Ally Bank 2012 Annual Report Download - page 54

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The following table summarizes the components of net financing losses for Corporate and Other.
At and for the year ended December 31, ($ in millions) 2012 2011 2010
Original issue discount amortization
2008 bond exchange amortization $ (320) $ (886) $ (1,158)
Other debt issuance discount amortization (29) (39) (46)
Total original issue discount amortization (a) (349) (925) (1,204)
Net impact of the funds transfer pricing methodology
Unallocated liquidity costs (b) (586) (564) (495)
Funds-transfer pricing / cost of funds mismatch (c) 170 42 (364)
Unassigned equity costs (d) (467) (364) (77)
Total net impact of the funds transfer pricing methodology (883) (886) (936)
Other (including Commercial Finance Group net financing revenue) 59 90 87
Total net financing losses for Corporate and Other $ (1,173) $ (1,721) $ (2,053)
Outstanding original issue discount balance $ 1,840 $ 2,194 $ 3,169
(a) Amortization is included as interest on long-term debt in the Consolidated Statement of Comprehensive Income.
(b) Represents the unallocated cost of funding our cash and investment portfolio.
(c) Represents our methodology to assign funding costs to classes of assets and liabilities based on expected duration and the London interbank offer rate
(LIBOR) swap curve plus an assumed credit spread. Matching duration allocates interest income and interest expense to the reportable segments so the
respective reportable segments results are insulated from interest rate risk. The balance above is the resulting benefit (loss) due to holding interest rate risk
at Corporate and Other.
(d) Primarily represents the unassigned cost of maintaining required capital positions for certain of our regulated entities, primarily Ally Bank and Ally
Insurance.
The following table presents the scheduled remaining amortization of the original issue discount at December 31, 2012.
Year ended December 31, ($ in millions) 2013 2014 2015 2016 2017 2018 and thereafter (a) Total
Original issue discount
Outstanding balance $ 1,579 $ 1,391 $ 1,335 $ 1,272 $ 1,197 $—
Total amortization (b) 261 188 56 63 75 1,197 $ 1,840
2008 bond exchange amortization (c) 241 166 43 53 66 1,059 1,628
(a) The maximum annual scheduled amortization for any individual year is $158 million in 2030 of which $152 million is related to 2008 bond exchange
amortization.
(b) The amortization is included as interest on long-term debt on the Consolidated Statement of Comprehensive Income.
(c) 2008 bond exchange amortization is included in total amortization.
2012 Compared to 2011
Loss from continuing operations before income tax expense for Corporate and Other was $3.0 billion for the year ended December 31,
2012, compared to $2.0 billion for the year ended December 31, 2011. Corporate and Other’s loss from continuing operations before income
tax expense was driven by net financing losses, which primarily represents original issue discount amortization expense and the net impact of
our FTP methodology, which includes the unallocated cost of maintaining our liquidity and investment portfolios.
The higher loss from continuing operations before income tax expense for the year ended December 31, 2012 was primarily due to a
$1.2 billion charge related to ResCap's filing for relief under Chapter 11 of the bankruptcy code in the United States. Refer to Note 1 to the
Consolidated Financial Statements for additional information related to ResCap. Additionally, higher losses for the year ended December 31,
2012 were impacted by the early prepayment of certain Federal Home Loan Bank debt to further reduce funding costs, the absence of a $121
million gain on the early settlement of a loss holdback provision related to certain historical automotive whole-loan forward flow agreements
recognized during 2011, and an increase in compensation and benefits expense as a result of increased incentive compensation and pension-
related expenses. The pension-related expenses resulted from our decision to de-risk our long-term pension liability through lump-sum
buyouts and annuity placements for former subsidiaries. Refer to Note 24 to the Consolidated Financial Statements for further detail on these
certain pension actions. Partially offsetting the higher losses for the year ended December 31, 2012 were decreases in OID amortization
expense related to bond maturities and normal monthly amortization. Additionally, we incurred no accelerated amortization of OID for the
year ended December 31, 2012, compared to $50 million for the year ended December 31, 2011.
Corporate and Other also includes the results of our Commercial Finance Group. Our Commercial Finance Group earned income from
continuing operations before income tax expense of $48 million for the year ended December 31, 2012, compared to $141 million for the
year ended December 31, 2011. The decrease was primarily related to lower net revenue resulting from a decline in income from servicer
advance collections, lower accelerated fee income due to fewer early loan payoffs during 2012, compared to 2011. Additionally, provision
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K