Ally Financial (ALLY) 10-Q 2021 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021, or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                         to                         

Commission file number: 1-3754

Ally Financial Inc.

(Exact name of registrant as specified in its charter)

Delaware	38-0572512
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Ally Detroit Center

500 Woodward Avenue, Floor 10

Detroit, Michigan 48226

(Address of principal executive offices)

(Zip Code)

(866) 710-4623

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ALLY	NYSE
8.125% Fixed Rate/Floating Rate Trust Preferred Securities, Series 2 of GMAC Capital Trust I	ALLY PRA	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                    Yes ☑                    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                            Yes ☑                    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
						Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐                    No ☑

At April 29, 2021, the number of shares outstanding of the Registrant’s common stock was 370,680,573 shares.

1

INDEX

Ally Financial Inc. • Form 10-Q

		Page
	Glossary of Abbreviations and Acronyms	3
Part I — Financial Information
Item 1.	Financial Statements	5
	Condensed Consolidated Statement of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2021, and 2020	5
	Condensed Consolidated Balance Sheet (unaudited) at March 31, 2021, and December 31, 2020	7
	Condensed Consolidated Statement of Changes in Equity (unaudited) for the Three Months Ended March 31, 2021, and 2020	9
	Condensed Consolidated Statement of Cash Flows (unaudited) for the Three Months Ended March 31, 2021, and 2020	10
	Notes to Condensed Consolidated Financial Statements (unaudited)	12
	Note 1. Description of Business, Basis of Presentation, and Changes in Significant Accounting Policies	12
	Note 2. Revenue from Contracts with Customers	12
	Note 3. Other Income, Net of Losses	14
	Note 4. Reserves for Insurance Losses and Loss Adjustment Expenses	14
	Note 5. Other Operating Expenses	15
	Note 6. Investment Securities	16
	Note 7. Finance Receivables and Loans, Net	19
	Note 8. Leasing	26
	Note 9. Securitizations and Variable Interest Entities	29
	Note 10. Other Assets	31
	Note 11. Deposit Liabilities	32
	Note 12. Debt	32
	Note 13. Accrued Expenses and Other Liabilities	34
	Note 14. Accumulated Other Comprehensive Income	34
	Note 15. Earnings per Common Share	36
	Note 16. Regulatory Capital and Other Regulatory Matters	36
	Note 17. Derivative Instruments and Hedging Activities	40
	Note 18. Income Taxes	45
	Note 19. Fair Value	45
	Note 20. Offsetting Assets and Liabilities	52
	Note 21. Segment Information	53
	Note 22. Contingencies and Other Risks	55
	Note 23. Subsequent Events	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	101
Item 4.	Controls and Procedures	102
Part II — Other Information		103
Item 1.	Legal Proceedings	103
Item 1A.	Risk Factors	103
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	103
Item 3.	Defaults Upon Senior Securities	103
Item 4.	Mine Safety Disclosures	103
Item 5.	Other Information	103
Item 6.	Exhibits	104
Signatures		105

2

Index of Defined Terms

Ally Financial Inc. • Form 10-Q

Glossary of Abbreviations and Acronyms

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

Term	Definition
ABS	Asset-backed securities
ALCO	Asset-Liability Committee
ALM	Asset Liability Management
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
BHC Act	Bank Holding Company Act of 1956 as amended
BHC	Bank holding company
BMC	Better Mortgage Company
Board	Ally Board of Directors
CCAR	Comprehensive Capital Analysis and Review
CD	Certificate of deposit
CECL	Accounting Standards Update 2016-13 (and related Accounting Standards Updates), or current expected credit loss
COVID-19	Coronavirus disease 2019
CRA	Community Reinvestment Act of 1977 as amended
CSG	Commercial Services Group
CVA	Credit valuation adjustment
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 as amended
EGRRCP Act	Economic Growth, Regulatory Relief, and Consumer Protection Act as amended
ERMC	Enterprise Risk Management Committee
F&I	Finance and insurance
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
FDICIA	Federal Deposit Insurance Corporation Improvement Act of 1991 as amended
FHC	Financial holding company
FHLB	Federal Home Loan Bank
FRB	Federal Reserve Bank, or Board of Governors of the Federal Reserve System, as the context requires
FTP	Funds-transfer pricing
GAP	Guaranteed asset protection
GDP	Gross domestic product of the United States of America
GLB Act	Gramm-Leach-Bliley Act of 1999 as amended
GM	General Motors Company
IB Finance	IB Finance Holding Company, LLC
IRA	Individual retirement account
LCR	Liquidity coverage ratio
LIBOR	London Interbank Offered Rate
LMI	Low-to-moderate income
LTV	Loan-to-value
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
NYSE	New York Stock Exchange
OTC	Over-the-counter
P&C	Property and casualty
PCA	Prompt corrective action
RC	Risk Committee of the Ally Board of Directors
ROU	Right-of-use

3

Index of Defined Terms

Ally Financial Inc. • Form 10-Q

Term	Definition
RV	Recreational vehicle
RWA	Risk-weighted asset
SEC	U.S. Securities and Exchange Commission
Series 2 TRUPS	8.125% Fixed Rate/Floating Rate Trust Preferred Securities, Series 2 of GMAC Capital Trust I
SOFR	Secured Overnight Financing Rate
SPE	Special-purpose entity
Stellantis	Stellantis N.V.
TDR	Troubled debt restructuring
UPB	Unpaid principal balance
U.S. Basel III	The rules implementing the 2010 Basel III capital framework in the United States as well as related provisions of the Dodd-Frank Act, as amended from time to time
U.S. GAAP	Accounting Principles Generally Accepted in the United States of America
VIE	Variable interest entity
VMC	Vehicle maintenance contract
VSC	Vehicle service contract
WAC	Weighted-average coupon
wSTWF	Weighted short-term wholesale funding

4

Table of Contents PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statement of Comprehensive Income (unaudited)

Ally Financial Inc. • Form 10-Q

	Three months ended March 31,
($ in millions)		2021		2020
Financing revenue and other interest income
Interest and fees on finance receivables and loans		$	1,582	$	1,742
Interest on loans held-for-sale		5		2
Interest and dividends on investment securities and other earning assets		131		226
Interest on cash and cash equivalents		4		14
Operating leases		370		367
Total financing revenue and other interest income		2,092		2,351
Interest expense
Interest on deposits		306		592
Interest on short-term borrowings		1		17
Interest on long-term debt		250		348
Total interest expense		557		957
Net depreciation expense on operating lease assets		163		248
Net financing revenue and other interest income		1,372		1,146
Other revenue
Insurance premiums and service revenue earned		280		277
Gain (loss) on mortgage and automotive loans, net		36		(12)
Loss on extinguishment of debt		(1)		0
Other gain (loss) on investments, net		123		(79)
Other income, net of losses		127		80
Total other revenue		565		266
Total net revenue		1,937		1,412
Provision for credit losses		(13)		903
Noninterest expense
Compensation and benefits expense		395		360
Insurance losses and loss adjustment expenses		63		74
Other operating expenses		485		486
Total noninterest expense		943		920
Income (loss) from continuing operations before income tax expense		1,007		(411)
Income tax expense (benefit) from continuing operations		211		(92)
Net income (loss) from continuing operations		796		(319)
Net income (loss)		$	796	$	(319)
Other comprehensive (loss) income, net of tax		(604)		583
Comprehensive income		$	192	$	264

Statement continues on the next page.

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

5

Condensed Consolidated Statement of Comprehensive Income (unaudited)

Ally Financial Inc. • Form 10-Q

	Three months ended March 31,
(in dollars) (a)		2021		2020
Basic earnings per common share
Net income (loss) from continuing operations		$	2.12	$	(0.85)
Net income (loss)		$	2.12	$	(0.85)
Diluted earnings per common share (b)
Net income (loss) from continuing operations		$	2.11	$	(0.85)
Net income (loss)		$	2.11	$	(0.85)
Cash dividends declared per common share		$	0.19	$	0.19

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

(b)Due to the antidilutive effect of the net loss from continuing operations for the three months ended March 31, 2020, basic weighted-average common shares outstanding was used to calculate basic and diluted earnings per share.

Refer to Note 15 for additional earnings per share information. The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

6

Condensed Consolidated Balance Sheet (unaudited)

Ally Financial Inc. • Form 10-Q

($ in millions, except share data)	March 31, 2021		December 31, 2020
Assets
Cash and cash equivalents
Noninterest-bearing	$	747	$	724
Interest-bearing	15,031		14,897
Total cash and cash equivalents	15,778		15,621
Equity securities	1,068		1,071
Available-for-sale securities (amortized cost of $33,336 and $28,936) (a)	33,446		29,830
Held-to-maturity securities (fair value of $1,250 and $1,331)	1,197		1,253
Loans held-for-sale, net	630		406
Finance receivables and loans, net
Finance receivables and loans, net of unearned income	113,076		118,534
Allowance for loan losses	(3,152)		(3,283)
Total finance receivables and loans, net	109,924		115,251
Investment in operating leases, net	9,944		9,639
Premiums receivable and other insurance assets	2,725		2,679
Other assets	7,167		6,415
Total assets	$	181,879	$	182,165
Liabilities
Deposit liabilities
Noninterest-bearing	$	155	$	128
Interest-bearing	139,430		136,908
Total deposit liabilities	139,585		137,036
Short-term borrowings	0		2,136
Long-term debt	20,503		22,006
Interest payable	453		412
Unearned insurance premiums and service revenue	3,487		3,438
Accrued expenses and other liabilities	3,226		2,434
Total liabilities	167,254		167,462
Contingencies (refer to Note 22)
Equity
Common stock and paid-in capital ($0.01 par value, shares authorized 1,100,000,000; issued 503,643,221 and 501,237,055; and outstanding 371,804,633 and 374,674,415)	21,566		21,544
Accumulated deficit	(3,555)		(4,278)
Accumulated other comprehensive income	27		631
Treasury stock, at cost (131,838,588 and 126,562,640 shares)	(3,413)		(3,194)
Total equity	14,625		14,703
Total liabilities and equity	$	181,879	$	182,165

(a)Refer to Note 6 for discussion of investment securities pledged as collateral.

Statement continues on the next page.

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

7

Condensed Consolidated Balance Sheet (unaudited)

Ally Financial Inc. • Form 10-Q

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

($ in millions)	March 31, 2021		December 31, 2020
Assets
Finance receivables and loans, net
Consumer automotive	$	8,551	$	7,630
Commercial	3,911		5,868
Allowance for loan losses	(307)		(285)
Total finance receivables and loans, net	12,155		13,213
Other assets	1,266		983
Total assets	$	13,421	$	14,196
Liabilities
Long-term debt	$	3,553	$	4,158
Accrued expenses and other liabilities	4		3
Total liabilities	$	3,557	$	4,161

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

8

Condensed Consolidated Statement of Changes in Equity (unaudited)

Ally Financial Inc. • Form 10-Q

($ in millions)	Common stock and paid-in capital		Accumulated deficit		Accumulated other comprehensive income		Treasury stock		Total equity
Balance at December 31, 2019	$	21,438	$	(4,057)	$	123	$	(3,088)	$	14,416
Cumulative effect of changes in accounting principles, net of tax
Adoption of Accounting Standards Update 2016-13			(1,017)						(1,017)
Balance at January 1, 2020	$	21,438	$	(5,074)	$	123	$	(3,088)	$	13,399
Net loss			(319)						(319)
Share-based compensation	32								32
Other comprehensive income					583				583
Common stock repurchases							(104)		(104)
Common stock dividends ($0.19 per share)			(72)						(72)
Balance at March 31, 2020	$	21,470	$	(5,465)	$	706	$	(3,192)	$	13,519
Balance at December 31, 2020	$	21,544	$	(4,278)	$	631	$	(3,194)	$	14,703
Net income			796						796
Share-based compensation	22								22
Other comprehensive loss					(604)				(604)
Common stock repurchases							(219)		(219)
Common stock dividends ($0.19 per share)			(73)						(73)
Balance at March 31, 2021	$	21,566	$	(3,555)	$	27	$	(3,413)	$	14,625

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

9

Condensed Consolidated Statement of Cash Flows (unaudited)

Ally Financial Inc. • Form 10-Q

Three months ended March 31, ($ in millions)	2021		2020
Operating activities
Net income (loss)	$	796	$	(319)
Reconciliation of net income (loss) to net cash provided by operating activities
Depreciation and amortization	373		386
Provision for credit losses	(13)		903
(Gain) loss on mortgage and automotive loans, net	(36)		12
Other (gain) loss on investments, net	(123)		79
Loss on extinguishment of debt	1		0
Originations and purchases of loans held-for-sale	(1,175)		(366)
Proceeds from sales and repayments of loans held-for-sale	1,137		300
Net change in
Deferred income taxes	(19)		(87)
Interest payable	41		69
Other assets	78		44
Other liabilities	105		(290)
Other, net	5		83
Net cash provided by operating activities	1,170		814
Investing activities
Purchases of equity securities	(472)		(625)
Proceeds from sales of equity securities	589		117
Purchases of available-for-sale securities	(10,116)		(4,565)
Proceeds from sales of available-for-sale securities	2,327		3,817
Proceeds from repayments of available-for-sale securities	3,612		1,623
Purchases of held-to-maturity securities	(63)		0
Proceeds from repayments of held-to-maturity securities	118		70
Purchases of finance receivables and loans held-for-investment	(930)		(925)
Proceeds from sales of finance receivables and loans initially held-for-investment	164		1
Originations and repayments of finance receivables and loans held-for-investment and other, net	5,783		900
Purchases of operating lease assets	(1,269)		(1,138)
Disposals of operating lease assets	780		568
Net change in nonmarketable equity investments	29		(92)
Other, net	(100)		(76)
Net cash provided by (used in) investing activities	452		(325)
Statement continues on the next page.
The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

10

Condensed Consolidated Statement of Cash Flows (unaudited)

Ally Financial Inc. • Form 10-Q

Three months ended March 31, ($ in millions)	2021		2020
Financing activities
Net change in short-term borrowings	(2,136)		3,963
Net increase in deposits	2,545		1,565
Proceeds from issuance of long-term debt	56		788
Repayments of long-term debt	(1,340)		(3,939)
Repurchases of common stock	(219)		(104)
Dividends paid	(73)		(72)
Net cash (used in) provided by financing activities	(1,167)		2,201
Effect of exchange-rate changes on cash and cash equivalents and restricted cash	2		(4)
Net increase in cash and cash equivalents and restricted cash	457		2,686
Cash and cash equivalents and restricted cash at beginning of year	16,574		4,380
Cash and cash equivalents and restricted cash at March 31,	$	17,031	$	7,066
Supplemental disclosures
Cash paid for
Interest	$	492	$	869
Income taxes	4		2
Noncash items
Loans held-for-sale transferred to finance receivables and loans held-for-investment	4		11
Additions of property and equipment	46		0
Finance receivables and loans held-for-investment transferred to loans held-for-sale	329		0

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

March 31, ($ in millions)	2021		2020
Cash and cash equivalents on the Condensed Consolidated Balance Sheet	$	15,778	$	6,161
Restricted cash included in other assets on the Condensed Consolidated Balance Sheet (a)	1,253		905
Total cash and cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows	$	17,031	$	7,066

(a)Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 10 for additional details describing the nature of restricted cash balances.

