Ally Financial Profile
Ally Financial Inc., together with its subsidiaries, operates as a digital financial-services company. The company offers a wide range of financial services and insurance products to automotive dealerships and consumers. Its digital direct bank (Ally Bank, Member Federal Deposit Insurance Corporation (FDIC) and Equal Housing Lender) offers mortgage lending, point-of-sale personal lending, and a variety of deposit and other banking products, including savings, money-market, and checking accounts, certificate of deposits (CDs), and individual retirement accounts (IRAs). Additionally, the company offers securities-brokerage and investment-advisory services through Ally Invest. Its corporate-finance business offers capital for equity sponsors and middle-market companies. The company is registered as a Bank holding company (BHC) under the Bank Holding Company Act of 1956 as amended (BHC Act), and a Financial holding company (FHC) under the Gramm-Leach-Bliley Act of 1999 as amended (GLB Act). Its primary business lines are Dealer Financial Services, which consists of its Automotive Finance and Insurance operations; Mortgage Finance; and Corporate Finance. Corporate and Other primarily consists of centralized corporate treasury activities, the management of the company’s legacy mortgage portfolio, the activity related to Ally Invest and Ally Lending (its unsecured personal-lending business unit), and reclassifications and eliminations between the reportable operating segments. Within the company’s Automotive Finance and Insurance operations, it also focuses on strengthening its network of dealer relationships and pursuing digital distribution channels for its products and services, including through its operation of a direct-lending platform and its work with dealers innovating in digital transactions. Within its other banking operations, including Mortgage Finance and Corporate Finance, the company seeks to expand its consumer and commercial banking products and services, while providing a high level of customer service. Ally Lending serves medical, retail, and home improvement service providers by enabling promotional and fixed rate installment-loan products through a digital application process at point-of-sale. At Ally Invest, the company seeks to augment its securities-brokerage and investment-advisory services to assist its customers in managing their savings and wealth. Additionally, the company acquired Fair Square Financial Holdings LLC and its subsidiaries (Fair Square) in December 2021, which provides it with a digital-first credit card platform and advances its evolution as a leading digital consumer bank. Ally Credit Card features technology, and a proprietary, analytics-based underwriting model. Business Dealer Financial Services Dealer Financial Services comprises the company’s Automotive Finance and Insurance segments. Its primary customers are automotive dealers, which are independently owned businesses. The company offers a wide range of financial services and insurance products to automotive dealerships and their customers. Its dealer-centric business model encourages dealers to use its broad range of products through incentive programs like its Ally Dealer Rewards program. Its automotive finance services include purchasing retail installment sales contracts and operating leases from dealers, extending automotive loans directly to consumers, offering term loans to dealers, financing dealer floorplans and providing other lines of credit to dealers, supplying warehouse lines to automotive retailers, offering automotive-fleet financing, providing financing to companies and municipalities for the purchase or lease of vehicles, and supplying vehicle-remarketing services. The company also offers retail vehicle service contracts (VSCs) and commercial insurance primarily covering dealers’ vehicle inventories. The company provides VSCs, guaranteed asset protection (GAP), and vehicle maintenance contract (VMCs). Automotive Finance The company’s Automotive Finance operations provide the U.S.-based automotive financing services to consumers, automotive dealers, other businesses, and municipalities. Its dealer-focused business model, value-added products and services, full-spectrum financing, and business expertise proven over many credit cycles make it a premier automotive finance company. For consumers, the company provides financing for new and used vehicles. In addition, its Commercial Services Group (CSG) provides automotive financing for small businesses and municipalities. Through its commercial automotive financing operations, the company funds dealer purchases of new and used vehicles through wholesale floorplan financing. It manages commercial account servicing on approximately 3,200 dealers that utilizes its floorplan inventory lending or other commercial loans. The company focuses on meeting the needs of both its dealer and consumer customers and continuing to strengthen and expand upon the approximately 21,100 dealer relationships it has. It continues to identify and cultivate relationships with automotive retailers, including those with eCommerce platforms. The company also operates Clearlane, its online direct-lending platform, which provides a