only to settle obligations of the consolidated VIEs and the liabilities of those entities for which creditors or beneficial interest holders do not have recourse to our general credit were as follows.

December 31, ($ in millions)		2019				2018
Assets
Finance receivables and loans, net
Consumer		$	10,791			$	7,282
Commercial		7,919				10,804
Allowance for loan losses		(153		)		(114		)
Total finance receivables and loans, net		18,557				17,972
Investment in operating leases, net		—				164
Other assets		787				767
Total assets		$	19,344			$	18,903
Liabilities
Long-term debt		$	9,087			$	10,482
Accrued expenses and other liabilities		11				12
Total liabilities		$	9,098			$	10,494

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 years ended December 31, 2019, 2018, and 2017. Additionally, this table contains information regarding cash flows received from and paid to nonconsolidated SPEs that existed during each period.

Year ended December 31, ($ in millions)		Consumer automotive				Consumer mortgage
2019
Cash flows received on retained interests in securitization entities		$	23			$	—
Servicing fees		10				—
Cash disbursements for repurchases during the period		(2		)		—
2018
Cash proceeds from transfers completed during the period		$	24			$	—
Cash flows received on retained interests in securitization entities		20				—
Servicing fees		18				—
Cash disbursements for repurchases during the period		(4		)		—
Representation and warranty recoveries		—				2
2017
Cash proceeds from transfers completed during the period		$	1,187			$	—
Cash disbursements for repurchases during the period (a)		(491		)		—
Servicing fees		31				—
Cash flows received on retained interests in securitization entities		21				—
Other cash flows		4				—

(a)	During the second quarter of 2017, we elected to not renew a consumer automotive credit conduit facility and also purchased the related consumer automotive loans and settled associated retained interests.

---

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
December 31, ($ in millions)	2019				2018				2019				2018
Off-balance-sheet securitization entities
Consumer automotive	$	417			$	1,235			$	6			$	13
Whole-loan sales (a)
Consumer automotive	207				634				2				3
Total	$	624			$	1,869			$	8			$	16

(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
Year ended December 31, ($ in millions)		2019				2018
Off-balance-sheet securitization entities
Consumer automotive		$	6			$	10
Whole-loan sales (a)
Consumer automotive		1				2
Total		$	7			$	12

(a)	Whole-loan sales are not part of a securitization transaction, but represent consumer automotive pools of loans sold to third-party investors.

Affordable Housing Investments

We have investments in various limited partnerships that sponsor affordable housing projects, which meet the definition of a VIE. The purpose of these investments is to achieve a satisfactory return on capital through the receipt of low-income housing tax credits (LIHTC) and to assist us in achieving goals associated with the CRA. Our affordable housing investments are accounted for using the proportional amortization method of accounting, which recognizes the amortized cost of the investment as a component of income tax expense.

The following table summarizes information about our affordable housing investments.

Year ended December 31, ($ in millions)		2019				2018				2017
Affordable housing tax credits and other tax benefits (a)		$	86			$	61			$	43
Tax credit amortization expense recognized as a component of income tax expense		72				51				44

(a)	There were no impairment losses recognized during the years ended December 31, 2019, 2018, and 2017, resulting from the forfeiture or ineligibility of tax credits or other circumstances.

Our investment in qualified affordable housing projects was $830 million and $649 million at December 31, 2019, and 2018, respectively, and is included within other assets on our Consolidated Balance Sheet. Additionally, unfunded commitments to provide additional capital to investees in qualified affordable housing projects were $372 million and $319 million at December 31, 2019, and 2018, respectively, and are included within accrued expenses and other liabilities on our Consolidated Balance Sheet. Substantially all of the unfunded commitments at December 31, 2019, are expected to be paid out within the next five years.

Premiums receivable and other insurance assets consisted of the following.

December 31, ($ in millions)		2019				2018
Prepaid reinsurance premiums		$	551			$	527
Reinsurance recoverable on unpaid losses		88				96
Reinsurance recoverable on paid losses		23				22
Premiums receivable		105				88
Deferred policy acquisition costs		1,791				1,593
Total premiums receivable and other insurance assets		$	2,558			$	2,326

---

The components of other assets were as follows.

December 31, ($ in millions)		2019				2018
Property and equipment at cost		$	1,332			$	1,250
Accumulated depreciation		(686		)		(686		)
Net property and equipment		646				564
Nonmarketable equity investments (a)		1,232				1,410
Investment in qualified affordable housing projects		830				649
Restricted cash held for securitization trusts (b)		738				965
Accrued interest, fees, and rent receivables		589				599
Goodwill (c)		393				240
Equity-method investments (d)		358				262
Other accounts receivable		117				203
Restricted cash and cash equivalents (e)		87				124
Net intangible assets (f)		69				59
Fair value of derivative contracts in receivable position (g)		64				41
Net deferred tax assets		58				317
Other assets		892				720
Total other assets		$	6,073			$	6,153

(a)

Includes investments in FHLB stock of $701 million and $903 million at December 31, 2019, and 2018, respectively; FRB stock of $449 million and $448 million at December 31, 2019, and 2018, respectively; and equity securities without a readily determinable fair value of $82 million and $59 million at December 31, 2019, and 2018, respectively, measured at cost with adjustments for impairment and observable changes in price. During the year ended December 31, 2019, we recorded $9 million of upward adjustments and $3 million of impairments and downward adjustments related to equity securities without a readily determinable fair value. Through December 31, 2019, we recorded $10 million of cumulative upward adjustments and $6 million of cumulative impairments and downward adjustments related to equity securities without a readily determinable fair value.

(b)	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.

(c)

Includes goodwill of $27 million within our Insurance operations at both December 31, 2019, and 2018; $20 million within Automotive Finance operations at both December 31, 2019, and 2018; and $346 million and $193 million within Corporate and Other at December 31, 2019, and 2018, respectively. The increase in goodwill within Corporate and Other of $153 million was attributable to our acquisition of Health Credit Services, as further described in Note 2. No other changes to the carrying amount of goodwill were recorded during the years ended December 31, 2019, and 2018.

(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 $111 million and $88 million at December 31, 2019, and 2018, respectively, and accumulated depreciation of $42 million and $29 million at December 31, 2019, and 2018.

(g)	For additional information on derivative instruments and hedging activities, refer to Note 21.

Deposit liabilities consisted of the following.

December 31, ($ in millions)		2019				2018
Noninterest-bearing deposits		$	119			$	142
Interest-bearing deposits
Savings and money-market checking accounts		62,486				56,050
Certificates of deposit		58,146				49,985
Other deposits		1				1
Total deposit liabilities		$	120,752			$	106,178

At December 31, 2019, and December 31, 2018, certificates of deposit included $25.6 billion and $21.0 billion, respectively, of those in denominations of $100 thousand or more. At December 31, 2019, and December 31, 2018, certificates of deposit included $8.2 billion and $6.1 billion, respectively, of those in denominations in excess of $250 thousand federal insurance limits.

---

The following table presents the scheduled maturity of total certificates of deposit at December 31, 2019.

($ in millions)
Due in 2020		$	41,419
Due in 2021		10,541
Due in 2022		4,061
Due in 2023		996
Due in 2024		1,129
Total certificates of deposit		$	58,146

Short-term Borrowings

The following table presents the composition of our short-term borrowings portfolio.

		2019												2018
December 31, ($ in millions)		Unsecured				Secured (a)				Total				Unsecured				Secured (a)				Total
Demand notes		$	2,581			$	—			$	2,581			$	2,477			$	—			$	2,477
Federal Home Loan Bank		—				2,950				2,950				—				6,825				6,825
Securities sold under agreements to repurchase		—				—				—				—				685				685
Total short-term borrowings		$	2,581			$	2,950			$	5,531			$	2,477			$	7,510			$	9,987
Weighted average interest rate (b)										1.8		%										2.5		%

(a)	Refer to the section below titled Long-term Debt for further details on assets restricted as collateral for payment of the related debt.

(b)	Based on the debt outstanding and the interest rate at December 31 of each year.

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. As of December 31, 2019, Ally had no securities sold under agreements to repurchase. Refer to Note 8 and Note 25 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 December 31, 2019, we placed no cash collateral and did not receive cash or noncash collateral. At December 31, 2018, we did not place any collateral, and we received cash collateral totaling $8 million and noncash collateral totaling $4 million.

---

Long-term Debt

The following tables present the composition of our long-term debt portfolio.

December 31, ($ in millions)	Amount				Interest rate		Weighted average stated interest rate (a)			Due date range
2019
Unsecured debt
Fixed rate (b)	$	8,566
Variable rate	1
Trust preferred securities (c)	2,575
Hedge basis adjustment (d)	62
Total unsecured debt	11,204				1.71–8.00%		6.34	%		2020–2049
Secured debt
Fixed rate	21,477
Variable rate (e)	1,384
Hedge basis adjustment (d)	(38		)
Total secured debt (f) (g) (h)	22,823				1.35–4.03%		2.44	%		2020–2027
Total long-term debt	$	34,027
2018
Unsecured debt
Fixed rate (b)	$	9,406
Variable rate	1
Trust preferred securities (c)	2,572
Hedge basis adjustment (d)	128
Total unsecured debt	12,107				2.42–8.40%		6.29	%		2019–2049
Secured debt
Fixed rate	23,514
Variable rate (e)	8,633
Hedge basis adjustment (d)	(61		)
Total secured debt (f) (g) (h)	32,086				1.26–4.50%		2.54	%		2019–2037
Total long-term debt	$	44,193

(a)	Based on the debt outstanding and the interest rate at December 31 of each year excluding any impacts of interest rate hedges.

(b)	Includes subordinated debt of $1.0 billion at both December 31, 2019, and 2018.

(c)	Refer to the section below titled Trust Preferred Securities for further information.

(d)	Represents the basis adjustment associated with the application of hedge accounting on certain of our long-term debt positions. Refer to Note 21 for additional information.

(e)	Includes $92 million and $5 million at December 31, 2019, and 2018, respectively, of long-term debt that does not have a stated interest rate.

(f)	Includes $9.1 billion and $10.5 billion of VIE secured debt at December 31, 2019, and 2018, respectively.

(g)	Includes $450 million and $6.7 billion of debt outstanding from our committed secured credit facilities at December 31, 2019, and 2018, respectively.

(h)	Includes advances from the FHLB of Pittsburgh of $13.3 billion and $14.9 billion at December 31, 2019, and 2018, respectively.

		2019												2018
December 31, ($ in millions)		Unsecured				Secured				Total				Unsecured				Secured				Total
Long-term debt (a)
Due within one year		$	2,214			$	7,005			$	9,219			$	1,663			$	7,313			$	8,976
Due after one year		8,990				15,818				24,808				10,444				24,773				35,217
Total long-term debt (b) (c)		$	11,204			$	22,823			$	34,027			$	12,107			$	32,086			$	44,193

(a)	Includes basis adjustments related to the application of hedge accounting.

To achieve the desired balance between fixed- and variable-rate debt, we may utilize interest rate swap agreements. The use of these derivative financial instruments had the effect of converting $7.0 billion of our fixed-rate debt into variable-rate obligations at December 31, 2019. We did not have any derivative financial instruments that converted fixed-rate debt into variable-rate obligations or variable-rate debt into fixed rate obligations at December 31, 2018.

---

The following table presents the scheduled remaining maturity of long-term debt at December 31, 2019, 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		$	2,258			$	697			$	1,121			$	(9	)		$	1,470			$	6,767			$	12,304
Original issue discount		(44		)		(47		)		(52		)		(59		)		(65		)		(833		)		(1,100		)
Total unsecured		2,214				650				1,069				(68		)		1,405				5,934				11,204
Secured
Long-term debt		7,005				9,530				5,552				627				107				2				22,823
Total long-term debt		$	9,219			$	10,180			$	6,621			$	559			$	1,512			$	5,936			$	34,027

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.

