Ally Bank 2014 Annual Report Download - page 37

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operation (MD&A), as well as other
portions of this Form 10-K, may contain certain statements that constitute forward-looking statements within the meaning of the federal
securities laws. The words “expect,” “anticipate,” “estimate,” “forecast,” “initiative,” “objective,” “plan,” “goal,” “project,” “outlook,”
“priorities,” “target,” “intend,” “evaluate,” “pursue,” “seek,” “may,” “would,” “could,” “should,” “believe,” “potential,” “continue,” or the
negatives of any of these words or similar expressions are intended to identify forward-looking statements. All statements herein, other than
statements of historical fact, including without limitation statements about future events and financial performance, are forward-looking
statements that involve certain risks and uncertainties. You should not place undue reliance on any forward-looking statement and should
consider all uncertainties and risks discussed in this report, including those under Item 1A, Risk Factors, as well as those provided in any
subsequent Securities and Exchange Commission (SEC) filings. Forward-looking statements apply only as of the date they are made, and Ally
undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date the forward-
looking statement are made.
Overview
Ally Financial Inc. (formerly GMAC Inc.) is a leading, independent, diversified financial services firm. Founded in 1919, we are a
leading financial services company with approximately 95 years of experience providing a broad array of financial products and services,
primarily to automotive dealers and their customers. We operate as a financial holding company (FHC) and a bank holding company (BHC).
Our banking subsidiary, Ally Bank, is an indirect, wholly-owned subsidiary of Ally Financial Inc. and a leading franchise in the growing
direct (internet, telephone, mobile, and mail) banking market.
Initial Public Offering of Common Stock and Stock Split
In April 2014, we completed an initial public offering (IPO) of 95 million shares of common stock at $25 per share. Proceeds from the
offering amounted to $2.4 billion, which were obtained by the U.S. Department of the Treasury (Treasury) as the single selling stockholder. In
May 2014, the underwriters on the IPO elected to partially exercise the over-allotment option to purchase an additional 7,245,670 shares of
Ally common stock at the IPO price of $25 per share. In connection with the IPO, we effected a 310-for-one stock split on shares of our
common stock, $0.01 par value per share. Accordingly, all references in this MD&A and in the Consolidated Financial Statements to share
and per share amounts relating to common stock have been adjusted, on a retroactive basis, to recognize the 310-for-one stock split.
Our Business
Dealer Financial Services
Dealer Financial Services includes our Automotive Finance operations and Insurance operations. Our primary customers are automotive
dealers, which are typically independently owned businesses. As part of the process of selling a vehicle, automotive dealers typically enter
into retail installment sales contracts and leases with their retail customers. Dealers then select Ally or another automotive finance provider to
which they sell those retail installment sales contracts and leases.
Our Dealer Financial Services operations offer a wide range of financial services and insurance products to almost 17,000 automotive
dealerships and approximately 4.4 million of their retail customers. We have deep dealer relationships that have been built over our
approximately 95-year history, and we are leveraging competitive strengths to expand our dealer footprint. Our dealer-focused business model
encourages dealers to use our broad range of products through incentive programs like our Ally Dealer Rewards program, which rewards
individual dealers based on the depth and breadth of our relationship. Our automotive finance services include providing retail installment
sales contracts, loans, and leases, offering term loans to dealers, financing dealer floorplans and other lines of credit to dealers, fleet financing,
and vehicle remarketing services. We also offer retail vehicle service contracts (VSCs) and commercial insurance primarily covering dealers'
wholesale vehicle inventories. We are a leading provider of VSCs, guaranteed automobile protection (GAP), and maintenance coverage.
Automotive Finance
Our Automotive Finance operations provide U.S.-based automotive financing services to consumers and automotive dealers. For
consumers, we provide retail financing and leasing for new and used vehicles, including recreational vehicles (RVs). In addition, our
Commercial Services Group (CSG) provides automotive financing for small businesses. Through our commercial automotive financing
operations, we fund dealer purchases of new and used vehicles through wholesale or floorplan financing. At December 31, 2014, our
Automotive Finance operations had $113.2 billion of assets and generated $3.6 billion of total net revenue in 2014. We manage commercial
account servicing for approximately 4,300 dealers that utilize our floorplan inventory lending or other commercial loans. We provide
consumer asset servicing for a $81.3 billion portfolio at December 31, 2014. The extensive infrastructure and experience of our servicing
operations are important to our ability to minimize our loan losses and enable us to deliver favorable customer experience to both our dealers
and their retail customers.
Our success as an automotive finance provider is driven by the consistent and broad range of products and services we offer to dealers
who originate loans and leases to their retail customers who are acquiring new and used vehicles. Ally and other automotive finance providers
purchase these loans and leases from automotive dealers. Our growth strategy continues to focus on diversifying the franchise by expanding
into different products as well as strengthening our network of dealer relationships outside of General Motors Company (GM) and Fiat
Chrysler Automobiles US LLC (Chrysler). During 2014, originations in this channel have increased 45% from 2013. Over the past several
years, we have continued to focus on the used vehicle segment primarily through franchised dealers, which has resulted in used vehicle