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

11

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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

Ally Financial Inc. (together with its consolidated subsidiaries unless the context otherwise requires, Ally, the Company, or we, us, or our) is a leading digital financial-services company. As a customer-centric company with passionate customer service and innovative financial solutions, we are relentlessly focused on “Doing it Right” and being a trusted financial-services provider to our consumer, commercial, and corporate customers. We are one of the largest full-service automotive finance operations in the United States and offer a wide range of financial services and insurance products to automotive dealerships and consumers. Our award-winning digital direct bank (Ally Bank, Member FDIC and Equal Housing Lender) offers mortgage lending, point-of-sale personal lending, and a variety of deposit and other banking products, including savings, money-market, and checking accounts, CDs, and IRAs. Additionally, we offer securities-brokerage and investment-advisory services through Ally Invest. Our corporate-finance business offers capital for equity sponsors and middle-market companies. We are a Delaware corporation and are registered as a BHC under the BHC Act, and an FHC under the GLB Act.

Our accounting and reporting policies conform to U.S. GAAP. Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. 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 Condensed Consolidated Financial Statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and that affect income and expenses during the reporting period and related disclosures. In developing the estimates and assumptions, management uses all available evidence; however, actual results could differ because of uncertainties associated with estimating the amounts, timing, and likelihood of possible outcomes. Our most significant estimates pertain to the allowance for loan losses, valuations of automotive lease assets and residuals, fair value of financial instruments, and the determination of the provision for income taxes.

The Condensed Consolidated Financial Statements at March 31, 2021, and for the three months ended March 31, 2021, and 2020, are unaudited but reflect all adjustments that are, in management’s opinion, necessary for the fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements (and the related Notes) included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed on February 24, 2021, with the SEC.

Significant Accounting Policies

Income Taxes

In calculating the provision for interim income taxes, in accordance with ASC 740, Income Taxes, we apply an estimated annual effective tax rate to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. This method differs from that described in Note 1 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K, which describes our annual significant income tax accounting policy and related methodology.

Refer to Note 1 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K regarding additional significant accounting policies.

Recently Adopted Accounting Standards

Reference Rate Reform (ASU 2021-01)

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarified the scope of ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting, indicating that certain optional expedients and exceptions included in ASU 2020-04 are applicable to derivative instruments affected by the market-wide change in interest rates used for discounting, margining, or contract price alignment. We adopted the amendments in this ASU immediately upon issuance in January 2021 on a prospective basis and will apply this guidance, along with the guidance from ASU 2020-04, as contracts are modified through December 2022. The adoption did not have an immediate direct impact on our financial statements. We do not expect there to be a material impact to our financial statements.

2.    Revenue from Contracts with Customers

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

12

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The following table presents a disaggregated view of our revenue from contracts with customers. For further information regarding our revenue recognition policies and details about the nature of our respective revenue streams, refer to Note 1 and Note 3 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K.

Three months ended March 31, ($ in millions)	Automotive Finance operations		Insurance operations		Mortgage Finance operations		Corporate Finance operations		Corporate and Other		Consolidated
2021
Revenue from contracts with customers
Noninsurance contracts (a) (b) (c)	$	0	$	155	$	0	$	0	$	0	$	155
Remarketing fee income	27		0		0		0		0		27
Brokerage commissions and other revenue	0		0		0		0		20		20
Deposit account and other banking fees	0		0		0		0		6		6
Brokered/agent commissions	0		4		0		0		0		4
Other	6		0		0		0		0		6
Total revenue from contracts with customers	33		159		0		0		26		218
All other revenue	29		220		40		26		32		347
Total other revenue (d)	$	62	$	379	$	40	$	26	$	58	$	565
2020
Revenue from contracts with customers
Noninsurance contracts (a) (b) (c)	$	0	$	143	$	0	$	0	$	0	$	143
Remarketing fee income	17		0		0		0		0		17
Brokerage commissions and other revenue	0		0		0		0		13		13
Deposit account and other banking fees	0		0		0		0		4		4
Brokered/agent commissions	0		4		0		0		0		4
Other	5		0		0		0		0		5
Total revenue from contracts with customers	22		147		0		0		17		186
All other revenue (e)	25		(10)		10		13		42		80
Total other revenue (d)	$	47	$	137	$	10	$	13	$	59	$	266

(a)We had opening balances of $3.0 billion and $2.9 billion in unearned revenue associated with outstanding contracts at December 31, 2020, and December 31, 2019, respectively, and $225 million and $214 million of these balances were recognized as insurance premiums and service revenue earned in our Condensed Consolidated Statement of Comprehensive Income during the three months ended March 31, 2021, and March 31, 2020, respectively.

(b)At March 31, 2021, we had unearned revenue of $3.0 billion associated with outstanding contracts, and with respect to this balance we expect to recognize revenue of $620 million in 2021, $757 million in 2022, $659 million in 2023, $483 million in 2024, and $513 million thereafter. At March 31, 2020, we had unearned revenue of $2.9 billion associated with outstanding contracts.

(c)We had deferred insurance assets of $1.8 billion at both December 31, 2020, and March 31, 2021, and recognized $132 million of expense during the three months ended March 31, 2021. We had deferred insurance assets of $1.7 billion at both December 31, 2019, and March 31, 2020, and recognized $125 million of expense during the three months ended March 31, 2020.

(d)Represents a component of total net revenue. Refer to Note 21 for further information on our reportable operating segments.

(e)Insurance operations for the three months ended March 31, 2020, include $132 million of insurance premiums and service revenue earned and $142 million of net losses on investment securities.

In addition to the components of other revenue presented above, as part of our Automotive Finance operations, we recognized net remarketing gains of $64 million for the three months ended March 31, 2021, and $2 million for the three months ended March 31, 2020, on the sale of off-lease vehicles. These gains are included in depreciation expense on operating lease assets in our Condensed Consolidated Statement of Comprehensive Income.

13

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

3.    Other Income, Net of Losses

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

	Three months ended March 31,
($ in millions)		2021		2020
Late charges and other administrative fees		$	31	$	21
Remarketing fees		27		17
Income (loss) from equity-method investments		14		(1)
Gain on nonmarketable equity investments, net		4		0
Other, net		51		43
Total other income, net of losses		$	127	$	80

4.    Reserves for Insurance Losses and Loss Adjustment Expenses

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

($ in millions)	2021		2020
Total gross reserves for insurance losses and loss adjustment expenses at January 1,	$	129	$	122
Less: Reinsurance recoverable	90		88
Net reserves for insurance losses and loss adjustment expenses at January 1,	39		34
Net insurance losses and loss adjustment expenses incurred related to:
Current year	64		72
Prior years (a)	(1)		2
Total net insurance losses and loss adjustment expenses incurred	63		74
Net insurance losses and loss adjustment expenses paid or payable related to:
Current year	(36)		(46)
Prior years	(23)		(24)
Total net insurance losses and loss adjustment expenses paid or payable	(59)		(70)
Net reserves for insurance losses and loss adjustment expenses at March 31,	43		38
Plus: Reinsurance recoverable	89		104
Total gross reserves for insurance losses and loss adjustment expenses at March 31,	$	132	$	142

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

14

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

5.    Other Operating Expenses

Details of other operating expenses were as follows.

	Three months ended March 31,
($ in millions)		2021		2020
Insurance commissions		$	136	$	126
Technology and communications		78		79
Lease and loan administration		55		38
Advertising and marketing		41		44
Property and equipment depreciation		36		34
Professional services		33		31
Vehicle remarketing and repossession		21		23
Regulatory and licensing fees		18		29
Occupancy		15		16
Non-income taxes		6		7
Amortization of intangible assets		5		5
Other		41		54
Total other operating expenses		$	485	$	486

15

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

6.    Investment Securities

Our investment portfolio includes various debt and equity securities. Our debt securities, which are classified as available-for-sale or held-to-maturity, include government securities, corporate bonds, asset-backed securities, and mortgage-backed securities. The cost, fair value, and gross unrealized gains and losses on available-for-sale and held-to-maturity securities were as follows.

	March 31, 2021								December 31, 2020
	Amortized cost		Gross unrealized				Fair value		Amortized cost		Gross unrealized				Fair value
($ in millions)			gains		losses						gains		losses
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	1,743	$	7	$	(44)	$	1,706	$	783	$	20	$	0	$	803
U.S. States and political subdivisions	1,031		36		(3)		1,064		1,046		50		(1)		1,095
Foreign government	169		5		(2)		172		167		9		0		176
Agency mortgage-backed residential	21,346		395		(223)		21,518		18,053		538		(3)		18,588
Mortgage-backed residential	2,284		30		(2)		2,312		2,595		49		(4)		2,640
Agency mortgage-backed commercial	4,272		74		(194)		4,152		4,063		139		(13)		4,189
Asset-backed	470		4		0		474		420		5		0		425
Corporate debt	2,021		53		(26)		2,048		1,809		105		0		1,914
Total available-for-sale securities (a) (b) (c) (d) (e)	$	33,336	$	604	$	(494)	$	33,446	$	28,936	$	915	$	(21)	$	29,830
Held-to-maturity securities
Debt securities
Agency mortgage-backed residential	$	1,197	$	66	$	(13)	$	1,250	$	1,253	$	79	$	(1)	$	1,331
Total held-to-maturity securities (e) (f)	$	1,197	$	66	$	(13)	$	1,250	$	1,253	$	79	$	(1)	$	1,331

(a)Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $13 million at both March 31, 2021, and December 31, 2020.

(b)Certain available-for-sale securities are included in fair value hedging relationships. Refer to Note 17 for additional information.

(c)Available-for-sale securities with a fair value of $163 million and $145 million at March 31, 2021, and December 31, 2020, respectively, were pledged for purposes as required by contractual obligation or law. Under these agreements, we granted the counterparty the right to sell or pledge the underlying investment securities.

(d)Totals do not include accrued interest receivable, which was $92 million and $90 million at March 31, 2021, and December 31, 2020, respectively. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.

(e)There was no allowance for credit losses recorded at March 31, 2021, or December 31, 2020, as management determined that there were no expected credit losses in our portfolio of available-for-sale and held-to-maturity securities.

(f)Totals do not include accrued interest receivable, which was $3 million at both March 31, 2021, and December 31, 2020. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.

16

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The maturity distribution of debt securities outstanding is summarized in the following tables based upon contractual maturities. Call or prepayment options may cause actual maturities to differ from contractual maturities.

	Total				Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years
($ in millions)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
March 31, 2021
Fair value of available-for-sale securities (a)
U.S. Treasury and federal agencies	$	1,706	1.1	%	$	12	0.1	%	$	495	1.0	%	$	1,199	1.1	%	$	0	0	%
U.S. States and political subdivisions	1,064		3.0		44		1.5		106		2.5		227		2.6		687		3.2
Foreign government	172		1.9		14		1.8		94		1.9		64		1.9		0		0
Agency mortgage-backed residential	21,518		2.7		0		0		0		0		33		2.0		21,485		2.7
Mortgage-backed residential	2,312		3.0		0		0		0		0		32		2.9		2,280		3.0
Agency mortgage-backed commercial	4,152		1.9		0		0		0		0		1,675		2.3		2,477		1.7
Asset-backed	474		2.5		0		0		338		2.8		111		1.3		25		3.2
Corporate debt	2,048		2.4		127		2.8		804		2.5		1,097		2.4		20		2.3
Total available-for-sale securities	$	33,446	2.5		$	197	2.3		$	1,837	2.1		$	4,438	2.0		$	26,974	2.6
Amortized cost of available-for-sale securities	$	33,336			$	195			$	1,797			$	4,423			$	26,921
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential	$	1,197	3.0	%	$	0	0	%	$	0	0	%	$	0	0	%	$	1,197	3.0	%
Total held-to-maturity securities	$	1,197	3.0		$	0	0		$	0	0		$	0	0		$	1,197	3.0
December 31, 2020
Fair value of available-for-sale securities (a)
U.S. Treasury and federal agencies	$	803	1.2	%	$	13	0.1	%	$	708	1.1	%	$	82	1.7	%	$	0	0	%
U.S. States and political subdivisions	1,095		3.0		49		1.4		103		2.3		228		2.7		715		3.3
Foreign government	176		2.1		9		1.7		86		2.3		81		1.9		0		0
Agency mortgage-backed residential	18,588		3.1		0		0		0		0		37		2.0		18,551		3.1
Mortgage-backed residential	2,640		3.1		0		0		0		0		36		2.9		2,604		3.1
Agency mortgage-backed commercial	4,189		1.9		0		0		0		0		1,628		2.3		2,561		1.7
Asset-backed	425		2.9		0		0		349		3.0		49		1.8		27		3.1
Corporate debt	1,914		2.7		155		2.7		625		2.9		1,077		2.6		57		2.1
Total available-for-sale securities	$	29,830	2.8		$	226	2.3		$	1,871	2.2		$	3,218	2.4		$	24,515	3.0
Amortized cost of available-for-sale securities	$	28,936			$	224			$	1,808			$	3,022			$	23,882
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential	$	1,253	3.0	%	$	0	0	%	$	0	0	%	$	0	0	%	$	1,253	3.0	%
Total held-to-maturity securities	$	1,253	3.0		$	0	0		$	0	0		$	0	0		$	1,253	3.0

(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 $20 million and $25 million at March 31, 2021, and December 31, 2020, respectively, and were composed primarily of money-market funds and short-term securities, including U.S. Treasury bills.

The following table presents interest and dividends on investment securities.

	Three months ended March 31,
($ in millions)		2021		2020
Taxable interest		$	114	$	205
Taxable dividends		5		5
Interest and dividends exempt from U.S. federal income tax		5		3
Interest and dividends on investment securities		$	124	$	213

17

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The following table presents gross gains and losses realized upon the sales of available-for-sale securities, and net gains or losses on equity securities held during the period.