		2019								2018
December 31, ($ in millions)		Total (a)				Ally Bank				Total (a)				Ally Bank
Investment securities (b)		$	2,698			$	2,698			$	10,280			$	9,564
Mortgage assets held-for-investment and lending receivables		17,135				17,135				16,498				16,498
Consumer automotive finance receivables		13,481				11,534				17,015				9,715
Commercial automotive finance receivables		12,890				12,890				15,563				15,563
Operating leases		—				—				170				—
Total assets restricted as collateral (c) (d)		$	46,204			$	44,257			$	59,526			$	51,340
Secured debt		$	25,773		(e)	$	24,069			$	39,596		(e)	$	32,072

(a)	Ally Bank is a component of the total column.

(b)	A portion of the restricted investment securities at December 31, 2018, was restricted under repurchase agreements. Refer to the section above titled Short-term Borrowings for information on the repurchase agreements.

(c)

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 $24.8 billion and $30.8 billion at December 31, 2019, and December 31, 2018, 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 December 31, 2019, and December 31, 2018. 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.

(d)	Excludes restricted cash and cash reserves for securitization trusts recorded within other assets on the Consolidated Balance Sheet. Refer to Note 13 for additional information.

(e)	Includes $3.0 billion and $7.5 billion of short-term borrowings at December 31, 2019, and December 31, 2018, respectively.

Trust Preferred Securities

At both December 31, 2019, and December 31, 2018, we had issued and outstanding approximately $2.6 billion in aggregate liquidation preference of 8.125% Fixed Rate/Floating Rate Trust Preferred Securities, Series 2 (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 December 31, 2019. The amount represents the carrying amount of the Series 2 TRUPS less our common stock investment in the trust.

---

Covenants and Other Requirements

In secured funding transactions, there are trigger events that could cause the debt to be prepaid at an accelerated rate or could cause our usage of the committed secured credit facility to be discontinued. The triggers are generally based on the financial health and performance of the servicer as well as performance criteria for the pool of receivables, such as delinquency ratios, loss ratios, and commercial payment rates. During 2019, there were no trigger events that resulted in the repayment of debt at an accelerated rate or impacted the usage of our facilities.

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 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 December 31, 2019, all of our $2.5 billion of capacity was revolving and of this balance, $1.1 billion was from facilities with a remaining tenor greater than 364 days.

Committed Secured Credit Facilities

		Outstanding								Unused capacity (a)								Total capacity
December 31, ($ in millions)		2019				2018				2019				2018				2019				2018
Bank funding
Secured		$	—			$	3,500			$	—			$	1,300			$	—			$	4,800
Parent funding
Secured		450				3,165				2,050				635				2,500				3,800
Total committed secured credit facilities		$	450			$	6,665			$	2,050			$	1,935			$	2,500			$	8,600

(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.

The components of accrued expenses and other liabilities were as follows.

December 31, ($ in millions)		2019				2018
Accounts payable		$	535			$	516
Unfunded commitments for investment in qualified affordable housing projects		372				319
Employee compensation and benefits		296				255
Reserves for insurance losses and loss adjustment expenses		122				134
Net deferred tax liabilities		67				17
Cash collateral received from counterparties		48				41
Deferred revenue		36				27
Fair value of derivative contracts in payable position (a)		5				37
Other liabilities		491				330
Total accrued expenses and other liabilities		$	1,972			$	1,676

(a)	For additional information on derivative instruments and hedging activities, refer to Note 21.

---

Common Stock

The following table presents changes in the number of shares issued and outstanding.

(shares in thousands) (a)	2019			2018			2017
Common stock
Total issued at January 1,	492,797			489,884			485,708
New issuances
Employee benefits and compensation plans	4,160			2,914			4,176
Total issued at December 31,	496,958			492,797			489,884
Treasury balance at January 1,	(87,898	)		(52,830	)		(18,707	)
Repurchase of common stock (b)	(34,728	)		(35,068	)		(34,122	)
Total treasury stock at December 31,	(122,626	)		(87,898	)		(52,830	)
Total outstanding at December 31,	374,332			404,900			437,054

(a)	Figures in the table may not recalculate exactly due to rounding. Number of shares issued, in treasury, and outstanding are calculated based on unrounded numbers.

(b)	Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans. Refer to the section titled Capital Planning and Stress Tests in Note 20 for additional information regarding our common-stock-repurchase program.

The following table presents changes, net of tax, in each component of accumulated other comprehensive income (loss).

($ 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 income (loss)
Balance at January 1, 2017	$	(273	)		$	14			$	8			$	(90	)		$	(341	)
Net change	100				2				3				1				106
Balance at December 31, 2017	(173		)		16				11				(89		)		(235		)
Cumulative effect of changes in accounting principles, net of tax
Adoption of Accounting Standards Update 2016-01	27				—				—				—				27
Adoption of Accounting Standards Update 2018-02	(40		)		4				—				(6		)		(42		)
Balance at January 1, 2018	(186		)		20				11				(95		)		(250		)
Net change	(295		)		(2		)		8				—				(289		)
Balance at December 31, 2018	(481		)		18				19				(95		)		(539		)
Cumulative effect of changes in accounting principles, net of tax (c)
Adoption of Accounting Standards Update 2017-08	8				—				—				—				8
Balance at January 1, 2019	(473		)		18				19				(95		)		(531		)
Net change	681				1				(17		)		(11		)		654
Balance at December 31, 2019	$	208			$	19			$	2			$	(106	)		$	123

(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 21.

(c)	Refer to the section titled Recently Adopted Accounting Standards in Note 1 for additional information.

---

The following tables present the before- and after-tax changes in each component of accumulated other comprehensive income (loss).

Year ended December 31, 2019 ($ in millions)	Before tax				Tax effect				After tax
Investment securities
Net unrealized gains arising during the period	$	968			$	(227	)		$	741
Less: Net realized gains reclassified to income from continuing operations	78			(a)	(18		)	(b)	60
Net change	890				(209		)		681
Translation adjustments
Net unrealized gains arising during the period	7				(2		)		5
Net investment hedges (c)
Net unrealized losses arising during the period	(6		)		2				(4		)
Cash flow hedges (c)
Net unrealized losses arising during the period	(11		)		4				(7		)
Less: Net realized gains reclassified to income from continuing operations	12			(d)	(2		)	(b)	10
Net change	(23		)		6				(17		)
Defined benefit pension plans
Net unrealized losses arising during the period	(14		)		3				(11		)
Other comprehensive income	$	854			$	(200	)		$	654

(a)	Includes gains reclassified to other gain on investments, net in our Consolidated Statement of Income.

(b)	Includes amounts reclassified to income tax expense from continuing operations in our Consolidated Statement of Income.

(c)	For additional information on derivative instruments and hedging activities, refer to Note 21.

(d)	Includes gains reclassified to interest on deposits and interest on long-term debt in our Consolidated Statement of Income.

Year ended December 31, 2018 ($ in millions)	Before tax				Tax effect				After tax
Investment securities
Net unrealized losses arising during the period	$	(375	)		$	88			$	(287	)
Less: Net realized gains reclassified to income from continuing operations	11			(a)	(3		)	(b)	8
Net change	(386		)		91				(295		)
Translation adjustments
Net unrealized losses arising during the period	(14		)		3				(11		)
Net investment hedges (c)
Net unrealized gains arising during the period	12				(3		)		9
Cash flow hedges (c)
Net unrealized gains arising during the period	12				(2		)		10
Less: Net realized gains reclassified to income from continuing operations	2			(d)	—				2
Net change	10				(2		)		8
Defined benefit pension plans
Net unrealized gains arising during the period	1				(1		)		—
Other comprehensive loss	$	(377	)		$	88			$	(289	)

(a)	Includes gains reclassified to other gain on investments, net in our Consolidated Statement of Income.

(b)	Includes amounts reclassified to income tax expense from continuing operations in our Consolidated Statement of Income.

(c)	For additional information on derivative instruments and hedging activities, refer to Note 21.

(d)	Includes gains reclassified to interest on deposits and interest on long-term debt in our Consolidated Statement of Income.

---

Year ended December 31, 2017 ($ in millions)	Before tax				Tax effect				After tax
Investment securities
Net unrealized gains arising during the period	$	237			$	(45	)		$	192
Less: Net realized gains reclassified to income from continuing operations	105			(a)	(13		)	(b)	92
Net change	132				(32		)		100
Translation adjustments
Net unrealized gains arising during the period	12				(4		)		8
Net investment hedges (c)
Net unrealized losses arising during the period	(10		)		4				(6		)
Cash flow hedges (c)
Net unrealized gains arising during the period	5				(2		)		3
Defined benefit pension plans
Net unrealized gains arising during the period	1				—				1
Other comprehensive income	$	140			$	(34	)		$	106

(a)	Includes gains reclassified to other gain on investments, net in our Consolidated Statement of Income.

(b)	Includes amounts reclassified to income tax expense from continuing operations in our Consolidated Statement of Income.

(c)	For additional information on derivative instruments and hedging activities, refer to Note 21.

The following table presents the calculation of basic and diluted earnings per common share.

Year ended December 31, ($ in millions, except per share data; shares in thousands) (a)	2019				2018				2017
Net income from continuing operations	$	1,721			$	1,263			$	926
(Loss) income from discontinued operations, net of tax	(6		)		—				3
Net income attributable to common stockholders	$	1,715			$	1,263			$	929
Basic weighted-average common shares outstanding (b)	393,234				425,165				453,704
Diluted weighted-average common shares outstanding (b)	395,395				427,680				455,350
Basic earnings per common share
Net income from continuing operations	$	4.38			$	2.97			$	2.04
(Loss) income from discontinued operations, net of tax	(0.02		)		—				0.01
Net income	4.36				2.97				2.05
Diluted earnings per common share
Net income from continuing operations	4.35				2.95				2.03
(Loss) income from discontinued operations, net of tax	(0.02		)		—				0.01
Net income	$	4.34			$	2.95			$	2.04

(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.

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. The risk-based capital ratios are based on a banking organization’s risk-weighted assets (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.

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. As of January 1, 2015, Ally and Ally Bank became subject to the rules implementing the 2010 Basel III capital framework in the United States (U.S. Basel III), which generally reflects higher capital requirements, capital buffers, and changes to regulatory capital definitions, deductions, and adjustments, relative to the predecessor requirements implementing the Basel I

---

capital framework in the United States. Certain aspects of U.S. Basel III, including the capital buffers, were subject to a phase-in period through December 31, 2018.

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 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.

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 of more than 2.5%. Failure to maintain the full amount of the buffer 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%.

U.S. Basel III also revised the eligibility criteria for regulatory capital instruments and provides for the phase-out of instruments that had previously been recognized as capital but that do not satisfy these criteria. For example, subject to certain exceptions (for example, certain debt or equity issued to the U.S. government under the Emergency Economic Stabilization Act), trust preferred and other hybrid securities were excluded from a BHC’s Tier 1 capital as of January 1, 2016. Also, subject to a phase-in schedule, certain items are deducted from Common Equity Tier 1 capital under U.S. Basel III that had not previously been deducted from regulatory capital, and certain other deductions from regulatory capital have been modified. Among other things, U.S. Basel III requires significant investments in the common stock of unconsolidated financial institutions, mortgage servicing assets (MSAs), and certain deferred tax assets (DTAs) that exceed specified individual and aggregate thresholds to be deducted from Common Equity Tier 1 capital. U.S. Basel III also revised the standardized approach for calculating RWAs by, among other things, modifying certain risk weights and the methods for calculating RWAs for certain types of assets and exposures.

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.

The following table summarizes our capital ratios under the U.S. Basel III capital framework.

