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Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
59
Allowance for Loan Losses
The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans.
($ in millions)
Consumer
automotive
Consumer
mortgage
Total
consumer Commercial Total
Allowance at January 1, 2014 $ 673 $ 389 $ 1,062 $ 146 $ 1,208
Charge-offs (720) (51) (771) (5) (776)
Recoveries 219 8 227 12 239
Net charge-offs (501) (43) (544) 7 (537)
Provision for loan losses 540 (69) 471 (14) 457
Other (a) (27) (125) (152) 1 (151)
Allowance at December 31, 2014 $ 685 $ 152 $ 837 $ 140 $ 977
Allowance for loan losses to finance receivables and loans
outstanding at December 31, 2014 (b) 1.2% 2.0% 1.3% 0.4% 1.0%
Net charge-offs to average finance receivables and loans
outstanding at December 31, 2014 (b) 0.9% 0.5% 0.8% —% 0.5%
Allowance for loan losses to total nonperforming finance
receivables and loans at December 31, 2014 (b) 177.3% 86.3% 148.7% 169.9% 151.5%
Ratio of allowance for loans losses to net charge-offs at
December 31, 2014 1.4 3.6 1.5 (19.8) 1.8
(a) Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.
(b) Coverage percentages are based on the allowance for loan losses related to finance receivables and loans excluding those loans held at fair value as a
percentage of the unpaid principal balance, net of premiums and discounts.
The allowance for consumer loan losses at December 31, 2014, declined $225 million compared to December 31, 2013. The decrease
was primarily due to the transfer of consumer mortgage assets to held-for-sale as reflected within other, combined with lower reserve
requirements within our Mortgage operations as a result of continued runoff of legacy mortgage assets. The decrease was partially offset by
the continued execution of our underwriting strategy to originate consumer automotive assets across a broad risk spectrum, as well as growth
in our consumer automotive portfolio.
The allowance for commercial loan losses declined $6 million at December 31, 2014, compared to December 31, 2013, primarily as a
result of improved portfolio performance.
($ in millions)
Consumer
automotive
Consumer
mortgage
Total
consumer Commercial Total
Allowance at January 1, 2013 $ 575 $ 452 $ 1,027 $ 143 $ 1,170
Charge-offs (639) (93) (732) (5) (737)
Recoveries 237 18 255 10 265
Net charge-offs (402) (75) (477) 5 (472)
Provision for loan losses 490 13 503 (2) 501
Other 10 (1) 9 — 9
Allowance at December 31, 2013 $ 673 $ 389 $ 1,062 $ 146 $ 1,208
Allowance for loan losses to finance receivables and loans
outstanding at December 31, 2013 (a) 1.2% 4.6% 1.6% 0.4% 1.2%
Net charge-offs to average finance receivables and loans
outstanding at December 31, 2013 (a) 0.7% 0.8% 0.7% —% 0.5%
Allowance for loan losses to total nonperforming finance
receivables and loans at December 31, 2013 (a) 204.4% 203.1% 203.9% 71.6% 166.6%
Ratio of allowance for loans losses to net charge-offs at
December 31, 2013 1.7 5.2 2.2 (27.1) 2.6
(a) Coverage percentages are based on the allowance for loan losses related to finance receivables and loans excluding those loans held at fair value as a
percentage of the unpaid principal balance, net of premiums and discounts.
The allowance for consumer loan losses at December 31, 2013, increased $35 million compared to December 31, 2012. The increase was
primarily due to increases in the allowance for consumer automotive assets due to the continued execution of our underwriting strategy to
prudently expand our originations of consumer automotive assets across a broader credit spectrum, and the growth in our U.S. automotive
consumer portfolio. The increase was partially offset by continued improved performance of mortgage assets.