Ally Bank 2014 Annual Report Download - page 127

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K
115
9. Investment in Operating Leases, Net
Investments in operating leases were as follows.
December 31, ($ in millions) 2014 2013
Vehicles $ 23,144 $ 21,125
Accumulated depreciation (3,634) (3,445)
Investment in operating leases, net $ 19,510 $ 17,680
Depreciation expense on operating lease assets includes remarketing gains and losses recognized on the sale of operating lease assets.
The following summarizes the components of depreciation expense on operating lease assets.
Year ended December 31, ($ in millions) 2014 2013 2012
Depreciation expense on operating lease assets (excluding remarketing gains) $ 2,666 $ 2,327 $ 1,515
Remarketing gains (433) (332) (116)
Depreciation expense on operating lease assets $ 2,233 $ 1,995 $ 1,399
The following table presents the future lease nonresidual rental payments due from customers for vehicles on operating leases.
Year ended December 31, ($ in millions)
2015 $ 3,251
2016 2,165
2017 825
2018 38
2019 and after —
Total $ 6,279
10. Securitizations and Variable Interest Entities
Overview
We are involved in several types of securitization and financing transactions that utilize special-purpose entities (SPEs). A SPE is an
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 and operating lease assets.
The SPEs involved in our securitization and other financing transactions are generally considered VIEs. VIEs are entities that have either
a total equity investment at risk that is insufficient to permit the entity to finance its activities without additional subordinated financial
support or whose equity investors at risk lack the ability to control the entity's activities.
Our mortgage securitization activity and involvement with certain mortgage-related VIEs has substantially decreased. We no longer
securitize consumer mortgage loans through transactions involving the Federal National Mortgage Association (Fannie Mae), the Federal
Home Loan Mortgage Corporation (Freddie Mac), and the Government National Mortgage Association (Ginnie Mae) (collectively, the
Government-sponsored Enterprises, or GSEs), or through private-label mortgage securitizations. Accordingly, the discussion below represents
our current involvement with VIEs as of December 31, 2014, except where otherwise stated or where comparative information is presented.
Securitizations
We provide a wide range of consumer and commercial automotive loans, operating leases, and commercial loans to a diverse customer
base. We often securitize these loans (also referred to as financial assets) and leases through the use of securitization entities, which may or
may not be consolidated on our Consolidated Balance Sheet. We securitize consumer and commercial automotive loans, operating leases, and
other commercial loans through private-label securitizations.
In executing a securitization transaction, we typically sell pools of financial assets to a wholly owned, bankruptcy-remote SPE, which
then transfers the financial assets to a separate, transaction-specific securitization entity for cash, and typically, other retained interests. The
securitization entity is funded through the issuance of beneficial interests in the securitized financial assets. The beneficial interests take the
form of either notes or trust certificates, which are sold to investors and/or retained by us. These beneficial interests are collateralized by the
transferred leases and loans and entitle the investors to specified cash flows generated from the underlying securitized assets. In addition to
providing a source of liquidity and cost-efficient funding, securitizing these financial assets and operating lease assets also reduces our credit
exposure to the borrowers beyond any economic interest we may retain.
Each securitization is governed by various legal documents that limit and specify the activities of the securitization entity. The
securitization entity is generally allowed to acquire the loans, to issue beneficial interests to investors to fund the acquisition of the loans, and