		December 31, 2019							December 31, 2018							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.		$	13,837			9.54	%		$	13,397			9.14	%		4.50	%		(b)
Ally Bank		16,627				12.30			16,552				12.61			4.50			6.50	%
Tier 1 (to risk-weighted assets)
Ally Financial Inc.		$	16,271			11.22	%		$	15,831			10.80	%		6.00	%		6.00	%
Ally Bank		16,627				12.30			16,552				12.61			6.00			8.00
Total (to risk-weighted assets)
Ally Financial Inc.		$	18,506			12.76	%		$	18,046			12.31	%		8.00	%		10.00	%
Ally Bank		17,854				13.21			17,620				13.42			8.00			10.00
Tier 1 leverage (to adjusted quarterly average assets) (c)
Ally Financial Inc.		$	16,271			9.08	%		$	15,831			9.00	%		4.00	%		(b)
Ally Bank		16,627				10.01			16,552				10.69			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% and 1.875% at December 31, 2019, and December 31, 2018, 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.

---

At December 31, 2019, and 2018, Ally and Ally Bank were “well-capitalized” and met all applicable capital requirements to which each was subject.

Recent Regulatory Developments

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 establish four risk-based categories of prudential standards and capital and liquidity requirements for banking organizations with $100 billion or more in total consolidated assets. The most stringent standards and requirements apply to U.S. global systemically important BHCs, which are assigned to Category I. The assignment of other banking organizations to the remaining three categories is based on measures of size and four other risk-based indicators: cross-jurisdictional activity, weighted short-term wholesale funding (wSTWF), nonbank assets, and off-balance-sheet exposure. Under the final rules, Ally is designated as a Category IV firm and, as such, is (1) made subject to supervisory stress testing on a two-year cycle rather than the previously required one-year cycle, (2) required to continue submitting an annual capital plan to the FRB, (3) allowed to continue excluding accumulated other comprehensive income from regulatory capital, (4) required to continue maintaining a buffer of unencumbered highly liquid assets to meet projected net stressed cash outflows over a 30-day planning horizon, (5) required to conduct liquidity stress tests on a quarterly basis rather than the previously required monthly basis, (6) allowed to engage in more tailored liquidity risk management, including monthly rather than weekly calculations of collateral positions, the elimination of limits for activities that are not relevant to the firm, and fewer required elements of monitoring of intraday liquidity exposures, (7) exempted from company-run capital stress testing, (8) exempted from the modified liquidity coverage ratio (LCR) and the proposed modified net stable funding ratio provided that wSTWF remains under $50 billion, and (9) allowed to remain exempted from the supplementary leverage ratio, the countercyclical capital buffer, and single-counterparty credit limits. The final rules went in effect on December 31, 2019. Relatedly, in April 2019, the Federal Deposit Insurance Corporation (FDIC) extended the date by which all covered insured depository institutions (CIDIs), including Ally Bank, must submit their next resolution plans to the date or dates specified by the FDIC in the future in connection with its final determination on amendments to the rule governing CIDI resolution planning, which have not yet been issued. At this time, the impacts that such a potential future proposal may have on us are not clear.

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). Under the current capital rule, a banking organization must deduct from capital amounts of threshold items that individually exceed 10% of Common Equity Tier 1 capital. The aggregate amount of threshold items not deducted under the 10% threshold deduction but that nonetheless exceeds 15% of Common Equity Tier 1 capital minus certain deductions from and adjustments to Common Equity Tier 1 capital must also be deducted. Any amount of these MSAs and certain DTAs not deducted from Common Equity Tier 1 capital are currently risk weighted at 100%. The final rule removes the individual and aggregate deduction thresholds for threshold items and adopts a single 25% Common Equity Tier 1 capital deduction threshold for each item individually, and requires that any of the threshold items not deducted be risk weighted at 250%. The final rule also simplifies the calculation methodology for minority interests. These provisions will take effect for us on April 1, 2020. We do not expect these provisions to have a material impact on our capital position.

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. For regulatory capital purposes, this permitted us to phase in 25% of the capital impact of CECL on January 1, 2020, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2023. In addition, the FRB announced that, in order to reduce uncertainty, the FRB will maintain its current modeling framework for the allowance for loan losses in supervisory stress tests through the 2021 cycle.

In April 2018, the FRB issued a proposal to more closely align forward-looking stress testing results with the FRB’s non-stress regulatory capital requirements for banking organizations with $50 billion or more in total consolidated assets. The proposal would introduce a stress capital buffer based on firm-specific stress test performance, which would effectively replace the non-stress capital conservation buffer. The proposal would also make 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, and eliminating the 30% dividend payout ratio as a criterion for heightened scrutiny of a firm’s capital plan. In December 2017, the Basel Committee 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. At this time, how the FRB proposal and the Basel Committee revisions will be harmonized and finalized in the United States is not clear or predictable, and we continue to evaluate the impacts these proposals and revisions may have on us.

Compliance with capital requirements is a strategic priority for Ally. We expect to be in compliance with all applicable requirements within the established timeframes.

Capital Planning and Stress Tests

Under the final rules implementing the EGRRCP Act, we are (1) made subject to supervisory stress testing on a two-year cycle rather than the previously required one-year cycle, (2) required to continue submitting an annual capital plan to the FRB, (3) allowed to continue excluding accumulated other comprehensive income from regulatory capital, (4) exempted from company-run capital stress testing, and (5) allowed to remain exempted from the supplementary leverage ratio and the countercyclical capital buffer.

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 its risks and above the minimum regulatory capital ratios, and will serve as a source of strength to Ally Bank. The FRB will either object to the plan, in whole or in part, or provide a notice of non-objection. If the FRB objects to the plan, or if certain material events occur after submission of the plan, we must submit a revised plan to the FRB within 30 days. Even if the FRB does not object to the plan, we may be precluded from or limited in paying dividends or other capital distributions without the FRB’s approval under certain circumstances—for example, when we would not meet minimum regulatory capital ratios and capital buffers after giving effect to the distributions.

In October 2019, the FRB noted its intent to propose changes to the capital-plan rule, including for the purpose of providing Category IV firms like us with additional flexibility in developing their annual capital plans. At this time, the impacts that such a potential future proposal may have on us are not clear.

The following table presents information related to our common stock and distributions to our common stockholders over the last eight quarters.

		Common stock repurchased during period (a)							Number of common shares outstanding						Cash dividends declared per common share (b)
($ in millions, except per share data; shares in thousands)		Approximate dollar value				Number of shares			Beginning of period			End of period
2018
First quarter		$	185			6,473			437,054			432,691			$	0.13
Second quarter		195				7,280			432,691			425,752			0.13
Third quarter		250				9,194			425,752			416,591			0.15
Fourth quarter		309				12,121			416,591			404,900			0.15
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

(a)	Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(b)	On January 13, 2020, the Ally Board of Directors (our Board) declared a quarterly cash dividend of $0.19 per share on all common stock, payable on February 14, 2020. Refer to Note 31 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 this cycle are 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, representing a 25% increase over our previously announced program. Additionally, on January 13, 2020, our Board declared a quarterly cash dividend of $0.19 per share of our common stock. Refer to Note 31 for further information on the most recent dividend.

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 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, 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 at any time.

Depository Institutions

Ally Bank is a member of the Federal Reserve System and is subject to regulation, supervision, and examination by the FRB and the UDFI. Ally Bank’s deposits are insured by the FDIC, and Ally Bank is required to file periodic reports with the FDIC concerning its financial condition. Total assets of Ally Bank were $167.5 billion and $159.0 billion at December 31, 2019, and 2018, respectively. Federal and Utah law place a number of conditions, restrictions, and limitations on dividends and other capital distributions that may be paid by Ally Bank to Ally. Dividends or other distributions made by Ally Bank to Ally were $2.0 billion and $2.6 billion in 2019 and 2018, respectively.

The FRB requires banks to maintain minimum average reserve balances. The amount of the required reserve balance for Ally Bank was $416 million and $279 million at December 31, 2019, and 2018, respectively.

Ally Bank is required to satisfy regulatory net worth requirements. Failure to meet minimum capital requirements can initiate certain mandatory actions by federal, state, and foreign agencies that could have a material effect on our results of operations and financial condition. Ally Bank was in compliance with these requirements at December 31, 2019.

---

Insurance Companies

Certain of our Insurance operations are subject to certain minimum aggregate capital requirements, net asset and dividend restrictions under applicable state and foreign insurance laws, and the rules and regulations promulgated by various U.S. and foreign regulatory agencies. Under various state and foreign insurance regulations, dividend distributions may be made only from statutory unassigned surplus, with approvals required from the regulatory authorities for dividends in excess of certain statutory limitations. At December 31, 2019, the maximum dividend that could be paid by the U.S. insurance subsidiaries over the next 12 months without prior statutory approval was $129 million.

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-sale 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 (loss). 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.

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 over-the-counter (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 years ended December 31, 2019, 2018, or 2017.

We placed noncash collateral totaling $118 million supporting our derivative positions at December 31, 2019, compared to $26 million and $105 million of cash and noncash collateral, respectively, at December 31, 2018, 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 15 for details on the repurchase agreements. The receivables for cash collateral placed are included on our Consolidated Balance Sheet in other assets.

We received cash and noncash collateral from counterparties totaling $40 million and $29 million, respectively, in accounts maintained by counterparties at December 31, 2019, compared to $30 million and $3 million of cash and noncash collateral at December 31, 2018. These amounts include collateral received from clearinghouses and exclude cash and noncash collateral pledged under repurchase agreements. Refer to Note 15 for details on repurchase agreements. The payables for cash collateral received are included on our 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.

---

Balance Sheet Presentation

The following table summarizes the amounts of derivative instruments reported on our 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 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.

		2019												2018
		Derivative contracts in a								Notional amount				Derivative contracts in a								Notional amount
December 31, ($ in millions)		receivable position				payable position								receivable position				payable position
Derivatives designated as accounting hedges
Interest rate contracts
Swaps		$	—			$	—			$	17,101			$	—			$	—			$	24,203
Purchased options		62				—				14,100				—				—				—
Foreign exchange contracts
Forwards		—				3				157				1				—				136
Total derivatives designated as accounting hedges		62				3				31,358				1				—				24,339
Derivatives not designated as accounting hedges
Interest rate contracts
Futures and forwards		—				—				81				—				—				11
Written options		2				—				522				—				37				6,793
Purchased options		—				—				416				37				—				6,742
Total interest rate risk		2				—				1,019				37				37				13,546
Foreign exchange contracts
Futures and forwards		—				2				112				3				—				181
Total foreign exchange risk		—				2				112				3				—				181
Total derivatives not designated as accounting hedges		2				2				1,131				40				37				13,727
Total derivatives		$	64			$	5			$	32,489			$	41			$	37			$	38,066

---

The following table presents amounts recorded on our Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges.

December 31, ($ 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)
		2019				2018				2019				2018				2019				2018
Assets
Available-for-sale securities (b) (c)		$	1,217			$	1,485			$	18			$	—			$	18			$	(5	)
Finance receivables and loans, net (d)		33,312				40,850				135				24				44				5
Liabilities
Long-term debt		$	11,995			$	13,001			$	24			$	67			$	127			$	67

(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. Refer to Note 8 for a reconciliation of the amortized cost and fair value of available-for-sale securities.

(c)

Includes the amortized cost basis of 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. At December 31, 2019, the amortized cost basis of the closed portfolios used in these hedging relationships was $230 million, the amount identified as the last of layer in the discontinued hedge relationship was $200 million, and the basis adjustment associated with the discontinued last-of-layer relationships was a $2 million asset, 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. At December 31, 2018, the amortized cost basis of the closed portfolios used in these hedging relationships was $47 million, the amount identified as the last of layer in the hedge relationship was $28 million, and there was no basis adjustment associated with the last-of-layer relationships.

