Ally Bank 2014 Annual Report Download - page 63

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
51
Loan and Lease Exposure
The following table summarizes the exposures from our loan and lease activities.
December 31, ($ in millions)2014 2013
Finance receivables and loans
Dealer Financial Services $ 90,592 $ 90,220
Mortgage operations 7,474 8,444
Corporate and Other 1,882 1,664
Total finance receivables and loans 99,948 100,328
Loans held-for-sale
Dealer Financial Services $ 1,515 $—
Mortgage operations 452 16
Corporate and Other 36 19
Total loans held-for-sale 2,003 35
Total on-balance sheet loans $ 101,951 $ 100,363
Off-balance sheet securitized loans
Dealer Financial Services $ 2,801 $ 899
Total off-balance sheet securitized loans $ 2,801 $ 899
Operating lease assets
Dealer Financial Services $ 19,510 $ 17,680
Total operating lease assets $ 19,510 $ 17,680
Serviced loans and leases
Dealer Financial Services $ 115,391 $ 111,589
Mortgage operations 7,926 8,333
Corporate and Other 1,347 1,498
Total serviced loans and leases $ 124,664 $ 121,420
The risks inherent in our loan and lease exposures are largely driven by changes in the overall economy, used vehicle and housing price
levels, unemployment levels, and their impact to our borrowers. The potential financial statement impact of these exposures varies depending
on the accounting classification and future expected disposition strategy. We retain the majority of our automotive loans as they complement
our core business model, but we do sell loans from time to time on an opportunistic basis. We ultimately manage the associated risks based on
the underlying economics of the exposure.
• Finance receivables and loans — Loans that we have the intent and ability to hold for the foreseeable future or until maturity, or
loans associated with an on-balance sheet securitization classified as secured financing. These loans are recorded at the principal
amount outstanding, net of unearned income, premiums and discounts, and allowances. We manage the economic risks of these
exposures, including credit risk, by adjusting underwriting standards and risk limits, augmenting our servicing and collection
activities (including loan modifications and restructurings), and optimizing our product and geographic concentrations.
Additionally, we have elected to account for certain mortgage loans at fair value. Changes in the fair value of these loans are
recognized in a valuation allowance separate from the allowance for loan losses and were reflected in current period earnings. We
use market-based instruments, such as derivatives, to hedge changes in the fair value of these loans.
• Loans held-for-sale — Loans that we do not have the intent and ability to hold for the foreseeable future or until maturity. These
loans are recorded on our balance sheet at the lower of cost or estimated fair value and are evaluated by portfolio and product type.
Changes in the recorded value are recognized in a valuation allowance and reflected in current period earnings. We manage the
economic risks of these exposures, including market and credit risks, in various ways including the use of market-based
instruments, such as derivatives.
• Off-balance sheet securitized loans — Loans that we transfer off-balance sheet to nonconsolidated variable interest entities. We
primarily report this exposure as cash or retained interests (if applicable). Similar to finance receivables and loans, we manage the
economic risks of these exposures, including credit risk, through activities including servicing and collections.
• Operating lease assets — The net book value of the automotive assets we lease includes the expected residual values upon
remarketing the vehicles at the end of the lease. We are exposed to fluctuations in the expected residual value upon remarketing the
vehicle at the end of the lease, and as such at contract inception, we determine the projected residual value based on an internal
evaluation of the expected future value. This evaluation is based on a proprietary model, which includes variables such as age,