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Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
60
The allowance for commercial loan losses increased $3 million at December 31, 2013, compared to December 31, 2012, primarily
related to the higher automotive assets during 2013.
Allowance for Loan Losses by Type
The following table summarizes the allocation of the allowance for loan losses by product type.
2014 2013
December 31, ($ in millions)
Allowance for
loan losses
Allowance as
a % of loans
outstanding
Allowance as
a % of total
allowance for
loan losses
Allowance for
loan losses
Allowance as
a % of loans
outstanding
Allowance as
a % of total
allowance for
loan losses
Consumer
Consumer automotive $ 685 1.2% 70.1% $ 673 1.2% 55.7%
Consumer mortgage 152 2.0 15.6 389 4.6 32.2
Total consumer loans 837 1.3 85.7 1,062 1.6 87.9
Commercial
Commercial and industrial
Automotive 65 0.2 6.7 67 0.2 5.6
Other 42 2.2 4.2 50 3.0 4.1
Commercial real estate — Automotive 33 1.0 3.4 29 1.0 2.4
Total commercial loans 140 0.4 14.3 146 0.4 12.1
Total allowance for loan losses $ 977 1.0 100.0% $ 1,208 1.2 100.0%
Provision for Loan Losses
The following table summarizes the provision for loan losses by product type.
Year ended December 31, ($ in millions)2014 2013 2012
Consumer
Consumer automotive $ 540 $ 490 $ 257
Consumer mortgage (69) 13 86
Total consumer loans 471 503 343
Commercial
Commercial and industrial
Automotive (1) 11 (3)
Mortgage —— (1)
Other (16) (6) (10)
Commercial real estate — Automotive 3(7) —
Total commercial loans (14) (2) (14)
Total provision for loan losses $ 457 $ 501 $ 329
The provision for consumer loan losses decreased $32 million for the year ended December 31, 2014, compared to 2013. The decrease
was primarily due to the 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 and growth in our consumer automotive portfolio.
The provision for commercial loan losses was a net credit of $14 million for the year ended December 31, 2014, compared to a net credit
of $2 million in 2013. This decrease was largely driven by improved portfolio performance.
Lease Residual Risk Management
We are exposed to residual risk on vehicles in the consumer lease portfolio. This lease residual risk represents the possibility that the
actual proceeds realized upon the sale of returned vehicles will be lower than the projection of these values used in establishing the pricing at
lease inception. For information on our valuation of automotive lease residuals including periodic revisions through adjustments to
depreciation expense based on current and forecasted market conditions, refer to Critical Accounting Estimates — Valuation of Automotive
Lease Assets and Residuals within this MD&A.
• Priced residual value projections — At contract inception, we determine pricing based on 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