(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 as of December 31, 2019, and $21.4 billion as of December 31, 2018. The basis adjustment associated with the open last-of-layer relationship was a $91 million asset as of December 31, 2019, and a $19 million asset as of December 31, 2018, 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 $12.8 billion at December 31, 2019. The basis adjustment associated with the discontinued last-of-layer relationship was a $43 million asset as of December 31, 2019, which was allocated across the entire remaining pool upon termination of the hedge relationship.

Statement of 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 Consolidated Statement of Income.

Year ended December 31, ($ in millions)	2019				2018				2017
Gain (loss) recognized in earnings
Interest rate contracts
Gain on mortgage and automotive loans, net	$	1			$	—			$	1
Other income, net of losses	(11		)		—				(3		)
Total interest rate contracts	(10		)		—				(2		)
Foreign exchange contracts
Other income, net of losses	—				13				(7		)
Other operating expenses	(4		)		—				—
Total foreign exchange contracts	(4		)		13				(7		)
Total (loss) gain recognized in earnings	$	(14	)		$	13			$	(9	)

---

The following table summarizes the location and amounts of gains and losses on derivative instruments designated as fair value and cash flow hedges reported in our Consolidated Statement of 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
Year ended December 31, ($ in millions)	2019			2018			2017				2019			2018			2017				2019			2018			2017				2019			2018			2017
Gain (loss) on fair value hedging relationships
Interest rate contracts
Hedged fixed-rate unsecured debt	$	—		$	—		$	—			$	—		$	—		$	—			$	—		$	—		$	—			$	41		$	62		$	8
Derivatives designated as hedging instruments on fixed-rate unsecured debt	—			—			—				—			—			—				—			—			—				(41		)	(61		)	(3		)
Hedged fixed-rate FHLB advances	—			—			—				—			—			—				—			—			—				—			47			22
Derivatives designated as hedging instruments on fixed-rate FHLB advances	—			—			—				—			—			—				—			—			—				—			(47		)	(22		)
Hedged available-for-sale securities	—			—			—				28			(3		)	(1		)		—			—			—				—			—			—
Derivatives designated as hedging instruments on available-for-sale securities	—			—			—				(28		)	3			1				—			—			—				—			—			—
Hedged fixed-rate consumer automotive loans	138			19			(3		)		—			—			—				—			—			—				—			—			—
Derivatives designated as hedging instruments on fixed-rate consumer automotive loans	(138		)	(19		)	1				—			—			—				—			—			—				—			—			—
Total (loss) gain on fair value hedging relationships	—			—			(2		)		—			—			—				—			—			—				—			1			5
(Loss) gain on cash flow hedging relationships
Interest rate contracts
Hedged deposit liabilities
Reclassified from accumulated other comprehensive income into income	—			—			—				—			—			—				(4		)	1			—				—			—			—
Hedged variable-rate borrowings
Reclassified from accumulated other comprehensive income into income	—			—			—				—			—			—				—			—			—				15			1			—
Total (loss) gain on cash flow hedging relationships	$	—		$	—		$	—			$	—		$	—		$	—			$	(4	)	$	1		$	—			$	15		$	1		$	—
Total amounts presented in the Consolidated Statement of Income	$	7,337		$	6,688		$	5,819			$	955		$	788		$	599			$	2,538		$	1,735		$	1,077			$	1,570		$	1,753		$	1,653

During the next 12 months, we estimate $19 million of losses will be reclassified into pretax earnings from derivatives designated as cash flow hedges.

---

The following table summarizes 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 Consolidated Statement of 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
Year ended December 31, ($ in millions)	2019			2018			2017				2019			2018			2017				2019			2018			2017				2019			2018			2017
Gain (loss) on fair value hedging relationships
Interest rate contracts
Amortization of deferred unsecured debt basis adjustments	$	—		$	—		$	—			$	—		$	—		$	—			$	—		$	—		$	—			$	25		$	51		$	77
Interest for qualifying accounting hedges of unsecured debt	—			—			—				—			—			—				—			—			—				—			8			24
Amortization of deferred secured debt basis adjustments (FHLB advances)	—			—			—				—			—			—				—			—			—				(23		)	(17		)	(2		)
Interest for qualifying accounting hedges of secured debt (FHLB advances)	—			—			—				—			—			—				—			—			—				—			6			3
Amortization of deferred basis adjustments of available-for-sale securities	—			—			—				(3		)	—			—				—			—			—				—			—			—
Interest for qualifying accounting hedges of available-for-sale securities	—			—			—				2			(1		)	—				—			—			—				—			—			—
Amortization of deferred loan basis adjustments	(28		)	(14		)	(21		)		—			—			—				—			—			—				—			—			—
Interest for qualifying accounting hedges of consumer automotive loans held-for-investment	22			16			(1		)		—			—			—				—			—			—				—			—			—
Total (loss) gain on fair value hedging relationships	(6		)	2			(22		)		(1		)	(1		)	—				—			—			—				2			48			102
Gain (loss) on cash flow hedging relationships
Interest rate contracts
Interest for qualifying accounting hedges of variable-rate borrowings	—			—			—				—			—			—				—			—			—				—			8			(1		)
Interest for qualifying accounting hedges of deposit liabilities	—			—			—				—			—			—				(1		)	3			—				—			—			—
Interest for qualifying accounting hedges of variable-rate commercial loans	1			—			—				—			—			—				—			—			—				—			—			—
Total gain (loss) on cash flow hedging relationships	$	1		$	—		$	—			$	—		$	—		$	—			$	(1	)	$	3		$	—			$	—		$	8		$	(1	)

The following table summarizes the effect of cash flow hedges on accumulated other comprehensive income (loss).

Year ended December 31, ($ in millions)		2019				2018				2017
Interest rate contracts
(Loss) gain recognized in other comprehensive income (loss)		$	(23	)		$	10			$	5

---

The following table summarizes the effect of net investment hedges on accumulated other comprehensive income (loss) and the Consolidated Statement of Income.

Year ended December 31, ($ in millions)		2019				2018				2017
Foreign exchange contracts (a) (b)
(Loss) gain recognized in other comprehensive income (loss)		$	(6	)		$	12			$	(10	)

(a)	There were no amounts excluded from effectiveness testing for the years ended December 31, 2019, 2018, or 2017.

(b)	Gains and losses reclassified from accumulated other comprehensive income (loss) are reported as other income, net of losses, in the Consolidated Statement of Income. There were no amounts reclassified for the years ended December 31, 2019, 2018, or 2017.

The significant components of income tax expense from continuing operations were as follows.

Year ended December 31, ($ in millions)	2019				2018				2017
Current income tax (benefit) expense
U.S. federal	$	(2	)		$	(12	)		$	(17	)
Foreign	4				5				6
State and local	65				35				53
Total current expense	67				28				42
Deferred income tax expense (benefit)
U.S. federal	178				328				566
Foreign	2				—				—
State and local	(1		)		3				(27		)
Total deferred expense	179				331				539
Total income tax expense from continuing operations	$	246			$	359			$	581

A reconciliation of income tax expense from continuing operations with the amounts at the statutory U.S. federal income tax rate is shown in the following table.

Year ended December 31, ($ in millions)	2019				2018				2017
Statutory U.S. federal tax expense (a)	$	413			$	340			$	527
Change in tax resulting from
Valuation allowance change, excluding expirations	(219		)		(8		)		(49		)
State and local income taxes, net of federal income tax benefit (b)	50				26				7
Nondeductible expenses	29				28				4
Tax credits, excluding expirations	(27		)		(20		)		(12		)
Changes in unrecognized tax benefits	5				22				1
Tax law enactment	(1		)		(23		)		119
Other, net	(4		)		(6		)		(16		)
Total income tax expense from continuing operations	$	246			$	359			$	581

(a)	The statutory U.S. federal tax rate was 21% for both the years ended December 31, 2019, and 2018, and 35% for year ended December 31, 2017.

(b)	Amount for 2017 includes state deferred tax adjustments primarily offset in the valuation allowance change caption.

For the year ended December 31, 2019, consolidated income tax expense from continuing operations was driven by tax attributable to pretax earnings for the year, partially offset by a release of valuation allowance on foreign tax credit carryforwards during the second quarter of 2019. The valuation allowance release was primarily driven by our current capacity to engage in certain foreign securitization transactions and the market demand from investors related to these transactions, coupled with the anticipated timing of the forecasted expiration of certain foreign tax credit carryforwards. For the year ended December 31, 2018, consolidated income tax expense from continuing operations was largely driven by tax attributable to pretax earnings for the year. For the year ended December 31, 2017, consolidated income tax expense from continuing operations was largely driven by tax attributable to pretax earnings for the year and income tax expense attributable to changes to our net deferred tax assets as a result of the Tax Cuts and Jobs Act of 2017 (Tax Act), partially offset by changes to our valuation allowance balances related to capital-in-nature deferred tax assets and foreign tax credit carryforwards.

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.

The significant components of deferred tax assets and liabilities are reflected in the following table.

December 31, ($ in millions)	2019				2018
Deferred tax assets
Tax credit carryforwards	$	1,784			$	1,796
Adjustments to loan value	448				366
State and local taxes	153				168
Unearned insurance premiums	98				90
Other	214				257
Gross deferred tax assets	2,697				2,677
Valuation allowance	(837		)		(1,057		)
Deferred tax assets, net of valuation allowance	1,860				1,620
Deferred tax liabilities
Lease transactions	1,325				850
Deferred acquisition costs	366				321
Debt transactions	91				93
Other	87				56
Gross deferred tax liabilities	1,869				1,320
Net deferred tax (liabilities) assets (a)	$	(9	)		$	300

(a)

Amounts include $58 million and $317 million of net deferred tax assets included in other assets on our Consolidated Balance Sheet for tax jurisdictions in a total net deferred tax asset position at December 31, 2019, and 2018, respectively, and $67 million and $17 million included in accrued expenses and other liabilities on our Consolidated Balance Sheet for tax jurisdictions in a total net deferred tax liability position.

The following table summarizes net deferred tax assets including related valuation allowances at December 31, 2019.

($ in millions)		Deferred tax asset (liability)				Valuation allowance				Net deferred tax asset (liability)				Years of expiration
Tax credit carryforwards
Foreign tax credits		$	1,433			$	(737	)		$	696			2022–2029
General business credits		351				—				351				2025–2039
Total tax credit carryforwards		1,784				(737		)		1,047
Tax loss carryforwards
Net operating losses — federal		7			(a)	—				7				2027–2036
Net operating losses — state		176			(b)	(100		)		76				2020–2039
Total federal and state tax loss carryforwards		183				(100		)		83
Other net deferred tax liabilities		(1,139		)		—				(1,139		)		n/a
Net deferred tax assets (liabilities)		$	828			$	(837	)		$	(9	)

(a)	Federal net operating loss carryforwards are included in the other assets total disclosed in our deferred inventory table above.

(b)	State net operating loss carryforwards are included in the state and local taxes and other liabilities totals disclosed in our deferred inventory table above.

As of December 31, 2019, we continue to not assert that foreign earnings are indefinitely reinvested outside of the United States. Deferred tax liabilities for incremental U.S. tax that stem from temporary differences related to investment in foreign subsidiaries or corporate joint ventures are negligible and have been recognized as of December 31, 2019.

---

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits.

($ in millions)	2019				2018				2017
Balance at January 1,	$	44			$	15			$	14
Additions based on tax positions related to the current year	—				—				—
Additions for tax positions of prior years	11				29				3
Reductions for tax positions of prior years	(5		)		—				(1		)
Settlements	(2		)		—				—
Expiration of statute of limitations	—				—				(1		)
Balance at December 31,	$	48			$	44			$	15

Included in the unrecognized tax benefits balances are some items, the recognition of which would not affect the effective tax rate, such as the tax effect of certain temporary differences and the portion of gross state unrecognized tax benefits that would be offset by the tax benefit of the associated federal deduction. At December 31, 2019, 2018, and 2017, the balance of unrecognized tax benefits that, if recognized, would affect our effective tax rate were $38 million, $34 million, and $12 million, respectively.

