Ally Bank 2014 Annual Report Download - page 140

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K
128
20. Earnings per Common Share
The following table presents the calculation of basic and diluted earnings per common share.
Year ended December 31, ($ in millions except per share data)2014 2013 2012
Net income from continuing operations $ 925 $ 416 $ 1,370
Preferred stock dividends — U.S. Department of the Treasury —(543) (535)
Impact of repurchase of mandatorily convertible preferred stock held by U.S. Department of
the Treasury and elimination of share adjustment right —(240) —
Preferred stock dividends (268) (267) (267)
Net income (loss) from continuing operations attributable to common shareholders 657 (634) 568
Income (loss) from discontinued operations, net of tax 225 (55) (174)
Net income (loss) attributable to common shareholders $ 882 $ (689) $ 394
Basic weighted-average common shares outstanding (a) 481,154,609 420,166,188 412,600,700
Diluted weighted-average common shares outstanding (a) (b) 481,933,811 420,166,188 412,600,700
Basic earnings per common share
Net income (loss) from continuing operations $ 1.36 $ (1.51) $ 1.38
Income (loss) from discontinued operations, net of tax 0.47 (0.13) (0.42)
Net income (loss) $ 1.83 $ (1.64) $ 0.96
Diluted earnings per common share
Net income (loss) from continuing operations $ 1.36 $ (1.51) $ 1.38
Income (loss) from discontinued operations, net of tax 0.47 (0.13) (0.42)
Net income (loss) $ 1.83 $ (1.64) $ 0.96
(a) Includes shares related to share-based compensation that have vested but have not been issued for the year ended December 31, 2014.
(b) Due to the antidilutive effect of converting the Fixed Rate Cumulative Mandatorily Convertible Preferred Stock into common shares and the net loss from
continuing operations attributable to common shareholders for 2013, net (loss) income from continuing operations attributable to common shareholders
and basic weighted-average common shares outstanding were used to calculate basic and diluted earnings per share.
The effects of converting the outstanding Fixed Rate Cumulative Mandatorily Convertible Preferred Stock into common shares are not
included in the diluted earnings per share calculation for the years ended December 31, 2013, and 2012, respectively, as the effects would be
antidilutive for those periods. As such, 89 million, and 178 million of potential common shares were excluded from the diluted earnings per
share calculation for the years ended December 31, 2013, and 2012, respectively.
21. Regulatory Capital and Other Regulatory Matters
As a BHC, we and our wholly-owned state-chartered banking subsidiary, Ally Bank, are subject to risk-based and leverage capital
requirements issued by U.S. banking regulators that require us to maintain regulatory capital ratios above minimum levels. On January 1,
2015, the capital standards applicable to Ally transitioned from a framework based on the 1988 Basel I capital accord to one based on the
2010 Basel III capital framework.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators
that, if undertaken, could have a direct material effect on the consolidated financial statements or the results of operations and financial
condition of Ally and Ally Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet
specific capital guidelines that involve quantitative measures of our capital, assets and certain off-balance sheet items. These measures and
related classifications, which are used in our risk-based and leverage capital ratios, are also subject to qualitative judgments by the regulators
about the components of capital, the risk-weightings of our assets and other exposures, and other factors. The U.S. banking regulators also use
these ratios and guidelines as part of the capital planning and stress testing processes.
A risk-based capital ratio is the ratio of a banking organization’s regulatory capital (numerator) to its risk-weighted assets (denominator).
Under the capital framework effective until December 31, 2014 (U.S. Basel I), regulatory capital was divided into two tiers: Tier 1 capital and
Tier 2 capital. Tier 1 capital generally consisted of common equity, minority interests, and qualifying noncumulative preferred stock, less
goodwill and other adjustments. Tier 2 capital generally consisted of perpetual preferred stock not qualifying as Tier 1 capital, limited
amounts of subordinated debt and the allowance for loan losses, and other adjustments. The amount of Tier 2 capital was not permitted to
exceed the amount of Tier 1 capital. Total regulatory capital was the sum of Tier 1 and Tier 2 capital. Under U.S. Basel I, risk-weighted assets
were determined by allocating assets and specified off-balance sheet financial instruments into several broad risk weight categories with
higher risk weights (expressed in percentage) assigned to asset classes that present greater perceived risk. Under U.S. Basel I, banking
organizations were required to maintain a minimum Total risk-based capital ratio (Total capital to risk-weighted assets) of 8% and a Tier 1
risk-based capital ratio (Tier 1 capital to risk-weighted assets) of 4%.