digital platform for consumers seeking direct financing. The company has and continues to provide automobile financing for hybrid and battery-electric vehicles. The company has established relationships with thousands of Growth channel dealers through its customer-centric approach and specialized incentive programs designed to drive loyalty amongst dealers to its products and services. In this channel, the company has approximately 14,800 dealer relationships, of which approximately 74% are franchised dealers (including brands, such as Ford, Nissan, Kia, Hyundai, Toyota, Honda, and others), or used vehicle only retailers with a national presence. For consumers, the company provides automotive loan financing and leasing for approximately 4.4 million new and used vehicle contracts. Retail financing for the purchase of vehicles by individual consumers takes the form of installment sales financing. The company originated a total of approximately 1.4 million automotive loans and operating leases during the year ended December 31, 2021. The company’s consumer automotive financing operations generate revenue primarily through finance charges on retail installment sales contracts and rental payments on operating lease contracts. For operating leases, when the contract is originated, the company estimates the residual value of the leased vehicle at lease termination. Periodically thereafter, the company revises the projected residual value of the leased vehicle at lease termination and adjust depreciation expense over the remaining life of the lease if appropriate. The company’s commercial automotive financing operations primarily fund dealer inventory purchases of new and used vehicles, commonly referred to as wholesale floorplan financing. This represents the largest portion of its commercial automotive financing business. Wholesale floorplan loans are secured by vehicles financed (and all other vehicle inventory), which provide collateral protection in the event of dealership default. Additional collateral or other credit enhancements (for example, personal guarantees from dealership owners) are obtained to further mitigate credit risk. The amount it advances to dealers is equal to 100% of the wholesale invoice price of new vehicles, subject to payment curtailment schedules. Interest on wholesale automotive financing is generally payable monthly and is indexed to a floating-rate benchmark. The company also provides comprehensive automotive remarketing services, including the use of SmartAuction, its online auction platform, which supports dealer-to-dealer and other commercial wholesale vehicle transactions. SmartAuction provides diversified fee-based revenue and serves as a means of deepening relationships with its dealership customers. In 2021, the company and other parties, including dealers, fleet rental companies, and financial institutions, utilized SmartAuction to sell approximately 261,000 vehicles to dealers and other commercial customers. SmartAuction served as the remarketing channel for 29% of the company’s off-lease vehicles. Insurance The company’s Insurance operations offer both consumer finance protection and insurance products sold primarily through the automotive dealer channel, and commercial insurance products sold directly to dealers. It serves approximately 2.5 million consumers nationwide across finance and insurance (F&I) and property and casualty (P&C) products. In addition, the company offers F&I products in Canada, where it serves more than 400 thousand consumers and is the VSC and other protection plan provider for GM Canada and vehicle service contract (VSC) provider for Subaru Canada. As part of its focus on offering dealers a broad range of consumer F&I products, the company offers VSCs, VMCs, and GAP products. It also underwrites selected commercial insurance coverages, which primarily insure dealers’ wholesale vehicle inventory. Ally Premier Protection is the company’s flagship VSC offering, which provides coverage for new and used vehicles of virtually all makes and models. The company also offers ClearGuard on the SmartAuction platform, which is a protection product designed to minimize the risk to dealers from arbitration claims for eligible vehicles sold at auction. From a dealer perspective, the company provides significant value and expertise, which creates high retention rates and relationships. In addition to its product offerings, the company provides consultative services and training to assist dealers in optimizing F&I results while achieving high levels of customer satisfaction and regulatory compliance. The company also advises dealers regarding necessary liability and physical damage coverages. The company’s F&I products are primarily distributed indirectly through the automotive dealer network. It has established approximately 1,500 F&I dealer relationships nationwide and 550 dealer relationships in Canada. Its VSCs for retail customers offer owners and lessees mechanical repair protection and roadside assistance for new and used vehicles beyond the manufacturer’s new vehicle warranty. These VSCs are marketed to the public through automotive dealerships and on a direct response basis. The company also offers GAP products, which allow the