We recognize accrued interest and penalties related to uncertain income tax positions in interest expense and other operating expenses, respectively. For the years ended December 31, 2019, 2018, and 2017, the cumulative accrued balance for interest and penalties was less than $1 million and interest and penalties of $1 million or less were accrued each year.

It is reasonably possible that the unrecognized tax benefits will decrease by up to $36 million over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdictions.

We file tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. Our most significant operations are in the United States and Canada. The oldest tax years that remain subject to examination for those jurisdictions are 2016 and 2011, respectively.

23.    Share-based Compensation Plans

We grant Restricted Stock Units or Awards (RSUs) and Performance Stock Units or Awards (PSUs) to certain employees under the Ally Financial Inc. Incentive Compensation Plan (AICP). The AICP allows us to grant an array of equity-based and other incentive awards to our named executive officers and other employees. These awards are structured to align with long-term value creation for our stockholders, to provide appropriate incentives for participating employees, and to achieve the other objectives of our compensation philosophy. At December 31, 2019, we had 30,703,972 shares available for future grants of equity-based awards remaining under the AICP.

Our equity-based awards generally settle in Ally common stock and are classified as equity awards under GAAP. The cost of the awards is ratably charged to compensation and benefits expense in our Consolidated Statement of Income over their applicable service period and are based on the grant date fair value of Ally common stock. The awards typically include retirement eligibility and qualifying termination provisions, which fully vest as of the date upon meeting the eligibility requirements and are paid on the original settlement date.

PSUs and RSUs

PSUs are payable contingent upon Ally achieving certain predefined performance objectives over a three- year measurement period for 2019 granted awards, or a two-year measurement period for 2018, 2017, and 2016 granted awards. All PSUs granted have a three-year service condition. The number of awards payable upon vesting can range from zero to 150% of the grant amount. The PSUs settle in the form of Ally common stock. We accrue dividend equivalents for our PSUs that are paid upon vesting and based on the number of awards payable.

RSUs are awarded to employees at no cost to the recipient upon their grant. The compensation costs related to these awards are ratably charged to expense over the applicable service period. The majority of the existing RSUs settle in the form of Ally common stock. RSUs generally vest one third ratably each year over a three-year period starting on the date the award was issued and are converted into shares of common stock as of the vesting date. We accrue dividend equivalents for our RSUs that are paid upon vesting. Ally has awards that vested but were not yet distributed for the years ended December 31, 2019, 2018, and 2017.

---

The following table presents the changes in outstanding non-vested PSUs and RSUs activity during 2019.

(in thousands, except per share data)	Number of units			Weighted-average grant date fair value per share
RSUs and PSUs
Outstanding non-vested at January 1, 2019	4,864			$	23.71
Granted	3,007			26.29
Vested	(3,411	)		22.37
Forfeited	(93	)		26.28
Outstanding non-vested at December 31, 2019	4,367			26.48

We recognized expense related to PSUs and RSUs of $67 million, $72 million, and $60 million for the years ended December 31, 2019, 2018, and 2017, respectively.

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.

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 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 credit valuation adjustment (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
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.

---

		Recurring fair value measurements
December 31, 2018 ($ in millions)		Level 1				Level 2				Level 3				Total
Assets
Investment securities
Equity securities (a)		$	766			$	—			$	7			$	773
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies		1,850				1				—				1,851
U.S. States and political subdivisions		—				802				—				802
Foreign government		7				138				—				145
Agency mortgage-backed residential		—				17,138				—				17,138
Mortgage-backed residential		—				2,686				—				2,686
Agency mortgage-backed commercial		—				3				—				3
Mortgage-backed commercial		—				714				—				714
Asset-backed		—				723				—				723
Corporate debt		—				1,241				—				1,241
Total available-for-sale securities		1,857				23,446				—				25,303
Mortgage loans held-for-sale (b)		—				—				8				8
Interests retained in financial asset sales		—				—				4				4
Derivative contracts in a receivable position
Interest rate		—				37				—				37
Foreign currency		—				4				—				4
Total derivative contracts in a receivable position		—				41				—				41
Total assets		$	2,623			$	23,487			$	19			$	26,129
Liabilities
Accrued expenses and other liabilities
Derivative contracts in a payable position
Interest rate		$	—			$	37			$	—			$	37
Total derivative contracts in a payable position		—				37				—				37
Total liabilities		$	—			$	37			$	—			$	37

(a)	Our investment in any one industry did not exceed 9%.

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

---

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 Dec. 31, 2019			Net unrealized gains still held at December 31, 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
Investment securities
Equity securities	$	7		$	5		(a)	$	—		$	—		$	—		$	—		$	(4	)	$	8		$	5		$	—
Available-for-sale securities	—			—				—			2			—			—			—			2			—			—
Mortgage loans held-for-sale (b)	8			12			(c)	—			742			(732		)	—			—			30			—			—
Finance receivables and loans, net (b)	—			1			(d)	—			15			—			—			(5		)	11			—			—
Other assets
Interests retained in financial asset sales	4			—				—			—			—			—			(2		)	2			—			—
Derivative assets, net of derivative liabilities	—			2			(c)	—			—			—			—			—			2			2			—
Total assets	$	19		$	20			$	—		$	759		$	(732	)	$	—		$	(11	)	$	55		$	7		$	—

(a)	Reported as other gain on investments, net, in the Consolidated Statement of Income.

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

(c)	Reported as gain on mortgage and automotive loans, net, in the Consolidated Statement of Income.

(d)	Reported as interest and fees on finance receivables and loans in the Consolidated Statement of Income.

	Level 3 recurring fair value measurements
	Fair value at Jan. 1, 2018			Net realized/unrealized (losses) gains							Purchases			Sales			Issuances			Settlements			Fair value at Dec. 31, 2018			Net unrealized losses still held at December 31, 2018
($ in millions)				included in earnings				included in OCI																		included in earnings			included in OCI
Assets
Equity securities	$	19		$	(7	)	(a)	$	—		$	—		$	—		$	—		$	(5	)	$	7		$	(10	)	$	—
Mortgage loans held-for-sale (b)	13			5			(c)	—			303			(313		)	—			—			8			—			—
Other assets
Interests retained in financial asset sales	5			—				—			—			—			—			(1		)	4			—			—
Derivative assets	1			(1		)	(c)	—			—			—			—			—			—			—			—
Total assets	$	38		$	(3	)		$	—		$	303		$	(313	)	$	—		$	(6	)	$	19		$	(10	)	$	—

(a)	Reported as other gain on investments, net, in the Consolidated Statement of Income.

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

(c)	Reported as gain on mortgage and automotive loans, net, in the Consolidated Statement of Income.

---

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 December 31, 2019, and December 31, 2018, respectively. The amounts are 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
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 allowance, loan loss allowance, or cumulative impairment.

(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.

---

		Nonrecurring fair value measurements																Lower-of-cost or fair value reserve, valuation reserve, or cumulative adjustments				Total gain (loss) included in earnings
December 31, 2018 ($ in millions)		Level 1				Level 2				Level 3				Total
Assets
Loans held-for-sale, net
Automotive (a)		$	—			$	—			$	210			$	210			$	(2	)		n/m	(b)
Other		—				—				96				96				—				n/m	(b)
Total loans held-for-sale, net		—				—				306				306				(2		)		n/m	(b)
Commercial finance receivables and loans, net (c)
Automotive		—				—				84				84				(10		)		n/m	(b)
Other		—				—				55				55				(46		)		n/m	(b)
Total commercial finance receivables and loans, net		—				—				139				139				(56		)		n/m	(b)
Other assets
Nonmarketable equity investments		—				—				1				1				(1		)		n/m	(b)
Equity-method investments		—				—				3				3				—				n/m	(b)
Repossessed and foreclosed assets (d)		—				—				13				13				(1		)		n/m	(b)
Total assets		$	—			$	—			$	462			$	462			$	(60	)		n/m

n/m = not meaningful

(a)	Represents loans within our commercial automotive portfolio. Of this amount, $104 million was valued based upon a sales price for a transaction that closed in January 2019, and $106 million was valued using a discounted cash flow analysis, with a spread over forward interest rates as a significant unobservable input utilizing a range of 0.08–1.09% and weighted average of 0.72%.

(b)

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 allowance, loan loss allowance, or cumulative impairment.

(c)	Represents the portion of the portfolio specifically impaired during 2018. The related valuation allowance represents the cumulative adjustment to fair value of those specific receivables.

(d)	The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.

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 December 31, 2019, and December 31, 2018.

					Estimated fair value
($ in millions)	Carrying value				Level 1				Level 2				Level 3				Total
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
December 31, 2018
Financial assets
Held-to-maturity securities	$	2,362			$	—			$	2,307			$	—			$	2,307
Loans held-for-sale, net	306				—				—				306				306
Finance receivables and loans, net	128,684				—				—				130,878				130,878
FHLB/FRB stock (a)	1,351				—				1,351				—				1,351
Financial liabilities
Deposit liabilities	$	51,985			$	—			$	—			$	51,997			$	51,997
Short-term borrowings	9,987				—				—				9,992				9,992
Long-term debt	44,193				—				23,846				21,800				45,646

(a)	Included in other assets on our Consolidated Balance Sheet.

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.

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 December 31, 2019, these instruments are reported as gross assets and gross liabilities on the Consolidated Balance Sheet.

---

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 Consolidated Balance Sheet				Net amounts of assets/liabilities presented on the Consolidated Balance Sheet
														Gross amounts not offset on the Consolidated Balance Sheet
December 31, ($ in millions)														Financial instruments				Collateral (a) (b) (c)				Net amount
2019
Assets
Derivative assets in net asset positions (d)		$	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 (d)		$	5			$	—			$	5			$	—			$	(4	)		$	1
Total liabilities		$	5			$	—			$	5			$	—			$	(4	)		$	1
2018
Assets
Derivative assets in net asset positions		$	41			$	—			$	41			$	—			$	(4	)		$	37
Total assets (d)		$	41			$	—			$	41			$	—			$	(4	)		$	37
Liabilities
Derivative liabilities in net liability positions (d)		$	37			$	—			$	37			$	—			$	—			$	37
Securities sold under agreements to repurchase (e)		685				—				685				—				(685		)		—
Total liabilities		$	722			$	—			$	722			$	—			$	(685	)		$	37

(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 and $3 million of noncash derivative collateral pledged to us that was excluded at December 31, 2019, and 2018, respectively, and $4 million of noncash collateral associated with our repurchase agreements pledged to us that was excluded at December 31, 2018. We do not record such collateral received on our 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 and $7 million at December 31, 2019, and 2018, respectively. We have not sold or pledged any of the noncash collateral received under these agreements as of both December 31, 2019, and December 31, 2018.

(d)	For additional information on derivative instruments and hedging activities, refer to Note 21.

(e)	For additional information on securities sold under agreements to repurchase, refer to Note 15.

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 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 non-bank 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 funds-transfer pricing (FTP) and treasury asset liability management (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.

---

Financial information for our reportable operating segments is summarized as follows.