	Three months ended March 31,
($ in millions)		2021		2020
Available-for-sale securities
Gross realized gains		$	32	$	105
Net realized gains on available-for-sale securities		32		105
Net realized gain on equity securities		74		1
Net unrealized gain (loss) on equity securities		17		(185)
Other gain (loss) on investments, net		$	123	$	(79)

The following table presents the credit quality of our held-to-maturity securities, based on the latest available information as of March 31, 2021, and December 31, 2020. The credit ratings are sourced from nationally recognized statistical rating organizations, which include S&P, Moody’s, and Fitch. They represent a composite of the ratings or, where credit ratings cannot be sourced from the agencies, are presented based on the asset type. All of our held-to-maturity securities were current in their payment of principal and interest as of March 31, 2021, and December 31, 2020. We have not recorded any interest income reversals on our held-to-maturity securities during the three months ended March 31, 2021, or 2020.

	March 31, 2021			December 31, 2020
($ in millions)		AA		Total (a)		AA		Total (a)
Debt securities
Agency mortgage-backed residential		$	1,197	$	1,197	$	1,253	$	1,253
Total held-to-maturity securities		$	1,197	$	1,197	$	1,253	$	1,253

(a)Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, which may include capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current operating, legislative, and regulatory environment. A credit rating is not a recommendation to buy, sell, or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency.

The following table summarizes available-for-sale securities in an unrealized loss position, which we evaluated to determine if a credit loss exists requiring the recognition of an allowance for credit losses. For additional information on our methodology, refer to Note 1 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K. As of March 31, 2021, and December 31, 2020, we did not have the intent to sell the available-for-sale securities with an unrealized loss position and we do not believe it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. As a result of this evaluation, management determined that no credit reserves were required at March 31, 2021, or December 31, 2020. We have not recorded any interest income reversals on our available-for-sale securities during the three months ended March 31, 2021, or 2020.

	March 31, 2021								December 31, 2020
	Less than 12 months				12 months or longer				Less than 12 months				12 months or longer
($ in millions)	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	1,297	$	(44)	$	0	$	0	$	3	$	0	$	0	$	0
U.S. States and political subdivisions	186		(3)		0		0		83		(1)		0		0
Foreign government	46		(2)		0		0		7		0		0		0
Agency mortgage-backed residential	9,289		(223)		0		0		1,225		(3)		0		0
Mortgage-backed residential	361		(2)		5		0		316		(4)		0		0
Agency mortgage-backed commercial	2,731		(194)		0		0		926		(13)		0		0
Asset-backed	68		0		0		0		11		0		0		0
Corporate debt	785		(26)		4		0		59		0		5		0
Total available-for-sale securities	$	14,763	$	(494)	$	9	$	0	$	2,630	$	(21)	$	5	$	0

18

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

During the three months ended March 31, 2021, and 2020, management determined that there were no expected credit losses for securities in an unrealized loss position. This analysis considered a variety of factors including, but not limited to, performance indicators of the issuer, default rates, industry analyst reports, credit ratings, and other relevant information, which indicated that contractual cash flows are expected to occur.

7.    Finance Receivables and Loans, Net

The composition of finance receivables and loans reported at amortized cost basis was as follows.

($ in millions)	March 31, 2021		December 31, 2020
Consumer automotive (a)	$	73,998	$	73,668
Consumer mortgage
Mortgage Finance (b)	12,445		14,632
Mortgage — Legacy (c)	458		495
Total consumer mortgage	12,903		15,127
Consumer other (d)	490		407
Total consumer	87,391		89,202
Commercial
Commercial and industrial
Automotive	15,132		19,082
Other	5,541		5,242
Commercial real estate	5,012		5,008
Total commercial	25,685		29,332
Total finance receivables and loans (e) (f)	$	113,076	$	118,534

(a)Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 17 for additional information.

(b)Includes loans originated as interest-only mortgage loans of $7 million and $8 million at March 31, 2021, and December 31, 2020, respectively. All of these loans have exited the interest-only period.

(c)Includes loans originated as interest-only mortgage loans of $27 million and $30 million at March 31, 2021, and December 31, 2020, respectively, of which 99% have exited the interest-only period.

(d)Includes $8 million of finance receivables at both March 31, 2021, and December 31, 2020, for which we have elected the fair value option.

(e)Totals include net unearned income, unamortized premiums and discounts, and deferred fees and costs of $2.1 billion and $2.0 billion at March 31, 2021, and December 31, 2020, respectively.

(f)Totals do not include accrued interest receivable, which was $506 million and $587 million at March 31, 2021, and December 31, 2020, respectively. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.

The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans for the three months ended March 31, 2021, and March 31, 2020, respectively.

Three months ended March 31, 2021 ($ in millions)	Consumer automotive		Consumer mortgage		Consumer other (a)		Commercial		Total
Allowance at December 31, 2020	$	2,902	$	33	$	73	$	275	$	3,283
Charge-offs (b)	(284)		(2)		(8)		(14)		(308)
Recoveries	187		3		0		0		190
Net charge-offs	(97)		1		(8)		(14)		(118)
Provision for credit losses	4		(7)		3		(13)		(13)
Other	0		(1)		1		0		0
Allowance at March 31, 2021	$	2,809	$	26	$	69	$	248	$	3,152

(a)Excludes $8 million of finance receivables at both March 31, 2021, and December 31, 2020, for which we have elected the fair value option.

(b)Refer to Note 1 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for information regarding our charge-off policies.

19

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

Three months ended March 31, 2020 ($ in millions)	Consumer automotive		Consumer mortgage		Consumer other (a)		Commercial		Total
Allowance at December 31, 2019	$	1,075	$	46	$	9	$	133	$	1,263
Cumulative effect of the adoption of Accounting Standards Update 2016-13	1,334		(6)		16		2		1,346
Allowance at January 1, 2020	2,409		40		25		135		2,609
Charge-offs (b)	(373)		(3)		(5)		(3)		(384)
Recoveries	111		5		1		1		118
Net charge-offs	(262)		2		(4)		(2)		(266)
Provision for credit losses	685		(3)		25		196		903
Other	1		0		(1)		(1)		(1)
Allowance at March 31, 2020	$	2,833	$	39	$	45	$	328	$	3,245

(a)Excludes $10 million and $11 million of finance receivables at March 31, 2020, and December 31, 2019, respectively, for which we have elected the fair value option.

(b)Refer to Note 1 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for information regarding our charge-off policies.

During the second half of March 2020, the U.S. economy experienced a significant deterioration driven by the COVID-19 pandemic, which impacted our allowance for loan losses. Primarily as a result of the deterioration in the macroeconomic outlook from COVID-19, we recorded additional reserves through provision expense in the first quarter of 2020. During the first quarter of 2021, the economic outlook continued to improve which resulted in reductions in our allowance for loan losses in the period.

The following table presents information about significant sales of finance receivables and loans and transfers of finance receivables and loans from held for investment to held for sale based on net carrying value.

	Three months ended March 31,
($ in millions)		2021		2020
Consumer mortgage		$	329	$	0
Total sales and transfers		$	329	$	0

The following table presents information about significant purchases of finance receivables and loans based on unpaid principal balance at the time of purchase.

	Three months ended March 31,
($ in millions)		2021		2020
Consumer automotive		$	577	$	360
Consumer mortgage		188		484
Total purchases of finance receivables and loans		$	765	$	844

20

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

Nonaccrual Loans

The following tables present the amortized cost of our finance receivables and loans on nonaccrual status. All consumer or commercial finance receivables and loans that were 90 days or more past due were on nonaccrual status as of March 31, 2021, and December 31, 2020.

			March 31, 2021
($ in millions)	Nonaccrual status at Jan. 1, 2021		Nonaccrual status		Nonaccrual with no allowance (a)
Consumer automotive	$	1,256	$	1,173	$	554
Consumer mortgage
Mortgage Finance	67		63		23
Mortgage — Legacy	35		32		27
Total consumer mortgage	102		95		50
Consumer other	3		2		0
Total consumer	1,361		1,270		604
Commercial
Commercial and industrial
Automotive	40		17		1
Other	116		150		85
Commercial real estate	5		2		2
Total commercial	161		169		88
Total finance receivables and loans	$	1,522	$	1,439	$	692

(a)Represents a component of nonaccrual status at end of period.

			December 31, 2020
($ in millions)	Nonaccrual status at Jan. 1, 2020		Nonaccrual status		Nonaccrual with no allowance (a)
Consumer automotive	$	762	$	1,256	$	604
Consumer mortgage
Mortgage Finance	17		67		18
Mortgage — Legacy	40		35		28
Total consumer mortgage	57		102		46
Consumer other	2		3		0
Total consumer	821		1,361		650
Commercial
Commercial and industrial
Automotive	73		40		10
Other	138		116		41
Commercial real estate	4		5		5
Total commercial	215		161		56
Total finance receivables and loans	$	1,036	$	1,522	$	706

(a)Represents a component of nonaccrual status at end of period.

During both the three months ended March 31, 2021, and March 31, 2020, we recorded interest income from cash payments of $2 million, associated with finance receivables and loans in nonaccrual status.

Credit Quality Indicators

We evaluate the credit quality of our consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is generally based upon borrower payment activity, relative to the contractual terms of the loan. In accordance with regulatory guidance, if borrowers are less than 30 days past due on their loans and enter into loan modifications offered as a result of COVID-19, their loans generally continue to be considered performing loans and continue to accrue interest during the period of the loan modification. For borrowers who are 30 days or more past due when entering into loan modifications offered as a result of COVID-19, we

21

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

evaluate the loan modifications under our existing troubled debt restructuring framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan is accounted for as a TDR and generally will not accrue interest.

The following tables present the amortized cost basis of our consumer finance receivables and loans by credit quality indicator based on delinquency status and origination year.

	Origination year														Revolving loans converted to term
March 31, 2021 ($ in millions)	2021		2020		2019		2018		2017		2016 and prior		Revolving loans				Total
Consumer automotive
Current	$	8,900	$	24,842	$	17,404	$	10,794	$	6,114	$	4,362	$	0	$	0	$	72,416
30–59 days past due	9		205		285		223		153		146		0		0		1,021
60–89 days past due	1		59		92		67		44		42		0		0		305
90 or more days past due	0		34		71		59		42		50		0		0		256
Total consumer automotive	8,910		25,140		17,852		11,143		6,353		4,600		0		0		73,998
Consumer mortgage
Mortgage Finance
Current	762		3,099		1,805		1,333		1,733		3,611		0		0		12,343
30–59 days past due	0		11		6		7		6		14		0		0		44
60–89 days past due	0		2		1		4		2		5		0		0		14
90 or more days past due	0		1		5		9		4		25		0		0		44
Total Mortgage Finance	762		3,113		1,817		1,353		1,745		3,655		0		0		12,445
Mortgage — Legacy
Current	0		0		0		0		0		109		286		31		426
30–59 days past due	0		0		0		0		0		2		2		1		5
60–89 days past due	0		0		0		0		0		2		0		0		2
90 or more days past due	0		0		0		0		0		17		6		2		25
Total Mortgage — Legacy	0		0		0		0		0		130		294		34		458
Total consumer mortgage	762		3,113		1,817		1,353		1,745		3,785		294		34		12,903
Consumer other
Current	173		248		39		10		3		1		0		0		474
30–59 days past due	1		2		1		0		0		0		0		0		4
60–89 days past due	0		2		0		0		0		0		0		0		2
90 or more days past due	0		2		0		0		0		0		0		0		2
Total consumer other (a)	174		254		40		10		3		1		0		0		482
Total consumer	$	9,846	$	28,507	$	19,709	$	12,506	$	8,101	$	8,386	$	294	$	34	$	87,383

(a)Excludes $8 million of finance receivables at March 31, 2021, for which we have elected the fair value option.

22

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

	Origination year														Revolving loans converted to term
December 31, 2020 ($ in millions)	2020		2019		2018		2017		2016		2015 and prior		Revolving loans				Total
Consumer automotive
Current	$	27,255	$	19,204	$	12,129	$	7,060	$	3,678	$	1,766	$	0	$	0	$	71,092
30–59 days past due	281		466		376		264		174		97		0		0		1,658
60–89 days past due	66		165		129		88		55		32		0		0		535
90 or more days past due	32		108		96		71		46		30		0		0		383
Total consumer automotive	27,634		19,943		12,730		7,483		3,953		1,925		0		0		73,668
Consumer mortgage
Mortgage Finance
Current	3,432		2,410		1,744		2,254		1,177		3,492		0		0		14,509
30–59 days past due	10		9		10		11		7		16		0		0		63
60–89 days past due	1		1		3		2		1		3		0		0		11
90 or more days past due	1		5		8		10		4		21		0		0		49
Total Mortgage Finance	3,444		2,425		1,765		2,277		1,189		3,532		0		0		14,632
Mortgage — Legacy
Current	0		0		0		0		0		121		303		36		460
30–59 days past due	0		0		0		0		0		4		2		0		6
60–89 days past due	0		0		0		0		0		2		0		0		2
90 or more days past due	0		0		0		0		0		20		5		2		27
Total Mortgage — Legacy	0		0		0		0		0		147		310		38		495
Total consumer mortgage	3,444		2,425		1,765		2,277		1,189		3,679		310		38		15,127
Consumer other
Current	306		53		13		4		1		0		0		0		377
30–59 days past due	9		3		1		0		0		0		0		0		13
60–89 days past due	4		1		0		1		0		0		0		0		6
90 or more days past due	2		1		0		0		0		0		0		0		3
Total consumer other (a)	321		58		14		5		1		0		0		0		399
Total consumer	$	31,399	$	22,426	$	14,509	$	9,765	$	5,143	$	5,604	$	310	$	38	$	89,194

(a)Excludes $8 million of finance receivables at December 31, 2020, for which we have elected the fair value option.

We evaluate the credit quality of our commercial loan portfolio using regulatory risk ratings, which are based on relevant information about the borrower’s financial condition, including current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. We use the following definitions for risk rankings.

•Special mention — Loans that have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

•Substandard — Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These loans have a well-defined weakness or weakness that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

•Doubtful — Loans that have all the weaknesses inherent in those classified as substandard, with the additional characteristic that the weaknesses make collection or liquidation in full, based on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

23

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The regulatory risk classification utilized is influenced by internal credit risk ratings, which are based on a variety of factors. A borrower’s internal credit risk rating is updated at least annually, and more frequently when a borrower’s credit profile changes, including when we become aware of potential credit deterioration. The following tables present the amortized cost basis of our commercial finance receivables and loans by credit quality indicator based on risk rating and origination year.