recovery of a specified amount beyond the covered vehicle’s value in the event the vehicle is damaged or stolen and declared a total loss. The company has approximately 3,100 dealer relationships within its P&C business to whom it offers a variety of commercial products and levels of coverage. Vehicle inventory insurance for dealers provides physical damage protection for dealers’ floorplan vehicles. Among dealers to whom the company provides wholesale financing, its insurance product penetration rate is approximately 78%. Dealers who receive wholesale financing from the company are eligible for insurance incentives, such as automatic eligibility for its preferred insurance programs. Mortgage Finance The company’s Mortgage Finance operations consist of the management of held-for-investment and held-for-sale consumer mortgage loan portfolios. Its held-for-investment portfolio includes its direct-to-consumer Ally Home mortgage offering, and bulk purchases of high-quality jumbo and low-to-moderate income (LMI) mortgage loans originated by third parties. The company, through its direct-to-consumer channel, offers a variety of competitively priced jumbo and conforming fixed- and adjustable-rate mortgage products through a third-party fulfillment provider. Under Its arrangement, its direct-to-consumer conforming mortgages are originated as held for sale and sold, while jumbo and LMI mortgages are originated as held for investment. Loans originated in the direct-to-consumer channel are sourced by existing Ally customer marketing, prospect marketing on third-party websites, and email or direct mail campaigns. In 2019, the company announced a strategic partnership with Better Mortgage Company (BMC), which delivers an enhanced end-to-end digital mortgage experience for its customers through its direct-to-consumer channel. The company, through the bulk loan channel, purchases loans from several qualified sellers, including direct originators and large aggregators who have the financial capacity to support representations and warranties and the industry knowledge and experience to originate assets. Bulk purchases are made on a servicing-released basis, allowing the company to directly oversee servicing activities and manage refinancing through its direct-to-consumer channel. Its mortgage loan purchases are held-for-investment. Corporate Finance The company’s Corporate Finance operations primarily provides senior secured leveraged cash flow and asset-based loans to mostly U.S.-based middle-market companies owned by private equity sponsors, and loans to asset managers that primarily provide leveraged loans. Its corporate-finance lending portfolio includes first-lien, first-out loans. The company’s focus is on businesses owned by private equity sponsors with loans typically used for leveraged buyouts, refinancing and recapitalizations, mergers and acquisitions, growth, co-lending arrangements, turnarounds, and debtor-in-possession financings. Loan facilities typically include both a revolver and term loan component. Its target commitment hold level for these individual exposures ranges from $15 million to $150 million, depending on product type. Additionally, the company’s Lender Finance business provides asset managers with facilities from $50 million to up to $500 million to partially fund their direct-lending activities. It also selectively arranges larger transactions that it may retain on-balance sheet or syndicate to other lenders. By syndicating loans to other lenders, the company provides financing commitments in excess of its target hold levels to its customers and generates loan syndication fee income, while reducing its risk exposure to individual borrowers. The company’s loans are floating-rate facilities with maturities typically ranging from two to seven years. In certain instances, the company may be offered the opportunity to make small equity investments in its borrowers, which provide a potential additional revenue opportunity for its business. The portfolio is diversified across multiple industries, including financials, services, manufacturing distribution, and other specialty sectors. These specialty sectors include the company’s healthcare, technology/venture finance, defense and aerospace, and transportation and logistics. It also provides a healthcare-based commercial real estate product focused on lending to skilled nursing facilities, senior housing, medical office buildings, and hospitals. Other smaller complementary product offerings include selectively offering second-out loans on certain transactions and issuing letters of credit through Ally Bank. Corporate and Other Corporate and Other primarily consists of centralized corporate treasury activities, such as the management of the cash and corporate investment securities and loan portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments, original issue discount, and the residual impacts of the company’s corporate funds-transfer pricing (FTP) and treasury asset liability management (ALM) activities. Corporate and Other also includes activity related to certain equity investments, which primarily consist of Federal Home Loan Bank (FHLB) and FRB (Federal Reserve Bank, or Board of Governors of the Federal Reserve