Ally Bank 2011 Annual Report Download - page 91

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10−K
In addition, the FDIC indicated that it expected us to diversify Ally Bank's overall funding in order to reduce reliance on any one source of funding
and to achieve a well−balanced funding portfolio across a spectrum of risk, duration, and cost of funds characteristics. Over the past few years, we have
been focused on diversifying our funding sources, in particular at Ally Bank by expanding its securitization programs, through both public and private
committed credit facilities, extending the maturity profile of our brokered deposit portfolio while not exceeding a $10 billion portfolio, establishing
repurchase agreements, and continuing to access funds from the Federal Home Loan Banks.
Since 2009, we have been directing new bank−eligible assets in the United States to Ally Bank in order to reduce and minimize our nonbanking
exposures and funding requirements and utilize our growing consumer deposit−taking capabilities. This has allowed us to use bank funding for a wider
array of our automotive finance assets and to provide a sustainable long−term funding channel for the business, while also improving the cost of funds for
the enterprise.
Ally Bank
Ally Bank raises deposits directly from customers through the direct banking channel via the internet and over the telephone. These deposits provide
our automotive finance and mortgage loan operations with a stable and low−cost funding source. At December 31, 2011, Ally Bank had $39.6 billion of
total external deposits, including $27.7 billion of retail deposits. We expect that our cost of funds will continue to improve over time as our deposit base
grows.
At December 31, 2011, Ally Bank maintained cash liquidity of $3.6 billion and highly liquid U.S. federal government and U.S. agency securities of
$6.3 billion, excluding certain securities that were encumbered at December 31, 2011. In addition, at December 31, 2011, Ally Bank had unused capacity in
committed secured funding facilities of $4.9 billion, including an equal allocation of shared unused capacity of $2.5 billion from a facility also available to
the parent company. Our ability to access this unused capacity depends on having eligible assets to collateralize the incremental funding and, in some
instances, the execution of interest rate hedges.
Maximizing bank funding continues to be a key part of our long−term liquidity strategy. We have made significant progress in migrating assets to Ally
Bank and growing our retail deposit base since becoming a bank holding company in December 2008. Retail deposit growth is key to further reducing our
cost of funds and decreasing our reliance on the capital markets. We believe deposits provide a low−cost source of funds that are less sensitive to interest
rate changes, market volatility, or changes in our credit ratings than other funding sources. We have continued to expand our deposit gathering efforts
through our direct and indirect marketing channels. Current retail product offerings consist of a variety of savings products including certificates of
deposits (CDs), savings accounts, money market accounts, IRA deposit products, as well as an online checking product. In addition, we utilize brokered
deposits, which are obtained through third−party intermediaries. During 2011, the deposit base at Ally Bank grew $5.7 billion, ending the year at
$39.6 billion from $33.9 billion at December 31, 2010. The growth in deposits has been primarily attributable to our retail deposit portfolio. Strong retention
rates continue to materially contribute to our growth in retail deposits. In the fourth quarter of 2011 and full year 2011, we retained 92% and 89% of
maturing CD balances, respectively. In addition to retail and brokered deposits, Ally Bank had access to funding through a variety of other sources
including FHLB advances, public securitizations, private secured funding arrangements, and the Federal Reserve's Discount Window. At December 31,
2011, debt outstanding from the FHLB totaled $5.4 billion with no debt outstanding from the Federal Reserve. Also, as part of our liquidity and funding
plans, Ally Bank utilizes certain securities as collateral to access funding from repurchase agreements with third parties. Repurchase agreements are
generally short−term and often on an overnight basis. Funding from repurchase agreements is accounted for as debt on our Consolidated Balance Sheet. At
December 31, 2011, and December 31, 2010, Ally Bank had no debt outstanding under repurchase agreements.
Refer to Note 15 to the Consolidated Financial Statements for a summary of deposit funding by type.
The following table shows Ally Bank's number of accounts and deposit balances by type as of the end of each quarter since 2010.
($ in millions) 4th Quarter 2011 3rd Quarter 2011 2nd Quarter 2011 1st Quarter 2011 4th Quarter 2010 3rd Quarter 2010 2nd Quarter 2010 1st Quarter 2010
Number of retail accounts 976,877 919,670 851,991 798,622 726,104 676,419 616,665 573,388
Deposits
Retail $ 27,685 $ 26,254 $ 24,562 $ 23,469 $ 21,817 $ 20,504 $ 18,690 $ 17,672
Brokered 9,890 9,911 9,903 9,836 9,992 9,978 9,858 9,757
Other (a) 2,029 2,704 2,405 2,064 2,108 2,538 2,267 1,914
Total deposits $ 39,604 $ 38,869 $ 36,870 $ 35,369 $ 33,917 $ 33,020 $ 30,815 $ 29,343
(a) Other deposits include mortgage escrow and other deposits (excluding intercompany deposits).
In addition to building a larger deposit base, we continue to remain active in the securitization markets to finance our Ally Bank automotive loan
portfolios. During 2011, Ally Bank completed 11 transactions and raised $9.3 billion of secured funding backed by retail automotive loans as well as dealer
floorplan automotive loans. Continued structural efficiencies in securitizations combined with improving capital market conditions have resulted in a
reduction in the cost of funds achieved through secured funding transactions, making them a very attractive source of funding. Additionally, for retail
automotive loans and leases, the term structure of the transaction locks in funding for a specified pool of loans and leases for the life of the underlying asset
making a very effective funding program. Also in 2011, Ally Bank raised $1.5 billion from whole−loan sales of U.S. retail automotive loans. We manage
the execution risk arising from secured funding by maintaining
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