	Origination year														Revolving loans converted to term
March 31, 2021 ($ in millions)	2021		2020		2019		2018		2017		2016 and prior		Revolving loans				Total
Commercial and industrial
Automotive
Pass	$	130	$	632	$	209	$	52	$	81	$	82	$	12,272	$	0	$	13,458
Special mention	10		31		22		48		46		41		1,425		0		1,623
Substandard	0		2		2		1		0		1		45		0		51
Doubtful	0		0		0		0		0		0		0		0		0
Total automotive	140		665		233		101		127		124		13,742		0		15,132
Other
Pass	122		532		628		269		201		199		2,443		85		4,479
Special mention	0		75		143		84		101		181		107		17		708
Substandard	0		33		25		0		139		76		25		20		318
Doubtful	0		0		0		0		6		27		2		1		36
Total other	122		640		796		353		447		483		2,577		123		5,541
Commercial real estate
Pass	167		1,142		918		785		538		1,105		0		3		4,658
Special mention	7		66		130		50		32		51		0		0		336
Substandard	0		0		0		0		3		13		0		0		16
Doubtful	0		0		0		0		0		2		0		0		2
Total commercial real estate	174		1,208		1,048		835		573		1,171		0		3		5,012
Total commercial	$	436	$	2,513	$	2,077	$	1,289	$	1,147	$	1,778	$	16,319	$	126	$	25,685

24

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

	Origination year														Revolving loans converted to term
December 31, 2020 ($ in millions)	2020		2019		2018		2017		2016		2015 and prior		Revolving loans				Total
Commercial and industrial
Automotive
Pass	$	869	$	220	$	58	$	91	$	76	$	34	$	15,433	$	0	$	16,781
Special mention	48		23		59		52		9		18		2,013		0		2,222
Substandard	3		2		0		0		1		0		72		0		78
Doubtful	0		0		0		0		0		0		1		0		1
Total automotive	920		245		117		143		86		52		17,519		0		19,082
Other
Pass	536		622		244		210		81		69		2,142		76		3,980
Special mention	76		169		123		190		102		115		123		43		941
Substandard	33		26		0		108		0		77		21		20		285
Doubtful	0		0		0		6		0		27		2		1		36
Total other	645		817		367		514		183		288		2,288		140		5,242
Commercial real estate
Pass	1,108		928		799		580		651		512		0		2		4,580
Special mention	38		132		116		32		49		43		0		0		410
Substandard	0		0		0		3		6		7		0		0		16
Doubtful	0		0		0		0		2		0		0		0		2
Total commercial real estate	1,146		1,060		915		615		708		562		0		2		5,008
Total commercial	$	2,711	$	2,122	$	1,399	$	1,272	$	977	$	902	$	19,807	$	142	$	29,332

The following table presents an analysis of our past-due commercial finance receivables and loans recorded at amortized cost basis.

($ in millions)	30–59 days past due		60–89 days past due		90 days or more past due		Total past due		Current		Total finance receivables and loans
March 31, 2021
Commercial
Commercial and industrial
Automotive	$	0	$	0	$	0	$	0	$	15,132	$	15,132
Other	0		0		5		5		5,536		5,541
Commercial real estate	3		0		2		5		5,007		5,012
Total commercial	$	3	$	0	$	7	$	10	$	25,675	$	25,685
December 31, 2020
Commercial
Commercial and industrial
Automotive	$	0	$	0	$	0	$	0	$	19,082	$	19,082
Other	0		0		0		0		5,242		5,242
Commercial real estate	0		0		2		2		5,006		5,008
Total commercial	$	0	$	0	$	2	$	2	$	29,330	$	29,332

Troubled Debt Restructurings

TDRs are loan modifications where concessions were granted to borrowers experiencing financial difficulties. For consumer automotive loans, we may offer several types of assistance to aid our customers, including payment extensions and rewrites of the loan terms. Additionally, for mortgage loans, as part of certain programs, we offer mortgage loan modifications to qualified borrowers. These programs are in place to provide support to our mortgage customers in financial distress, including principal forgiveness, maturity extensions, delinquent interest capitalization, and changes to contractual interest rates. Total TDRs recorded at amortized cost were $2.4 billion and $2.2 billion at March 31, 2021, and December 31, 2020, respectively.

25

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

Our consumer auto portfolio accounts for the majority of the year-over-year increase in TDR balances. TDRs in our consumer auto portfolio increased as a result of the COVID-19 loan modification program offered to customers. Additionally, following the expiration of that program, we have continued to support impacted borrowers pursuant to our established risk management policies and practices.

Total commitments to lend additional funds to borrowers whose terms had been modified in a TDR were $17 million and $14 million at March 31, 2021, and December 31, 2020, respectively. Refer to Note 1 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for additional information.

The following table presents information related to finance receivables and loans recorded at amortized cost modified in connection with a TDR during the period.

	2021					2020
Three months ended March 31, ($ in millions)	Number of loans	Pre-modification amortized cost basis		Post-modification amortized cost basis		Number of loans	Pre-modification amortized cost basis		Post-modification amortized cost basis
Consumer automotive	25,590	$	472	$	466	22,800	$	340	$	318
Consumer mortgage
Mortgage Finance	5	4		4		10	4		4
Mortgage — Legacy	1	0		0		32	4		4
Total consumer mortgage	6	4		4		42	8		8
Total consumer	25,596	476		470		22,842	348		326
Commercial and industrial
Automotive	0	0		0		1	7		7
Other	1	33		33		0	0		0
Total commercial	1	33		33		1	7		7
Total finance receivables and loans	25,597	$	509	$	503	22,843	$	355	$	333

The following table presents information about finance receivables and loans recorded at amortized cost that have redefaulted during the reporting period and were within 12 months or less of being modified as a TDR. Redefault is when finance receivables and loans meet the requirements for evaluation under our charge-off policy (refer to Note 1 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for additional information) except for commercial finance receivables and loans, where redefault is defined as 90 days past due.

	2021					2020
Three months ended March 31, ($ in millions)	Number of loans	Amortized cost		Charge-off amount		Number of loans	Amortized cost		Charge-off amount
Consumer automotive	2,814	$	33	$	20	1,164	$	13	$	9
Consumer mortgage
Mortgage — Legacy	2	0		0		0	0		0
Total consumer finance receivables and loans	2,816	$	33	$	20	1,164	$	13	$	9

8.    Leasing

Ally as the Lessee

We have operating leases for our corporate facilities, which have remaining lease terms of 3 months to 11 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 1 year to 15 years. Some of those lease agreements also include options to terminate the leases in periods that range from approximately 5 years 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.

During both the three months ended March 31, 2021, and March 31, 2020, we paid $13 million in cash for amounts included in the measurement of lease liabilities. These amounts are included in net cash provided by operating activities in the Condensed Consolidated Statement of Cash Flows. During the three months ended March 31, 2021, and March 31, 2020, we obtained $337 million and $35 million, respectively, of ROU assets in exchange for new lease liabilities. As of March 31, 2021, the weighted-average remaining lease term of our operating lease portfolio was 7 years, and the weighted-average discount rate was 2.19%, compared to 7 years and 2.21% as of December 31, 2020.

26

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The following table presents future minimum rental payments we are required to make under operating leases that have commenced as of March 31, 2021, and that have noncancelable lease terms expiring after March 31, 2021.

($ in millions)
2021	$	33
2022	35
2023	26
2024	19
2025	17
2026 and thereafter	58
Total undiscounted cash flows	188
Difference between undiscounted cash flows and discounted cash flows	(12)
Total lease liability	$	176

In March 2021, we commenced the lease for a new corporate facility in Charlotte, North Carolina, which includes an underlying purchase option that is reasonably expected to be executed. As a result, this lease facility is presented as a financing lease at March 31, 2021. The finance lease liability of $337 million, includes payments inherent in the purchase obligation. The expense associated with this lease for the period in which it met the criteria for classification as a finance lease was not material. We provided notice of our intent to exercise the purchase option in April 2021, and the purchase is tentatively scheduled to close in the second quarter of 2021. Additionally, we agreed to sublease a portion of this corporate facility in exchange for $13 million in future lease payments over a ten year lease term.

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

	Three months ended March 31,
($ in millions)		2021		2020
Operating lease expense		$	12	$	13
Variable lease expense		2		2
Total lease expense, net (a)		$	14	$	15

(a)Included in other operating expenses in our Condensed Consolidated Statement of Comprehensive Income.

Ally as the Lessor

Investment in Operating Leases

We purchase consumer operating lease contracts and the associated vehicles from dealerships after those contracts are executed by the dealers and the consumers. The amount we pay a dealer for an operating lease contract is based on the negotiated price for the vehicle less vehicle trade-in, down payment from the consumer, and available automotive manufacturer incentives. Under the operating lease, the consumer is obligated to make payments in amounts equal to the amount by which the negotiated purchase price of the vehicle (less any trade-in value, down payment, or available manufacturer incentives) exceeds the contract residual value (including residual support) of the vehicle at lease termination, plus operating lease rental charges. The customer can terminate the lease at any point after commencement, subject to additional charges and fees. Both the consumer and the dealership have the option to purchase the vehicle at the end of the lease term, which can range from 24 to 60 months, at the residual value of the vehicle, however it is not reasonably certain this option will be exercised and accordingly our consumer leases are classified as operating leases. In addition to the charges described above, the consumer is generally responsible for certain charges related to excess mileage or excessive wear and tear on the vehicle. These charges are deemed variable lease payments and, as these payments are not based on a rate or index, they are recognized as net depreciation expense on operating lease assets in our Condensed Consolidated Statement of Comprehensive Income as incurred.

When we acquire a consumer operating lease, we assume ownership of the vehicle from the dealer. We require that property damage, bodily injury, collision, and comprehensive insurance be obtained by the lessee on all consumer operating leases. Neither the consumer nor the dealer is responsible for the value of the vehicle at the time of lease termination. When vehicles are not purchased by customers or the receiving dealer at scheduled lease termination, the vehicle is returned to us for remarketing. We generally bear the risk of loss to the extent the value of a leased vehicle upon remarketing is below the expected residual value. At termination, our actual sales proceeds from remarketing the vehicle may be higher or lower than the estimated residual value resulting in a gain or loss on remarketing, which is included in net depreciation expense on operating lease assets in our Condensed Consolidated Statement of Comprehensive Income. Excessive mileage or excessive wear and tear on the vehicle during the lease may impact the sales proceeds received upon remarketing. As of March 31, 2021, and December 31, 2020, consumer operating leases with a carrying value, net of accumulated depreciation, of $310 million and $352 million, respectively, were covered by a residual value guarantee of 15% of the manufacturer’s suggested retail price.

27

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The following table details our investment in operating leases.

($ in millions)	March 31, 2021		December 31, 2020
Vehicles	$	11,434	$	11,182
Accumulated depreciation	(1,490)		(1,543)
Investment in operating leases, net	$	9,944	$	9,639

The following table presents future minimum rental payments we have the right to receive under operating leases with noncancelable lease terms expiring after March 31, 2021.

($ in millions)
2021	$	1,114
2022	1,111
2023	655
2024	149
2025	11
2026 and thereafter	0
Total lease payments from operating leases	$	3,040

We recognized operating lease revenue of $370 million for the three months ended March 31, 2021, and $367 million for the three months ended March 31, 2020. Depreciation expense on operating lease assets includes net remarketing gains recognized on the sale of operating lease assets. The following table summarizes the components of depreciation expense on operating lease assets.

	Three months ended March 31,
($ in millions)		2021		2020
Depreciation expense on operating lease assets (excluding remarketing gains) (a)		$	227	$	250
Remarketing gains, net		(64)		(2)
Net depreciation expense on operating lease assets		$	163	$	248

(a)Includes variable lease payments related to excess mileage and excessive wear and tear on vehicles of $5 million during the three months ended March 31, 2021, and $6 million during the three months ended March 31, 2020.

Finance Leases

In our Automotive Finance operations, we also hold automotive leases that require finance lease treatment as prescribed by ASC Topic 842, Leases. Our total gross investment in finance leases, which is included in finance receivables and loans, net, on our Condensed Consolidated Balance Sheet was $482 million and $450 million as of March 31, 2021, and December 31, 2020, respectively. This includes lease payment receivables of $469 million and $437 million at March 31, 2021, and December 31, 2020, respectively, and unguaranteed residual assets of $13 million at both March 31, 2021, and December 31, 2020. Interest income on finance lease receivables was $6 million for both the three months ended March 31, 2021, and March 31, 2020, and is included in interest and fees on finance receivables and loans in our Condensed Consolidated Statement of Comprehensive Income.

The following table presents future minimum rental payments we have the right to receive under finance leases with noncancelable lease terms expiring after March 31, 2021.

($ in millions)
2021	$	128
2022	141
2023	112
2024	82
2025	37
2026 and thereafter	21
Total undiscounted cash flows	521
Difference between undiscounted cash flows and discounted cash flows	(52)
Present value of lease payments recorded as lease receivable	$	469

28

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

9.    Securitizations and Variable Interest Entities

We securitize, transfer, and service consumer and commercial automotive loans. We often securitize these loans (also referred to as financial assets) using SPEs. An SPE is a legal entity that is designed to fulfill a specified limited need of the sponsor. Our principal use of SPEs is to obtain liquidity by securitizing certain of our financial assets. SPEs are often VIEs and may or may not be included on our Condensed Consolidated Balance Sheet.

VIEs are legal entities that either have an insufficient amount of equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the ability to control the entity’s activities that most significantly impact economic performance through voting or similar rights, or do not have the obligation to absorb the expected losses or the right to receive expected residual returns of the entity.

The VIEs included on the Condensed Consolidated Balance Sheet represent SPEs where we are deemed to be the primary beneficiary, primarily due to our servicing activities and our beneficial interests in the VIE that could be potentially significant.

The nature, purpose, and activities of nonconsolidated SPEs are similar to those of our consolidated SPEs with the primary difference being the nature and extent of our continuing involvement. For nonconsolidated SPEs, the transferred financial assets are removed from our balance sheet provided the conditions for sale accounting are met. The financial assets obtained from the securitization are primarily reported as cash or retained interests (if applicable). Liabilities incurred as part of these securitizations, are recorded at fair value at the time of sale and are reported as accrued expenses and other liabilities on our Condensed Consolidated Balance Sheet. Upon the sale of the loans, we recognize a gain or loss on sale for the difference between the assets recognized, the assets derecognized, and the liabilities recognized as part of the transaction. With respect to our ongoing right to service the assets we sell, the servicing fee we receive represents adequate compensation, and consequently, we do not recognize a servicing asset or liability.