System) stock, as well as other strategic investments, the management of its legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, the activity related to Ally Invest, Ally Lending, Ally Credit Card, Community Reinvestment Act of 1977 as amended (CRA) loans and related investments, and reclassifications and eliminations between the reportable operating segments. Ally Invest Corporate and Other includes the results of Ally Invest, the company’s digital brokerage and wealth management offering. The digital wealth management business aligns with the company’s strategy to create a premier digital financial services company and provides additional sources of fee income through asset management and certain other fees. The company, through Ally Invest, offers an array of products through a fully integrated digital consumer platform centered around self-directed products and digital advisory services. Ally Invest’s suite of commission-free and investing options serve both active and passive investors with diverse and evolving financial objectives through a transparent online process. Its digital platform and broad product offerings are enhanced by outstanding client-focused and user-friendly customer service that is generally accessible twenty-four hours a day, seven days a week, via the phone, web or email—consistent with the Ally brand. Ally Invest provides clients with self-directed trading services for a variety of securities, including stocks, options, exchange-traded funds (ETFs), mutual funds, and fixed-income products through Ally Invest Securities. Ally Invest Securities also offers margin lending, which allows customers to borrow money by using securities and cash held in their accounts as collateral. Through Ally Invest Forex, the company offers self-directed investors and traders the ability to trade over 50 currency pairs through a state-of-the-art forex trading platform. Ally Invest also provides digital advisory services to clients through web-based solutions, informational resources, and virtual interaction through Ally Invest Advisors, which operates as the U.S. Securities and Exchange Commission (SEC)-registered investment advisor. Ally Invest Advisors provides clients the opportunity to obtain professional portfolio management services in return for a fee based upon the client’s assets under management. The company also offers cash enhanced portfolios that incur no management fee. Ally Lending Information related to the company’s unsecured personal lending business, Ally Lending, is also included within Corporate and Other. Ally Lending serves medical, retail, and home improvement service providers by enabling promotional and fixed rate installment-loan products through a digital application process at point-of-sale. The home improvement segment, which was launched in the second quarter of 2020, represents approximately 38% of new originations. Point-of-sale lending broadens the company’s capabilities and expands its product offering into consumer unsecured lending. Ally Credit Card Additionally, beginning in December 2021 with the acquisition of Fair Square, which the company rebranded Ally Credit Card, financial information related to its credit card business is included within Corporate and Other. The acquisition provides the company with a digital-first credit card platform and advances the company’s evolution as a digital consumer bank. Ally Credit Card features technology and a proprietary, analytics-based underwriting model. As of December 31, 2021, the company’s credit card business approximately included 750,000 customers. Deposits Ally Bank is a digital direct bank with no branch network that obtains retail deposits directly from customers. Its segment results include the cost of funds associated with these deposit-product offerings. The company’s deposit products and services are designed to develop long-term customer relationships and capitalize on the shift in consumer preference for direct banking. Ally Bank offers a spectrum of retail deposit products, including online savings accounts, money-market demand accounts, certificates of deposit (CDs), interest-bearing checking accounts, trust accounts, and individual retirement accounts (IRAs). The company’s deposit services include Zelle person-to-person payment services, eCheck remote deposit capture, and mobile banking. Over 500,000 customers have adopted the company’s Smart Savings Tools. The company had approximately 2.5 million deposit customers and 4.7 million retail bank accounts as of December 31, 2021. Its customer base spans across diverse demographic segmentations and socioeconomic bands. Strategy The company’s strategy and approach to extending credit, as well as its management of credit risk, are the critical elements of its business. Investment Portfolio As of December 31, 2021, the company’s investment portfolio included debt securities, such as the U.S. treasury and federal agencies; the U.S. states and political subdivisions; foreign government; agency mortgage-backed residential; mortgage-backed residential; agency mortgage-backed commercial; asset-backed; and corporate debt securities. Regulation and Supervision The company is subject to direct supervision and periodic examinations by various