Ally Bank 2012 Annual Report Download - page 39

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Operating lease revenue increased 23% for the year ended December 31, 2012, compared to 2011, primarily due to higher lease asset
balances as a result of strong origination volume.
Interest expense increased $99 million for the year ended December 31, 2012, compared to 2011. The increase was primarily due to
higher levels of earning assets, primarily as a result of growth in the retail loan and lease portfolios.
Depreciation expense on operating lease assets increased 49% for the year ended December 31, 2012, compared to 2011, primarily due
to higher lease asset balances as a result of strong lease origination volume and lower lease remarketing gains primarily due to lower lease
remarketing volume.
Servicing fee income decreased 32% for the year ended December 31, 2012, compared to 2011, due to lower levels of off-balance sheet
retail serviced assets.
Gains on the sale of automotive loans were $41 million for the year ended December 31, 2012, compared to $48 million for 2011. We
sold approximately $2.5 billion of retail automotive loans during 2012 compared to approximately $2.8 billion during 2011. While we
continue to opportunistically utilize whole-loan sales as a source of funding, we have primarily focused on securitization and deposit-based
funding sources.
Other income decreased 19% for the year ended December 31, 2012, compared to 2011, primarily due to lower remarketing fee income
driven by lower remarketing volumes through our proprietary SmartAuction platform.
The provision for loan losses was $253 million for the year ended December 31, 2012, compared to $89 million in 2011. The increase
was primarily due to continued growth in the consumer portfolio and our prudent expansion of underwriting strategy to originate volumes
across a broader credit spectrum, which was significantly narrowed during the recession.
2011 Compared to 2010
Our Automotive Finance operations earned income before income tax expense of $1.3 billion for the year ended December 31, 2011,
compared to $1.8 billion for the year ended December 31, 2010. Results for the year ended December 31, 2011, were primarily driven by less
favorable remarketing results in our operating lease portfolio due primarily to lower lease terminations and the absence of gains on the sale of
automotive loans due to the expiration of our forward flow agreements during the fourth quarter of 2010. These declines were partially offset
by increased consumer financing revenue driven by strong loan origination volume related primarily to improvement in automotive industry
sales, the growth in used vehicle financing volume, and a lower loan loss provision due to an improved credit mix and improved consumer
credit performance.
Consumer financing revenue increased 23% for the year ended December 31, 2011, compared to 2010, due to an increase in consumer
asset levels primarily related to strong loan origination volume during 2010 and 2011 resulting primarily from higher automotive industry
sales, increased used vehicle financing volume, and higher on-balance sheet retention. Additionally, we continue to prudently expand our
nonprime origination volume and introduce innovative finance products to the marketplace. The increase in consumer revenue was partially
offset by lower yields as a result of an increasingly competitive market environment and a change in the consumer asset mix, including the
runoff of the higher-yielding Nuvell nonprime automotive financing portfolio.
Loans held-for-sale financing revenue decreased $107 million for the year ended December 31, 2011, compared to 2010, due to the
expiration of whole-loan forward flow agreements during the fourth quarter of 2010. Subsequent to the expiration of these agreements,
consumer loan originations have largely been retained on-balance sheet utilizing deposit funding from Ally Bank and on-balance sheet
securitization transactions.
Operating lease revenue decreased 25% for the year ended December 31, 2011, compared to 2010. Operating lease revenue and
depreciation expense declined due to a lower average operating lease portfolio balance. Depreciation expense was also impacted by lower
remarketing gains due primarily to a decline in lease termination volume. In 2008 and 2009, we significantly curtailed our lease product
offerings in the United States. During the latter half of 2009, we re-entered the U.S. leasing market with targeted lease product offerings and
have continued to expand lease volume since that time.
Servicing fee income decreased $66 million for the year ended December 31, 2011, compared to 2010, due to lower levels of off-balance
sheet retail serviced assets driven by a reduction of new whole-loan sales subsequent to the expiration of our forward flow agreements in the
fourth quarter of 2010.
Net gain on automotive loans decreased $200 million for the year ended December 31, 2011, compared to 2010, primarily due to the
expiration of whole-loan forward flow agreements during the fourth quarter of 2010.
The provision for loan losses was $89 million for the year ended December 31, 2011, compared to $260 million in 2010. The decrease
was primarily due to improved credit quality that drove improved loss performance in the consumer loan portfolio and continued strength in
the used vehicle market, partially offset by continued growth in the consumer loan portfolio.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K