There were 0 sales of financial assets into nonconsolidated VIEs for either the three months ended March 31, 2021, or March 31, 2020.

We provide long-term guarantee contracts to investors in certain nonconsolidated affordable housing entities and have extended a line of credit to provide liquidity. Since we do not have control over the entities or the power to make decisions, we do not consolidate the entities and our involvement is limited to the guarantee and the line of credit.

We are involved with various other nonconsolidated equity investments, including affordable housing entities and venture capital funds and loan funds. We do not consolidate these entities and our involvement is limited to our outstanding investment, additional capital committed to these funds plus any previously recognized low-income housing tax credits that are subject to recapture.

Refer to Note 1 and Note 11 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for further description of our securitization activities and our involvement with VIEs.

29

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The following table presents our involvement in consolidated and nonconsolidated VIEs in which we hold variable interests. For additional detail related to the assets and liabilities of consolidated variable interest entities refer to the Condensed Consolidated Balance Sheet.

($ in millions)	Carrying value of total assets			Carrying value of total liabilities			Assets sold to nonconsolidated VIEs (a)		Maximum exposure to loss in nonconsolidated VIEs
March 31, 2021
On-balance sheet variable interest entities
Consumer automotive	$	19,157	(b)	$	2,505	(c)
Commercial automotive	4,468			1,151
Off-balance sheet variable interest entities
Commercial other	1,332		(d)	533		(e)	0		1,755		(f)
Total	$	24,957		$	4,189		$	0	$	1,755
December 31, 2020
On-balance sheet variable interest entities
Consumer automotive	$	17,833	(b)	$	3,103	(c)
Commercial automotive	6,276			1,152
Off-balance sheet variable interest entities
Commercial other	1,295		(d)	529		(e)	0		1,754		(f)
Total	$	25,404		$	4,784		$	0	$	1,754

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

(b)Includes $10.2 billion and $9.9 billion of assets that were not encumbered by VIE beneficial interests held by third parties at March 31, 2021, and December 31, 2020, respectively. Ally or consolidated affiliates hold the interests in these assets.

(c)Includes $99 million and $94 million of liabilities that were not obligations to third-party beneficial interest holders at March 31, 2021, and December 31, 2020, respectively.

(d)Amounts are classified as other assets.

(e)Amounts are classified as accrued expenses and other liabilities.

(f)For certain nonconsolidated affordable housing entities, maximum exposure to loss represents the yield we guaranteed investors through long-term guarantee contracts. The amount disclosed is based on the unlikely event that the yield delivered to investors in the form of low-income tax housing credits is recaptured. For nonconsolidated equity investments, maximum exposure to loss represents our outstanding investment, additional committed capital, and low-income housing tax credits subject to recapture. The amount disclosed is based on the unlikely event that our committed capital is funded, our investments become worthless, and the tax credits previously delivered to us are recaptured. This required disclosure is not an indication of our expected loss.

Cash Flows with Off-Balance Sheet Securitization Entities

The following table summarizes cash flows received and paid related to SPEs and asset-backed financings where the transfer is accounted for as a sale and we have a continuing involvement with the transferred consumer automotive assets (for example, servicing) that were outstanding during the three months ended March 31, 2021, and 2020. Additionally, this table contains information regarding cash flows received from and paid to nonconsolidated SPEs that existed during each period.

	Three months ended March 31,
($ in millions)	2021		2020
Consumer automotive
Cash flows received on retained interests in securitization entities	$	0	$	4
Servicing fees	0		1
Total	$	0	$	5

Delinquencies and Net Credit Losses

We did not have any off-balance sheet securitizations or whole-loan sales where we have continuing involvement at March 31, 2021, or December 31, 2020. During the three months ended March 31, 2020, we recognized $1 million of net credit losses from off-balance sheet securitizations where we have continuing involvement.

30

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

10.    Other Assets

The components of other assets were as follows.

($ in millions)	March 31, 2021		December 31, 2020
Property and equipment at cost	$	1,620	$	1,541
Accumulated depreciation	(844)		(815)
Net property and equipment	776		726
Restricted cash held for securitization trusts (a)	1,173		875
Investment in qualified affordable housing projects	1,086		1,095
Nonmarketable equity investments (b) (c)	889		915
Accrued interest, fees, and rent receivables	608		704
Equity-method investments (d)	370		320
Goodwill	343		343
Finance lease right-of-use assets (e)	337		0
Net deferred tax assets	263		94
Operating lease right-of-use assets	150		162
Other accounts receivable	139		166
Restricted cash and cash equivalents (f)	80		78
Net intangible assets (g)	46		50
Fair value of derivative contracts in receivable position (h)	18		17
Other assets	889		870
Total other assets	$	7,167	$	6,415

(a)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.

(b)Includes investments in FHLB stock of $248 million and $276 million at March 31, 2021, and December 31, 2020, respectively; FRB stock of $449 million at both March 31, 2021, and December 31, 2020; and equity securities without a readily determinable fair value of $192 million and $189 million at March 31, 2021, and December 31, 2020, respectively, measured at cost with adjustments for impairment and observable changes in price.

(c)For the three months ended March 31, 2021, we recorded $2 million of upward adjustments and $1 million of impairments and downward adjustments related to equity securities without a readily determinable fair value, respectively. Securities held in our portfolio of equity securities without a readily determinable fair value as of March 31, 2021, include cumulative upward adjustments of $117 million and impairments and downward adjustments of $13 million through March 31, 2021.

(d)Primarily relates to investments made in connection with our CRA program.

(e)For additional information on finance lease right-of-use assets, refer to Note 8.

(f)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.

(g)Includes gross intangible assets of $109 million at both March 31, 2021, and December 31, 2020, and accumulated amortization of $63 million and $59 million at March 31, 2021, and December 31, 2020, respectively.

(h)For additional information on derivative instruments and hedging activities, refer to Note 17.

The carrying balance of goodwill by reportable operating segment was as follows.

($ in millions)	Automotive Finance operations		Insurance operations		Corporate and Other (a)		Total
Goodwill at December 31, 2020	$	20	$	27	$	296	$	343
Impairment losses	0		0		0		0
Goodwill at March 31, 2021	$	20	$	27	$	296	$	343

(a)Includes $153 million of goodwill associated with Ally Lending at both March 31, 2021, and December 31, 2020, and $143 million of goodwill associated with Ally Invest at both March 31, 2021, and December 31, 2020.

31

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

11.    Deposit Liabilities

Deposit liabilities consisted of the following.

($ in millions)	March 31, 2021		December 31, 2020
Noninterest-bearing deposits	$	155	$	128
Interest-bearing deposits
Savings, money market, and checking accounts	90,468		83,698
Certificates of deposit	48,962		53,210
Total deposit liabilities	$	139,585	$	137,036

At March 31, 2021, and December 31, 2020, certificates of deposit included $24.2 billion and $25.8 billion, respectively, of those in denominations of $100 thousand or more. At March 31, 2021, and December 31, 2020, certificates of deposit included $8.2 billion and $8.6 billion, respectively, of those in denominations in excess of $250 thousand federal insurance limits.

12.    Debt

Short-Term Borrowings

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

	March 31, 2021						December 31, 2020
($ in millions)	Unsecured		Secured (a)		Total		Unsecured		Secured (a)		Total
Demand notes (b)	$	0	$	0	$	0	$	2,136	$	0	$	2,136
Total short-term borrowings	$	0	$	0	$	0	$	2,136	$	0	$	2,136

(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)On March 1, 2021, we terminated the offering of our demand notes program, and redeemed in full all outstanding demand notes.

Long-Term Debt

The following table presents the composition of our long-term debt portfolio.

	March 31, 2021						December 31, 2020
($ in millions)	Unsecured		Secured		Total		Unsecured		Secured		Total
Long-term debt (a)
Due within one year	$	1,219	$	4,418	$	5,637	$	647	$	4,438	$	5,085
Due after one year	10,583		4,283		14,866		11,367		5,554		16,921
Total long-term debt (b) (c)	$	11,802	$	8,701	$	20,503	$	12,014	$	9,992	$	22,006

(a)Includes basis adjustments related to the application of hedge accounting. Refer to Note 17 for additional information.

(b)Includes $2.6 billion of trust preferred securities at both March 31, 2021, and December 31, 2020.

(c)Includes advances net of hedge basis adjustment from the FHLB of Pittsburgh of $5.1 billion and $5.8 billion at March 31, 2021, and December 31, 2020, respectively.

The following table presents the scheduled remaining maturity of long-term debt at March 31, 2021, 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)	2021		2022		2023		2024		2025		2026 and thereafter		Total
Unsecured
Long-term debt	$	608	$	1,116	$	2,117	$	1,469	$	2,362	$	5,182	$	12,854
Original issue discount	(37)		(54)		(60)		(67)		(72)		(762)		(1,052)
Total unsecured	571		1,062		2,057		1,402		2,290		4,420		11,802
Secured
Long-term debt	3,137		4,897		615		32		10		10		8,701
Total long-term debt	$	3,708	$	5,959	$	2,672	$	1,434	$	2,300	$	4,430	$	20,503

32

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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.

	March 31, 2021				December 31, 2020
($ in millions)	Total (a)		Ally Bank		Total (a)		Ally Bank
Consumer mortgage finance receivables	$	12,799	$	12,799	$	14,979	$	14,979
Consumer automotive finance receivables	10,808		10,462		9,953		9,510
Commercial finance receivables	3,921		3,921		10,866		10,866
Total assets restricted as collateral (b) (c)	$	27,528	$	27,182	$	35,798	$	35,355
Secured debt	$	8,701	$	8,436	$	9,992	$	9,634

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

(b)Ally Bank has an advance agreement with the FHLB, and had assets pledged to secure borrowings that were restricted as collateral to the FHLB totaling $12.8 billion and $20.0 billion at March 31, 2021, and December 31, 2020, 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 March 31, 2021, and December 31, 2020. 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 other subsidiaries.

(c)Excludes restricted cash and cash reserves for securitization trusts recorded within other assets on the Condensed Consolidated Balance Sheet. Refer to Note 10 for additional information.

Trust Preferred Securities

At both March 31, 2021, and December 31, 2020, we had issued and outstanding approximately $2.6 billion in aggregate liquidation preference of Series 2 TRUPS. Each Series 2 TRUPS security has a liquidation amount of $25. Distributions are cumulative and are payable until redemption at the applicable coupon rate. Distributions are payable at an annual rate equal to three-month LIBOR 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 March 31, 2021. The amount represents the carrying amount of the Series 2 TRUPS less our common stock investment in the trust.

On April 22, 2021, we issued $1.35 billion of preferred stock, and announced our intent to use the proceeds to redeem in part the Series 2 TRUPS outstanding. Refer to Note 23 for additional information.

Funding Facilities

We utilize both committed secured credit facilities and other collateralized funding vehicles. The debt outstanding under our various funding facilities is included on our Condensed Consolidated Balance Sheet.

The total capacity in our credit facilities is provided by banks through private transactions. The facilities can be revolving in nature, generally having an original tenor ranging from 364 days to two years, and allow for additional funding during the commitment period, or they can be amortizing and not allow for any further funding after the commitment period. At March 31, 2021, all of our $460 million of capacity was revolving and of this balance, $175 million was from facilities with a remaining tenor greater than 364 days.

Committed Secured Credit Facilities

	Outstanding				Unused capacity (a)				Total capacity
($ in millions)	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Parent funding
Secured	$	0	$	0	$	460	$	560	$	460	$	560
Total committed secured credit facilities	$	0	$	0	$	460	$	560	$	460	$	560

(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.

33

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

13.    Accrued Expenses and Other Liabilities

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

($ in millions)	March 31, 2021		December 31, 2020
Accounts payable	$	943	$	602
Unfunded commitments for investment in qualified affordable housing projects	529		525
Finance lease liabilities	337		0
Employee compensation and benefits	257		316
Operating lease liabilities	176		187
Reserves for insurance losses and loss adjustment expenses	132		129
Deferred revenue	124		104
Fair value of derivative contracts in payable position (a)	44		33
Net deferred tax liabilities	14		92
Cash collateral received from counterparties	6		6
Other liabilities	664		440
Total accrued expenses and other liabilities	$	3,226	$	2,434

(a)For additional information on derivative instruments and hedging activities, refer to Note 17.

14.    Accumulated Other Comprehensive Income

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

($ in millions)	Unrealized gains on investment securities (a)		Translation adjustments and net investment hedges (b)		Cash flow hedges (b)		Defined benefit pension plans		Accumulated other comprehensive income
Balance at December 31, 2019	$	208	$	19	$	2	$	(106)	$	123
Net change	453		(1)		128		3		583
Balance at March 31, 2020	$	661	$	18	$	130	$	(103)	$	706
Balance at December 31, 2020	$	640	$	19	$	82	$	(110)	$	631
Net change	(587)		1		(17)		(1)		(604)
Balance at March 31, 2021	$	53	$	20	$	65	$	(111)	$	27

(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 17.

34

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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

Three months ended March 31, 2021 ($ in millions)	Before tax			Tax effect			After tax
Investment securities
Net unrealized losses arising during the period	$	(736)		$	174		$	(562)
Less: Net realized gains reclassified to income from continuing operations	32		(a)	(7)		(b)	25
Net change	(768)			181			(587)
Translation adjustments
Net unrealized gains arising during the period	3			(1)			2
Net investment hedges (c)
Net unrealized losses arising during the period	(2)			1			(1)
Cash flow hedges (c)
Less: Net realized gains reclassified to income from continuing operations	21		(d)	(4)		(b)	17
Defined benefit pension plans
Net unrealized losses arising during the period	(2)			1			(1)
Other comprehensive loss	$	(790)		$	186		$	(604)

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

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

(c)For additional information on derivative instruments and hedging activities, refer to Note 17.

(d)Includes gains reclassified to interest and fees on finance receivables and loans in our Condensed Consolidated Statement of Comprehensive Income.

Three months ended March 31, 2020 ($ in millions)	Before tax			Tax effect			After tax
Investment securities
Net unrealized gains arising during the period	$	702		$	(168)		$	534
Less: Net realized gains reclassified to income from continuing operations	105		(a)	(24)		(b)	81
Net change	597			(144)			453
Translation adjustments
Net unrealized losses arising during the period	(13)			3			(10)
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	169			(41)			128
Defined benefit pension plans
Net unrealized gains arising during the period	4			(1)			3
Other comprehensive income	$	769		$	(186)		$	583

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

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

(c)For additional information on derivative instruments and hedging activities, refer to Note 17.