Year ended December 31, ($ in millions)		Automotive Finance operations				Insurance operations				Mortgage Finance operations				Corporate Finance operations				Corporate and Other				Consolidated (a)
2019
Net financing revenue and other interest income		$	4,141			$	54			$	171			$	239			$	28			$	4,633
Other revenue		249				1,274				22				45				171				1,761
Total net revenue		4,390				1,328				193				284				199				6,394
Provision for loan losses		962				—				5				36				(5		)		998
Total noninterest expense		1,810				1,013				148				95				363				3,429
Income (loss) from continuing operations before income tax expense		$	1,618			$	315			$	40			$	153			$	(159	)		$	1,967
Total assets		$	113,863			$	8,547			$	16,279			$	5,787			$	36,168			$	180,644
2018
Net financing revenue and other interest income		$	3,769			$	54			$	179			$	204			$	184			$	4,390
Other revenue		269				981				7				38				119				1,414
Total net revenue		4,038				1,035				186				242				303				5,804
Provision for loan losses		920				—				1				12				(15		)		918
Total noninterest expense		1,750				955				140				86				333				3,264
Income (loss) from continuing operations before income tax expense		$	1,368			$	80			$	45			$	144			$	(15	)		$	1,622
Total assets		$	117,304			$	7,734			$	15,211			$	4,670			$	33,950			$	178,869
2017
Net financing revenue and other interest income		$	3,713			$	59			$	132			$	167			$	150			$	4,221
Other revenue		355				1,059				4				45				81				1,544
Total net revenue		4,068				1,118				136				212				231				5,765
Provision for loan losses		1,134				—				8				22				(16		)		1,148
Total noninterest expense		1,714				950				108				76				262				3,110
Income (loss) from continuing operations before income tax expense		$	1,220			$	168			$	20			$	114			$	(15	)		$	1,507
Total assets		$	114,089			$	7,464			$	11,708			$	3,979			$	29,908			$	167,148

(a)	Net financing revenue and other interest income after the provision for loan losses totaled $3.6 billion, $3.5 billion, and $3.1 billion for the years ended December 31, 2019, 2018, and 2017, respectively.

Certain of our senior notes issued by the parent are guaranteed by 100% directly owned subsidiaries of Ally (the Guarantors). As of December 31, 2019, the Guarantors include Ally US LLC and IB Finance Holding Company, LLC (IB Finance), each of which fully and unconditionally guarantee the senior notes on a joint and several basis.

The following financial statements present condensed consolidating financial data for (i) Ally Financial Inc. (on a parent company-only basis); (ii) the Guarantors; (iii) the nonguarantor subsidiaries (all other subsidiaries); and (iv) a column for adjustments to arrive at (v) the information for the parent company, the Guarantors, and nonguarantors on a consolidated basis.

Investment in subsidiaries is accounted for by the parent company and the Guarantors using the equity method for this presentation. Results of operations of subsidiaries are therefore classified in the parent company’s and Guarantors’ investment in subsidiaries accounts. The elimination entries set forth in the following condensed consolidating financial statements eliminate distributed and undistributed income of subsidiaries, investment in subsidiaries, and intercompany balances and transactions between the parent, the Guarantors, and nonguarantors.

---

Condensed Consolidating Statements of Comprehensive Income

Year ended December 31, 2019 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Financing revenue and other interest income
Interest and fees on finance receivables and loans		$	(225	)		$	—			$	7,570			$	(8	)		$	7,337
Interest and fees on finance receivables and loans — intercompany		11								6				(17		)		—
Interest on loans held-for-sale		—								17				—				17
Interest and dividends on investment securities and other earning assets		—				—				955				—				955
Interest on cash and cash equivalents		10				—				68				—				78
Interest on cash and cash equivalents — intercompany		14				—				17				(31		)		—
Operating leases		2				—				1,468				—				1,470
Total financing (loss) revenue and other interest income		(188		)		—				10,101				(56		)		9,857
Interest expense
Interest on deposits		—				—				2,538				—				2,538
Interest on short-term borrowings		53				—				82				—				135
Interest on long-term debt		849				—				721				—				1,570
Interest on intercompany debt		23				—				25				(48		)		—
Total interest expense		925				—				3,366				(48		)		4,243
Net depreciation expense on operating lease assets		3				—				978				—				981
Net financing (loss) revenue and other interest income		(1,116		)		—				5,757				(8		)		4,633
Cash dividends from subsidiaries
Bank subsidiary		1,950				1,950				—				(3,900		)		—
Nonbank subsidiaries		436				—				—				(436		)		—
Other revenue
Insurance premiums and service revenue earned		—				—				1,087				—				1,087
Gain on mortgage and automotive loans, net		4				—				24				—				28
Other gain on investments, net		2				—				241				—				243
Other income, net of losses		337				—				611				(545		)		403
Total other revenue		343				—				1,963				(545		)		1,761
Total net revenue		1,613				1,950				7,720				(4,889		)		6,394
Provision for loan losses		35				—				981				(18		)		998
Noninterest expense
Compensation and benefits expense		36				—				1,186				—				1,222
Insurance losses and loss adjustment expenses		—				—				321				—				321
Other operating expenses		590				—				1,841				(545		)		1,886
Total noninterest expense		626				—				3,348				(545		)		3,429
Income from continuing operations before income tax expense and undistributed income of subsidiaries		952				1,950				3,391				(4,326		)		1,967
Income tax (benefit) expense from continuing operations		(566		)		—				812				—				246
Net income from continuing operations		1,518				1,950				2,579				(4,326		)		1,721
Loss from discontinued operations, net of tax		(6		)		—				—				—				(6		)
Undistributed income of subsidiaries
Bank subsidiary		210				210				—				(420		)		—
Nonbank subsidiaries		(7		)		—				—				7				—
Net income		1,715				2,160				2,579				(4,739		)		1,715
Other comprehensive income, net of tax		654				492				685				(1,177		)		654
Comprehensive income		$	2,369			$	2,652			$	3,264			$	(5,916	)		$	2,369

---

Year ended December 31, 2018 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Financing revenue and other interest income
Interest and fees on finance receivables and loans		$	(40	)		$	—			$	6,728			$	—			$	6,688
Interest and fees on finance receivables and loans — intercompany		12				—				5				(17		)		—
Interest on loans held-for-sale		—				—				15				—				15
Interest and dividends on investment securities and other earning assets		—				—				789				(1		)		788
Interest on cash and cash equivalents		8				—				64				—				72
Interest on cash and cash equivalents — intercompany		8				—				9				(17		)		—
Operating leases		5				—				1,484				—				1,489
Total financing (loss) revenue and other interest income		(7		)		—				9,094				(35		)		9,052
Interest expense
Interest on deposits		—				—				1,735				—				1,735
Interest on short-term borrowings		44				—				105				—				149
Interest on long-term debt		1,009				—				744				—				1,753
Interest on intercompany debt		15				—				20				(35		)		—
Total interest expense		1,068				—				2,604				(35		)		3,637
Net depreciation expense on operating lease assets		8				—				1,017				—				1,025
Net financing (loss) revenue and other interest income		(1,083		)		—				5,473				—				4,390
Cash dividends from subsidiaries
Bank subsidiary		2,600				2,600				—				(5,200		)		—
Nonbank subsidiaries		443				—				—				(443		)		—
Other revenue
Insurance premiums and service revenue earned		—				—				1,022				—				1,022
Gain on mortgage and automotive loans, net		70				—				9				(54		)		25
Other loss on investments, net		—				—				(50		)		—				(50		)
Other income, net of losses		411				—				770				(764		)		417
Total other revenue		481				—				1,751				(818		)		1,414
Total net revenue		2,441				2,600				7,224				(6,461		)		5,804
Provision for loan losses		176				—				796				(54		)		918
Noninterest expense
Compensation and benefits expense		83				—				1,072				—				1,155
Insurance losses and loss adjustment expenses		—				—				295				—				295
Other operating expenses		681				—				1,897				(764		)		1,814
Total noninterest expense		764				—				3,264				(764		)		3,264
Income from continuing operations before income tax (benefit) expense and undistributed (loss) income of subsidiaries		1,501				2,600				3,164				(5,643		)		1,622
Income tax (benefit) expense from continuing operations		(300		)		—				659				—				359
Net income from continuing operations		1,801				2,600				2,505				(5,643		)		1,263
(Loss) income from discontinued operations, net of tax		(2		)		—				2				—				—
Undistributed (loss) income of subsidiaries
Bank subsidiary		(614		)		(614		)		—				1,228				—
Nonbank subsidiaries		78				—				—				(78		)		—
Net income		1,263				1,986				2,507				(4,493		)		1,263
Other comprehensive loss, net of tax		(289		)		(243		)		(308		)		551				(289		)
Comprehensive income		$	974			$	1,743			$	2,199			$	(3,942	)		$	974

---

Year ended December 31, 2017 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Financing revenue and other interest income
Interest and fees on finance receivables and loans		$	(27	)		$	—			$	5,846			$	—			$	5,819
Interest and fees on finance receivables and loans — intercompany		12				—				6				(18		)		—
Interest and dividends on investment securities and other earning assets		—				—				601				(2		)		599
Interest on cash and cash equivalents		7				—				30				—				37
Interest on cash and cash equivalents — intercompany		4				—				7				(11		)		—
Operating leases		11				—				1,856				—				1,867
Total financing revenue and other interest income		7				—				8,346				(31		)		8,322
Interest expense
Interest on deposits		3				—				1,078				(4		)		1,077
Interest on short-term borrowings		60				—				67				—				127
Interest on long-term debt		1,101				—				552				—				1,653
Interest on intercompany debt		15				—				12				(27		)		—
Total interest expense		1,179				—				1,709				(31		)		2,857
Net depreciation expense on operating lease assets		11				—				1,233				—				1,244
Net financing (loss) revenue and other interest income		(1,183		)		—				5,404				—				4,221
Cash dividends from subsidiaries
Bank subsidiary		3,300				3,300				—				(6,600		)		—
Nonbank subsidiaries		752				—				—				(752		)		—
Other revenue
Insurance premiums and service revenue earned		—				—				973				—				973
Gain on mortgage and automotive loans, net		40				—				28				—				68
Other gain on investments, net		—				—				102				—				102
Other income, net of losses		675				—				834				(1,108		)		401
Total other revenue		715				—				1,937				(1,108		)		1,544
Total net revenue		3,584				3,300				7,341				(8,460		)		5,765
Provision for loan losses		465				—				683				—				1,148
Noninterest expense
Compensation and benefits expense		180				—				915				—				1,095
Insurance losses and loss adjustment expenses		—				—				332				—				332
Other operating expenses		899				—				1,892				(1,108		)		1,683
Total noninterest expense		1,079				—				3,139				(1,108		)		3,110
Income from continuing operations before income tax expense and undistributed (loss) income of subsidiaries		2,040				3,300				3,519				(7,352		)		1,507
Income tax expense from continuing operations		337				—				244				—				581
Net income from continuing operations		1,703				3,300				3,275				(7,352		)		926
Income (loss) from discontinued operations, net of tax		7				—				(4		)		—				3
Undistributed (loss) income of subsidiaries
Bank subsidiary		(1,168		)		(1,168		)		—				2,336				—
Nonbank subsidiaries		387				—				—				(387		)		—
Net income		929				2,132				3,271				(5,403		)		929
Other comprehensive income, net of tax		106				65				104				(169		)		106
Comprehensive income		$	1,035			$	2,197			$	3,375			$	(5,572	)		$	1,035