governmental agencies and industry self-regulatory organizations (SROs) that are charged with overseeing the kinds of business activities in which it engages, including the FRB, the Utah Department of Financial Institutions (UDFI), the FDIC, the Consumer Financial Protection Bureau (CFPB), the SEC, Financial Industry Regulatory Authority (FINRA), and a number of state regulatory and licensing authorities, such as the New York Department of Financial Services (NYDFS). The company and IB Finance Holding Company, LLC (IB Finance), a Delaware limited liability company, are BHCs under the BHC Act. The company is also an FHC under the GLB Act. IB Finance is a direct subsidiary of the company and the direct parent of Ally Bank, which is a commercial bank that is organized under the laws of the state of Utah and whose deposits are insured by the FDIC under the Federal Deposit Insurance Act as amended (FDI Act). As BHCs, the company and IB Finance are subject to regulation, supervision, and examination by the FRB. Ally Bank is a member of the Federal Reserve System and is subject to regulation, supervision, and examination by the FRB and the UDFI. To remain eligible to conduct and expand broader financial and related activities, Ally and Ally Bank must continue to be treated as an FHC. In addition, its ability to expand these financial and related activities or to make acquisitions generally requires that the company achieves a rating of satisfactory or better under the CRA. The company is subject to enhanced prudential standards that have been established by the FRB under the Dodd-Frank Act. Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W prevent Ally and its nonbank subsidiaries from taking undue advantage of the benefits afforded to Ally Bank as a depository institution, including its access to federal deposit insurance and the FRB’s discount window. Under Federal Deposit Insurance Corporation Improvement Act of 1991 as amended (FDICIA), insured depository institutions, such as Ally Bank must be well capitalized or adequately capitalized in order to accept brokered deposits, and even adequately capitalized institutions are subject to some restrictions on the rates they may offer for brokered deposits. The UDFI and the FDIC have similarly expansive authorities and powers over Ally Bank and its subsidiaries. Ally Bank is an insured depository institution and as such, is required to file periodic reports with the FDIC about its financial condition. Ally Bank’s deposits are insured by the FDIC in the standard insurance amounts per depositor for each account ownership category as prescribed by the FDI Act. Ally Invest Securities LLC (Ally Invest Securities) is registered as a securities broker-dealer with the SEC and in all 50 states, the District of Columbia, and Puerto Rico, is registered with the Municipal Securities Rulemaking Board as a municipal securities broker-dealer, and is a member of FINRA and the Securities Investor Protection Corporation (SIPC). As a result, Ally Invest Securities and its personnel are subject to extensive requirements under the Securities Exchange Act of 1934, as amended (Exchange Act), SEC regulations, SRO rules, and state laws, which collectively cover all aspects of the firm’s securities activities—including sales and trading practices, capital adequacy, recordkeeping, privacy, anti-money laundering, financial and other reporting, supervision, misuse of material nonpublic information, conduct of its business in accordance with just and equitable principles of trade, and personnel qualifications. Ally Invest Forex LLC (Ally Invest Forex) is registered with the U.S. Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association (NFA), which is the primary SRO for the U.S. futures industry. The firm is subject to similarly expansive requirements under the Commodity Exchange Act, CFTC and NFA rules governing introducing brokers and their personnel, and CFTC retail forex rules. Ally Invest Advisors Inc. (Ally Invest Advisors) is registered as an investment adviser with the SEC. As a result, the firm is subject to a host of requirements governing investment advisers and their personnel under the Investment Advisers Act of 1940, as amended, and related rules and regulations, including certain fiduciary and other obligations with respect to its relationships with its investment advisory clients. Regulators conduct periodic examinations of Ally Invest Securities, Ally Invest Forex, and Ally Invest Advisors and regularly review reports that the firms are required to submit on an ongoing basis. The other more significant laws to which the company is subject include The GLB Act; Under the Dodd-Frank Act and implementing regulations of the CFTC, the FDIC, the FRB, the Office of the Comptroller of the Currency, and the SEC (collectively, the Volcker Rule); the Equal Credit Opportunity Act, the Fair Housing Act, and similar fair-lending laws (collectively, Fair Lending Laws); the Fair Credit Reporting Act; the Truth in Lending Act (TILA) and Regulation Z; the Sarbanes-Oxley Act of 2002; the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act); and Community Reinvestment Act. History Ally Financial Inc. was founded in 1919. The company was incorporated in 1997.