35

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

15.    Earnings per Common Share

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

	Three months ended March 31,
($ in millions, except per share data; shares in thousands) (a)	2021		2020
Net income (loss) from continuing operations	$	796	$	(319)
Net income (loss) attributable to common stockholders	$	796	$	(319)
Basic weighted-average common shares outstanding (b)	375,229		375,723
Diluted weighted-average common shares outstanding (b) (c)	377,529		375,723
Basic earnings per common share
Net income (loss) from continuing operations	$	2.12	$	(0.85)
Net income (loss)	$	2.12	$	(0.85)
Diluted earnings per common share
Net income (loss) from continuing operations	$	2.11	$	(0.85)
Net income (loss)	$	2.11	$	(0.85)

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

(b)Includes shares related to share-based compensation that vested but were not yet issued.

(c)Due to the antidilutive effect of the net loss from continuing operations for the three months ended March 31, 2020, basic weighted-average common shares outstanding was used to calculate basic and diluted earnings per share. During the three months ended March 31, 2020, there were 1.8 million in shares underlying share-based awards excluded because their inclusion would have been antidilutive. There were 0 antidilutive shares during the three months ended March 31, 2021.

16.    Regulatory Capital and Other Regulatory Matters

Ally is currently subject to enhanced prudential standards that were established by the FRB under the Dodd-Frank Act. Targeted amendments to the Dodd-Frank Act and other financial-services laws were enacted through the 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. Through final rules implementing these amendments—which are commonly known as the tailoring framework—the FRB and other U.S. banking agencies established four risk-based categories of prudential standards and capital and liquidity requirements for banking organizations with $100 billion or more in total consolidated assets. 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, wSTWF, nonbank assets, and off-balance-sheet exposure.

Under the tailoring framework, Ally is a Category IV firm and, as such, is (1) subject to supervisory stress testing on a two-year cycle, (2) required to submit an annual capital plan to the FRB, (3) exempted from company-run capital stress testing requirements, (4) required to maintain a buffer of unencumbered highly liquid assets to meet projected net stressed cash outflows over a 30-day planning horizon, (5) exempted from the requirements of the LCR and the net stable funding ratio provided that our average wSTWF continues to remain under $50 billion, and (6) exempted from the requirements of the supplementary leverage ratio, the countercyclical capital buffer, and single-counterparty credit limits. Refer to Note 20 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for additional details on the tailoring framework and other applicable capital and liquidity requirements.

We continue to be subject to rules enabling the FRB to conduct supervisory stress testing on a more or less frequent basis based on our financial condition, size, complexity, risk profile, scope of operations, or activities, or risks to the U.S. economy. Further, we remain subject to rules requiring the resubmission of our capital plan if we determine that there has been or will be a material change in our risk profile, financial condition, or corporate structure since we last submitted the capital plan or if the FRB determines that (a) our capital plan is incomplete or our capital plan or internal capital adequacy process contains material weaknesses, (b) there has been, or will likely be, a material change in our risk profile (including a material change in our business strategy or any risk exposure), financial condition, or corporate structure, (c) the BHC stress scenario(s) are not appropriate for our business model and portfolios, or changes in the financial markets or the macroeconomic outlook that could have a material impact on our risk profile and financial condition require the use of updated scenarios, or (d) our capital plan or condition raise any issues of objection.

Refer to Note 20 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for further discussion about regulatory developments.

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 RWAs, which are generally determined under the standardized approach applicable to Ally and Ally Bank by (1) assigning on-balance-sheet

36

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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.

Under U.S. Basel III, Ally and Ally Bank must maintain a minimum Common Equity Tier 1 risk-based capital ratio of 4.5%, a minimum Tier 1 risk-based capital ratio of 6%, and a minimum total risk-based capital ratio of 8%. In addition to these minimum risk-based capital ratios, Ally and Ally Bank are subject to a capital conservation buffer requirement, which for Ally was 3.5% and for Ally Bank was 2.5% as of March 31, 2021, as further described in the next paragraph. Failure to maintain more than the full amount of the capital conservation buffer requirement would result in automatic restrictions on the ability of Ally and Ally Bank to make capital distributions, including dividend payments and stock repurchases and redemptions, and to pay discretionary bonuses to executive officers. U.S. Basel III also subjects Ally and Ally Bank to a minimum Tier 1 leverage ratio of 4%.

In March 2020, the FRB issued a final rule to more closely align forward-looking stress testing results with the FRB’s non-stress regulatory capital requirements for BHCs with $100 billion or more in total consolidated assets and other specified companies. The final rule introduced a stress capital buffer requirement based on firm-specific stress test performance and planned dividends, which for Ally replaced the fixed 2.5% component of the capital conservation buffer requirement. Refer to Note 20 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for details about changes to the CCAR process effected by the final rule. Under the final rule, Ally’s stress capital buffer requirement is the greater of 2.5% and the result of the following calculation: (1) the difference between Ally’s starting and minimum projected Common Equity Tier 1 capital ratios under the severely adverse scenario in the supervisory stress test, plus (2) the sum of the dollar amount of Ally’s planned common stock dividends for each of the fourth through seventh quarters of its nine-quarter capital planning horizon, as a percentage of risk-weighted assets. For a Category IV firm like Ally, the capital conservation buffer requirement comprises the stress capital buffer requirement. The capital conservation buffer requirement applicable to Ally’s depository-institution subsidiary, Ally Bank, continues to be a fixed 2.5%. Ally received its first preliminary stress capital buffer requirement from the FRB in June 2020, which was determined under this new methodology to be 3.5%, was finalized in August 2020, and became effective in October 2020. In June 2020, the FRB also announced its determination that changes in financial markets or the macroeconomic outlook could have a material effect on the risk profiles and financial conditions of firms subject to the capital-plan rule and that, as a result, the firms (including Ally) would be required to resubmit capital plans to the FRB within 45 days after receiving updated stress scenarios from the FRB. In September 2020, the FRB released two updated scenarios—severely adverse and alternative severe. We updated our capital plan in light of firm-specific baseline and stress scenarios, as required, and submitted our updated plan to the FRB in November 2020. In December 2020, the FRB publicly disclosed summary results of this second round of supervisory stress testing and extended its deadline for notifying firms about whether their stress capital buffer requirements will be recalculated to March 31, 2021. On March 25, 2021, the FRB further extended this deadline to June 30, 2021. Refer to the later section titled Capital Planning and Stress Tests for more information.

Under the capital conservation buffer requirement, the maximum amount of capital distributions and discretionary bonus payments that can be made by a banking organization, such as Ally or Ally Bank, is a function of its eligible retained income. During the COVID-19 pandemic, the FRB and other U.S. banking agencies expressed a concern that the definition of eligible retained income would not limit distributions in the gradual manner intended but instead could do so in a sudden and severe manner even if a banking organization were to experience only a modest reduction in its capital ratios. As a result, to better allow a banking organization to use its capital buffer as intended and continue lending in adverse conditions, the U.S. banking agencies issued an interim final rule that became effective in March 2020, and revised the definition of eligible retained income to the greater of (1) a banking organization’s net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (2) the average of a banking organization’s net income over the preceding four quarters. This interim final rule was adopted as final with no changes effective January 1, 2021.

Ally and Ally Bank are subject to the U.S. Basel III standardized approach for counterparty credit risk but not to the U.S. Basel III advanced approaches for credit risk or operational risk. Ally is also not subject to the U.S. market-risk capital rule, which applies only to banking organizations with significant trading assets and liabilities.

The risk-based capital ratios and the Tier 1 leverage ratio play a central role in PCA, which is an enforcement framework used by the U.S. banking agencies to constrain the activities of depository institutions based on their levels of regulatory capital. Five categories have been established using thresholds for the Common Equity Tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio, the total risk-based capital ratio, and the Tier 1 leverage ratio: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. FDICIA generally prohibits a depository institution from making any capital distribution, including any payment of a cash dividend or a management fee to its BHC, if the depository institution would become undercapitalized after the distribution. An undercapitalized institution is also subject to growth limitations and must submit and fulfill a capital restoration plan. While BHCs are not subject to the PCA framework, the FRB is empowered to compel a BHC to take measures—such as the execution of financial or performance guarantees—when PCA is required in connection with one of its depository-institution subsidiaries. In addition, under FDICIA, only well-capitalized and, with a waiver from the FDIC, adequately capitalized institutions may accept brokered deposits, and even adequately capitalized institutions are subject to some restrictions on the rates they may offer for brokered deposits. At March 31, 2021, Ally Bank was well capitalized under the PCA framework.

37

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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

	March 31, 2021				December 31, 2020				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.	$	15,359	11.06	%	$	14,878	10.64	%	4.50	%	(b)
Ally Bank	17,879		13.68		17,567		13.38		4.50		6.50	%
Tier 1 (to risk-weighted assets)
Ally Financial Inc.	$	17,795	12.82	%	$	17,289	12.37	%	6.00	%	6.00	%
Ally Bank	17,879		13.68		17,567		13.38		6.00		8.00
Total (to risk-weighted assets)
Ally Financial Inc.	$	20,240	14.58	%	$	19,778	14.15	%	8.00	%	10.00	%
Ally Bank	19,513		14.93		19,210		14.63		8.00		10.00
Tier 1 leverage (to adjusted quarterly average assets) (c)
Ally Financial Inc.	$	17,795	9.78	%	$	17,289	9.41	%	4.00	%	(b)
Ally Bank	17,879		10.38		17,567		10.12		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 was required to maintain a minimum capital conservation buffer of 3.5% at both March 31, 2021, and December 31, 2020, and Ally Bank was required to maintain a minimum capital conservation buffer of 2.5% at both March 31, 2021, and December 31, 2020.

(b)Currently, there is no ratio component for determining whether a BHC is “well-capitalized.”

(c)Federal regulatory reporting guidelines require the calculation of adjusted quarterly average assets using a daily average methodology.

In December 2018, the FRB and other U.S. banking agencies approved a final rule to address the impact of CECL on regulatory capital by allowing BHCs and banks, including Ally, the option to phase in the day-one impact of CECL over a three-year period. In March 2020, the FRB and other U.S. banking agencies issued an interim final rule that became effective for the first quarter of 2020 and that provides BHCs and banks with an alternative option to temporarily delay an estimate of the impact of CECL, relative to the incurred loss methodology for estimating the allowance for loan losses, on regulatory capital. The interim final rule was clarified and adjusted in a final rule that became effective in September 2020. We have elected this alternative option instead of the one described in the December 2018 rule. As a result, under the final rule, we will delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021. Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. The estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as the entire day-one impact at adoption plus 25% of the subsequent change in allowance during the two-year deferral period. As of March 31, 2021, the total deferred impact on Common Equity Tier 1 capital related to our adoption of CECL was $1.2 billion.

At both March 31, 2021, and December 31, 2020, Ally and Ally Bank were “well-capitalized.” 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 tailoring framework described earlier in the section titled Basel Capital Framework, we are generally subject to supervisory stress testing on a two-year cycle and exempted from mandated company-run capital stress testing requirements. We are also required to submit an annual capital plan to the FRB. Our annual capital plan must include an assessment of our expected uses and sources of capital and a description of all planned capital actions over a nine-quarter planning horizon, including any issuance of a debt or equity capital instrument, any dividend or other capital distribution, and any similar action that the FRB determines could have an impact on our capital. The plan must also include a detailed description of our process for assessing capital adequacy, including a discussion of how we, under expected and stressful conditions, will maintain capital commensurate with our risks and above the minimum regulatory capital ratios, will serve as a source of strength to Ally Bank, and will maintain sufficient capital to continue our operations by maintaining ready access to funding, meeting our obligations to creditors and other counterparties, and continuing to serve as a credit intermediary.

We submitted our 2020 capital plan in April 2020, which included planned capital distributions to common stockholders through share repurchases and cash dividends over the nine-quarter planning horizon. In June 2020, the FRB provided us with the results of the supervisory stress test, additional industry-wide sensitivity analyses conducted in light of the COVID-19 pandemic, and our preliminary stress capital buffer requirement. As described earlier in the section titled Basel Capital Framework, we updated our capital plan in light of revised stress scenarios from the FRB and submitted our updated plan to the FRB in November 2020. In December 2020, the FRB publicly disclosed summary results of its second round of supervisory stress testing and extended its deadline for notifying firms about whether their stress

38

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

capital buffer requirements will be recalculated to March 31, 2021. On March 25, 2021, the FRB further extended this deadline to June 30, 2021.

In June 2020, the FRB announced several actions to ensure that large firms, such as Ally, would remain resilient despite the economic uncertainty from the COVID-19 pandemic, including for the third quarter of 2020 (1) the suspension of repurchases by any firm of its common stock, except repurchases relating to issuances of common stock related to employee stock ownership plans, and (2) the disallowance of any increase by a firm in the amount of its common-stock dividends and the imposition of a common-stock dividend limit equal to the average of the firm’s net income for the four preceding calendar quarters. These restrictions were extended by the FRB for the fourth quarter of 2020. In December 2020, the FRB extended and modified these restrictions for the first quarter of 2021 to limit aggregate common-stock dividends and share repurchases to an amount equal to the average of the firm’s net income for the four preceding calendar quarters subject to specified exceptions. On March 25, 2021, the FRB extended these modified restrictions for the second quarter of 2021 and announced that, for a firm such as Ally that is not subject to the 2021 supervisory stress test and on a two-year cycle, the additional restrictions will end after June 30, 2021, and the firm’s stress capital buffer requirement based on the June 2020 supervisory stress test results will remain in place. The FRB, however, retains the discretion to change course and further extend these restrictions or impose different ones. On January 11, 2021, our Board authorized a stock-repurchase program, permitting us to repurchase up to $1.6 billion of our common stock from time to time from the first quarter of 2021 through the fourth quarter of 2021 subject to restrictions imposed by the FRB.

In January 2021, the FRB issued a final rule effective April 5, 2021, to align its capital planning and stress capital buffer requirements with the tailoring framework. Under the final rule, unless otherwise directed by the FRB in specified circumstances, Ally and other Category IV firms are generally no longer required to calculate forward-looking projections of revenues, losses, reserves, and pro forma capital levels under scenarios provided by the FRB. Each firm continues to be required, however, to provide a forward-looking analysis of income and capital levels under expected and stressful conditions that are designed by the firm. In addition, for Category IV firms, the final rule updated the frequency of calculating the portion of the stress capital buffer derived from the supervisory stress test to every other year. These firms have the ability to elect to participate in the supervisory stress test—and receive a correspondingly updated stress capital buffer requirement—in a year in which they would not generally be subject to the supervisory stress test. During a year in which a Category IV firm does not undergo a supervisory stress test, the firm would receive an updated stress capital buffer requirement that reflects its updated planned common-stock dividends. The final rule also includes reporting and other changes consistent with the tailoring framework. The deadline for electing to opt into the 2021 supervisory stress test was April 5, 2021, and Ally did not make such an election.