---

Condensed Consolidating Balance Sheet

December 31, 2019 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Assets
Cash and cash equivalents
Noninterest-bearing		$	49			$	—			$	570			$	—			$	619
Interest-bearing		5				—				2,931				—				2,936
Interest-bearing — intercompany		2,051				—				1,087				(3,138		)		—
Total cash and cash equivalents		2,105				—				4,588				(3,138		)		3,555
Equity securities		—				—				616				—				616
Available-for-sale securities		—				—				30,284				—				30,284
Held-to-maturity securities		—				—				1,578				(10		)		1,568
Loans held-for-sale, net		—				—				158				—				158
Finance receivables and loans, net
Finance receivables and loans, net		2,167				—				126,054				10				128,231
Intercompany loans to
Nonbank subsidiaries		161				—				110				(271		)		—
Allowance for loan losses		(22		)		—				(1,241		)		—				(1,263		)
Total finance receivables and loans, net		2,306				—				124,923				(261		)		126,968
Investment in operating leases, net		1				—				8,863				—				8,864
Intercompany receivables from
Bank subsidiary		94				—				—				(94		)		—
Nonbank subsidiaries		50				—				77				(127		)		—
Investment in subsidiaries
Bank subsidiary		16,954				16,954				—				(33,908		)		—
Nonbank subsidiaries		6,535				—				—				(6,535		)		—
Premiums receivable and other insurance assets		—				—				2,558				—				2,558
Other assets		2,193				—				5,690				(1,810		)		6,073
Total assets		$	30,238			$	16,954			$	179,335			$	(45,883	)		$	180,644
Liabilities and equity
Deposit liabilities
Noninterest-bearing		$	—			$	—			$	119			$	—			$	119
Interest-bearing		1				—				120,632				—				120,633
Interest-bearing — intercompany		—				—				2,051				(2,051		)		—
Total deposit liabilities		1				—				122,802				(2,051		)		120,752
Short-term borrowings		2,581				—				2,950				—				5,531
Long-term debt		11,389				—				22,638				—				34,027
Intercompany debt to
Bank subsidiary		10				—				—				(10		)		—
Nonbank subsidiaries		1,197				—				161				(1,358		)		—
Intercompany payables to
Bank subsidiary		18				—				—				(18		)		—
Nonbank subsidiaries		98				—				133				(231		)		—
Interest payable		145				—				496				—				641
Unearned insurance premiums and service revenue		—				—				3,305				—				3,305
Accrued expenses and other liabilities		383				—				3,371				(1,782		)		1,972
Total liabilities		15,822				—				155,856				(5,450		)		166,228
Total equity		14,416				16,954				23,479				(40,433		)		14,416
Total liabilities and equity		$	30,238			$	16,954			$	179,335			$	(45,883	)		$	180,644

---

December 31, 2018 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Assets
Cash and cash equivalents
Noninterest-bearing		$	55			$	—			$	755			$	—			$	810
Interest-bearing		5				—				3,722				—				3,727
Interest-bearing — intercompany		1,249				—				521				(1,770		)		—
Total cash and cash equivalents		1,309				—				4,998				(1,770		)		4,537
Equity securities		—				—				773				—				773
Available-for-sale securities		—				—				25,303				—				25,303
Held-to-maturity securities		—				—				2,382				(20		)		2,362
Loans held-for-sale, net		—				—				314				—				314
Finance receivables and loans, net
Finance receivables and loans, net		2,349				—				127,577				—				129,926
Intercompany loans to
Nonbank subsidiaries		882				—				397				(1,279		)		—
Allowance for loan losses		(55		)		—				(1,187		)		—				(1,242		)
Total finance receivables and loans, net		3,176				—				126,787				(1,279		)		128,684
Investment in operating leases, net		5				—				8,412				—				8,417
Intercompany receivables from
Bank subsidiary		158				—				—				(158		)		—
Nonbank subsidiaries		45				—				129				(174		)		—
Investment in subsidiaries
Bank subsidiary		16,213				16,213				—				(32,426		)		—
Nonbank subsidiaries		6,928				—				—				(6,928		)		—
Premiums receivable and other insurance assets		—				—				2,326				—				2,326
Other assets		2,226				—				5,453				(1,526		)		6,153
Total assets		$	30,060			$	16,213			$	176,877			$	(44,281	)		$	178,869
Liabilities and equity
Deposit liabilities
Noninterest-bearing		$	—			$	—			$	142			$	—			$	142
Interest-bearing		1				—				106,035				—				106,036
Interest-bearing — intercompany		—				—				1,249				(1,249		)		—
Total deposit liabilities		1				—				107,426				(1,249		)		106,178
Short-term borrowings		2,477				—				7,510				—				9,987
Long-term debt		12,774				—				31,419				—				44,193
Intercompany debt to
Bank subsidiary		20				—				—				(20		)		—
Nonbank subsidiaries		918				—				882				(1,800		)		—
Intercompany payables to
Bank subsidiary		45				—				—				(45		)		—
Nonbank subsidiaries		124				—				129				(253		)		—
Interest payable		159				—				364				—				523
Unearned insurance premiums and service revenue		—				—				3,044				—				3,044
Accrued expenses and other liabilities		274				—				2,962				(1,560		)		1,676
Total liabilities		16,792				—				153,736				(4,927		)		165,601
Total equity		13,268				16,213				23,141				(39,354		)		13,268
Total liabilities and equity		$	30,060			$	16,213			$	176,877			$	(44,281	)		$	178,869

---

Condensed Consolidating Statement of Cash Flows

Year ended December 31, 2019 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Operating activities
Net cash provided by operating activities		$	1,818			$	1,950			$	4,628			$	(4,346	)		$	4,050
Investing activities
Purchases of equity securities		—				—				(498		)		—				(498		)
Proceeds from sales of equity securities		—				—				814				—				814
Purchases of available-for-sale securities		—				—				(15,199		)		—				(15,199		)
Proceeds from sales of available-for-sale securities		—				—				7,079				—				7,079
Proceeds from repayments of available-for-sale securities		—				—				5,154				—				5,154
Purchases of held-to-maturity securities		—				—				(514		)		—				(514		)
Proceeds from repayments of held-to-maturity securities		—				—				302				—				302
Net change in investment securities — intercompany		—				—				10				(10		)		—
Purchases of finance receivables and loans held-for-investment		—				—				(4,974		)		535				(4,439		)
Proceeds from sales of finance receivables and loans initially held-for-investment		548				—				1,025				(535		)		1,038
Originations and repayments of finance receivables and loans held-for-investment and other, net		(253		)		—				4,497				8				4,252
Net change in loans — intercompany		718				—				284				(1,002		)		—
Purchases of operating lease assets		—				—				(4,023		)		—				(4,023		)
Disposals of operating lease assets		3				—				2,622				—				2,625
Acquisitions, net of cash acquired		—				—				(171		)		—				(171		)
Capital contributions to subsidiaries		(2		)		—				—				2				—
Returns of contributed capital		259				—				—				(259		)		—
Net change in nonmarketable equity investments		(13		)		—				203				—				190
Other, net		(4		)		—				(375		)		—				(379		)
Net cash provided by (used in) investing activities		1,256				—				(3,764		)		(1,261		)		(3,769		)
Financing activities
Net change in short-term borrowings — third party		104				—				(4,560		)		—				(4,456		)
Net increase in deposits		—				—				15,349				(802		)		14,547
Proceeds from issuance of long-term debt — third party		801				—				6,114				—				6,915
Repayments of long-term debt — third party		(2,173		)		—				(15,051		)		—				(17,224		)
Net change in debt — intercompany		271				—				(718		)		447				—
Repurchase of common stock		(1,039		)		—				—				—				(1,039		)
Dividends paid — third party		(273		)		—				—				—				(273		)
Dividends paid and returns of contributed capital — intercompany		—				(1,950		)		(2,646		)		4,596				—
Capital contributions from parent		—				—				2				(2		)		—
Net cash used in financing activities		(2,309		)		(1,950		)		(1,510		)		4,239				(1,530		)
Effect of exchange-rate changes on cash and cash equivalents and restricted cash		—				—				3				—				3
Net increase (decrease) in cash and cash equivalents and restricted cash		765				—				(643		)		(1,368		)		(1,246		)
Cash and cash equivalents and restricted cash at beginning of year		1,398				—				5,998				(1,770		)		5,626
Cash and cash equivalents and restricted cash at end of year		$	2,163			$	—			$	5,355			$	(3,138	)		$	4,380

---

The following table provides a reconciliation of cash and cash equivalents and restricted cash from the Condensed Consolidating Balance Sheet to the Condensed Consolidating Statement of Cash Flows.

December 31, 2019 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Cash and cash equivalents on the Condensed Consolidating Balance Sheet		$	2,105			$	—			$	4,588			$	(3,138	)		$	3,555
Restricted cash included in other assets on the Condensed Consolidating Balance Sheet (a)		58				—				767				—				825
Total cash and cash equivalents and restricted cash in the Condensed Consolidating Statement of Cash Flows		$	2,163			$	—			$	5,355			$	(3,138	)		$	4,380

(a)	Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 13 for additional details describing the nature of restricted cash balances.

---

Year ended December 31, 2018 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Operating activities
Net cash provided by operating activities		$	1,659			$	2,600			$	5,536			$	(5,645	)		$	4,150
Investing activities
Purchases of equity securities		—				—				(1,076		)		—				(1,076		)
Proceeds from sales of equity securities		—				—				787				—				787
Purchases of available-for-sale securities		—				—				(7,868		)		—				(7,868		)
Proceeds from sales of available-for-sale securities		—				—				852				—				852
Proceeds from repayments of available-for-sale securities		—				—				3,215				—				3,215
Purchases of held-to-maturity securities		—				—				(578		)		—				(578		)
Proceeds from repayments of held-to-maturity securities		—				—				147				—				147
Net change in investment securities — intercompany		—				—				54				(54		)		—
Purchases of finance receivables and loans held-for-investment		(131		)		—				(7,101		)		1,539				(5,693		)
Proceeds from sales of finance receivables and loans initially held-for-investment		1,596				—				34				(1,539		)		91
Originations and repayments of finance receivables and loans held-for-investment and other, net		3,489				—				(6,734		)		—				(3,245		)
Net change in loans — intercompany		(20		)		—				(2		)		22				—
Purchases of operating lease assets		—				—				(3,709		)		—				(3,709		)
Disposals of operating lease assets		10				—				3,079				—				3,089
Capital contributions to subsidiaries		(61		)		(6		)		—				67				—
Returns of contributed capital		266				—				—				(266		)		—
Net change in nonmarketable equity investments		(16		)		—				(165		)		—				(181		)
Other, net		—				—				(340		)		—				(340		)
Net cash provided by (used in) investing activities		5,133				(6		)		(19,405		)		(231		)		(14,509		)
Financing activities
Net change in short-term borrowings — third party		(694		)		—				(732		)		—				(1,426		)
Net (decrease) increase in deposits		(11		)		—				12,989				(111		)		12,867
Proceeds from issuance of long-term debt — third party		69				—				18,332				—				18,401
Repayments of long-term debt — third party		(4,774		)		—				(13,166		)		—				(17,940		)
Net change in debt — intercompany		(198		)		—				(10		)		208				—
Repurchase of common stock		(939		)		—				—				—				(939		)
Dividends paid — third party		(242		)		—				—				—				(242		)
Dividends paid and returns of contributed capital — intercompany		—				(2,600		)		(3,309		)		5,909				—
Capital contributions from parent		—				6				61				(67		)		—
Net cash (used in) provided by financing activities		(6,789		)		(2,594		)		14,165				5,939				10,721
Effect of exchange-rate changes on cash and cash equivalents and restricted cash		—				—				(5		)		—				(5		)
Net increase in cash and cash equivalents and restricted cash		3				—				291				63				357
Cash and cash equivalents and restricted cash at beginning of year		1,395				—				5,707				(1,833		)		5,269
Cash and cash equivalents and restricted cash at end of year		$	1,398			$	—			$	5,998			$	(1,770	)		$	5,626

The following table provides a reconciliation of cash and cash equivalents and restricted cash from the Condensed Consolidating Balance Sheet to the Condensed Consolidating Statement of Cash Flows.

December 31, 2018 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Cash and cash equivalents on the Condensed Consolidating Balance Sheet		$	1,309			$	—			$	4,998			$	(1,770	)		$	4,537
Restricted cash included in other assets on the Condensed Consolidating Balance Sheet (a)		89				—				1,000				—				1,089
Total cash and cash equivalents and restricted cash in the Condensed Consolidating Statement of Cash Flows		$	1,398			$	—			$	5,998			$	(1,770	)		$	5,626

(a)	Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 13 for additional details describing the nature of restricted cash balances.

