Ally Bank 2014 Annual Report Download - page 57

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
45
Mortgage Operations
Results of Operations
The following table summarizes the operating results for our Mortgage operations excluding discontinued operations for the periods
shown. The amounts presented are before the elimination of balances and transactions with our other reportable segments.
Year ended December 31, ($ in millions) 2014 2013 2012
Favorable/
(unfavorable)
2014-2013
% change
Favorable/
(unfavorable)
2013-2012
% change
Net financing revenue
Total financing revenue and other interest income $ 282 $ 378 $ 617 (25) (39)
Interest expense 239 302 468 21 35
Net financing revenue 43 76 149 (43) (49)
Servicing fees —68 300 (100) (77)
Servicing asset valuation and hedge activities, net —(213) (4) (100) n/m
Total servicing (loss) income, net —(145) 296 (100) (149)
Gain on mortgage loans, net 655 375 (89) (85)
Other income, net of losses 11 90 488 (88) (82)
Total other revenue 17 — 1,159 n/m (100)
Total net revenue 60 76 1,308 (21) (94)
Provision for loan losses (69) 13 86 n/m 85
Noninterest expense
Compensation and benefits expense 11 39 96 72 59
Representation and warranty expense (10) 104 171 110 39
Other operating expenses 66 178 360 63 51
Total noninterest expense 67 321 627 79 49
Income (loss) from continuing operations before income tax
expense (benefit) $ 62 $ (258) $ 595 124 (143)
Total assets $ 7,884 $ 8,168 $ 14,744 (3) (45)
n/m = not meaningful
2014 Compared to 2013
Our Mortgage operations earned income from continuing operations before income tax expense of $62 million for the year ended
December 31, 2014, compared to incurring a loss of $258 million for the year ended December 31, 2013. Favorability during 2014 was
primarily the result of lower noninterest expense driven by our exit in 2013 of all non-strategic mortgage-related activities, including
consumer mortgage-lending production associated with government-sponsored refinancing programs, and our agency MSRs portfolio, as well
as lower provision for loan losses. In addition, results for 2013 were unfavorably impacted by the valuation of our MSRs portfolio, which was
sold during the second quarter of 2013.
Net financing revenue was $43 million for the year ended December 31, 2014, compared to $76 million in 2013. The decrease in net
financing revenue was primarily due to the wind-down of our legacy consumer held-for-sale portfolio and lower asset levels in our held-for-
investment portfolio, partially offset by lower interest expense as a result of lower funding costs.
We earned no net servicing income for the year ended December 31, 2014, compared to incurring a net servicing loss of $145 million in
2013, primarily due to the completed sales of our agency MSRs portfolio during the second quarter of 2013.
The net gain on mortgage loans decreased $49 million for the year ended December 31, 2014, compared to 2013. The decrease was
primarily related to our 2013 decision to cease mortgage-lending production through our direct lending channel. The decrease was partially
offset by the completed sale of a $40 million student lending portfolio during the second quarter of 2014.
Other income, net of losses, was $11 million for the year ended December 31, 2014, compared to $90 million in 2013. The decrease was
primarily due to lower fee income and net origination revenue related to our exit from consumer mortgage-lending production.
The provision for loan losses decreased $82 million for the year ended December 31, 2014, compared to 2013. The decrease was
primarily due to lower reserve requirements as a result of the continued runoff of legacy mortgage assets, lower net charge-offs in 2014, and
improvements in home prices.