We submitted our 2021 capital plan on April 5, 2021, which includes planned capital distributions to common stockholders through share repurchases and cash dividends over the nine-quarter planning horizon and other capital actions. Our ability to make capital distributions, including our ability to pay dividends or repurchase shares of our common stock, will continue to be subject to the FRB’s review and our internal governance requirements, including approval by our Board. The amount and size of any future dividends and share repurchases also will be subject to various factors, including Ally’s capital and liquidity positions, accounting and regulatory considerations (including any restrictions that may be imposed by the FRB), impacts related to the COVID-19 pandemic, financial and operational performance, alternative uses of capital, common-stock price, and general market conditions, and may be extended, modified, or discontinued at any time.

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

	Common stock repurchased during period (a) (b)			Number of common shares outstanding		Cash dividends declared per common share (c)
($ in millions, except per share data; shares in thousands)	Approximate dollar value		Number of shares	Beginning of period	End of period
2020
First quarter	$	104	3,838	374,332	373,155	$	0.19
Second quarter	0		53	373,155	373,837	0.19
Third quarter	1		9	373,837	373,857	0.19
Fourth quarter	1		37	373,857	374,674	0.19
2021
First quarter	$	219	5,276	374,674	371,805	$	0.19

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

(b)On March 17, 2020, we announced the voluntary suspension of our stock-repurchase program through its termination on June 30, 2020. Consistent with the FRB’s restrictions on common-stock repurchases for large firms such as Ally, described above, we did not implement a new stock-repurchase program or repurchase shares of our common stock, except in connection with compensation plans, for the remainder of 2020. Refer to the discussion above for further details about this action.

(c)On April 13, 2021, our Board declared a quarterly cash dividend of $0.19 per share on all common stock, payable on May 14, 2021, to stockholders of record at the close of business on April 30, 2021. Refer to Note 23 for further information regarding this common stock dividend.

39

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

17.    Derivative Instruments and Hedging Activities

We enter into derivative instruments, which may include interest rate swaps, foreign-currency forwards, equity options, 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-rate 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-rate and variable-rate assets and liabilities and may enter into interest rate swaps, forwards, and options to achieve our desired mix of fixed-rate 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, and options to mitigate interest rate risk.

We also enter into interest rate lock commitments and forward commitments that are executed as part of our mortgage business that meet the accounting definition of a derivative.

Foreign Exchange Risk

We enter into derivative financial instrument contracts to mitigate the risk associated with variability in cash flows related to our various foreign-currency exposures.

We enter into foreign-currency forwards with external counterparties as net investment hedges of foreign exchange exposure on our investment in foreign subsidiaries. Our equity is impacted by the cumulative translation adjustments resulting from the translation of foreign subsidiary results; this impact is reflected in our accumulated other comprehensive income. We also periodically enter into foreign-currency forwards to economically hedge any foreign-denominated debt, centralized lending, and foreign-denominated third-party loans. These foreign-currency forwards that are used as economic hedges are recorded at fair value with changes recorded as income or expense offsetting the gains and losses on the associated foreign-currency transactions.

Investment Risk

We enter into equity options to mitigate the risk associated with our exposure to the equity markets.

Credit Risk

We enter into various retail automotive-loan purchase agreements with certain counterparties. As part of those agreements, Ally may withhold a portion of the purchase price from the counterparty and be required to pay the counterparty all or part of the amount withheld at agreed upon measurement dates and determinable amounts if actual credit performance of the acquired loans on the measurement date is better than or equal to what was estimated at the time of acquisition. Based upon these terms, these contracts meet the accounting definition of a derivative.

Counterparty Credit Risk

Derivative financial instruments contain an element of credit risk if counterparties are unable to meet the terms of the agreements. Credit risk associated with derivative financial instruments is measured as the net replacement cost should the counterparties that owe us under the contract completely fail to perform under the terms of those contracts, assuming no recoveries of underlying collateral as measured by the market value of the derivative financial instrument.

We manage our risk to financial counterparties through internal credit analysis, limits, and monitoring. Additionally, derivatives and repurchase agreements are entered into with approved counterparties using industry standard agreements.

We execute certain OTC derivatives, such as interest rate caps and floors, using bilateral agreements with financial counterparties. Bilateral agreements generally require both parties to post collateral in the event the fair values of the derivative financial instruments meet posting thresholds established under the agreements. In the event that either party defaults on the obligation, the secured party may seize the collateral. Payments related to the exchange of collateral for OTC derivatives are recognized as collateral.

40

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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 March 31, 2021, or 2020.

We placed cash and noncash collateral totaling $1 million and $163 million, respectively, supporting our derivative positions at March 31, 2021, compared to $4 million and $145 million of cash and noncash collateral at December 31, 2020, 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 12 for details on the repurchase agreements. The receivables for cash collateral placed are included on our Condensed Consolidated Balance Sheet in other assets.

We received cash collateral from counterparties totaling $4 million in accounts maintained by counterparties at March 31, 2021. This amount includes collateral received from clearinghouses and exclude cash and noncash collateral pledged under repurchase agreements. Refer to Note 12 for details on repurchase agreements. The payables for cash collateral received are included on our Condensed Consolidated Balance Sheet in accrued expenses and other liabilities. Included in these amounts is noncash collateral where we have been granted the right to sell or pledge the underlying assets. We have not sold or pledged any of the noncash collateral received under these agreements.

41

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

Balance Sheet Presentation

The following table summarizes the amounts of derivative instruments reported on our Condensed Consolidated Balance Sheet. The amounts are presented on a gross basis, are segregated by derivatives that are designated and qualifying as hedging instruments or those that are not, and are further segregated by type of contract within those two categories.

Derivative contracts in a receivable and payable position exclude open trade equity on derivatives cleared through central clearing counterparties. Any associated margin exchanged with our central clearing counterparties are treated as settlements of the derivative exposure, rather than collateral. Such payments are recognized as settlements of the derivatives contracts in a receivable and payable position on our Condensed Consolidated Balance Sheet.

Notional amounts are reference amounts from which contractual obligations are derived and are not recorded on the balance sheet. In our view, derivative notional is not an accurate measure of our derivative exposure when viewed in isolation from other factors, such as market rate fluctuations and counterparty credit risk.

	March 31, 2021						December 31, 2020
	Derivative contracts in a				Notional amount		Derivative contracts in a				Notional amount
($ in millions)	receivable position		payable position				receivable position		payable position
Derivatives designated as accounting hedges
Interest rate contracts
Swaps	$	0	$	0	$	17,945	$	0	$	0	$	12,385
Foreign exchange contracts
Forwards	1		0		161		1		0		164
Total derivatives designated as accounting hedges	1		0		18,106		1		0		12,549
Derivatives not designated as accounting hedges
Interest rate contracts
Futures and forwards	3		0		459		1		0		391
Written options	11		5		576		15		0		587
Total interest rate risk	14		5		1,035		16		0		978
Foreign exchange contracts
Futures and forwards	2		0		448		0		1		159
Total foreign exchange risk	2		0		448		0		1		159
Credit contracts (a)
Other credit derivatives	0		37		n/a		0		28		n/a
Total credit risk	0		37		n/a		0		28		n/a
Equity contracts
Written options	0		2		2		0		4		2
Purchased options	1		0		0		0		0		0
Total equity risk	1		2		2		0		4		2
Total derivatives not designated as accounting hedges	17		44		1,485		16		33		1,139
Total derivatives	$	18	$	44	$	19,591	$	17	$	33	$	13,688

n/a = not applicable.

(a)The maximum potential amount of undiscounted future payments that could be required under these credit derivatives was $66 million and $56 million as of March 31, 2021, and December 31, 2020, respectively.

42

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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

($ in millions)	Carrying amount of the hedged items				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items
					Total				Discontinued (a)
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Assets
Available-for-sale securities (b) (c)	$	4,999	$	1,259	$	15	$	39	$	19	$	28
Finance receivables and loans, net (d)	35,233		28,393		173		225		73		72
Liabilities
Long-term debt	$	7,833	$	8,656	$	33	$	169	$	113	$	203

(a)Represents the fair value hedging adjustment on qualifying hedges for which the hedging relationship was discontinued. This represents a subset of the amounts reported in the total hedging adjustment.

(b)The carrying amount of hedged available-for-sale securities is presented above using amortized cost and includes $3.5 billion and $592 million at March 31, 2021, and December 31, 2020, respectively, related to closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. Refer to Note 6 for a reconciliation of the amortized cost and fair value of available-for-sale securities.

(c)The amount that is identified as the last of layer in the open hedge relationship was $3.1 billion as of March 31, 2021. The basis adjustment associated with the open last of layer relationship was a $3 million liability as of March 31, 2021, which would be allocated across the entire remaining pool upon termination or maturity of the hedge relationship. The amount that has been identified as the last of layer in the discontinued hedge relationship was $1.4 billion and $1.2 billion as of March 31, 2021, and December 31, 2020, respectively. The basis adjustment associated with the discontinued last of layer relationship was a $16 million asset as of March 31, 2021, and a $20 million asset as of December 31, 2020, which was allocated across the entire remaining pool upon termination of the hedge relationship.

(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 $11.7 billion and $9.4 billion at March 31, 2021, and December 31, 2020, respectively. The basis adjustment associated with the open last-of-layer relationship was a $100 million asset as of March 31, 2021, and a $153 million asset as of December 31, 2020, 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 $19.6 billion at March 31, 2021, and $18.5 billion at December 31, 2020. The basis adjustment associated with the discontinued last-of-layer hedge relationship was a $73 million asset and a $72 million asset as of March 31, 2021, and December 31, 2020, respectively, which was allocated across the entire remaining pool upon termination of the hedge relationship.

Statement of Comprehensive Income Presentation

The following table summarizes the location and amounts of gains and losses on derivative instruments not designated as accounting hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Three months ended March 31,
($ in millions)		2021		2020
Gain (loss) recognized in earnings
Interest rate contracts
Loss on mortgage and automotive loans, net		$	(7)	$	(15)
Total interest rate contracts		(7)		(15)
Foreign exchange contracts
Other income, net of losses		0		8
Other operating expenses		(2)		0
Total foreign exchange contracts		(2)		8
Credit contracts
Other income, net of losses		(8)		0
Total credit contracts		(8)		0
Total loss recognized in earnings		$	(17)	$	(7)

43

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The following table summarizes the location and amounts of gains and losses on derivative instruments designated as qualifying fair value and cash flow hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Interest and fees on finance receivables and loans				Interest and dividends on investment securities and other earning assets					Interest on deposits			Interest on long-term debt
Three months ended March 31, ($ in millions)	2021		2020			2021		2020			2021		2020		2021		2020
Gain (loss) on fair value hedging relationships
Interest rate contracts
Hedged fixed-rate unsecured debt	$	0	$	0		$	0	$	0		$	0	$	0	$	139	$	(170)
Derivatives designated as hedging instruments on fixed-rate unsecured debt	0		0			0		—			0		0		(139)		170
Hedged available-for-sale securities	0		0			(13)		41			0		0		0		0
Derivatives designated as hedging instruments on available-for-sale securities	0		0			13		(41)			0		0		0		0
Hedged fixed-rate consumer automotive loans	(39)		248			0		0			0		0		0		0
Derivatives designated as hedging instruments on fixed-rate consumer automotive loans	39		(248)			0		0			0		0		0		0
Total gain on fair value hedging relationships	0		0			0		0			0		0		0		0
Gain (loss) on cash flow hedging relationships
Interest rate contracts
Hedged deposit liabilities
Reclassified from accumulated other comprehensive income into income	0		0			0		0			(1)		(3)		0		0
Hedged variable-rate commercial loans
Reclassified from accumulated other comprehensive income into income	22		3			0		0			0		0		0		0
Total gain (loss) on cash flow hedging relationships	$	22	$	3		$	0	$	0		$	(1)	$	(3)	$	0	$	0
Total amounts presented in the Condensed Consolidated Statement of Comprehensive Income	$	1,582	$	1,742		$	131	$	226		$	306	$	592	$	250	$	348

During the next 12 months, we estimate $46 million of gains 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 qualifying fair value and cash flow hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Interest and fees on finance receivables and loans				Interest and dividends on investment securities and other earning assets					Interest on long-term debt
Three months ended March 31, ($ in millions)	2021		2020			2021		2020			2021		2020
Gain (loss) on fair value hedging relationships
Interest rate contracts
Amortization of deferred unsecured debt basis adjustments	$	0	$	0		$	0	$	0		$	1	$	6
Interest for qualifying accounting hedges of unsecured debt	0		0			0		0			1		0
Amortization of deferred secured debt basis adjustments (FHLB advances)	0		0			0		0			(5)		(6)
Amortization of deferred basis adjustments of available-for-sale securities	0		0			(2)		(1)			0		0
Interest for qualifying accounting hedges of available-for-sale securities	0		0			(1)		0			0		0
Amortization of deferred loan basis adjustments	(13)		(13)			0		0			0		0
Interest for qualifying accounting hedges of consumer automotive loans held-for-investment	(30)		(9)			0		0			0		0
Total loss on fair value hedging relationships	(43)		(22)			(3)		(1)			(3)		0
Gain on cash flow hedging relationships
Interest rate contracts
Interest for qualifying accounting hedges of variable-rate commercial loans	0		1			0		0			0		0
Total gain on cash flow hedging relationships	$	0	$	1		$	0	$	0		$	0	$	0

44

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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

	Three months ended March 31,
($ in millions)		2021		2020
Interest rate contracts
(Loss) gain recognized in other comprehensive income		$	(21)	$	169

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

	Three months ended March 31,
($ in millions)		2021		2020
Foreign exchange contracts (a) (b)
(Loss) gain recognized in other comprehensive income		$	(2)	$	12

(a)There were 0 amounts excluded from effectiveness testing for the three months ended March 31, 2021, or 2020.

(b)Gains and losses reclassified from accumulated other comprehensive income are reported as other income, net of losses, in the Condensed Consolidated Statement of Comprehensive Income. There were 0 amounts reclassified for the three months ended March 31, 2021, or 2020.

18.    Income Taxes

We recognized total income tax expense from continuing operations of $211 million for the three months ended March 31, 2021, compared to an income tax benefit of $92 million for the same period in 2020. The increase in income tax expense for the three months ended March 31, 2021, compared to the same period in 2020, was primarily due to the tax effects of an increase in pretax earnings.