---

Year ended December 31, 2017 ($ in millions)		Parent				Guarantors				Nonguarantors				Consolidating adjustments				Ally consolidated
Operating activities
Net cash provided by operating activities		$	4,591			$	3,300			$	3,466			$	(7,278	)		$	4,079
Investing activities
Purchases of equity securities		—				—				(899		)		—				(899		)
Proceeds from sales of equity securities		—				—				1,049				—				1,049
Purchases of available-for-sale securities		—				—				(10,335		)		—				(10,335		)
Proceeds from sales of available-for-sale securities		—				—				3,584				—				3,584
Proceeds from repayments of available-for-sale securities		—				—				2,899				—				2,899
Purchases of held-to-maturity securities		—				—				(1,026		)		—				(1,026		)
Proceeds from repayments of held-to-maturity securities		—				—				68				—				68
Net change in investment securities — intercompany		7				—				291				(298		)		—
Purchases of finance receivables and loans held-for-investment		(35		)		—				(5,417		)		—				(5,452		)
Proceeds from sales of finance receivables and loans initially held-for-investment		106				—				1,233				—				1,339
Originations and repayments of finance receivables and loans held-for-investment and other, net		860				—				33				(1,956		)		(1,063		)
Net change in loans — intercompany		2,068				—				217				(2,285		)		—
Purchases of operating lease assets		—				—				(4,052		)		—				(4,052		)
Disposals of operating lease assets		13				—				5,554				—				5,567
Capital contributions to subsidiaries		(1,212		)		(5		)		—				1,217				—
Returns of contributed capital		1,567				—				—				(1,567		)		—
Net change in nonmarketable equity investments		—				—				(187		)		—				(187		)
Other, net		(31		)		—				(99		)		(89		)		(219		)
Net cash provided by (used in) investing activities		3,343				(5		)		(7,087		)		(4,978		)		(8,727		)
Financing activities
Net change in short-term borrowings — third party		(453		)		—				(810		)		—				(1,263		)
Net (decrease) increase in deposits		(156		)		—				15,466				(1,138		)		14,172
Proceeds from issuance of long-term debt — third party		354				—				15,654				1,961				17,969
Repayments of long-term debt — third party		(6,111		)		—				(21,797		)		—				(27,908		)
Net change in debt — intercompany		(225		)		—				(2,074		)		2,299				—
Repurchase of common stock		(753		)		—				—				—				(753		)
Dividends paid — third party		(184		)		—				—				—				(184		)
Dividends paid and returns of contributed capital — intercompany		—				(3,300		)		(5,619		)		8,919				—
Capital contributions from parent		—				5				1,212				(1,217		)		—
Net cash (used in) provided by financing activities		(7,528		)		(3,295		)		2,032				10,824				2,033
Effect of exchange-rate changes on cash and cash equivalents and restricted cash		—				—				3				—				3
Net increase (decrease) in cash and cash equivalents and restricted cash		406				—				(1,586		)		(1,432		)		(2,612		)
Cash and cash equivalents and restricted cash at beginning of year		989				—				7,293				(401		)		7,881
Cash and cash equivalents and restricted cash at end of year		$	1,395			$	—			$	5,707			$	(1,833	)		$	5,269

Guarantees

Guarantees are defined as contracts or indemnification agreements that contingently require us to make payments to third parties based on changes in the underlying agreements with the guaranteed parties. The following summarizes our outstanding guarantees, including those of our discontinued operations, made to third parties on our Consolidated Balance Sheet, for the periods shown.

		2019								2018
December 31, ($ in millions)		Maximum liability				Carrying value of liability				Maximum liability				Carrying value of liability
Standby letters of credit and other guarantees		$	249			$	6			$	218			$	7

---

Our Corporate Finance operations has exposure to standby letters of credit that represent irrevocable guarantees of payment of specified financial obligations. Third-party beneficiaries primarily accept standby letters of credit as insurance in the event of nonperformance by our borrowers. Our borrowers may request letters of credit under their revolving loan facility up to a certain sub-limit amount. We may also require collateral to be posted by our borrowers. We received no cash collateral related to these letters of credit at December 31, 2019. Expiration dates on letters of credit range from certain ongoing commitments that will expire during the upcoming year to terms of several years for certain letters of credit. If the beneficiary draws under a letter of credit, we will be liable to the beneficiary for payment of the amount drawn under such letter of credit, with our recourse being a charge to the borrower’s loan facility or transfer of ownership to us of the related collateral. 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 the letters of credit are not necessarily indicative of future cash requirements.

In connection with our Ally Invest wealth management business, we introduce customer securities accounts to a clearing broker, which clears and maintains custody of all customer assets and account activity. We are responsible for obtaining from each customer such funds or securities as are required to be deposited or maintained in their accounts. As a result, we are liable for any loss, liability, damage, cost, or expense incurred or sustained by the clearing broker as a result of the failure of any customer to timely make payments or deposits of securities to satisfy their contractual obligations. In addition, customer securities activities are transacted on either a cash or margin basis. In margin transactions, we may extend credit to the customer, through our clearing broker, subject to various regulatory rules and margin lending practices, collateralized by cash and securities in the customer’s account. In connection with these activities, we also execute customer transactions involving the sale of securities not yet purchased. Such transactions may expose us to credit risk in the event the customer’s assets are not sufficient to fully cover losses, which the customer may incur. In the event the customer fails to satisfy its obligations, we will purchase or sell financial instruments in the customer’s account in order to fulfill the customer’s obligations. The maximum potential exposure under these arrangements is difficult to estimate; however, the potential for us to incur material losses pursuant to these arrangements is remote.

Commitments

Financing Commitments

The contractual commitments were as follows.

December 31, ($ in millions)		2019				2018
Unused revolving credit line commitments and other (a)		$	4,384			$	3,435
Commitments to provide capital to investees (b)		504				394
Mortgage loan origination commitments (c)		314				171
Home equity lines of credit (d)		226				253
Construction-lending commitments (e)		127				85

(a)	The unused portion of revolving lines of credit reset at prevailing market rates and, as such, approximate market value.

(b)	We are committed to contribute capital to certain investees.

(c)	Commitments with mortgage loan applicants in which the loan terms, including interest rate and price, are guaranteed for a designated period of time subject to the completion of underwriting procedures.

(d)	We are committed to fund the remaining unused balances on home equity lines of credit.

(e)	We are committed to fund the remaining unused balance while loans are in the construction period.

Revolving credit line commitments contain an element of credit risk. We manage the credit risk for unused revolving credit line commitments by applying the same credit policies in making commitments as we do for extending loans.

Lease Commitments

For details about our future minimum payments under operating leases with noncancelable lease terms, refer to Note 10.

Contractual Commitments

We have entered into multiple agreements for sponsorship, information technology, voice and communication technology, and related maintenance. Many of the agreements are subject to variable price provisions, fixed or minimum price provisions, and termination or renewal provisions.

Year ended December 31, ($ in millions)
2020		$	68
2021		38
2022		40
2023		37
2024		14
2025 and thereafter		27
Total future payment obligations		$	224

---

Concentration with GM and Chrysler

While we are continuing to diversify our automotive finance and insurance businesses and to expand into other financial services, General Motors Company (GM) and Fiat Chrysler Automobiles US LLC (Chrysler) dealers and their retail customers continue to constitute a significant portion of our customer base. GM, Chrysler, and their captive finance companies compete vigorously with us and could take further actions that negatively impact the amount of business that we do with GM and Chrysler dealers and their customers. Further, a significant adverse change in GM’s or Chrysler’s business—including, for example, in the production or sale of GM or Chrysler vehicles, the quality or resale value of GM or Chrysler vehicles, GM’s or Chrysler’s relationships with its key suppliers, or the rate or volume of recalls of GM or Chrysler vehicles—could negatively impact our GM and Chrysler dealer and retail customer bases and the value of collateral securing our extensions of credit to them. Any future reductions in GM and Chrysler business that we are not able to offset could adversely affect our business and financial results.

Legal Matters and Other Contingencies

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 for additional information on 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 our potentially material 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 jurisdiction. The request for relief includes 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 for a writ prohibiting the circuit court from taking further action other than vacating the order denying decertification—State of Missouri, ex. rel. Ally Financial Inc. v. Hon. Katherine Hardy Senkel, Case No. ED 108501—which was denied that same month. Later in

---

December 2019, Ally filed a petition with the Missouri Supreme Court for an equivalent writ of prohibition—State of Missouri, ex rel. Ally Financial Inc. v. Hon. Katherine Hardy Senkel, Case No. SC 98285—which remains pending. We intend to vigorously defend against this counterclaim.

($ in millions)		First quarter				Second quarter				Third quarter				Fourth quarter
2019
Net financing revenue and other interest income		$	1,132			$	1,157			$	1,188			$	1,156
Other revenue		466				395				413				487
Total net revenue		1,598				1,552				1,601				1,643
Provision for loan losses		282				177				263				276
Total noninterest expense		830				881				838				880
Income from continuing operations before income tax expense		486				494				500				487
Income tax expense (benefit) from continuing operations		111				(90		)		119				106
Net income from continuing operations		375				584				381				381
Loss from discontinued operations, net of tax		(1		)		(2		)		—				(3		)
Net income		$	374			$	582			$	381			$	378
Basic earnings per common share (a)
Net income from continuing operations		$	0.93			$	1.47			$	0.98			$	1.00
Net income		0.93				1.46				0.97				0.99
Diluted earnings per common share (a)
Net income from continuing operations		0.92				1.46				0.97				0.99
Net income		0.92				1.46				0.97				0.99
Cash dividends declared per common share		$	0.17			$	0.17			$	0.17			$	0.17
2018
Net financing revenue and other interest income		$	1,049			$	1,094			$	1,107			$	1,140
Other revenue		354				364				398				298
Total net revenue		1,403				1,458				1,505				1,438
Provision for loan losses		261				158				233				266
Total noninterest expense		814				839				807				804
Income from continuing operations before income tax expense		328				461				465				368
Income tax expense from continuing operations		76				113				91				79
Net income from continuing operations		252				348				374				289
(Loss) income from discontinued operations, net of tax		(2		)		1				—				1
Net income		$	250			$	349			$	374			$	290
Basic earnings per common share (a)
Net income from continuing operations		$	0.58			$	0.81			$	0.89			$	0.70
Net income		0.57				0.81				0.89				0.70
Diluted earnings per common share (a)
Net income from continuing operations		0.57				0.80				0.88				0.70
Net income		0.57				0.81				0.88				0.70
Cash dividends declared per common share		$	0.13			$	0.13			$	0.15			$	0.15

(a)	Earnings per share is calculated quarterly on an independent basis, therefore the total of the amounts presented for each year above may not reconcile to the annual amounts presented in Note 19.

---

Declaration of Quarterly Dividend

On January 13, 2020, our Board declared a quarterly cash dividend of $0.19 per share on all common stock, a $0.02 per share increase relative to our prior quarterly cash dividend. The dividend was paid on February 14, 2020, to stockholders of record at the close of business on January 31, 2020.

CardWorks Acquisition

On February 18, 2020, Ally announced its execution of a definitive 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. The acquisition is valued at approximately $2.65 billion, with approximately $1.35 billion in cash and approximately $1.30 billion in common stock of Ally. The consideration is subject to closing equity and other adjustments and to “fill or kill” rights. A possible “fill or kill” adjustment may arise if Ally’s stock price declines by more than 15%, a “fill or kill” termination right is exercised, and Ally elects to “fill” by issuing additional stock. The acquisition is expected to close in the third quarter of 2020 and is subject to the receipt of customary regulatory approvals and the satisfaction of other closing conditions. We filed a copy of the definitive agreement with the SEC on February 20, 2020.

---

---

---

---

(a)	Includes restricted stock units outstanding under the Incentive Compensation Plan and deferred stock units outstanding under the Non-Employee Directors Equity Compensation Plan.

(b)	Includes 22,011,576 securities available for issuance under the plans identified in (a) above and 1,801,925 securities available for issuance under Ally’s Employee Stock Purchase Plan.

---

---

---

---

---