Ally Bank 2012 Annual Report Download - page 37

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Interest expense decreased 8% for the year ended December 31, 2011, compared to 2010, primarily as a result of a change in our funding
mix with an increased amount of funding coming from deposit liabilities as well as favorable trends in the securitization markets.
Net servicing income was $569 million for the year ended December 31, 2011, compared to $1.1 billion in 2010. The decrease was
primarily due to a decrease in interest rates and increased market volatility compared to favorable valuation adjustments in 2010.
Additionally, 2011 includes a valuation adjustment that estimates the impact of higher servicing costs related to enhanced foreclosure
procedures, establishment of single point of contact, and other processes to comply with a consent order (the Consent Order) with the FRB
and the FDIC entered into on April 13, 2011.
Insurance premiums and service revenue earned decreased 15% for the year ended December 31, 2011, compared to 2010. The decrease
was primarily driven by the sale of certain international insurance operations during the fourth quarter of 2010 and lower earnings from our
U.S. vehicle service contracts written between 2007 and 2009 due to lower domestic vehicle sales volume.
Gain on mortgage and automotive loans decreased 62% for the year ended December 31, 2011, compared to 2010. The decrease was
primarily due to lower margins on mortgage loan sales, a decrease in mortgage loan production, lower whole-loan mortgage sales and
mortgage loan resolutions in 2011, the absence of the 2010 gain on the deconsolidation of an on-balance sheet securitization, and the
expiration of our automotive forward flow agreements during the fourth quarter of 2010.
We incurred a loss on extinguishment of debt of $64 million for the year ended December 31, 2011, compared to a loss of $124 million
for the year ended December 31, 2010. The activity in all periods related to the extinguishment of certain Ally debt, which included $50
million of accelerated amortization of original issue discount for 2011, compared to $101 million in 2010.
Other gain on investments was $259 million for the year ended December 31, 2011, compared to $502 million in 2010. The decrease was
primarily due to lower realized investment gains on our Insurance operations investment portfolio.
Other income, net of losses, increased 48% for the year ended December 31, 2011, compared to 2010. The increase during 2011 was
primarily due to the positive impact of a $121 million gain on the early settlement of a loss holdback provision related to certain historical
automotive whole-loan forward flow agreements and a favorable change in the fair value option election adjustment.
The provision for loan losses was $188 million for the year ended December 31, 2011, compared to $357 million in 2010. The decrease
during 2011 reflected improved credit quality of the overall portfolio as a result of the decision to curtail nonprime lending in 2009 and the
continued runoff and improved loss performance of our Nuvell nonprime automotive financing portfolio.
Insurance losses and loss adjustment expenses decreased 12% for the year ended December 31, 2011, compared to 2010. The decrease
was primarily due to lower frequency and severity experienced in our U.S. vehicle service contract business and the sale of certain
international insurance operations during the fourth quarter of 2010, which was partially offset by higher weather-related losses in the United
States on our dealer inventory insurance products.
Other operating expenses decreased 5% for the year ended December 31, 2011, compared to 2010. The decrease was primarily related to
a decrease of $346 million in mortgage representation and warranty reserve expense, lower insurance commissions expense, and lower
vehicle remarketing and repossession expense. The decrease was partially offset by a $230 million expense related to penalties imposed by
certain regulators and other governmental agencies in connection with mortgage foreclosure-related matters.
We recognized consolidated income tax expense of $51 million for the year ended December 31, 2011, compared to $104 million in
2010. For those respective periods, we had a full valuation allowance against our domestic net deferred tax assets and certain international net
deferred tax assets. Accordingly, tax expense was driven by U.S. state income taxes in states where profitable subsidiaries are required to file
separately from other loss companies in the group or where the use of prior losses is restricted, and foreign income taxes on pretax profits
within foreign jurisdictions. The decrease in income tax expense for 2011, compared to 2010, was driven by increased foreign pretax losses.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K