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.

19.    Fair Value

Fair Value Measurements

For purposes of this disclosure, fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date under current market conditions. Fair value is based on the assumptions we believe market participants would use when pricing an asset or liability. Additionally, entities are required to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring the fair value of a liability.

Judgment is used in estimating inputs to our internal valuation models used to estimate our Level 3 fair value measurements. Level 3 inputs such as interest rate movements, prepayment speeds, credit losses, and discount rates are inherently difficult to estimate. Changes to these inputs can have a significant effect on fair value measurements and amounts that could be realized.

GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels.

Level 1    Inputs are quoted prices in active markets for identical assets or liabilities at the measurement date. Additionally, the entity must have the ability to access the active market, and the quoted prices cannot be adjusted by the entity.

Level 2    Inputs are other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full term of the assets or liabilities.

Level 3    Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.

45

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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, 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 Condensed Consolidated Balance Sheet. Because these derivatives are valued using internal pricing models with unobservable inputs, they are classified as Level 3.

We purchase automotive finance receivables and loans from third parties as part of forward flow arrangements and, from time-to-time, execute opportunistic ad-hoc bulk purchases. As part of those agreements, Ally may withhold a portion of the purchase price from the counterparty and be required to pay the counterparty all or part of the amount withheld at agreed upon measurement dates and determinable amounts if actual credit performance of the acquired loans on the measurement date is better than or equal to what was estimated at the time of acquisition. Because these contracts meet the accounting definition of a derivative, we recognize a liability at fair value for these deferred purchase price payments. The fair value of these liabilities is determined using a discounted cash flow method. 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 expected credit losses). These liabilities are valued using internal loss models with unobservable inputs, and are classified as Level 3.

We are required to consider all aspects of nonperformance risk, including our own credit standing, when measuring fair value of a liability. We reduce credit risk on the majority of our derivatives by entering into legally enforceable agreements that enable the posting and receiving of collateral associated with the fair value of our derivative positions on an ongoing basis. In the event that we do not enter into legally enforceable agreements that enable the posting and receiving of collateral, we will consider our credit risk and the credit risk of our counterparties in the valuation of derivative instruments through a CVA, if warranted. The CVA calculation would utilize the credit default swap spreads of the counterparty.

46

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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
March 31, 2021 ($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Investment securities
Equity securities (a)	$	1,057	$	0	$	11	$	1,068
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	1,706		0		0		1,706
U.S. States and political subdivisions	0		1,057		7		1,064
Foreign government	17		155		0		172
Agency mortgage-backed residential	0		21,518		0		21,518
Mortgage-backed residential	0		2,312		0		2,312
Agency mortgage-backed commercial	0		4,152		0		4,152
Asset-backed	0		474		0		474
Corporate debt	0		2,048		0		2,048
Total available-for-sale securities	1,723		31,716		7		33,446
Mortgage loans held-for-sale (b)	0		0		146		146
Finance receivables and loans, net
Consumer other (b)	0		0		8		8
Derivative contracts in a receivable position
Interest rate	0		0		14		14
Foreign currency	0		3		0		3
Other	1		0		0		1
Total derivative contracts in a receivable position	1		3		14		18
Total assets	$	2,781	$	31,719	$	186	$	34,686
Liabilities
Accrued expenses and other liabilities
Derivative contracts in a payable position
Interest rate	$	0	$	0	$	5	$	5
Credit contracts	0		0		37		37
Equity contracts	2		0		0		2
Total derivative contracts in a payable position	2		0		42		44
Total liabilities	$	2	$	0	$	42	$	44

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

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

47

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

	Recurring fair value measurements
December 31, 2020 ($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Investment securities
Equity securities (a)	$	1,064	$	0	$	7	$	1,071
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	803		0		0		803
U.S. States and political subdivisions	0		1,088		7		1,095
Foreign government	17		159		0		176
Agency mortgage-backed residential	0		18,588		0		18,588
Mortgage-backed residential	0		2,640		0		2,640
Agency mortgage-backed commercial	0		4,189		0		4,189
Asset-backed	0		425		0		425
Corporate debt	0		1,914		0		1,914
Total available-for-sale securities	820		29,003		7		29,830
Mortgage loans held-for-sale (b)	0		0		91		91
Finance receivables and loans, net
Consumer other (b)	0		0		8		8
Derivative contracts in a receivable position
Interest rate	0		0		16		16
Foreign currency	0		1		0		1
Total derivative contracts in a receivable position	0		1		16		17
Total assets	$	1,884	$	29,004	$	129	$	31,017
Liabilities
Accrued expenses and other liabilities
Derivative contracts in a payable position
Foreign currency	$	0	$	1	$	0	$	1
Credit contracts	0		0		28		28
Equity contracts	4		0		0		4
Total derivative contracts in a payable position	4		1		28		33
Total liabilities	$	4	$	1	$	28	$	33

(a)Our direct investment in any one industry did not exceed 11%.

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

48

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

The following tables present the reconciliation for all Level 3 assets and liabilities measured at fair value on a recurring basis. 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.

	Equity securities (a)				Available-for-sale securities				Mortgage loans held-for-sale (b) (c)				Finance receivables and loans, net (b) (d)				Interests retained in financial asset sales
($ in millions)	2021		2020		2021		2020		2021		2020		2021		2020		2021		2020
Assets
Fair value at January 1,	$	7	$	8	$	7	$	2	$	91	$	30	$	8	$	11	$	0	$	2
Net realized/unrealized gains (losses)
Included in earnings	4		(4)		0		0		28		5		2		(1)		0		0
Included in OCI	0		0		0		0		0		0		0		0		0		0
Purchases	0		0		0		1		1,039		302		4		6		0		0
Sales	0		0		0		0		(1,012)		(269)		0		0		0		0
Issuances	0		0		0		0		0		0		0		0		0		—
Settlements	0		0		0		0		0		0		(6)		(6)		0		(1)
Transfers into (out of) Level 3	0		0		0		0		0		0		0		0		0		0
Fair value at March 31,	$	11	$	4	$	7	$	3	$	146	$	68	$	8	$	10	$	0	$	1
Net unrealized gains (losses) still held at March 31,
Included in earnings	$	4	$	(4)	$	0	$	0	$	1	$	1	$	0	$	0	$	0	$	0
Included in OCI	0		0		0		0		0		0		0		0		0		0

(a)Net realized/unrealized gains (losses) are reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.

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

(c)Net realized/unrealized gains (losses) are reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.

(d)Net realized/unrealized gains (losses) are reported as interest and fees on finance receivables and loans and other income, net of losses, in the Condensed Consolidated Statement of Comprehensive Income.

	Derivative liabilities, net of derivative assets
($ in millions)	2021 (a)		2020 (b)
Liabilities
Fair value at January 1,	$	12	$	(2)
Net realized/unrealized losses (gains)
Included in earnings	15		(6)
Included in OCI	0		0
Purchases	0		0
Sales	0		0
Issuances	1		0
Settlements	0		0
Transfers into (out of) Level 3	0		0
Fair value at March 31,	$	28	$	(8)
Net unrealized losses (gains) still held at March 31,
Included in earnings	$	15	$	(6)
Included in OCI	0		0

(a)Net realized/unrealized (gains) losses are reported as gain on mortgage and automotive loans, net, and other income, net of losses, in the Condensed Consolidated Statement of Comprehensive Income.

(b)Net realized/unrealized (gains) losses are reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.

49

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

Nonrecurring Fair Value

We may be required to measure certain assets and liabilities at fair value from time to time. These periodic fair value measures typically result from the application of lower-of-cost or fair value accounting or certain impairment measures. These items would constitute nonrecurring fair value measures.

The following tables display assets and liabilities measured at fair value on a nonrecurring basis and still held at March 31, 2021, and December 31, 2020, respectively. The amounts are generally as of the end of each period presented, which approximate the fair value measurements that occurred during each period.

	Nonrecurring fair value measurements								Lower-of-cost-or-fair-value reserve, valuation reserve, or cumulative adjustments		Total gain (loss) included in earnings
March 31, 2021 ($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Loans held-for-sale, net	$	0	$	0	$	346	$	346	$	0	n/m	(a)
Commercial finance receivables and loans, net (b)
Automotive	0		0		14		14		(4)		n/m	(a)
Other	0		0		42		42		(23)		n/m	(a)
Total commercial finance receivables and loans, net	0		0		56		56		(27)		n/m	(a)
Other assets
Nonmarketable equity investments	0		1		11		12		2		n/m	(a)
Repossessed and foreclosed assets (c)	0		0		7		7		0		n/m	(a)
Total assets	$	0	$	1	$	420	$	421	$	(25)	n/m

n/m = not meaningful

(a)We consider the applicable valuation allowance, loan loss allowance, or cumulative impairment to be the most relevant indicator of the impact on earnings caused by the fair value measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the respective valuation reserve, loan loss allowance, or cumulative adjustment.

(b)Represents collateral-dependent loans held for investment for which a nonrecurring measurement was made. The related allowance for loan losses represents the cumulative fair value adjustments for 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.

50

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

	Nonrecurring fair value measurements								Lower-of-cost-or-fair-value reserve, valuation reserve, or cumulative adjustments		Total gain (loss) included in earnings
December 31, 2020 ($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Loans held-for-sale, net	$	0	$	0	$	315	$	315	$	0	n/m	(a)
Commercial finance receivables and loans, net (b)
Automotive	0		0		27		27		(5)		n/m	(a)
Other	0		0		54		54		(20)		n/m	(a)
Total commercial finance receivables and loans, net	0		0		81		81		(25)		n/m	(a)
Other assets
Nonmarketable equity investments (c)	0		7		118		125		88		n/m	(a)
Repossessed and foreclosed assets (d)	0		0		9		9		(1)		n/m	(a)
Total assets	$	0	$	7	$	523	$	530	$	62	n/m

n/m = not meaningful

(a)We consider the applicable valuation allowance, loan loss allowance, or cumulative impairment to be the most relevant indicator of the impact on earnings caused by the fair value measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the respective valuation reserve, loan loss allowance, or cumulative adjustment.

(b)Represents collateral-dependent loans held for investment for which a nonrecurring measurement was made. The related allowance for loan losses represents the cumulative fair value adjustments for those specific receivables.

(c)Primarily relates to an investment in one entity for which there was a subsequent funding round. This subsequent funding round resulted in an observable price change in the value of our investment in the entity. Refer to Note 13 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for further discussion.

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

Additionally, on April 30, 2020, we recognized a $50 million impairment of goodwill at Ally Invest. At the time of impairment, the fair value of goodwill at Ally Invest was classified as Level 3 under the fair value hierarchy. Refer to Note 13 to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for further discussion.

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.

51

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

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 March 31, 2021, and December 31, 2020.

			Estimated fair value
($ in millions)	Carrying value		Level 1		Level 2		Level 3		Total
March 31, 2021
Financial assets
Held-to-maturity securities	$	1,197	$	0	$	1,250	$	0	$	1,250
Loans held-for-sale, net	484		0		0		485		485
Finance receivables and loans, net	109,916		0		0		116,955		116,955
FHLB/FRB stock (a)	697		0		697		0		697
Financial liabilities
Deposit liabilities	$	50,962	$	0	$	0	$	51,476	$	51,476
Long-term debt	20,503		0		17,943		5,457		23,400
December 31, 2020
Financial assets
Held-to-maturity securities	$	1,253	$	0	$	1,331	$	0	$	1,331
Loans held-for-sale, net	315		0		0		315		315
Finance receivables and loans, net	115,243		0		0		122,156		122,156
FHLB/FRB stock (a)	725		0		725		0		725
Financial liabilities
Deposit liabilities	$	55,210	$	0	$	0	$	55,932	$	55,932
Short-term borrowings	2,136		0		0		2,136		2,136
Long-term debt	22,006		0		19,161		6,310		25,471

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

In addition to the financial instruments presented in the above table, we have various financial instruments for which the carrying value approximates the fair value due to their short-term nature and limited credit risk. These instruments include cash and cash equivalents, restricted cash, cash collateral, accrued interest receivable, accrued interest payable, trade receivables and payables, and other short-term receivables and payables. Included in cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal. Classified as Level 1 under the fair value hierarchy, cash and cash equivalents generally expose us to limited credit risk and are so near maturity that they present insignificant risk of changes in value because of changes in interest rates.

20.    Offsetting Assets and Liabilities

Our derivative contracts and repurchase/reverse repurchase transactions are supported by qualifying master netting and master repurchase agreements. These agreements are legally enforceable bilateral agreements that (i) create a single legal obligation for all individual transactions covered by the agreement to the nondefaulting entity upon an event of default of the counterparty, including bankruptcy, insolvency, or similar proceeding, and (ii) provide the nondefaulting entity the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set off collateral promptly upon an event of default of the counterparty.

To further mitigate the risk of counterparty default related to derivative instruments, we maintain collateral agreements with certain counterparties. The agreements require both parties to maintain collateral in the event the fair values of the derivative financial instruments meet established thresholds. In the event that either party defaults on the obligation, the secured party may seize the collateral. Generally, our collateral arrangements are bilateral such that we and the counterparty post collateral for the obligation. Contractual terms provide for standard and customary exchange of collateral based on changes in the market value of the outstanding derivatives. A party posts additional collateral when their obligation rises or removes collateral when it falls, such that the net replacement cost of the nondefaulting party is covered in the event of counterparty default.

52

Notes to Condensed Consolidated Financial Statements (unaudited)

Ally Financial Inc. • Form 10-Q

In certain instances, as it relates to our derivative instruments, we have the option to report derivative assets and liabilities as well as assets and liabilities associated with cash collateral received or delivered that is governed by a master netting agreement on a net basis as long as certain qualifying criteria are met. Similarly, for our repurchase/reverse repurchase transactions, we have the option to report recognized assets and liabilities subject to a master netting agreement on a net basis if certain qualifying criteria are met. At March 31, 2021, these instruments are reported as gross assets and gross liabilities on the Condensed Consolidated Balance Sheet. For additional information on derivative instruments and hedging activities, refer to Note 17.

The composition of offsetting derivative instruments, financial assets, and financial liabilities was as follows.

	Gross amounts of recognized assets/liabilities		Gross amounts offset on the Condensed Consolidated Balance Sheet		Net amounts of assets/liabilities presented on the Condensed Consolidated Balance Sheet		Gross amounts not offset on the Condensed Consolidated Balance Sheet
($ in millions)							Financial instruments	Collateral (a) (b) (c)	Net amount
March 31, 2021
Assets
Derivative assets in net asset positions	$	3	$	0	$	3